<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 18, 1999
REGISTRATION NO. 333-84533
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
THE TRIZETTO GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
DELAWARE 7374 33-0761159
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
567 SAN NICOLAS DRIVE, SUITE 360, NEWPORT BEACH, CA 92660
(949) 719-2200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
JEFFREY H. MARGOLIS, CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE
OFFICER
567 SAN NICOLAS DRIVE, SUITE 360, NEWPORT BEACH, CA 92660, (949) 719-2200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
K.C. SCHAAF, ESQ. KENNETH M. DORAN, ESQ.
CHRISTINE A. MILLER, ESQ. SCOTT J. CALFAS, ESQ.
TIMOTHY N. STICKLER, ESQ. JOSHUA A. KREINBERG, ESQ.
STRADLING YOCCA CARLSON & RAUTH, GIBSON, DUNN & CRUTCHER LLP
A PROFESSIONAL CORPORATION 333 SOUTH GRAND AVENUE
660 NEWPORT CENTER DRIVE, SUITE 1600 LOS ANGELES, CALIFORNIA 90071-3197
NEWPORT BEACH, CALIFORNIA 92660 (213) 229-7000
(949) 725-4000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this registration statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all costs and expenses, other than
underwriting discounts and commissions, payable by us in connection with the
sale of the common stock being registered hereunder. All of the amounts shown
are estimates except for the SEC registration fee, the Nasdaq National Market
application fee and the NASD filing fee.
<TABLE>
<S> <C>
SEC registration fee........................................ $ 15,985
--------
NASD filing fee............................................. 6,250
--------
Nasdaq National Market application fee...................... *
Printing expenses........................................... *
Legal fees and expenses (other than Blue Sky)............... *
Accounting fees and expenses................................ *
Blue sky fees and expenses.................................. *
Miscellaneous............................................... *
--------
Total.................................................. $ *
========
</TABLE>
- ---------------
* To be filed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
(a) As permitted by Delaware law, our certificate of incorporation
eliminates the liability of directors to us or our stockholders for monetary
damages for breach of fiduciary duty as directors, except to the extent
otherwise required by Delaware law.
(b) Our certificate of incorporation provides that we will indemnify each
person who was or is made a party to any proceeding by reason of the fact that
such person is or was a director or officer of the company against all expense,
liability and loss reasonably incurred or suffered by such person in connection
therewith to the fullest extent authorized by Delaware law. Our bylaws provide
for a similar indemnity to our directors and officers to the fullest extent
authorized by Delaware law.
(c) Our certificate of incorporation also gives us the ability to enter
into indemnification agreements with each of our directors and officers. We have
entered into indemnification agreements with certain of our directors and
officers, which provide for the indemnification of our directors or officers
against any and all expenses, judgments, fines, penalties and amounts paid in
settlement, to the fullest extent permitted by law.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The following is a summary of transactions by us from our inception in May
1997 through the date hereof involving sales of our securities that were not
registered under the Securities Act:
- On September 1, 1997, Croghan & Associates issued a promissory note in
principal amount of $520,000 to KFS Management, Inc. In connection with
this promissory note, Croghan & Associates issued KFS Management, Inc.
warrants to purchase 243,893 shares of Croghan & Associates' common stock
at $.53 per share. When we acquired Croghan & Associates, we converted
these warrants into warrants to purchase 162,595 shares of our common
stock at $.80 per share.
- On October 1, 1997, we issued 5,800,895 shares of our common stock in
exchange for all of the equity interests in Croghan & Associates and
3,716,667 shares of common stock in exchange for all the equity interests
in Margolis Health Enterprises.
II-1
<PAGE> 3
- On April 15, 1998, we sold 465,000 shares of our common stock to five
employees for an aggregate offering price of $60,000.
- On April 30, 1998, we sold 4,195,804 shares of our Series A preferred
stock to four accredited investors for an aggregate offering price of
$6,000,000.
- On October 30, 1998, we sold 349,650 shares of our Series A preferred
stock to two accredited investors for an aggregate offering price of
$500,000.
- On February 15, 1999, we issued 572,000 shares of our common stock to
former shareholders of Creative Business Solutions in exchange for all of
the issued and outstanding shares of capital stock of Creative Business
Solutions.
- On February 15, 1999, we issued 83,000 shares of our common stock to
former partners of HealthWeb in exchange for the entire partnership
interest of HealthWeb.
- On April 12, 1999, we sold 1,730,770 shares of our Series B preferred
stock to five accredited investors for an aggregate offering price of
$4,500,000.
- On April 19, 1999, we issued 60,000 shares of our common stock to the
former majority shareholder of Management and Technology Solutions in
exchange for certain assets and liabilities of Management and Technology
Solutions.
- On August 2, 1999, we issued 162,595 shares of our common stock pursuant
to the exercise of warrants held by KFS Management, Inc.
- Since May 15, 1998, we have granted options to purchase an aggregate of
2,841,878 shares of common stock to employees pursuant to our 1998 Stock
Option Plan.
We used the proceeds of the stock sales for working capital and other
general corporate purposes.
We did not employ any underwriters, brokers or finders in connection with
any of the transactions set forth above.
The sales of the securities listed above were deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) of the
Securities Act, or Regulation D promulgated thereunder, or, with respect to
issuances to employees, Rule 701 promulgated under Section 3(b) of the
Securities Act as transactions by an issuer not involving a public offering or
transactions pursuant to compensatory benefit plans and contracts relating to
compensation as provided under Rule 701. The recipients of securities in each
such transaction represented their intentions to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof and appropriate legends were affixed to the instruments
representing such securities issued in such transactions. All recipients had
adequate access, through their relationships with us, to information about us.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
1.1* Form of Underwriting Agreement.
2.1** Exchange Agreement, dated October 1, 1997, by and among M C
Health Holdings, Inc. and the stockholders of Croghan &
Associates, Inc. and stockholders of Margolis Health
Enterprises, Inc.
2.2**+ Stock Purchase Agreement, dated February 5, 1999, by and
between Creative Business Solutions, Inc. and the
stockholders of Creative Business Solutions, Inc.
2.3**+ Partnership Interest Purchase Agreement, dated February 5,
1999, by and between the Registrant, TriZetto Acquisition
Group, LLC, HealthWeb Systems, Ltd., HealthWeb General
Partner, Inc., and the holders of partnership interests.
</TABLE>
II-2
<PAGE> 4
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
2.4** Asset Purchase Agreement, dated April 1, 1999, between the
Registrant and Management and Technology Solutions, Inc.
2.5+ Information Technology Services Agreement, dated May 1,
1999, between the Registrant and MedPartners, Inc.
3.1** Amended and Restated Certificate of Incorporation of the
Registrant, as in effect.
3.2 Form of Amended and Restated Certificate of Incorporation of
the Registrant, to be adopted prior to the closing of the
offering made under this Registration Statement.
3.3** Amended and Restated Bylaws of the Registrant, as in effect.
3.4 Amended and Restated Bylaws of the Registrant, to be adopted
prior to the closing of the offering made under this
Registration Statement.
4.1** Specimen common stock certificate.
5.1* Opinion of Stradling Yocca Carlson & Rauth, a Professional
Corporation.
10.1** 1998 Stock Option Plan.
10.2** Form of 1998 Incentive Stock Option Agreement.
10.3** Form of 1998 Non-Qualified Stock Option Agreement.
10.4 1999 Employee Stock Purchase Plan.
10.5** Employment Agreement, dated April 30, 1998, between the
Registrant and Jeffrey H. Margolis.
10.6** Promissory Note, dated April 30, 1998, between the
Registrant and Jeffrey H. Margolis.
10.7** Form of Indemnification Agreement.
10.8 First Amended and Restated Investor Rights Agreement, dated
April 9, 1999 among Raymond Croghan, Jeffrey Margolis, the
Registrant and Series A and Series B Preferred Stockholders.
10.9+ Professional Services Agreement, dated January 1, 1999,
between the Registrant and CCN Managed Care, Inc.
10.10** Office Lease Agreement, dated April 26, 1999, between St.
Paul Properties, Inc. and the Registrant (including
addendum).
10.11** Sublease Agreement, dated December 18, 1998, between TPI
Petroleum, Inc. and the Registrant (including underlying
Office Lease Agreement by and between St. Paul Properties,
Inc. and Total, Inc.).
10.12** Sublease Agreement, dated May 1, 1999, between MedPartners,
Inc. and the Registrant (including underlying Lease by and
between Riverchase Tower, Ltd. and MedPartners, Inc.).
10.13+ Technical Support Agreement, dated May 15, 1995, between DHI
Computing Services, Inc. and Croghan & Associates, Inc.
10.14+ Standard Multi-Directory and Support Agreement, dated May
25, 1999, between the Registrant and Epic Systems
Corporation.
10.15+ Master Software License Agreement, dated May 1, 1999,
between Medic Computer Systems, Inc. and the Registrant.
10.16+ Addendum to the Master License Agreement, dated April 15,
1999, between Medical Manager Midwest, Inc. and Management
and Technology Solutions, Inc. (including underlying Medical
Manager License Agreement between Medical Manager Midwest,
Inc. and Management and Technology Solutions, Inc.).
10.17+ Technical Infrastructure Maintenance Agreement, dated March
1, 1998, between Medical Manager Midwest, Inc. and
Management and Technology Solutions, Inc.
10.18** North American Partner Agreement, dated May 26, 1999,
between Great Plains Software and the Registrant.
10.19** Form of Restricted Stock Purchase Agreement between the
Registrant and certain employees.
</TABLE>
II-3
<PAGE> 5
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
10.20 Bank One Credit Facility (including Promissory Note, Loan
Agreement and Commercial Security Agreement), dated March 4,
1999.
21.1** Subsidiaries of the Registrant.
23.1* Consent of Stradling Yocca Carlson & Rauth, a Professional
Corporation (included in exhibit 5.1).
23.2 Consent of PricewaterhouseCoopers LLP.
24.1** Power of Attorney.
27.1** Financial Data Schedule.
</TABLE>
- ---------------
* To be filed by amendment.
** Previously filed.
+ Portions of this exhibit are omitted and were filed separately with the SEC
pursuant to the Company's application requesting confidential treatment under
Rule 406 of the Securities Act of 1933.
(B) FINANCIAL STATEMENT SCHEDULES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
Other schedules are omitted because they are not applicable or because the
information is included in the financial statements or the related notes.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
The undersigned registrant hereby undertakes:
(1) That, for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Newport Beach, State of California, on the 18th day of August 1999.
THE TRIZETTO GROUP, INC.
By: /s/ JEFFREY H. MARGOLIS
------------------------------------
Jeffrey H. Margolis
President, Chief Executive Officer
and Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ JEFFREY H. MARGOLIS President, Chief Executive August 18, 1999
- --------------------------------------------------- Officer and Chairman of the
Jeffrey H. Margolis Board (principal executive
officer)
/s/ MICHAEL J. SUNDERLAND Vice President of Finance, Chief August 18, 1999
- --------------------------------------------------- Financial Officer and Secretary
Michael J. Sunderland (principal financial and
accounting officer)
/s/ DONALD J. LOTHROP* Director August 18, 1999
- ---------------------------------------------------
Donald J. Lothrop
/s/ PETER D. MANN* Director August 18, 1999
- ---------------------------------------------------
Peter D. Mann
/s/ WILLIAM E. FISHER* Director August 18, 1999
- ---------------------------------------------------
William E. Fisher
/s/ PAUL F. LEFORT* Director August 18, 1999
- ---------------------------------------------------
Paul F. LeFort
</TABLE>
*By: /s/ JEFFREY H. MARGOLIS
---------------------------------
Jeffrey H. Margolis
(Attorney-in-fact)
II-5
<PAGE> 7
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
1.1* Form of Underwriting Agreement.
2.1** Exchange Agreement, dated October 1, 1997, by and among M C
Health Holdings, Inc. and the stockholders of Croghan &
Associates, Inc. and stockholders of Margolis Health
Enterprises, Inc.
2.2**+ Stock Purchase Agreement, dated February 5, 1999, by and
between Creative Business Solutions, Inc. and the
stockholders of Creative Business Solutions, Inc.
2.3**+ Partnership Interest Purchase Agreement, dated February 5,
1999, by and between the Registrant, TriZetto Acquisition
Group, LLC, HealthWeb Systems, Ltd., HealthWeb General
Partner, Inc., and the holders of partnership interests.
2.4** Asset Purchase Agreement, dated April 1, 1999, between the
Registrant and Management and Technology Solutions, Inc.
2.5+ Information Technology Services Agreement, dated May 1,
1999, between the Registrant and MedPartners, Inc.
3.1** Amended and Restated Certificate of Incorporation of the
Registrant, as in effect.
3.2 Form of Amended and Restated Certificate of Incorporation of
the Registrant, to be adopted prior to the closing of the
offering made under this Registration Statement.
3.3** Amended and Restated Bylaws of the Registrant, as in effect.
3.4 Amended and Restated Bylaws of the Registrant, to be adopted
prior to the closing of the offering made under this
Registration Statement.
4.1** Specimen common stock certificate.
5.1* Opinion of Stradling Yocca Carlson & Rauth, a Professional
Corporation.
10.1** 1998 Stock Option Plan.
10.2** Form of 1998 Incentive Stock Option Agreement.
10.3** Form of 1998 Non-Qualified Stock Option Agreement.
10.4 1999 Employee Stock Purchase Plan.
10.5** Employment Agreement, dated April 30, 1998, between the
Registrant and Jeffrey H. Margolis.
10.6** Promissory Note, dated April 30, 1998, between the
Registrant and Jeffrey H. Margolis.
10.7** Form of Indemnification Agreement.
10.8 First Amended and Restated Investor Rights Agreement, dated
April 9, 1999 among Raymond Croghan, Jeffrey Margolis, The
Registrant and Series A and Series B Preferred Stockholders.
10.9+ Professional Services Agreement, dated January 1, 1999,
between the Registrant and CCN Managed Care, Inc.
10.10** Office Lease Agreement, dated April 26, 1999, between St.
Paul Properties, Inc. and the Registrant (including
addendum).
10.11** Sublease Agreement, dated December 18, 1998, between TPI
Petroleum, Inc. and the Registrant (including underlying
Office Lease Agreement by and between St. Paul Properties,
Inc. and Total, Inc.).
10.12** Sublease Agreement, dated May 1, 1999, between MedPartners,
Inc. and the Registrant (including underlying Lease by and
between Riverchase Tower, Ltd. and MedPartners, Inc.).
10.13+ Technical Support Agreement, dated May 15, 1995, between DHI
Computing Services, Inc. and Croghan & Associates, Inc.
10.14+ Standard Multi-Directory and Support Agreement, dated May
25, 1999, between the Registrant and Epic Systems
Corporation.
</TABLE>
<PAGE> 8
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
10.15+ Master Software License Agreement, dated May 1, 1999,
between Medic Computer Systems, Inc. and the Registrant.
10.16+ Addendum to the Master License Agreement, dated April 15,
1999, between Medical Manager Midwest, Inc. and Management
and Technology Solutions, Inc. (including underlying Medical
Manager License Agreement between Medical Manager Midwest,
Inc. and Management and Technology Solutions, Inc.).
10.17+ Technical Infrastructure Maintenance Agreement, dated March
1, 1998, between Medical Manager Midwest, Inc. and
Management and Technology Solutions, Inc.
10.18** North American Partner Agreement, dated May 26, 1999,
between Great Plains Software and the Registrant.
10.19** Form of Restricted Stock Purchase Agreement between the
Registrant and certain employees.
10.20 Bank One Credit Facility (including Promissory Note, Loan
Agreement and Commercial Security Agreement), dated March 4,
1999.
21.1** Subsidiaries of the Registrant.
23.1* Consent of Stradling Yocca Carlson & Rauth, a Professional
Corporation (included in exhibit 5.1).
23.2 Consent of PricewaterhouseCoopers LLP.
24.1** Power of Attorney.
27.1** Financial Data Schedule.
</TABLE>
- ---------------
* To be filed by amendment.
** Previously filed.
+ Portions of this exhibit are omitted and were filed separately with the SEC
pursuant to the Company's application requesting confidential treatment under
Rule 406 of the Securities Act of 1933.
<PAGE> 1
EXHIBIT 2.5
INFORMATION TECHNOLOGY SERVICES AGREEMENT
BETWEEN
MEDPARTNERS, INC.
AND
THE TRIZETTO GROUP, INC.
DATED MAY 1, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
Understanding and Services........................................ Section 1
Additional Services: Exclusivity.................................. Section 2
Term.............................................................. Section 3
Transition Plan................................................... Section 4
Affected Employees................................................ Section 5
Business Unit Asset Purchase...................................... Section 6
Project Management................................................ Section 7
Performance....................................................... Section 8
Payments.......................................................... Section 9
Clinic Agreements................................................. Section 10
Service Locations and Security.................................... Section 11
Management and Change Control Process............................. Section 12
Data and Reports.................................................. Section 13
Software Rights................................................... Section 14
Hardware Rights................................................... Section 15
Agency............................................................ Section 16
Disaster Recovery................................................. Section 17
Force Majeure..................................................... Section 18
Audits............................................................ Section 19
Confidential Information.......................................... Section 20
Representations and Warranties.................................... Section 21
Dispute Resolution................................................ Section 22
Termination....................................................... Section 23
Limited Right to Continuation of Services......................... Section 24
Exit Plan......................................................... Section 25
Indemnification................................................... Section 26
Remedies.......................................................... Section 27
Insurance......................................................... Section 28
Miscellaneous..................................................... Section 29
</TABLE>
-i-
<PAGE> 3
TABLE OF EXHIBITS
Exhibit A Glossary of Terms
Exhibit B Services
Exhibit C Service Matrix
Exhibit D Additional Services
Exhibit E Transition Plan
Exhibit F Bonuses
Exhibit G Key Employees
Exhibit H Service Level Agreements
Exhibit I Service Credits
Exhibit J Pricing Schedule for Services
Exhibit K Change Control Process
Exhibit L Software Rights
Exhibit M Hardware Rights
Exhibit N Services Transition Assistance
Exhibit O Reporting Template
Exhibit P Disaster Recovery Plan
Exhibit Q Insurance
Exhibit R Excluded Expenses
Exhibit S Service Resources
Exhibit T Affected Employees
Exhibit U Business Unit Asset Purchase Agreement
Exhibit V Epic License Transfer Agreement
-ii-
<PAGE> 4
INFORMATION TECHNOLOGY SERVICES AGREEMENT
This INFORMATION TECHNOLOGY SERVICES AGREEMENT ("Agreement"), is dated as of May
1, 1999 (the "Effective Date"), by and between MedPartners, Inc., a Delaware
corporation ("MDM") (MDM together with its subsidiaries and affiliates are
collectively referred to herein as the "Customer") and The TriZetto Group, Inc.,
a Delaware corporation (the "Vendor"). Vendor and Customer are sometimes
hereinafter referred to individually as a "Party" and collectively as the
"Parties." All capitalized terms used but not defined herein shall have the
meanings ascribed to them in EXHIBIT A "GLOSSARY OF TERMS" attached hereto.
RECITALS
WHEREAS, Customer has contracted with certain health care clinics to provide
those clinics with certain management support and information technology
services;
WHEREAS, Customer also provides information technology services to Customer's
own business operations and the business operations of its affiliate company,
Caremark, Inc. ("Caremark");
WHEREAS, Customer is ending its relationship with the Clinics, and wishes to
outsource the services it provides to the Clinics, for the period from the
Effective Date of this Agreement to the date when each Clinic is disassociated
from Customer and for the period after such disassociation until Customer's
obligations to provide services to the Clinic end;
WHEREAS, Customer also wishes to outsource the services it provides to its own
business operations and the business operations of Caremark;
WHEREAS, Vendor desires to provide such services to the Customer Group; and
WHEREAS, Vendor recognizes that the Customer Group expects to be treated as a
valued customer and expects Vendor to exhibit a customer service attitude in
delivering the services required under this Agreement;
NOW, THEREFORE, in consideration of the recitals and for mutual promises and
covenants contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. UNDERSTANDINGS AND SERVICES.
(a) On and after the Effective Date and throughout the Term of this
Agreement, Vendor shall provide Customer Group the information
technology and other services described in EXHIBIT B--SERVICES
attached hereto and in this Agreement (the "Services"),
including, without
<PAGE> 5
limitation, those services described in the service matrix set
forth in EXHIBIT C--SERVICE MATRIX. The Services shall include,
without limitation, the General Services, Clinic Services, the
Corporate Services, and the Caremark Services. The Parties
intend that the Services shall include all of the functions,
responsibilities and tasks that are being performed and
delivered by the Affected Employees up to and including the
Effective Date, except as noted on EXHIBIT D.
(b) There may be functions, responsibilities, activities and tasks
not specifically described in this Agreement which are required
for the proper performance and delivery of the Services and are
a necessary, customary or inherent part of, or a necessary
sub-part included within, the Services. If such functions,
responsibilities, activities and tasks are determined to be
required for the proper performance and delivery of the Services
or are a necessary, customary or inherent part, or a necessary
sub-part included within, the Services, such functions,
responsibilities, activities and tasks shall be deemed to be
implied by and included within the scope of the Services to the
same extent and in the same manner as if specifically described
in this Agreement. Each such determination shall be made by
agreement of the Parties or resolved pursuant to the dispute
resolution provisions set forth in SECTION 22.
(c) Vendor shall not service or support additional customers or
clients from the Service Locations without Customer's prior
written approval (which shall not be unreasonably withheld),
where such service or support would place a significant demand
on Vendor's resources or would materially adversely impact
Vendor's ability to provide the Services and achieve the Service
Level Agreements. Prior to servicing or supporting additional
customers or clients from the Service Locations, Vendor shall
provide to Customer, for Customer's approval, a proposal for
providing such services to the third party, including the
material terms and anticipated scope of the obligations and
expenses, and the risks and/or expenses to Customer during the
Term and upon the termination of this Agreement.
(d) As part of the Services, Vendor shall be responsible for
obtaining at its expense any hardware, software, personnel or
other resources (whether new or replacement) required in order
to provide the Services.
(e) As part of the Services, Vendor shall be responsible for
obtaining all governmental licenses, authorizations, and permits
required by applicable laws and regulations, which Vendor is
required to have in order to perform the Services. Vendor shall
be financially responsible for all fees and taxes associated
with such licenses and permits.
(f) As part of the Services, Vendor shall identify the impact of
changes in applicable laws and regulations on its ability to
deliver the Services or on the
-2-
<PAGE> 6
Services required by Customer. Vendor shall notify Customer of
such changes and shall work with Customer to identify any
adjustment to the Services required by such changes. Vendor
shall promptly implement any such adjustment to the Services
through the Change Control Process. Where changes required under
this Section materially impact the scope of either Party's
duties and obligations under this Agreement, the Parties shall
cooperate in good faith to negotiate revisions to the terms and
conditions of this Agreement required by such changes. Proposed
revisions shall be made by agreement of the Parties, or in the
absence of agreement on such changes, pursuant to the dispute
resolution provisions set forth in SECTION 22. Vendor shall be
responsible for any fines and penalties imposed on Vendor and
Customer arising from any noncompliance with such laws and
regulations by Vendor, its agents, subcontractors, or third
party product or service providers; provided, however, that
Vendor shall not be responsible for any fines and penalties
resulting from compliance with instructions received from
Customer or from activities undertaken by Customer on its own
behalf.
(g) Vendor will perform all of the Services strictly in accordance
with (i) the requirements of all Regulations, (ii) federal,
state and community standards and (iii) other applicable
policies related to the Regulations. Without limiting the
generality of the foregoing, Vendor shall (i) comply with all
policies, procedures and protocols of Customer applicable to
activities of Vendor subject to any Regulation; (ii) direct all
requests for claims processing inquiries, decisions and rulings
either to Customer or to another party designated by Customer;
and (iii) work in cooperation with Customer, health care plans
and other parties to payor agreements to ensure that the
processes followed by Customer and Vendor in connection with the
Services, either in combination or individually, do not violate
and are not inconsistent with the Regulations. Vendor will
perform no Services requiring that Vendor be a regulated entity
(such as a preferred provider organization or third party
administrator) without first ensuring that it has satisfied all
licensure, permitting, approval and other Regulations applicable
to such activities. At no time will Vendor engage in any
activity involving a decision to reject or otherwise not pay a
claim or requiring an adjudication of any claim relating to the
Customer Group.
2. ADDITIONAL SERVICES; EXCLUSIVITY
(a) The Parties have identified on EXHIBIT D--ADDITIONAL SERVICES,
certain services which are not within the scope of the Services
as described herein, but which the Parties anticipate that the
Customer may require during the Term of this Agreement. In the
event that Customer requires, during the Clinic Services Period
for any Clinic, any Services described on EXHIBIT D for such
Clinic or any other transitional or continued services required
by any Clinic prior to the end of the applicable Clinic Services
Period, Customer shall inform Vendor of its requirements and
Vendor shall have the right to submit a proposal for such
additional services. As
-3-
<PAGE> 7
soon as reasonably practicable, but in no event more than five
(5) business days, after receiving Customer's request for
proposal on such Services, Vendor shall either submit a written
proposal for such Services or shall advise Customer that it does
not wish to perform such Services. Fees for such Additional
Services described in EXHIBIT D shall be as set forth in EXHIBIT
D, and fees for other Additional Services shall be in accordance
with the rate schedule set forth on EXHIBIT D. Customer shall
have no obligation to accept any proposal made by Vendor under
this SECTION 2(a).
(b) In the event that Customer chooses to engage a third party to
provide any Additional Service, Vendor shall cooperate with
Customer and such third party to the extent reasonably required
by Customer, including by providing (i) written requirements,
standards, and policies for systems operations so that the
enhancements or developments of such third party may be operated
by Vendor, (ii) assistance and support services to such third
party at reasonable prices, and (iii) access to the systems and
service locations as may be reasonably required by such third
party in connection with such Additional Service.
(c) Customer shall not engage any other party to provide Clinic
Services to any Clinic during the applicable Clinic Services
Period; provided, however, that the Services delivered to such
Clinic conform to the applicable Service Levels and other
requirements of this Agreement. Customer shall use commercially
reasonable efforts to support Vendor's efforts to market its
services to Clinics during the applicable Clinic Services
Period.
3. TERM
This Agreement shall commence on the Effective Date and shall continue
until December 31, 1999 (the "Initial Term") unless earlier terminated in
accordance with the terms and conditions hereof. Following the Initial Term,
this Agreement shall automatically renew for subsequent periods of thirty (30)
days (each, a "Renewal Term") unless terminated by Customer on thirty (30) days
written notice to Vendor prior to the expiration of the then-current term.
Customer's termination of this Agreement under this SECTION 3 shall not be
deemed to constitute a termination for convenience pursuant to SECTION 23 of
this Agreement.
4. TRANSITION PLAN.
(a) As part of the Services, Vendor will implement the "Transition
Plan" set forth in EXHIBIT E--TRANSITION PLAN describing (i) the
transition from the Customer to Vendor of the Affected
Employees; (ii) the transition of the administration,
management, operation under and financial responsibility for the
Third Party Agreements from the Customer to Vendor; and (iii)
the transition to Vendor of the performance of and
responsibility for the other
-4-
<PAGE> 8
functions, responsibilities and tasks currently performed by the
Customer which comprise the Services.
(b) Vendor shall execute and complete the Transition Plan without
causing a material disruption of Customer's operations. The
Customer Account Manager and the Vendor Account Manager shall
meet as required (but in any case, no less than once per week)
to ensure the appropriate execution and completion of the
Transition Plan. Vendor shall bear the reasonable costs of any
adverse impact to Customer caused by a delay in the Transition
Plan; provided, however, that Vendor shall not be responsible
for such costs to the extent caused by Customer's failure to
cooperate in the Transition Plan as required by SECTION 4(c)
(including providing appropriate resources to support the
implementation phase of the Transition Plan).
(c) Customer will cooperate with Vendor in implementing the
Transition Plan by providing the personnel (or portions of the
time of the personnel) set forth in the Transition Plan and
performing the tasks assigned to Customer in the Transition
Plan.
5. AFFECTED EMPLOYEES
(a) With Customer's consent and cooperation, Vendor shall offer
employment to each Affected Employee at salary and benefits
comparable to those provided by Customer to such Affected
Employee as of the Effective Date. [*]
(b) All costs and expenses incurred by Vendor in connection with the
offer to employ and the employment of the Affected Employees
shall be the responsibility of Vendor; provided, however, that
Customer shall pay Vendor [*] dollars ($[*]) on the Effective
Date towards the costs of personnel replacement premiums (the
"Personnel Premium"), and shall pay Vendor [*] ($[*]) on the
Effective Date to be used by Vendor towards the costs of the
Retention Bonuses to be paid by Vendor under SECTION 5(c) (the
"Retention Bonus Payment").
(c) Vendor represents and warrants that it shall pay [*]% of the
target bonuses set forth in EXHIBIT F--BONUSES to all Affected
Employees who
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
-5-
<PAGE> 9
are still in Vendor's employment as of [*], and that it shall
inform the Affected Employees of its obligation under this
Agreement to make such bonus payment no later than the Effective
Date. If Vendor terminates any Affected Employee without cause
prior to or on [*], Vendor shall pay the Affected Employee [*]%
of the Affected Employee's target bonus at the time of the
Affected Employee's termination. Vendor will not be obligated to
pay any bonus to any Affected Employee who (1) voluntarily
resigns from employment with Vendor prior to [*], (2) is
dismissed by Vendor for misconduct (e.g., fraud, drug abuse,
theft) or unsatisfactory performance in respect of his or her
duties and responsibilities to Customer or Vendor, or (3) is
unable to perform his or her duties due to his or her death or
disability. Vendor may elect to pay such bonuses in the form of
[*], if agreeable to the Affected Employee in his or her sole
discretion.
6. BUSINESS UNIT ASSET PURCHASE
On the Effective Date, Customer will sell to Vendor, and Vendor will buy
from Customer, all of Customer's right, title and interest in the Business Unit
Assets, pursuant to a Business Unit Asset Purchase Agreement entered into by the
Parties, a copy of which is attached hereto as EXHIBIT U. The purchase price of
the Business Unit Assets, which shall be payable by Vendor to Customer upon the
Effective Date, shall be equal to [*] ($[*]) (the "Business Unit Asset Purchase
Price") and shall be inclusive of all taxes.
7. PROJECT MANAGEMENT
(a) Prior to the execution of this Agreement, Customer and Vendor
shall each appoint a designated representative (each, an
"Account Manager") who shall be authorized to act as the primary
point of contact for each Party in dealing with the other Party
with respect to all aspects of this Agreement.
(b) Vendor's appointment of any Vendor Account Manager shall be
subject to Customer's consent, which shall not be unreasonably
withheld. Before the initial or subsequent assignment of an
individual to such position, Vendor shall notify Customer of the
proposed assignment, introduce the individual to appropriate
Customer representatives, and consistent with Vendor's personnel
practices, provide Customer with a resume and any other
information about the individual reasonably requested by
Customer. Vendor agrees to discuss with Customer any objections
Customer may have to such assignment and the Parties will in
good faith resolve such concerns on a mutually agreed basis.
(c) When possible, Vendor will give Customer at least thirty (30)
days advance notice of a change of the person appointed as the
Vendor Account
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
-6-
<PAGE> 10
Manager. Vendor will discuss with Customer any objections
Customer may have to such change and the Parties will in good
faith resolve such concerns on a mutually agreed basis. Vendor
shall not reassign or replace any Vendor Account Manager during
this Agreement unless Customer consents to such reassignment or
replacement (which consent shall not be unreasonably withheld)
or the individual (1) voluntarily resigns from employment with
Vendor, (2) is dismissed by Vendor for misconduct (e.g., fraud,
drug abuse, theft) or unsatisfactory performance in respect of
his or her duties and responsibilities to Customer or Vendor,
(3) is unable to perform his or her duties due to his or her
death or disability. Vendor may, with Customer's prior consent
(which shall not be unreasonably withheld), reassign the Vendor
Account Manager if the Vendor Account Manager voluntarily
requests a change of assignment.
(d) Vendor shall cause the person assigned as its Account Manager to
devote all reasonably necessary working time and effort in the
employ of Vendor to his or her responsibilities for the delivery
of the Services under this Agreement, subject to Vendor's
reasonable holiday, vacation and medical leave policies;
provided, however, that the Vendor Account Manager shall be
available to Customer within one (1) hour upon request during
all ordinary working hours.
(e) Each Party's Account Manager shall issue all consents or
approvals and make all requests on behalf of the Party.
References in this Agreement or any other related document to
Customer or Vendor making commitments or agreements or giving
consents or approvals on behalf of the respective Party shall
mean each Party's designated Account Manager.
(f) Customer shall appoint three members of its management staff and
Vendor shall appoint three members of its management staff,
including the Vendor Account Manager and the Customer Account
Manager, to serve on a management committee (the "Management
Committee"). Customer shall designate one of its members on the
Management Committee to act as chairperson of the Management
Committee. The Management Committee shall meet on a weekly basis
to review Vendor's performance under this Agreement during the
prior week and resolve any new or outstanding relationship
issues.
(g) Customer and Vendor have designated on EXHIBIT G--KEY EMPLOYEES
certain Affected Employees as Key Employees for the performance
of Services under this Agreement. Customer and Vendor may
mutually agree during the Term of this Agreement to modify the
list of Key Employees. Vendor shall cause the Key Employees to
each devote all reasonably necessary working time and effort in
the employ of Vendor to his or her responsibilities for the
provision of the Services under this Agreement,
-7-
<PAGE> 11
subject to Vendor's reasonable holiday, vacation and medical
leave policies.
(h) Vendor shall not reassign or replace any Key Employee without
prior notice to Customer and without Customer's prior consent
(which shall not be unreasonably withheld), if such reassignment
or replacement would materially impact Vendor's ability to
provide the Services or achieve the Service Level Agreements.
(i) If Customer reasonably and in good faith determines that it is
not in Customer's best interests for any Vendor or subcontractor
employee to be appointed to perform or to continue performing
any of the Services, Customer shall give Vendor written notice
specifying the reasons for its position and requesting that such
employee not be appointed or be removed from the Vendor employee
group servicing Customer and be replaced with another Vendor
employee or subcontractor. Promptly after its receipt of such a
notice, Vendor shall investigate the matters set forth in the
notice, discuss with Customer the results of the investigation
and resolve the matter in a manner reasonably acceptable to
Customer and Vendor.
(j) Vendor shall take commercially reasonable actions to efficiently
administer, manage, operate and use the resources employed by
Vendor to provide and perform the Services under this Agreement.
Vendor shall at all times utilize sufficient staff of suitable
training and skills to provide the Services.
(k) Vendor shall not subcontract any of the Services without
Customer's prior written consent, which shall not be
unreasonably withheld; provided, however, that Vendor shall be
permitted to utilize temporary employees (either directly or
through a third party recruiting firm) as may be reasonably
necessary, but in no event for a total period in excess of
thirty (30) days.. The consent of Customer to any subcontracting
relationship shall not relieve Vendor of its obligations and
responsibilities under this Agreement.
(l) While at Customer's service locations, Vendor's personnel and
agents shall (i) comply with reasonable requests from Customer
and standard rules and regulations of Customer communicated to
Vendor regarding personal and professional conduct (including
the wearing of a particular uniform, identification badge, or
personal protective equipment and adhering to Customer
regulations and general safety practices or procedures)
generally applicable to such Service Locations and (ii)
otherwise conduct themselves in a businesslike manner.
8. PERFORMANCE
-8-
<PAGE> 12
(a) The performance benchmarks for the Services provided to the
Customer are described in EXHIBIT H--SERVICE LEVEL AGREEMENTS,
which sets forth certain Service Levels. Vendor agrees that its
performance of the Services will meet or exceed each of the
Service Levels from the Effective Date and thereafter during the
Term, subject to the limitations set forth in this Agreement.
Vendor shall not be responsible for any failure to meet the
Service Levels resulting from any Force Majeure Event as and to
the extent set forth in SECTION 18.
(b) Customer and Vendor shall review the Service Levels monthly
during the Term, and to the extent any Service Levels are no
longer appropriate because of an increase, decrease, or change in
the Services, the Parties shall in good faith agree to adjust the
Service Levels. Both Parties must agree upon the reported Service
Levels as well as any adjustment to the Service Levels.
(c) The Parties may, at any time upon mutual agreement, adjust the
Service Levels. In addition, either Customer or Vendor may, at
any time upon notice to the other party, initiate negotiations to
review and adjust any Service Level, which such Party in good
faith believes is inappropriate at the time.
(d) As part of the Services, Vendor shall provide monthly performance
reports to Customer in the form set forth in EXHIBIT O--REPORTING
TEMPLATE or such other form as may be agreed upon by Customer and
Vendor. Reports will be made available to Customer no later than
ten (10) working days after the close of a calendar month, and
Customer and Vendor shall meet within five (5) working days after
the delivery of the report to review the report.
(e) Vendor shall pay to Customer Service Credits for any failure to
achieve the Service Levels as and to the extent set forth in
Exhibit I-Service Credits. Billing adjustments will be made on a
monthly basis to reflect Service Credits to Customer.
(f) In the event of a Critical Disruption, Customer may elect to
declare a critical service disruption, and Vendor shall, upon
notice from Customer, initiate at Vendor's expense appropriate
disaster recovery procedures in accordance with the Disaster
Recovery Plan. Without limiting the Parties' rights and
obligations under SECTION 18 of this Agreement, in the event that
there are more than [*] Critical Disruption events during any [*]
month period, Customer shall be entitled to terminate this
Agreement upon notice to Vendor in accordance with SECTION 23(c)
of this Agreement.
(g) Within [*] days after receipt of a notice from Customer alleging
Vendor's material failure to provide the Services or Vendor's
repeated failure to provide the Services in accordance with
"Priority 1" Service Levels as
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
-9-
<PAGE> 13
described in the Service Levels, Vendor shall (a) perform a
root-cause analysis to identify the cause of such failure, (b)
correct such failure, (c) provide Customer with a written report
detailing the cause of, and procedure for correcting, such
failure, and (d) provide Customer with reasonable assurance that
such failure will not reoccur. Vendor's obligations under this
SECTION 8(g) shall be in addition to its other obligations under
this SECTION 8 and under this Agreement.
(h) In the performance of its obligations under this Agreement,
Vendor shall at all times provide to Customer a quality of
service and terms for service that are at least as favorable as
those provided by Vendor to any other Vendor customer. As part
of this commitment, but without limitation, Vendor shall provide
to Customer Vendor's best pricing and priority of access to
Vendor's personnel. As part of the Services, Vendor shall, upon
Customer's request, provide to Customer equal access to Vendor's
specialized technical personnel and resources consistent with
Vendor's other commercial customers receiving substantially
similar goods and services. This SECTION 8(h) shall not require
Vendor to adjust pricing previously agreed upon with Customer,
should Vendor thereafter provide more favorable pricing to any
other Vendor customer.
(i) In the event that any Dispute concerning the Vendor's
performance of any particular Service is submitted to the Senior
Executives pursuant to SECTION 22(c), the Parties shall
establish and track a Service Level applicable to the Service
that is the subject of the Dispute. The Senior Executives shall
mutually agree upon the applicable Service Level. During the
period in which the Senior Executives are attempting to resolve
the Dispute, Vendor shall report its performance against the
Service Level to the Senior Executives as required by the Senior
Executives, but in no case less than once per week.
9. PAYMENTS
(a) Customer will pay a Monthly Services Charge for Services
rendered hereunder in accordance with the schedule of fees
attached as EXHIBIT J--PRICING SCHEDULE FOR SERVICES, as
invoiced in accordance with SECTION 9(b). Customer will pay the
applicable charges for all Additional Services as invoiced in
accordance with the associated schedule of fees set forth in
EXHIBIT J or as otherwise agreed to by the Parties for such
services; provided, however, that all fees for such Additional
Services must be supported by a written service request approved
by Customer for such Additional Services.
(b) For the first calendar month of this Agreement, the Monthly
Services Charge shall be equal to $[*], and Vendor may invoice
Customer for one hundred percent (100%) of the first Monthly
Services Charge upon
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
-10-
<PAGE> 14
the execution of this Agreement. Thereafter during the term of
this Agreement, Vendor shall invoice Customer for subsequent
monthly charges in accordance with Exhibit J--Pricing Schedule
for Services, on or after the first (1st) business day of each
calendar month. Vendor shall produce a final, reconciled invoice
to Customer no later than thirty (30) days following the
termination of this Agreement.
(c) Each monthly invoice also shall include any Service Credits due
to Customer from Vendor in accordance with SECTION 8 of this
Agreement, any charges due under any approved ASR's and any
other items provided for in EXHIBIT J--PRICING SCHEDULE FOR
SERVICES.
(d) Except as may be set forth in EXHIBIT R--EXCLUDED EXPENSES or as
may be mutually agreed to in connection with any Additional
Services, Vendor shall be responsible for the payment of all of
its expenses in connection with this Agreement incurred both
prior to the Effective Date and during the Term of this
Agreement. Customer shall not be required to pay any additional
fee or expense unless agreed to in advance by the Parties.
(e) Customer will cause the full amounts of the invoice for the
first Monthly Services Charge to be paid upon receipt and will
cause all undisputed amounts on all other invoices to be paid
within thirty (30) days of receipt.
(f) Vendor shall at Customer's request provide any and all
information reasonably required by Customer to permit
reconciliation of invoices as compared to the applicable pricing
schedule.
(g) Customer shall at Vendor's request and subject to any
confidentiality obligations of Customer, provide any and all
information reasonably required by Vendor to allow Vendor to
determine which resources will be required to meet Vendor's
obligations under this Agreement.
(h) During a transition period which shall last no longer than sixty
(60) days from the Effective Date, Customer shall continue to
process and pay on behalf of Vendor and in the capacity of agent
for Vendor, invoices which are Vendor's responsibility to
process and pay in accordance with SECTIONS 14 and 15 of this
Agreement. Vendor shall reimburse Customer for such payments at
the end of each calendar month. The intent of this SECTION 9(h)
is to permit Vendor sufficient time to assume the invoice
payment process from Customer.
(i) Customer shall pay Vendor the [*] and [*] in accordance with
SECTION 5(c), and Vendor shall pay Customer the Business Unit
Asset Purchase Price in accordance with SECTION 6 and $[*]
([*]), ([*]) for the transfer of certain software licenses as
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
-11-
<PAGE> 15
contemplated under the [*], on the Effective Date.
(j) Customer and Vendor shall cooperate to segregate the fees and
payments made under this Agreement into the following separate
line items: (1) those for taxable Services, (2) those for
nontaxable Services, (3) those for which a sales, use, or
similar tax has already been paid by Vendor, and (4) those for
which Vendor functions merely as a paying agent for Customer in
receiving goods, supplies, or services (including leasing and
licensing arrangements) that otherwise are nontaxable or have
previously been subject to tax.
(k) In the event either Customer or Vendor disputes the accuracy or
applicability of a charge or credit or other financial
arrangement described in this Agreement, the disputing party may
withhold payment of the disputed amount without interest,
penalty or breach of this Agreement, and shall notify the other
Party of such dispute as soon as practicable after the
discrepancy has been discovered. The Parties will investigate
and resolve the dispute using the dispute resolution processes
provided herein.
10. CLINIC AGREEMENTS
(a) It is expressly understood that the Clinic Services which Vendor
shall provide under this Agreement are intended only to be
transitional services designed to provide support for each
Clinic from the Effective Date until the end of the Clinic
Services Period in which the Clinic moves from receiving such
services from Customer (under an existing contractual obligation
between Customer and the Clinic) to receiving such services from
another party (such as Vendor, under an separate, individual
agreement with the Clinic). Vendor shall be responsible for
obtaining agreements to provide the Clinics continued service
beyond the end of the Clinic Services Period. In response to
reasonable requests received from Vendor from time to time
during the Term, Customer shall provide such reasonable
cooperation to Vendor in Vendor's efforts to market services to
Clinics, as Customer may determine to be appropriate under the
circumstances. Vendor acknowledges and agrees, however, that
Customer has made no representation or commitment to Vendor
concerning the number of Clinics that may ultimately engage
Vendor to provide Services to Clinics on a long-term basis, and
that Customer shall have no responsibility or liability to
Vendor in the event that the number of Clinics which elect to
engage Vendor to provide Services is less than Vendor's
expectations or business projections.
(b) The contractual obligations between Customer and the individual
Clinics are expected to be individually terminated or to expire,
on a rolling basis, during the Term of this Agreement. As of the
end of the Clinic Services Period, Vendor shall no longer be
responsible under this Agreement to provide
-12-
<PAGE> 16
Clinic Services to the particular Clinic, and Customer shall not
be responsible for the payment of any fees associated with
services for that particular Clinic which are incurred after
such date of termination or expiration.
(c) Vendor shall be solely responsible for any licenses required to
provide services for which it directly contracts with a Clinic
to provide.
(d) Vendor and Customer shall meet as necessary during the Term of
this Agreement to discuss the projected roll-off of each
individual Clinic and to develop appropriate plans to support
and facilitate such roll-off.
(e) All disputes, controversies, or claims arising out of or
relating to the Clinic Services which are brought or raised by a
Clinic shall be referred directly to the Vendor Account Manager.
The Vendor Account Manager shall inform the Customer Account
Manager of the dispute and the Parties shall work together in
good faith to resolve the dispute brought by the Clinic. Such
claims shall be subject to the dispute resolution procedures
under SECTION 22 of this Agreement, with Customer acting on
behalf or in conjunction with the Clinic.
(f) Vendor and Customer acknowledge that Customer may not be
successful in terminating its obligation to each Clinic to
provide Clinic Services to that Clinic (in such case, each, a
"Management Company Clinic"), and that [*]. Vendor agrees, as
part of the Services, that it shall provide Clinic Services to
[*] on the terms and conditions (including, without limitation,
the pricing terms set forth in EXHIBITS D and J) provided for in
this Agreement, either pursuant to an amendment of this
Agreement or a separate agreement between Vendor, Customer, the
[*] or some other party, incorporating such terms and
conditions, at Customer's discretion.
11. SERVICE LOCATIONS AND SECURITY
(a) Vendor shall not [*], without Customer's prior written approval,
which shall not be unreasonably withheld.
(b) As part of the Services, Vendor shall maintain and enforce at
the Service Locations safety and security procedures that are at
least (i) equal to industry standards for such Service Locations
and (ii) as rigorous as those procedures in effect at the
Service Locations as of the effective date. Vendor shall
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
-13-
<PAGE> 17
comply with and maintain the safety and security procedures
which are in effect at the Service Locations as of the Effective
Date.
(c) As part of the Services, Vendor shall implement and maintain
security processes, procedures and techniques in accordance with
industry standards designed to detect and prevent unauthorized
access to any and all networks and systems which process
Customer information, and shall implement and maintain virus
protection and similar software and procedures in accordance
with industry standards designed to detect and prevent software
viruses and any corruption of such networks and systems and the
data contained therein.
(d) As part of the Services, Vendor shall immediately inform
Customer of any breach in security or potential security issues,
that either (i) has a material impact on the delivery of the
Services, or (ii) may not be material in itself, but represents
a single instance in a pattern of breaches which collectively
are material. Vendor shall maintain tracking procedures
sufficient to allow it to evaluate security breaches and
determine whether they must be reported to Customer under the
preceding sentence.
(e) As part of the Services, Vendor shall provide access to and
cooperate with Customer's internal and external auditors in
respect to any audit or review of the Service Locations. Vendor
will, within a reasonable time, correct any issues raised in an
audit letter associated with items included in the scope of this
Agreement.
12. MANAGEMENT AND CHANGE CONTROL PROCESS
(a) Vendor shall, in the performance of the Services, follow any
procedures reasonably required by Customer in connection with
the following areas: (i) security; (ii) issue resolution; (iii)
change control; (iv) billing and invoicing; (v) additional
service requests; and (vi) performance tracking.
(b) Vendor shall inform Customer in advance of all proposed changes
to systems and networks used and controlled by Vendor in
performing its obligations under this Agreement, where such
change would materially alter the functionality, architecture or
technical environment of such systems or networks or would have
a material, adverse effect on the Services. Approval and
implementation of such changes shall be made pursuant to the
Change Control Process, as set forth in EXHIBIT K. No change may
be implemented without Customer's prior approval (which shall
not be unreasonably withheld) except as may be necessary on a
temporary basis to maintain the continuity of the Services.
Customer shall respond with reasonable promptness to requests
for approval from Vendor under this SECTION 12(b).
-14-
<PAGE> 18
(c) Vendor shall (i) schedule all projects and changes so as not to
unreasonably interrupt Customer's business operations, (ii)
monitor the status of changes, and (iii) document and provide to
Customer notification (which may be given orally provided that
such oral notice is confirmed in writing to Customer within five
business days) of all changes performed on a temporary basis to
maintain the continuity of the services, no later than the next
business day after the change is made.
13. DATA AND REPORTS
(a) All data and information submitted to Vendor by Customer or by
any Clinic in connection with the Services (the "Customer Data")
is and shall remain the property of Customer or the applicable
Clinic, [*]
(b) As part of the Services, Vendor shall promptly correct, with
Customer's reasonable cooperation, any errors or inaccuracies in
the Customer Data and the Reports that (1) are caused by Vendor,
its agents, subcontractors, or third party product or service
providers or (2) that were typically corrected by Customer in
normal course prior to the Effective Date. At Customer's
reasonable request, Vendor shall promptly correct any other
material errors or inaccuracies in the Customer Data or Reports.
(c) As part of the Services, Vendor shall promptly produce at
Customer's request a copy, in the format and on the media
available to the Vendor at the time of the request, all data
relating to a Clinic. All data relating to a Clinic which is
generated prior to this Agreement and through the end of the
Clinic Services Period, shall be maintained by Vendor throughout
the Term of this Agreement and made available to Customer at
Customer's request and in accordance with the procedures set
forth in this SECTION 13(c).
(d) As part of the Services, Vendor shall upon request by Customer
at any time and for any reason, at Customer's expense, promptly
return to Customer, in the format and on the media requested by
Customer, all Customer Data and all Clinic Data; [*]. Except as
provided herein, and unless necessary to provide the Services,
at Customer's request Vendor shall erase or destroy all Customer
-15-
<PAGE> 19
Data and Clinic Data in Vendor's possession. Any archival tapes
containing Customer Data or Clinic Data shall be used solely for
back-up purposes.
14. SOFTWARE RIGHTS
(a) The obligations and rights of the Parties with respect to
software required to provide the Services shall be as set forth
in this SECTION 14.
(B) EXHIBIT L--SOFTWARE RIGHTS provides a detailed schedule of all
software required to provide the Services, and categorizes such
software as follows: (i) proprietary Customer-owned software
("Customer Owned Software") which shall be licensed to Vendor in
accordance with SECTION 14(C); (ii) software which is licensed
by Customer from a third party and which Vendor shall operate
under the agency arrangement set forth in SECTION 14(D) and
SECTION 16 ("Retained Software"); (iii) third party software for
which Customer shall transfer the license to Vendor in
accordance with SECTION 14(E) ("Transferred Software"); (iv)
proprietary Vendor-owned software ("Vendor Owned Software")
which shall be used by Vendor in connection with this Agreement;
and (v) software which is licensed by Vendor from a third party
("Vendor Provided Software") which shall be used by Vendor in
connection with this Agreement. The Customer Owned Software,
Retained Software, Transferred Software, Vendor Owned Software
and Vendor Provided Software are collectively referred to herein
as the "Software".
(c) Customer hereby grants to Vendor the right and license to use,
operate, modify and copy the Customer Owned Software during the
term of this Agreement solely for the purposes of providing
Services under this Agreement; provided, however, that only for
Customer Owned Software which is identified on EXHIBIT L as
being subject to a perpetual license, Customer instead hereby
grants Vendor the right and license to use, operate, modify and
copy the such Customer Owned Software in perpetuity for all
purposes. Any enhancements or modifications to the Customer
Owned Software made during the Term of this Agreement, and any
related documentation, shall be and will remain the exclusive
property of Customer. Customer Owned Software is licensed "AS
IS" without warranty of any kind.
(d) Subject to Customer and Vendor obtaining any required
third-party consents, Customer will obtain appropriate
authorizations permitting Vendor to exercise all of Customer's
rights under the Retained Software, and Vendor will assume all
of Customer's obligations under the Retained Software. The
Parties will enter into appropriate agency agreements in
connection with the Retained Software. Unless otherwise noted on
EXHIBIT L, Vendor shall be responsible for the performance of
all obligations under the applicable licenses, including without
limitation
-16-
<PAGE> 20
payment of all maintenance fees, use charges and other related
fees and expenses, attributable to periods on or after the
Effective Date.
(e) Subject to Customer and Vendor obtaining any required
third-party consents, Customer shall transfer and assign to
Vendor all of Customer's rights under the licenses for the
Transferred Software. Vendor shall pay Customer the [*] in
consideration for transfer of the [*} as set forth in the [*].
The Parties will enter into appropriate assignment and
assumption agreements in connection with the Transferred
Software. Vendor shall be responsible for the performance of all
obligations under the applicable licenses, including without
limitation payment of all related maintenance fees, use charges
and other related fees and expenses, attributable to periods on
or after the Effective Date.
(f) Vendor shall be responsible for obtaining all licenses for
Vendor Provided Software and shall be responsible for the
performance of all obligations under the licenses therefor,
including without limitation payment of all maintenance fees,
use charges and other related fees and expenses, however
designated, for the Vendor Provided Software, and Customer shall
have no obligation to obtain such licenses or any required
third-party consents for such products.
(g) With the cooperation of the other Party, the Parties shall use
their best efforts to obtain all third party consents required
under this SECTION 14. Except as set forth in EXHIBIT L, Vendor
shall be responsible for obtaining and paying for any consents
necessary to allow Vendor to use any of the Software to perform
its obligations under this Agreement. In the event that any
required consent is not obtained, then, unless and until such
required consent is obtained, the Parties shall cooperate with
each other in achieving a reasonable alternative arrangement
under which Vendor may perform the Services without causing a
breach or violation of any agreement under which such required
consent is to be obtained.
(h) Except as may be previously approved by Customer in writing,
Vendor shall not make any changes or modifications to the
Software that would adversely alter the functionality of the
Software, degrade the performance of the Software, adversely
affect the day-to-day operations of Customer's business, or
violate the applicable license agreement for the Software.
(i) Vendor shall be responsible for managing, administering and
maintaining the agreements for the Software, including any
renewal, termination or cancellation notices or dates, the
processing of invoices and the payment of any fees in connection
therewith.
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
-17-
<PAGE> 21
(j) Vendor shall be responsible at no charge to Customer for any
modification or enhancement to, or substitution for, the
Software necessitated by unauthorized changes to the Software by
Vendor.
(k) Except to the extent caused by Customer, any modification,
termination, or cancellation fees imposed upon Customer in
connection with any modification, termination, or cancellation
of any agreement in connection with the Software which was (i)
caused by or resulted from an action or omission by Vendor,
including Vendor's failure to notify Customer of a renewal,
termination, or cancellation date in a timely manner, or (ii)
imposed by Vendor or its affiliates, shall be paid by Vendor.
(l) Each of Customer and Vendor shall promptly inform the other
party of any breach of, or misuse or fraud in connection with,
any agreement in respect of the Software 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 as a result
of a Party's failure to promptly notify the Other pursuant to
the preceding sentence), associated taxes, legal expenses, and
other incidental expenses incurred by the other Party as a
result of action or inaction by the paying Party.
14A. SERVICE RESOURCES
The Service Resources described on EXHIBIT S--SERVICE RESOURCES shall be
transferred to Vendor. Vendor shall be responsible for and shall pay all costs,
fees and other expenses associated with such relationships from and after the
Effective Date.
15. HARDWARE RIGHTS
(a) The Parties obligations and rights with respect to hardware
required to provide the Services shall be as set forth in this
SECTION 15.
(B) EXHIBIT M--HARDWARE RIGHTS provides a detailed schedule of all
hardware required to provide the Services, and categorizes such
hardware as follows: (i) Customer-owned hardware which shall be
transferred to Vendor in accordance with SECTION 15(c) ("Owned
Hardware"); (ii) hardware which is leased by Customer from a
third party and which Vendor shall operate under the agency
arrangement set forth in SECTION 15(d) and SECTION 16 ("Retained
Hardware"); (iii) leased hardware for which Customer shall
transfer the lease to Vendor in accordance with SECTION 15(e)
("Leased Hardware"); and (iv) hardware which is owned or leased
by Vendor from a third party ("Vendor Provided Hardware") which
shall be used by Vendor in connection with this Agreement. The
Owned Hardware, Retained Hardware, Leased Hardware and Vendor
Provided Hardware are collectively referred to herein as the
"Hardware".
-18-
<PAGE> 22
(c) The Owned Hardware shall be conveyed to Vendor as part of the
Business Unit Assets in accordance with SECTION 6 of this
Agreement.
(d) Subject to Customer and Vendor obtaining any required
third-party consents, Customer will obtain appropriate
authorizations permitting Vendor to exercise all of Customer's
rights under leases for the Retained Hardware, and Vendor will
assume all of Customer's obligations under the leases for the
Retained Hardware which accrue on or after the Effective Date.
The Parties will enter into appropriate agency agreements in
connection with the Retained Hardware. Unless otherwise noted on
EXHIBIT M, Vendor shall be responsible for the performance of
all obligations under the applicable leases, including without
limitation payment of all maintenance fees, use charges and
related fees and expenses, attributable to periods on or after
the Effective Date.
(e) Subject to Customer obtaining any required third-party consents,
Customer shall transfer and assign to Vendor all of Customer's
rights under the leases for the Leased Hardware. The Parties
will enter into appropriate assignment and assumption agreements
in connection with the Leased Hardware. Unless otherwise noted
on EXHIBIT M, Vendor shall be responsible for the performance of
all obligations under the applicable leases, including without
limitation payment of all maintenance fees, use charges and
related fees and expenses, attributable to periods on or after
the Effective Date.
(f) Vendor shall be responsible for obtaining all rights to Vendor
Provided Hardware and shall be responsible for the performance
of all obligations under the leases and agreements therefor,
including without limitation payment of all lease charges,
maintenance fees, use charges and related fees and expenses,
however designated, for the Vendor Provided Hardware, and
Customer shall have no obligation to obtain such leases or
agreements or any required third-party consents for such
products.
(g) With the cooperation of the other Party, the Parties shall use
best efforts to obtain all third party consents required under
this SECTION 15; provided, however, that Vendor shall be
responsible for obtaining and paying for all consents necessary
to allow Vendor to use any of the Hardware (excluding the Owned
Hardware) to perform its obligations under this Agreement. In
the event that any required consent is not obtained, then,
unless and until such required consent is obtained, the Parties
shall cooperate with each other in achieving a reasonable
alternative arrangement under which Vendor may perform the
Services without causing a breach or violation of any agreement
under which such required consent is to be obtained.
-19-
<PAGE> 23
(h) Except as may be approved by Customer, Vendor shall not make any
changes or modifications to the Hardware that would adversely
alter the functionality of the Hardware, degrade the performance
of the Hardware, adversely affect the day-to-day operations of
Customer's business, or violate the applicable lease agreements
for the Hardware.
(i) Vendor shall be responsible for managing, administering and
maintaining the agreements for the Hardware, including any
renewal, termination or cancellation notices or dates, the
processing of invoices and the payment of any fees in connection
therewith.
(j) Vendor shall be responsible at no charge to Customer for any
modification or enhancement to, or substitution for, the
Hardware necessitated by unauthorized changes to the Hardware by
Vendor.
(m) Except to the extent caused by Customer, any modification,
termination, or cancellation fees imposed upon Customer in
connection with any modification, termination, or cancellation
of any agreement in connection with the Hardware which was (i)
caused by or resulted from an action or omission by Vendor,
including Vendor's failure to notify Customer of a renewal,
termination, or cancellation date in a timely manner, or (ii)
imposed by Vendor or its affiliates, shall be paid by Vendor.
(n) Each of Customer and Vendor shall promptly inform the other
party of any breach of, or misuse or fraud in connection with,
any agreement in respect of the Hardware 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 as a result
of a Party's failure to promptly notify the other pursuant to
the preceding sentence), associated taxes, reasonable legal
expenses, and other incidental expenses incurred by the other
Party as a result of the first Party's nonperformance of its
obligations under this Agreement with respect to the Hardware.
(o) In the event that Vendor or Customer identifies any equipment or
hardware in a Service Location which is not listed on EXHIBIT M,
the Parties shall reasonably cooperate with each other to
determine whether such equipment or hardware shall be retained
by Customer or shall be subject to this Agreement as Owned
Hardware (in consideration of an appropriate purchase price to
be paid by Vendor to Customer), Retained Hardware or Leased
Hardware.
16. AGENCY
(a) Customer appoints Vendor as the agent of the Customer, and
Vendor accepts such appointment as a part of the Services, for
the limited
-20-
<PAGE> 24
purposes of administering, managing, supporting, operating under
and paying under such Third Party Agreements as to which
Customer has not obtained required consents in accordance with
this Agreement. Customer does not appoint Vendor as its agent
for the purposes of entering into oral or written agreements
with any individual or business entity for or in the name of the
Customer or its Affiliates, without the prior express written
approval of Customer.
(b) Vendor will perform its obligations and responsibilities as an
agent pursuant to SECTION 16(a) under all Third Party Agreements
subject to the provisions of this Agreement. Upon Customer's
request, Vendor will provide to Customer all information and
documentation Customer may reasonably request related to its
activities as the Customer's agent with regard to such Third
Party Agreements. Customer may terminate or provide additional
restrictions on Vendor's agency appointment with respect to any
Third Party Agreement at any time in Customer's discretion
provided that such action does not affect Vendor's provision of
the Services.
17. DISASTER RECOVERY
As part of the Designated Services, Vendor shall develop, implement and
maintain a disaster recovery plan (the "Disaster Recovery Plan") that is
reasonably acceptable to Customer. Vendor shall develop and present to Customer
an initial Disaster Recovery Plan within [*] from the Effective Date of this
Agreement, and shall implement the final, approved Disaster Recovery Plan no
later than [*] from the Effective Date. The Disaster Recovery Plan shall include
at least the elements set forth in EXHIBIT P--DISASTER RECOVERY PLAN. During the
Term of this Agreement, Vendor shall (a) periodically update and test the
operability of such plan, (b) certify to Customer that the plan is fully
operational at least once during every [*] period, and, (c) implement the plan
upon notice of a disaster from Customer. All Critical Functions shall be
restored within [*].
18. FORCE MAJEURE
(a) Each Party shall be excused from performance under this
Agreement and shall have no liability to the other for any
period it is prevented from performing any of its obligations,
in whole or in part, as and to the extent set forth in this
SECTION 18, as a result of an event or delay that could not have
been prevented by reasonable precautions, was not caused by
Vendor's (or its subcontractor's) negligence, and cannot
reasonably be circumvented by the non-performing Party through
the use of alternate sources, work-around plans, or other means,
and which is caused, directly or indirectly, by fire, flood,
earthquake, elements of nature or acts of God, acts
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
-21-
<PAGE> 25
of war, terrorism, riots, civil disorders, rebellions or
revolutions in the United States, strikes, lockouts, or labor
difficulties, or any other similar cause beyond the reasonable
control of such Party (each, a "Force Majeure Event").
(b) If a Force Majeure Event occurs, the nonperforming Party will be
excused from any further performance or observance of the
obligation(s) so affected for as long as such circumstances
prevail and such Party continues to use commercially reasonable
efforts to recommence performance or observance whenever and to
whatever extent possible without delay. Any Party so delayed in
its performance will promptly notify the other by telephone and
describe at a reasonable level of detail the circumstances
causing such delay (to be confirmed in writing within [*] hours
after the inception of such delay).
(c) If any Force Majeure Event substantially prevents, hinders, or
delays performance of the Services necessary for the performance
of Customer's Critical Functions for more than [*] ([*])
consecutive days, then at Customer's option:
(i) [*]
(ii) Customer may terminate this Agreement as of a date
specified by Customer in a written notice of termination
to Vendor, and Customer will pay all fees due and
payable through the termination date. If Customer elects
such termination, Customer shall not be obligated to pay
any other termination or other fees, however described,
to Vendor, except fees for Services Transfer Assistance.
(d) Whenever a Force Majeure Event or a disaster causes Vendor to
allocate limited resources between or among Vendor's customers
and affiliates at the affected service locations, Customer shall
receive at least the same priority in respect of such allocation
as Vendor's other commercial customers receiving substantially
similar goods and services.
19. AUDITS
(a) Upon notice from Customer, Vendor shall provide, and shall cause
its subcontractors to provide, such auditors and inspectors as
Customer or any regulatory authority may reasonably designate in
such notice with reasonable
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
-22-
<PAGE> 26
access (i) during normal business days and hours (except as may
be necessary to perform security audits) to the premises of
Vendor and its subcontractors and (ii) at any time at the
Service Locations for the purpose of performing audits or
inspections of the business of Customer (including Vendor's
delivery of any Services being provided in support of such
business being audited).
(b) As part of the Services, Vendor shall provide, and shall cause
its subcontractors to provide, such auditors and inspectors any
assistance that they may reasonably require; provided, however,
that to the extent such assistance exceeds [*] full days over
the course of any consecutive [*] period, Vendor shall charge
Customer, and Customer shall pay Vendor, fees for such
assistance at Vendor's then-current time and materials rates.
(c) If any audit by a regulatory authority having jurisdiction over
Customer or Vendor results in Customer or Vendor being notified
that Vendor or its subcontractors are not in compliance with any
requirement relating to the Services, Vendor shall, at its own
expense and within the period of time specified by such
regulatory authority, comply with such regulatory requirements.
(d) If any audit by an auditor designated by Customer results in
Customer or Vendor being notified that Vendor or its
subcontractors are not in compliance with any generally accepted
accounting principle or other reasonable audit requirement
relating to the Services, Vendor shall, within reason, at its
own expense and within a reasonable period of time, use its best
efforts to comply with such requirement.
(e) Upon notice from Customer, Vendor shall provide, and shall cause
its subcontractors to provide, Customer with access to such
records and documentation as may be reasonably necessary for
Customer to determine the accuracy of Vendor's charges to
Customer. If, as a result of such audit, it is determined that
Vendor has overcharged Customer or Customer has underpaid
Vendor, Customer shall notify Vendor of the amount of such
overcharge or underpayment. In the case of an overcharge, Vendor
shall promptly pay to Customer the amount of the overcharge, or
in the case of an underpayment, Customer shall promptly pay to
Vendor the amount of the underpayment.
(f) In the event any such audit by Customer or its agents reveals
an overcharge to Customer by Vendor of [*] more in any fee
category, Vendor shall reimburse Customer for the reasonable
cost of such audit.
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
-23-
<PAGE> 27
(g) Vendor shall, during the Term of this Agreement and until four
(4) years after termination of this Agreement, make available,
upon appropriate written request by a state or federal
governmental entity or its representatives, a copy of this
Agreement and such books, documents, records and data of Vendor
as are necessary to verify the nature and extent of the costs to
Customer for Services under this Agreement and the accuracy of
invoices for such services.
20. CONFIDENTIAL INFORMATION
(a) Vendor and Customer each acknowledge that the other Party
possesses and will continue to possess information, which has
commercial value in its business and is not in the public
domain, that has been created, discovered, developed by it or
provided to it by a third party, and in which property rights
have been assigned or otherwise conveyed to it. "Confidential
Information" means any and all proprietary business information
in the possession of the disclosing Party treated as secret by
the disclosing party (that is, it is the subject of efforts by
the disclosing Party or its Affiliates that are reasonable under
the circumstances to maintain its secrecy) that does not
constitute a Trade Secret (defined below), including, without
limitation, any and all proprietary information in the
possession of such Party of which the receiving Party becomes
aware as a result of its access to and presence at the other
Party's facilities. "Trade Secrets" means information related to
the services or business of the disclosing Party or its
Affiliates or of a third party which (i) derives economic value,
actual or potential, from not being generally known to or
readily ascertainable by other persons who can obtain economic
value from its disclosure or use; and (ii) is the subject of
efforts by the disclosing Party or its Affiliates that are
reasonable under the circumstances to maintain its secrecy,
including without limitation (A) marking any information reduced
to tangible form clearly and conspicuously with a legend
identifying its confidential or proprietary nature; (B)
identifying any oral presentation or communication as
confidential immediately before, during or after such oral
presentation or communication; or (C) otherwise, treating such
information as confidential or secret. Assuming the criteria in
sections (i) and (ii) above are met, Trade Secrets include, but
are not limited to, technical and nontechnical data, formulas,
patterns, compilations, computer programs and software, devices,
drawings, processes, methods, techniques, designs, programs,
financial plans, product plans, and lists of actual or potential
customers and suppliers. "Company Information" means
collectively the Confidential Information and Trade Secrets.
Company Information also includes information which has been
disclosed to either Party by a third party which such Party is
obligated to treat as confidential or secret.
-24-
<PAGE> 28
(b) Customer and Vendor will each refrain from disclosing, will hold
as confidential and will use the same level of care to prevent
disclosing to third parties, the Company Information of the
other Party as it employs to avoid disclosure, publication or
dissemination of its own information of a similar nature but in
no event less than a reasonable standard of care.
Notwithstanding the foregoing, the Parties may disclose Company
Information in the case of Customer, to members of the Customer
Group and in the case of both Parties, the authorized
contractors and subcontractors involved in providing and using
the Services under this Agreement where: (i) such disclosure is
necessary to permit the members of the Customer Group and the
contractor or subcontractor to perform its duties hereunder or
use the Services; (ii) members of the Customer Group and the
contractor or subcontractor agree in writing to observe the
confidentiality and restricted use and disclosure covenants and
standards of care set forth in this SECTION 20 and under which
the disclosing Party is a third party beneficiary for all
purposes; and (iii) the receiving Party making the disclosure
assumes full responsibility for the acts or omissions of its
contractor or subcontractor and in the case of Customer, the
members of the Customer Group, no less than if the acts or
omissions were those of the receiving Party.
(c) Neither Customer nor Vendor shall use the Company Information of
the other Party except in the case of Vendor and its
subcontractors, in connection with the performance of the
Services and as otherwise specifically permitted in this
Agreement, and in the case of Customer, its contractors and
other members of the Customer Group, as specifically permitted
in this Agreement and in connection with the use of the
Services. Vendor shall be responsible to ensure that its
subcontractors comply with this SECTION 20(c) and Customer shall
be responsible to ensure that the members of the Customer Group
and its subcontractors comply with this SECTION 20(c).
(d) Without limiting the generality of the foregoing, neither Party
will publicly disclose the terms of this Agreement, except to
the extent permitted by this SECTION 20 and to enforce the terms
of this Agreement, without the prior written consent of the
other. Furthermore, neither Vendor nor Customer will make any
use of the Company Information of the other Party except as
contemplated by this Agreement; acquire any right in or assert
any lien against the other Party's Company Information except as
contemplated by this Agreement; or refuse to promptly return,
provide a copy of or destroy such Company Information upon the
request of the disclosing Party.
(e) Notwithstanding any other provision of the Agreement, neither
Party will be restricted in using, in the development,
manufacturing and marketing of its products and services and in
its operations, any data processing, system
-25-
<PAGE> 29
operations, applications development or network management
ideas, concepts, know-how and techniques which are retained in
the minds of employees who have had access to the other Party's
Company Information (without reference to any physical or
electronic embodiment of such information), unless such use
shall infringe any of such Party's patent rights, copyrights or
mask works rights.
(f) Notwithstanding the foregoing, this SECTION 20 will not apply to
any information which Vendor or Customer can demonstrate was:
(i) at the time of disclosure to it, in the public domain; (ii)
after disclosure to it, published or otherwise becomes part of
the public domain through no fault of the receiving Party; (iii)
without a breach of duty owed to the disclosing Party, is in the
possession of the receiving Party at the time of disclosure to
it; (iv) received after disclosure to it from a third party who
had a lawful right to and, without a breach of duty owed to the
disclosing Party, did disclose such information to it; or (v)
independently developed by the receiving Party without reference
to Company Information of the disclosing Party. Further, either
Party may disclose the other Party's Company Information to the
extent required by law or order of a court or governmental
agency. However, the recipient of such Company Information must
give the other Party prompt notice and make a reasonable effort
to obtain a protective order or otherwise protect the
confidentiality of such information, all at the disclosing
party's cost and expense. It is understood that the receipt of
Company Information under this Agreement will not limit or
restrict assignment or reassignment of employees of Vendor and
the Customer Group within or between the respective Parties and
their Affiliates.
(g) The receiving Party will immediately notify the disclosing
Party, orally or in writing in the event of any disclosure,
loss, or use in violation of this Agreement.
(h) The covenants of confidentiality set forth herein (i) will apply
after the Effective Date to any Company Information disclosed to
the receiving Party before and after the Effective Date and (ii)
will continue and must be maintained from the Effective Date
through the termination of the relationship between the Parties
and (A) with respect to Trade Secrets, until such Trade Secrets
no longer qualify as trade secrets under applicable law; and (B)
with respect to Confidential Information for a period equal to
the shorter of two (2) years after termination of the Parties'
relationship under this Agreement or until such Confidential
Information no longer qualifies as confidential under applicable
law. Neither Party will be responsible for the security of the
Company Information of the other Party during transmission via
public communications facilities, except to the extent that such
breach of security is caused by the failure of such Party to
-26-
<PAGE> 30
perform its obligations under this Agreement or the negligent
acts or omissions of such Party, its contractors, subcontractors
or Affiliates.
(i) Vendor acknowledges and agrees that all Clinic Data is owned by
the respective Clinics, and Vendor shall act in the capacity of
the custodian of such data during the Term of this Agreement.
Clinic Data shall be considered Confidential Information for the
purposes of this Agreement, and Vendor shall observe all
obligations and duties under this Section 20 with respect to
such data. In addition, Vendor shall be responsible for
complying with all federal and state laws applicable to the
Clinic Data.
21. REPRESENTATIONS AND WARRANTIES
(a) Vendor warrants, represents and covenants that (i) it has, and
during the Term will have, and each of the subcontractors that
it will use to provide and perform the Services has and during
the Term will have, the necessary knowledge, skills, experience,
qualifications, rights and resources to provide and perform the
Services in accordance with this Agreement; and (ii) the
Services will be performed for Customer in a diligent,
workmanlike manner in accordance with industry standards
applicable to the performance of such services.
(b) Vendor warrants, represents and covenants that the Services will
be rendered by the Vendor in a manner consistent with good
commercial practices.
(c) Vendor warrants, represents and covenants that it will perform
its responsibilities under this Agreement in a manner that, to
the best of its knowledge, does not infringe, or constitute an
infringement or misappropriation of, any patent, trade secret,
copyright or other proprietary right of any third party.
(d) Each Party hereby represents and warrants that (i) it has all
requisite corporate power and authority to enter, and fully
perform pursuant to, into this Agreement; (ii) the execution,
delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby have been duly and
properly authorized by all requisite corporate action on its
part; and (iii) this Agreement has been duly executed and
delivered by such Party.
(e) Each Party agrees at its cost and expense to obtain all
necessary regulatory approvals applicable to its business, to
obtain any necessary permits for its business, and to comply in
all material respects with all laws and regulatory requirements
applicable to the performance of its obligations under this
Agreement.
-27-
<PAGE> 31
(f) Vendor represents and warrants that as of the Effective Date,
Vendor has not disclosed to any unauthorized party any
Confidential Information.
(g) RESERVED
(h) Customer represents and warrants that, as of the Effective Date
and to its knowledge, the Customer Owned Software does not
infringe any copyright, patent or trade secret right of any
third party.
(i) Vendor represents and warrants that, as of the Effective Date
and to its knowledge, the Vendor Owned Software does not
infringe any copyright, patent or trade secret right of any
third party.
(j) NEITHER PARTY MAKES ANY WARRANTIES NOT SET FORTH EXPRESSLY IN
THIS AGREEMENT AND EXPLICITLY DISCLAIMS ALL OTHER WARRANTIES,
EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE.
22. DISPUTE RESOLUTION
(a) The Parties agree that they shall attempt to resolve issues
concerning this Agreement at the operational level using
standard business practices, cooperative approaches and
unemotional behavior. Among other resolution strategies, the
Parties may elect to use a staff facilitator to speed resolution
of the issue. All disputes, controversies, or claims arising out
of or relating to this Agreement (including the Exhibits hereto)
that are not so resolved ("Disputes") shall be referred to the
Vendor Account Manager and the Customer Account Manager prior to
escalation to the Management Committee. The Vendor Account
Manager and the Customer Account Manager shall maintain a log of
all Disputes detailing the date, circumstances, possible
solutions, assignments arising from the resolution process,
resolution schedule and ultimate disposition of such Dispute. If
the Customer Account Manager and the Vendor Account Manager are
unable to resolve, or do not anticipate resolving, the Dispute
within fifteen (15) days after referral of the matter to them,
the parties shall submit the Dispute to the Management
Committee.
(b) In the event a Dispute is submitted to the Management Committee,
the Management Committee shall meet within seven (7) days (or at
such other time as the Parties may designate) for the purpose of
resolving the Dispute. The Management Committee shall consider
Disputes in the order of the materiality of such Disputes, or if
it is unclear as to the priority of materiality, in the order
such Disputes are brought before it. In the event the Management
Committee is unable to resolve a Dispute within thirty (30)
-28-
<PAGE> 32
days, the Management Committee shall submit the dispute to the
Senior Executives pursuant to SECTION 22(c).
(c) In the event that the Management Committee is not successful in
resolving a Dispute within thirty (30) days after submission,
the Management Committee shall submit the dispute to the Chief
Executive Officer of Vendor and the Chief Information Officer or
the Chief Financial Officer of Customer (the "Senior
Executives"). The Senior Executives shall meet as necessary (but
in any case, at least once per week) for the purpose of
resolving the Dispute. No Dispute under this Agreement shall be
the subject of arbitration or other formal proceedings between
Customer and Vendor before being considered by the Management
Committee and the Senior Executives, pursuant to this SECTION
22, except for an action to seek injunctive relief to stay a
breach of this Agreement.
(d) Disputes that are not resolved by the procedures set forth above
may be submitted by either Party to binding and final
arbitration according to the rules of the American Arbitration
Association. The arbitration shall be heard before a single
arbitrator to be chosen by mutual consent of the Parties within
thirty (30) days of the initiation of the arbitration by either
Party. The schedule and rules for the arbitration hearing shall
be as set by the arbitrator and the hearing shall be held in
Birmingham, Alabama. Each party shall bear its own costs of
conducting the hearing and shall be bound by the arbitrator's
decision. The costs of the arbitration shall be paid by the
party designated by the arbitrator. The arbitrator shall have
not less than ten (10) years experience in the information
technology industry, commercial software marketing, or
large-scale information technology project management. The
decision of the arbitrator is final and binding upon all
parties. Judgment upon the final arbitration decision may be
entered with any court having jurisdiction thereof. The
obligation to arbitrate if the preceding dispute resolution
steps fail is an essential provision of this Agreement and the
Parties both agree that such obligation is legally binding upon
them. In case of a violation of the obligation to arbitrate by
either Party, the other Party may bring an action to seek
enforcement of such obligation in any state or federal court of
appropriate jurisdiction.
(e) All negotiations under this SECTION 22 shall be confidential and
treated as compromise and settlement negotiations for purposes
of the state and federal rules of evidence.
(f) In the event of a Dispute between Customer and Vendor pursuant
to which Customer in good faith believes it is entitled to
withhold payment and during the pendency of the dispute
resolution process described in this Agreement, Vendor shall,
subject to the escrow of disputed amounts pursuant to this
Agreement, continue to provide the Services and Customer shall
continue to pay any undisputed amounts to Vendor. Customer
shall, upon request by
-29-
<PAGE> 33
Vendor, deposit any disputed amount in an interest bearing
escrow account. Upon resolution of the Dispute, the parties
shall allocate the money in the escrow account, plus any
interest earned on such money, according to the resolution of
such Dispute.
23. TERMINATION
(a) Termination Upon Payment Default by Customer. At Vendor's
option, this Agreement may be terminated by Vendor in the event
that the Customer shall fail to make any payment due to Vendor
under this Agreement except as provided in SECTION 9(k) or 23(d)
and shall fail to cure such payment default within [*] days
after Vendor's written notice to Customer detailing such payment
default.
(b) Termination Upon Event of Default by Vendor. Upon the occurrence
of an Event of Default (as defined below) and at any time
thereafter during the continuance of such Event of Default,
Customer may terminate this Agreement or any Services being
provided by Vendor under this Agreement by written notice given
to the Vendor, and pursue any legal remedies available to it
under law and this Agreement. The occurrence of any of the
following events with the passing of any applicable notice and
cure periods shall constitute an "Event of Default" under this
Agreement:
(i) Vendor fails to observe or perform any other material
obligation to be observed or performed by it hereunder,
and such failure shall continue for [*] days after
written notice of default from the Customer; or
(ii) Upon a Change of Control of Vendor or an announcement or
acknowledgement of a pending Change of Control of
Vendor, with [*] days notice to Vendor of such
termination; or
(iii) Vendor fails to provide the Critical Functions and
Vendor does not, within [*] hours after notice of such
failure from Customer, cure such failure or, if such
failure cannot be cured within such [*] hour period,
provide to Customer and implement a workaround for such
Critical Functions reasonably satisfactory to Customer;
or
(iv) Vendor shall admit in writing its inability to pay its
debts as they mature, or shall make an assignment for
the benefit of its or any of its creditors; or
(v) Proceedings in bankruptcy, or for reorganization of
Vendor or for the readjustment of any of its debts,
under the United States Bankruptcy Code, or under any
other laws, whether state or
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
-30-
<PAGE> 34
federal, for the relief of debtors, now or hereafter
existing, shall be commenced by Vendor, or shall be
commenced against Vendor and shall not be discharged or
terminated within sixty (60) days of their commencement;
or
(vi) A receiver or trustee shall be appointed for Vendor or
for any substantial part of its assets, or any
proceedings shall be instituted for the dissolution or
the full or partial liquidation of Vendor, and such
receiver or trustee shall not be discharged within sixty
(60) days of his appointment, or such proceedings shall
not be discharged within sixty (60) days of their
commencement, or Vendor shall discontinue its business;
or
(vii) As determined by Customer, there exists a series of
non-material or persistent breaches by Vendor that in
the aggregate have a significant adverse impact on the
Services or upon the management of the Services; or
(viii) Vendor fails to meet any particular Service Level [*] or
more times in any [*] day period, or Vendor fails to
meet the Minimum Performance Levels set forth in EXHIBIT
H at any time.
(c) Additionally, Customer may terminate this Agreement as permitted
under SECTIONS 8(f) and 18(c)(ii).
(d) Termination for Convenience. Customer may terminate this
Agreement or the Clinic Services for convenience without
penalty, termination fee or other liability to Vendor, at any
time after December 31, 1999, upon thirty (30) days prior
written notice to Vendor. In addition, Customer may terminate
this Agreement or the Clinic Services for convenience prior to
December 31, 1999, but no earlier than October 31, 1999, upon
written notification of termination at any time during the Term
giving ninety (90) days notice to Vendor and payment of the
Convenience Termination Fee. Notwithstanding the foregoing,
Customer may terminate the Corporate Services or the Caremark
Services at any time for any reason without penalty, termination
fee or other liability to Vendor upon written notice to Vendor
giving ninety (90) days notice to Vendor.
24. LIMITED RIGHT TO CONTINUATION OF SERVICES.
Upon the termination of this Agreement for any reason, Vendor shall
provide the Services Transfer Assistance set forth in EXHIBIT N--SERVICES
TRANSFER ASSISTANCE for a period up to ninety (90) days after the date of
termination, and in accordance with the fee schedule set forth on EXHIBIT N. The
quality and level of performance of the Services during the termination process
shall not be degraded unless otherwise agreed to by the Parties.
-31-
<PAGE> 35
25. EXIT PLAN.
Upon the termination by Customer of this Agreement for an Event of
Default or under SECTION 8(f) or SECTION 18(c)(ii), Customer may, at its option,
purchase any of the Hardware and Software used to provide the Corporate Services
and/or Caremark Services at a price equal to then-current fair market value, but
not to exceed $[*].
26. INDEMNIFICATION.
(a) Customer shall indemnify, defend and hold harmless Vendor from
any liability or expenses (including reasonable attorneys' fees)
arising out of or relating to any claim by a third party that
the Customer Owned Software, as delivered by Customer and
otherwise unmodified and unchanged (unless and to the extent
such modification or change would not materially impact the
third party claim), infringes upon the proprietary rights of any
third party.
(b) Customer shall indemnify, defend and hold harmless Vendor from
any liability or expenses (including reasonable attorneys' fees)
arising out of or relating to any claim concerning (i) any
allegation of improper billing practices that occurred prior to
the Effective Date brought by the Health Care Financing
Administration or any other party, (ii) Customer's performance
prior to the Effective Date of services similar to the Services,
or (iii) any breach of the Third Party Agreements or any other
agreement related to either the Services or Service Locations,
accruing before the Effective Date of this Agreement.
(c) Customer shall indemnify, defend and hold harmless Vendor from
any liability or expenses (including reasonable attorneys' fees)
arising out of or relating to any claim brought by a third party
to the extent such claim is the result of actions taken by
Vendor after Vendor's written objection at the specific
direction of Customer in connection with Vendor's performance
under this Agreement or any amendment thereto.
(d) Vendor shall indemnify, defend and hold harmless Customer from
any liability or expenses (including reasonable attorneys' fees)
arising out of or relating to Vendor's use of the Software to
provide services to a third party (other than a member of the
Customer Group).
(e) Vendor shall indemnify, defend and hold harmless each member of
the Customer Group from any liability or expenses (including
reasonable attorneys' fees) arising out of or relating to any
claim by a third party that the Services, the Vendor Proprietary
Software, or any work performed by Vendor or its agents with
respect to the Software under this Agreement infringes upon the
proprietary rights of any third party. In the event of such
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
-32-
<PAGE> 36
a claim by a third party, Vendor shall use commercially
reasonable best efforts to also provide Customer a
non-infringing work-around which is functionally equivalent to
the software, services or work in question, at no additional
cost to Customer.
(f) Vendor shall indemnify, defend and hold harmless each member of
the Customer Group from any liability or expenses (including
reasonable attorneys' fees) arising out of or relating to any
claim by a third party with respect to inadequacies in the
physical and data security control systems at the Service
Locations to the extent such systems are controlled or provided
by Vendor after the Effective Date of this Agreement.
(g) Vendor shall indemnify, defend and hold harmless each member of
the Customer Group from any liability or expenses (including
reasonable attorneys' fees) arising out of or relating to any
claim concerning (i) any allegation of improper billing
practices that occurred on or after the Effective Date brought
by the Health Care Financing Administration or any other party;
(ii) the performance of services by Vendor on or after the
Effective Date (including, without limitation, Vendor's breach
of Section 1(g) of this Agreement); or (iii) any breach of the
Third Party Agreements or any other agreement related to the
Services or the Service Locations, accruing on or after the
Effective Date of this Agreement.
(h) Customer shall indemnify, defend and hold harmless Vendor from
any liability or expenses (including reasonable attorneys' fees)
arising out of any act or omission by Customer under the lease
agreements covering Customer's locations in Glastonbury,
Connecticut, or Birmingham, Alabama, accruing, in each case,
before the Effective Date of this Agreement.
(i) Vendor shall indemnify, defend and hold harmless each member of
the Customer Group from any liability or expenses (including
reasonable attorneys' fees) arising out of any act or omission
by Vendor under the lease agreement assumed by Vendor for the
Glastonbury, Connecticut Service Location, or the sub-lease
agreement for the Birmingham, Alabama, Service Location,
accruing, in each case, on or after the Effective Date of this
Agreement.
(j) Each Party shall indemnify, defend and hold harmless the other
Party from any liability or expenses (including reasonable
attorneys' fees) arising out of or relating to any amounts
including taxes, interest, and penalties assessed against a
Party which are obligations of the other Party.
(i) Each Party shall indemnify, defend and hold harmless the other Party
from any costs and expenses (including reasonable attorneys fees)
incurred in connection with the enforcement of the other Party's
indemnity rights.
-33-
<PAGE> 37
(j) Procedure. If any third party shall notify a Party hereto (the
"Indemnified Party") with respect to any matter which may give
rise to a claim for indemnification against the other Party (the
"Indemnifying Party") under this SECTION 26, then the
Indemnified Party shall notify the Indemnifying Party in writing
thereof promptly; provided, however, that no delay on the part
of the Indemnified Party in notifying any Indemnifying Party
shall relieve the Indemnifying Party from any liability or
obligation hereunder unless (and then solely to the extent) the
Indemnifying Party experiences any prejudice in the ability to
provide the indemnification required under this SECTION 26. If
the Indemnifying Party acknowledges that this Agreement applies
with respect to such claim, then the Indemnifying Party shall be
entitled to take control of the defense and investigation of the
claim. In the event any Indemnifying Party notifies the
Indemnified Party that it is assuming the defense thereof, (A)
the Indemnifying Party will defend the Indemnified Party against
the matter with counsel of the Indemnifying Party's choice
reasonably satisfactory to the Indemnified Party, (B) the
Indemnified Party may retain separate co-counsel at its sole
cost and expense (except that the Indemnifying Party will be
responsible for the fees and expenses of the separate co-counsel
to the extent the Indemnified Party concludes reasonably that
the counsel the Indemnifying Party has selected has a conflict
of interest), (C) the Indemnified Party will not consent to the
entry of any judgment or enter into any settlement with respect
to the matter without the written consent of the Indemnifying
Party which consent will not be withheld or delayed
unreasonably, and (D) the Indemnifying Party will not consent to
the entry of any judgment with respect to the matter, or enter
into any settlement which does not include a provision whereby
the plaintiff or claimant in the matter releases the Indemnified
Party from all liability with respect thereto, without the
written consent of the Indemnified Party, which consent will not
be withheld or delayed unreasonably.
27. REMEDIES.
(a) Unless specifically provided to the contrary in this Agreement,
neither party shall have any liability whether based on
contract, tort (including without limitation, negligence),
warranty, guarantee or any other legal or equitable grounds to
the other party for any damages other than Direct Damages.
(b) Neither Party shall have any liability to the other Party for
any damages arising out of or resulting from the performance and
non-performance of its obligations under this Agreement in
excess of [*] ($[*]) in the aggregate.
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
-34-
<PAGE> 38
(c) The limitations set forth in SECTIONS 27(a) - (c) are not
applicable to (i) the Parties' indemnification obligations for
third party claims under SECTION 26; (ii) losses covered by
insurance policies maintained by the Party liable for such
damages; or (iii) liability resulting from the gross negligence
or willful misconduct of a Party.
28. INSURANCE. During the Term, Vendor shall maintain the insurance coverages
required under EXHIBIT Q--INSURANCE of this Agreement and otherwise comply with
the requirements set forth on EXHIBIT Q.
29. MISCELLANEOUS.
(a) Headings. The Section headings herein are for reference purposes
only and shall not affect in any way the meaning or
interpretation of this Agreement.
(b) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that no party hereto
will assign its rights or delegate its obligations under this
Agreement without the express prior written consent of the other
party hereto except that Customer at its discretion may assign
this Agreement and any of its rights and obligations under this
Agreement pursuant to a merger, corporate reorganization or sale
of all or substantially all of its assets or stock.
(c) Governing Law. This Agreement shall be construed and governed by
the internal laws of the State of Alabama, without reference to
the choice of law principles thereof. Each party irrevocably
agrees that any legal action, suit, or proceeding brought by it
in any way arising out of the agreement must be brought solely
and exclusively in the federal district court (or in the absence
of federal jurisdiction, the appropriate state court) sitting in
Birmingham, Alabama and each party 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.
(d) Notices. All communications or notices required or permitted by
this Agreement shall be sufficiently given for all purposes
hereunder if given in writing and delivered (i) personally, (ii)
by United States mail, return receipt requested, (iii) by
document overnight delivery service or (iv) by telecopy,
facsimile or other electronic transmission service, provided the
sender delivers a confirmation copy of such telecopy, facsimile
or other electronic transmission service within three (3)
business days thereafter. All notices delivered in accordance
with this Section shall be sent to the appropriate address or
number, as set forth below, or to such other address or to the
attention of such other person as the recipient party has
specified by prior written notice to the sending party, and
shall be effective upon its
-35-
<PAGE> 39
delivery to the addressee, as provided herein, either
personally, by mail or by electronic transmission, as the case
may be, or three (3) business days after it is sent or
dispatched, whichever occurs earlier.
(e) Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this
Agreement is held to be prohibited by or invalid under
applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating
the remainder of this Agreement.
(f) Amendments. This Agreement may not be modified or amended except
by an instrument or instruments in writing signed by the party
against whom enforcement of any such modification or amendment
is sought.
(g) Exhibits; Entire Agreement. The exhibits and other attachments
to this Agreement are hereby incorporated by reference and made
part hereof. This Agreement (including, without limitation, the
Regulated Services Agreement and each of the exhibits and
attachments to this Agreement) constitutes the entire
understanding of the parties with respect to the subject matter
hereof and there are no restrictions, promises, warranties,
covenants or undertakings other than those expressly set forth
or referred to herein. This Agreement supersedes all prior
negotiations, agreements and undertakings between the parties
with respect to such subject matter.
(h) No Third Party Beneficiaries. This Agreement is not intended to
and shall not be construed to give any person or entity, other
than the parties hereto, any interest, rights, or remedies
(including, without limitation, any third party beneficiary
rights) with respect to or in connection with this Agreement or
any agreements or provisions contemplated hereby.
(i) Relationship of Parties. Vendor, in furnishing services to
Customer under this Agreement, is acting only as an independent
contractor. Except where this Agreement expressly provides
otherwise, Vendor does not undertake by this Agreement or
otherwise to perform any obligations of Customer, whether
regulatory or contractual, or to assume any responsibility for
Customer's business or operations.
(j) Publicity; Trade Reference. Before using Customer or Customer's
name as a trade reference or for publicity, marketing,
advertising or otherwise, Vendor shall obtain Customer's prior
written consent, which shall not be unreasonably withheld.
Likewise, prior to the Customer using the Vendor or Vendor's
name as a trade reference or for publicity, marketing
advertising or otherwise, Customer shall obtain Vendor's prior
written consent, which shall not be unreasonably withheld.
However, either Party may include the other Party's name and a
factual description of the work
-36-
<PAGE> 40
performed under this Agreement on employee bulletin boards, in
its list of references and in the experience section of
proposals to third parties, in internal business planning
documents and in its annual report to stockholders, and whenever
required by reason of legal, accounting or regulatory
requirements.
(k) Construction. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual
intent, and no rule of strict construction shall be applied
against any party. Any reference to any federal, state, local,
or foreign statute or law shall be deemed also to refer to all
rules and regulations promulgated thereunder, unless the context
requires otherwise.
(l) Except as specifically set forth in this Agreement, all
consents, approvals, acceptances, or similar actions 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.
(m) During the Term and for a period of three (3) months after the
termination of this Agreement, except for the Affected
Employees, neither Party shall solicit any employee of the other
without the other Party's consent.
(n) Sections 5(c), 9(b), 10(a), 19(g), 20, 22, 24, 25, 26, 27 and 28
of this Agreement shall survive the termination or expiration of
this Agreement for any reason.
IN WITNESS WHEREOF, the parties have caused this Information Technology Services
Agreement to be executed in their names as of the date first above written.
MEDPARTNERS, INC. THE TRIZETTO GROUP, INC.
3000 Galleria Tower, Suite 1000 567 San Nicholas Drive, Suite 360
Birmingham, AL 35244 Newport Beach, CA 92660
By:_______________________________ By:______________________________________
(Authorized Signature) (Authorized Signature)
Name:_____________________________ Name:____________________________________
Title:____________________________ Title:___________________________________
Date:_____________________________ Date:____________________________________
-37-
<PAGE> 41
EXHIBIT A
GLOSSARY OF TERMS
ACCOUNT MANAGER Shall have the meaning set forth in SECTION
7(a).
ADDITIONAL SERVICES Shall have the meaning set forth in EXHIBIT
D.
AFFECTED EMPLOYEES Shall be those individuals listed on EXHIBIT
T.
AFFILIATES Shall mean any party controlling, controlled
by or under common control with another
party.
AGREEMENT Shall mean this Information Technology
Services Agreement.
ASR Shall have the meaning set forth in EXHIBIT
D.
BUSINESS UNIT ASSETS Shall have the meaning set forth in the
Business Unit Purchase Agreement attached as
EXHIBIT U.
BUSINESS UNIT ASSET PURCHASE PRICE Shall have the meaning set forth in SECTION
6.
CALENDAR Shall have the meaning set forth in EXHIBIT
B.
CAREMARK Shall be Caremark, Inc., a subsidiary of
MedPartners, Inc.
CAREMARK SERVICES Shall have the meaning set forth in EXHIBIT
B.
CHANGE CONTROL PROCESS Shall mean the change control process set
forth in EXHIBIT K.
CHANGE OF CONTROL Shall mean the transfer of the ownership or
control, directly or indirectly, of the
majority of the voting capital stock of
Vendor, from the persons or persons who hold
such control on the Effective Date to another
person or persons; provided, however, that a
Change of Control shall not include: (i) any
transfer of such stock by a stockholder of
Vendor to an immediate family member, (ii)
any transfer of such stock to any trust or
similar entity established for the benefit of
either (1) any stockholder of Vendor; or (2)
an immediate family member of any stockholder
of Vendor; or (iii) any initial public
offering of Vendor.
CLINIC DATA Shall be that portion of the Customer Data
which specifically relates to a Clinic or the
Clinics, including but not limited to medical
records and patient data.
CLINIC SERVICES Shall be that portion of the Services set
forth in EXHIBIT B to be provided to the
Clinics in accordance with the service matrix
set forth in EXHIBIT C.
CLINIC SERVICES PERIOD Shall be, for each Clinic, the period from
the Effective Date through such time as the
Clinic and Customer mutually agree that
Customer is no longer obligated to provide
the Clinic Services to the Clinic, including,
but not limited to, the period during the
Term before and after the date on which the
Clinic is disassociated from Customer.
CLINICS Shall be those clinics identified on EXHIBIT
C.
COMPANY INFORMATION Shall have the meaning set forth in SECTION
20(a).
CONFIDENTIAL INFORMATION Shall have the meaning set forth in SECTION
20(a).
CONVENIENCE TERMINATION FEE Shall be equal to the sum of $[*] per month
for the period
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
Exhibit A
<PAGE> 42
between the date on which termination is
effective and December 31, 1999, prorated as
necessary for any portion of a month.
CORPORATE SERVICES Shall have the meaning set forth in EXHIBIT
B.
CRITICAL DISRUPTION Shall mean the failure of Vendor to provide
the Critical Functions for any period of
thirty six (36) consecutive hours.
CRITICAL FUNCTIONS Shall mean financial process support, Clinic
process support, communications services and
help desk services.
CUSTOMER Shall have the meaning set forth in the
introductory paragraph of the Agreement.
CUSTOMER DATA Shall have the meaning set forth in SECTION
13(a).
CUSTOMER GROUP Shall be MDM, Caremark, the Clinics
(including, without limitation, the
Management Company Clinics).
CUSTOMER OWNED SOFTWARE Shall have the meaning set forth in SECTION
14(b).
DIRECT DAMAGES Shall mean actual, direct damages incurred by
the claiming Party which include, by way of
example but without limitation, (i) costs of
recreating or reloading any Customer Data or
Clinic Data (ii) costs of implementing a
workaround in connection with a failure to
provide any or all of the Services; (iii)
costs of replacing lost or damaged equipment,
software and materials, (iv) costs and
expenses incurred by Customer to correct
errors in software maintenance and
enhancements provided as part of the Services
or any part thereof; (v) costs and expenses
incurred by Customer to procure the Services
from an alternate source, to the extent in
excess of Vendor's charges under this
Agreement, where permitted under this
Agreement, (vi) straight time, overtime, or
related expenses incurred by the Other Party,
including, overhead allocations of the other
Party for the employees, wages, and salaries
of additional employees, travel expenses,
overtime expenses, telecommunication charges,
and similar charges of the other Party, due
to a Party's breach of its obligations under
this Agreement; (vii) payments or penalties
imposed by a regulatory agency for failure to
comply with deadlines; (viii) the Service
Credits; and (ix) similar damages; provided,
however, "Direct Damages" shall not include
(A) loss of interest, profit or revenue of
the claiming Party or (B) incidental,
consequential, special or indirect damages
suffered by the claiming Party (except as to
the damages described in (A) and (B) are
included as a part of the Service Credits or
as otherwise provided for in this Agreement)
and shall not include punitive or exemplary
damages suffered by the claiming Party
arising from or related to this Agreement,
even if such Party has been advised of the
possibility of such losses or damages.
DISASTER RECOVERY PLAN Shall have the meaning set forth in SECTION
17.
DISPUTES Shall have the meaning set forth in SECTION
22(a).
EFFECTIVE DATE Shall be May 1, 1999.
EFFECTIVE LICENSE PURCHASE PRICE Shall have the meaning set forth in SECTION
9(i).
Exhibit A
<PAGE> 43
[*] [*]
EVENT OF DEFAULT Shall have the meaning set forth in SECTION
23(b).
FORCE MAJEURE EVENT Shall have the meaning set forth in SECTION
18(a).
GENERAL SERVICES Shall have the meaning set forth in EXHIBIT
B.
HARDWARE Shall have the meaning set forth in SECTION
15(b).
INITIAL TERM Shall have the meaning set forth in SECTION
3.
KEY EMPLOYEES Shall have the meaning set forth in SECTION
7(g).
LEASED HARDWARE Shall have the meaning set forth in SECTION
15(b).
MANAGEMENT COMMITTEE Shall have the meaning set forth in SECTION
7(f).
MANAGEMENT COMPANY Shall have the meaning set forth in SECTION
10(f).
MANAGEMENT COMPANY CLINICS Shall have the meaning set forth in SECTION
10(f).
MDM Shall be MedPartners, Inc.
MINIMUM PERFORMANCE LEVELS Shall have the meaning set forth in EXHIBIT
H.
MONTHLY SERVICES CHARGE Shall have the meaning set forth in EXHIBIT
J.
OWNED HARDWARE Shall have the meaning set forth in SECTION
15(b).
PARTIES Shall mean both Vendor and Customer.
PARTY Shall mean either Vendor or Customer.
PERFORMANCE RESULT Shall have the meaning set forth in EXHIBIT
I.
PERSONNEL PREMIUM Shall have the meaning set forth in SECTION
5(b).
PROBLEMS Shall have the meaning set forth in SECTION
2.1.6 of EXHIBIT B.
REGULATION Shall mean any law, rule or regulation of any
kind pertaining to delivery of healthcare
services, ancillary services or any other
matter.
RENEWAL TERM Shall have the meaning set forth in SECTION
3.
REPORTS Shall mean any report to be delivered by
Vendor under this Agreement.
RETAINED HARDWARE Shall have the meaning set forth in SECTION
15(b).
RETAINED SOFTWARE Shall have the meaning set forth in SECTION
14(b).
RETENTION BONUS Shall have the meaning set forth in SECTION
5(c).
RETENTION BONUS PAYMENT Shall have the meaning set forth in SECTION
5(b).
SENIOR EXECUTIVES Shall have the meaning set forth in SECTION
22(c).
SERVICE CREDITS Shall have the meaning set forth in EXHIBIT
I.
SERVICE LEVELS Shall be those service levels to be
maintained by Vendor as set forth in EXHIBIT
H.
SERVICE LOCATIONS Shall be the facilities in Birmingham,
Alabama and Glastonbury, Connecticut..
Exhibit A
<PAGE> 44
SERVICES Shall have the meaning set forth in SECTION
1(a).
SERVICE RESOURCES Shall mean those service relationships
described in Exhibit S.
SERVICES TRANSFER ASSISTANCE Shall be those services set forth in EXHIBIT
N.
SOFTWARE Shall have the meaning set forth in SECTION
14(b).
TERM Shall be the Initial Term plus any Renewal
Term.
THIRD PARTY AGREEMENTS Shall mean the license, lease and service
agreements between Customer and the
applicable third party in connection with
Retained Software, Retained Hardware,
Transferred Software and Leased Hardware.
TRADE SECRET Shall have the meaning set forth in SECTION
20(a).
TRANSFERRED SOFTWARE Shall have the meaning set forth in SECTION
14(b).
TRANSITION PLAN Shall have the meaning set forth in SECTION
4.
VENDOR Shall be The TriZetto Group, Inc.
VENDOR PROVIDED HARDWARE Shall have the meaning set forth in SECTION
15(b).
VENDOR PROVIDED SOFTWARE Shall have the meaning set forth in SECTION
14(b).
Exhibit A
<PAGE> 45
EXHIBIT B
DATA PROCESSING SERVICES
1. INTRODUCTION
This Exhibit B describes certain duties and responsibilities of Vendor
(the "Services") as well as certain duties and responsibilities of
Customer. The Services listed in this Exhibit B are in addition to
Vendor's other duties and obligations under the Agreement.
2. GENERAL SERVICES
Beginning on the Commencement Date, Vendor shall be responsible for the
operation, support and management of Customer's information technology
operations group operations in Birmingham, Alabama and Glastonbury,
Connecticut and Customer's business support groups for billing and
managed care in Glastonbury, Connecticut (collectively, the "IT
Operations Centers"), including without limitation, responsibility for
maintaining proper and adequate facilities, equipment and supplies and
establishing and maintaining an information technology operations
population and a business support group population for billing and
managed care, that in each case is properly trained and fully staffed
and that shall include necessary management and support staff. The
hours of operation shall be 24 hours per day, seven days per week.
Additionally, Vendor shall coordinate with Customer's various internal
and external service providers. Without limitation, the Services shall
include those functions, responsibilities and tasks set forth in this
Sections 2, 3, 4, 5 and 6 of this EXHIBIT B.
2.1 IT OPERATIONS CENTERS
This Section 2.1 of this Exhibit B describes the general IT Operations
support Vendor shall be responsible for providing as part of the
Services:
2.1.1 Operations
Vendor shall be responsible for daily job schedule execution,
monitoring, backup/recovery operations and facility and
equipment maintenance of all production and development
computing platforms within the IT Operations Centers. These
platforms include IBM - AIX and Windows based systems.
Vendor shall maintain and make available to Customer an
operations calendar (the "Calendar") at all times. Vendor
shall execute all backup/recovery tasks when scheduled in
accordance with the Calendar.
2.1.2 Systems Software
Vendor shall be responsible for system software implementation
and correction, patch management/change control, capacity
planning, performance tuning, and second level problem
resolution for all production systems, including, but not
limited to, IBM-AIX and Windows based systems.
Exhibit B
<PAGE> 46
2.1.3 Desktop
Vendor shall be responsible for the support of the Corporate
Common Office Environment. This includes support of Windows as
the standard desktop operating system, Microsoft's SMS or
other equal or better software product as the LAN software
distribution tool, Microsoft Exchange to provide e-mail
capabilities, Microsoft Internet Explorer as the standard web
browser, and TCP/IP connectivity.
2.1.4 Network
Vendor's responsibilities in connection with the network
infrastructure shall include monitoring of network components,
problem isolation and resolution, optimizing data traffic
performance, capacity planning, backup configuration and
administration. The current network configurations include
dial-up facilities, frame relay with fractional T-1 service,
and frame relay with redundant SONET service. The hardware
supported includes: Bay Network hubs and routers, Cisco
routers, Adtran CSU/DSU, and Ethernet LAN interfaces. Network
maintenance shall include routine disassociation tasks.
Vendor shall be responsible for the support of all network
software components including Bay RS Version 12.x for the Bay
Network Routers, Version 10.x for Cisco routers, and Netview
as the network management tool.
2.1.5 Security
Vendor shall be responsible for the execution of
Customer-defined security policies for all Customer computing
systems. Vendor shall provide first-level support and
administration of security changes and enhancements.
2.1.6 Problem Management
Vendor shall maintain a IT Operations Centers staff with
necessary ability and skills to meet all Service Levels.
In managing Service Level failures and other problems and
incidents arising in connection with or affecting Vendor's
provision of the Services (collectively, "Problems"), Vendor
shall at a minimum take the following actions:
(a) identify, record, track and correct issues impacting the
delivery of the Services;
(b) recognize recurring Problems;
(c) address procedural issues relating to Problem
management; and
(d) contain or reduce the impact of Problems that occur.
2.2 DATA RETENTION SERVICES
This Section 2.2 of this Exhibit B describes the data retention
services Vendor shall be responsible for providing as part of the
Services:
Exhibit B
-2-
<PAGE> 47
Vendor shall maintain all Customer Data and all Clinic Data in
appropriate storage media compliant with regulatory
requirements, during the Term and for a period of at least one
(1) year after the end of the Term. Vendor shall not remove or
destroy any Customer Data or Clinic Data during such retention
period.
2.3 REPORT GENERATION SERVICES
This Section 2.3 of this Exhibit B describes the report generation
services Vendor shall be responsible for providing as part of the
Services:
Vendor shall generate such reports as may be required under
any applicable law, rule or regulation, or a requirement of
any state or federal governmental regulator, or as may be
reasonably requested by Customer or Customer's auditors. Such
reports shall include, for example (but without limitation),
any reports required in response to requests received from any
representative of the Department of Health and Human Resources
or the Office of the Comptroller General of the United States
General Accounting Office.
2.4 DISASSOCIATION SERVICES
This Section 2.4 of this Exhibit B describes the Clinic disassociation
services Vendor shall be responsible for providing as part of the
Services:
Vendor will provide information technology support services
reasonably required by each Clinic in connection with its
disassociation from Customer, including but not limited to all
normal disassociation and transition services that were
provided by the Affected Employees prior to and as of the
Effective Date of the Agreement. These services may also
include, for example (but without limitation), support in
discontinuing ancillary services that had been provided by
Customer to the Clinic under an agreement between Customer and
the Clinic, assistance to Customer during clinic value
assessment and due diligence processes, and production of
tangible products such as data extracts in specified formats
using currently available media (i.e., tape drives, paper). An
example of such services for one such Clinic is set forth on
Schedule 3 to this EXHIBIT B.
2.5 CONVERSION SERVICES
This Section 2.5 of this Exhibit B describes the data conversion
services Vendor shall be responsible for providing as part of the
Services:
Vendor shall provide support services reasonably required by
any Clinic in converting from the information technology
platform provided at the Service Locations to a different
technology platform. These services will include, for example
(but without limitation), the removal of Clinic Data from the
Service Location platform, the discontinuation of other
Services provided under this Agreement to the Clinic, the
delivery of Clinic Data to the Clinic's new service provider
in a reasonably acceptable format and medium.
Exhibit B
-3-
<PAGE> 48
2.6 YEAR 2000 SERVICES
This Section 2.6 of this Exhibit B describes the year 2000 services
Vendor shall be responsible for providing as part of the Services:
Vendor shall test the software and hardware used by Vendor in
performing the Services (the "Tested Assets") in accordance
with the testing schedule attached hereto as Schedule 1 to
this Exhibit B. Should such testing reveal that any Tested
Asset is not year 2000 compliant (a "Non-Compliant Asset"),
Vendor shall notify Customer of such non-compliance. Where the
Non-Compliant Asset is not part of the Data Center Assets, as
defined below, Vendor also shall provide Customer with an
estimate of the costs of remediating the Non-Compliant Asset.
Unless Customer directs otherwise in response to such report,
Vendor shall remediate each Non-Compliant Data Center Asset to
ensure that the Non-Compliant Data Center Asset is made year
2000 compliant, and shall use its best efforts to remediate
Non-Compliant Assets that are not Data Center Assets, to
achieve year 2000 compliance. It is understood by Customer
that the limited time available prior to December 31, 1999
precludes the ability of Vendor to guarantee that any of the
Tested Assets that are not Data Center Assets can be made year
2000 compliant. Where the non-compliant status of a Tested
Asset that is not a Data Center Asset is discovered prior to
December 31, 1999, Customer shall bear the costs of
remediating such Non-Compliant Asset (provided that the
remediation services are the subject of an ASR and shall be
performed at Vendor's rates for Additional Services set forth
in Exhibit D). Vendor shall bear the costs of remediating any
Tested Asset which is a Data Center Asset. Further, Vendor
shall be responsible for the remediation costs of any Tested
Asset where the non-compliant status is discovered after
December 31, 1999.
For purposes of this Section 2.6 of this Exhibit B, Data
Center Assets shall mean elements in Exhibit M--Hardware
Rights and associated operating system and communications
software.
2.7 RESERVED
2.8 TRAINING SERVICES
This Section 2.8 of this Exhibit B describes the training services
Vendor shall be responsible for providing as part of the Services:
Customer shall be provided access to routine Computer Based
Training (CBT) courses.
2.9 END-OF-PERIOD REPORTING
This Section 2.9 of this Exhibit B describes the end-of-period
reporting services that Vendor shall be responsible for providing as
part of the Services:
Vendor shall be responsible for maintaining, supporting and
executing routine end-of-period (month, quarter, annual)
processes and reports.
Exhibit B
-4-
<PAGE> 49
2.10 APPLICATION SERVICES GROUP
This Section 2.10 of this Exhibit B describes the applications services
group services Vendor shall be responsible for providing as part of the
Services:
Vendor shall responsible for those tasks associated with
applications supported and described in the "Applications"
portion of Schedule 2 of this Exhibit B.
2.11 DESKTOP SERVICES
This Section 2.11 of this Exhibit B describes the desktop services
Vendor shall be responsible for providing as part of the Services:
Vendor shall responsible for those tasks associated with
desktop services described in the "Desktop" portion of
Schedule 2 of this Exhibit B.
2.12 HELP DESK SERVICES
This Section 2.12 of this Exhibit B describes the help desk services
Vendor shall be responsible for providing as part of the Services:
Vendor shall responsible for those tasks associated with help
desk services described in the "Help Desk Services" portion of
Schedule 2 of this Exhibit B.
2.13 SYSTEM SOFTWARE
This Section 2.13 of this Exhibit B describes the system software
services Vendor shall be responsible for providing as part of the
Services:
Vendor shall responsible for those tasks associated with the
systems support described in the "Technical Services" portion
of Schedule 2 of this Exhibit B.
2.14 INTERNET ACCESS
This Section 2.14 of this Exhibit B describes the Internet access
services Vendor shall be responsible for providing as part of the
Services:
Vendor shall responsible for those tasks associated with the
Internet services described in the "Internet Services" portion
of Schedule 2 of this Exhibit B.] In addition, Vendor shall be
responsible for providing access to the Internet at no
additional cost to Customer's California operations.
2.15 CUBS SOFTWARE
This Section 2.15 of this Exhibit B describes the CUBS application
services Vendor shall be responsible for providing as part of the
Services:
Vendor shall responsible for those tasks associated with the
CUBS application services described in the "CUBS" portion of
Schedule 2 of this Exhibit B. Vendor's obligation to perform
at no additional cost one thousand (1000) hours
Exhibit B
-5-
<PAGE> 50
of "Cubs Support" shall be applicable to new (i.e., arising
after the Effective Date of the Agreement) interface services
only.
2.16 HUBS AND ROUTERS
This Section 2.16 of this Exhibit B describes the hubs and router
services Vendor shall be responsible for providing as part of the
Services:
Vendor shall provide all services associated with maintaining
connectivity to and through existing hubs and routers for
locations existing as of the Effective Date.
3. CLINIC SERVICES
In addition to the services described in this Exhibit B and the
Agreement which are applicable to the Clinics, Vendor shall provide as
"Clinic Services" the Services which are identified on the service
matrix set forth on SCHEDULE C. Descriptions of the Services identified
on SCHEDULE C are attached as Schedule 2 to this Exhibit B.
4. CORPORATE SERVICES
Corporate Services shall be those Services set forth in the Agreement
and in Section 2 of this Exhibit B which are applicable to Customer, as
well as the "Business Services" portion of Schedule 2 of this Exhibit
B and those additional services which are identified on the service
matrix set forth on SCHEDULE C and described on Schedule 2 to this
Exhibit B.
5. CAREMARK SERVICES
Caremark Services shall be those Services set forth in the Agreement
and in Section 2 of this Exhibit B which are applicable to Caremark, as
well as the "Business Services" portion of Schedule 2 of this Exhibit B
and those additional services which are identified on the service
matrix set forth on SCHEDULE C and described on Schedule 2 to this
Exhibit B.
Exhibit B
-6-
<PAGE> 51
EXHIBIT B
[Schedules 1, 2 and 3 omitted pursuant to Regulation S-K, Item 601(b)(2) of the
Securities Act of 1933, as amended. Schedule 1 contains reports regarding the
TriZetto's Year 2000 testing and compliance efforts. Schedule 2 contains
descriptions of TriZetto's services. Schedule 3 contains a list of TriZetto
employees. TriZetto hereby agrees to furnish supplementally a copy of these
omitted schedules as requested by the Securities and Exchange Commission.]
<PAGE> 52
EXHIBIT C
SERVICE MATRIX
[Schedule 1 omitted pursuant to Regulation S-K, Item 601(b)(2) of the
Securities Act of 1933, as amended. Schedule 1 contains a table listing the
services TriZetto shall perform for each clinic assumed under this Agreement.
TriZetto hereby agrees to furnish supplementally a copy of these
omitted schedules as requested by the Securities and Exchange Commission.]
<PAGE> 53
EXHIBIT D
ADDITIONAL SERVICES
From time to time during the Term, Customer may request Vendor to
perform certain Additional Services at the rates set forth in Section II of this
EXHIBIT D (the "Additional Services"); provided, however, that Vendor and
Customer shall first execute an Additional Services Request ("ASR") applicable
to such Additional Services. ASR's will, in all cases, have a detailed
description of the work being requested, a firm estimate of cost and resource
usage, and other pertinent information required for its approval by Customer.
I. ADDITIONAL SERVICES
The Additional Services to be provided by Vendor at Customer's request
shall include the following (without limitation):
1. DISASSOCIATION SERVICES
Routine Clinic disassociation and transition services are provided as
part of the Services, as set forth in the Agreement and SECTION 2.4 of EXHIBIT
B. Additional Services will include (a) projects such as conversions and new
reports or extracts demanding a substantial amount of work (above forty (40)
hours per project); and (b) special requests from Clinics or a third party prior
to the close of any deal that requires a substantial amount of work (above forty
(40) hours per project).
2. SPECIAL REPORTING REQUESTS
Additional Services will include requests for new, non-standard
month-end reports.
3. DATA ENTRY SERVICES
Additional Services will include requests for data entry other than
routine file maintenance.
4. FINANCIAL SYSTEMS CONVERSIONS
Routine conversion services are provided as part of the Services, as
set forth in the Agreement and SECTION 2.5 of EXHIBIT B. Additional Services
will include major conversion services required to assist Clinics with the
design and implementation of an alternate support environment when the decision
to implement such new environment is made by Customer; provided, however, that
such services shall be billed to the applicable Clinic or to a third party, and
not to Customer.
5. CUSTOM INTERFACES AND EXTRACTS
Additional Services will include requests for custom interfaces and
extracts which demand a substantial amount of work (above forty (40) hours per
project) other than the CUBS interface work described in SECTION 2.15 of EXHIBIT
B.
<PAGE> 54
6. NETWORK SERVICES
Routine network services are provided as part of the Services, as set
forth in the Agreement and SECTION 2.1.4 of EXHIBIT B. Additional Services will
include (a) network re-engineering at the local Clinic level which demand more
than twenty-four (24) hours per project, (b) requests for new network technology
or services, (c) web site or Internet development services directly requested by
the Clinics, and (d) systems build-out at the local Clinic level.
7. TRAINING
Routine training services to Customer are provided as part of the
Services, as set forth in the Agreement and SECTION 2.8 of EXHIBIT B. Additional
Services will include training requests requiring classroom training or Clinic
on-site education.
8. MONTH-END SERVICES
Routine end of period (month, quarter, annual) services are provided as
part of the Services, as set forth in the Agreement and SECTION 2.9 of EXHIBIT
B. Additional Services include requests from Clinics to process, balance and
close non-Customer books and to generate and distribute associated reports.
9. HUBS AND ROUTERS
Routine hub and router services required to ensure connectivity to and
through existing Clinic locations are provided as part of the Services, as set
forth in the Agreement and SECTION 2.16 of EXHIBIT B. Additional Services
include services to establish connectivity to new Clinic locations.
10. CLINIC HARDWARE AND SOFTWARE
Additional Services include requests for installation, maintenance and
remediation of hardware and software at the location of any Clinic.
II. RATES
Vendor shall perform the Additional Services as described in this
Exhibit at the following rates:
<TABLE>
<CAPTION>
STAFF LEVEL HOURLY RATE ($)
- ----------- ---------------
<S> <C>
Documentation Specialist [*]
Installation Manager [*]
Account Manager [*]
Programming/Work Orders [*]
Technical Architect [*]
System Programmer [*]
Group Practice Consultant [*]
Managed Care Consultant [*]
Project Manager [*]
Management Consultant - VIO [*]
Strategic Consultant [*]
</TABLE>
[*] CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.
<PAGE> 55
The rates set forth above may be increased on [*] by no more than [*] if
Vendor's cost of delivering such Additional Services has increased
proportionately.
Positions not specified above will be billed to Customer at no greater than [*]
margin above fully loaded cost [*].
[*] CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.
<PAGE> 56
EXHIBIT E
TRANSITION PLAN
Vendor and Customer will execute the following Transition Plan to
ensure that the functions being transferred to Vendor from Customer do not
suffer performance downturns.
Transition Plan
The Transition Plan will be executed beginning on the Effective Date
and will be completed no later than July 1, 1999. The Transition Plan shall
include the following elements:
1. PREPARATION FOR TRANSITION OF AFFECTED EMPLOYEES
Vendor and Customer shall cooperate together in preparing for
the transition of Affected Employees to Vendor, including without limitation the
performance of the following tasks:
(a) Identification of Affected Employees
(b) Definition of organization going forward
(c) Development of predictable questions
(d) Pre-announcement of transition to staff; Question and
Answer sessions
(e) Resolution of key issues; and
(f) Preparation of employee transition packages.
2. COMPLETION OF CONTRACT ISSUES
Vendor and Customer shall cooperate together in resolving
open issues in connection with the Agreement, including without limitation the
performance of the following tasks:
(a) Execution of Agreement;
(b) Development of list of open items;
(c) Assignment of deadlines for open issue resolution;
(d) External announcement (if appropriate);
(e) Internal announcements; and
(f) Announcements to Clinics.
3. EXECUTION OF AFFECTED EMPLOYEE TRANSITION
Vendor shall perform the following tasks, without
limitation, in connection with transition of the Affected Employees to Vendor:
(a) Deliver employee transition packages; and
(b) Execute formal transition of Affected Employees.
4. ACTIVATION OF GOVERNING BODIES
Vendor and Customer shall cooperate together in activating
the appointment of the managers of the relationship between the Parties,
including without limitation the performance of the following tasks:
(a) Appointment of the Management Committee;
(b) Appointment of the Vendor Account Manager and Customer
Account Manager;
(c) Establishment of a meeting schedule; and
Exhibit E
<PAGE> 57
(d) Schedule and hold first Management Committee meeting.
5. DEFINITION OF REPORTING PACKAGE
Vendor shall create the Reports required under the Agreement,
including without limitation the performance of the following tasks:
(a) Definition of performance elements;
(b) Development of data collection processes;
(c) Development of reporting formats; and
(d) Assignment of reporting accountabilities.
6. DEVELOPMENT OF BILLING PROCESS
Vendor shall develop the billing process requirements,
including without limitation the performance of the following tasks:
(a) Establishment of the billing process;
(b) Development of appropriate financial system support
structure;
(c) Development of invoice timing, elements and format
(d) Development of first and second pro-formas; and
(e) Adjustment of above elements.
7. TRANSITION PROCESS MONITORING
Vendor and Customer shall cooperate together in monitoring
issues in connection with the transition of the Affected Employees to Vendor,
including without limitation the performance of the following tasks:
(a) Establishment of weekly monitoring meeting;
(b) Develop process for identifying issues;
(c) Develop resolutions, definitions and clarifications.
8. ACHIEVE "STEADY STATE"
Vendor and Customer shall cooperate together to achieve a
"steady state" for the performance of the Services, including without limitation
the performance of the following tasks:
(a) Development of measurements and goals;
(b) Definition of processes and procedures to achieve
steady state;
(c) Successfully resolve the first two performance
reporting periods;
(d) Successfully resolve the first two invoices;
(e) Sign-off on resolution of Agreement open-issue list;
(f) Poll user base/Customer on performance;
(g) Adjust relationship as necessary;
(h) Achieve steady state;
(i) Sign-off on transition.
9. ADDITIONAL CUSTOMER RESPONSIBILITIES
Additionally, Customer shall reasonably cooperate in providing
information required to facilitate the execution of the Transition Plan by
Vendor.
Exhibit E
<PAGE> 58
EXHIBIT F
BONUSES
Vendor shall pay Retention Bonuses to those Affected Employees eligible
to receive such bonuses under SECTION 5(c) of the Agreement in the amounts set
forth in a memorandum from Vendor to Customer.
Exhibit F
<PAGE> 59
EXHIBIT G
KEY EMPLOYEES
The following Affected Employees shall be considered Key Employees for
the purposes of this Agreement:
1. [*]
2. [*]
3. [*]
4. [*]
5. [*]
6. [*]
7. [*]
8. [*]
9. [*]
10. [*]
11. [*]
12. [*]
13. [*]
14. [*]
15. [*]
16. [*]
17. [*]
[*] CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.
<PAGE> 60
EXHIBIT H
SERVICE LEVEL AGREEMENTS
I. SERVICE LEVELS
Vendor will provide the Services at the levels indicated in the
Agreement and in this Exhibit H (collectively, the "Service Levels").
A. HOST SYSTEM AVAILABILITY
1. Overall Availability. Vendor shall be responsible for ensuring the
host systems will be available not less than [*] of the time, [*]
hours a day, [*] days a week. Host system availability shall be
recorded by the Vendor through the use of an Availability Log. The
Availability Log will show the times from the recognition of a system
outage until the time the system has been restored. Host System
Availability is the primary service level and is not subordinate to
any other service categories.
2. Online Processing. Vendor shall be responsible for ensuring that the
[*] online systems will be available not less than [*] of the time,
[*]. Vendor will be permitted reasonable time (no more than [*]
elapsed from system available to system available) to effect
maintenance on equipment [*]. This activity will be planned and
communicated to Customer's Account Manager no less that [*] in advance
of projected downtime.
3. Batch Processing. Vendor shall be responsible for ensuring that all
production batch systems will be available not less than [*] of the
time during After Normal Business Hours ([*].) Vendor will be
permitted reasonable time (no more than [*] elapsed from system
available to system available) to effect maintenance on equipment one
Sunday per month. This activity will be planned and communicated to
Customer's Account Manager no less that [*] in advance of projected
downtime.
B. NETWORK AVAILABILITY.
1. Data Center Local Area Network. Vendor shall be responsible for
ensuring the Local Area Network within the Data Center is available
not less than [*] of the time, [*].
2. Wide Area Network. Vendor shall be responsible for ensuring the Wide
Area Network is available not less than [*] of the time, [*].
3. Dial-Up Connectivity. Vendor shall be responsible for ensuring dial-up
connectivity between the customer and the Data Center is available not
less than [*] of the time, [*].
4. Customer Local Area Network. Vendor shall have responsibility
supporting the customer local area network at the [*] and at clinics
normally supported through staff affected by this transaction. Vendor
shall ensure that the Local Area Networks included are available not
less than [*] of the time, [*].
C. HUMAN RESOURCE AVAILABILITY.
1. Emergency Support. Vendor shall be responsible for ensuring adequate
people resources are available to support [*] requests not less than
[*] of the time, [*].
2. Non-Emergency Support. Vendor shall be responsible for ensuring
adequate people resources are available to support non-Priority 1
request not less than [*] of the time, during Normal Business Hours
[*].
PRIORITY 1 requests are defined as those events associated with a key system
failure to a business function or location. This category is characterized by
the following:
- - Issues that keep The Client from operating their business
- - Have a large detrimental impact on the business
- - No alternative work around exists.
All other failures are categorized as non-emergency.
D. CUSTOMER SERVICE HELP DESK.
1. SERVICE REQUESTS. Vendor shall be responsible for ensuring that all
requests will be prioritized and addressed according to the
following priorities without limitation.
a) Priority 1: Urgent/Emergency. These events are of the most critical nature
and of the highest priority. This category is characterized by the following:
- Issues that keep The Client form operating their business
- Have a large detrimental impact on the business
- No alternative work around exists.
The technical support staff will work continuously, [*], until the
issue is resolved. Follow-up calls will be made every [*] until issue
is resolved.
b) Priority 2: High. These issues have a negative impact upon a large business
function. This category is characterized by the following:
- Issues that significantly impact the normal conduct of Client
business
- Temporary workaround is a reasonable option.
Vendor will make a best effort to resolve these issues within [*]
Updates to customer will be given [*].
c) Priority 3: Medium. These issues have narrow functional limitations and
situations that do not currently impair the customer's business activities.
These issues are characterized by the following:
- Impaired function is limited in scope but used daily
- Temporary workaround is a reasonable option.
- Vendor will meet to assign work priority.
d) Priority 4: Low. These issues involve functions within the system that do
not negatively impact daily operations. These issues are characterized by
the following:
- Issues that are cosmetic in nature
- Infrequent occurrence
- Intermittent function.
2. RESPONSE AND RESOLUTION TIMES. Based on the priority of the problem,
Vendor shall be responsible for ensuring that the following response and
resolution times are adhered to:
<TABLE>
<CAPTION>
MAXIMUM MAXIMUM RESOLUTION SERVICE LEVEL
PRIORITY RESPONSE TIME TIME TARGETS
<S> <C> <C> <C>
1-Urgent/Emergency [*] [*] [*]
2-High [*] [*] [*]
3-Medium [*] [*] [*]
4-Low [*] [*] [*]
</TABLE>
NOTE: ONE BUSINESS DAY = 7:00 A.M. CENTRAL TIME - 6:00 P.M.
CENTRAL TIME, OR 11 HOURS.
II. MINIMUM PERFORMANCE LEVEL
The Minimum Performance Level shall be [*] overall host system
availability (as described above in Section I.A.1 of this Exhibit H), measured
over the period of any [*].
[*] CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.
EXHIBIT H
<PAGE> 61
EXHIBIT I
SERVICE CREDITS
I. SERVICE CREDITS
Vendor shall provide to Customer certain service credits ("Service
Credits") for breach of any of the Service Levels set forth in this EXHIBIT I.
Service Credits for each of the associated Service Levels will be totaled for
the month in which they are incurred (the "Measurement Month") and will be
deducted from the invoice for the month following the Measurement Month. Vendor
shall pay to Customer any Service Credits that have accumulated as of the
termination of this Agreement within [*] days after such date.
II. CALCULATION OF SERVICE CREDITS
Service Credits shall be calculated by first compiling the performance
data for each associated Service Level and calculating a [*] Month (the
"Performance Result"). Any negative deviation from the target percentage will
be calculated and a Service Credit will be calculated in accordance with the
following table for each of [*] that the Performance Result is less than the
target percentage.
<TABLE>
<CAPTION>
HIERARCHY SERVICE CREDIT
--------- --------------
<S> <C>
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
</TABLE>
III. SERVICE CREDIT GRACE PERIOD.
Vendor and Customer agree that no Service Credits shall be charged for Services
performed in [*].
[*] CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.
<PAGE> 62
EXHIBIT J
PRICING SCHEDULE FOR SERVICES
This Exhibit J contains three elements, as follows:
I. Monthly Invoice Process
II. Ramp-down Calculations
- Schedule 1
- Schedule 2
III. Sample Monthly Invoice
I. MONTHLY INVOICE PROCESS
The following process will be followed in order to generate a monthly bill.
A FULL SERVICE PORTION
1 [*]
2 [*]
3 [*]
4 [*]
5 [*]
B INFRASTRUCTURE PORTION
1 [*]
2 [*]
3 [*]
4 [*]
C SAP PORTION
1 [*]
2 [*]
3 [*]
4 [*]
D Sum A + B + C = Total Monthly Recurring Services Charges
E [*]
F [*]
G [*]
H [*]
I [*]
J Sum E + F + G + H + I = Total Invoice Amount submitted for approval
K All monthly invoices will be in the form of the "Sample Monthly
Invoice" attached to this Exhibit J.
[*] CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.
<PAGE> 63
MEDPARTNERS - TRIZETTO OUTSOURCING FINANCIALS
RAMP DOWN CALCULATIONS
FULL SERVICE, INFRASTRUCTURE & SAP
[Schedule Ramp Down Calculations omitted pursuant to Regulation S-K,
Item 601(b)(2) of the Securities Act of 1933, as amended. This Schedule
contains calculations for computing certain ramp down values for full
service sites and physicians. TriZetto hereby agrees to furnish
supplementally a copy of these omitted schedules as requested by the
Securities and Exchange Commission.]
CONFIDENTIAL, COVER
<PAGE> 64
Exhibit K
EXHIBIT K
CHANGE CONTROL PROCESS
Within [*] days after the Effective Date and for the remainder of the Term, the
Parties shall define, establish, implement, document and maintain a change
control process for activities, processes, provisions and operations under this
Agreement and to evolve the Services (the "Change Control Process"). The
purposes and objectives of the Change Control Process are (i) to review each
request for a change to this Agreement and the Services to determine whether
such change is appropriate (a "Change Request"), (ii) to determine whether such
change is within the scope of the Services or constitutes an Additional Service,
(iii) to prioritize all Change Requests, (iv) to minimize the risk of exceeding
both time and cost estimates associated with the requested changes by
identifying, documenting, quantifying, controlling, managing and communicating
requested changes and their disposition and as applicable, implementation; and
(v) to identify the different roles, responsibilities and actions that shall be
assumed and taken by the Parties to define and implement the changes to the
Services and to this Agreement.
The Change Control Review Team, chaired by the Customer and Vendor Account
Managers or their respective designees, shall be the focal point for all Change
Requests and shall be responsible for promptly and diligently effecting the
activities set forth above in this Change Control Process with respect to each
Change Request.
The Change Control Process shall include, at a minimum:
(a) Changes to this Agreement and Services may be requested by
either Party. Since a change may affect the price, schedule or
other terms, both the Customer and Vendor Account Managers must
review and approve, in writing, each Change Request before any
Change Request is implemented.
(b) The Party proposing a Change Request will write a Change Request
Form ("CRF"), describing the change, the rationale for the
change and the anticipated effect that change will have, if
completed, or the anticipated impact it will have, if rejected,
on this Agreement and/or the Services.
(c) Customer's or Vendor's representative, as appropriate, will
review the proposed Change Request. If accepted, the CRF will be
submitted to the other Party for review. If rejected, the CRF
will be returned to the originator along with the reason for
rejection.
(d) Customer's and Vendor's representatives will weigh the merits of
the proposed Change Request and will decide whether further
study of the Change Request is in order. Approval of a CRF
proposed by Customer for further study constitutes authorization
by Customer for Vendor to proceed to investigate the CRF and
invoice Customer for such costs incurred by Vendor in such
activity. Approval of a CRF proposed by Vendor for further study
constitutes authorization by the Parties to further investigate
and study the Change Request without charge to Customer.
[*] CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.
EXHIBIT K
<PAGE> 65
(e) Vendor will present the results of the study to the Customer
Account Manager detailing the technical merits, effects on
price, schedule, and impact on other terms, conditions and
modifications that will result from implementation of the
proposed Change Request. The Customer Account Manager shall then
either approve or reject the Change Request.
(f) Each approved Change Request will be implemented through a
written change authorization and this Agreement will be updated
to reflect the changes in scope, price or terms and conditions,
as appropriate.
EXHIBIT K
<PAGE> 66
EXHIBIT L
[Schedule 1 of Exhibit L omitted pursuant to Regulation S-K, Item 601(b)(2) of
The Securities Act of 1933, as amended. Schedule 1 identifies the software used
by TriZetto for the purposes of this Agreement. TriZetto hereby agrees to
furnish supplementally a copy of these omitted schedules as requested by the
Securities and Exchange Commission.]
<PAGE> 67
EXHIBIT M
HARDWARE RIGHTS
I. INTRODUCTION
This Exhibit M and the Schedules hereto describe the arrangements of
the Parties in connection with the Hardware.
II. OWNED HARDWARE
The hardware and equipment that are being transferred to Customer
pursuant to the Business Unit Asset Purchase Agreement (the "Owned Hardware")
are identified on Schedule 1 which is attached to this Exhibit M.
III. RETAINED HARDWARE; LEASED HARDWARE
This Section III of this Exhibit M describes the arrangements of the
Parties in connection with Hardware which is leased by Customer.
The following equipment, leased by Customer from DVI Financial
Services, account numbers [*] respectively, shall be considered "Leased
Hardware" for which Vendor shall assume (in accordance with the procedures
provided for in Section 15 of the Agreement) the applicable leases: [*].
In addition, the following equipment, leased by Customer from [*],
account number [*], shall be considered "Leased Hardware" for which Vendor shall
assume (in accordance with the procedures provided for in Section 15 of the
Agreement) the applicable lease: [*].
The Bay Networks equipment listed on Schedule 2 to this Exhibit M is
leased by Customer under a lease from [*], account number [*], which expires
[*]. For the period from the Effective Date until [*], such equipment shall be
"Retained Hardware" for which Customer shall be responsible for the lease
payments. Upon the expiration of such lease on [*], Vendor shall
either (1) purchase, at Vendor's expense, the equipment from [*], or (2) enter
into a separate lease or purchase agreement with [*] or a third party for such
equipment or equivalent or better equipment, under which Vendor shall be
responsible for the lease or purchase payments. In either case, the equipment
shall then become "Vendor Provided Hardware".
The Bay Networks equipment listed on Schedule 3 to this Exhibit M is
leased by Customer under a lease from [*], account number [*], which expires
[*]. For the period from the Effective Date until [*], such equipment shall be
"Retained Hardware" for which Customer shall be responsible for the lease
payments; provided, however, that Vendor shall reimburse Customer [*] for such
lease payments. Upon the expiration of such lease on [*], Vendor shall either
(1) purchase, at Vendor's expense, the equipment from [*], or (2) enter into a
separate lease or purchase agreement with [*] or another third party for such
equipment or equivalent or better equipment, under which Vendor shall be
responsible for the lease or purchase payments. In either case, the equipment
shall then become "Vendor Provided Hardware".
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
<PAGE> 68
IV. VENDOR PROVIDED HARDWARE
Vendor will not provide any "Vendor Provided Hardware" as of the time
of the Effective Date.
<PAGE> 69
EXHIBIT M
SCHEDULE 1
[Schedule 1 of Exhibit M omitted pursuant to Regulation S-K, Item 601(b)(2) of
The Securities Act of 1933, as amended. Schedule 1 is a list of fixtures and
equipment from MedPartner's Glastonbury office. TriZetto hereby agrees to
furnish supplementally a copy of these omitted schedules as requested by the
Securities and Exchange Commission.]
<PAGE> 70
EXHIBIT N
SERVICES TRANSITION ASSISTANCE
I. OVERVIEW
Upon the termination or expiration of this Agreement, Vendor shall
provide at Customer's request the services described in this EXHIBIT N to assist
Customer in bringing the Services back in-house or transferring the Services to
another provider.
II. CONTINUED OPERATION
Vendor will continue to provide the Services in accordance with the terms and
conditions of the Agreement for a period of up to [*] days at Customer's request
after the termination or expiration of this Agreement.
III. DATA MANAGEMENT
Vendor shall return or transfer the Customer Data and the Clinic Data
at no cost in accordance with the Agreement and EXHIBIT B.
IV. TRANSITION SERVICES
Vendor shall provide any of the following additional transition
services requested by Customer at the rates set forth in EXHIBIT D:
1. Transition planning;
2. Current operation assessment;
3. Software inventory;
4. Hardware inventory;
5. Contract review;
6. Lease review;
7. Transition plan development; and
8. Coordination and implementation assistance.
[*] Confidential portions omitted
and filed separately with the
Securities and Exchange Commission.
Exhibit N
<PAGE> 71
EXHIBIT O
REPORTING TEMPLATES
[Schedule 1 of Exhibit O omitted pursuant to Regulation S-K, Item 601(b)(2) of
The Securities Act of 1933, as amended. Schedule 1 contains forms of reporting
templates. TriZetto hereby agrees to furnish supplementally a copy of these
omitted schedules as requested by the Securities and Exchange Commission.]
<PAGE> 72
EXHIBIT P
DISASTER RECOVERY PLAN
Vendor and Customer agree that the Disaster Recovery Plan to be
provided by Vendor to Customer under SECTION 17 of the Agreement shall include
each of the elements set forth in this EXHIBIT P, in detail reasonably
satisfactory to Customer:
I. REDUNDANT SERVICE CAPABILITY
The Disaster Recovery Plan shall include redundant service capability to
provide Services in the event of a disaster which would cause Vendor's physical
or system facilities to become inoperative. Such redundant service capability
will provide, at a minimum:
(a) Backup copies of all Customer Data delivered [*] to off-site, secured
storage area for use in the event of a disaster;
(b) The ability, in the event of a disaster that incapacitates Vendor's data
center operations, to completely recreate Services, with backed up data,
within [*] hours at a remote facility.
(c) Backup telecommunications services in place which will allow dial-in access
to the remote facility;
(d) Operation of the remote facility in conjunction with Vendor personnel to
recreate Services in conformance with the Standards set forth in this
Agreement.
(e) Customer may provide, at Customer's option and expense, qualified
individuals to assist Vendor, at Vendor's direction, in the event of a
disaster which causes Vendor's physical or system facilities to become
inoperative.
(f) Vendor will perform tests of its disaster recovery service capability at
least once during every six (6) month period, and will allow Customer to
participate, at Customer's option and expense and at Vendor's direction, in
such testing process. Vendor will provide Customer with the results of such
test.
II. EXECUTION
In the event of significant disruption to, or interruption of Services which
impairs Vendor's ability to provide the Services to Customer (including,
without limitation, Critical Disruptions), Vendor will initiate, in whole or
part, the specific sections of its disaster recovery plan associated with
restoring the interrupted capability. The plan shall provide for the
re-activation of service capability from a stand-by, hot production site [*].
Vendor currently subscribes to the [*] unit of [*], and is contracted to
utilize their [*] data center as the designated hot site for Vendor's [*]
platforms. Other data center or system platforms may be subscribed to alternate
[*] locations. Vendor's plan provides for the documentation of all current
information technology infrastructure, business unit impact analysis, disaster
activation steps, recovery activity and periodic plan testing.
A. PREPARATION/TESTING
The Disaster Recovery Plan will include the following elements:
1. SITE ASSESSMENT. For each data center, Vendor performs a disaster risk
assessment and hardware inventory to ensure that appropriate preventive
measures have been taken and that the environmental support systems at each
site appropriately minimize the potential for service outages. Vendor will
establish hardware maintenance contracts wherever they are deemed
appropriate to ensure risk exposure kept acceptable low.
2. INPUT FROM CUSTOMER. Vendor will meet with and request input from business
unit representatives to assess their tolerance and sensitivity to service
interruption. This assessment will be performed on an individual software
application basis and which may result in the initiation of application
specific recovery efforts that vary in scope or recovery timeframes. The
assessment deliverable will be an acceptance/acknowledgement of the specific
recovery timelines and any service level changes associated with the
disaster scenario.
3. PLATFORM SPECIFIC RECOVERY PLANS. Vendor will establish CPU
hardware/equipment recovery procedures for each in-scope processing
platform.
4. JOINT DISASTER RECOVERY COORDINATION TEAM. Vendor will establish a Disaster
Recovery Coordination Team (DRCT) with the Customer whose responsibility it
will be to participate in the evaluation of severe service degradations or
interruptions for scope/magnitude in order to ensure the most appropriate
service restoration plan is initiated.
5. SEMI-ANNUAL TEST. Vendor will perform [*] of its disaster recovery plan
including the verification of service capability from the hot site. Vendor
will allow Customer to participate, at Customer's option and expense and at
Vendor's direction, in such testing process. Vendor will provide Customer
with the results of such tests.
6. [*] TAPE BACKUPS. As documented elsewhere, system and data file backups are
taken daily and rotated to an offsite storage location by ARCUS data
security. Vendor will review the frequency and tape cycling activity, as
well as the pertinent regulatory archival requirements to ensure that all
potential data restoration needs can be met.
7. CONNECTIVITY CONTINGENCY PLAN. Vendor will network connectivity plans to
ensure redundant data circuits where necessary. Contracts [*] or other
carriers have been established to procure emergency network data circuits
from designated clinic sites to the pre-designated hot site(s).
B. DISASTER RECOVERY.
Vendor's disaster recovery plan includes the following steps.
1. DAMAGE ASSESSMENT. Upon notice of a major event seriously degrading or
disabling a data center, Vendor will convene the Disaster Recovery
Coordination Team to rapidly assess damage and determine whether to declare
a disaster and invoke efforts to move operations to the [*]. Key decision
criteria include:
a. [*]
b. [*]
c. [*]
d. [*]
2. INITIATION OF MOVE TO HOT SITE.
a. First alert notification, IT management
b. Notify business unit personnel
c. Activate [*] "Declared Disaster" notification
d. Notification to [*] security to release backup data tapes. [*] responds
within [*] minutes and activates [*].
3. MOVE KEY PERSONNEL TO HOT SITE. Also using [*] key personnel will move
immediately to the hot site to begin configuration of hot site.
4. ACTIVATION OF DATA CIRCUITS. Notify [*] or other affected carriers of
disaster plan initiation to temporarily re-home data circuits from clinic
sites to hot site.
5. INSTALLATION OF KEY APPLICATIONS. Using [*] re-installed hardware and
emergency vendor supplied equipment, Vendor installs appropriate processing
environmental on hosts.
6. CONFIGURATION OF SERVERS AND MAINFRAMES.
7. TESTING AT HOT SITE.
a. Data circuits, router-to-router
b. Application testing
c. Configuration testing
8. USER TESTING
a. Unit testing
b. Acceptance testing
9. GO-LIVE
a. Recover business functions
b. Recover administration functions
c. Report to Customer on service levels
10. PLAN FOR RESTORATION OF DATA CENTER
[*] Confidential portions omitted
and filed separately with the
Securities and Exchange Commission.
Exhibit P
<PAGE> 73
EXHIBIT Q
INSURANCE
During the Term of this Agreement Vendor shall maintain and keep in
force, at its own expense, the following minimum insurance coverages and minimum
limits set forth on this Insurance Exhibit and as otherwise mutually agreed to
between Customer and Vendor:
(a) workers' compensation insurance, with statutory limits as
required by the various laws and regulations applicable to the
employees of Vendor or any Vendor contractor or subcontractor;
(b) employees liability insurance, for employee bodily injuries and
deaths, with a limit of [*] each accident;
(c) comprehensive or commercial general liability insurance,
covering claims for bodily injury, death and property damage,
including premises and operations, independent contractors,
products, services and completed operations (as applicable to
the Services), personal injury, contractual, and broad-form
property damage liability coverages, in an amount not less than
[*];
(d) comprehensive automobile liability insurance, covering owned,
non-owned and hired vehicles, with limits as follows (1)
combined single limit of [*] for bodily injury, death and
property damage per occurrence; or (2) split liability limits of
(i) [*] for bodily injury per person; (ii) [*] for bodily injury
per occurrence; and (iii) [*] for property damage; and
(e) all-risk property insurance, on a replacement cost basis,
covering the real and personal property of Vendor which Vendor
is obligated to insure by this Agreement. Such real and personal
property may include buildings, equipment, furniture, fixtures
and supply inventory.
All such policies of insurance of Vendor and its contractors and subcontractors
shall provide that the same shall not be canceled nor the coverage modified nor
the limits changed without first giving thirty (30) days prior written notice
thereof to Customer. No such cancellation, modification or change shall affect
Vendor's obligation to maintain the insurance coverages required by this
Agreement. Except for workers' compensation insurance, Customer shall be named
as an additional insured and loss payee on all such required policies. Vendor
shall be responsible for payment of any and all deductibles from insured claims
under its policies of insurance.
The coverage afforded under any insurance policy obtained by Vendor pursuant to
this Agreement shall be primary coverage regardless of whether or not Customer
has similar coverage. Vendor and its contractors and subcontractors shall not
perform under this Agreement without the prerequisite insurance. Upon Customer's
request, Vendor shall provide Customer with certificates of such insurance
including renewals thereof. Unless previously agreed to in writing by Customer,
Vendor's contractors and subcontractors shall comply with the insurance
requirements herein.
Exhibit Q
[*] Confidential portions omitted
and filed separately with the
Securities and Exchange Commission.
<PAGE> 74
The minimum limits of coverage required by this Agreement may be satisfied by a
combination of primary and excess or umbrella insurance policies. If Vendor or
its contractors or subcontractors shall fail to comply with any of the insurance
requirements herein, upon written notice to Vendor by Customer and a ten (10)
day cure period, Customer may, without any obligation to do so, procure such
insurance and Vendor shall pay Customer the cost thereof. The maintenance of the
insurance coverages required under this Agreement shall in no way operate to
limit the liability of Vendor to Customer under the provisions of this
Agreement.
The parties do not intend to shift all risk of loss to insurance. The naming of
Customer as an additional insured or loss payee is not intended to be a
limitation of Vendor's liability and shall in no event be deemed to, or serve
to, limit Vendor's liability to Customer to available insurance coverage or to
the policy limits, nor to limit Customer's rights to exercise any and all
remedies available to Customer under contract, at law or in equity.
<PAGE> 75
EXHIBIT R
EXCLUDED EXPENSES
This EXHIBIT R sets forth the financial responsibility for the
following expenses, which the Parties acknowledge may not represent a complete
list of all expenses for which financial responsibility must be allocated. Where
Customer is to assume responsibility for the expense, the charges are not
included in the Monthly Services Charge and shall be payable by Customer or
reimbursable to Vendor as agreed to by the Parties.
A. Hubs and Routers: Lease and maintenance charges for hubs
and routers located at the Clinics will be the
responsibility of [*]; these costs will [*].
B. Telecommunications Costs: Telecommunications costs for both
voice and data will be appropriately allocated between [*].
These costs include frame relay, local and long distance
and data circuits. Charges for the Sonet Ring shall be
allocated between [*] based upon usage.
C. EDI Claim Submission: EDI Claim submission costs which are
currently passed through to the Clinics will [*]. These
costs include, but are not limited to, transmission and
statement charges.
D. Training: Training materials and other out-of-pocket
expenses not pertaining to the CBT courses (as described in
Section 2.8 of Exhibit B) shall be [*].
The Parties will cooperate in good faith to ensure that all expenses
are paid in a timely manner so as to avoid discontinuation of services. If
penalties or interest are incurred as a result of untimely payment of invoices,
the Party responsible for the delay shall be responsible for such penalties or
interest.
Where Vendor is to assume primary responsibility for the expense, the
Parties shall execute an Additional Services Request setting forth such
responsibility.
Exhibit R
<PAGE> 76
EXHIBIT S
SERVICE RESOURCES
[Schedule 1 omitted pursuant to Regulation S-K, Item 601(b)(2) of the Securities
Act of 1933, as amended. Schedule 1 contains a list of support service centers.
TriZetto hereby agrees to furnish supplementally a copy of these omitted
schedules as requested by the Securities and Exchange Commission.]
<PAGE> 77
EXHIBIT T
AFFECTED EMPLOYEES
The "Affected Employees" are those individuals listed below on this Exhibit T.
[*]
[*] Confidential portions omitted
and filed separately with the
Securities and Exchange Commission.
<PAGE> 78
EXHIBIT U
BUSINESS UNIT ASSET PURCHASE AGREEMENT
This BUSINESS UNIT ASSET PURCHASE AGREEMENT ("Agreement") is entered into as of
May 1, 1999 (the "Effective Date"), by and between The Trizetto Group, Inc.
("Purchaser") and MedPartners, Inc. ("Seller").
RECITALS
WHEREAS, Purchaser and Seller are entering into an Information Technology
Services Agreement dated May 1, 1999 (the "Services Agreement");
WHEREAS, in connection with the Services Agreement, Seller has agreed to sell,
and Purchaser has agreed to purchase the Business Unit Assets (as set forth on
Schedule 1) on the Effective Date; and
WHEREAS, Seller desires to transfer and assign the Business Unit Assets and
Purchaser desires to accept the transfer and assignment thereof.
NOW, THEREFORE, in consideration of the mutual covenants contained herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. In consideration of Purchaser's payment to Seller of [*]
(the "Purchase Price"), due upon execution of this
Agreement, Seller hereby irrevocably sells, transfers,
conveys, and assigns to Purchaser all of Seller's right,
title, and interest to the Business Unit Assets, TO HAVE
AND TO HOLD the same unto Purchaser, its successors, and
assigns, forever.
2. Purchaser hereby agrees to pay Seller the Purchase Price
in full upon execution of this Agreement, and hereby
accepts the sale, transfer, conveyance, and assignment
of the Business Unit Assets.
3. At any time or from time to time after the date hereof,
at Purchaser's request and without further
consideration, Seller shall execute such other
instruments of transfer, conveyance, assignment, and
confirmation, provide such materials and information and
take such other actions as may be reasonably necessary
in order more effectively to transfer, convey, and
assign to Purchaser, and confirm Purchaser's title to,
all of the Business Unit Assets, and, to the full extent
permitted by law, to put Purchaser in actual possession
and operating control of the Business Unit Assets and to
assist Purchaser in exercising all rights with respect
thereto.
4. Seller hereby warrants and represents that Vendor shall
receive good and rightful title in and to the Business
Unit Assets, free and clear of any liens, claims or
encumbrances, upon consummation of transfer contemplated
by Sections 1 and 2 of this Agreement.
1
[*] Confidential portions omitted
and filed separately with the
Securities and Exchange Commission.
<PAGE> 79
5. EXCEPT AS SPECIFICALLY SET FORTH IN SECTION 4 OF THIS
AGREEMENT, ALL OF THE BUSINESS UNIT ASSETS BEING
TRANSFERRED FROM SELLER TO PURCHASER PURSUANT TO THIS
AGREEMENT ARE BEING TRANSFERRED AS IS, WHERE IS, AND IT IS
THE EXPLICIT INTENT OF EACH PARTY HERETO THAT SELLER IS NOT
MAKING ANY ADDITIONAL REPRESENTATION OR WARRANTY
WHATSOEVER, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED
TO ANY IMPLIED REPRESENTATION OR WARRANTY AS TO CONDITION,
MERCHANTABILITY, SUITABILITY OR FITNESS FOR ANY PARTICULAR
PURPOSE AS TO ANY OF THE BUSINESS UNIT ASSETS.
6. In addition to the Purchase Price, Purchaser shall pay
Seller [*], due upon execution of this Agreement, for
Seller's clinic client contact list.
7. This Agreement shall be construed and governed by the
internal laws of the State of Alabama, without reference to
the choice of law principles thereof. Each party
irrevocably agrees that any legal action, suit, or
proceeding brought by it in any way arising out of the
agreement must be brought solely and exclusively in the
federal district court (or in the absence of federal
jurisdiction, the appropriate state court) sitting in
Birmingham, Alabama and each party 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.
IN WITNESS WHEREOF, the parties have caused this Business Unit Asset Purchase
Agreement to be executed in their names as of the Effective Date.
THE TRIZETTO GROUP, INC. MEDPARTNERS, INC.
567 San Nicholas Drive, Suite 360 3000 Galleria Tower, Suite 1000
Newport Beach, CA 92660 Birmingham, AL 35244
By: By:
------------------------------- ------------------------------------
(Authorized Signature) (Authorized Signature)
Name: Name:
----------------------------- ----------------------------------
Title: Title:
---------------------------- ---------------------------------
Date: Date:
---------------------------- ---------------------------------
[*] Confidential portions omitted
and filed separately with the
Securities and Exchange Commission.
2
<PAGE> 80
SCHEDULE 1
The items identified on the attachment to this Schedule 1 shall be the "Business
Unit Assets" for the purposes of this Agreement.
[Schedule 1 omitted pursuant to Regulation S-K, Item 601(b)(2) of the Securities
Act of 1933, as amended. Schedule 1 is a list of assets from MedPartners'
Glastonbury office. TriZetto hereby agrees to furnish supplementally a copy of
these omitted schedules as requested by the Securities and Exchange Commission.]
3
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF THE TRIZETTO GROUP, INC.,
A DELAWARE CORPORATION
(Pursuant to Section 242 and 245)
The undersigned, Jeffrey H. Margolis, hereby certifies that:
ONE: He is the President of said corporation.
TWO: The corporation was originally incorporated under the name M C
Health Holdings, Inc.; the original Certificate of Incorporation of said
corporation was originally filed with the Secretary of State of Delaware on May
27, 1997.
THREE: The Amended and Restated Certificate of Incorporation was filed
with the Secretary of State of Delaware on April 29, 1998.
FOUR: A Certificate of Amendment to the Amended and Restated
Certificate of Incorporation was filed with the Secretary of State of Delaware
on October 28, 1998.
FIVE: A subsequent Amended and Restated Certificate of Incorporation
was filed with the Secretary of State of Delaware on April 8, 1999.
SIX: The Certificate of Incorporation of said corporation shall be
amended and restated to read in full as follows:
ARTICLE 1
The name of this corporation is The TriZetto Group, Inc. (the
"Corporation").
ARTICLE 2
The address of the registered office of the Corporation in the State of
Delaware is 9 East Loockerman Street, Dover, County of Kent, Delaware 19901. The
name of the Corporation's registered agent at that address is National
Registered Agents, Inc.
ARTICLE 3
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware, as amended from time to time.
ARTICLE 4
The Corporation is authorized to issue two classes of shares to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares which the Corporation shall have authority to issue is 45,000,000
shares. The total number of shares of Common Stock which the Corporation shall
have authority to issue is 40,000,000 shares, $0.001 par value per share. The
total number of shares of Preferred Stock which the Corporation shall have
authority to issue is 5,000,000 shares, $0.001 par value per share. The
Preferred Stock may be issued from time to time, in one or more
<PAGE> 2
series, each series to be appropriately designated by a distinguishing letter or
title, prior to the issue of any shares thereof.
The Board of Directors is authorized, subject to limitations prescribed
by law, to provide for the issuance of the shares of Preferred Stock in one or
more series, and by filing a certificate as required by the General Corporation
Law of the State of Delaware, to establish from time to time the number of
shares to be included in each such series, and to fix the designation, powers,
preferences and relative, participating, optional or other special rights of the
shares of each such series and any qualifications, limitations or restrictions
thereof.
ARTICLE 5
The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors and elections of directors need
not be by written ballot unless otherwise provided in the Bylaws. The number of
directors of the Corporation shall be fixed from time to time by the Board of
Directors either by a resolution or Bylaw adopted by the affirmative vote of a
majority of the entire Board of Directors.
Meetings of the stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the Delaware Statutes) outside the State
of Delaware at such place or places as may be designated from time to time by
the Board of Directors or by the Bylaws of the Corporation.
ARTICLE 6
A director of this Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, provided that this provision shall not eliminate or limit
the liability of a director (i) for any breach of his duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of the law, (iii)
under Section 174 of the General Corporation Law of the State of Delaware, or
(iv) for any transaction from which the director derives an improper personal
benefit.
This Corporation shall, to the maximum extent permitted from time to
time under the law of the State of Delaware, indemnify and upon request shall
advance expenses to any person who is or was a party or is threatened to be made
a party to any threatened, pending or completed action, suit, proceeding or
claim, whether civil, criminal, administrative or investigative, by reason of
the fact that such person is or was or has agreed to be a director or officer of
this Corporation or while a director or officer is or was serving at the request
of this Corporation as a director, officer, partner, trustee, employee or agent
of any corporation, partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, against expenses
(including attorney's fees and expenses), judgments, fines, penalties and
amounts paid in settlement incurred in connection with the investigation,
preparation to defend or defense of such action, suit, proceeding or claim;
provided; however, that the foregoing shall not require this Corporation to
indemnify or advance expenses to any person in connection with any action, suit,
proceeding, claim or counterclaim initiated by or on behalf of such person. Such
indemnification shall not be exclusive of other indemnification rights arising
under any bylaw, agreement, vote of directors or stockholders or otherwise and
shall inure to the benefit of the heirs and legal representatives of such
person. Any person seeking indemnification under this Article 6 shall be deemed
to have met the standard of conduct required for such indemnification unless the
contrary shall be established.
If the General Corporation Law of the State of Delaware is hereafter
amended to authorize corporate action further limiting or eliminating the
personal liability of directors, then the liability of the
-2-
<PAGE> 3
directors of the Corporation shall be limited or eliminated to the fullest
extent permitted by the General Corporation Law of the State of Delaware, as so
amended from time to time. Any repeal or modification of this Article 6 by the
stockholders of the Corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director of the
Corporation existing at the time of such repeal or modification.
ARTICLE 7
The Board of Directors shall have the power to make, alter, amend,
change, add to or repeal the Bylaws of the Corporation.
Notwithstanding the foregoing provision of this Article 7, the Bylaws
may be rescinded, altered, amended or repealed in any respect by the affirmative
vote of the holders of at least 50% of the outstanding voting stock of the
Corporation, voting together as a single class.
ARTICLE 8
The Board of Directors shall be and is divided into three classes,
Class I, Class II and Class III. The number of directors in each class shall be
the whole number contained in the quotient arrived at by dividing the number of
authorized directors by three, and if a fraction is also contained in such
quotient then if such fraction is one-third (1/3) the extra director shall be a
member of Class III and if the fraction is two-thirds (2/3) one of the extra
directors shall be a member of Class III and the other shall be a member of
Class II. Each director shall serve for a term ending on the date of the third
annual meeting following the annual meeting at which such director was elected;
provided, however, that the directors of the Corporation as of the date of
filing of this Amended and Restated Certificate of Incorporation are hereby each
assigned to a class, and the director assigned to Class I shall serve for a term
ending on the date of the annual meeting in 2000, the directors assigned to
Class II shall serve for a term ending on the date of the annual meeting in
2001, and the directors assigned to Class III shall serve for a term ending on
the date of the annual meeting in 2002.
The members of the present Board of Directors are allocated as follows:
CLASS I CLASS II CLASS III
------- -------- ---------
Paul F. LeFort Peter D. Mann Donald J. Lothrop
William E. Fisher Jeffrey H. Margolis
In the event of any increase or decrease in the authorized number of
directors, (a) each director then serving as such shall nevertheless continue as
a director of the class of which he or she is a member until the expiration of
his or her current term, or his or her prior death, retirement, resignation or
removal, and (b) the newly created or eliminated directorships resulting from
such increase or decrease shall be apportioned by the Board of Directors to such
class or classes as shall, so far as possible, bring the number of directors in
the respective classes into conformity with the formula in this Article 8, as
applied to the new number of directors.
Notwithstanding any of the foregoing provisions of this Article 8, each
director shall serve until his successor is elected and qualified or until his
death, retirement, resignation or removal. A director may be removed by the
stockholders only for cause. Should a vacancy occur or be created, the remaining
directors (even though less than a quorum) may fill the vacancy for the full
term of the class in which the vacancy occurs or is created.
-3-
<PAGE> 4
ARTICLE 9
No action shall be taken by the stockholders except at an annual or
special meeting of stockholders. The stockholders may not take action by written
consent.
ARTICLE 10
Special meetings of the stockholders of the Corporation for any purpose
or purposes may be called at any time by the Chairman of the Board, or by a
majority of the Board of Directors, or by a committee of the Board of Directors
which has been duly designated by the Board of Directors and whose powers and
authority, as provided in a resolution of the Board of Directors or in the
Bylaws of the Corporation, include the power to call such meetings, but such
special meetings may not be called by any other person or persons. The
stockholders may not call a special meeting.
ARTICLE 11
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Amended and Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred on stockholders herein are granted subject to this reservation;
provided, however, that no amendment, alteration, change or repeal may be made
to Article 5, 8, 9, 10 or 11 without the affirmative vote of the holders of at
least 66 2/3% of the outstanding voting stock of the Corporation, voting
together as a single class.
SEVEN: The foregoing Amended and Restated Certificate of Incorporation
has been approved by the Board of Directors in accordance with Section 141(i) of
the General Corporation Law of the State of Delaware.
EIGHT: The foregoing Amended and Restated Certificate of Incorporation
has been approved by the stockholders of the Corporation by written consent in
accordance with Section 228 of the General Corporation Law of the State of
Delaware.
NINE: The foregoing Amended and Restated Certificate of Incorporation
has been duly adopted in accordance with the applicable provisions of Section
242 and 245 of the General Corporation Law of the State of Delaware.
-4-
<PAGE> 5
IN WITNESS WHEREOF, THE TRIZETTO GROUP, INC. has caused this
certificate to be signed by the undersigned, and the undersigned has executed
this certificate and affirms the foregoing as true and under penalty of perjury
this ___ day of ____________ 1999.
Jeffrey H. Margolis, President
-5-
<PAGE> 1
EXHIBIT 3.4
AMENDED AND RESTATED
BYLAWS
OF
THE TRIZETTO GROUP, INC.
A DELAWARE CORPORATION
AS EFFECTIVE ON SEPTEMBER ___, 1999
<PAGE> 2
AMENDED AND RESTATED
BYLAWS
OF
THE TRIZETTO GROUP, INC.
A DELAWARE CORPORATION
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The address of the registered office of
the Corporation in the State of Delaware is 9 East Loockerman Street, Dover,
County of Kent, Delaware 19901. The name of the Corporation's registered agent
at that address is National Registered Agents, Inc.
SECTION 2. OTHER OFFICES. The Corporation may also have offices at such
other places, both within and without the State of Delaware, as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
SECTION 3. BOOKS. The books of the Corporation may be kept within or
without the State of Delaware as the Board of Directors may from time to time
determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. PLACE OF MEETINGS. All meetings of stockholders for the
election of directors shall be held at such place either within or without the
State of Delaware as may be fixed from time to time by the Board of Directors,
or at such other place either within or without the State of Delaware as shall
be designated from time to time by the Board of Directors and stated in the
notice of the meeting. Meetings of stockholders for any other purpose may be
held at such time and place, within or without the State of Delaware, as shall
be stated in the notice of the meeting or in a duly executed waiver of notice
thereof.
SECTION 2. ANNUAL MEETINGS. Annual meetings of stockholders shall be
held at a time and date designated by the Board of Directors for the purpose of
electing directors and transacting such other business as may properly be
brought before the meeting.
SECTION 3. SPECIAL MEETINGS. A special meeting of stockholders may be
called at any time by the Board of Directors, or by a majority of the Board of
Directors or by a committee of the Board of Directors which has been duly
designated by the Board of Directors and whose powers and authority, as provided
in a resolution of the Board of Directors, include the power to call such
meetings, but such special meetings may not be called by any other person or
persons.
SECTION 4. NOTIFICATION OF BUSINESS TO BE TRANSACTED AT MEETING. To be
properly brought before a meeting, business must be (a) specified in the notice
of meeting (or any supplement thereto) given by or at the direction of the Board
of Directors, (b) otherwise properly brought before the
1
<PAGE> 3
meeting by or at the direction of the Board of Directors, or (c) otherwise
properly brought before the meeting by a stockholder entitled to vote at the
meeting.
SECTION 5. NOTICE; WAIVER OF NOTICE. Whenever stockholders are required
or permitted to take any action at a meeting, a written notice of the meeting
shall be given which shall state the place, date and hour of the meeting, and,
in the case of a special meeting, the purpose or purposes for which the meeting
is called. Unless otherwise required by law, such notice shall be given not less
than 10 nor more than 60 days before the date of the meeting to each stockholder
of record entitled to vote at such meeting. If mailed, such notice shall be
deemed to be given when deposited in the mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the Corporation. A
written waiver of any such notice signed by the person entitled thereto, whether
before or after the time stated therein, shall be deemed equivalent to notice.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the person attends the meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened.
SECTION 6. QUORUM; ADJOURNMENT. Except as otherwise required by law, or
provided by the Certificate of Incorporation or these Bylaws, the holders of a
majority of the capital stock issued and outstanding and entitled to vote
thereat, present in person or represented by proxy, shall constitute a quorum
for the transaction of business at all meetings of the stockholders. A meeting
at which a quorum is initially present may continue to transact business,
notwithstanding the withdrawal of enough votes to leave less than a quorum, if
any action taken is approved by at least a majority of the required quorum to
conduct that meeting. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the chairman of the meeting
shall have power to adjourn the meeting from time to time, without notice other
than announcement at the meeting of the time and place of the adjourned meeting,
until a quorum shall be present or represented. At such adjourned meeting at
which a quorum shall be present or represented, any business may be transacted
which might have been transacted at the meeting as originally noticed. If the
adjournment is for more than 30 days, or if after the adjournment a new record
date is fixed for the adjourned meeting, a notice of the adjourned meeting shall
be given to each stockholder entitled to vote at the meeting.
SECTION 7. VOTING. Except as otherwise required by law, or provided by
the Certificate of Incorporation or these Bylaws, any question brought before
any meeting of stockholders at which a quorum is present shall be decided by the
vote of the holders of a majority of the stock represented and entitled to vote
thereat. Unless otherwise provided in the Certificate of Incorporation, each
stockholder represented at a meeting of stockholders shall be entitled to cast
one vote for each share of the capital stock entitled to vote thereat held by
such stockholder. Such votes may be cast in person or by proxy, but no proxy
shall be voted on or after three years from its date, unless such proxy provides
for a longer period. Elections of directors need not be by ballot unless the
Chairman of the meeting so directs or unless a stockholder demands election by
ballot at the meeting and before the voting begins.
SECTION 8. STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING. The
stockholders may not take action by written consent.
SECTION 9. RECORD DATE FOR STOCKHOLDER NOTICE AND VOTING. For purposes
of determining the holders entitled to notice of any meeting or to vote, the
Board of Directors may fix, in advance, a record date, which shall not be more
than 60 days nor less than 10 days prior to the date of any such meeting, and in
such case only stockholders of record on the date so fixed are entitled to
2
<PAGE> 4
notice and to vote, notwithstanding any transfer of any shares on the books of
the Corporation after the record date fixed as aforesaid, except as otherwise
provided in the Delaware General Corporation Law. If the Board of Directors does
not so fix a record date, the record date for determining stockholders entitled
to notice of or to vote at a meeting of stockholders shall be at the close of
business on the business day next preceding the day on which notice is given or,
if notice is waived, at the close of business on the business day next preceding
the day on which the meeting is held.
SECTION 10. STOCK LEDGER. The stock ledger of the Corporation shall be
the only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by Section 9 of this Article II or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.
SECTION 11. INSPECTORS OF ELECTION. In advance of any meeting of
stockholders, the Board of Directors may appoint one or more persons (who shall
not be candidates for office) as inspectors of election to act at the meeting or
any adjournment thereof. If an inspector or inspectors are not so appointed, or
if an appointed inspector fails to appear or fails or refuses to act at a
meeting, the Chairman of any meeting of stockholders may, and on the request of
any stockholder or his proxy shall, appoint an inspector or inspectors of
election at the meeting. The duties of such inspector(s) shall include:
determining the number of shares outstanding and the voting power of each; the
shares represented at the meeting; the existence of a quorum; the authenticity,
validity and effect of proxies; receiving votes, ballots or consents; hearing
and determining all challenges and questions in any way arising in connection
with the right to vote; counting and tabulating all votes or consents;
determining the result; and such acts as may be proper to conduct the election
or vote with fairness to all stockholders. In the event of any dispute between
or among the inspectors, the determination of the majority of the inspectors
shall be binding.
SECTION 12. ORGANIZATION. At each meeting of stockholders the Chairman
of the Board of Directors, if one shall have been elected, (or in his absence or
if one shall not have been elected, the President) shall act as Chairman of the
meeting. The Secretary (or in his absence or inability to act, the person whom
the Chairman of the meeting shall appoint Secretary of the meeting) shall act as
Secretary of the meeting and keep the minutes thereof.
3
<PAGE> 5
SECTION 13. ORDER OF BUSINESS.
(A) ANNUAL MEETINGS OF STOCKHOLDERS.
(1) Nominations of persons for election to the Board of
Directors of the Corporation and the proposal of business to be considered by
the stockholders may be made at an annual meeting of stockholders (a) pursuant
to the Corporation's notice of meeting, (b) by or at the direction of the Board
of Directors or (c) by any stockholder of the Corporation who was a stockholder
of record at the time of giving of notice provided for in this Bylaw, who is
entitled to vote at the meeting and who complies with the notice procedures set
forth in this Bylaw.
(2) For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to clause (c) of paragraph
(A)(1) of this Bylaw, the stockholder must have given timely notice thereof in
writing to the Secretary of the Corporation and such other business must
otherwise be a proper matter for stockholder action. To be timely, a
stockholder's notice shall be delivered to the Secretary at the principal
executive offices of the Corporation not less than the close of business on the
120th calendar day in advance of the first anniversary of the date the
Corporation's proxy statement was released to stockholders in connection with
the preceding year's annual meeting; provided, however, that if no annual
meeting was held in the previous year or the date of the annual meeting has been
changed by more than 30 calendar days from the date contemplated at the time of
the previous year's proxy statement, a proposal shall be received by the
Corporation no later than the close of business on the tenth day following the
day on which notice of the date of the meeting was mailed or public announcement
of the date of the meeting was made, whichever comes first. In no event shall
the public announcement of an adjournment of an annual meeting commence a new
time period for the giving of a stockholder's notice as described above. Such
stockholder's notice shall set forth (a) as to each person whom the stockholder
proposes to nominate for election or reelection as a director all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors in an election contest, or is otherwise
required, in each case pursuant to applicable federal securities laws,
including, without limitation, Regulation 14A under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and Rule 14a-11 thereunder (including
such person's written consent to being named in the proxy statement as a nominee
and to serving as a director if elected); (b) as to any other business that the
stockholder proposes to bring before the meeting, a brief description of the
business desired to be brought before the meeting, the reasons for conducting
such business at the meeting and any material interest in such business of such
stockholder and the beneficial owner, if any, on whose behalf the proposal is
made; and (c) as to the stockholder giving the notice and the beneficial owner,
if any, on whose behalf the nomination or proposal is made (i) the name and
address of such stockholder, as they appear on the Corporation's books, and of
such beneficial owner and (ii) the class and number of shares of the Corporation
which are owned beneficially and of record by such stockholder and such
beneficial owner.
(3) Notwithstanding anything in the second sentence of
paragraph (A)(2) of this Bylaw to the contrary, in the event that the number of
directors to be elected to the Board of Directors of the Corporation is
increased and there is no public announcement by the Corporation naming all of
the nominees for director or specifying the size of the increased Board of
Directors at least 70 days prior to the first anniversary of the date of the
preceding years annual meeting, a stockholders notice required by this Bylaw
shall also be considered timely, but only with respect to nominees for any new
positions created by such increase, if it shall be delivered to the Secretary at
the principal executive
4
<PAGE> 6
offices of the Corporation not later than the close of business on the tenth day
following the day on which such public announcement is first made by the
Corporation.
(B) SPECIAL MEETINGS OF STOCKHOLDERS.
Only such business shall be conducted at a special meeting of
stockholders as shall be brought before the meeting pursuant to the
Corporation's notice of meeting.
A stockholder's nomination of one or more persons for election
to the Board of Directors shall only be permitted to be made at a special
meeting of stockholders if: (i) the Corporation's notice of such meeting
specified that directors are to be elected at such special meeting; (ii) such
stockholder was a stockholder of record entitled to vote at the meeting at the
time of giving of notice provided for in this Bylaw; and (iii) if such
stockholder complies with the notice procedures set forth in this Bylaw. In the
event the Corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board of Directors, any such stockholder
may nominate a person or persons (as the case may be), for election to such
position(s) as specified in the Corporation's notice of meeting, if the
stockholder's notice required by paragraph (A)(2) of this Bylaw shall be
delivered to the Secretary at the principal executive offices of the Corporation
not earlier than the close of business on the 90th day prior to such special
meeting and not later than the close of business on the later of the 60th day
prior to such special meeting or the 10th day following the day on which public
announcement is first made of the date of the special meeting and of the
nominees proposed by the Board of Directors to be elected at such meeting. In no
event shall the public announcement of an adjournment of a special meeting
commence a new time period for the giving of a stockholder's notice as described
above.
(C) GENERAL.
(1) Only such persons who are nominated in accordance with the
procedures set forth in this Bylaw shall be eligible to serve as directors.
Except as otherwise provided by law, the Certificate of Incorporation or these
Bylaws, the chairman of the meeting shall have the power and authority to
determine the procedures of a meeting of stockholders, including, without
limitation, the authority to determine whether a nomination or any other
business proposed to be brought before the meeting was made or proposed, as the
case may be, in accordance with the procedures set forth in this Bylaw and, if
any proposed nomination or business is not in compliance with this Bylaw, to
declare that such defective proposal or nomination shall be disregarded.
(2) For purposes of this Bylaw, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the Corporation with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Bylaw, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this Bylaw. Nothing in this Bylaw shall be deemed to affect any rights
(i) of stockholders to request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act or (ii) of the holders
of any series of preferred stock, if any, to elect directors under certain
circumstances.
5
<PAGE> 7
ARTICLE III
DIRECTORS
SECTION 1. POWERS. Except as otherwise required by law or provided by
the Certificate of Incorporation, the business and affairs of the Corporation
shall be managed by or under the direction of the Board of Directors.
SECTION 2. NUMBER AND ELECTION OF DIRECTORS. The number of directors of
this Corporation shall be not less than one nor more than nine in number. The
exact number of directors shall be fixed from time to time by a resolution
adopted by a majority of the directors. Until otherwise fixed by the directors,
the number of directors constituting the entire Board of Directors shall be
five. Directors shall be elected at each annual meeting of the stockholders to
replace the directors whose terms then expire, and each director elected shall
hold office until his successor is duly elected and qualified, or until his
earlier death, resignation or removal. The Board of Directors shall be
classified as set forth in the Certificate of Incorporation.
SECTION 3. VACANCIES. Subject to the limitations in the Certificate of
Incorporation, vacancies in the Board of Directors resulting from death,
resignation, removal or otherwise and newly created directorships resulting from
any increase in the authorized number of directors may be filled by a majority
of the directors then in office, although less than a quorum, or by a sole
remaining director. Each director so selected shall hold office for the
remainder of the full term of office of the former director which such director
replaces and until his successor is duly elected and qualified, or until his
earlier death, resignation or removal. No decrease in the authorized number of
directors constituting the Board of Directors shall shorten the term of any
incumbent directors.
SECTION 4. TIME AND PLACE OF MEETINGS. The Board of Director's shall
hold its meetings at such place, either within or without the State of Delaware,
and at such time as may be determined from time to time by the Board of
Directors.
SECTION 5. ANNUAL MEETING. The Board of Directors shall meet for the
purpose of organization, the election of officers and the transaction of other
business, as soon as practicable after each annual meeting of stockholders, on
the same day and at the same place where such annual meeting shall be held.
Notice of such meeting need not be given. In the event such annual meeting is
not so held, the annual meeting of the Board of Directors may be held at such
place, either within or without the State of Delaware, on such date and at such
time as shall be specified in a notice thereof given as hereinafter provided in
Section 7 of this Article III or in a waiver of notice thereof.
SECTION 6. REGULAR MEETINGS. Regular meetings of the Board of Directors
may be held at such places within or without the State of Delaware at such date
and time as the Board of Directors may from time to time determine and, if so
determined by the Board of Directors, notices thereof need not be given.
SECTION 7. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by the Chairman of the Board, the President, the Secretary or by
any director. Notice of the date, time and place of special meetings shall be
delivered personally or by telephone to each director or sent by first-class
mail or telegram, charges prepaid, addressed to each director at the director's
address as it is shown on the records of the Corporation. In case the notice is
mailed, it shall be deposited in the
6
<PAGE> 8
United States mail at least four days before the time of the holding of the
meeting. In case the notice is delivered personally or by telephone or telegram,
it shall be delivered personally or by telephone or to the telegraph company at
least 24 hours before the time of the holding of the meeting. The notice need
not specify the purpose of the meeting. A written waiver of any such notice
signed by the person entitled thereto, whether before or after the time stated
therein, shall be deemed equivalent to notice. Attendance of a person at a
meeting shall constitute a waiver of notice of such meeting, except when the
person attends the meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened.
SECTION 8. QUORUM; VOTE REQUIRED FOR ACTION; ADJOURNMENT. Except as
otherwise required by law, or provided in the Certificate of Incorporation or
these Bylaws, a majority of the directors shall constitute a quorum for the
transaction of business at all meetings of the Board of Directors and the
affirmative vote of not less than a majority of the directors present at any
meeting at which there is a quorum shall be the act of the Board of Directors.
If a quorum shall not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting, from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
A meeting at which a quorum is initially present may continue to transact
business, notwithstanding the withdrawal of directors, if any action taken is
approved by at least a majority of the required quorum to conduct that meeting.
When a meeting is adjourned to another time or place (whether or not a quorum is
present), notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken. At
the adjourned meeting, the Board of Directors may transact any business which
might have been transacted at the original meeting.
SECTION 9. ACTION BY WRITTEN CONSENT. Unless otherwise restricted by
the Certificate of Incorporation, any action required or permitted to be taken
at any meeting of the Board of Directors or of any committee thereof may be
taken without a meeting if all the members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
SECTION 10. TELEPHONE MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation, members of the Board of Directors of the
Corporation, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors or such committee, as the
case may be, by conference telephone or other communications equipment by means
of which all persons participating in the meeting can hear each other.
Participation in a meeting pursuant to this Section 10 shall constitute presence
in person at such meeting.
SECTION 11. COMMITTEES. The Board of Directors may, by resolution
passed unanimously by the entire Board, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation. The
Board of Directors may designate one or more directors as alternate members of
any such committee, who may replace any absent or disqualified member at any
meeting of the committee. In the event of absence or disqualification of a
member of a committee, and in the absence of a designation by the Board of
Directors of an alternate member to replace the absent or disqualified member,
the committee member or members present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
the absent or disqualified member. Any committee, to the extent allowed by law
and as provided in the resolution establishing such committee, shall have and
may exercise all the power and authority of the Board of Directors in the
management of the business and affairs of the Corporation, but no such committee
shall have the power or authority in
7
<PAGE> 9
reference to amending the Certificate of Incorporation, adopting an agreement of
merger or consolidation, recommending to the stockholders the sale, lease or
exchange of all or substantially all of the Corporation's property and assets,
recommending to the stockholders a dissolution of the Corporation or a
revocation of a dissolution, or amending the Bylaws of the Corporation; and,
unless the resolution or the Certificate of Incorporation expressly so provides,
no such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock. Each committee shall keep regular minutes of
its meetings and report to the Board of Directors when required.
SECTION 12. COMPENSATION. The directors may be paid such compensation
for their services as the Board of Directors shall from time to time determine.
SECTION 13. INTERESTED DIRECTORS. No contract or transaction between
the Corporation and one or more of its directors or officers, or between the
Corporation and any other Corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or the committee thereof
which authorizes the contract or transaction, or solely because his of their
votes are counted for such purpose if: (i) the material facts as to his or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of Directors
or committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (ii) the material facts as to
his or their relationship or interest and as to the contract or transaction are
disclosed or are known to the stockholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
stockholders; or (iii) the contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified, by the Board of
Directors, a committee thereof, or the stockholders. Common or interested
directors may be counted in determining the presence of a quorum at a meeting of
the Board of Directors or of a committee which authorizes the contract or
transaction.
SECTION 14. REMOVAL OF DIRECTORS. Any director or the entire Board of
Directors may be removed with cause, by the holders of a majority of the shares
then entitled to vote at an election of directors.
ARTICLE IV
OFFICERS
SECTION 1. OFFICERS. The officers of the Corporation shall be a
President, a Secretary and a Chief Financial Officer. The Corporation may also
have, at the discretion of the Board of Directors, a Chairman of the Board, a
Vice Chairman of the Board, a Chief Executive Officer, one or more Vice
Presidents, one or more Assistant Financial Officers and Treasurers, one or more
Assistant Secretaries and such other officers as may be appointed in accordance
with the provisions of Section 3 of this Article IV.
SECTION 2. APPOINTMENT OF OFFICERS. The officers of the Corporation,
except such officers as may be appointed in accordance with the provisions of
Section 3 or Section 5 of this Article IV, shall be appointed by the Board of
Directors, and each shall serve at the pleasure of the Board, subject to the
rights, if any, of an officer under any contract of employment.
8
<PAGE> 10
SECTION 3. SUBORDINATE OFFICERS. The Board of Directors may appoint,
and may empower the Chief Executive Officer or President to appoint, such other
officers as the business of the Corporation may require, each of whom shall hold
office for such period, have such authority and perform such duties as are
provided in the Bylaws or as the Board of Directors may from time to time
determine.
SECTION 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the rights
of an officer under any contract, any officer may be removed at any time, with
or without cause, by the Board of Directors or, except in case of an officer
chosen by the Board of Directors, by any officer upon whom such power of removal
may be conferred by the Board of Directors. Any officer may resign at any time
by giving written notice to the Corporation. Any resignation shall take effect
at the date of the receipt of that notice or at any later time specified in that
notice; and, unless otherwise specified in that notice, the acceptance of the
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights of the Corporation under any contract to
which the officer is a party.
SECTION 5. VACANCIES IN OFFICES. A vacancy in any office because of
death, resignation, removal, disqualification or any other cause shall be filled
in the manner prescribed in these Bylaws for regular appointments to that
office.
SECTION 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if such an
officer is elected, shall, if present, preside at meetings of the stockholders
and of the Board of Directors, unless otherwise determined by the Board of
Directors. He shall, in addition, perform such other functions (if any) as may
be prescribed by the Bylaws or the Board of Directors.
SECTION 7. VICE CHAIRMAN OF THE BOARD. The Vice Chairman of the Board,
if such an officer is elected, shall, in the absence or disability of the
Chairman of the Board, perform all duties of the Chairman of the Board and when
so acting shall have all the powers of and be subject to all of the restrictions
upon the Chairman of the Board. The Vice Chairman of the Board shall have such
other powers and duties as may be prescribed by the Board of Directors or the
Bylaws.
SECTION 8. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of the
Corporation shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and the officers of
the Corporation. He shall exercise the duties usually vested in the chief
executive officer of a Corporation and perform such other powers and duties as
may be assigned to him from time to time by the Board of Directors or prescribed
by the Bylaws. In the absence of the Chairman of the Board and any Vice Chairman
of the Board, the Chief Executive Officer shall preside at all meetings of the
stockholders and of the Board of Directors.
SECTION 9. PRESIDENT. The President of the Corporation shall, subject
to the control of the Board of Directors and the Chief Executive Officer of the
Corporation, if there be such an officer, have general powers and duties of
management usually vested in the office of president of a Corporation and shall
have such other powers and duties as may be prescribed by the Board of Directors
or the Bylaws or the Chief Executive Officer of the Corporation. In the absence
of the Chairman of the Board, Vice Chairman of the Board and Chief Executive
Officer, the President shall preside at all meetings of the Board of Directors
and stockholders.
9
<PAGE> 11
SECTION 10. VICE PRESIDENT. In the absence or disability of the
President, the Vice Presidents, if any, in order of their rank as fixed by the
Board of Directors or, if not ranked, a Vice President designated by the Board
of Directors, shall perform all the duties of the President, and when so acting
shall have all the powers of, and subject to all the restrictions upon, the
President. The Vice Presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
Board of Directors or the Bylaws, and the President, or the Chairman of the
Board.
SECTION 11. SECRETARY. The Secretary shall keep or cause to be kept, at
the principal executive office or such other place as the Board of Directors may
direct, a book of minutes of all meetings and actions of directors, committees
of directors, and stockholders, with the time and place of holding, whether
regular or special, and, if special, how authorized, the notice given, the names
of those present at directors' meetings or committee meetings, the number of
shares present or represented at stockholders' meetings, and a summary of the
proceedings.
The Secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the Corporation's transfer agent or
registrar, as determined by resolution of the Board of Directors, a share
register, or a duplicate share register, showing the names of all stockholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates issued for the same, and the number and date of
cancellation of every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all meetings
of the stockholders and of the Board of Directors required by the Bylaws or by
law to be given, and he shall keep or cause to be kept the seal of the
Corporation if one be adopted, in safe custody, and shall have such powers and
perform such other duties as may be prescribed by the Board of Directors or by
the Bylaws.
SECTION 12. CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall
keep and maintain, or cause to be kept and maintained, adequate and correct
books and records of accounts of the properties and business transactions of the
Corporation. The Chief Financial Officer shall deposit all moneys and other
valuables in the name and to the credit of the Corporation with such
depositories as may be designated by the Board of Directors. He shall make such
disbursements of the funds of the Corporation as are authorized and shall render
from time to time an account of all of his transactions as Chief Financial
Officer and of the financial condition of the Corporation. The Chief Financial
Officer shall also have such other powers and perform such other duties as may
be prescribed by the Board of Directors or the Bylaws.
ARTICLE V
STOCK
SECTION 1. FORM OF CERTIFICATES. Every holder of stock in the
Corporation shall be entitled to have a certificate signed by, or in the name of
the Corporation (i) by the Chairman or Vice Chairman of the Board of Directors,
or the President or a Vice President and (ii) by the Chief Financial Officer or
the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant
Secretary of the Corporation, certifying the number of shares owned by such
stockholder in the Corporation.
SECTION 2. SIGNATURES. Any or all of the signatures on the certificate
may be a facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been
10
<PAGE> 12
placed upon a certificate shall have ceased to be such officer, transfer agent
or registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer, transfer agent or
registrar at the date of issue.
SECTION 3. LOST CERTIFICATES. The Corporation may issue a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation, alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate to be lost,
stolen or destroyed. The Corporation may, in the discretion of the Board of
Directors and as a condition precedent to the issuance of such new certificate,
require the owner of such lost, stolen, or destroyed certificate, or his legal
representative, to give the Corporation a bond (or other security) sufficient to
indemnify it against any claim that may be made against the Corporation
(including any expense or liability) on account of the alleged loss, theft or
destruction of any such certificate or the issuance of such new certificate.
SECTION 4. TRANSFERS. Stock of the Corporation shall be transferable in
the manner prescribed by law and in these Bylaws or in any agreement with the
stockholder making the transfer. Transfers of stock shall be made on the books
of the Corporation only by the person named in the certificate or by his
attorney lawfully constituted in writing and upon the surrender of the
certificate therefor, which shall be cancelled before a new certificate shall be
issued.
SECTION 5. RECORD HOLDERS. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the record
holder of shares to receive dividends, and to vote as such record holder, and to
hold liable for calls and assessments a person registered on its books as the
record holder of shares, and shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise required by law.
ARTICLE VI
INDEMNIFICATION
SECTION 1. RIGHT TO INDEMNIFICATION. Each person who was or is made a
party or is threatened to be made a party to or is otherwise involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that he or she
is or was a director or officer of the Corporation or is or was serving at the
request of the Corporation as a director or officer of another Corporation or of
a partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans (hereinafter an "indemnitee"), whether the
basis of such proceeding is alleged action in an official capacity as a director
or officer or in any other capacity while serving as a director or officer,
shall be indemnified and held harmless by the Corporation to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Corporation to provide broader indemnification
rights than such law permitted the Corporation to provide prior to such
amendment), against all expense, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid in
settlement) reasonably incurred or suffered by such indemnitee in connection
therewith and such indemnification shall continue as to an indemnitee who has
ceased to be a director or officer and shall inure to the benefit of the
indemnitee's heirs, executors and administrators; provided, however, that,
except as provided in Section 2 of this Article VI with respect to proceedings
to enforce rights to
11
<PAGE> 13
indemnification, the Corporation shall indemnify any such indemnitee in
connection with a proceeding (or part thereof) initiated by such indemnitee only
if such proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation. The right to indemnification conferred in this Section shall be
a contract right and shall include the right to be paid by the Corporation the
expenses incurred in defending any such proceeding in advance of its final
disposition (hereinafter an "advancement of expenses"); provided, however, that,
if the Delaware General Corporation Law requires, an advancement of expenses
incurred by an indemnitee in his or her capacity as a director or officer (and
not in any other capacity in which service was or is rendered by such
indemnitee, including without limitation, service to an employee benefit plan)
shall be made only upon delivery to the Corporation of an undertaking, by or on
behalf of such indemnitee, to repay all amounts so advanced if it shall
ultimately be determined that such indemnitee is not entitled to be indemnified
for such expenses under this Article VI or otherwise (hereinafter an
"undertaking").
SECTION 2. RIGHT OF INDEMNITEE TO BRING SUIT. If a claim under Section
1 of this Article VI is not paid in full by the Corporation within 45 days after
a written claim has been received by the Corporation, the indemnitee may at any
time thereafter bring suit against the Corporation to recover the unpaid amount
of the claim. If successful in whole or part in any such suit or in a suit
brought by the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the indemnitee shall be entitled to be paid also the
expense of prosecuting or defending such suit. In (i) any suit brought by the
indemnitee to enforce a right to indemnification hereunder (but not in a suit
brought by the indemnitee to enforce a right to an advancement of expenses) it
shall be a defense that, and (ii) any suit by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking the Corporation
shall be entitled to recover such expenses upon a final adjudication that, the
indemnitee has not met the applicable standard of conduct set forth in the
Delaware General Corporation Law. Neither the failure of the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
suit that indemnification of the indemnitee is proper in the circumstances
because the indemnitee has met the applicable standard of conduct set forth in
the Delaware General Corporation Law, nor an actual determination by the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) that the indemnitee has not met such applicable standard of
conduct, shall create a presumption that the indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by
indemnitee, be a defense to such suit. In any suit brought by the indemnitee to
enforce a right hereunder, or by the Corporation to recover an advancement of
expenses pursuant to the terms of an undertaking, the burden of proving that the
indemnitee is not entitled to be indemnified or to such advancement of expenses
under this Article VI or otherwise shall be on the Corporation.
SECTION 3. NON-EXCLUSIVITY OF RIGHTS. The rights of indemnification and
to the advancement of expenses conferred in this Article VI shall not be
exclusive of any other right which any person may have or hereafter acquire
under any statute, provision of the Certificate of Incorporation, Bylaw,
agreement, vote of stockholders or disinterested directors or otherwise.
SECTION 4. INSURANCE. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another Corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
12
<PAGE> 14
SECTION 5. INDEMNIFICATION OF EMPLOYEES OR AGENTS OF THE CORPORATION.
The Corporation may, to the extent authorized from time to time by the Board of
Directors, grant rights to indemnification and to the advancement of expenses,
to any employee or agent of the Corporation to the fullest extent of the
provisions of this Article VI with respect to the indemnification and
advancement of expenses of directors or officers of the Corporation.
SECTION 6. INDEMNIFICATION CONTRACTS. The Board of Directors is
authorized to enter into a contract with any director, officer, employee or
agent of the Corporation, or any person serving at the request of the
Corporation as a director, officer, employee or agent of another Corporation,
partnership, joint venture, trust or other enterprise, including employee
benefit plans, providing for indemnification rights equivalent to or, if the
Board of Directors so determinates, greater than, those provided for in this
Article VI.
SECTION 7. EFFECT OF AMENDMENT. Any amendment, repeal or modification
of any provision of this Article VI by the stockholders or the directors of the
Corporation shall not adversely affect any right or protection of a director or
officer of the Corporation existing at the time of such amendment, repeal or
modification.
ARTICLE VII
GENERAL PROVISIONS
SECTION 1. DIVIDENDS. Subject to limitations contained in the General
Corporation Law of the State of Delaware and the Certificate of Incorporation,
the Board of Directors may declare and pay dividends upon the shares of capital
stock of the Corporation, which dividends may be paid either in cash, securities
of the Corporation or other property.
SECTION 2. DISBURSEMENTS. All checks or demands for money and notes of
the Corporation shall be signed by such officer or officers or such other person
or persons as the Board of Directors may from time to time designate.
SECTION 3. FISCAL YEAR. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
SECTION 4. CORPORATE SEAL. The Corporation shall have a corporate seal
in such form as shall be prescribed by the Board of Directors.
SECTION 5. RECORD DATE. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action, the Board of Directors may fix, in advance, a record
date, which shall not be more than 60 days nor less than 10 days before the date
of such meeting, nor more than 60 days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting. Stockholders on the record date are entitled to notice and to vote or
to receive the dividend, distribution or allotment of rights or to exercise the
rights, as the case may be, notwithstanding any transfer of any shares on the
books of the Corporation after the record date, except as otherwise provided by
agreement or by applicable law.
13
<PAGE> 15
SECTION 6. VOTING OF STOCK OWNED BY THE CORPORATION. The Chairman of
the Board, the Chief Executive Officer, the President and any other officer of
the Corporation authorized by the Board of Directors shall have power, on behalf
of the Corporation, to attend, vote and grant proxies to be used at any meeting
of stockholders of any corporation (except this Corporation) in which the
Corporation may hold stock.
SECTION 7. CONSTRUCTION AND DEFINITIONS. Unless the context requires
otherwise, the general provisions, rules of construction and definitions in the
General Corporation Law of the State of Delaware shall govern the construction
of these Bylaws.
SECTION 8. AMENDMENTS. The Bylaws, or any of them, may be rescinded,
altered, amended or repealed, and new Bylaws may be made (i) by the Board of
Directors, by vote of a majority of the number of directors then in office as
directors, acting at any meeting of the Board of Directors, or (ii) by the
stockholders, by the vote of the holders of 66 2/3% of the outstanding voting
stock of the Corporation, at any annual or special meeting of stockholders,
provided that notice of such proposed amendment, modification, repeal or
adoption is given in the notice of the annual or special meeting; provided,
however, that the Bylaws can only be amended if such amendment would not
conflict with the Certificate of Incorporation. Any Bylaw made or altered by the
requisite number of stockholders may be altered or repealed by the Board of
Directors or may be altered or repealed by the requisite number of stockholders.
14
<PAGE> 1
EXHIBIT 10.4
THE TRIZETTO GROUP, INC.
EMPLOYEE STOCK PURCHASE PLAN
This EMPLOYEE STOCK PURCHASE PLAN (the "Plan") is hereby established by
The TriZetto Group, Inc., a Delaware corporation (the "Company"), effective
September ___, 1999.
ARTICLE I
PURPOSE OF THE PLAN
1.1 PURPOSE. The Company has determined that it is in its the best
interest to provide incentives to attract and retain employees and to increase
employee morale by providing a program through which employees of the Company,
and of such of the Company's subsidiaries as the Company's Board of Directors
(the "Board") may from time to time designate (each a "Designated Subsidiary",
and collectively, "Designated Subsidiaries"), may acquire a proprietary interest
in the Company through the purchase of shares of the common stock of the Company
("Company Stock"). The Plan is hereby established by the Company to permit
employees to subscribe for and purchase directly from the Company shares of the
Company Stock at a discount from the market price, and to pay the purchase price
in installments by payroll deductions. The Plan is intended to qualify as an
"employee stock purchase plan" under Section 423 of the Internal Revenue Code of
1986, as amended from time to time (the "Code"). The provisions of the Plan are
to be construed in a matter consistent with the requirements of Section 423 of
the Code. The Plan is not intended to be an employee benefit plan under the
Employee Retirement Income Security Act of 1974, and therefore is not required
to comply with that Act.
ARTICLE II
DEFINITIONS
2.1 COMPENSATION. "Compensation" means the amount indicated on the Form
W-2, including any elective deferrals with respect to a plan of the Company
qualified under either Section 125 or Section 401(a) of the Code, issued to an
employee by the Company.
2.2 EMPLOYEE. "Employee" means each person currently employed by the
Company or any of its Designated Subsidiaries, any portion of whose income is
subject to withholding of income tax or for whom Social Security retirement
contributions are made by the Company or any Designated Subsidiary.
2.3 EFFECTIVE DATE. "Effective Date" means the effective date of the
Company's Registration Statement on Form S-1 filed with the Securities and
Exchange Commission (the "SEC") in connection with the Company's initial public
offering.
2.4 5% OWNER. "5% Owner" means an Employee who, immediately after the
grant of any rights under the Plan, would own Company Stock or hold outstanding
options to purchase Company Stock possessing 5% or more of the total combined
voting power of all classes of stock of the Company. For purposes of this
Section, the ownership attribution rules of Section 424(d) of the Code shall
apply and stock which the Employee may purchase under outstanding options shall
be treated as stock owned by the Employee.
<PAGE> 2
2.5 GRANT DATE. "Grant Date" means the first day of each Offering
Period (January 1 and July 1) under the Plan. In the first Plan Year only, the
initial Grant Date shall be the Effective Date.
2.6 PARTICIPANT. "Participant" means an Employee who has satisfied the
eligibility requirements of Section 3.1 and has become a participant in the Plan
in accordance with Section 3.2.
2.7 PLAN YEAR. "Plan Year" means the twelve consecutive month period
ending on December 31.
2.8 OFFERING PERIOD. "Offering Period" means the six-month periods from
January 1 through June 30 and July 1 through December 31 of each Plan Year.
However, the first Offering Period shall commence on the Effective Date and
shall end on December 31, 1999.
2.9 PURCHASE DATE. "Purchase Date" means the last day of each Offering
Period (June 30 or December 31).
ARTICLE III
ELIGIBILITY AND PARTICIPATION
3.1 ELIGIBILITY. Each Employee of the Company, or any Designated
Subsidiary, who, on the Grant Date, is customarily engaged on a
regularly-scheduled basis of more than 20 hours per week for more than five
months per calendar year and who has been employed for at least 90 days (or, for
the initial Offering Period only, such Employees who are employed on the
Effective Date) in the rendition of personal services to the Company, or any
Designated Subsidiary, may become a Participant in the Plan on the Grant Date
coincident with or next following his satisfaction of such requirements of
employment with the Company or any Designated Subsidiary.
3.2 PARTICIPATION. An Employee who has satisfied the eligibility
requirements of Section 3.1 may become a Participant in the Plan upon his
completion and delivery to the Secretary of the Company of a Subscription
Agreement provided by the Company (the "Subscription Agreement") authorizing
payroll deductions. Payroll deductions for a Participant shall commence on the
Grant Date coincident with or next following the filing of the Participant's
Subscription Agreement and shall remain in effect until revoked by the
Participant by the filing of a notice of withdrawal from the Plan under Article
VIII or by the filing of a new Subscription Agreement providing for a change in
the Participant's payroll deduction rate under Section 5.2.
3.3 SPECIAL RULES. Under no circumstances shall:
(a) A 5% Owner be granted a right to purchase Company Stock
under the Plan;
(b) A Participant be entitled to purchase Company Stock under
the Plan which, when aggregated with all other employee stock purchase plans of
the Company, exceed an amount equal to the Aggregate Maximum. "Aggregate
Maximum" means an amount equal to $25,000 worth of Company Stock (determined
using the fair market value of such Company Stock at each applicable Grant Date)
during each Plan Year; or
(c) The number of shares of Company Stock purchasable by a
Participant on any Purchase Date exceed 5,000 shares, subject to periodic
adjustments under Section 10.4.
2
<PAGE> 3
ARTICLE IV
OFFERING PERIODS
4.1 OFFERING PERIODS. The initial grant of the right to purchase
Company Stock under the Plan shall occur on the Effective Date. Thereafter, the
Plan shall provide for Offering Periods commencing on each Grant Date and
terminating on the next following Purchase Date. The Board shall have the power
to change the Offering Periods without stockholder approval.
ARTICLE V
PAYROLL DEDUCTIONS
5.1 PARTICIPANT ELECTION. Upon completion of the Subscription
Agreement, each Participant shall designate the amount of payroll deductions to
be made from his paycheck to purchase Company Stock under the Plan. The amount
of payroll deductions shall be designated in whole percentages of Compensation,
not to exceed 15%. The amount so designated upon the Subscription Agreement
shall be effective as of the next Grant Date and shall continue until terminated
or altered in accordance with Section 5.2 below.
5.2 CHANGES IN ELECTION. A Participant may terminate participation in
the Plan at any time prior to the close of an Offering Period as provided in
Article 8. A Participant may decrease or increase the rate of payroll deductions
one time during any Offering Period by completing and delivering to the
Secretary of the Company a new Subscription Agreement setting forth the desired
change at least 15 days prior to the end of the Offering Period. A Participant
may also terminate payroll deductions and have accumulated deductions for the
Offering Period applied to the purchase of Company Stock as of the next Purchase
Date by completing and delivering to the Secretary a new Subscription Agreement
setting forth the desired change. Any change under this Section shall become
effective on the next payroll period (to the extent practical under the
Company's payroll practices) following the delivery of the new Subscription
Agreement.
5.3 PARTICIPANT ACCOUNTS. The Company shall establish and maintain a
separate account ("Account") for each Participant. The amount of each
Participant's payroll deductions shall be credited to his Account. Other than
through payroll deductions, an Employee may not make any other payments into his
Account. No interest will be paid or allowed on amounts credited to a
Participant's Account. All payroll deductions received by the Company under the
Plan are general corporate assets of the Company and may be used by the Company
for any corporate purpose. The Company is not obligated to segregate such
payroll deductions.
ARTICLE VI
GRANT OF PURCHASE RIGHTS
6.1 RIGHT TO PURCHASE SHARES. On each Grant Date, each Participant
shall be granted a right to purchase at the price determined under Section 6.2
that number of shares and partial shares of Company Stock that can be purchased
with the amounts held in his Account, subject to the limits set forth in Section
3.3(c). If there are amounts held in a Participant's Account
3
<PAGE> 4
that are not used to purchase Company Stock, such amounts shall remain in the
Participant's Account and shall be eligible to purchase Company Stock in any
subsequent Offering Period.
6.2 PURCHASE PRICE. The purchase price for any Offering Period shall be
the lesser of:
(a) 85% of the Fair Market Value of Company Stock on the Grant
Date; or
(b) 85% of the Fair Market Value of Company Stock on the
Purchase Date.
6.3 FAIR MARKET VALUE. "Fair Market Value" for the initial Grant Date
(which is the Effective Date) shall be the initial price to the public as set
forth in the final prospectus included within the registration statement on Form
S-1 filed with the SEC for the initial public offering of the Company's common
stock. For any subsequent date thereafter, "Fair Market Value" shall mean the
value of one share of Company Stock, determined as follows:
(a) If the Company Stock is then listed or admitted to trading
on the Nasdaq National Market System or a stock exchange which reports closing
sale prices, the Fair Market Value shall be the closing sale price on the date
of valuation on the Nasdaq National Market System or principal stock exchange on
which the Company Stock is then listed or admitted to trading, or, if no closing
sale price is quoted or no sale takes place on such day, then the Fair Market
Value shall be the closing sale price of the Company Stock on the Nasdaq
National Market System or such exchange on the next preceding day on which a
sale occurred.
(b) If the Company Stock is not then listed or admitted to
trading on the Nasdaq National Market System or a stock exchange which reports
closing sale prices, the Fair Market Value shall be the average of the closing
bid and asked prices of the Company Stock in the over-the-counter market on the
date of valuation. If no sales take place on such day, then the fair market
value shall be the average of the closing bid and asked prices on the next
preceding day on which sales occurred.
(c) If neither (a) nor (b) is applicable as of the date of
valuation, then the Fair Market Value shall be determined by the Board or any
committee appointed by the Board in good faith using any reasonable method of
valuation, which determination shall be conclusive and binding on all interested
parties.
ARTICLE VII
PURCHASE OF STOCK
7.1 PURCHASE OF COMPANY STOCK. Absent an election by the Participant to
terminate and have his Account returned, on each Purchase Date, the Plan shall
purchase on behalf of each Participant the maximum number of whole shares of
Company Stock at the purchase price determined under Section 6.2 above as can be
purchased with the amounts held in each Participant's Account. In the event that
there are amounts held in a Participant's Account that are not used to purchase
Company Stock, all such amounts shall be held in the Participant's Account and
carried forward to the next Offering Period.
7.2 DELIVERY OF COMPANY STOCK.
(a) Company Stock acquired under the Plan may either be issued
directly to Participants or may be issued to a contract administrator
("Administrator") engaged by the Company to administer the Plan under Article
IX. If the Company Stock is issued in the name
4
<PAGE> 5
of the Administrator, all Company Stock so issued ("Plan Held Stock") shall be
held in the name of the Administrator for the benefit of the Plan. The
Administrator shall maintain accounts for the benefit of the Participants which
shall reflect each Participant's interest in the Plan Held Stock. Such accounts
shall reflect the number of shares of Company Stock that are being held by the
Administrator for the benefit of each Participant.
(b) Any Participant may elect to have the Company Stock
purchased under the Plan from his Account be issued directly to the Participant.
Any election under this paragraph shall be on the forms provided by the Company
and shall be issued in accordance with paragraph (c) below.
(c) In the event that Company Stock under the Plan is issued
directly to a Participant, the Company will deliver to each Participant a stock
certificate or certificates issued in his name for the number of shares of
Company Stock purchased as soon as practicable after the Purchase Date. Where
Company Stock is issued under this paragraph, only full shares of stock will be
issued to a Participant. The time of issuance and delivery of shares may be
postponed for such period as may be necessary to comply with the registration
requirements under the Securities Act of 1933, as amended, the listing
requirements of any securities exchange on which the Company Stock may then be
listed, or the requirements under other laws or regulations applicable to the
issuance or sale of such shares.
ARTICLE VIII
WITHDRAWAL
8.1 IN SERVICE WITHDRAWALS. At any time prior to the Purchase Date of
an Offering Period, any Participant may withdraw the amounts held in his Account
by executing and delivering to the Secretary for the Company written notice of
withdrawal on the form provided by the Company. In such a case, the entire
balance of the Participant's Account shall be paid to the Participant, without
interest, as soon as is practicable. Upon such notification, the Participant
shall cease to participate in the Plan for the remainder of the Offering Period,
and for the immediately following Offering Period in which the notice is given.
Any Employee who has withdrawn under this Section shall be excluded from
participation in the Plan for the remainder of the Offering Period and for the
immediately following Offering Period, but may then be reinstated as a
Participant for a subsequent Offering Period by executing and delivering a new
Subscription Agreement to the Secretary of the Company.
8.2 TERMINATION OF EMPLOYMENT.
(a) In the event that a Participant's employment with the
Company terminates for any reason, the Participant shall cease to participate in
the Plan on the date of termination. As soon as is practical following the date
of termination, the entire balance of the Participant's Account shall be paid to
the Participant or his beneficiary, without interest.
(b) A Participant may file a written designation of a
beneficiary who is to receive any shares of Company Stock purchased under the
Plan or any cash from the Participant's Account in the event of his death
subsequent to a Purchase Date, but prior to delivery of such shares and cash. In
addition, a Participant may file a written designation of a beneficiary who is
to receive any cash from the Participant's Account under the Plan in the event
of his death prior to a Purchase Date under paragraph (a) above.
5
<PAGE> 6
(c) Any beneficiary designation under paragraph (b) above may
be changed by the Participant at any time by written notice. In the event of the
death of a Participant, the Committee may rely upon the most recent beneficiary
designation it has on file as being the appropriate beneficiary. In the event of
the death of a Participant where no valid beneficiary designation exists or the
beneficiary has predeceased the Participant, the Committee shall deliver any
cash or shares of Company Stock to the executor or administrator of the estate
of the Participant, or if no such executor or administrator has been appointed
to the knowledge of the Committee, the Committee, in its sole discretion, may
deliver such shares of Company Stock or cash to the spouse or any one or more
dependents or relatives of the Participant, or if no spouse, dependent or
relative is known to the Committee, then to such other person as the Committee
may designate.
ARTICLE IX
PLAN ADMINISTRATION
9.1 PLAN ADMINISTRATION.
(a) Authority to control and manage the operation and
administration of the Plan shall be vested in the Board or a committee
("Committee") thereof. As used herein, the term "Administrator" means the Board
or, with respect to any matter as to which responsibility has been delegated to
the Committee, the term Administrator shall mean the Committee. The
Administrator shall have all powers necessary to supervise the administration of
the Plan and control its operations.
(b) In addition to any powers and authority conferred upon the
Administrator elsewhere in the Plan or by law, the Administrator shall have the
following powers and authority:
(i) To designate agents to carry out responsibilities
relating to the Plan;
(ii) To administer, interpret, construe and apply
this Plan and to answer all questions which may arise or which may be raised
under this Plan by a Participant, his beneficiary or any other person
whatsoever;
(iii) To establish rules and procedures from time to
time for the conduct of its business and for the administration and effectuation
of its responsibilities under the Plan; and
(iv) To perform or cause to be performed such further
acts as it may deem to be necessary, appropriate, or convenient for the
operation of the Plan.
(c) Any action taken in good faith by the Board or Committee
in the exercise of authority conferred upon it by this Plan shall be conclusive
and binding upon a Participant and his beneficiaries. All discretionary powers
conferred upon the Board or Committee shall be absolute.
9.2 LIMITATION ON LIABILITY. No Employee of the Company nor member of
the Board or Committee shall be subject to any liability with respect to his
duties under the Plan unless the person acts fraudulently or in bad faith. To
the extent permitted by law, the Company shall indemnify each member of the
Board or Committee, and any other Employee of the Company
6
<PAGE> 7
with duties under the Plan who was or is a party, or is threatened to be made a
party, to any threatened, pending or completed proceeding, whether civil,
criminal, administrative, or investigative, by reason of the person's conduct in
the performance of his duties under the Plan.
ARTICLE X
COMPANY STOCK
10.1 LIMITATIONS ON PURCHASE OF SHARES. The maximum number of shares of
Company Stock that shall be made available for sale under the Plan shall be
600,000 shares, subject to adjustment under Section 10.4 below. The shares of
Company Stock to be sold to Participants under the Plan will be issued by the
Company. If the total number of shares of Company Stock that would otherwise be
issuable pursuant to rights granted pursuant to Section 6.1 of the Plan at the
Purchase Date exceeds the number of shares then available under the Plan, the
Company shall make a pro rata allocation of the shares remaining available in as
uniform and equitable manner as is practicable. In such event, the Company shall
give written notice of such reduction of the number of shares to each
Participant affected thereby and any unused payroll deductions shall be returned
to such Participant if necessary.
10.2 VOTING COMPANY STOCK. The Participant will have no interest or
voting right in shares to be purchased under Section 6.1 of the Plan until such
shares have been purchased.
10.3 REGISTRATION OF COMPANY STOCK. Shares to be delivered to a
Participant under the Plan will be registered in the name of the Participant
unless designated otherwise by the Participant.
10.4 CHANGES IN CAPITALIZATION OF THE COMPANY. Subject to any required
action by the stockholders of the Company, the number of shares of Company Stock
covered by each right under the Plan which has not yet been exercised and the
number of shares of Company Stock which have been authorized for issuance under
the Plan but have not yet been placed under rights or which have been returned
to the Plan upon the cancellation of a right, as well as the Purchase Price per
share of Company Stock covered by each right under the Plan which has not yet
been exercised, shall be proportionately adjusted for any increase or decrease
in the number of issued shares of Company Stock resulting from a stock split,
stock dividend, spin-off, reorganization, recapitalization, merger,
consolidation, exchange of shares or the like. Such adjustment shall be made by
the Board of Directors for the Company, whose determination in that respect
shall be final, binding and conclusive. Except as expressly provided herein, no
issue by the Company of shares of stock of any class, or securities convertible
into shares of stock of any class, shall affect, and no adjustment by reason
thereof shall be made with respect to, the number or price of shares of Company
Stock subject to any right granted hereunder.
10.5 MERGER OF COMPANY. In the event that the Company at any time
proposes to merge into, consolidate with or enter into any other reorganization
pursuant to which the Company is not the surviving entity (including the sale of
substantially all of its assets or a "reverse" merger in which the Company is
the surviving entity), the Plan shall terminate, unless provision is made in
writing in connection with such transaction for the continuance of the Plan and
for the assumption of rights theretofore granted, or the substitution for such
rights of new rights covering the shares of a successor
7
<PAGE> 8
corporation, with appropriate adjustments as to number and kind of shares and
prices, in which event the Plan and the rights theretofore granted or the new
rights substituted therefor, shall continue in the manner and under the terms so
provided. If such provision is not made in such transaction for the continuance
of the Plan and the assumption of rights theretofore granted or the substitution
for such rights of new rights covering the shares of a successor corporation,
then the Board of Directors or its committee shall cause written notice of the
proposed transaction to be given to the persons holding rights not less than 10
days prior to the anticipated effective date of the proposed transaction, and,
concurrent with the effective date of the proposed transaction, such rights
shall be exercised automatically in accordance with Section 7.1 as if such
effective date were a Purchase Date of the applicable Offering Period unless a
Participant withdraws from the Plan as provided in Section 8.1.
ARTICLE XI
MISCELLANEOUS MATTERS
11.1 AMENDMENT AND TERMINATION. The Plan shall terminate on the ten
year anniversary of the Effective Date. Since future conditions affecting the
Company cannot be anticipated or foreseen, the Company reserves the right to
amend, modify, or terminate the Plan at any time. Upon termination of the Plan,
all benefits shall become payable immediately. Notwithstanding the foregoing, no
such amendment or termination shall affect rights previously granted, nor may an
amendment make any change in any right previously granted which adversely
affects the rights of any Participant. In addition, no amendment may be made
without prior approval of the stockholders of the Company if such amendment
would:
(a) Increase the number of shares of Company Stock that may be
issued under the Plan;
(b) Materially modify the requirements as to eligibility for
participation in the Plan; or
(c) Materially increase the benefits which accrue to
Participants under the Plan.
11.2 STOCKHOLDER APPROVAL. Continuance of the Plan and the
effectiveness of any right granted hereunder shall be subject to approval by the
stockholders of the Company, within twelve months before or after the date the
Plan is adopted by the Board.
11.3 BENEFITS NOT ALIENABLE. Benefits under the Plan may not be
assigned or alienated, whether voluntarily or involuntarily. Any attempt at
assignment, transfer, pledge or other disposition shall be without effect,
except that the Company may treat such act as an election to withdraw funds in
accordance with Article VIII.
11.4 TRANSFERABILITY. Neither payroll deductions credited to a
Participant's Account, nor any rights with regard to the exercise of an option
or to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution, or as provided in Section 8.2 hereof) by the Participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from the Offering Period in accordance with Article VIII hereof.
11.5 NO ENLARGEMENT OF EMPLOYEE RIGHTS. This Plan is strictly a
voluntary undertaking on the part of the Company and shall not be deemed to
constitute a contract between the Company and any Employee or to be
consideration for, or an inducement to, or a condition of, the employment of any
Employee. Nothing contained in the Plan shall be deemed to give the right to any
Employee to be retained in the employ of the Company or to interfere with the
right of the Company to discharge any Employee at any time.
8
<PAGE> 9
11.6 GOVERNING LAW. To the extent not preempted by Federal law, all
legal questions pertaining to the Plan shall be determined in accordance with
the laws of the State of Delaware.
11.7 NON-BUSINESS DAYS. When any act under the Plan is required to be
performed on a day that falls on a Saturday, Sunday or legal holiday, that act
shall be performed on the next succeeding day which is not a Saturday, Sunday or
legal holiday. Notwithstanding the above, Fair Market Value shall be determined
in accordance with Section 6.3.
11.8 COMPLIANCE WITH SECURITIES LAWS. Notwithstanding any provision of
the Plan, the Committee shall administer the Plan in such a way to ensure that
the Plan at all times complies with any requirements of Federal Securities Laws.
For example, affiliates may be required to make irrevocable elections in
accordance with the rules set forth under Section 16b-3 of the Securities
Exchange Act of 1934.
9
<PAGE> 1
EXHIBIT 10.8
FIRST AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
THIS FIRST AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT is entered
into as of April 9, 1999, by and among The TriZetto Group, Inc., a Delaware
corporation (the "Company"), the persons holding the shares of Common Stock or
options to purchase shares of Common Stock (the "Founders' Shares") listed on
Schedule A hereto (the "Founders"), the holders of Series A Preferred Stock
listed on Schedule A hereto (the "Series A Holders") and the holders of Series B
Preferred Stock listed on Schedule A hereto (the "Series B Holders"). The Series
A Holders and the Series B Holders are referred to herein collectively as
"Holders" and individually as a "Holder."
WHEREAS, in connection with the Company's issuance of an aggregate of
4,545,454 shares of Series A Preferred Stock pursuant to those certain Series A
Preferred Stock Purchase Agreements dated as of April 30, 1998 and October 29,
1998 (the "Series A Purchase Agreements"), the Company entered into an Investor
Rights Agreement as a condition to the Closing thereunder.
WHEREAS, in connection with the Company's subsequent issuance of up to
1,730,770 shares of Series B Preferred Stock pursuant to the Series B Preferred
Stock Purchase Agreement dated concurrently herewith (the "Series B Purchase
Agreement"), the Company has agreed to enter into this First Amended and
Restated Investor Rights Agreement (the "Agreement") as a condition to the
closing thereunder; and
WHEREAS, upon execution by a majority of the Founders and the Series A
Holders, this Agreement shall supersede that certain Investor Rights Agreement
dated as of April 30, 1998.
NOW THEREFORE, in consideration of the mutual agreements, covenants and
conditions and releases contained herein, the Company, the Founders, the Series
A Holders and the Series B Holders hereby agree as follows:
1. REGISTRATION RIGHTS
The Company hereby grants to each of the Series A Holders and the Series
B Holders the registration rights set forth in this Section 1, with respect to
the Registrable Securities (as hereinafter defined) owned by such Series A
Holders and Series B Holders. The Company, the Series A Holders and the Series B
Holders agree that the registration rights provided herein set forth the sole
and entire agreement on the subject matter between the Company, the Series A
Holders and the Series B Holders.
1.1 DEFINITIONS. AS USED IN THIS SECTION 1:
1.1.1 The terms "register", "registered", and "registration"
refer to a registration effected by filing with the Securities and Exchange
Commission (the "SEC") a registration statement (the "Registration Statement")
in compliance with the Securities Act of 1933, as amended (the "1933 Act"), and
the declaration or ordering by the SEC of the effectiveness of such Registration
Statement.
1.1.2 The term "Registrable Securities" means (i) Common Stock
issued or issuable upon conversion of the shares of Series A Preferred Stock
issued to the Series A Holders; (ii) Common Stock issued or issuable upon
conversion of the shares of Series B Preferred Stock
-1-
<PAGE> 2
issued to the Series B Holders; and (iii) any Common Stock of the Company issued
as (or issuable upon the conversion or exercise of any warrant, right, or other
security that is issued as) a dividend or other distribution with respect to, or
in exchange or in replacement of, such Registrable Securities. In the event of
any recapitalization by the Company, whether by stock split, reverse stock
split, stock dividend or the like, the number of shares of Registrable
Securities used throughout this Agreement for various purposes shall be
proportionately increased or decreased.
1.2 DEMAND REGISTRATION.
1.2.1 Demand for Registration. If the Company shall receive
from the Series A Holders and the Series B Holders a written demand (a "Demand
Registration") that the Company effect any registration under the 1933 Act of at
least thirty-five percent (35%) of the combined outstanding Registrable
Securities then held by the Series A Holders and the Series B Holders (other
than a registration on Form S-3 or any related form of registration statement,
such a request being provided for under Section 1.9 hereof) the Company will use
its best efforts to effect such registration as soon as practicable as may be so
demanded and as will permit or facilitate the sale and distribution of all or
such portion of the such Holders' Registrable Securities as are specified in
such demand, provided that the Company shall not be obligated to take any action
to effect any such registration, pursuant to this Section 1.2:
(a) Within ninety (90) days immediately following
the effective date of any registration statement pertaining to an underwritten
public offering of securities of the Company for its own account (other than a
registration on Form S-4 relating solely to an SEC Rule 145 transaction, or a
registration relating solely to employee benefit plans);
(b) Prior to the earlier of (i) April 30, 2002, or
(ii) six (6) months after the closing of the initial public offering of shares
of the Company's Common Stock; or
(c) In the event such Demand Registration is for the
Company's initial public offering, unless the holders of at least seventy-five
percent (75%) of the Registrable Securities have consented to such registration.
1.2.2 Underwriting. If the Series A Holders and the Series B
Holders intend to distribute the Registrable Securities covered by their demand
by means of an underwriting, they shall so advise the Company as part of their
demand made pursuant to this Section 1.2.
The Company shall, together with the Series A Holders and the Series B
Holders proposing to distribute their securities through such underwriting,
enter into an underwriting agreement in customary form with the underwriter or
underwriters selected by the Series A Holders and the Series B Holders
representing a majority of the Registrable Securities for which registration is
demanded and reasonably satisfactory to the Company. Notwithstanding any other
provision of this Section 1.2, if the underwriter shall advise the Company in
writing that marketing factors (including, without limitation, an adverse effect
on the per share offering price) require a limitation of the number of shares to
be underwritten, then the Company shall so advise the Series A Holders and the
Series B Holders, and, provided all other securities proposed to be included in
such registration are excluded first, the number of shares of Registrable
Securities that may be included in the registration and underwriting shall be
reduced accordingly. For purposes of any underwriter cutback, all Registrable
Securities held by the Series A Holders and the Series B Holders or any
permissible assignee which is a partnership or corporation shall also include
any Registrable Securities held by
-2-
<PAGE> 3
the partners, retired partners, stockholders or affiliated entities of such
Series A Holder and such Series B Holders, or the estates and family members of
any such partners and retired partners and any trusts for the benefit of any of
the foregoing persons, and such Series A Holder and such Series B Holder and
other persons shall be deemed to be a single "Selling Holder." No Registrable
Securities excluded from the underwriting by reason of the underwriter's
marketing limitation shall be included in such registration.
If the underwriter has not limited the number of Registrable Securities
to be underwritten, the Company may include securities for its own account (or
for the account of other stockholders) in such registration if the underwriter
so agrees and if the number of Registrable Securities that would otherwise have
been included in such registration and underwriting will not thereby be limited.
1.3 COMPANY REGISTRATION.
1.3.1 If at any time or from time to time the Company shall
determine to register any of its securities, either for its own account or the
account of security holders (including the Series A Holders and the Series B
Holders), other than a registration relating solely to employee benefit plans, a
registration on Form S-4 relating solely to an SEC Rule 145 transaction, or a
registration pursuant to Section 1.2 hereof, the Company will:
(a) promptly give to each of the Holders and
Founders written notice thereof (which shall include a list of the jurisdictions
in which the Company intends to attempt to qualify such securities under the
applicable blue sky or other state securities laws); and
(b) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities and Founders' Shares specified
in a written request or requests, made within twenty (20) days after receipt of
such written notice from the Company, or by any of the Holders or Founders,
except as set forth in Section 1.3.2 below.
1.3.2 Underwriting. If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise each of the Holders and Founders as a part of the
written notice given pursuant to Section 1.3.1(a). In such event, the right of
any of the Holders and Founders to registration pursuant to this Section 1.3
shall be conditioned upon such Holders' and Founders' participation in such
underwriting and the inclusion of such Holders' Registrable Securities and such
Founders' Founders' Shares in the underwriting to the extent provided herein.
Each of the Holders and Founders proposing to distribute their securities
through such underwriting shall, together with the Company and the other parties
distributing their securities through such underwriting, 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 this Section 1.3, if the underwriter determines that marketing
factors require a limitation of the number of shares to be underwritten, the
underwriter may limit the number of Registrable Securities and Founders' Shares
to be included in the registration and underwriting, or may exclude Registrable
Securities and Founders' Shares entirely from such registration and underwriting
subject to the terms of this paragraph; provided, however, for any registration
other than the registration for the initial public offering of shares of the
Company, the limitation shall not reduce the number of Registrable Securities to
be included in the offering below twenty percent (20%) of the total number of
shares to be included in the offering unless the Holders otherwise consent to or
approve the limitation of the number of shares to be
-3-
<PAGE> 4
underwritten. In such event, the Company shall so advise the holders of the
Company's securities that would otherwise be registered and underwritten
pursuant hereto, and the number of shares of such securities, including
Registrable Securities and Founders' Shares, that may be included in the
registration and underwriting shall be allocated in the following manner:
shares, other than Registrable Securities, requested to be included in such
registration by other stockholders shall be excluded, and if a limitation on the
number of shares is still required, the number of Registrable Securities that
may be included pursuant to this Section 1.3 shall be allocated to the Holders
with respect to their Registrable Securities in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities held by each
such Holder at the time of filing the Registration Statement (excluding any
Registrable Securities included pursuant to Section 1.2 hereof). For purposes of
any underwriter cutback, all Registrable Securities held by a Holder which is a
partnership or corporation shall also include any Registrable Securities held by
the partners, retired partners, stockholders or affiliated entities 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 persons, and
such Holder and other persons shall be deemed to be a single "Selling Holder",
and any pro rata reduction with respect to such "Selling Holder" shall be based
upon the aggregate amount of shares carrying registration rights owned by all
entities and individuals included in such "Selling Holder", as defined in this
sentence. No securities excluded from the underwriting by reason of the
underwriter's marketing limitation shall be included in such registration. If
any of the Holders or Founders disapproves of the terms of the underwriting,
such Holder or Founder may elect to withdraw therefrom by written notice to the
Company and the underwriter. The Registrable Securities or Founders' Shares so
withdrawn shall also be withdrawn from registration.
1.4 EXPENSES OF REGISTRATION. All expenses incurred in connection
with the first two registrations effected pursuant to Section 1.2 and all
registrations effected pursuant to Sections 1.3 and 1.9, including without
limitation all registration, filing, and qualification fees (including blue sky
fees and expenses), printing expenses, escrow fees, fees and disbursements of
counsel for the Company and of one special counsel for the Holders, and expenses
of any special audits incidental to or required by such registration, shall be
borne by the Company; provided, however, that the Company shall not be required
to pay stock transfer taxes, underwriters' discounts or commissions relating to
Registrable Securities. Notwithstanding anything to the contrary above, the
Company shall not be required to pay for any expenses of any registration
proceeding under Section 1.2 if the registration request is subsequently
withdrawn at the request of the Holders, unless such Holders agree to forfeit
their right to a demand registration pursuant to Section 1.2 for which the
Company is obligated to pay expenses pursuant to the preceding sentence. In the
absence of such an agreement to forfeit, such Holders shall bear all such
expenses. Notwithstanding the preceding sentence, however, (a) if at the time of
the withdrawal, such Holders have learned of a material adverse change in the
condition, business, or prospects of the Company from that known to such Holders
at the time of their request, of which the Company had knowledge at the time of
the request, or (b) in the event that such withdrawal is requested on account of
the Registration Statement not being declared effective within at least ninety
(90) days of the date of its filing with the SEC, then such Holders shall not be
required to pay any of said expenses and shall retain its rights pursuant to the
first sentence of this Section 1.4.
-4-
<PAGE> 5
1.5 OBLIGATIONS OF THE COMPANY. Whenever required under this Section
1 to effect the registration of any Registrable Securities or Founders' Shares,
the Company shall, as expeditiously as reasonably possible:
1.5.1 Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and Founders' Shares (if applicable)
and use its diligent best efforts to cause such registration statement to become
effective, and keep such registration statement effective for up to ninety (90)
days or until the Holders and the Founders have completed the distribution
relating thereto, provided however, that (i) such ninety (90) day period shall
be extended for a period of time equal to the period the Holder or Founder
refrains from selling any securities included in such registration at the
request of an underwriter of Common Stock (or other securities) of the Company;
and (ii) in the case of any registration of Registrable Securities on Form S-3
which are intended to be offered on a continuous or delayed basis, such ninety
(90) day period shall be extended, if necessary, to keep the registration
statement effective until all such Registrable Securities (if applicable) are
sold, provided that Rule 415, or any successor rule under the Act, permits an
offering on a continuous or delayed basis, and provided further that applicable
rules under the Act governing the obligation to file a post-effective amendment
permit, in lieu of filing a post-effective amendment which (I) includes any
prospectus required by Section 10(A)(3) of the Act or (II) reflects facts or
events representing a material or fundamental change in the information set
forth in the registration statement, the incorporation by reference of
information required to be included in (I) and (II) above to be contained in
periodic reports filed pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, (the "1934 Act") in the registration
statement.
1.5.2 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 1933 Act with respect to the disposition of all securities
covered by such registration statement.
1.5.3 Furnish to the Holders and Founders (if applicable) such
numbers of copies of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the 1933 Act, and such other documents as
they may reasonably request in order to facilitate the disposition of
Registrable Securities and Founders' Shares owned by them.
1.5.4 Use its 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 and Founders (if applicable), provided that the Company shall not be
required 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.
1.5.5 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 of such offering. Each of the
Holders and Founders (if applicable) participating in such underwriting shall
also enter into and perform its obligations under such an agreement.
1.5.6 Notify each of the Holders and Founders (if applicable)
covered by such registration statement at any time when a prospectus relating
thereto is required to be delivered under the 1933 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
-5-
<PAGE> 6
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.
1.5.7 Cause all such Registrable Securities and Founders'
Shares (if applicable) registered hereunder to be listed on each securities
exchange on which similar securities issued by the Company are then listed.
1.5.8 Provide a transfer agent and registrar for all
Registrable Securities and Founders' Shares (if applicable) registered hereunder
and a CUSIP number for all such Registrable Securities, in each case not later
than the effective date of such registration.
1.5.9 Furnish, at the request of any of the Holders or
Founders, if requesting registration of Registrable Securities or Founders'
Shares pursuant to this Section 1, on the date that such Registrable Securities
or Founders' Shares are delivered to the underwriters for sale in connection
with a registration pursuant to this Section 1, if such securities are being
sold through underwriters, or on the date that the registration statement with
respect to such securities becomes effective, (i) an opinion, dated 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 to each Holder and
Founder, if requesting registration of Registrable Securities or Founders'
Shares, and (ii) to the extent permitted under the rules of the AICPA, a letter,
dated such date, from the independent accountants of the Company, in form and
substance as is customarily given by independent accountants to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and to
each Holder and Founder, if requesting registration of Registrable Securities or
Founders' Shares.
1.6 INDEMNIFICATION.
1.6.1 The Company will, and does hereby undertake to,
indemnify and hold harmless each Holder and Founder, each of such Holder's and
Founder's officers, directors, partners and agents, and each person controlling
such Holder or such Founder, with respect to any registration, qualification, or
compliance effected pursuant to this Section 1, and each underwriter, if any,
and each person who controls any underwriter, of the Registrable Securities or
Founders' Shares held by or issuable to such Holder or Founder, against all
claims, losses, damages, and liabilities (or actions in respect thereto) to
which they may become subject under the 1933 Act, the 1934 Act, or other federal
or state law arising out of or based on (i) any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus, offering
circular, or other similar document (including any related Registration
Statement, notification, or the like) incident to any such registration,
qualification, or compliance, or based on any 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 (ii) any violation or alleged
violation by the Company of any federal, state or common law rule or regulation
applicable to the Company in connection with any such registration,
qualification, or compliance, and will reimburse, as incurred, each Holder, each
Founder, each underwriter, and each director, officer, partner, agent and
controlling person, for any legal and any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability, or action; provided that the Company will not be liable in any such
case to the extent that any such claim, loss, damage, liability or expense,
arises out of or is based on any untrue statement or omission based upon written
information furnished to the Company by an instrument duly executed by any of
the Holders, Founders or underwriter and stated to be specifically for use
therein.
-6-
<PAGE> 7
1.6.2 Each Holder and Founder will, if Registrable Securities
or Founders' Shares held by or issuable to such Holder or such Founder are
included in such registration, qualification, or compliance, severally and not
jointly, indemnify the Company, each of its directors, and each officer who
signs a Registration Statement in connection therewith, and each person
controlling the Company, each underwriter, if any, and, each person who controls
any underwriter, of the Company's securities covered by such a Registration
Statement, against all claims, losses, damages, and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such Registration
Statement, prospectus, offering circular, or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse,
as incurred, the Company, and each such underwriter or other person, for any
legal or any other expenses reasonably incurred in connection with investigating
or defending any such claim, loss, damage, liability, or action, in each case to
the extent, but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) was made in such
Registration Statement, prospectus, offering circular, or other document, in
reliance upon and in conformity with written information furnished to the
Company by an instrument duly executed by such Holder or such Founder and stated
to be specifically for use therein; provided, however, that the liability of
each such Holder or such Founder hereunder shall be limited to the net proceeds
received by such Holder or such Founder from the sale of securities under such
Registration Statement. In no event will any Holder or Founder be required to
enter into any agreement or undertaking in connection with any registration
under this Section 1 providing for any indemnification or contribution
obligations on the part of such Holder or Founder greater than such Holder's or
Founder's obligations under this Section 1.6.
1.6.3 Each party entitled to indemnification under this
Section 1.6 (the "Indemnified Party") shall give notice to the party required to
provide such indemnification (the "Indemnifying Party") of any claim as to which
indemnification may be sought promptly after such Indemnified Party has actual
knowledge thereof, and shall permit the Indemnifying Party to assume the defense
of any such claim or any litigation resulting therefrom; provided that counsel
for the Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be subject to approval by the Indemnified Party (whose
approval shall not be unreasonably withheld) and the Indemnified Party may
participate in such defense with its separate counsel at the Indemnifying
Party's expense if representation of such Indemnified Party would be
inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by such counsel in such
proceeding; and provided further that the failure of any Indemnified Party to
give notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Section 1, except to the extent that such failure to give
notice shall materially adversely affect the Indemnifying Party in the defense
of any such claim or any such litigation. 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
that does not include as an unconditional term thereof the giving by the
claimant or plaintiff therein, to such Indemnified Party, of a release from all
liability in respect to such claim or litigation.
1.7 INFORMATION BY THE HOLDERS AND FOUNDERS. If any Holder or
Founder includes Registrable Securities or Founders' Shares in any registration,
such Holder or Founder shall furnish to the Company such information regarding
such Holder or Founder, and the distribution proposed by such Holder or Founder,
as the Company may reasonably request in writing and as shall be required in
connection with any registration, qualification, or compliance referred to in
this Section 1.
-7-
<PAGE> 8
1.8 TRANSFER OF REGISTRATION RIGHTS. The rights of the Holders
contained in Sections 1.2, 1.3 and 1.9 hereof, to cause the Company to register
the Registrable Securities, may be assigned or otherwise conveyed to a
transferee or assignee of Registrable Securities, who shall be considered a
"Holder", as applicable, for purposes of this Section 1; provided that such
transferee or assignee (a) receives such securities as a partner in connection
with partnership distributions of a Holder, or (b) holds at least 50,000 shares
of the Registrable Securities held by the transferring Holder; and, provided
further, that the Company is given written notice by such Holder at the time of
or within a reasonable time after said transfer stating the name and address of
said transferee or assignee and identifying the securities with respect to which
such registration rights are being assigned.
1.9 FORM S-3. If the Company's stock becomes publicly traded, the
Company shall use its best efforts to qualify for registration on Form S-3 and
to that end the Company shall register (whether or not required by law to do so)
its Common Stock under the 1934 Act within twelve (12) months following the
effective date of the first registration of any securities of the Company under
the 1933 Act. After the Company has qualified for the use of Form S-3, the
Holders shall have the right to request an unlimited number of registrations on
Form S-3 under this Section 1.9. Subject to the foregoing, the Company will use
its best efforts to effect promptly the registration of all shares of
Registrable Securities on Form S-3, as the case may be, to the extent requested
by Holders thereof for purposes of disposition; provided, however, that the
Company shall not be obligated to effect any such registration (i) if the
Holders propose to sell Registrable Securities and such other securities (if
any) at an aggregate price to the public of less than $500,000, or (ii) more
than once during any six (6) month period; or (iii) in the event that the
conditions set forth in Section 1.2.1(a) are met (but subject to the limitations
set forth therein).
1.10 DELAY OF REGISTRATION. No Holder or Founder shall have any right
to obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 1.
1.11 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after
the date of this Agreement, the Company shall not, without the prior written
consent of the Series A Holders and Series B Holders holding a majority of the
then outstanding Registrable Securities, voting together as a single class,
enter into any agreement with any holder or prospective holder of any securities
of the Company which would allow such holder or prospective holder to (a)
require the Company to effect a registration or (b) include any securities in
any registration filed under Section 1.2, 1.3 or 1.9 hereof, unless, under the
terms of such agreement, such holder or prospective holder may include such
securities in any such registration only to the extent that the inclusion of
such securities will not diminish the amount of Registrable Securities which are
included in such registration and includes the equivalent of Section 5.1 as a
term.
1.12 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 best efforts to:
1.12.1 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 1933 Act, at all times commencing ninety (90) days
after the effective date of the first registration filed by the Company for an
offering of its securities to the general public;
-8-
<PAGE> 9
1.12.2 File with the SEC, in a timely manner, all reports and
other documents required of the Company under the 1933 Act and 1934 Act; and
1.12.3 So long as a Holder owns any Registrable Securities,
furnish to such Holder upon request: a written statement by the Company as to
its compliance with the reporting requirements of said Rule 144 of the 1933 Act,
and of the 1934 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.
1.13 AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Section
1 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 Series A Holders and the Series B
Holders owning seventy-five percent (75%) of the Registrable Securities owned by
all Series A Holders and the Series B Holders (voting together as a single
class). Any amendment or waiver effected in accordance with this paragraph shall
be binding upon each Holder, each future holder of Registrable Securities, and
the Company.
1.14 EXPIRATION OF RIGHTS. The obligations of the Company to register
any Holders' Registrable Securities or Founders' Shares shall terminate five (5)
years after the Company's first underwritten public offerings.
2. RIGHTS OF FIRST REFUSAL
2.1 RIGHTS ON SALE BY COMPANY.
2.1.1 Pro Rata Right. The Company hereby grants to the Series
A Holders and the Series B Holders the right of first refusal to purchase, pro
rata, all New Securities (as defined in Section 2.1.2 below) which the Company
may, from time to time, propose to issue, sell or exchange. Each Series A
Holder's and each Series B Holder's pro rata share, for purposes of this right
of first refusal, is the ratio (A) the numerator of which is the number of
shares of Common Stock issued or issuable upon conversion of Series A Preferred
Stock and Series B Preferred Stock held by such Holder, on the date of the
Company's written notice pursuant to Section 2.1.3 below; and (B) the
denominator of which is the total number of shares of Common Stock then
outstanding and issuable upon exercise and conversion of all outstanding
options, warrants, rights and convertible securities. This right of first
refusal shall be subject to the following additional provisions of this Section
2.1.
2.1.2 Definition.
"New Securities" shall mean any capital stock (including the
Common Stock or the Preferred Stock) of the Company whether now authorized or
not, and rights, options or warrants to purchase, subscribe for or otherwise
acquire capital stock, and securities of any type whatsoever that are, or may
become, convertible into or exchangeable for capital stock; provided that the
term "New Securities" does not include (i) securities issuable upon conversion
of or with respect to Series A Preferred Stock or Series B Preferred Stock; (ii)
securities issued pursuant to the acquisition of another corporation by the
Company by merger, purchase of substantially all the assets or other
reorganization whereby the Company owns more than fifty percent (50%) of the
voting power of such corporation; (iii) 2,925,000 shares of Common Stock
(including options to purchase Common Stock) issued to employees, consultants,
vendors or directors of, or other persons with important
-9-
<PAGE> 10
business relationships with, the Company pursuant to any stock option plan or
stock purchase or stock bonus agreement or arrangement approved by the Board of
Directors of the Company; (iv) securities issued pursuant to any stock dividend,
stock split, combination or other reclassification by the Company of any of its
capital stock; or (v) securities offered pursuant to a Qualified Offering.
2.1.3 Required Notices. In the event the Company proposes to
undertake an issuance of New Securities, it shall give the Series A Holders and
Series B Holders written notice, pursuant to the provisions of Section 5.4
hereof, of the proposed issuance, describing the type of New Securities
(including a brief description of the rights, preferences and privileges
thereof), the number of New Securities proposed to be issued, the proposed
issuance date, the price and the general terms upon which the Company proposes
to issue the same. Each Series A Holder and Series B Holder shall have thirty
(30) days from the date of receipt (the "Purchase Period"), of any such notice
to agree to purchase its pro rata share of such New Securities for the price and
upon the general terms specified in the notice by giving written notice to the
Company and the other Holders and stating therein the quantity of New Securities
to be purchased.
2.1.4 Company's Right to Sell. If the Series A Holders and
Series B Holders (as a group) have not elected to purchase all of their pro rata
share of the New Securities, the Company shall have ninety (90) days thereafter
to sell or enter into an agreement (pursuant to which the sale of New Securities
covered thereby shall be closed, if at all, within ninety (90) days from the
date of said agreement) to sell the New Securities not purchased by the Series A
Holders and Series B Holders (the "Available New Securities") at a price and
upon general terms no more favorable in any material respect to the purchasers
thereof than specified in the Company's notice. In the event the Company has not
sold within said ninety (90) day period or entered into an agreement to sell the
Available New Securities within said ninety (90) day period (or sold and issued
the Available New Securities in accordance with the foregoing within ninety (90)
days from the date of said agreement), the Company shall not thereafter issue or
sell any New Securities, without first offering such securities to the Series A
Holders and Series B Holders in the manner provided above.
2.2 TERMINATION. The provisions of this Section 2 shall terminate
upon the occurrence of any one of the following events: (i) the closing of an
underwritten public offering of the Company's Common Stock pursuant to a
Qualified Offering; or (ii) with respect to the rights of the Series A Holders
and Series B Holders, the number of shares of Common Stock and shares issued or
issuable upon conversion of the Series A Preferred Stock and Series B Preferred
Stock held by the Series A Holders and Series B Holders represent less than two
percent (2%) of the fully diluted outstanding shares of Common Stock of the
Company.
2.3 ASSIGNMENT. The right of first refusal set forth in this Section
2 is nonassignable, except that (a) such right is assignable in connection with
a sale or assignment of not less than 50,000 shares (as adjusted for stock
splits, stock dividends or recapitalizations after the date hereof) of Common
Stock (including Common Stock issuable upon conversion of Series A Preferred
Stock and Series B Preferred Stock), (b) such right is assignable by a Series A
Holder and Series B Holder to any wholly-owned subsidiary or parent of, or to
any corporation, entity or other person which is, within the meaning of the 1933
Act, controlling, controlled by or under common control with such Series A
Holder and Series B Holder, and (c) such right is assignable by a partnership to
its partners in connection with distributions to the partners and if so assigned
will be treated as one Series A Holder and Series B Holder for purposes of this
Section 2.
-10-
<PAGE> 11
2.4 AMENDMENT OF RIGHTS OF FIRST REFUSAL. Any provision of this
Section 2 may be amended and the observance thereof may be waived (either
generally or in a particular instance either retroactively or prospectively)
only with the written consent of the Company, the Series A Holders and the
Series B Holders owning seventy-five percent (75%) of the shares described in
clause A of Section 2.1.1 above owned by all Series A Holders and Series B
Holders or their permitted transferees of such rights.
3. COVENANTS
3.1 BASIC FINANCIAL INFORMATION.
3.1.1 So long as any Series A Holder, Series B Holder or any
assignee of such Holder shall own any Registrable Securities the Company shall
furnish the following reports to such Holder:
(a) As soon as practicable after the end of each
fiscal year, and in any event within 90 days thereafter, audited consolidated
balance sheets of the Company and its subsidiaries, if any, as at the end of
such fiscal year, and audited consolidated statements of income and cash flows
of the Company and its subsidiaries, if any, for such fiscal year, prepared in
accordance with generally accepted accounting principles ("GAAP") and setting
forth in each case in comparative form the figures for the previous fiscal year,
all in reasonable detail and accompanied by a report and opinion thereon, by
independent public accountants of national reputation selected by the Company's
Board of Directors and by a copy of such accountants' management letter prepared
in connection therewith;
(b) As soon as practicable after the end of each
month, but in any event within thirty (30) days thereafter, the Company's
unaudited consolidated balance sheet as of the end of such month and its
unaudited statement of income and cash flows for such month, indicating actual
results versus the Company's plan, all in reasonable detail and prepared in
accordance with generally accepted accounting principles and certified by the
principal financial or accounting officer of the Company;
(c) No later than thirty (30) days prior to the
beginning of each fiscal quarter and not later than sixty (60) days prior to the
beginning of each fiscal year, a copy of the Company's annual operating plan for
the forthcoming fiscal quarter or year, as the case may be, forecasting the
Company's revenues, expenses and cash position on a monthly basis and, as soon
as practicable after the adoption thereof, copies of any revisions to such
operating plan;
(d) With respect to the financial statements called
for in subsection (b) of this Section 3.1.1, an instrument executed by the Chief
Financial Officer or President of the Company and certifying that such
financials were prepared in accordance with GAAP consistently applied with prior
practice for earlier periods (with the exception of footnotes that may be
required by GAAP) and fairly present the financial condition of the Company and
its results of operation for the period specified, subject to year-end audit
adjustment; and
(e) Such other information relating to the financial
condition, business, prospects or corporate affairs of the Company as a Series A
Holder, Series B Holder or any assignee of a Series A Holder or Series B Holder
may from time to time request, provided, however, that the Company shall not be
obligated under this subsection (e) or any other subsection of Section 3.1.1 to
-11-
<PAGE> 12
provide information which it deems in good faith to be a trade secret or similar
confidential information unless such Series A Holder or Series B Holder agrees
to hold such information in confidence.
3.1.2 The Company may require any recipient of the information
set forth in Section 3.1.1 above to execute a reasonable non-disclosure
agreement in a form acceptable to Company counsel.
3.1.3 The rights granted pursuant to this Section 3.1 may be
assigned or otherwise conveyed by the Series A Holders or Series B Holders or by
any subsequent transferee of Registrable Securities, provided such transferee
holds at lease 50,000 shares of Registrable Securities; and provided further,
that the Company may refuse to provide such information if the transferee is a
competitor of the Company.
3.2 ANNUAL BUDGETS, CAPITAL EXPENDITURES. At least thirty (30) days
prior to the commencement of each fiscal year, the Board of Directors shall
approve an operating and capital budget. Any capital expenditures in excess of
the budget shall be approved by the Board of Directors.
3.3 INSPECTION. The Company shall permit the Series A Holders and
the Series B Holders, their attorneys, or their other representatives to visit
and inspect the Company's properties, to examine the Company's books of account
and other records, to make copies or extracts therefrom and to discuss the
Company's affairs, finances and accounts with its officers, management employees
and independent accountants, all at such reasonable times and as often as the
Series A Holder and the Series B Holders may reasonably request; provided,
however, that the Company shall not be obligated pursuant to this paragraph 3.2
to provide trade secret or confidential information or to provide information to
any person who the Company reasonably believes is a competitor of the Company.
3.4 KEY EXECUTIVE INSURANCE. The Company covenants and agrees that
for so long as the Series A Preferred Stock or Series B Preferred Stock remain
outstanding or until such earlier time as determined by the Board of Directors
and approved by the Series A Holders and the Series B Holders owning
seventy-five (75%) of the Series A Preferred Stock and Series B Preferred Stock,
then outstanding, voting together as a single class, that it will obtain, within
a commercially reasonable amount of time, and maintain with a reputable and
responsible insurance company or association, term life insurance payable to the
Company, in the amount of $5,000,000 on the life of Jeffrey Margolis and
$1,000,000 on each of the lives of Dan Spirek and Shaun Bowen.
3.5 ELECTION OF DIRECTORS.
(a) The Series A Holders agree as follows: (i) during the term of
this Agreement and for so long as Delphi Ventures IV, L.P. ("Delphi") and any of
its affiliates (as that term is defined in Rule 405 of Regulation C promulgated
under the Securities Act) collectively hold at least fifty percent (50%) of the
amount of shares of Series A Preferred Stock and Series B Preferred Stock shown
as held by them on Schedule A attached hereto, Fidelity Ventures Limited and
Fidelity Investors Limited Partnership ("Fidelity") and any of its affiliates
agree to vote its Series A Preferred Stock and Series B Preferred Stock to elect
the designee of Delphi as one of the two directors of the Company that the
Series A Holders and Series B Holders have the right to elect pursuant to
Section 4.3d(2) of the Certificate of Incorporation; and (ii) during the term of
this Agreement and for
-12-
<PAGE> 13
so long as Fidelity and any of its affiliates (as that term is defined in Rule
405 of Regulation C promulgated under the Securities Act) collectively hold at
least fifty percent (50%) of the amount of shares of Series A Preferred Stock
and Series B Preferred Stock shown as held by them on Schedule A attached
hereto, Delphi agrees to vote its Series A Preferred Stock and Series B
Preferred Stock to elect the designee of Fidelity as one of the two directors of
the Company that the Series A Holders and Series B Holders have the right to
elect pursuant to Section 4.3d(2) of the Certificate of Incorporation.
(b) In addition to any persons elected by the Series A Holders and
Series B Holders pursuant to their separate right to elect directors pursuant to
Section 4.3d(2) of the Certificate of Incorporation, the Series A Holders and
Series B Holders agree to vote to elect (i) two (2) persons designated by a
majority of the Company's issued and outstanding Common Stock, and (ii) two (2)
persons, having relevant outside industry experience, designated by a majority
of the members of the Board of Directors elected by the Series A Holders and
Series B Holders and pursuant to subsection (i) of this Section 3.5(b).
3.6 COMPENSATION COMMITTEE. Management compensation shall be
determined by a Compensation Committee of the Board of Directors, composed of
three (3) directors, one of whom shall be a director elected by the Series A
Holders and the Series B Holders, and one of whom shall be a non-employee
director.
3.7 OPTIONS. All options granted, or to be granted and all
restricted stock to be issued by the Company, shall vest in equal annual
installments over a period of four years from the date of grant. Restricted
stock may be granted only to senior management of the Company and may be
purchased by promissory note to the Company, provided such notes become due upon
termination of employment. The aggregate number of shares of Common Stock
issuable to officers, directors, employees, consultants and others with
important business relationships with the Company shall not exceed 2,325,000,
including shares issued and options granted prior to the date hereof.
3.8 PROPRIETARY RIGHTS AGREEMENTS. Each officer, employee or
consultant of the Company will execute a proprietary information agreement in a
form approved by the Company's Board of Directors.
3.9 EXPIRATION OF COVENANTS. The covenants set forth in this Section
3 shall expire and be of no further force or effect upon the first sale of
Common Stock of the Company to the public pursuant to a firm underwriting, which
sale is effected pursuant to a registration statement filed with, and declared
effective by, the SEC under the 1933 Act, from which the aggregate gross
proceeds exceed $15,000,000 at a per share price to the public not less than
$6.50 and that results in the Corporation's Common Stock being listed on a
national exchange or the Nasdaq National Market (a "Qualified Offering").
3.10 AMENDMENT OF COVENANTS. Any provision of this Section 3 may be
amended and the observance thereof may be waived (either generally or in a
particular instance either retroactively or prospectively) only with the written
consent of the Company, the Series A Holders and the Series B Holders owning
seventy-five percent (75%) of the then outstanding Series A Preferred Stock and
Series B Preferred Stock, or their permitted transferees of such rights, voting
together as a single class.
-13-
<PAGE> 14
4. CO-SALE RIGHTS.
4.1 RIGHTS OF CO-SALE. In the event a Founder desires, at any time,
to sell, transfer, assign or otherwise dispose of any Founders' Shares greater
than the number of Exempt Shares (as defined in Section 4.6 below), including
any Exempt Shares previously sold (whether now held or hereafter acquired) (the
"Offered Shares"), or receives a bona fide offer from a third party to purchase
such Offered Shares, such Founder shall deliver a notice (the "Notice") to the
Company stating (i) such Founder's bona fide intention to sell or transfer the
Offered Shares, (ii) the number of Offered Shares to be sold or transferred,
(iii) the price for which such Founder proposes to sell or transfer such Offered
Shares, (iv) the name of the proposed purchaser or transferee, or class of
purchaser or transferee, and (v) all other material terms and provisions
relating to the proposed sale or transfer. The Secretary of the Company shall
then promptly give notice of the contemplated transfer to each Series A Holder
and Series B Holder, who shall have the right, exercisable upon written notice
to the Founder holding such Offered Shares within thirty (30) days after receipt
by such Series A Holder and Series B Holder (an "Electing Holder") from the
Company of the notice described above, to participate in such Founder's sale of
Offered Shares. To the extent such Electing Holder exercises such right of
participation in accordance with the terms and conditions set forth below, the
number of Offered Shares which such Founder may sell pursuant to the Notice
shall be correspondingly reduced. The right of participation of such Electing
Holder shall be subject to the following terms and conditions:
4.1.1 The Electing Holder may sell all or any part of that
number of shares of Common Stock of the Company equal to the product obtained by
multiplying (i) the aggregate number of Offered Shares covered by the Notice by
(ii) a fraction, the numerator of which is the number of shares of Common Stock
of the Company acquired by the Electing Holder pursuant to the Series A Purchase
Agreements and/or the Series B Purchase Agreement and at the time owned by the
Electing Holder, and the denominator of which is the combined number of shares
of Common Stock of the Company acquired by the Electing Holders pursuant to the
Series A Purchase Agreements or the Series B Purchase Agreement and at the time
owned by such Electing Holders and the Founders' Shares owned by the selling
Founder. For purposes of making such computation, the Series A Holder and Series
B Holder shall be deemed to own the number of shares of Common Stock into which
all its Series A Preferred Stock and Series B Preferred Stock of the Company, if
any, is at the time convertible.
4.1.2 The Electing Holder may effect its participation in the
sale by delivering to the Founder for transfer to the purchase offeror one or
more certificates, properly endorsed for transfer, which represent:
(a) the number of shares of Common Stock which the
Series A Holder and Series B Holder elects to sell pursuant to this Section 4.1;
or
(b) that number of shares of Series A Preferred
Stock and Series B Preferred Stock which is at such time convertible into the
number of shares of Common Stock which such purchaser elects to sell pursuant to
this Section 4.1; provided, however, that if the purchase offeror objects to the
delivery of Series A Preferred Stock and/or Series B Preferred Stock in lieu of
Common Stock, the Series A Holder and Series B Holder may convert and deliver
Common Stock.
-14-
<PAGE> 15
4.2 DELIVERIES. The stock certificate or certificates which a Series
A Holder and/or Series B Holder delivers to a Founder pursuant to Section 4.1
shall be transferred by such Founder to the proposed purchaser in consummation
of the sale of the Common Stock pursuant to the terms and conditions specified
in the Notice, and such Founder shall promptly thereafter remit to such Series A
Holder and/or Series B Holder that portion of the sale proceeds to which such
Series A Holder and/or Series B Holder is entitled by reason of its
participation in such sale.
4.3 SUBSEQUENT SALES OF SHARES. The exercise or non-exercise of the
rights of any Series A Holder and Series B Holder hereunder to participate in
one or more sales of the Shares made by a Founder shall not adversely affect its
rights to participate in subsequent Common Stock sales by such Founder pursuant
to this Section 4.
4.4 PROHIBITED TRANSFERS. In the event any Founder should sell any
of the Shares in contravention of the restrictions of this Section 4 (a
"Prohibited Transfer"), a Series A Holder and Series B Holder, in addition to
such other remedies as may be available at law or in equity or hereunder, shall
have the put option provided in Section 4.5 below, and such Founder shall be
bound by the applicable provisions of such put option.
4.5 PUT OPTION. In the event of a Prohibited Transfer, a Series A
Holder and Series B Holder shall have the right (but shall not be obligated) to
sell to the Founder who made the prohibited transfer a number of shares of
Common Stock of the Company (either directly or through conversion of Series A
Preferred Stock and Series B Preferred Stock) equal to the number of shares the
Series A Holder and Series B Holder would have been entitled to transfer to the
proposed purchaser in the Prohibited Transfer pursuant to this Section 4
assuming the Series A Holder and Series B Holder elected to exercise its co-sale
rights under Section 4.1 to their fullest extent. Such sale shall be made on the
following terms and conditions:
4.5.1 The price per share at which the shares are to be sold
to any such Founder shall be equal to the price per share paid by the purchaser
to such Founder in the Prohibited Transfer. Such Founder shall also reimburse
the Series A Holder and Series B Holder for any and all reasonable fees and
expenses, including attorneys' fees and expenses, incurred pursuant to the
exercise of the Series A Holder's and Series B Holder's rights under this
Section 4.5.
4.5.2 Within ninety (90) days after the later of the dates on
which the Series A Holder and/or Series B Holder (i) received notice from such
Founder of the Prohibited Transfer or (ii) otherwise have actual knowledge of
the Prohibited Transfer, the Series A Holder and/or Series B Holder shall, if
exercising the put option created hereby, deliver to such Founder the
certificate or certificates representing shares to be sold, each certificate to
be properly endorsed for transfer. The failure of the Series A Holder and/or
Series B Holder to exercise the put option in such ninety (90) day period shall
constitute a waiver of the Series A Holder's and/or Series B Holder's right
under this Section 4.5
4.5.3 Such Founder shall, upon receipt of the certificate or
certificates for the shares to be sold by the Series A Holder and/or Series B
Holder, pursuant to Section 4.5.2, pay the aggregate purchase price therefor and
the amount of fees and expenses reimbursable under Section 4.5.1, by check made
payable to the order of the Series A Holder and/or Series B Holder.
4.6 PERMITTED TRANSFERS. The rights of the Series A Holders and the
Series B Holders under this Section 4 shall not pertain or apply to (i) any sale
or transfer by a Founder of not more
-15-
<PAGE> 16
than ten percent (10%) of the shares of Common Stock he or she owned on the date
of first sale of Series A Preferred Stock by the Company ("Exempt Shares"), or
(ii) any transfer of the Shares to a Founder's ancestors or descendants or
spouse or to a trustee for their benefit or the Founder's benefit; provided that
in the case of transfers permitted by clause (ii), (1) such Founder shall inform
the Company and the Series A Holder and the Series B Holder of such transfer
prior to effecting it and (2) the transferee (the "Permitted Transferee") shall
furnish the Company and the Series A Holders and Series B Holders with a written
agreement to be bound by and comply with all provisions of this Agreement
applicable to such Founder.
4.7 TERMINATION. The provisions of this Section 4 shall terminate
upon the occurrence of any one of the following events: (i) the closing of an
underwritten public offering of the Company's Common Stock pursuant to a
Qualified Offering; or (ii) the number of shares of Common Stock and shares
issued or issuable upon conversion of the Series A Preferred Stock and Series B
Preferred Stock held by the Series A Holders and Series B Holders represent less
than five percent (5%) of the fully diluted outstanding shares of Common Stock
of the Company.
4.8 LEGENDS. Each certificate representing Founders Shares now or
hereafter owned by the Founders or issued to any Permitted Transferee pursuant
to this Section 4 shall be endorsed with the following legend:
THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY MAY NOT BE
SOLD, ASSIGNED, TRANSFERRED, ENCUMBERED, OR IN ANY MANNER
DISPOSED OF EXCEPT IN CONFORMITY WITH THE TERMS OF AN INVESTOR
RIGHTS AGREEMENT DATED APRIL 30, 1998, AS AMENDED THEREAFTER,
BETWEEN THE CORPORATION AND THE REGISTERED HOLDER OF THE SHARES
(OR THE PREDECESSOR IN INTEREST TO THE SHARES). SUCH AGREEMENT
GRANTS CERTAIN CO-SALE RIGHTS AND RIGHTS OF FIRST REFUSAL TO
CERTAIN OF THE CORPORATION'S STOCKHOLDERS (OR THEIR ASSIGNEES)
UPON THE SALE, ASSIGNMENT, TRANSFER, ENCUMBRANCE OR OTHER
DISPOSITION OF THE CORPORATION'S SHARES AND MAY RESTRICT THE
TRANSFER OF THE SHARES FOLLOWING THE EFFECTIVE DATE OF A
REGISTRATION STATEMENT OF THE CORPORATION FILED UNDER THE
SECURITIES ACT OF 1933. THE CORPORATION WILL, UPON WRITTEN
REQUEST, FURNISH A COPY OF SUCH AGREEMENT TO THOSE PERSONS OR
ENTITIES HAVING A LEGITIMATE INTEREST WITHOUT CHARGE.
4.9 AMENDMENT OF CO-SALE RIGHTS. Any provision of this Section 4 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 Founders and the Series A Holders and the Series B
Holders owning seventy-five percent (75%) of the shares of Common Stock
(including shares issuable upon exercise of Series A Preferred Stock and Series
B Preferred Stock) acquired by the Series A Holders and the Series B Holders
pursuant to the Series A Purchase Agreement or the Series B Purchase Agreement,
or their permitted transferees of such rights.
-16-
<PAGE> 17
5. MISCELLANEOUS
5.1 "MARKET STAND-OFF" AGREEMENT. Each Founder and Holder hereby
agrees that during the 180-day period following the effective date of a
registration statement of the Company filed under the 1933 Act covering the
initial public offering of the Company's Common Stock, he, she or it shall not,
to the extent requested by the Company and any underwriter, sell or otherwise
transfer or dispose of (other than to donors who agree to be similarly bound)
any Common Stock of the Company held by him, her or it at any time during such
period except Common Stock included in such registration; provided, however,
that all officers and directors of the Company and all other persons with
registration rights (whether or not pursuant to this Agreement) enter into
similar agreements. In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the Registrable Securities of
each Founder and Holder (and the shares or securities of every other person
subject to the foregoing restriction) until the end of such period.
5.2 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of California as applied to agreements among
California residents made and to be performed entirely with the State of
California.
5.3 ENTIRE AGREEMENT. This Agreement constitutes the full and entire
understanding and agreement between the parties with respect to the subject
matter hereof. This Agreement supersedes and replaces the Investor Rights
Agreement dated April 30, 1998.
5.4 NOTICES. Any notice, request or other communication required or
permitted hereunder shall be given in writing and shall be deemed to have been
duly given if personally delivered or if telegraphed, or mailed by registered or
certified mail, postage prepaid, at the respective addresses of the parties as
set forth on below each signature and shall be deemed to have been received when
delivered. Any party hereto may by notice so given change its address for future
notices hereunder.
5.5 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
5.6 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision.
5.7 CAPTIONS. The captions and headings to Sections of this
Agreement have been inserted for identification and reference purposes only and
shall not be used to construe the meaning or the interpretation of this
Agreement.
5.8 REFERENCES. Any references to forms or schedules governed by the
1933 Act or 1934 Act means such forms or schedules under the 1933 Act and 1934
Act as in effect on the date hereof or any successor forms or schedules
subsequently adopted by the SEC.
-17-
<PAGE> 18
IN WITNESS WHEREOF, this First Amended and Restated Investor Rights
Agreement has been duly executed and delivered by the parties as of the date
first above written.
Address: THE TRIZETTO GROUP, INC.
567 San Nicholas Drive
Newport Beach, CA 92660
By: /s/ Jeffrey H. Margolis
-------------------------------------
Its: Chief Executive Officer
and President
-------------------------------------
Address: DELPHI VENTURES IV, L.P.
3000 Sand Hill Road By: Delphi Management
Building 1, Suite 135 Partners IV, L.L.C. General Partner
Menlo Park, CA 94025
By: /s/ Donald Lothrop
-------------------------------------
Its: Managing Member
-------------------------------------
Address: DELPHI BIOINVESTMENTS IV, L.P.
3000 Sand Hill Road By: Delphi Management
Building 1, Suite 135 Partners IV, L.L.C. General Partner
Menlo Park, CA 94025
By: /s/ Donald Lothrop
-------------------------------------
Its: Managing Member
Address: FIDELITY VENTURES LIMITED
By: Fidelity Capital Associates, Inc.
82 Devonshire, M/S R25C Its: General Partner
Boston, MA 02109
By: /s/ Peter Mann
-------------------------------------
Name: Peter Mann
-----------------------------------
Title: Vice President
----------------------------------
<PAGE> 19
Address: FIDELITY INVESTORS II
LIMITED PARTNERSHIP
By: Fidelity Investors Management, LLC
82 Devonshire, M/S R25C ------------------------------------
Boston, MA 02109 Its: General Partner
By: /s/ John J. Remondi
-------------------------------------
Name: John J. Remondi
-----------------------------------
Title: President
----------------------------------
Address: FIDELITY INVESTORS LIMITED PARTNERSHIP
82 Devonshire, M/S R25C By: Fidelity Investors Management, LLC
Boston, MA 02109 Its: General Partner
By: /s/ John J. Remondi
-------------------------------------
Name: John J. Remondi
-----------------------------------
Title: President
----------------------------------
Address: HLM\UH FUND L.P.
By: HLM\UH Associates LLC
Its: General Partner
By: /s/ A.R. Haberkorn, III
-------------------------------------
Name: A.R. Haberkorn, III
-----------------------------------
Title: Member Manager
----------------------------------
FOUNDERS
Address:
- --------------------------------- /s/ Jeffrey H. Margolis
----------------------------------------
- --------------------------------- Jeffrey H. Margolis
Address:
- --------------------------------- /s/ Raymond D. Croghan
----------------------------------------
- --------------------------------- Raymond D. Croghan
<PAGE> 20
SCHEDULE A
<TABLE>
<CAPTION>
NO. OF
NO. OF SHARES OF SHARES OF NO. OF SHARES
COMMON STOCK SERIES A OF SERIES B
---------------- --------- --------------
<S> <C> <C> <C>
FOUNDERS:
Raymond D. Croghan 4,050,000 0 0
Jeffrey H. Margolis 2,500,000 0 0
HOLDERS:
Delphi Ventures IV, L.P. 0 2,398,111 282,635
Delphi BioInvestments IV., L.P. 0 49,441 5,827
Fidelity Ventures Limited 0 1,048,951 240,385
Fidelity Investors Limited 0 874,126 0
Partnership
Fidelity Investors II Limited 0 174,825 240,385
Partnership
HLM\UH Fund L.P. 0 0 961,538
--------- --------- ---------
TOTALS 6,550,000 4,545,454 1,730,770
========= ========= =========
</TABLE>
A-1
<PAGE> 1
EXHIBIT 10.9
ENGAGEMENT LETTERS AND PROJECT AGREEMENTS
<TABLE>
<CAPTION>
P.O. PROJECT DATE AMOUNT TAB
---- ------- ---- ------ ---
<S> <C> <C> <C> <C>
[*]
</TABLE>
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
<PAGE> 2
May 4, 1999
PROFESSIONAL SERVICES AGREEMENT
This Professional Services Agreement (the "Agreement") is made and entered into
this 1st day of January, 1999, by and between CCN Managed Care, Inc. a Delaware
corporation, of 5251 Viewridge Court, San Diego, CA 92123 (for itself and its
parent, subsidiary and affiliated corporations) hereinafter referred to as
"CCN", and The TriZetto(SM) Group, a Delaware corporation, of 567 San Nicolas
Drive, Suite 360, Newport Beach, California, 92660 hereinafter referred to as
"TriZetto".
WHEREAS, CCN and TriZetto currently are parties to a Consulting
Services Contract dated May 5, 1998;
WHEREAS, TriZetto is in the business of providing professional services
and;
WHEREAS, CCN desires to have TriZetto continue to perform such
services, for the benefit of CCN;
NOW, THEREFORE, in consideration of the mutual promises contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. PROFESSIONAL SERVICES
- ------------------------
1.1. Upon reasonable request from CCN from time to time, TriZetto shall
provide to CCN professional services, including but not limited to,
project planning, project management, systems integration, data
processing, software evaluation, software installation, computer
programming, management training and/or similar professional services,
under the terms, conditions and fees set forth in this Agreement, any
schedule or exhibit hereto, and any Project Agreement executed
hereunder (the "Services").
1.2. Definition of TriZetto's Services shall be submitted to CCN, in the
form of a proposed "Project Agreement", within a mutually agreed upon
time period from the initial verbal or written request for professional
services by CCN from TriZetto. Project Agreements
Page l of 23
<PAGE> 3
May 4, 1999
shall be submitted to a person designated by CCN to be its project
leader (the "CCN Project Leader") and will specify, at a minimum,
anticipated Project Agreement background, scope, approach, staffing,
schedule, deliverables, and costs. Once a final Project Agreement is
agreed to by CCN and executed by both parties, it will be considered
addendum to and will be governed by this Agreement.
1.3. Services will commence upon TriZetto's receipt of a verbal or written
request by authorized CCN personnel and will be governed by the terms
herein until such time as a final Project Agreement pertaining to the
requested effort has been executed by both parties, but no later than
thirty (30) days following commencement of Services by TriZetto.
TriZetto will provide CCN written notice of verbal requests for
Services within two (2) business days from the commencement of Services
to fulfill such verbal requests.
1.4. In the event that TriZetto wishes to use the services of a
subcontractor to supplement its Services to be performed under this
Agreement, TriZetto must seek approval by CCN in advance of any
Services to be performed by such individual(s). Any approved
subcontractors must be covered by TriZetto's liability insurance or the
subcontractor must furnish proof of individual liability insurance with
coverage amounts equal to that of TriZetto.
2. SERVICE CHARGES AND PAYMENT.
- -------------------------------
2.1. As compensation for Services provided by TriZetto pursuant to this
Agreement, CCN shall pay TriZetto on a monthly basis, in arrears, for
Services rendered and expenses incurred. The agreed upon hourly rates
are set forth in the Fee Schedule attached hereto as Exhibit A to this
Agreement. [*]. The fees shall remain firm through [*], thereafter,
fees may be subject to an [*] increase not to exceed [*]. The parties
also agree to discuss incentive payments and/or penalties for various
Project Agreements, the amount, timing and scope of which will be
determined on an individual Project Agreement basis as may be mutually
agreed by the parties.
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
Page 2 of 23
<PAGE> 4
May 4, 1999
2.2. At the beginning of each calendar month, TriZetto will provide CCN with
an invoice for Services provided in the prior month which shall specify
with sufficient detail the fees and expense amounts attributable to (i)
mutually agreed Project Agreements, and (ii) billings for such other
incremental services as are mutually agreed to by the parties in the
applicable Project Agreements. CCN shall pay the full amount of such
invoice within thirty (30) days of the date of receipt of such invoice.
On each invoice, TriZetto will (i) associate charges to CCN-defined
project codes or purchase orders, and (ii) estimate charges for the
subsequent month.
2.3. CCN shall also reimburse TriZetto for all reasonable travel and lodging
expenses incurred by TriZetto or any Contractor in the performance of
the Services. CCN shall also reimburse TriZetto for other reasonable
out-of-pocket expenses incurred by TriZetto in connection with the
performance of the Services. All such travel-related expenses will be
in accordance with CCN's current travel policy as provided to TriZetto.
2.4. TriZetto shall advise CNN in writing of any invoice remaining unpaid
for more than [*] from receipt of invoice upon which CNN shall have [*]
to remit payment to TriZetto. If CNN does not remit payment within said
[*] period, TriZetto shall have the right to charge CNN interest which
shall accrue at a rate of the lesser of [*] per month or the highest
rate allowed by law.
2.5. In the event of any dispute with regard to a portion of an invoice, (i)
the undisputed portion shall be paid as provided herein, and (ii) if
the dispute persists for more than sixty (60) days beyond the invoice
date of the disputed invoice and is resolved in favor of TriZetto, CCN
agrees to pay to TriZetto, in addition to the disputed amount, interest
on the disputed amount from the date of such invoice until the date
such disputed amount is actually paid at a rate equal to the lesser of
one (1.0%) percent per month or the highest rate allowed by law.
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
Page 3 of 23
<PAGE> 5
May 4, 1999
2.6. Fee Discounts For Time and Materials Projects
2.6.1 For time and materials projects performed and paid for during
calendar 1999 and subsequent years for which this Agreement will be in
effect, TriZetto will grant CCN the following discounts from TriZetto's
then-current published hourly rates set forth in the Fee Schedule
attached as Exhibit A.
A. [*] cumulatively paid to TriZetto to less than
B. [*] to less than
C. Over [*]
2.6.2 For the purposes of this Section, "Time and Materials" projects
shall be defined as those projects which are NOT (i) fixed fee projects
or (ii) projects the pricing of which are partially value-based,
benefits-based or results-contingent (i.e. level of payment based
partially on the extent to which targeted results, deliverables, or
benefits are achieved).
2.6.3 The cumulative calculation of fees paid to TriZetto for Time and
Materials projects for purposes of determining the applicable discount
level will be done based on gross fees beginning from the Effective
Date of this Agreement. An increased discount rate, once reached, will
apply to existing and future Professional Services arranged under this
Agreement, but not retroactively. In the event an increased discount
level is granted based on the parties' expectation that a particular
project will cause the cumulative payments to fall into a
higher-discount tier, but the project is later cancelled, then TriZetto
will recalculate the applicable rates and bill CCN accordingly.
2.6.4 Fees paid to TriZetto by CCN for the following products and
services will also be included in calculating the discount level
specified above: (i) TriZetto software products or Solution Enablement
Tools ("SET") (i.e., counted at gross license fees against the discount
levels specified above, notwithstanding any reduction in license fees
that may or may not be then applicable to such software or SET[s]),
(ii) projects performed under
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
Page 4 of 23
<PAGE> 6
May 4, 1999
a fixed fee or partially value-based, benefits-based or
results-contingent based, (iii) outsourcing services provided by
TriZetto, or (iv) gross maintenance fees paid for TriZetto software
products or SET's. However, none of such discount levels will be
applicable to any of the four types of products or services specified
above.
2.6.5 Reimbursed expenses, or expenses for third party hardware,
software and/or related products and services procured for CCN by
TriZetto will neither impact the applicable cumulative rates discount
nor have such discounts applied to them. Fees for projects other than
Time and Materials projects will be as specified in the parties'
Project Agreements for such projects.
3. OWNERSHIP OF WORK PRODUCT AND RELATED MATERIALS
3.1. WORK PRODUCT.
3.1.1 TriZetto agrees that CCN shall own all rights, title and
interest, including but not limited to copyright, patent, trademarks,
trade secrets, and all other intellectual property rights in any
Original Work Product including all documentation, reports, notes, work
papers, and other written material developed and delivered to CCN,
including any creative works, directly arising out of or resulting from
the performance of Services and specifically developed by TriZetto for
the benefit of CCN as expressly provided in a Project Agreement by
TriZetto under this Agreement (the "Original Work Product").
3.1.2 TriZetto hereby agrees that the Original Work Product, if any, is
being delivered as "work for hire". If, for any reason, TriZetto is
ever held or deemed to be the owner of any intellectual property rights
set forth herein in the Original Work Product, then TriZetto hereby
irrevocably assigns to CCN all such rights, title and interest and
agrees to execute all documents reasonably necessary to implement and
confirm the letter and intent of this Section.
3.1.3 The Original Work Product is deemed to be CCN's Confidential
Information hereunder, and except as permitted herein, shall not be
used or disclosed by TriZetto except as set forth below in Section
3.1.4.
3.1.4 [*]
Page 5 of 23
<PAGE> 7
May 4,1999
[*]
3.1.5 Subject to the foregoing, it is understood that TriZetto shall be
free to use its general knowledge, skills and experience and any ideas,
concepts, know-how, and techniques related to the scope of TriZetto's
consulting and used in the course of providing the Services.
3.1.6 Any of the foregoing can be modified by terms of a Project
Agreement for the purposes of that Project Agreement.
4. NON-TRANSFERRED CCN PROPERTY. Except for property to which title or the
exclusive right to use is transferred to TriZetto as evidenced by a
bill of sale or comparable written instrument, no interest or
obligation (except the obligation to exercise reasonable care) is
conferred upon TriZetto regarding CCN's property beyond the limited
right to use such property in furtherance of this Agreement. All such
property remains in the care, custody and control of CCN.
5. LIMITATION OF LIABILITY.
5.1. Except as otherwise stipulated by a Project Agreement, the limit of
TriZetto's liability (whether in contract, tort, negligence, strict
liability in tort or by statute or otherwise) to CCN concerning
performance or non-performance by TriZetto, or in any manner related to
a Project Agreement, for any and all claims shall not exceed [*] the
aggregate amount of fees and expenses paid by CNN to TriZetto under the
Project Agreement to which the liability may be attributed, provided
however, such limitation shall not apply to gross negligence, willful
misconduct or a breach of TriZetto's intellectual property
representations herein. If requested by CCN, Project Agreements,
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
Page 6 of 23
<PAGE> 8
May 4, 1999
which arrange for TriZetto to assume "outsourcing" responsibilities,
shall specifically define additional terms regarding limitation of
liability.
5.2. Except as otherwise stipulated by a Project Agreement, in no event
shall either party be liable for consequential, incidental or punitive
loss, damage or expenses (including lost profit or saving) even if it
has been advised of their possible existence. Any action by either
party must be brought within [*] after the cause of action arose. The
allocations of liability in this Section 5 represent the agreed and
bargained-for understanding of the parties and TriZetto's compensation
for the Services reflects such allocations.
6. CONFIDENTIAL INFORMATION.
6.1. During the course of this Agreement, CCN may provide TriZetto with
certain information deemed confidential or proprietary to CCN.
Likewise, TriZetto may also provide to CCN such information that it
deems confidential or proprietary. Such "Confidential Information" is
defined to include the identity of patients, the content of medical
records, financial and tax information, information regarding Medicare
and Medicaid claims submission and reimbursements, the object and
source codes and documentation for proprietary software, and such other
information to be disclosed that is confidential or proprietary
business information and delivered or disclosed pursuant to this
Agreement.
6.2. The party receiving the Confidential Information (the "Receiving
Party") from the party who owns or holds in confidence such
Confidential Information (the "Owning Party") may use the Confidential
Information solely for the purpose of performing its obligations or
enforcing its rights under this Agreement.
6.3. Each party shall take appropriate action, by instruction to or
agreement with its employees, agents and subcontractors, to maintain
the confidentiality of the Confidential Information. CCN may disclose
any Confidential Information on an as needed basis to its non-employee
fiduciaries, including without limitation CCN's attorneys, accountants,
auditors, controlling persons, officers, directors or trustees, without
TriZetto's prior consent. The Receiving Party shall promptly notify the
Owning
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
Page 7 of 23
<PAGE> 9
May 4,1999
Party in the event that the Receiving Party learns of unauthorized
release of Confidential Information.
6.4. Except as may be permitted by this Agreement, TriZetto shall not use or
include CCN Confidential Information, nor any extrapolations or
normative versions thereof, in any database or other application or
program that TriZetto publishes or makes available to a third party or
otherwise use Confidential Information received from any member of CCN
for the purpose of developing information or statistical compilations
for use by third parties or for any other commercial exploitation or
enterprise without first obtaining CCN's specific written consent,
which consent CCN may withhold in the exercise of its sole discretion.
6.5. Unless otherwise agreed, the Receiving Party shall have no obligation
with respect to:
6.5.1. Confidential Information made available to the general public
without restriction by the owning party or by an authorized
third party;
6.5.2. Confidential Information rightfully known to the Receiving
party independently of disclosures by the Owning party under
this Agreement;
6.5.3. Confidential Information independently developed by the
Receiving Party; or
6.5.4. Confidential Information that the Receiving Party may be
required to disclose pursuant to subpoena or other lawful
process; provided, however, that the Receiving party notifies
the Owning Party in a timely manner to allow the Owning Party
to appear and protect its interests.
6.6. Upon the termination of this Agreement, each party shall (i)
immediately cease to use the other party's Confidential Information,
(ii) return to the other party or confirm destruction of such
Confidential Information and all copies thereof within ten (10) days of
the termination, and (iii) upon request, certify in writing to the
other party that it has complied with in its obligations set forth in
this Section 6, unless otherwise provided in this Agreement.
Page 8 of 23
<PAGE> 10
May 4,1999
6.7. The parties acknowledge that monetary remedies may be inadequate to
protect their rights with respect to Confidential Information and that,
in addition to legal remedies otherwise available, injunctive relief is
an appropriate judicial remedy to protect such rights.
6.8. TriZetto shall not use Confidential Information received from CCN for
the purpose of developing information or statistical compilation for
use by third parties or for any other commercial exploitation or
enterprise.
6.9. Each party agrees to provide reasonable assistance and cooperation upon
the reasonable request of the other party in connection with any
litigation against third parties to protect the requesting party's
Confidential Information, provided that the party seeking such
assistance and cooperation shall reimburse the other party for its
reasonable out-of-pocket expenses.
6.10 Unless otherwise specified, the Owning Party is administratively and
financially responsible for obtaining any consents necessary, if any,
for the Receiving Party to use each item of the Confidential
Information and, if appropriate, for transferring rights to the
Receiving Party that are necessary for the Receiving Party to use such
Confidential Information.
7. PROPRIETARY MATERIALS.
- -------------------------
7.1 SETS. In the course of performance of Services hereunder, TriZetto may
use (and will authorize CCN personnel to use in the performance of
CCN's responsibilities as may be mutually agreed upon in writing by the
parties in any Project Agreement) [*] are TriZetto Confidential
Information for purposes of Section 6. If TriZetto authorizes CCN to
retain any [*], CCN and such third parties as are engaged by CCN to
provide services in connection with its services and equipment may use
[*] such only for internal business purposes and may not use them for
the benefit of others. CCN will be responsible for maintaining
Page 9 of 23
<PAGE> 11
May 4, 1999
and supporting the [*], which are made available solely as an
accommodation, at no charge and with no obligation to update or
maintain them. [*]
7.2 OTHER TRIZETTO PROPRIETARY INFORMATION. In the course of
performance hereunder, TriZetto may use products proprietary to it.
Such proprietary products are TriZetto Confidential Information as
defined in Section 6 and will be identified by TriZetto in writing. CCN
shall not have and shall not obtain any rights in such proprietary
products other than to use them or permit third parties engaged by CCN
to use them as authorized by TriZetto from time to time solely for
purposes set forth in any Project Agreement or pursuant to TriZetto's
standard license for such product(s) as may be entered into by CCN and
TriZetto.
7.3 CCN PROVIDED MATERIALS. In order to carry out its responsibilities
under this Agreement, TriZetto, may need to use certain software,
databases and data that are owned by or licensed to CCN ("CCN Provided
Materials"). CCN is responsible for obtaining any consents necessary
for TriZetto to use such CCN Provided Materials, and transfer rights to
TriZetto if appropriate. TriZetto will comply with any restriction on
its use of the CCN Provided Materials as set forth in any Project
Agreement.
8. WARRANTIES.
- --------------
8.1 TriZetto warrants to CCN that Services will be performed in a good and
workmanlike manner by personnel possessing competency which (a)
consistent with applicable industry standards, and (b) sufficient to
perform the Services properly.
8.2. YEAR 2000. Unless otherwise stated in a Project Agreement, TriZetto
warrants that all equipment and systems used to furnish Services
pursuant to this Agreement are Year 2000 Compliant or do not contain
components which process date information. TriZetto also warrants that
any software [*] provided under the terms of any Project Agreement will
be Year 2000 Compliant. "Year 2000 Compliant" is defined to mean the
product/systems accurately and unambiguously processes (including, but
not limited to, compares, calculates, manipulates, sequences, displays,
and exchanges data with other
Page 10 of 23
<PAGE> 12
May 4, 1999
systems) data containing time and/or dates prior to, at, and after the
year 2000 without error or interruption, and the product operates
properly and in conformance with applicable specifications, without any
detrimental effect on patient care or otherwise, continuously, before,
at, and after the year 2000.
8.3 WARRANTY OF TITLE. TriZetto warrants TriZetto's absolute right to sell
or license any software [*] under the terms and conditions of any
Project Agreement, and, as long as CCN is not in default, warrants and
represents that CCN shall quietly and peacefully possess any software
or [*] provided hereunder subject to and in accordance with the
provisions of this Agreement and the applicable Project Agreement.
8.4 INTELLECTUAL PROPERTY WARRANTY. Licensor warrants that any software or
[*] licensed under any Project Agreement and CCN's use thereof in
accordance with appropriate documentation, shall not infringe or
violate the patent, trademark, copyright, trade secret or any other
intellectual property right of any entity not a party to this
Agreement.
8.5. VIRUS PROTECTION. TriZetto warrants and represents that it will use its
best efforts to ensure that, at the time any software or [*] are
delivered to CCN, no portion of the software or [*] or the media upon
which it is stored has any type of software routines or other element
which is designed to or capable of permitting any of the following: (1)
unauthorized access to or intrusion upon; (2) disabling of; (3) erasure
of; or (4) interference with any hardware, software, data or peripheral
equipment. In the event of a breach of this representation and
warranty, TriZetto shall compensate CCN for any and all harm, injury,
damages, costs, and expenses incurred by CCN by reason of the breach.
8.5 THE WARRANTIES HEREIN IS EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES,
WHETHER EXPRESS OF IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
Page 11 of 23
<PAGE> 13
May 4, 1999
9. CCN'S RESPONSIBILITIES.
- --------------------------
9.1 CCN shall be responsible for its compliance with any laws and
regulations associated with any deliverables supplied by TriZetto
hereunder, any decision to act, or refrain from acting, upon said
deliverables, and ensuring that its instructions to TriZetto satisfy
CCN's policies and business requirements. TriZetto shall be entitled to
rely on all decisions and approvals of CCN related to this Agreement.
9.2 CCN agrees that TriZetto's performance is dependent on CCN's timely and
effective satisfaction of CCN Responsibilities and on CCN's timely
decisions and approvals. Accordingly, CCN acknowledges that any
material delay by CCN may result in TriZetto being released from an
obligation or scheduled deadline or in CCN having to pay extra fees for
TriZetto's agreement to meet a specific obligation or deadline despite
the delay.
10. INDEMNITY.
- --------------
10.1 Each party shall indemnify and hold harmless the other party and its
affiliates, directors, officers, employees and agents (collectively,
the "indemnitee") against any and all losses, liabilities, judgments,
awards and costs (including legal fees and expenses) arising out of or
related to any third-party claim for personal injury or property
damage, including any damages finally awarded attributable to such
claim and any reasonable expense incurred by indemnitee in assisting
indemnitor in defending against such claim, that arises out of any
action or inaction by the indemnitor or its employees or agents;
provided, however, that indemnitee gives indemnitor: (i) written notice
within a reasonable time after indemnitee is served with legal process
in an action asserting such claims, provided that the failure or delay
to notify indemnitor shall not relieve indemnitor from any liability
that it may have to indemnitee hereunder so long as the failure or
delay shall not have prejudiced the defense of such claim; (ii)
reasonable assistance in defending the claim; and (iii) sole authority
to defend or settle such claim. In the event indemnitor elects not to
defend any such claim, the indemnitee shall have the option but not the
duty to reasonably defend or settle the claim and indemnitor shall
indemnify indemnitee for such settlement or any damages finally awarded
against indemnitee attributable to such claim, reasonable costs and
expenses (including attorneys' fees), and interest on such recoverable
funds advanced.
Page 12 of 23
<PAGE> 14
May 4, 1999
10.2 Either party shall indemnify and hold the other party harmless from and
against any and all liability, losses, damages, causes of actions, and
expenses, including reasonable attorney's fees, associated with any
action or omission of the other party or the personnel under its
supervision which action or omission is not in compliance with such
party's obligations under this Agreement.
11. INTELLECTUAL PROPERTY INDEMNIFICATION.
- ------------------------------------------
11.1 TriZetto shall defend, indemnify and hold CCN, and the Enterprise
harmless from any loss, liability, damage, cost, or expense (including
reasonable attorney's fees and litigation costs), arising out of any
claims or suits that may be made or brought against CCN by reason of
the breach or alleged breach by TriZetto of the warranties or
representations contained herein, or by reason of any infringement or
alleged infringement of any patent, trademark, copyright or trade
secret right resulting from the Work Product and CCN's use thereof.
TriZetto shall have the sole right to conduct the defense of any such
claim or action and all negotiations for its settlement or compromise,
unless otherwise mutually agreed to in writing, or unless TriZetto
fails to assume its obligation to defend and CCN is required to do so
to protect its interests
11.2 If such infringement claim or action occurs, or in TriZetto's judgment
is likely to occur, TriZetto shall, at its option and expense, either:
(a) Procure for CCN the right to continue using the Work Product;
(b) Modify such Work Product to become non-infringing (provided
that such modifications does not adversely affect CCN's
intended use of Work Product) such that the modified Work
Product is not infringing and is equally suitable, compatible,
and functionally equivalent to the original Work Product at no
additional charge to CCN;
(c) If none of the foregoing alternatives is reasonably available
to TriZetto, upon prior written consent of CCN, CCN shall
return the Work Product to TriZetto and TriZetto shall refund
all moneys paid by CCN in respect of such Work Product.
Page 13 of 23
<PAGE> 15
May 4, 1999
12. INSURANCE.
- --------------
12.1 TriZetto shall maintain liability coverage for errors and omissions with
coverage of at least [*] per incident and [*] in the aggregate. CCN shall be
provided a copy of the certificate of insurance upon request. CCN shall be
promptly notified at least thirty (30) days prior to any cancellation of policy
or reduction of coverage below the required amounts specified in this section.
12.2 During the term of this Agreement, TriZetto shall also maintain at its own
expense, commercial liability insurance for bodily injury, death and property
loss and damage (including coverages for product liability, completed
operations, contractual liability and personal injury liability) covering
TriZetto for damages arising out of its performance under this Agreement, and
any negligent or otherwise wrongful acts or omissions by TriZetto or any
employee or agent of TriZetto, arising out of its performance under this
Agreement, with CCN listed as named additional insured. All policies of
insurance shall provide for coverage on an [*] basis in the minimum amount of
[*] with an annual aggregate of [*]. If coverage is provided on a claims made
basis, TriZetto shall maintain, through the purchase of an [*] reporting
endorsement, or a [*] policy coverage for any occurrence taking place relating
to TriZetto's products and/or Services. Upon CCN's request, TriZetto shall
provide CCN with a copy of all such policies and certificates of insurance
satisfactory to CCN, evidencing TriZetto's insurance coverage.
13. INDEPENDENT CONTRACTOR STATUS.
- ----------------------------------
TriZetto agrees that it shall perform its duties under this Agreement as an
independent contractor. Contractors who perform Services on behalf of TriZetto
shall remain under the supervision, management and control of TriZetto and all
compensation of Contractors shall be the responsibility of TriZetto, including
any and all benefits which are required by law, including but not limited to the
provision of workers' compensation insurance, and federal and state payroll
taxes. This Agreement is not and shall not be considered to create an
employer/employee relationship, joint venture, or partnership of any kind, and
neither party shall represent to any third persons that any such relationship
exists. Each party to this Agreement is and shall remain professionally and
economically independent of the other, and neither party
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
Page 14 of 23
<PAGE> 16
May 4, 1999
will have any authority to bind or commit the other party. Nothing in this
Agreement will be deemed or construed to create a joint venture, partnership or
agency relationship between the parties for any purpose. With respect to its own
personnel, each party is, accordingly, independently responsible for all
obligations incumbent upon an employer.
14. TRIZETTO PERSONNEL.
- -----------------------
TriZetto reserves the right to determine which of its personnel or
subcontractors shall be assigned to perform Services, and to replace or reassign
such personnel during the term hereof, provided, however, that it will, subject
to scheduling and staffing considerations, attempt to honor CCN's request for
specific individuals. CCN shall have the right to request that individual
TriZetto personnel cease the provision of Professional Services for any reason.
In such instances, TriZetto and CCN will exert best efforts to mutually agree to
a corrective course of action.
15. NON-SOLICITATION OF EMPLOYEES.
- ----------------------------------
Each party agrees that it shall not, during the term of any Project Agreement,
solicit, hire or retain as an independent contractor any of the other party's
employees or personnel of any job classification or rank who are assigned to the
project on either a full-time or part-time basis. However, this obligation shall
not apply if either (a) the particular individual has already terminated
employment with the other party prior to any solicitation by a party or (b) the
other party delivers its prior written express approval (i.e., after the
initiating party request such approval from the other party, before any
solicitation by the initiating party to the particular individual). For the
purposes of this Agreement, Employment shall mean any arrangement between two
parties which promises reimbursement to one party for provision of services on
behalf of the other.
16. WORK ENVIRONMENT.
- ---------------------
Except as otherwise stipulated by a Project Agreement, when TriZetto's
employees are physically assigned to work on CCN's premises, CCN shall provide
to TriZetto's employees a work environment consistent with the work environment
provided to CCN's employees, including reasonable work space, furniture,
supplies and equipment, to enable TriZetto to
Page 15 of 23
<PAGE> 17
May 4, 1999
perform its obligations under this and any Project Agreement executed hereunder.
In the event that CCN is unable to provide such a work environment, TriZetto
will provide the required space, furniture, supplies, equipment and
communications linkages (including but not limited to high-speed data lines and
video conferencing equipment), and shall be reimbursed by CCN under section 2.3
of this agreement based upon CCN's prior approval.
17. PUBLICITY.
- --------------
Neither party shall refer to the existence of this Agreement or disclose its
terms or use the name of the other party in any press release, advertising or
materials distributed to prospective or existing customers, without the prior
written consent of the other party. TriZetto shall have the right to disclose to
prospective customers the fact of this Agreement's existence and the general
scope of the Services to be provided hereunder. CCN agrees to serve as a
business reference for TriZetto provided that TriZetto remains in compliance
with its obligations under this Agreement.
18. ASSIGNMENT.
- ---------------
Unless otherwise expressly provided in this Agreement, neither party may assign
its rights or delegate its duties and obligations under this Agreement without
the prior written consent of the other party, which will not be unreasonably
withheld or delayed. Notwithstanding the foregoing, consent will not be required
if either party assigns its rights or delegates its duties and obligations under
this Agreement to a parent, to a subsidiary or affiliate in which either party
directly or indirectly has more than a fifty percent (50%) controlling interest,
or to an entity into which either party is merged or with which either party is
consolidated, or to the purchaser of all or substantially all the assets of
either party, unless such assignment or delegation would have a material impact
on the Services to be provided under this Agreement.
19. GOVERNING LAW.
- ------------------
This Agreement shall be construed according to, and the rights of the parties
shall be governed by, the laws of the State of California.
Page 16 of 23
<PAGE> 18
May 4, 1999
20. SEVERABILITY.
- -----------------
If any of the provisions of this Agreement shall be held to be illegal, invalid
or unenforceable, the validity, legality or enforceability of the remaining
provisions shall not in any way be affected or impaired thereby; provided,
however, that in the event such remaining provisions are inadequate to permit
each party to realize the material benefits for which it has bargained, the
parties shall in good faith negotiate mutually acceptable substitute provisions
which are valid, legal and enforceable and which most nearly provide for the
material benefits sought to be accomplished by the provision(s) held to be
illegal, invalid or unenforceable. IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT
EACH AND EVERY PROVISION OF THIS AGREEMENT THAT PROVIDES FOR A LIMITATION OF
LIABILITY, DISCLAIMER OR WARRANTIES OR EXCLUSION OF DAMAGES IS INTENDED BY THE
PARTIES TO BE SEVERABLE AND INDEPENDENT OF ANY OTHER PROVISION AND TO BE
ENFORCED AS SUCH. FURTHER, IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT IN THE
EVENT THAT ANY REMEDY HEREUNDER IS DETERMINED TO HAVE FAILED ITS ESSENTIAL
PURPOSE, ALL LIMITATIONS OF LIABILITY AND EXCLUSIONS OF DAMAGES SET FORTH HEREIN
SHALL REMAIN IN EFFECT.
21. WAIVER OF BREACH.
- ---------------------
The waiver of either party of any one or more breach or defect in performance by
either party and its Contractors under this Agreement shall not be construed as
a waiver of any other or future breach or defect, and shall not stop either
party from requiring the specific performance of any obligations arising under
this Agreement.
22. AMENDMENT.
- --------------
This agreement may be amended, modified or supplemented only by a writing signed
by the parties to this Agreement. Such amendments, modifications or supplements
shall be deemed as much a part of this Agreement as if so incorporated herein
(e.g., Project Agreements).
Page 17 of 23
<PAGE> 19
May 4, 1999
23. ENTIRE AGREEMENT.
- ---------------------
This Agreement and its exhibits set forth the entire agreement between parties
hereto with regard to the subject matter hereof. No other agreements,
representations, or warranties have been made by either party to the other with
respect to the subject matter of this Agreement. The parties have, however,
previously entered into certain agreements and other binding documents with
respect to services and products and such agreements and documents remain in
full force and effect as separate contracts with respect to the subject
matter(s) thereof. This Agreement is not intended to modify or amend any such
other agreements or documents in any way. Notwithstanding anything to the
contrary provided herein, contrary or inconsistent terms in any specific Project
Agreement shall supersede and control the terms set forth herein.
24. FORCE MAJEURE.
- ------------------
Neither party hereto shall be liable for any failure or delay in performance of
its obligations hereunder by reason of any event or circumstance beyond its
reasonable control, including without limitation acts of God, war, riot, strike,
labor disturbance, fire, explosion, flood, or shortage or failure of suppliers;
provided, however, that a delay or failure in performance due to lack of
financial resources, or availability of skilled personnel not caused by acts of
God, war, riot, strike, labor disturbance, fire, explosion, flood, or shortage
or failure of suppliers shall not be considered a circumstance beyond the
reasonable control of the delaying or failing party.
25. TAXES.
- ----------
There shall be added to any charges payable by CCN under this Agreement amounts
equal to any and all applicable taxes, however designated, incurred as a result
of or otherwise in connection with this Agreement or the Services, including
without limitation state and local privilege, excise, sales, and use taxes and
any taxes or amounts in lieu thereof paid or payable by TriZetto, but excluding
taxes based upon the net income, personnel costs, or net worth of TriZetto.
Page 18 of 23
<PAGE> 20
May 4, 1999
26. TERM AND TERMINATION.
- -------------------------
26.1 The term of this Agreement commences on the Effective Date and shall
continue for a period of [*] thereafter.
26.2 This Agreement may be terminated by either party upon the other party's
failure to cure a material breach of this Agreement or a Project Agreement
issued under the terms of this Agreement. In the event either party defaults in
any obligation in this Agreement or Project Agreement, the other party shall
give written notice of such default, and, if the party in default has not cured
the default within thirty (30) days of the notice, the other party shall have
the right to terminate this Agreement.
26.3 Unless otherwise stated in a Project Agreement, this Agreement or any
particular Project Agreement may be terminated by CCN without cause with thirty
(30) days advance written notice to TriZetto.
26.4 Notwithstanding the foregoing or any provision of a Project Agreement to
the contrary, in the event that TriZetto, or TriZetto's parent company, if
applicable, is directly or indirectly acquired by or merged with, or assigns all
or substantially all of its assets to another entity without CCN's prior written
consent pursuant to Section 18 hereof, CCN shall have the option to immediately
terminate this Agreement and any or all Project Agreements executed hereunder
that are then effective subject to the wind-down provisions, if any, contained
in any such Project Agreements.
26.5 In the event of termination of this Agreement for any reason, CCN shall pay
TriZetto all accrued fees payable for Time and Materials Projects to TriZetto in
accordance for any Services rendered, and all approved expenses up to the
effective date of termination.
26.6 Unless otherwise stated in any Project Agreement, Project Agreements which
are deliverables based (i.e. any project which is NOT a Time and Materials
Project), which are uncompleted at the time the Agreement is terminated, shall
be partially paid based upon the amount of partial deliveries that have been
completed and are determined to be of value to and accepted by CCN.
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
Page 19 of 23
<PAGE> 21
May 4, 1999
26.7 Cancellation of a service requested by a Project Agreement to be performed
by TriZetto does not constitute termination of this Agreement.
26.8 Regardless of the reason for expiration or termination of this Agreement,
TriZetto will return to CCN all CCN Confidential Information in TriZetto's
possession promptly after notification of termination or upon CCN's request.
27. SURVIVAL.
Notwithstanding the provisions of Section 26 relating to Termination, Section 2
(Service Charges and Payment), Section 3 (Ownership of Work Product and Related
Materials), Section 5 (Limitation of Liability), Section 6 (Confidential
Information), Section 10 (Indemnity), Section 11 (Intellectual Property
Indemnity) Section 15 (Non-Solicitation of Employees), Section 17 (Publicity),
Section 18 (Warranties), Section 19 (Governing Law), Section 25 (Taxes), and
Section 28 (Dispute Resolution and Attorneys' Fees) survive the expiration or
termination of this Agreement (or any Schedule) for any reason.
28. DISPUTE RESOLUTION AND ATTORNEYS' FEES.
In the event of a dispute between the parties that cannot be resolved between
them, the parties shall submit their dispute to non-binding mediation prior to
initiating litigation. Selection of the mediator shall be by mutual agreement of
both parties. Each party shall bear their own costs and expenses of
participating in the mediation (including without limitation, attorneys' fees)
and each party shall bear one-half (1/2) of the costs and expenses of the
mediator. The matters discussed or revealed in the mediation session shall not
be revealed in any subsequent litigation, except as expressly provided in this
section. In the event the matter is not resolved in the mediation, suit may be
brought. In addition to recovering any damages or other relief awarded by the
court, the prevailing party may recover attorneys' fees, provided, however, any
award of attorneys' fees shall be limited as follows: (a) the award shall not
exceed the amount of monetary damages awarded to the prevailing party by the
court, and (b) no award shall be made if, prior to the initiation of the suit
(i.e., service of process upon the party-defendant), the party made an offer to
settle the dispute and the amount of monetary damages awarded in the court
proceeding was less than or equal to the settlement offer. Nothing in this
Section 23 shall be deemed to limit a party's access to the court system to
pursue a remedy which is limited to
Page 20 of 23
<PAGE> 22
May 4, 1999
injunctive relief.
29. BOOKS, RECORDS, AND COMPLIANCE.
29.1 Pursuant to the requirements of 42 CFR 420.300 et seq., TriZetto
agrees to make available to the Secretary of Health and Human Services ("HHS"),
the Comptroller General of the Government Accounting Office ("GAO") or their
authorized representatives, all contracts, books, documents and records relating
to the nature and extent of costs hereunder for a period of four (4) years after
the furnishing of Services hereunder for any and all Services furnished under
this Agreement. In addition, TriZetto hereby agrees to require by contract that
each subcontractor makes available to the HHS and GAO, or their authorized
representative, all contracts, books, documents and records relating to the
nature and extent of the costs thereunder for a period of four (4) years after
the furnishing of Services thereunder.
29.2 Unless this Agreement is exempted by the rules and regulations of
the Secretary of Labor issued pursuant to Section 204 of Executive Order 11246,
there is incorporated herein by reference paragraphs 1 through 7 of the contract
clause set forth in sections 202 of Executive Order 11246.
29.3 TriZetto shall, to the extent applicable, comply with the
provisions of the Immigration Reform and Control Act of 1996. Unless this
Agreement is exempted by the rules and regulation of the Secretary of Labor,
pursuant to Title 41 chapter 60 part 60-250 of the Code of Federal Regulations,
the affirmative action clause relating to an affirmative action for veterans
contained in 60-250.4(a) - (m) is incorporated by reference.
29.4 TriZetto agrees to comply at all times with the regulations issued
by the Department of Health and Human Services, published at 42 CFR 1001, and
which relate to TriZetto's obligation to report and disclose discounts, rebates
and other reductions to CCN for products purchased by CCN under this Agreement.
29.5 CCN shall have the right, at its expense, during normal business
hours and with reasonable advance notice, to review and photocopy TriZetto's
books and records that pertain
Page 21 of 23
<PAGE> 23
May 4, 1999
directly to the accounts of CCN, the fees payable to TriZetto under this
Agreement, or the goods and Services provided by TriZetto hereunder.
29.6 If TriZetto carries out the duties of this Agreement through a
subcontract worth $10,000 or more over a twelve month period with a related
organization, the subcontract will also contain a clause substantially identical
to the Sections 29.1, 29.2, 29.3, 29.4, and 29.5 to permit access by CCN, the
Secretary, the United States Comptroller General and their representatives to
the related organization's books and records.
29.7 CCN's rights under this Section shall survive for a period of four
(4) years after termination or expiration of this Agreement.
29.8 TriZetto represents and warrants that it has not been excluded
from participation in any Federal healthcare program as defined in 42 U.S.C.
Section 1320a-7b(f).
30. NOTICES.
Any notice or other communication given pursuant to this Agreement shall be in
writing and shall be effective or made (i) when delivered personally to the
party for whom intended, (ii) five (5) days following deposit of the same into
the United States mail (certified mail, return receipt requested, or first class
postage prepaid) to the address specified below, or (iii) two (2) business days
after delivery to an established national overnight delivery service (such as
Federal Express) when sent prepaid to the address specified below:
To CCN: CCN Managed Care, Inc.
5251 Viewridge Court
San Diego, CA 92123
Attn: Bob Neal
Columbia/HCA Healthcare Corporation
One Park Plaza
Nashville, TN 37202
Attn: General Counsel
Page 22 of 23
<PAGE> 24
May 4, 1999
To TriZetto: The TriZetto Group, Inc.
567 San Nicolas Drive, Suite 360
Newport Beach, CA 92660
Attn:
Either party may designate a different address by notice to the other
given in accordance herewith.
31. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same document. In making proof of this Agreement, it shall not be necessary to
produce or account for more than one such counterpart executed by the party
against whom enforcement of this Agreement is sought.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their authorized representatives as of the date first set
forth above.
THE TRIZETTO GROUP CCN MANAGED CARE, INC.
By: /s/ Daniel J. Spirel By: /s/ RL Neal
-------------------------------- -------------------------------
Name: Daniel J. Spirel Name: Bob Neal
------------------------------ -----------------------------
Title: Vice President Title: Senior Vice President
---------------------------- Chief Information Officer
Date: 5/4/99 Date: 5/4/99
------------------------------ ------------------------------
Page 23 of 23
<PAGE> 25
The TriZetto Group
Exhibit A
1999 SMS Professional Services Rate Schedule
<TABLE>
<CAPTION>
[*]
<S> <C> <C> <C> <C> <C> <C> <C>
[*]
</TABLE>
[*]
Private and Confidential All Rates Subject to Change
The TriZetto Group, January 1999
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
<PAGE> 1
EXHIBIT 10.13
TECHNICAL SUPPORT AGREEMENT
---------------------------
This Technical Support Agreement (the "Agreement") is made and entered
into this 15th day of May, 1995, by and between DHI COMPUTING SERVICE, INC., a
Utah corporation ("DHI") and CROGHAN & ASSOCIATES, INC. (d/b/a "System One"), a
Colorado corporation ("System One").
DHI and System One have entered into a License Agreement (the "License
Agreement") on this date pursuant to which DHI has granted to System One a
perpetual, restrictive and nonexclusive license to use the DHI Systems Software,
the DHI Financial Software Modules, and the DHI FTI Software, as defined in the
License Agreement, in the health care industry. System One desires to obtain
from DHI certain technical support services with respect thereto.
In consideration of the mutual covenants contained herein and other
valuable consideration, the adequacy and receipt of which is hereby mutually
acknowledged, the parties hereto agree as follows:
1. Definitions. The term "Software" in this Agreement means the DHI
Systems Software, the DHI Financial Software Modules, and the DHI FTI Software,
as defined in the License Agreement, and includes, without limitation, all error
corrections, new releases, and associated materials provided by DHI to System
One pursuant to this Agreement. The term "Software" in this Agreement
specifically excludes the Part (d) Components, as defined in the License
Agreement, except to the extent part of the DHI Systems Software, the DHI
Financial Software Modules, or the DHI FTI Software. The term "Documentation"
means the portion of the Software which includes the related printed or tangible
materials, such as, but not limited to, flow charts, logic diagrams, listings,
and user documentation. The terms "DHI Systems Software," "DHI Financial
Software Modules," and "DHI FTI Software," also have the same meanings as in the
License Agreement.
2. Support Services. During the term of this Agreement, DHI agrees,
except as otherwise stated in this Agreement, to provide the following technical
support services to System One:
(a) DHI agrees to use prompt and commercially reasonable
efforts to correct verifiable and reproducible errors in the Software
which are reported to DHI by System One in accordance with DHI's
standard reporting procedures as outlined in Exhibit A. For purposes
of this Agreement, the term "error" means any failure of the Software
to function on compatible computer equipment (as defined by DHI from
time to time) substantially as provided in DHI's then current
Documentation for the Software. The correction of errors shall involve
either a software modification or addition that, when made or added to
the Software, makes them capable of functioning on compatible computer
equipment substantially as provided in
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
<PAGE> 2
DHI's user documentation, or a procedure or routine that, when
observed in the regular operation of the Software, eliminates the
practical adverse effect on System One of the error. A breach of
warranty may be eliminated by revising the Documentation to conform
with the Software only if to do so will not materially and adversely
affect the functions of the Software for System One. DHI shall have no
responsibility under this Agreement with respect to errors in any
version of the Software other than the most recent release thereof made
available by DHI to System One pursuant to Section 2(d) (or the
release of the Software delivered pursuant to the License Agreement, if
no release has been made pursuant to Section 2(d) of this Agreement),
provided that DHI shall continue to support a prior release for a
reasonable period sufficient to allow System One to implement the most
recent release, but not to exceed 120 days.
DHI's obligations under this Section 2(a) are conditioned
upon proper use of the Software and shall not apply if System One makes
or permits any modification or alteration therein which is not approved
by DHI in writing, or deviates from the operating procedures therefor
which are suggested by DHI, or if an error results in whole or in part
from any neglect, accident or misuse by System One or its employees or
agents, or from any computer equipment failure or failure to maintain a
proper operating environment for the computer equipment, or from any
error in the operating programs which are not part of the Software. If
DHI performs services to correct an error and it is mutually determined
that the error resulted in whole or in part from circumstances
described in the preceding sentence, DHI shall have the option to
charge System One a reasonable fee for such service in addition to the
fee provided for in Section 6 herein, which fee shall be based on DHI's
then standard rates for personnel, computer usage, travel and other
costs.
(b) DHI shall be available to provide reasonable 24 hour a day
telephone assistance to System One in problem diagnosis and resolution
with respect to System One's use of the Software. DHI shall, at its
expense, maintain an 800 number for this purpose. On Sundays and on
Federal and State holidays, DHI's response may be slower to the
extent it utilizes an answering service or paging device. The telephone
support service to be provided by DHI shall not be a substitute for
proper training of System One's employees. Except in emergency
situations, all telephone communications by System One shall be made by
System One's representative designated by it from time to time pursuant
to Section 13 herein.
(c) At the request of System One from time to time, DHI shall
maintain dial-up communication capability with one central computer of
System One with which the Software is
2
<PAGE> 3
being used, and System one shall also maintain dial-up communication
capability with DHI's computer facilities. Alternatively, at System
One's option, a dedicated telephone line shall be utilized to
maintain communication. System One shall pay all telephone charges
incurred by it or DHI in connection with such dial-up or dedicated
line communications. (In conjunction with the execution of this
Agreement, the parties are entering into a Lease Agreement (the
"Lease") pursuant to which System One will occupy space at DHI's
principal offices in Provo, Utah, and pursuant to which System one
will be entitled to certain usage of the central processing equipment
of DHI located at those facilities. The dial-up capability
contemplated by this part (c) will be for a central computer of
System One which is in addition to the central processing equipment
of DHI which will be available to System One during the term of the
Lease.)
(d) DHI may, from time to time, issue new releases of the
Software for its own use or to customers generally, containing error
corrections and minor or major enhancements. DHI shall provide System
One with a copy of any such releases, except: (i) with respect to the
DHI Financial Software Modules, any new applications of such modules
(as contrasted to minor or major enhancements of applications
existing at the date of this Agreement), and (ii) as provided in
section 4 herein with respect to the DHI FTI Software. Copies of any
new releases to be provided by DHI shall be provided to System One
within forty-five (45) days after DHI commences use thereof in the
ordinary course of its business (not including testing) or at the
same time that DHI provides copies thereof to customers generally.
(e) With respect to new releases provided to System One
pursuant to this Agreement, DHI shall provide object code, source
code, and user documentation.
(f) DHI shall maintain a trained staff capable of rendering
the services set forth in this Agreement.
3. DHI Financial Software Modules. There are five (5) DHI Financial
Software Modules: General Ledger, Fixed Assets, Accounts Payable, Payroll,
and Materials Management. DHI will provide technical support to System One
pursuant to this Agreement with respect to the General Ledger Module and the
Fixed Assets Module.
The Accounts Payable Module, the Payroll Module, and the Materials
Management Module (collectively the "HPS Related Modules") have historically
been supported by DHI in conjunction with its HPS Division, and, notwithstanding
anything in this Agreement to the contrary, the support obligations of DHI under
this Agreement will not extend to the HPS Related Modules. However,, if at any
time DHI does issue new releases of the HPS Related Modules containing error
corrections and minor or major
3
<PAGE> 4
enhancements (but not new applications), DHI shall provide System One with a
copy of any such releases as contemplated in Section 2(d) herein.
System One agrees to provide to DHI technical support (corresponding to
the technical support which DHI is to provide to System One with respect to the
General Ledger Module and the Fixed Assets Module) with respect to the HPS
Related Modules and, in conjunction therewith, will provide DHI with copies of
new releases of the HPS Related Modules containing error corrections and minor
or major enhancements (but not now applications) which System One provides to
its customers generally.
Pursuant to Section 8 herein, additional technical support services
with respect to the DHI Financial System Modules may be provided by either party
to the other. The parties may negotiate some method of offsetting the charges
for such services, with the party owing the most to pay the balance from time to
time as may be agreed upon.
Either party shall have the right for any reason whatever, upon ninety
(90) days advance written notice to the other party, to terminate this Agreement
with respect to the DHI Financial System Modules.
4. DHI FTI Software. Notwithstanding anything in this Agreement to the
contrary: (a) the support obligation of DHI with respect to the DHI FTI Software
applies only to the modules or classes thereof which are generally available to
customers of DHI prior to the date of this Agreement (the "existing modules or
classes" which are the modules and classes described in the description of the
DHI FTI Software which is attached as Exhibit C to the License Agreement), and
(b) System One shall not be entitled to any modules or classes of DHI FTI
Software which are currently under development (which, for this purpose, do not
include the existing modules or classes as described in part (a) above) or which
are hereafter developed by DHI, whether or not such modules or classes of DHI
FTI Software are otherwise released by DHI as minor or major enhancements to the
existing modules or classes.
5. Term The term of this Agreement shall be for a period of two years
from the date of this Agreement with respect to the DHI Financial System
Modules, and the DHI FTI Software, except as it may be earlier terminated with
respect to the DHI Financial System Modules pursuant to Section 3 herein.
The term of this Agreement with respect to the DHI Systems Software
shall continue until terminated pursuant to Section 7 herein.
6. Fees. For the technical support services to be provided by DHI under
this Agreement, System One agrees to pay to DHI a
4
<PAGE> 5
monthly fee in the amount of $[*], subject to adjustment as hereinafter
provided.
At the beginning of the second year of the term and at the beginning of
each additional year of the term, the fee shall be increased by a percentage
equal to the sum of: (a) [*], (b) [*]. The "percentage increase in CPI-U during
the immediately preceding year" means the percentage increase in the CPI-U (the
Consumer Price Index--U.S. City Average For All Items For All Urban Consumers
(1982-84=100) published by the Bureau of Labor Statistics of the United States
Department of Commerce) between the last full calendar month prior to the
commencement of such immediately preceding year and the last full calendar month
in such immediately preceding year. (If the CPI-U is at any time no longer
published, then another index reasonably selected by DHI shall be substituted
for the CPI-U.) The monthly fee shall be due and payable in advance, on or
before the first day of the month to which it relates.
In addition to the foregoing fee, System One shall pay the following
expenses reasonably incurred by any employees of DHI who travel at the request
of System One (other than to the premises leased by System One pursuant to the
Lease) in connection with the performance by DHI of its services under this
Agreement: economy class, round trip air fare or its equivalent; first class,
single occupancy hotel or motel accommodations; reasonable out-of-pocket meal
expenses; and reasonable out-of-pocket local transportation expenses for taxi
and/or automobile rental service. System One shall reimburse DHI for any such
expenses within 30 days after receipt of a correct invoice therefor. DHI may
submit an invoice at any time for any part or all of such fees to the extent
the services to be provided for such fees have been rendered. If an invoice is
deemed incorrect, System One must notify DHI within five working days of
receipt; otherwise, such invoice shall be deemed correct.
7. Termination. This Agreement may be terminated as follows:
(a) This Agreement may be terminated by DHI on any anniversary
of this Agreement (but not earlier than the fourth anniversary) in the
event DHI no longer uses the DHI Systems Software in the ordinary
course of its business or no longer provides technical support services
for the DHI Systems Software to customers.
(b) This Agreement may be terminated by System One on any
anniversary of this Agreement (but not earlier than the second
anniversary) for any reason whatever, provided that at least ninety
(90) days prior written notice is given to DHI.
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
5
<PAGE> 6
(c) This Agreement may be terminated by DHI on any
anniversary of this Agreement (but not earlier than the seventh
anniversary) for any reason whatever, provided that at least 180 days
prior written notice is given to System One.
(d) This Agreement may be terminated by either party upon
material default by the other party in the performance of its
obligations and failure of such other party to correct such default
within 15 days after written notice thereof (or if such default, other
than a default in the payment of money owed, cannot reasonably be
corrected within such 15 days, then failure of such other party to
commence corrective steps within such 15 day period and diligently to
pursue such steps to completion).
8. Additional Services. Upon written request from System One from time
to time, but subject to specific agreement by DHI in each instance, DHI shall
use commercially reasonable efforts to perform additional technical support
services which System One may reasonably need in addition to those otherwise
provided for in this Agreement. Additional technical support services not
otherwise covered by this Agreement would include, without limitation, the
following: (a) installation of the Software on equipment of Customers, (b) any
modifications to the Software requested by System One except to correct errors
pursuant to Section 2(a) herein, (c) application program support services except
with respect to the DHI Financial Software Modules and the DHI FTI Software, and
(d) network control transition services. System One agrees, within 30 days after
receipt of an invoice, to pay reasonable charges for such additional services,
which shall be based on DHI's then standard rates for personnel, computer usage,
travel and other costs.
9. Cooperation. System One agrees to cooperate with DHI in the
performance by DHI of its obligations under this Agreement.
10. Ownership. Title to, ownership of and all proprietary rights in the
Software and the Documentation are reserved to and will at all times remain with
DHI, and System One acknowledges that, except for the License provided for and
defined in the License Agreement, it has and will have no right or interest
therein regardless of whether System One, its employees or agents, may have
contributed to the conception or development thereof or paid DHI for its
services in connection therewith. System One shall from time to time take any
further action and execute and deliver any further instruments, including
documents of assignment or acknowledgment, that DHI may reasonably request in
establishing and perfecting its ownership rights in the Software and the
Documentation.
11. Protection of Proprietary Rights. System One recognizes and agrees
that the Software and the Documentation: (a) are considered and will be
considered by DHI to contain trade secrets,
6
<PAGE> 7
(b) are and will be furnished to System One in confidence, and (c) contain and
will contain proprietary and confidential information of DHI. The placement of a
copyright notice on any portion of the Software or Documentation will not be
construed to mean that such portion has been published and will not derogate
from any claim that such portion is a trade secret or contains proprietary and
confidential information. System One agrees to hold the Software and
Documentation in confidence and to take all reasonable precautions to safeguard
the confidentiality thereof. System One shall keep all copyright notices and
proprietary legends on the Software and Documentation and all copies thereof.
System One will take appropriate action by instruction, agreement or
otherwise, with any persons permitted access to any portion of the Software or
Documentation, including, without limitation, any sublicensees, to inform them
of the trade secret, proprietary and confidential nature of the Software and
Documentation, and to obtain their compliance with the terms of this Section.
System One will be liable for noncompliance by agents and sublicensees to the
same extent as it would be liable for noncompliance by its employees.
System One will insure, prior to disposing of any media, that any
materials relating to the Software or Documentation have been erased or
otherwise destroyed.
The provisions of this Section shall survive any termination of this
Agreement or the License granted under the License Agreement. Notwithstanding
anything in this Section to the contrary, System One shall have no obligation of
confidentiality with respect to any portion of the Software or the Documentation
which (i) is now, or hereafter becomes, through no act or failure to act on the
part of System One, generally known or available to the public, or (ii) is
required to be disclosed by System One by judicial action after notice to DHI
and after all reasonably available legal remedies to maintain the
confidentiality thereof have been exhausted.
12. DHI Representatives. DHI agrees that it shall from time to time
designate one or more individuals (but not more than three (3)) who will be the
primary contacts on behalf of DHI with System One.
13. System One Representatives. System One agrees that it shall from
time to time designate qualified individual(s) (but not more than three (3)) who
will have the responsibilities herein described. All communications on behalf
of System One with respect to this Agreement and the interaction of DHI and
System One with respect thereto shall be made by such designated individual(s).
The qualified individual(s) designated by System One must have the skills
required to respond to operational questions from System One data processing
customers in the use of the Software, and System One agrees to have such
individual(s) respond to such questions and
7
<PAGE> 8
to work out the underlying problems to the extent possible for the purpose of
minimizing the involvement otherwise required by DHI.
14. Patent and Copyright Indemnity. DHI will, at its expense, defend
System One against any claim made against System One during the period of time
beginning eighteen (18) months after the date of this Agreement (which is when
the License Agreement no longer applies to infringement claims) and ending on
the date of the termination of the term of this Agreement with respect to any
portion of the Software (i.e., the DHI Software, the DHI Financial Software
Modules, or the DHI FTI Software), in which claim it is alleged that such
portion of the Software as used within the scope of the License granted to
System One pursuant to the License Agreement infringes a U. S. patent,
copyright, or trade secret belonging to any third party, and DHI will pay all
costs, damages, and attorneys' fees that a court finally awards against System
One as a result of such claim provided that:
(a) System One promptly notifies DHI in writing of any such
claim, and
(b) System One allows DHI to control, and fully cooperates
with DHI in, the defense and all related settlement negotiations.
If such a claim of infringement has occurred, or in DHI's judgment is likely to
occur, System One agrees to allow DHI, at DHI's option and expense, to procure
the right for System One to continue using the potentially infringing Software
or to replace or modify it so that it becomes non-infringing. If none of the
foregoing alternatives is available on terms which are reasonable in DHI's
judgment, then DHI shall have the right to terminate the license of the
potentially infringing Software upon 60 days prior written notice to System One,
in which event DHI shall refund to System One the amount of the fees paid by
System One to DHI pursuant to this Agreement during the two (2) year period
prior to the date on which such claim against System One was made (or a
proportionately smaller amount if only part of the Software is potentially
infringing). Notwithstanding anything herein to the contrary, DHI shall have no
liability for any infringement claim which results in any way from any
modification or alteration of the Software or any part thereof which is not made
by DHI pursuant to this Agreement.
This Section states DHI's entire obligation to System One, regarding
infringement or the like.
15. Taxes. System one agrees to pay when due (or reimburse DHI for) all
sales, use and other taxes, including penalties and interest (but only to the
extent such penalties and interest are not attributable to any delay by DHI in
invoicing System One for such sales, use and other taxes), which DHI is at any
time obligated to pay or collect in connection with this Agreement or
8
<PAGE> 9
the License of the Software or the other transactions contemplated by this
Agreement, except any taxes based on DHI's net income.
16. Disclaimer of Warranties. DHI MAKES NO REPRESENTATIONS OR
WARRANTIES UNDER THIS AGREEMENT WITH RESPECT TO THE SOFTWARE OR, EXCEPT AS SET
FORTH HEREIN, WITH RESPECT TO THE SERVICES TO BE RENDERED BY DHI HEREUNDER,
WHETHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO THE IMPLIED WARRANTIES
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
17. Limitation of Damages; Exclusions of Damages. THE TOTAL LIABILITY
OF DHI FOR ANY AND ALL CLAIMS IN ANY WAY RELATED TO THIS AGREEMENT, AND ANY
PERFORMANCE OR NONPERFORMANCE BY DHI HEREUNDER, REGARDLESS OF THE FORM OF
ACTION, WHETHER IN CONTRACT OR IN TORT, INCLUDING NEGLIGENCE, SHALL IN NO EVENT
EXCEED THE TOTAL FEES AND CHARGES PAID TO DHI BY SYSTEM ONE WITHIN THE SIX MONTH
PERIOD PRIOR TO THE ASSERTION OF ANY SUCH CLAIM. THIS LIMITATION OF LIABILITY
WILL NOT APPLY TO CLAIMS UNDER SECTION 14 HEREIN RELATED TO PATENT AND COPYRIGHT
INDEMNITY.
NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO EVENT
SHALL DHI BE LIABLE TO SYSTEM ONE OR TO ANY SUBLICENSEE OR TO ANY OTHER THIRD
PARTY FOR ANY LOST PROFITS, LOST SAVINGS OR OTHER CONSEQUENTIAL DAMAGES, OR FOR
ANY INCIDENTAL OR SPECIAL DAMAGES, EVEN IF DHI HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES, OR FOR ANY CLAIM BY SYSTEM ONE BASED UPON ANY CLAIM
BY ANY OTHER PARTY AGAINST SYSTEM ONE.
18. Third Party Claims. System One agrees to indemnify and hold DHI
harmless from any and all claims, losses and damages asserted against DHI by any
employee or agent of System One, or by any patient of System One's customers, or
any affiliate, or any other person or entity who may be affected by System One's
or System One's customers' use of the Software, except for claims in which it is
alleged that the Software or Documentation infringe a U.S. patent, copyright or
trade secret belonging to any third party.
19. Delay in Performance. DHI shall not be responsible for any failure
to perform due to causes beyond DHI's control, including, but not limited to,
labor disputes, strikes, acts of God, fire, storm, water, delays in
transportation, power failure, communication line failure and governmental
actions. Any delay beyond DHI's control shall be excused and the period of
performance extended as may be necessary to enable DHI to perform after the
cause of delay has been removed.
20. Confidential Information of System One. DHI agrees to take all
reasonable steps to assure that it does not use or copy System One's
confidential information unless such use or copying is approved by, and is for
the benefit of, System One.
9
<PAGE> 10
Each party hereto will take all reasonable steps to assure that the
confidential information of the other party shall not be disclosed by it to
others, in whole or in part, without the prior written permission of the other
party. Such prohibition on disclosures shall not apply to disclosures by either
party to its employees and agents, provided such disclosures are reasonably
necessary to the actions to be taken by such party pursuant to this Agreement,
and provided further that such party takes all reasonable steps to ensure that
such information is not disclosed by such employees in contravention of this
Agreement. The obligations of System One in this Section 20 are in addition to
the obligations of System One under Section 11 herein relating to the protection
of proprietary rights.
21. Notices. All notices given under this Agreement shall be in writing
and shall be given by personal delivery, United States mail, or United States
express mail or other established express delivery service (such as Federal
Express), postage or delivery charge prepaid, addressed to the parties as
follows:
DHI: DHI Computing Service, Inc.
Attention: Chief Executive Officer
1525 West 820 North
Provo, Utah 84601
System One: Croghan & Associates, Inc.
Attention: Contract Administrator
2900 Center Green Court South
Boulder, CO 80301
Notice shall be considered received on the date of actual receipt, in the event
of personal delivery, or on the date of first attempted delivery, in the event
of United States mail or United States express mail or other established express
delivery service. Either party, upon notice to the other, may change the address
for future notices, as long as the changed address is one to which notices may
be delivered in the manner contemplated by this section.
22. Governing Law; Limitation on Actions. This Agreement is entered
into in the State of Utah and in all respects shall be construed, interpreted,
and governed by the laws of the State of Utah, without regard to conflicts of
law principles. No claim or action arising out of this Agreement may be asserted
by either party more than two years after the cause of action has arisen.
23. Entire Agreement; Interpretation; Modification. This Agreement,
together with its exhibits, which exhibits are part of this Agreement, sets
forth the entire agreement and understanding of the parties with respect to
subject matter hereof, and supersedes all prior agreements, written or oral,
between the parties. The provisions of this Agreement shall be construed as a
whole and not strictly for or against either party. The section
10
<PAGE> 11
headings in this Agreement are included only for purposes of convenient
reference, and they shall not affect the interpretation of this Agreement. This
Agreement may not be amended or modified except by a written instrument signed
by both parties.
24. Late Payments. If any payment owed by System One to DHI is not paid
when due, DHI, at its option, may charge System One interest on such past due
amount at the rate of one and one-half percent (1.5%) per month, or the maximum
rate permitted by applicable law, whichever is less.
25. Effect of Invalid or Unenforceable Provision. This Agreement, to
the extent possible, shall be construed so as to give validity to all the
provisions hereof. Any provision of this Agreement found to be invalid or
unenforceable shall not affect the validity or enforceability of any other
provision of this Agreement, and each provision of this Agreement shall be
enforced to the fullest extent permitted by applicable law. However, if removal
of a provision would frustrate the contractual intent of the parties, such
removal shall be cause for termination.
26. Arbitration. If a dispute cannot be resolved to the parties' mutual
satisfaction, the dispute shall be resolved through binding arbitration. It is
the intent of the parties that the arbitration be structured in such a way as to
minimize costs and delay. The arbitration shall be conducted pursuant to the
rules of commercial arbitration of the American Arbitration Association (AAA),
with the following stipulations or exceptions:
(a) The arbitration hearing shall be held before a single
arbitrator if DHI and System One agree upon a single arbitrator. If DHI
and System One cannot agree upon a single arbitrator, then each shall
select an arbitrator, and those arbitrators shall select a third
arbitrator. If they are unable to agree upon a third arbitrator within
15 days, the third arbitrator shall be selected as provided in the AAA
rules. Each arbitrator shall have knowledge of healthcare electronic
data processing practices.
(b) Each party's presentation at the arbitration hearing shall
be limited to 14 hours, and the hearing shall be completed within ten
(10) business days.
(c) The arbitration decision shall be rendered not later than
thirty (30) days after the final day of the hearing and shall be
judicially enforceable, non-appealable and binding.
(d) Summaries of any expert testimony, along with copies of
all documents to be submitted as exhibits, shall be exchanged at least
ten (10) business days before arbitration under procedures set up by
the arbitrator(s).
11
<PAGE> 12
(e) Except as otherwise specified herein, there shall be no
discovery or dispositive motion practice except as may be permitted by
the arbitrator(s), who may authorize only such discovery as is shown to
be necessary to insure a fair hearing. No discovery or motions
permitted by the arbitrators shall in any way alter the time limits
specified herein.
(f) Arbitration costs, arbitrators' fees, and attorneys' fees
and costs shall be allocated between the parties by the arbitrator(s).
(g) The arbitration shall occur in Phoenix, Arizona.
(h) In no event may the arbitrator(s) award punitive damages.
27. Binding Effect; Condition on Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties, their successors and
assigns. System One may not assign its rights under this Agreement unless, in
conjunction therewith, the assignee agrees for the benefit of DHI to assume
System One's obligations under this Agreement, including, without limitation,
System One's obligations under Section 11 herein relating to the protection of
proprietary rights. No such assignment shall release System One of its
obligations under this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement.
DHI COMPUTING SERVICE, INC.,
a Utah corporation
By: /s/ [ILLEGIBLE]
--------------------------------------
Its: [ILLEGIBLE]
--------------------------------------
CROGHAN & ASSOCIATES, INC.,
a Colorado corporation
By: /s/ Raymond D. Croghan
--------------------------------------
Its: President & CEO
--------------------------------------
12
<PAGE> 1
EXHIBIT 10.14
[EPIC letterhead]
5301 Tokay Boulevard, Madison, WI 53711
STANDARD MULTI-DIRECTORY LICENSE AND
SUPPORT AGREEMENT
This Agreement is made between Epic Systems Corporation, a Wisconsin corporation
which is located at 5301 Tokay Boulevard, Madison, Wisconsin 53711 ("Epic"); and
the TriZetto Group, a Delaware corporation having its principal place of
business at 567 San Nicholas Drive, Ste. 360, Newport Beach, CA 92660 ("You").
Epic and You agree as follows:
1. DEFINITIONS
The definitions provided on Appendix A shall apply to this Agreement.
2. LICENSE
a. GENERAL. Epic hereby grants You a non-exclusive license to use
the Program Property during the term of this Agreement,
subject to the limitations set forth in the terms and
conditions of this Agreement and the Exhibits hereto.
b. LIMITATIONS. This license is limited as follows: (i) You are
licensed to use the licensed Program Property and third party
software in connection with the provisions of [*] only; (ii)
You are not permitted to sell or grant sublicenses; (iii) You
will not permit [*] to exceed the [*] for any Item of Program
Property without first obtaining an upgraded license pursuant
to Section 6(c); (iv) You will not offer to sell or sell [*]
which utilize the Program Property to entities or
organizations that employ, directly or indirectly, [*] or more
physicians without the express written consent of Epic; and
(v) You will use the Program Property in accordance with other
restrictions in this Agreement. The restriction in (iv) above
shall not apply to existing [*] who currently have actual
patient data processed utilizing the Program Property and who
become customers of Yours within [*] of the date of this
Agreement.
c. OWNERSHIP. The grant of this license does not confer on You
any right of ownership to any form of the Program
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
-1-
<PAGE> 2
Property (whether Code or Documentation). All Program Property
remains the property of Epic.
d. SUBLICENSE FOR OPERATING ENVIRONMENT SOFTWARE. You agree to
obtain a sublicense to and the maintenance for the Operating
Environment software from [*] used in conjunction with the
Program Property through Epic at Epic's then standard fees for
such sublicense and maintenance. Epic believes that its
standard fees for such sublicenses and maintenance are
competitive with the fees for such sublicenses and maintenance
charged by [*]. The terms of the [*] attached hereto applies
and sets forth the terms of Your sublicense to the Operating
Environment Software. [*] prices are based on [*] being
licensed. The [*] may not be readily ascertainable until after
the installation process has begun. IF "TBD" is listed for the
[*] Operating Environment software on Exhibit 1(a), then the
number of [*] and associated license and maintenance fees will
be determined during the installation process and agreed to by
Change Order. To the extent legally possible, Epic will
transfer to You [*] issued by Epic and [*]. You will be
responsible for any charges associated with such transfers.
e. SUBLICENSE FOR OTHER THIRD PARTY SOFTWARE AND DATA. Except
where the price is specified as "TBD" on Exhibit 1(a), You are
granted a sublicense to the Other Third Party Software and
Data and You agree to pay the fees specified on Exhibit 1(a)
with respect to such items. The terms of the following addenda
attached hereto apply and set forth the terms of Your
sublicense to these items: for the [*] from [*]; for the [*]
software, the [*]; for the [*], the [*]; for the images from
the [*], the [*]; and for the [*], the [*]. Your use of the
Other Third Party Software and Data is also limited as set
forth on Exhibit 1(a) under "Additional Billing Information"
for each such item. In addition, Your license to use the Other
Third Party Software and Data is limited solely to use in
conjunction with Your licensed use of the Program Property. IF
"TBD" is listed for any of the Other Third Party Software and
Data, then such item may be added by Change Order during the
installation process. Once added, such item will be licensed
as if it were included under the Additional Billing
Information in Exhibit l(a) with the applicable fees and
limitations stated in the Change Order. If You are licensing
the [*] in this Agreement, You may obtain a license to future
versions and/or additional copies of the [*] by Change Order.
Once added, such item will be licensed as if it were included
under the Additional Billing Information in Exhibit 1(a) with
the applicable fees and limitations stated in the Change
Order. The licensing requirements for the [*] are subject to
change with future versions; such changes will be reflected in
the Change Order. [*]
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
-2-
<PAGE> 3
[*]. You will be responsible for any charges associated with
such transfers.
f. ADDITION OF INTERFACES. The parties may determine that one or
more interfaces should be added as Program Property under this
Agreement. Interfaces may be added to this Agreement by an
amendment or by a Change Order executed by both parties. Upon
such execution, the specified interfaces will become Program
Property licensed under this Agreement with the additional
terms specified in the Change Order or amendment. [*]
3. DELIVERY
a. GENERAL. Items of Program Property listed an Exhibit 1(a) as
of the date of this Agreement are Items You are licensing
pursuant to a license [*]. These Items have been delivered to
You on the date of this Agreement. For any new Items of
Program Property, Epic will deliver the Code to You
substantially in accordance with the Implementation Schedule.
Epic will also deliver to You any Documentation published and
generally released by Epic to its customers for the Items of
Program Property licensed to You.
b. RESPONSIBILITY FOR SITE. You will be responsible for providing
proper hardware and establishing a suitable site for the
hardware, assuring proper operating methods and adequate
backup procedures, and implementing sufficient procedures and
checks to assure data security and accuracy in both input and
output and in the event of the need for restart or recovery
from malfunction.
c. VIRUSES AND TIME LOCKS. Except as provided in Section 4(g),
Epic agrees that Epic will not intentionally insert any
instructions, routines, devices key-locks, time-bombs or the
like into the Program Property to: (i) disrupt Your use of an
Item of Program Property, your network or Your other software
used with the Program Property or to which the Program
Property is linked; or (ii) destroy, damage or make data
inaccessible (except for file and purge routines necessary for
the routine functioning of the Program Property). Before
delivering any workstation Program Property to You, Epic will
first check the workstation Program Property code for viruses
using recently-released, commercially-available,
virus-detection software to the extent such software is
reasonably available to Epic. Epic believes there is currently
no software available for detecting viruses in [*]. Epic makes
no representations concerning viruses in any data or files
transmitted over the Internet, including, but not limited to
email and documents that are included as attachments to email.
4. INSTALLATION, TRAINING AND MARKETING
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
-3-
<PAGE> 4
a. GENERAL. Epic will assist You in installing and implementing
the Program Property on Your Designated Platform and will
assist in training Your employees, all substantially in
accordance with the Implementation Schedule. The
Implementation Schedule will outline the expected schedule for
the implementation of the Program Property on Your Designated
Platform. You are responsible for many of the tasks that will
be outlined in the Implementation Schedule. Therefore, the
timing of Your actual implementation of the Program Property
may vary.
b. TRAINING. Standard training courses utilize test data, test
items, standard screens, and other mock parameters for
training, while customized courses utilize Your screens, a
subset of Your items and data, and other parameters more
similar to Your actual operations. Additional fees are
chargeable for preparation time for customized courses.
c. PROJECT MANAGER. In order to facilitate communication, You
will designate an individual to serve as project manager to
coordinate with Epic concerning installation and training
services.
d. RATES. Except as provided in Section 4(j), all installation,
implementation and training services provided by Epic to You
and Your Affiliates shall be at Epic's standard rate for such
services. Such rates are listed on Exhibit 4 and will not
increase during the [*] of this Agreement and will not be
increased more than once during each subsequent [*].
e. ACCESS TO SERVER. You will provide Epic with access to the
server(s) on which the Program Property is installed through a
dedicated, leased data circuit, ISDN line, or comparable
technology as agreed to by Epic, with a minimum guaranteed
bandwidth of at least 56 Kilobits per second between Epic and
You. The connection between Epic and the server(s) on which
the Program Property is installed will have a maximum latency
of 150 milliseconds. Collectively, the access technology
requirement and the connection requirement are the "Minimum
Access Requirements." Access may not be through analog modem
or the Internet, except that, if approved in advance in
writing by Epic, access may be accomplished through the use of
[*] which may utilize Internet infrastructure in the creation
of a secure connection. You will be responsible for all
necessary hardware and software and line costs on both ends,
including configuration. Epic may revise the Minimum Access
Requirements from time to time to ensure that access is still
adequate given changes in technology. Epic will notify You of
any such revisions to the Minimum Access Requirements. You
agree to upgrade the access technology and/or connection, at
Your sole cost, to meet the Minimum Access Requirements within
six (6) months of written notice from Epic to You of any such
change. You also grant to Epic the right of access to the
Program Property as reasonably needed by Epic for support and
to monitor and maintain efficient Program Property operations.
After the First Live Use of an Item of Program Property, it
shall be Your responsibility to grant access to Your server(s)
containing the Program Property or Your data
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
-4-
<PAGE> 5
by Epic employees only as follows: Whenever access is
required, You will be responsible for verifying that the
applicable Epic employee may access Your server(s). Upon such
verification, You will provide the Epic employee with a
temporary password for use in accessing the server(s). After
consulting with Epic, You will reasonably determine the date
and time that the password will expire. In general, such
expiration should be scheduled to occur shortly after the
scheduled date and time of completion of the work requiring
such access.
f. OPERATING ENVIRONMENT, CHRONICLES AND SYSTEMS TRAINING AND
ASSISTANCE. Epic will provide You training and assistance
concerning the Operating Environment software and Epic's
Chronicles database system as provided in the Implementation
Schedule (including without limitation with respect to
journaling and typical backup procedures) at Epic's standard
hourly rate for such services. Such rates are listed on
Exhibit 4 and will not increase during the first [*] months of
this Agreement. Implementation and training assistance
concerning Your hardware and operating system should be
provided by the hardware and/or operating system vendor that
You select. Other training and assistance concerning Your
hardware and operating system or any assistance concerning
programming code developed by You to work in conjunction with
the Program Property or other services not directly related to
Epic's obligations hereunder will be provided as Epic
personnel are available at Epic's standard hourly rates for
such services. Such rates are listed on Exhibit 4 and will not
increase during the first twelve (12) months of this
Agreement.
g. [*]
h. [*]
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
-5-
<PAGE> 6
(i) [*]
(ii) [*]
(iii) End User Training. The quality of training for
Affiliate End Users will play an important role in
the success of Your Affiliates' implementations.
Therefore, You and Epic agree that only Epic
certified trainers will be used to train Your Service
Bureau Affiliate End-Users.
i. MAINTAINING AN ACCEPTABLE CUSTOMER SATISFACTION RATING.
(i) General. You agree to maintain an "Acceptable
Customer Satisfaction Rating" for Your Service Bureau
Affiliates.
(ii) You will be considered to have maintained an
"Acceptable Customer Satisfaction Rating" if the
average of the Customer Satisfaction Ratings for Your
Service Bureau Affiliates is [*] or greater for each
twelve (12) month period commencing May 1.
(iii) Customer Satisfaction Rating. "Customer Satisfaction
Rating" means the average of the ratings by
representatives of Your Service Bureau Affiliates of
Your performance in marketing or providing services
to that Affiliate. Epic may provide customer
satisfaction surveys to representatives of Your
Service Bureau Affiliates. The surveys will measure
the Affiliates' satisfaction in various categories.
Responses to questions will be on the following
scale: [*]
(iv) You will have each of Your Service Bureau Affiliates
rate Your performance on the following schedule: [*]
after Date of First Live Use; [*] after Date of First
Live Use; and [*] after Date of First Live Use; and
[*] per year thereafter.
j. MARKETING ASSISTANCE. Epic will provide You with marketing
assistance, at Your expense, as set forth on Exhibit 4(j).
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
-6-
<PAGE> 7
5. CUSTOMIZATION
a. GENERAL. You may request that Epic customize part of the
Program Property at any time more than three months after Your
First Live Use of the Program Property by using a Change
Order. Epic will furnish You with a written price quotation
for such customization on the Change Order. Your acceptance of
the Change Order within twenty (20) days will constitute an
agreement to pay the price specified therein. Payments for any
fixed-price customization will be [*]. Work on other
customizations will be invoiced as incurred.
b. RATES. Custom programming hourly rates will vary depending on
the services to be performed and the current rates are listed
on Exhibit 4 attached hereto. Such rates will not increase
during the first [*] of this Agreement and will not be
increased more than [*] during each subsequent [*]. Additional
charges apply for retrofits and rush Change Orders as
specified in the Change Order.
c. OWNERSHIP. Epic shall own all customized Code and customized
Documentation that Epic develops, and all copyrights, trade
secrets and other intellectual property rights with respect to
any customized Code or customized Documentation. [*]
d. WAIVER OF LICENSE FEE FOR [*] AND [*].
(i) [*]. If [*] is listed as an Item of Program Property
on Exhibit 1(a), the license fees for the [*] Item
are waived and You agree to provide to Epic and
Epic's [*] all report forms created using or for use
with [*] (except as provided below). Epic may make
such report formats available to any of its other
customers for their use either directly or through
the [*]. By licensing [*] and complying with this
provision, You will also have access to the reports
submitted by others to the [*] as they become
available. The [*] will be available on Epic's
customer website. You may designate report formats
that could give Your competitors a significant
competitive advantage as proprietary ("Proprietary
Report Formats") through a procedure to be determined
by Epic. You agree that no more than [*] of Your
total report formats will be so designated. Your
Proprietary Report Formats will not be distributed by
Epic except with [*]. Except as otherwise agreed by
Epic in writing, You hereby waive any copyrights,
trade secret rights and other proprietary rights that
You may have with respect to any Report Formats that
You provide to Epic (except those that You designate
as Proprietary Reports) and to any Report Formats
that You submit to the [*]. If You do not provide
Epic with the report formats as required by this
Section 6(d)(i), such failure shall be a breach of
this Agreement and the notice and cure periods
provided in Section 18(c) shall apply. The remedy for
such breach shall be that, upon written notice to
You, Epic may terminate Your access to the [*] and
reinstate the waived license fee for [*]. Such
reinstated fee shall
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
-7-
<PAGE> 8
be due and payable by You to Epic immediately upon
such reinstatement. INITIAL HERE IF YOU AGREE TO THIS
FEE WAIVER PROVISION _________
(ii) [*]. If [*] is listed as an Item of Program Property
on Exhibit 1(a), the license fees for [*] are waived
and You agree to provide to Epic and [*] all [*]
created using or for use with the Program Property
(except as provided below). Epic may make such [*]
available to any of its other customers for their use
either directly or through the [*]. By licensing [*]
and complying with this provision, You will also have
access to the [*] submitted by others to the [*] as
it becomes available. The [*] will be available on
Epic's customer website. You may designate those
items of Your [*] that could give Your competitors a
significant competitive advantage as [*] through a
procedure to be determined by Epic. You agree that no
more than [*] will be so designated. Your [*] will
not be distributed by Epic except with Your [*] and
You are not required to submit it to the [*]. Except
as otherwise agreed by Epic in writing, You hereby
waive any copyrights, trade secret rights and other
proprietary rights that You may have with respect to
any [*] that You provide to Epic (except those that
You designate as Proprietary Reports) and to any [*]
that You submit to the [*]. If You do not provide
Epic with the [*] as required by this Section
6(b)(ii), such failure shall be a material breach of
this Agreement and the notice and cure periods
provided in Section 18(c) shall apply. However, the
remedy for such breach shall be that, upon written
notice to You, Epic may terminate Your access to the
[*] and reinstate the waived license fee for the [*].
Such reinstated fee shall be due and payable by You
to Epic immediately upon such reinstatement. INITIAL
HERE IF YOU AGREE TO THIS FEE WAIVER PROVISION
_________
(iii) DISCLAIMER AND WAIVER. YOU UNDERSTAND THAT REPORT
FORMATS, [*] AND ANY OTHER DATA, SOFTWARE OR OTHER
ITEMS MADE AVAILABLE THROUGH THE [*] ARE PROVIDED ON
AN "AS IS" BASIS, WITHOUT ANY WARRANTY OF ANY KIND
FROM EPIC OR ANY OTHER PARTY AND EPIC AND ALL
AUTHORS, CREATORS, DISTRIBUTORS AND OTHERS ASSOCIATED
IN ANY WAY WITH SUCH REPORT FORMATS, [*], DATA,
SOFTWARE OR OTHER ITEMS HEREBY DISCLAIM ANY
WARRANTIES WITH RESPECT THERETO, INCLUDING WITHOUT
LIMITATION ANY WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE. YOU HEREBY AGREE TO
WAIVE ANY CLAIMS YOU MAY HAVE AGAINST EPIC OR ANY
AUTHORS, CREATORS, DISTRIBUTORS OR OTHERS ASSOCIATED
WITH SUCH REPORT FORMATS, [*], DATA, SOFTWARE OR
OTHER ITEMS WITH RESPECT THERETO
e. RETROFITS. Customized Code will normally be made available to
You through Epic's standard Update release process unless
otherwise agreed to on the Change Order. Retrofits are
available only to the then current standard version of the
Program Property upon Epic's consent in the Change Order.
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
-8-
<PAGE> 9
6. PAYMENTS
a. SCHEDULE. For the license rights to the Program Property, You
will pay Epic the Total License Fee as described in Sections
6(b) through 6(i) inclusive, when you enter into this
Agreement.
b. LARGE CLINIC LICENSE FEE.
(i) General. You acknowledge and agree that the customers
that You intend to provide Service Bureau Services to
are ambulatory care clinics which employ fewer than
[*] ("Large Clinic").
(ii) Large Clinic Fee. As provided in Section 2(b)(ii)
above, You agree that you will not offer to sell or
sell Service Bureau Services that utilize the Program
Property to any customer which employs [*] without
the [*]. Should [*] agree to pay Epic a [*] to be
agreed to in advance by Epic and This provision shall
not apply to existing MedPartners Affiliates who
currently have actual patient data processed using
the Program Property and who become customers of
Yours.
c. INCREASING THE LICENSED VOLUME. Exhibit 1(a) limits Your use
of each Item of Program Property to the Licensed Volume. If
You wish to increase the Licensed Volume, You should notify
Epic. This increase will become effective upon receipt of Your
payment of the additional license fee due for the greater
Licensed Volume. [*]
d. FEE FOR ADDITIONAL DIRECTORIES. [*].
e. THIRD PARTY LICENSE FEES. [*].
f. OUT-OF-POCKET EXPENSES. All travel, telephone for computer
connections, messenger and shipping costs, media charges,
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
-9-
<PAGE> 10
and other out-of-pocket expenses sustained by Epic for
installation, maintenance, error-correction, consultation, or
instructions in the Program Property will be billed to You
separately as incurred, with payment due upon receipt of
invoice. Travel shall not be initiated by Epic without Your
prior written approval.
g. PAYMENT DATE; INTEREST. You will pay all funds due to Epic by
the later of: (i) 45 days after the invoice date; (ii) the
payment date specified in the invoice; or (iii) the date such
payment is due as otherwise specified in this Agreement. If
You owe Epic any balance after the date specified in the
preceding sentence, then such balance will accrue interest
until paid at the rate of the lesser of one percent (1%) per
month or the maximum rate allowed by law. All payments shall
be applied first to accrued and unpaid interest charges and
then to other amounts due to Epic under this Agreement, as
determined in Epic's sole discretion. You agree that if any
amounts that You owe to Epic remain unpaid more than sixty
(60) days after such amounts are due to Epic, Epic may, in its
sole discretion and with written notice to You, suspend the
performance of Epic's installation, training, customization
and/or maintenance services under this Agreement until such
amounts are paid in full. In addition, if You fail to make any
payment specified in this Agreement when due, You will have
Materially Breached this Agreement if such payment remains
unpaid for a period of sixty (60) days or more after written
notice of default from Epic to You.
h. PAYMENTS BEFORE FIRST LIVE USE. You agree that You will begin
First Live Use of each Item only if at such time there are no
amounts due to Epic under this Agreement that are unpaid and
You agree that Epic will not enable an Item of Program
Property for live, production use by You if You are not
current with Your payments to Epic.
i. MAINTENANCE FEE. [*]
7. MAINTENANCE
a. GENERAL. [*] The Maintenance Program has three components:
(1) Epic will provide You with consultation and assistance
concerning the Program Property by telephone as specified in
Section 7(b); (2) Epic will provide You with Updates as
provided in Section 7(c); and (3) Epic will use its best
efforts to correct any errors or defects in the Program
Property as provided in Section 7(d). [*]
b. CONSULTATION AND ASSISTANCE. Epic will provide consultation
and assistance to You by telephone concerning the operation of
the Program Property. Such consultation and assistance will be
available during and after Epic's
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
-10-
<PAGE> 11
regular business hours (24 hours per day, 7 days per week) as
provided in Exhibit 7 hereto.
c. UPDATES. Epic will make all Updates available to You. You are
responsible for the installation of all Updates.
d. ERROR CORRECTION.
(i) Epic will use its best efforts to correct or provide
a Reasonable Workaround for any Program Error. Epic
will use reasonable efforts to respond to requests
concerning error correction during the Maintenance
Program within the periods set forth in Exhibit 8.
(ii) Epic's responsibility with respect to any Non-Program
Property Error shall be limited to providing
assistance and advice to enable You to determine
appropriate remedial action to be taken by You or
others. Epic shall charge You for any associated
consulting time for any Non-Program Property Error at
Epic's rates listed in Exhibit 4 attached hereto.
Such rates will not increase during the first twelve
(12) months of this Agreement and will not be
increased more than once during each subsequent
twelve (12) month period.
e. MAINTENANCE REQUESTS. You will perform first line consultation
and assistance to Your Affiliates concerning the operation of
the Program Property. You will, from time to time during the
term hereof, designate one or more of Your employees, who
shall be trained, knowledgeable, and Certified by Epic in the
Program Property, to be responsible for contacting Epic
concerning requests for service under the Maintenance Program.
From time to time You may designate additional or replacement
employees for this purpose. Epic may charge You at its then
standard rates for any direct requests for Maintenance
Program services that are not made through these designated
employees.
f. MAINTENANCE PROGRAM.
(i) General. By execution of this Agreement, You have
also contracted for the Maintenance Program for each
Item of Program Property currently in use to process
actual patient data for production purposes. For
Items of Program Property included on Exhibit 1(a) as
of the date of this Agreement, the Maintenance
Program begins on the date of this Agreement. Epic
acknowledges that not all items in Exhibit 1(a) are
in use to process actual patient data for production
purposes, and that during the first year of this
Agreement, the Items of Program Property subject to
the Maintenance Program will be adjusted quarterly,
upward or downward, to reflect the actual level of
usage of Each Item of Program Property by You. You
will provide Epic with reports regarding Your actual
level of use of Program Property each quarter. If
Your actual level of usage of any Licensed Volume of
any Item of Program Property drops below your highest
level of usage of that Item of Program Property, the
difference in volume shall be considered as [*].
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
-11-
<PAGE> 12
[*]
For Items of Program Property subsequently licensed
under this Agreement, the Maintenance Program for
such Item commences at the end of the Warranty Period
for that Item. [*]
(ii) [*]
(iii) Staying Current.
A. You will install and use: (1) the Current
Version of each Item of Program Property;
(2) the most current version of the
operating system supported by such version
for Your Designated Platform, and (3) the
most current version of the [*] software,
the SQL Module and, if applicable, the most
current version of the [*] Software and the
[*] supported by such version of the Program
Property for Your Designated Platform, all
subject to a transition period of [*] the
release of the newer version to You, and in
the case of Program Property set forth in
Exhibit l(a), no less than a [*] transition
period will be allowed for the Program
Property version currently being used to
process actual patient data, regardless of
version. If You are using the Superseded
Version of any Item of Program Property
during the [*] transition period, Epic's
obligations under this Section 7 concerning
the correction of any errors or defects in
the Superseded Version shall be limited
solely to the minimal maintenance necessary
to keep the Superseded Version operating in
the same manner that it had prior to the
release of the Current Version. Once the
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
-12-
<PAGE> 13
Current Version is released to You, Epic
will not provide any customization services
with respect to the Superseded Version. If
You do not remain current within the
transition periods as described above, you
have Materially Breached this Agreement.
B. If You are more than 90 days delinquent on
any payment due to Epic, You agree that Epic
may, in its sole discretion, suspend its
performance of the maintenance services set
forth in Sections 7(a) - (d) until such time
as You have become current in Your payments
to Epic.
(v) Epic agrees that it will make the Maintenance Program
available for all Items of Program Property for at
least five years after the date of this Agreement.
Thereafter, Epic may terminate the Maintenance
Program for any Item a by providing You with notice
of such termination at least one year prior to the
effective date of the termination.
(vi) [*]
g. THIRD PARTY SOFTWARE MAINTENANCE. The maintenance programs for
the [*] software, the [*] module and the [*] software begin
[*] after delivery of such software to You. The maintenance
programs for the [*] software and the [*] software and data
begin when You first begin the Maintenance Program for any
Program Property. You will contact Epic with respect to any
consultation or assistance requests relating to any of this
third-party software. During the maintenance period for any
of this third-party software, Epic will respond to such
inquiries by either consulting with and assisting You
directly, if possible, or by contacting the owners/publishers
of the applicable third party software to obtain any
additional consultation or assistance that is necessary. You
must participate in the software maintenance programs for all
of this software during any period that You are participating
in the Maintenance Program.
8. WARRANTY
a. GENERAL. THERE IS NO WARRANTY FOR ITEMS OF PROGRAM PROPERTY
THAT ARE SET FORTH ON EXHIBIT 1(a) AS OF THE DATE OF THIS
AGREEMENT BECAUSE THE WARRANTY PERIOD FOR SUCH ITEMS OCCURRED
DURING THE TERM OF THE MEDPARTNERS' LICENSE AND HAS NOW
EXPIRED. For Items of Program Property subsequently licensed
under this Agreement, Epic warrants that if, during the
Warranty Period, You notify Epic (in the manner specified in
Section 20) that an Item of Program Property contains a
Substantive Program Error, and such notice specifically refers
to this Section and describes each Substantive Program Error,
then Epic will either correct such Substantive Program Error
or provide a Reasonable Workaround for such Substantive
Program Error as provided in Section 8(b). Epic also will use
its best efforts to correct
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
-13-
<PAGE> 14
any Program Errors other than Substantive Program Errors that
You report to Epic during the Warranty Period.
b. CURE PERIODS. Epic shall have an initial cure period of
forty-five days after the end of the Warranty Period, if any,
to correct or provide a Reasonable Workaround for any
Substantive Program Error that is properly and timely reported
to Epic. You shall have until [*] after the [*] period to
notify Epic of either: (i) any remaining Substantive Program
Errors in such Item which You properly and timely reported to
Epic; or (ii) any new Substantive Program Errors in such Item
arising out of a correction or Reasonable Workaround completed
during the [*] period. Such notice shall be provided in the
manner specified in Section 20, shall specifically refer to
this Section and shall describe each Substantive Program
Error. Epic shall then have an additional cure period of [*]
after such notification to correct or provide a Reasonable
Workaround for any Substantive Program Errors.
c. RESPONSES TO WARRANTY SERVICE REQUESTS. Epic will use
reasonable efforts to respond to requests for warranty service
within the periods set forth in Exhibit 8.
d. CUSTOMIZED CODE. If You select the fixed price and warranty
option on the applicable Change Order, Epic also provides a
warranty with respect to Substantive Program Errors in
customized code provided under that Change Order. Such
warranty shall have the same provisions as Sections 8(a) and
8(b), except that the warranty period shall be the thirty-day
period after delivery of such customized code to You.
e. ACKNOWLEDGMENT. You acknowledge that the Program Property was
designed to operate in a certain manner to produce a defined
result as described in the Documentation for the Program
Property and if You would like the Program Property to operate
in a different manner or to achieve a different result, such
differences do not represent Program Errors or design defects.
You understand that Epic does not warrant that the Program
Property is free from error, or that the Program Property will
always run in an uninterrupted fashion, and that, due to the
complex nature of computer software, certain errors may be
virtually impossible to reproduce or correct.
f. CORRECTION OF PROGRAM ERRORS AFTER WARRANTY PERIOD. After the
Warranty Period or if there is no Warranty Period for an Item
(i.e., for those Items of Program Property set forth on
Exhibit l(a) as of the date of this Agreement) the correction
of Program Errors (other than those for which You properly and
timely notified Epic pursuant to Sections 8(a) and (b)) will
be governed by the terms of the Maintenance Program as
provided in Section 7 rather than the warranty specified in
this Section 8.
g. LIMITATIONS. In no event shall Epic bear any responsibility
for any errors or damages caused by or resulting from defects
in the hardware, input errors, changes to the Program Property
made by You, or combinations of the Program Property with
software not provided by Epic. Any modifications of the
Program Property by anyone other than Epic shall relieve Epic
of any and all obligations under this Section 8.
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
-14-
<PAGE> 15
h. EXCLUSIVE REMEDY. Your sole and exclusive remedy for a breach
of any warranty under Sections 8(a), (b) and (d) or for a
rejection under Section 9(b) in which the Substantive Program
Error has not been cured shall be to terminate Your license to
that Item (or that customized Code) by so notifying Epic in
the manner provided in Section 20 within thirty days after the
last cure period for that Item. Upon such termination, You
will receive a refund of the entire license fee You paid to
Epic with respect to such Item.
i. YEAR 2000 WARRANTY. Epic hereby warrants that the Program
Property licensed under the Agreement will process dates and
date-related data without any material error arising from the
transition to the year 2000 or the use of dates beyond
December 31, 1999, provided that the dates or date-related
data are properly entered by You and Your end users in
accordance with Documentation provided by Epic ("Year 2000
Program Error"). For such purposes, processing of data means
any calculating, comparing or sequencing of dates or
date-related data (including but not limited to date data
century recognition, calculations that accommodate same
century and multi-century formulas and date values) to the
extent the Program Property can perform such operations with
the applicable dates or date-related data for other dates
prior to January 1, 2000. You will notify Epic in writing as
provided in Section 20 of the Agreement concerning any Year
2000 Program Error and will specifically refer to this Section
8(i) of this Amendment or state that You are making a Year
2000 warranty claim. Epic shall have a cure period of thirty
(30) days after the receipt of the notice from You to correct
any reported Year 2000 Program Errors for which it has been
properly notified. If You have made any changes to the source
Code of the Program Property, Epic shall have no obligation to
retrofit any release that corrects a Year 2000 Program Error
to work with such changes. The warranty provided under this
Section 8(i) shall expire on January 1, 2001.
j. NO OTHER WARRANTY. THE ABOVE EXPRESS LIMITED WARRANTY IS
EXCLUSIVE AND ANY AND ALL OTHER WARRANTIES, WHETHER EXPRESSED
OR IMPLIED, ARE HEREBY DISCLAIMED, INCLUDING WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. You
acknowledge that no employee of Epic or any other party is
authorized to make any representations or warranty not in this
Agreement.
9. TESTING AND ACCEPTANCE
a. GENERAL. As is the case with very complex computer software,
the Program Property is likely to contain some errors. Both
Epic and You must test for errors both in the Program Property
as delivered and in any Updates. You are responsible for all
final testing of the Program Property, including any
customized Code. You should also instruct Your employees and
End Users using the Program Property to be vigilant in
identifying Program Errors and in reporting any Program Errors
detected to Epic both during the Warranty Period and
thereafter. Any procedures, rules or guidelines for medical
treatment incorporated into or provided with EpicCare or any
other Items of the Program
-15-
<PAGE> 16
Property are provided as examples only, and You must test and
validate that any such procedures, rules, or guidelines are
both medically correct and in accordance with Your
requirements and procedures.
b. REJECTION. Except for Items of Program Property set forth on
Exhibit 1(a) as of the date of this Agreement (which are
irrevocably accepted by You on the date of this Agreement),
You may reject any Item of Program Property, but only if it
contains a Substantive Program Error, by giving Epic explicit
written notice of such rejection before the earlier of the end
of the Warranty Period for that Item of Program Property or
fifteen months after the date the Code for that Item is
delivered to You. Any notice of rejection must be provided to
Epic in accordance with Section 20, contain a specific
reference to this Section 9(b), and describe each Substantive
Program Error for which You are rejecting the Program
Property. The same cure periods specified in Section 8(b)
shall also apply to a cure under this Section 9(b); however,
notice of a Substantive Program Error shall constitute a
rejection only if the notice specifically states that it is a
rejection and refers to this Section 9(b). If an Item of
Program Property is properly rejected and the Substantive
Program Error is not cured within the applicable cure periods,
then You shall have the remedy specified in Section 8(h) for a
refund of Your license fee. If an Item of Program Property is
not properly and timely rejected as specified in this Section
9(b), then that Item of Program Property shall be deemed to
have been irrevocably accepted by You. Upon actual or deemed
acceptance of an Item of Program Property, Epic shall continue
to provide maintenance services with respect to any Program
Errors as provided in Section 7 during the term of the
Maintenance Program.
10. LIMITATIONS OF LIABILITY
a. GENERAL. YOU AGREE THAT NEITHER PARTY WILL BE LIABLE TO THE
OTHER FOR ANY INCIDENTAL, SPECIAL, OR CONSEQUENTIAL DAMAGES OR
LOST PROFITS OR REVENUES RESULTING FROM OR IN ANY WAY RELATED
TO THIS AGREEMENT, ANY BREACH OR TERMINATION OF THIS AGREEMENT
OR OPERATION OF THE PROGRAM PROPERTY, INCLUDING CLAIMS BASED
ON THE NEGLIGENCE OR BREACH OF WARRANTY OF EPIC, OR EITHER
PARTY'S INDEMNIFICATION OBLIGATIONS HEREUNDER, WHETHER OR NOT
SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES
AND NOTWITHSTANDING THE FAILURE OF ESSENTIAL PURPOSE OF ANY
LIMITED REMEDY HEREIN. UNDER NO CIRCUMSTANCES SHALL EITHER
PARTY BE LIABLE TO THE OTHER FOR ANY REASON FOR ANY AMOUNT IN
EXCESS OF THE AGGREGATE LICENSE FEES AND TRANSFER FEES PAID BY
YOU TO EPIC HEREUNDER PRIOR TO THE DATE OF THE CLAIM.
b. FORCE MAJEURE. No liability shall result to You or Epic from
delay in performance or nonperformance caused by circumstances
beyond the reasonable control of You or Epic
-16-
<PAGE> 17
including, but not limited to, acts of God, fire, war,
embargo, any law or governmental regulations or labor dispute,
and the period of performance shall be deemed extended to
reflect such delay as agreed upon by the parties hereto.
c. TIMING OF ACTIONS. You shall not commence any action before an
arbitrator or arbitrators (if this Agreement provides for
arbitration) or in a court of law regarding or in any way
related to any Item of the Program Property more than [*] from
the date of First Live Use of that Item of the Program
Property. The immediately preceding sentence does not apply to
disputes involving the Maintenance Program or other continuing
services by Epic or to claims brought under Section 16(a). The
initial [*] limitation does not apply to any Update,
customization or other new Code that is subsequently added to
the Program Property; instead, a new [*] limitation period
shall apply to such new Code beginning on the date of First
Live Use of such Update, customization or other new Code.
11. CERTAIN LICENSEE COVENANTS
a. GENERAL. You will not, and will not permit Your employees or
agents, or any other person or party, to do any of the
following:
(i) Copy or duplicate by any means the Program Property
or any part thereof, except as follows: (1) You may
create additional Directories by notifying Epic and
paying additional fees as provided in Section 6(d),
Exhibit 1(b) and the definition of Directory in
Appendix A; (2) You may make copies of the Code to
the extent such copies are required for backup,
recovery, or system redundancy to ensure availability
of the system to You; (3) You may copy Workstation
Code onto any number of Your workstations for
authorized End-Users; and (4) You may modify and
reproduce the Documentation and disseminate the
Documentation to authorized End-Users of the Program
Property to the extent appropriate;
(ii) Reverse engineer any of the Program Property or any
part thereof,
(iii) Use the Program Property or any part thereof, other
than the Workstation Code, on any computer other than
the Designated Platform except for disaster recovery,
except with Epic's prior written consent; or
(iv) Remove the Epic copyright notice screen from any copy
of the Program Property or otherwise modify the
Program Property so that Epic's copyright notice is
not displayed to each user upon logon.
b. COPYRIGHT NOTICE ON PERMITTED COPIES. To the extent reasonably
practical, You further agree to affix and maintain the
copyright notice of Epic and on all permitted backup or
multiple use copies made of the Program Property.
c. TRADE SECRETS. You understand and agree that Epic's Program
Property contains trade secrets of Epic protected by operation
of law and this Agreement. Consistent with that understanding
and to protect the rights of Epic, You will, subject to the
provisions of Section 14,
(i) Maintain in confidence any information You acquire as
to the functioning or operation of the Program
Property,
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
-17-
<PAGE> 18
and will only use such information to carry out the
purposes of this Agreement;
(ii) Limit access to the Program Property to those of Your
employees, other End-Users, and Service Bureau
Clients who must have access to the Program Property
in order to make proper use of the same in connection
with Your operations;
(iii) Store all copies of the Program Property in a secure
place;
(iv) Either: (1) require any person given access to the
Program Property to execute a written agreement
(which may be Your standard employee agreement if it
applies these protections to the Program Property)
requiring non-disclosure of Epic's trade secrets in
the Program Property, and limiting the use of such
information to uses within the scope of the
employee's duties; or (2) inform all of such persons
that You are obligated to keep Epic's trade secrets
in the Program Property confidential and that it is
Your policy to keep all such information
confidential.
(v) You will notify Epic promptly and fully in writing of
any person, corporation or other entity that You know
has copied or obtained possession of or access to any
of the Program Property without authorization from
Epic.
Notwithstanding the foregoing, nothing in this Section 11c
shall be construed as preventing You from providing Service
Bureau Services for Your Customers using the Program Property
and Documentation licensed under this Agreement.
d. COVENANTS ESSENTIAL TO AGREEMENT. You agree and understand
that the covenants of Section 11 are essential to the
Agreement and that violation of any part of this Section is a
material breach of the Agreement.
12. YOUR CONFIDENTIAL INFORMATION
Epic will not disclose to any individual, entity, or other third party
any of Your Confidential Information, except: (a) as required by law or
court order; as confirmed by written opinion of Epic's legal counsel,
or (b) with Your prior written consent.
13. RESTRICTIONS ON TRANSFER
a. GENERAL. During the first 18 months of this Agreement You will
not assign, transfer, sublicense or timeshare this Agreement
or any licenses granted hereunder to or with any third party,
including Your parent, subsidiary, or affiliate, if any.
Thereafter, You may not assign, transfer, sublicense or
timeshare this Agreement or any licenses granted hereunder to
any third party, except that with the prior written approval
of Epic, which approval shall not be unreasonably withheld,
You may assign and/or transfer this Agreement in its entirety
to a third party in conjunction with the transfer by sale or
merger of substantially all of Your Assets to a successor
organization if the successor organization accepts in writing
an assignment of this Agreement and agrees to be bound by all
of its terms and conditions. For example purposes only, both
Parties agree that it would be "reasonable" for Epic to not
permit assignment of this Agreement to a competitor of Epic or
to an entity in poor financial condition or an entity with a
poor reputation in the industry. Nothing in this
-18-
<PAGE> 19
Section 13(a) shall be construed as preventing You from
providing Service Bureau Services for Your customers using the
Epic Software and Documentation licensed under this Agreement.
b. ASSIGNMENT BY EPIC. Epic may, upon giving You prior written
notice, assign some or all of its rights and obligations under
this Agreement to any Affiliated Company. Epic also may, upon
giving You prior written notice, assign all of its rights and
obligations under this Agreement pursuant to a complete
assignment in conjunction with the transfer by sale or merger
of substantially all of Epic's assets to a successor
organization if the successor organization accepts in writing
an assignment of this Agreement and agrees to be bound by all
of its terms. In either event, Epic will remain liable for
Epic's obligations under this Agreement if the Affiliated
Company or successor organization fails to satisfy such
obligations.
14. USE OF PROGRAM PROPERTY BY AFFILIATES
a. GENERAL. You may provide any Affiliate with access to and the
right to use the Program Property, subject to the following
terms and conditions:
(i) To preserve Epic's trade secrets from competitors,
You and Your Affiliates will not knowingly allow
access to any individual or entity outside of Your
company, which licenses or sells software Service
Bureau Services to health care facilities (or any
other potential competitor of Epic) without Epic's
prior written consent.
(ii) You will provide access to Affiliates, including
employees, only to the extent such access is
consistent with the requirements of Section
11(c)(ii).
(iii) You will grant access to a non-employee Affiliate
only as an end-user. You will not give any
non-employee Affiliate access to any source or object
code of the Program Property other than Workstation
Code.
(iv) Any rights of End Users will be subject to all of the
restrictions, limitations and conditions provided in
this Agreement. You will have the same responsibility
to Epic for the actions and omissions of any End User
as You would have if they were Your actions or
omissions.
b. [*]
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
-19-
<PAGE> 20
[*]
(ii) Except as specifically provided herein, any
termination of this Agreement or any license granted
in this Agreement shall also terminate the
corresponding rights of any End User.
c. USE OF EXHIBIT 1(a) LICENSES
The Volumes of Program Property licensed hereunder and listed
in Exhibit 1(a) can be used to provide Service Bureau Services
to the following customers:
(i) Current MedPartner Affiliates wherever located;
(ii) [*]
15. TRADE-IN
a. CHANGE IN DESIGNATED PLATFORM WITH [*]. If You elect to change
the Designated Platform to a new processor that is (i) [*] and
(ii) [*], then You may transfer the Program Property to the
new processor without charge if You provide at least thirty
(30) days written notice to Epic prior to the transfer.
b. CHANGE IN DESIGNATED PLATFORM [*]. If You elect to change the
Designated Platform processor manufacturer or operating system
or the publisher of the Operating Environment software, [*],
then Epic will license such product to You without an
additional license fee.
c. CONVERSION ASSISTANCE. You will pay Epic for any time spent by
Epic personnel in connection with any implementation,
consultation or conversion associated with any change of
processor, operating system or Operating Environment software
publisher, all at Epic's then standard hourly rates.
16. INDEMNIFICATIONS
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
-20-
<PAGE> 21
a. INTELLECTUAL PROPERTY INDEMNIFICATION. Epic agrees to defend
or settle, and to indemnify and to hold Your Indemnitees
harmless from, any Claim brought against any of Your
Indemnitees to the extent that: (1) it is based on a Claim of
infringement of any U.S. copyright; (2) it is based in whole
on all or part of the Program Property in the form supplied to
You by Epic; and (3) Your Indemnitees promptly notify Epic in
writing of the Claim, promptly provide Epic with the
information reasonably required for the defense of the same,
and grant to Epic exclusive control over its defense and
settlement. If such a Claim is brought by a third party, Epic
may, at its sole option and expense, either:
(i) procure the right for You to continue to use the
infringing Item Program Property;
(ii) modify or replace the infringing Item of Program
Property or such portion thereof as is appropriate as
long as such modified or replaced software has
substantially similar or better capabilities;
or if Epic determines that neither of the foregoing is
commercially practicable,
(iii) terminate Your license to the infringing Item of
Program Property. Upon such termination and the
return of such Item to Epic, Epic will repay to You
the license fee You paid to Epic for such Item less
depreciation calculated on a straight line basis over
a ten year period from the date of execution of this
Agreement.
This Section 16(a) states the entire liability and obligation
of Epic to Your Indemnities with respect to infringement of
any intellectual property rights.
b. INDEMNIFICATION IF EPICCARE LICENSED. If EpicCare is licensed
under the terms of this Agreement, then You agree to defend or
settle, and to indemnify and to hold the Epic Indemnitees
harmless from, any Claim by or on behalf of any [*], or by or
on behalf of any other third party or person claiming damage
by virtue of a familial or financial relationship with such a
patient, which is brought against any [*], including Claims
based on [*], which may arise out of the operation of the
copies of the Program Property licensed to You under this
Agreement, if the claim is not of the type covered by Section
16(a). The preceding sentence does not apply to the payment of
damages for claims in which the court finds that the injury at
issue was caused solely as a result of [*].
17. TAXES
All taxes arising out of the license or use of the Program Property,
including sales taxes, use taxes, personal property taxes, including
any assessments or taxes imposed by foreign governments, but excluding
any taxes on Epic's income, shall be Your responsibility. If Epic is
required to pay any such taxes or penalties or interest relating
thereto, You shall promptly pay to Epic an amount equal to any such
amounts actually paid or required to be collected or paid by Epic. If
You are exempt from paying applicable sales or use taxes, then Your tax
exemption number(s) for all relevant jurisdictions is (are):
_____________________________________________. If You are not exempt
from paying applicable sales or use taxes, then Your sales/use tax
identification number(s) for all relevant
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
-21-
<PAGE> 22
jurisdictions (are) [to be provided]______________________________
_________________________________.
18. TERM AND TERMINATION
a. GENERAL. The Initial Term of this Agreement will be for a [*]
commencing on [*] and ending on [*]. If You (i) are not in
default under any provision of the Agreement or (ii) are not
in Material Breach of the Agreement, the Agreement will
automatically renew for additional one (1) year terms unless
written notice of Intent Not to Renew is given by one party to
the other party at least one hundred fifty (150) days prior to
the end of the then current term. There is no limit on the
number of times this Agreement may be renewed.
b. EFFECT OF TERMINATION OF AGREEMENT. Upon termination of this
Agreement for any reason and by any party, all rights and
licenses granted to use the Program Property or to offer to
sell or sell Service Bureau Services that utilize the Program
Property, or to use any other Epic intellectual property, such
as the Epic name, Epic Logos, Epic Trademark and/or Service
Marks for any purpose shall terminate. [*].
c. TERMINATION UPON BANKRUPTCY, INSOLVENCY AND THE LIKE. Subject
to applicable bankruptcy and insolvency laws, if either party
(i) ceases the active conduct of business; (ii) becomes
subject to any bankruptcy or insolvency proceeding under
federal or state statute; (iii) becomes insolvent or subject
to direct control by a trustee, receiver, or similar
authority; or (iv) has wound up or liquidated its business,
voluntarily or otherwise, the other party may, at its sole
option, terminate this Agreement immediately.
d. TERMINATION UPON MATERIAL BREACH; CURE PERIODS. This Agreement
may not be terminated upon a Material Breach of this Agreement
unless the other party (the "Notifying Party") first provides
written notice of such breach to the first party (the "Curing
Party") as provided herein and the breach has not been cured
within sixty (60) days after the Curing Party receives such
notice. The notice shall be provided in the manner specified
in Section 20, shall reference this Section 18(d), and shall
describe each Material Breach of the Agreement in sufficient
detail to permit the Curing Party to cure the breach. Neither
party may claim a Material Breach of this Agreement until the
foregoing periods have expired. Termination and cure periods
with respect to the provisions of Sections 8 and 9 shall be
covered under such Sections and not under this Section 18(e).
e. EFFECT OF TERMINATION. If this Agreement or the license to any
Item of Program Property is terminated for any reason, then
You will return all copies of the Program Property (including
the Code and the Documentation) to Epic, or destroy such
copies and certify to Epic that such actions have occurred,
within thirty (30) days of the effective date of termination
or termination of providing Service Bureau Services utilizing
Program Property to Your then existing
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
-22-
<PAGE> 23
customers, whichever occurs first. In the event of termination
of this Agreement for any reason, You shall remain liable to
Epic for all fees and service charges accrued prior to such
termination.
f. SURVIVAL. The provisions of Sections 6, 8(g), (h) and (j),
10-14, 16, 17, 18, 19 and 21 shall survive termination or
expiration of this Agreement.
19. SOURCE CODE
a. DELIVERY AND USE. Epic will provide You with a complete copy
of the source Code for all of the Program Property. You agree
that You will use the source Code only for Your internal
maintenance of the Program. Notwithstanding any other
provisions of this Agreement, if You make changes to the
source Code, then all of Epic's warranty, support, and
maintenance obligations shall cease. You agree that You will
not modify the source Code in any way that will affect the
Program Property's ability to count Your Volume or the
accuracy of such counts.
b. UNLICENSED SOFTWARE. Epic's various items of software are
integrated for the benefit of Epic's customers. For Your and
Epic's convenience, Epic may provide You with object and/or
source code for items of software that are not licensed under
this Agreement. In such event, Epic will normally deactivate
the object and source code for the unlicensed items. You agree
that You will not modify the source code of such items or of
any of the Program Property in a manner that would allow You
or anyone else to use the unlicensed object or source code.
You agree not to use such unlicensed source or object code.
You also agree not to copy such unlicensed source or object
code other than as is incidental and necessary for any
properly licensed copying of the licensed Program Property. In
addition, although such code is not Program Property under
this Agreement, the non-Program Property Code will also be
subject to the restrictions on the use, confidentiality,
safekeeping and copying of Program Property under Section 11
of this Agreement.
20. NOTICE
a. GENERAL. No notice required to be provided in this Agreement
shall be effective unless it is in writing; is delivered to
the other party by either reputable overnight courier, U.S.
mail by registered, certified or overnight delivery service,
with all postage prepaid and return receipt requested, or by
personal delivery; and is addressed to:
If to Epic:
Judith R. Faulkner
President
Epic Systems Corporation
5301 Tokay Boulevard
Madison, WI 53711
or to such other address as Epic may designate by written notice to
You; and
If to You:
Jeffrey H. Margolis
President
-23-
<PAGE> 24
The TriZetto Group
567 San Nicolas Drive
Suite 360
Newport Beach, CA 92660
or to such other address as You may designate by written notice to
Epic.
b. INVOICES. Invoices should be sent to:
Accounts Payable
The TriZetto Group
567 San Nicolas Drive
Suite 360
Newport Beach, CA 92660
or to such other address as You may designate by written notice to
Epic.
21. MISCELLANEOUS
a. GOVERNING LAW, FORUM AND JURISDICTION. The validity,
construction and enforcement of this Agreement shall be
determined in accordance with the laws of Wisconsin, without
reference to its conflicts of laws principles, and any action
(whether by arbitration or in court) arising under this
Agreement shall be brought exclusively in Wisconsin. You
consent to the personal jurisdiction of the state and federal
courts located in Wisconsin.
b. SEVERABILITY. The provisions of this Agreement shall be
considered as severable, so that the invalidity or
unenforceability of any provisions will not affect the
validity or enforceability of the remaining provisions;
provided that no such severability shall be effective if it
materially changes the economic benefit of this Agreement to
either party.
c. NO WAIVER. The failure of either party to require the
performance of any item or obligation of this Agreement, or
the waiver by either party of any breach of this Agreement
shall not act as a bar to subsequent enforcement of such term
or obligation or be deemed a waiver of any subsequent breach.
d. PURCHASE ORDERS. Your purchase orders will be accepted by Epic
for accounting convenience only. No terms or conditions
contained in any purchase order shall amend this Agreement or
shall otherwise constitute an agreement between the parties.
e. ENTIRE AGREEMENT. This Agreement and the schedules and
exhibits herein, is the entire agreement between the parties
with regard to the subject matter of this Agreement and
supersedes and incorporates all prior or contemporaneous
representations, understandings or agreements, and may not be
modified or amended except by an agreement in writing signed
between the parties hereto. Each party represents that the
individual signing below on behalf of the party has the
authorization to bind the party indicated to this Agreement.
f. SUBCONTRACTING. Epic may subcontract services to be performed
under this Agreement to one or more subcontractors. No
subcontractor will begin working on any project or task until
You have first agreed in writing (on a
-24-
<PAGE> 25
change order form, by letter or otherwise) to the proposed
subcontractor and the specific project or tasks to be
subcontracted. Epic will be responsible to You for the work
performed by the subcontractor to the same extent that Epic
would be if it were Epic's own work. All other provisions of
this Agreement shall apply to the work of the subcontractor in
the same manner and to the same extent as if the work were
performed by Epic hereunder. All source code, object code and
associated documentation provided to You by the subcontractor
pursuant to this Agreement shall be owned by Epic and subject
to all applicable confidentiality and use restrictions as if
such code or documentation had been provided by Epic. Epic may
provide the subcontractor with a copy of those sections of
this Agreement with which the Subcontractor must comply. If
the Subcontractor needs access to Your confidential
information to perform the subcontracted services, Epic may
provide such access if the Subcontractor first agrees in
writing to comply with all confidentiality provisions
contained in this Agreement that apply to such information.
g. RESTRICTION ON OFFERS OF EMPLOYMENT. Before either party
directly or indirectly offers employment to, or discusses the
terms of prospective employment (such as salary and benefits)
with any person who is currently employed by the other party,
such party will first contact the management of the other
party (Your CIO or equivalent and Epic's president) to inform
the other party about such possibility.
h. INCORPORATION OF APPENDICES AND EXHIBITS. All appendices and
exhibits attached to this Agreement are incorporated into and
form a part of this Agreement.
i. HEADINGS. Headings contained in this Agreement are for
reference purposes only and shall not affect in any way the
meaning and interpretation of this Agreement.
j. SITE VISITS. From time to time a prospective customer for one
or more Items of Epic Program Property may contact You
concerning a visit to Your site for a demonstration of Epic
Program Property. Epic desires to participate in such
demonstrations and to arrange for such demonstrations to occur
in an appropriate place, time and manner agreed to by You.
Therefore, You agree to conduct any "site visits" related to
demonstrations of Epic's Program Property for potential Epic
customers only with Epic's prior approval.
k. PROVIDER ASSISTANCE TO EPIC. From time to time Epic may ask
Your providers to assist Epic with certain development
projects. Epic will pay Your providers for such assistance.
You agree to consider such requests in good faith and to allow
Your providers to so assist Epic unless such assistance
-25-
<PAGE> 26
to Epic would place an unreasonable burden upon Your
operations.
l. NOTICE OF INTENT TO USE. Prior to entering into any Service
Bureau Agreement with a new customer or the addition of a new
application to the service provided to an existing customer
which includes the provision of services that will utilize the
Licensed Program Property, You will notify Epic, in a manner
to be agreed to by Epic and You, of the name and address of
the customer, the Items of Licensed Program Property to be
utilized in providing the services to the customer, and the
anticipated volume levels for each Item of Licensed Program
Property. You will not finalize any such new or expanded
agreement without the written consent of Epic. Epic shall
withhold such consent if You are in Material Breach of this
Agreement or are more than sixty (60) days past due in the
payment of any amounts due to Epic pursuant to this Agreement.
[*].
An example of the latter would be a prestigious, small
start-up or pilot, of a large organization.
m. QUARTERLY REPORTS. Within thirty (30) days of the end of
calendar quarter, or such other period of time agreed to by
Epic and You, You will provide Epic with a written report, in
a form agreed to by the parties, showing Your actual usage of
each Item of Licensed Program Property during the said
calendar quarter. You will also provide Epic with any other
information reasonably required by Epic to monitor your
compliance with this Agreement.
n. AUDIT. Epic may, at its own expense, upon written notice to
You and during mutually agreed upon times, by itself or
through a recognized independent accounting firm, reasonably
acceptable to You, audit Your Volume, as well as the use and
location of Epic's Program Property. Representatives of any
accounting firm retained by Epic shall execute a mutually
agreed upon confidentiality agreement and shall abide by Your
reasonable security regulations while on Your premises. If
Your Volume is found to exceed the Licensed Volume, then Epic
will invoice You for the then current license fee applicable
to Your Volume. Furthermore, if Your Volume is more than [*]
greater than Your Licensed Volume, then You will pay Epic its
reasonable expenses for such audit.
o. ACCESS TO BOOKS AND RECORDS. Epic and You agree to make
available upon the written request of the Secretary of Health
and Human Services or the Comptroller General, or their
representatives, this Agreement and such books, documents and
records as may be necessary to verify the nature and extent of
the costs of the services rendered hereunder to the full
extent required by the Health Care Financing Administration
implementing Section 952 of the Omnibus Reconciliation Act
of 1980, codified at 42 U.S.C. Section 1395x(v)(1)(l), or by
any other applicable federal or state authority.
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
-26-
<PAGE> 27
THIS AGREEMENT HAS BEEN ENTERED INTO AS OF THE EXECUTION DATE INDICATED BY YOUR
SIGNATURE BELOW.
EPIC SYSTEMS CORPORATION TRIZETTO GROUP, INC.
By: /s/ Kerry M. Kearns
By: /s/ Judith R. Faulkner -------------------------------
-------------------------------
Name: Kerry M. Kearns
Name: Judith R. Faulkner ------------------------------
------------------------------
Title: Senior Vice President
Title: President -----------------------------
-----------------------------
Date: 5-21-99
Date: 5-25-99 ------------------------------
------------------------------
-27-
<PAGE> 28
APPENDIX A
DEFINITIONS
1. "Affiliate" means any person or entity with whom You have a business or
employee relationship and includes those entities for which You provide
Service Bureau Services using the Epic Software and Documentation
licensed under this Agreement. "Affiliates" shall not include
businesses that provide outsourcing or facility management services
unless Epic agrees in writing that such entities may become Your
Affiliate.
2. "Affiliated Companies" means an entity that (a) directly or indirectly
owns or controls at least fifty percent of the applicable party, or (b)
is at least fifty percent owned or controlled, directly or indirectly,
by the applicable party or an entity described in clause (a).
3. "Annual Volume" means:
(a) for all Items other than Tapestry and its modules, the
aggregate Volume for an Item of Program Property during the
twelve-month period beginning on the date of this Agreement
and for each succeeding twelve-month period thereafter
(whether or not You have increased the Licensed Volume); and
(b) for Tapestry and its modules, Annual Volume is the number of
members (see Exhibit 6) as of the last anniversary of the date
of this Agreement (or as of the date of this Agreement until
its first anniversary).
4. "Change Order" means the form attached to this Agreement as Exhibit 3
or such appropriate substitute form designated by Epic.
5. "Claims" shall include without limitation all claims, demands, actions,
liabilities, losses, damages and expenses including, without
limitation, settlement costs, and reasonable attorney's fees.
6. "Clinical Support Materials" shall mean the following types of data and
forms: SmartForms, SmartSets, SmartText, SmartPhrases, BestPractices
Pathways, BestPractices Decision Support Rules, Selection Lists,
Flowsheets, Handouts and Letter forms, After Visit Summary forms,
Preference Lists, and similar such data and forms that become available
using the Program Property.
7. "Code" means the object code and source code of the Program Property,
including all Updates and other modifications to the Program Property
provided by Epic to You pursuant to this Agreement.
-1-
<PAGE> 29
8. "[*]" means the [*] that is further identified on Exhibit 1(a) hereto.
9. "Current Version" means the most recently released version of the
particular Item for use on Your Designated Platform or any interim
version released since the last major version. Major versions are
typically released approximately once per year. Interim releases
currently are typically released once every three to four months. If
You are operating the most recent major version or a subsequent interim
version, then You will be deemed to be operating the Current Version.
10. "Designated Platform" means the make and model of the processor and its
operating system specified on Exhibit 1(a) hereto, it does not refer to
a specific processor designated by serial number.
11. "Directory" means and includes both: (i) each separate copy of the
server Code of the Program Property used to process actual patient
data; and (ii) each actual patient data base exceeding one that is
processed by the same server Code copy of Program Property. For
example, if You use three separate copies of the server Code of the
Program Property to process actual patient data, two of those copies
process only one patient data base each and one of those copies
processes two patient data bases, then You would be using four
Directories. You will notify Epic that You are creating an additional
Directory at least thirty days before the date such Directory is
created.
12. "Documentation" means any instructions, manuals or other materials
relating to the installation, operation or Code of the Program Property
that is provided by Epic to You pursuant to this Agreement.
13. "ECI" means the Employment Cost Index for Total Compensation (not
seasonally adjusted), Private Industry Workers, White-collar
occupations excluding sales, June 1989 = 100, compiled by the U.S.
Department of Labor, Bureau of Labor Statistics. The most recently
published ECI prior to the date of this Agreement shall be the base for
measuring any changes in the ECI, unless otherwise specified in this
Agreement. If publication of the ECI is discontinued, Epic may, in its
sole reasonable discretion, substitute a similar cost index for use for
the purposes that the ECI is used in this Agreement.
14. "End User" means any Affiliate granted access to or the right to use
the Program Property pursuant to Section 14.
15. "First Live Use" of a Major Item of Program Property occurs when You
first use such Item to process actual patient data for production
purposes. "First Live Use" of an Optional Item of Program Property
occurs upon the earlier of when You first use such Item to process
actual patient data for production purposes or the date of First Live
Use of a Major Item with which such Optional Item may be used by You if
the Optional Item is installed and available for use with the Major
Item.
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission
-2-
<PAGE> 30
16. "Implementation Schedule" means the implementation schedule for Items
of Program Property other than those set forth on Exhibit 1(a) as of
the date of this Agreement.
17. "Indemnitees" means the applicable party hereto, its affiliated
companies, all employees, officers and directors of the applicable
party and its affiliated companies, and, for Your Indemnitees, all End
Users. Thus, "Your Indemnitees" means You and each of these persons or
entities who are related to You, and "Epic Indemnitees" means Epic and
each of these persons or entities who are related to Epic.
18. "Item" means each individual line item of Program Property specified on
Exhibit 1(a). An Update is not a new Item, but shall be deemed to be
the same Item as the earlier version of Program Property upon which the
Update is based.
19. "Licensed Volume" means the limitation(s) on Your Annual Volume for
each Item as initially specified in Exhibit 1(a) and increased pursuant
to Section 6(c). You represent to Epic that You reasonably calculated
Your expected Annual Volume for each Item based on Your current
operations as if each Item were fully implemented and that such
expected Annual Volume does not exceed the initial Licensed Volume for
such Item as provided in Exhibit 1(a).
20. "Major Item" shall mean any of the following Items of Program Property:
EpicCare, Cadence, Resolute, Tapestry, Outpatient Registration,
EPIcenter, or Cohort.
21. "Maintenance Program" means the program of maintenance and support
available to You from Epic under the terms specified in Section 7.
22. "Non-Program Property Error" means any apparent or real defect, error,
or other anomaly relating to the operation of the Program Property that
is reasonably determined by Epic, after reasonable inquiry and
investigation, either not to have originated from the Program Property
(such as incorrect use of the Program Property or Your hardware; input
errors; or errors or defects originating in Your hardware, Your
communications equipment, the operating systems, the Operating
Environment software, the [*], the [*], the Programming Points Code
developed by You, or in any application software other than the Program
Property) or to have resulted from modifications of the Program
Property by anyone other than Epic. As used herein, "incorrect use of
the Program Property" means data processing procedures used by You that
do not substantially comply with the procedures described in the
Documentation associated with the Program Property.
23. "Operating Environment" shall mean the software published by [*] which
is identified on Exhibit 1(a) hereto and which shall be either the
current version of [*] products. With Epic's and [*] consent, You may
also be able to license [*] product directly from [*], since Epic does
not currently offer a sublicense to this product.
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission
-3-
<PAGE> 31
24. "Optional Item" shall mean any Item of Program Property other than a
Major Item.
25. "Other Third Party Software and Data" shall mean the software and data
specified in the "Additional Billing Information" section of Exhibit 1
(a) other than the Operating Environment.
26. "Program Error" means an error or defect in the Code which results in
the failure of the Program Property to operate or to produce output on
the Designated Platform in substantial conformity to descriptions of
such operation or output in the Documentation for the Program Property.
27. "Programming Points Code" means software code (other than the Code)
that is developed to be executable at places in the Code that are
designed to permit the execution of external code.
28. "Program Property" means each of the following with respect to each
computer program listed as an Item of Program Property on Exhibit 1
(a): the computer program object and source code, the Documentation,
and all Updates and other modifications to the object or source code
that are provided by Epic to You pursuant to this Agreement.
29. "Reasonable Workaround" means a workaround of a Program Error that does
not materially decrease the general utility of the Program Property.
30. [*]
31. "Substantive Program Error" means any Program Error that materially and
adversely affects Your operations.
32. "Superseded Version" means the second most recent version of an Item
released to You that is intended for use on Your Designated Platform.
33. "Total License Fee" means the sum of the license fees for the Program
Property listed in Exhibit 1(a).
34. "Update" means a release or version of the Program Property containing
functional enhancements, extensions, error corrections or fixes if such
release or version is intended for use on the Designated Platform and
is generally made available free of charge (other than charges for
media, handling and installation and services) to Epic's customers who
are then participating in Epic's Maintenance Service Program. An Update
will include the Code and its associated Documentation.
35. "Volume" means the actual level of use by You of an Item of Program
Property determined as provided in Exhibit 6 (e.g.,
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
-4-
<PAGE> 32
according to patient visits or members, depending upon the Item) and
Section 14(b(i)(1).
36. "Warranty Period" means, for each Item of the Program Property (other
than Items of Program Property set forth on Exhibit 1(a) as of the
date of this Agreement, for which there is no warranty), the ninety-day
period beginning on the date of the First Live Use of such Item.
37. "Workstation Code" means components of the object Code, if any, which
are designed to operate on personal computers for the purpose of
accessing the object Code on Your server(s).
38. "Your Confidential Information" means, except as provided below, all
confidential patient data stored using the Program Property, Your
confidential information concerning Your business strategies, and Your
confidential financial information. "Your Confidential Information"
shall exclude, without limitation, any information that: (a) is now or
hereafter becomes publicly known through no act or failure on the part
of Epic and without breach of this Agreement; (b) is known by Epic on a
nonconfidential basis at the time of the receipt of such information;
or (c) relates to the identity of Program Property modules that have
been licensed by You, the types and configuration of hardware or
operating systems on which the Program Property operates for You, or
the identity of any software or hardware systems with which the Program
Property interfaces for You.
-5-
<PAGE> 33
LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<S> <C>
1(a) List of All Licensed Program Property, Additional Billing
Information, and Applicable Limitations
1(b) Fees for Additional Directories
1(c) Maintenance Fees and Good Maintenance Program
3 Change Order Form (for requesting Customization)
4 Epic's Current Standard Hourly Rates
4(j) Marketing Assistance Packages
6 Definition of "Volume"
7 Epic's Support Policies
8 Epic's Service Response Times
Addendum [*] Addendum: Terms of [*] Sublicense
Addendum [*] Addendum: Terms of [*]
Addendum [*] Addendum
Addendum Distinct Addendum
Addendum Diagnostic Data Addendum
Addendum Illustration Addendum
</TABLE>
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission
<PAGE> 34
EXHIBIT 1(a)
The Program Property shall include the following listed items of standard or
customized programs on the following specifically listed Designated Processor,
for one production copy (unless otherwise provided), and for the limitations on
use indicated:
<TABLE>
<CAPTION>
INITIAL
PROGRAM PROPERTY MTNC. COMMENTS
<S> <C> <C>
A. CADENCE ENTERPRISE APPOINTMENT See Licensed for [*]
SCHEDULING SYSTEM Exhibit
1(c)
Additional Cadence-Related Items
B. Advanced, Ancillary Scheduling Features See Licensed for [*]
Exhibit
1(c)
C. Chart Tracking See Licensed for [*]
Exhibit
1(c)
D. RESOLUTE PATIENT ACCOUNTING SYSTEM See Licensed for [*]
Exhibit
1(c)
E. TAPESTRY MANAGED CARE SYSTEM See Licensed for [*]
Exhibit
1(c)
Tapestry Modules
F. Referral Authorization See Licensed for [*]
Exhibit
1(c)
G. Claims Adjudication See Licensed for [*]
Exhibit
1(c)
H. Capitation Payment See Licensed for [*]
Exhibit
1(c)
I. Case Management/Concurrent Review See Licensed for [*]
(Tapestry UM) Exhibit
1(c)
J. EPICCARE ELECTRONIC MEDICAL RECORDS See Licensed for [*]
SYSTEM Exhibit
1(c)
K. EPICCARE ORDERS/RESULTS SYSTEM See Licensed for [*]
Exhibit
1(c)
</TABLE>
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
<PAGE> 35
<TABLE>
<CAPTION>
ADDITIONAL ITEMS
<S> <C> <C>
L. Analyst Ad Hoc Report Generators and See Licensed for [*]
Statistics Exhibit
1 (c)
M. Clarity Enterprise Reporting* See Licensed for [*]
Exhibit
1 (c)
N. Bridges EDI Developer's License See Licensed for [*]
Exhibit
1 (c)
O. Advantage See Licensed for [*]
Exhibit
1 (c)
P. Epic Standard Outgoing Lab Orders (HL7) [*] Licensed for [*] annual patient visits for the formerly
per known [*] directory; maintenance will begin on go-live
month
Q. Epic Standard Incoming Lab Results (HL7) [*] Licensed for [*] annual patient visits for the formerly known
per [*] directory; maintenance will begin on the effective date
month of the agreement
Program Property Transfer Fee [*]
</TABLE>
<TABLE>
<CAPTION>
MONTHLY
Additional Billing Information - Description Mtnc.
(not Program Property) (US $) Comments
<S> <C> <C>
Requested Enhancements [*] [*] Maintenance starts on the [*] of the agreement
Interface Customizations [*] [*] Maintenance starts on the [*] of the agreement
Requested Enhancements [*] [*] Maintenance starts on the [*] of the agreement
[*] TBD
[*] TBD [*] concurrent user run-time license.
Licensed with Analyst.
[*] TBD Licensed for [*]
[*] [*] Site License for [*]
</TABLE>
LIMITATIONS
THE LICENSED VOLUME FOR EACH ITEM IS SPECIFIED IN THE COMMENTS SECTION.
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
<PAGE> 36
EXHIBIT 1(b)
EPIC SYSTEMS CORPORATION
LICENSE FEES FOR ADDITIONAL DIRECTORIES
Epic is to be notified 30 days prior to the creation of any new directory using
the attached election form. If Epic installation services are desired, such
request is to be made at least 60 days before any such assistance is required.
I. LICENSE FEE PRICE
[*].
II. INSTALLATION CHARGE FOR ADDITIONAL DIRECTORIES
[*].
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
-1-
<PAGE> 37
ELECTION TO ADD NEW DIRECTORY
EPIC SYSTEMS CORPORATION
Pursuant to its License Agreement with Epic Systems Corporation ("Epic"), You
hereby elect to add an additional Directory as follows:
Name of Affiliate
Location
Software Applications Name Expected Annual
Volume
Pricing (check one): ________ Aggregate with Licensee (Extension Sale Pricing)
________ Separately priced (requires separate agreement
between You and Epic)
Epic Installation Assistance Requested: _______ Yes _______ No
Approximate Date Directory is anticipated to go live: _________________________
Authorized Licensee Signature:_________________________
Print Name: _________________________
Title: _________________________
Date: _________________________
-2-
<PAGE> 38
EXHIBIT 1 (c)
MAINTENANCE FEES/GOOD MAINTENANCE PROGRAM
(MULTI-DIRECTORY)
[*]
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
-1-
<PAGE> 39
[*]
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
-2-
<PAGE> 40
[*]
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
-3-
<PAGE> 41
SCHEDULE 1
TO EXHIBIT 1(c)
EPIC APPLICATION MAINTENANCE FOR OUTSOURCING
MARCH 1999
Use the table below to determine Your maintenance payment to Epic for each
service bureau Affiliate of Yours. The annual maintenance payment per such
Affiliate is determined per "maintained" provider at that service bureau
Affiliate. A "maintained" provider is one who is actually setup to use EpicCare,
or whose volume (patient visits or members, as applicable) is counted for
purposes of Cadence, Resolute or Tapestry. Providers include physicians, nurse
practitioners, physicians' assistants, ophthalmologists, podiatrists, midwives,
and the like.
Maintenance for an optional module package is charged when one or more of the
Items of Program Property in that package is being used. The charge is the same
whether You use one or more of the Items of Program Property from a specific
module package.
Annual Maintenance is based upon "maintained" provider, whether employed,
affiliated, contracted, or sub-contracted. Providers can be counted in multiple
ways, including but not limited to the following: listings in the provider
directory and/or master files, names associated as the provider for a patient
encounter, having a template in scheduling for seeing patients, and assignment
as a PCP. Epic may dial into the systems at regular intervals to measure
provider counts.
<TABLE>
<CAPTION>
No. of Providers Annual Maintenance - Main Apps Annual Maintenance-Optional Module Packages
- ---------------- ------------------------------ -------------------------------------------
<S> <C> <C>
[*]
</TABLE>
(1) Includes [*]
(2) Includes [*]
(3) Includes [*]
(4) Bridges [*]
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
<PAGE> 42
EXHIBIT 4
EPIC HOURLY RATES
<TABLE>
<CAPTION>
Person Providing Services Hourly Billing Hourly Billing
Rate Rate
(at Epic) (On Site)
<S> <C> <C>
Installation and Application Coordinators [*] [*]
Application Training Staff [*] [*]
Programmer [*] [*]
Documentation Staff [*] [*]
Interface & Conversion Customization, Training & Support Staff [*] [*]
M Installation, Training & Support Staff (if not purchased through Epic) [*] [*]
Hardware & Systems Installation, Training, and Support Staff [*] [*]
Physician Staff [*] [*]
</TABLE>
Services provided outside regular business hours are [*] the above rates [*].
Travel time outside of the United States and Canada will be billed at [*] of the
on-site rate.
For training at Epic, you will not be charged hourly, but by the number of
persons attending the training per day as provided below.
CHARGES FOR TRAINING AT EPIC
<TABLE>
<CAPTION>
Charge Per Person Attending Training Per Day
First [*] of Your Next [*] of Your Your Additional
Trainees For a Trainees For a Trainees for a
Type of Training Session Session Session
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Application, Administrator and $[*] $[*] $[*]
Other Training at Epic (Except
System Manager/Work Station
Training)
System Manager/ Work Station $[*] $[*] $[*]
Training
</TABLE>
All prices on this Exhibit 4 are subject to change [*], except that prices are
firm for [*] from contract date.
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
-1-
<PAGE> 43
EXHIBIT 4(j)
MARKETING ASSISTANCE
Epic will provide You with the following sales and marketing assistance for the
prices indicated. You must notify Epic in writing of Your election prior to
arranging for marketing assistance services. Fees for any marketing assistance
are due before service is provided.
MARKETING AND SALES PACKAGE [*]
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
<PAGE> 44
EXHIBIT 6
DEFINITION OF A "VOLUME" BY ITEM OF PROGRAM PROPERTY
"Volume" is defined differently for different Items of Program Property. Except
as otherwise noted below, "Volume" is determined according to the number of
"Patient Visits" relating to such Item. For such purposes, "Patient Visit" is
defined by Item of Program Property as follows:
[*]
The "Volume" for certain applications is based in whole or in part on
"Additional Active Patient Records." For such purposes, "Additional Active
Patient Records" is defined as follows:
[*]
-1-
<PAGE> 45
[*]
The "Volume" for the Identity [*] is based solely on [*].
The "Volume" for the [*] and the [*] is based on the [*].
The "Volume" for the [*]. A [*]. A minimum of [*] be logged for any same day
activity for which the [*] system is used.
Certain Items are licensed based on user level. When this is applicable, these
Items are indicated on Exhibit 1(a).
With respect to other Items of Program Property, Epic will determine which of
the above counts is appropriate or whether an alternative means of determining
Volume is appropriate.
-2-
<PAGE> 46
EXHIBIT 7
EPIC SYSTEMS CORPORATION
SUPPORT POLICIES
Telephone consultation and assistance support will be available to You at any
time, 24 hours per day and 7 days per week as provided below.
REGULAR BUSINESS HOURS
Our regular business hours are 8 a.m. to 5:30 p.m., Monday through Friday,
Central Time, excluding holidays (currently New Year's Day, Good Friday,
Memorial Day, July 4, Labor Day, Thanksgiving, Christmas Eve, Christmas, and New
Year's Eve.). During our regular business hours, telephone consultation and
assistance concerning the Program Property under the Maintenance Program will be
provided at no additional charge.
EXTENDED DAILY SUPPORT
Extended hours are 7 a.m. to 8 a.m., and 5:30 p.m. to 8:00 p.m., Central Time
Monday through Friday, holidays excluded, for urgent problems. There will be an
operator at Epic to answer your calls. There is no additional charge for this
support.
AFTER HOURS SUPPORT
For urgent problems after 8:00 p.m. or before 7:00 a.m. Central Time, or on
holidays you can dial support directly at [*]. Or, you can access urgent support
through our regular phone number by dialing "0" when you hear the message.
(There will be a 10 second delay.)
During the Maintenance Program, consultation and assistance concerning any
Program Errors at any time will be provided by Epic without any additional
charge as provided in your Agreement.
If you request consultation and assistance after 8:00 p.m. or before 7:00 a.m.
Central Time or on a holiday or weekend, and such consultation and assistance is
not with respect to a Program Error, then there is an additional charge for this
service as follows:
PLANNED AFTER HOURS SUPPORT
You can schedule support for an evening, weekend, or holiday. The charge is
[*] the hourly rate for the task, with a $[*].
UNPLANNED AFTER HOURS SUPPORT
A signed authorization (fax, Change Order, etc.) is required. Please fax it
before you call. If you have a Standing Purchase Order with Epic, the
charge is [*] the hourly rate for the task, with a $[*]. Without a Standing
Purchase Order, the charge is twice the hourly rate for the task, with a
$[*].
24 HOUR SUBSCRIPTION SERVICE POLICY
A seven days a week, 24 hours a day service is available at standard hourly
rate plus a base fee (based on number of software systems, number of
sites/directories, and size of installation). Please contact Epic for
details.
These prices are available only to customers on standard maintenance.
Epic reserves the right to change these policies and prices without notice.
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
Page 1
<PAGE> 47
EXHIBIT 8
SERVICE RESPONSE TIMES
1. Epic will use reasonable efforts to acknowledge errors identified by
Licensee and provide workarounds or corrections according to the following
schedule as measured from Epic's receipt of the request and in accordance
with the priority level of the Error, as set forth below.
LEVEL OF PRIORITY:
Level 1 Critical: The problem renders the Program Property unusable at one
or more Data Centers or Medical Centers or severely impacts normal
processing at any such Data Center or Medical Center or the problem
threatens the integrity of clinical data.
Level 2 Serious but not Critical: The problem affects a portion of the
Program Property at one or more Data Centers or Medical Centers and makes
that portion of the Program Property unusable.
Level 3 Not Serious: The problem is of minor nature and does not
substantially affect the use of the Program Property at one or more Data
Centers or Medical Centers.
RESPONSE TIMES: *
Level 1: Acknowledgment of the problem within one (1) hour and initiation
of action immediately thereafter.
Level 2: Acknowledgment of the problem within four (4) hours and initiation
of action within same day.
Level 3: Acknowledgment of the problem within one (1) business day.
* The response times set forth above are for service requests made during
Epic's regular business hours. For service requested at other times, the
anticipated response times shall be tripled; however, Epic shall make
reasonable effort to provide response within one hour for Level 1 problems.
The response times are determined from the earlier of the time that (i)
Licensee receives a tracking number from Epic that is assigned specifically
to that service request; or (ii) Epic's answering service answers
Licensee's call after Epic's regular business hours and Licensee clearly
informs the answering service that the call is a request for after-hours
support service. Messages left in Epic's voice mail system shall not
constitute service requests for purposes of this response time policy.
2. Epic will use reasonable efforts to provide a workaround or correction
within one (1) day for any Level 1 problems and within four (4) days for
any Level 2 problem. For Level 3 problems, Epic and Licensee shall mutually
agree on an appropriate response time for providing a workaround or
correction, including providing the correction in a later release of the
Software.
3. Licensee may escalate any unresolved problem to the responsible Epic
product manager or to Epic's President, at Licensee's sole discretion.
-1-
<PAGE> 48
[*] SOFTWARE ADDENDUM
STANDARD ADDENDUM - [*]
A part of the software supplied to Licensee by Epic consists of the software
(either M or Cache, as applicable) from [*]. The following terms and conditions
apply to the sublicense of the Sublicensed Software from Epic to Licensee, as
required and authorized by [*].
1. REPRESENTATION OR WARRANTIES OF [*]
EXCEPT AS EXPRESSLY PROVIDED HEREIN, [*] DOES NOT MAKE AND SHALL NOT BE
DEEMED TO HAVE MADE ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS
TO THE CONDITION, MERCHANTABILITY, TITLE, DESIGN, OPERATION OR FITNESS FOR
A PARTICULAR PURPOSE OF THE SUBLICENSED SOFTWARE OR ANY OTHER
REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESSED OR IMPLIED, WITH RESPECT
TO THE SUBLICENSED SOFTWARE.
a. [*] hereby represents and warrants as follows:
(i) [*] has (a) valid title to the Sublicensed Software, free of all
liens, encumbrances, restrictions and claims of others, (b) the
right to license the same to Epic, and (c) the right to license
Epic to grant sublicenses of the type granted to User by Epic.
(ii) Any Sublicensed Software services performed hereunder or under
any Sublicensed Software maintenance agreement between [*] and
Epic shall be performed by highly skilled personnel qualified to
perform such services and such services shall be performed in a
professional and workmanlike manner in accordance with the then
prevailing standards of the computer services industry.
(iii) The Sublicensed Software and its use do not and will not
violate or infringe upon any currently issued United States
patent or any copyright, trade secret or other property right
(whether conferred by statute, code, common law, or otherwise) of
any other person or entity that is valid or enforceable in the
United States or in any country in which Epic now maintains or
hereafter maintains any office, property or data processing
services.
(iv) The Sublicensed Software, as delivered by [*], is free from
defects in manufacturing and materials and shall operate
substantially in the conformance with the Applicable
Specifications relating to such Sublicensed Software until thirty
(30) days after the later of (a) initial delivery of the
Sublicensed Software to User, and (b) the date when Epic Program
Property is first in live operation by User (the "Software
Warranty Period").
b. During the Software Warranty Period, [*] shall promptly provide,
through Epic and at no charge to User, corrections, modifications or
additions to the Sublicensed Software in the event that Epic notifies
[*] in writing of any substantive errors in the Sublicensed Software.
User shall assist Epic and, upon request, [*], in identifying the
circumstances in which any such substantive errors are discovered and,
if requested by Epic or [*], shall document the existence of the same.
In no event shall [*] have any responsibility to correct any data base
errors or errors or damages caused by or arising out of the hardware
defects or input errors or resulting
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission
-1-
<PAGE> 49
from changes to or modifications of the Sublicensed Software made by
Epic or User without the express written approval of [*].
c. All warranty claims or other claims pursuant to this section shall be
made to [*] through Epic.
d. The foregoing representations and warranties are by [*] only. Epic
makes no representations or warranties pursuant to, and Epic shall
have no liability arising out of, this section.
2. INDEMNIFICATION OF INTERSYSTEMS
a. [*] shall, and hereby agrees to, indemnify, defend, and hold harmless
User and its officers, employees, agents, and representatives, from
and against any and all claims, actions damages, liabilities, costs,
and expenses (including, without limitation, reasonable attorneys'
fees and expenses arising out of the defense of any claim, whether
proven or not) arising from or based upon a breach by [*] of any of
its representations or warranties in Section 1(a) hereunder,
including, without limitations, any claim or allegation that the
Sublicensed Software (or any component or part thereof) infringes upon
or violates any patent, copyright, trade secret, or other proprietary
right referenced in Section 1(a)(iii) above.
b. (i) The indemnities specified in Section 2(a) above shall not apply
to a specific claim, action, or allegation unless User shall have
provided written notice of such claim, action, or allegation to
[*] as soon as practicable, and shall have granted [*] full
opportunity to control the response thereto and the defense
thereof, including without limitation any agreement relating to
the settlement thereof, provided, however, that user shall have
the right to monitor, at its own expense, [*] defense of any such
claim, action, or allegation and, if necessary, to preclude a
default judgment or other loss of rights, to file pleadings on
its behalf in the event [*] fails to fulfill its obligation to
defend User pursuant to this Section 2.
(ii) In the case of a claim based on a breach of the representation
and warranty contained in Section 1(a)(iii) above, the indemnity
specified in Section 2(a) shall not apply to any claim, action,
or allegation (or any judgment or order related thereto) based
upon: (a) the use by User of the Sublicensed Software in
combination with other hardware or software not supplied by [*],
where the use of the Sublicensed Software alone is not claimed or
alleged to be an infringement; (b) the modification or alteration
of the Sublicensed Software in a manner that is not approved by
[*]; or (c) the failure by User to implement a release or
engineer change order for the Sublicensed Software issued by [*]
(which release or change order does not preclude the Sublicensed
Software from meeting the standards specified in Section 1(b))
c. In the event that the Sublicensed Software (or any component or part
thereof) becomes the subject of any claim, action, or allegation of
the type specified in Section 1(a)(iii), [*] shall promptly use all
reasonable efforts at its expense: (a) to procure for User the right
to continue using the Sublicensed Software (or applicable component or
part thereof); or (b) if such continued use cannot be so procured, to
modify it to become non-infringing; or (c) if such modification cannot
be so implemented, to provide substitute hardware, software, or other
products, components or parts of similar capability acceptable to and
approved by User, which approval shall not be unreasonably withheld or
delayed.
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission
-2-
<PAGE> 50
d. THE FOREGOING STATES THE ENTIRE OBLIGATION OF [*] WITH RESPECT TO THE
INFRINGEMENT OF PATENTS, COPYRIGHTS, AND OTHER PROPRIETARY RIGHTS.
e. The foregoing indemnification is by [*] only. Epic makes no
indemnification pursuant to, and Epic shall have no liability arising
out of, this section.
3. LIMITATION OF LIABILITY
Except as specifically set forth in Sections 1 and 2 above, [*] shall have
no liability of any kind to the User, whether direct or indirect, for any
loss or damage suffered by the User or its employees, agents or
representatives, or customers or patients using the facilities or retaining
the services of the User, as a result of or arising out of the Sublicensed
Software.
The liability of [*] for any loss or damage directly or indirectly suffered
by User as a result of any defects in the Sublicensed Software or any acts
of omission of [*] or its officers, employees, agents, or representatives
hereunder shall in no event exceed any amount equal to the license fees
paid or owed to [*] by Epic in respect of the Sublicensed Software and/or
services on account of which User has suffered loss or damage. The
foregoing shall not apply to claims of property damage or bodily injury or
those claims based on the willful misconduct of InterSystems.
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, IN NO EVENT SHALL [*] BE
LIABLE FOR SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES BASED UPON BREACH
OF WARRANTY, BREACH OF CONTRACT, NEGLIGENCE, STRICT TORT, OR ANY OTHER
LEGAL THEORY EVEN IF [*] HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES. SUCH DAMAGES SHALL INCLUDE, WITHOUT LIMITATION, LOSS OF PROFITS,
LOSS OF SAVINGS OR REVENUE, LOSS OF USE OF THE LICENSED SOFTWARE OR ANY
ASSOCIATED EQUIPMENT OR SOFTWARE, COST OF CAPITAL, COST OF ANY SUBSTITUTE
EQUIPMENT, FACILITIES OR SERVICES, DOWNTIME, THE CLAIMS OF THIRD PARTIES
(INCLUDING, WITHOUT LIMITATION, CUSTOMERS OR OTHER PERSONS USING THE
FACILITIES OF THE USER), AND PROPERTY DAMAGE.
4. PROPRIETARY RIGHTS AND CONFIDENTIALITY
a. The Sublicensed Software and related materials (including, without
limitation, the System Documentation) are and shall remain, the sole
property of [*] or one or more of its affiliates. No right to print or
copy, in whole or in part, any such Sublicensed Software, System
Documentation or related materials is granted hereunder except as
herein expressly provided.
b. EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, THE USER AGREES NOT TO
(i) DECOMPILE, DISASSEMBLE OR REVERSE ENGINEER THE LICENSED SOFTWARE
OR (ii) USE OR DISCLOSE OR DIVULGE TO OTHERS ANY DATA OR INFORMATION
RELATING TO THE LICENSED SOFTWARE AND/OR THE TECHNOLOGY, IDEAS,
CONCEPTS, KNOW-HOW AND TECHNIQUES EMBODIED THEREIN.
c. The obligations of confidentiality and non-use described in Section
4(b) above shall not be deemed to include disclosure or other use of
such data or information to the extent that the User can prove the
same is or becomes publicly known within the public domain (other than
by acts attributable to the User or any of its officers, agents,
shareholders of
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
-3-
<PAGE> 51
privately-held companies, employees or representatives). Information
shall not be deemed to be in the public domain by reason of the
general licensing and other commercial disposition of the Sublicensed
Software by [*] in the ordinary course of its business. The existence
of a copyright notice shall not cause, or be deemed or construed as
causing, the Sublicensed Software or System Documentation to be
published copyright work or to be in the public domain.
d. Nothing contained in this Section shall prohibit the User or any of
its officers, agents, shareholders, employees or representatives from:
(i) using his or its general technical skills when not otherwise
inconsistent with the terms hereof; or
(ii) disclosing data or information pursuant to any enforceable
administrative or judicial order, provided, however, that the
User first notifies [*] of the entry or existence of such order
and of the User's intention to comply with its terms. Data or
information shall not be deemed to be in the public domain solely
by reason of any such order.
e. The User further agrees:
(i) except for back-up security purposes, not to copy, reproduce or
duplicate, or allow to be copied, reproduced or duplicated, in
whole or in part, the Sublicensed Software, System Documentation
or any related materials without the prior written consent of
InterSystems;
(ii) not to provide or otherwise make available any Sublicensed
Software, System Documentation or related materials in any form
to any other Person or organization, without the prior written
consent of InterSystems; and
(iii) that it will take appropriate action with its officers, agents,
shareholders, employees or representatives, by instruction,
agreement or otherwise, to satisfy its obligations under this
Agreement with respect to use, copying, modification, and
protection and security of the Sublicensed Software, System
Documentation and related materials. Without limiting the
generality of the foregoing, the Customer shall in any event
denote the same degree of care to protecting the Sublicensed
Software and System Documentation as it devotes to the
protection of its own confidential and proprietary information.
f. In the event of any breach or threatening breach of the provisions of
this Section, [*] shall, in addition to all other rights and remedies
available to it at law or in equity, be entitled to a temporary or
permanent decree or order restraining and enjoining such breach and
the User shall not plead in defense thereto that there would be an
adequate remedy at law, it being hereby expressly acknowledged and
understood that damages at law will be an inadequate remedy in the
event of such a breach or threatened breach.
g. If, having complied with the foregoing provisions of this Section, the
User has actual notice of any unauthorized possession, use or
knowledge of any part of the Sublicensed Software or physical
embodiment thereof, or of the System Documentation any other
information made available pursuant to this Agreement by anyone else
other than Persons authorized by this Agreement to have such
possession, use or knowledge, the User agrees to notify [*]
promptly of the circumstances surrounding such unauthorized
possession, use or knowledge.
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
-4-
<PAGE> 52
h. The User shall not remove or destroy any proprietary markings or
proprietary legends placed upon or contained within the Sublicensed
Software or any related materials or System Documentation in the
User's possession.
i. Subject to other restrictions contained herein, User shall have the
right to grant access to the Sublicensed Software to others to the
same extent that User has the right to grant access to Epic's Program
Property under User's license agreement with Epic.
5. DEFINITIONS
For the purposes of this Addendum only, the following definitions apply to
the capitalized terms as follows.
"Affiliate" means, as to a specified Person, any entity controlling,
controlled by or under common control with such Person. For purposes of
this definition the term "control" shall mean the power to control the
operations and policies of such Entity, whether by ownership of voting
stock or other securities or interests, by contract or otherwise.
"Sublicensed Software" means the computer programs (which, unless otherwise
determined by [*] in its sole discretion, shall be in Object Code version
only) licensed by [*] through Epic to the Customer hereunder, which are
more fully identified as [*] software in Exhibit 1(a) to the Epic Standard
License Agreement of which this is a part, together with any Enhancements
and related items which InterSystems may announce while the Agreement is in
effect.
"System Documentation" means the documentation, reference manuals, user
guides and other standard visually readable materials relating to the
Sublicensed Software furnished by [*] to the VAR (Epic) and licensed by
Epic to the Licensee hereunder.
"User" means the Licensee in the Epic License and Support Agreement to
which this is a part.
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
-5-
<PAGE> 53
[*] ADDENDUM
This is a software license granted by [*], with its mailing address at [*]. The
[*] (SOFTWARE) is licensed to you as the end user; it is not sold. The SOFTWARE
is subject to the following license terms and conditions.
1. LICENSE
1.1 COPYRIGHT
The SOFTWARE is copyrighted material. Once you have paid the required
license fee, you may use the SOFTWARE for as long as you do not
violate the copyright and if you follow these simple rules.
1.2 MAXIMUM NUMBER OF USERS
You may use the SOFTWARE on any computer or computer network for which
it is designed so long as no more than the specified number of user(s)
(see comments in Exhibit 1(a) to the main license agreement with Epic)
use it at any one time. If you increase the number of users as
indicated above, you must upgrade your license to the appropriate
number of users or pay for additional copies of the SOFTWARE.
1.3 BACKUP COPIES
You may make no more than three (3) copies of the SOFTWARE for backup
purposes and all such copies, together with the original, must be kept
in your possession or control.
1.4 MODIFICATIONS
You may not make any changes or modifications to the Licensed
SOFTWARE, and you may not decompose, disassemble, or otherwise reverse
engineer the SOFTWARE. You may not rent or lease it to others.
1.5 BREACH OF THIS AGREEMENT
In the event you breach this license agreement, [*] may at its sole
option in addition to other remedies terminate your right to use the
SOFTWARE.
2. USING COMPILED QUERY ROUTINES
2.1 QUERY ROUTINES
Compiled Query Routines that are generated by the [*] compiler may
be used, given away or sold without additional license or fees.
3. LIMITED WARRANTY
3.1 DISTRIBUTION MEDIA AND DOCUMENTATION
[*] warrants the physical distribution media (diskettes, tape, etc.)
and physical documentation shipped with the SOFTWARE to be free of
defects in materials and workmanship for a period of 60 days from the
purchase date. If [*] receives notification within the warranty period
of defects in materials or workmanship, and such notification is
determined to be correct, [*] will replace the defective distribution
media or documentation.
3.2 PRODUCT RETURNS
DO NOT RETURN ANY PRODUCT UNTIL YOU HAVE CALLED THE [*] CUSTOMER
SERVICE DEPARTMENT AND OBTAINED AUTHORIZATION FOR SUCH RETURN.
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission
<PAGE> 54
3.3 BREACH OF THIS LIMITED WARRANTY
The entire and exclusive liability and remedy for breach of this
Limited Warranty shall be limited to replacement of defective
distribution media or documentation and shall not include or extend
any claim for or right to recover any damages, including but not
limited to, loss of profit, data or use of the SOFTWARE, or special,
incidental or consequential damages or other similar damage claims,
even if [*] has been specifically advised of the possibility of such
damages. In no event will [*] liability for any damages to you or
any other person ever exceed the lower of suggested list price or
actual price paid for the license to use the SOFTWARE, regardless of
any form of claim.
3.4 YOUR LEGAL RIGHTS
This limited warranty gives you specific legal rights; you may have
others which vary from state to state. Some states do not allow the
exclusion of incidental or consequential damages, or the limitation on
how long an implied warranty lasts, so some of the above may not apply
to you.
3.5 NO OTHER WARRANTIES
[*] SPECIFICALLY DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING BUT NOT LIMITED TO, ANY IMPLIED WARRANTY OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE.
4. GOVERNING LAW AND GENERAL PROVISIONS
4.1 STATE OF VIRGINIA
This license and Limited Warranty shall be construed, interpreted and
governed by the laws of the State of Virginia and any action hereunder
shall be brought only in Virginia. If any provision is found void,
invalid or unenforceable it will not affect the validity of the
balance of this license and Limited Warranty which shall remain valid
and enforceable according to its terms. If any remedy hereunder is
determined to have failed of its essential purpose, all limitations of
liability and exclusion of damages set forth herein shall remain in
full force and effect. This License and Limited Warranty may only be
modified in writing signed by you and a specifically authorized
representative of [*].
4.2 RESTRICTED RIGHTS LEGEND
Use, duplication or disclosure by the U.S. Government of the computer
software and documentation in this package shall be subject to the
restricted rights under DFARS 52.227-7013 applicable to commercial
computer software. All rights not specifically granted in this
statement are reserved by [*].
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
<PAGE> 55
[*] ADDENDUM
The following provisions apply to the license to the [*] Corporation object code
version of [*] Software") licensed under the Agreement.
1. If there is a limitation on the number of copies specified in Exhibit 1(a)
of the Agreement, then You may not make any additional copies of the [*]
Software and may use only the number of copies stated in Exhibit 1 (a). If
Exhibit 1(a) states that you have a site license, then You may use an
unlimited number of copies of the [*] Software for a single Directory, but
only in conjunction with Your licensed use of Program Property. In either
case, this is a run-time license only.
2. You shall not grant any sublicenses to the [*] Software to any other party
and You shall not sell or otherwise transfer any copies to any other party.
3. The [*] Software remains the proprietary property of [*] Corporation. You
shall not reverse engineer, disassemble, or decompile the [*] Software. You
shall comply with all United States export or technology transfer
restrictions at all times in connection with the [*] Software.
4. DISCLAIMER OF WARRANTY: THE [*] SOFTWARE (INCLUDING WITHOUT LIMITATION ANY
DOCUMENTATION RELATED TO THE [*] SOFTWARE) IS BEING PROVIDED AND IN EACH CASE
SHALL BE PROVIDED TO YOU STRICTLY "AS IS" WITHOUT WARRANTY OF ANY KIND. NO
WARRANTY OF ANY KIND IS BEING PROVIDED OR WILL BE PROVIDED TO YOU OR ANY THIRD
PARTY. THE ENTIRE RISK AS TO THE RESULTS AND PERFORMANCE OF THE [*] SOFTWARE IS
HEREBY EXPRESSLY ASSUMED BY YOU. EPIC AND [*] CORPORATION EACH HEREBY DISCLAIM
ANY AND ALL WARRANTIES OF ANY KIND OR NATURE PERTAINING OR RELATING TO THE [*]
SOFTWARE OR ANY PART THEREOF, WHETHER EXPRESS OR IMPLIED OR WRITTEN OR ORAL,
INCLUDING BUT NOT LIMITED TO IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS
FOR A PARTICULAR PURPOSE.
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission
<PAGE> 1
EXHIBIT 10.15
[MEDIC COMPUTER SYSTEMS LOGO]
This MASTER SOFTWARE LICENSE AND MAINTENANCE AGREEMENT ("Agreement") is made
this 1st day of May 1999, between Medic Computer Systems, Inc., having its
principal offices at 8601 Six Forks Road, Suite 300, Raleigh, North Carolina
27615 ("Medic") and The TriZetto Group Inc., having its principal office at 567
San Nicolas Drive, Suite 360, Newport Beach, California, 92660. ("Client").
1. LICENSE.
In accordance with the terms herein, Medic grants to Client, and Client accepts
from Medic, a perpetual, nonexclusive and nontransferable license to use the
software and related documentation described on the Purchase Schedule attached
hereto (the "Software") for the number of users as set forth on the Purchase
Schedule. All modifications, enhancements and updates to the Software provided
by Medic shall become part of the Software and subject to the terms and
conditions herein.
The Software shall be used only for Client's internal business needs and shall
be installed on a Central Processing Unit ("CPU") installed at the above
address; provided that Client may use the Software in combination with a
different CPU upon the payment of an additional license fee. Client shall not
permit any third party to use the Software or grant a sublicense for the use of
the Software, or allow access to the licensed Software through terminals located
outside Client's business premises.
In the event that Client should hereafter combine with any other entity or
person, Client shall promptly notify Medic of such combination and that portion
of the combined entity or person previously unlicensed to use the Software
shall be licensed to use the Software only upon the payment of an additional
license fee.
2. COPIES.
The license granted herein includes the right to copy the object code only in
non-printed, machine readable form in whole or in part as necessary for
Client's own business use, including the making of back-up copies. In order to
protect Medic's trade secret and copyrights in the Software, Client agrees to
reproduce and incorporate Medic's trade secret or copyright notice in any
allowed copies, compilations, modifications or partial copies. Client may
obtain additional copies from Medic at Medic's standard prices then in effect.
Violation of any provision of this paragraph shall be the basis for immediate
termination of this Agreement.
3. PRICE AND PAYMENT.
Client shall pay Medic an initial payment of [*] of the Total Purchase Price as
set forth in the Purchase Schedule upon execution of this Agreement and
the remaining [*] of the Total Purchase Price upon installation of the
Software. In addition to the license fee, Client shall pay all transportation
charges and all taxes (including, but not limited to sales, use, privilege, ad
valorem or excise taxes, but excluding all income taxes payable by Medic),
however designated, levied or based on amounts payable to Medic under this
Agreement. All payments hereunder shall be made in United States Dollars. All
other payments shall be due and payable within thirty (30) days of date of
invoice. On any invoice not paid within thirty (30) days, Client shall pay a
service charge accruing thereafter until the date of payment equal to the lesser
of (i) the rate of one and one-half percent (1.5%) per month, or (ii) the
maximum lawful interest rate applicable. On noncredit sales, shipment shall be,
at Medic's election, either cash with order, C.O.D. or other normal commercial
means. All collection costs shall be borne by Client, including reasonable
attorney's fees, in the event Medic commences litigation upon default by Client
of its obligation under this Agreement.
In the event that Client is leasing, the Total Purchase Price shall be due and
payable upon installation of the Software and the delivery and acceptance
receipt of the leasing company must be signed upon Software installation.
4. TITLE TO SOFTWARE AND CONFIDENTIALITY.
The Software, any modifications thereto, all programs developed hereunder, and
all copies thereof are proprietary to Medic (or to the third parties under
whose license Medic may distribute the Software) and title thereto remains in
Medic or in such third party. All applicable rights to patents, copyrights,
trademarks and trade secrets in the Software or any modifications made at
Client's request are and shall remain in Medic or in such third party. Client
shall not reverse assemble or decompile in whole or in part the Software.
Client shall not sell, license, transfer, publish, disclose, display or
otherwise make available the Software or copies thereof to others. Client agrees
to secure and protect the Software, documentation and copies thereof in a
manner consistent with the maintenance of Medic's rights therein and to take
appropriate action by instruction or agreement with its employees or consultants
who are permitted access to the Software to satisfy its obligations hereunder.
Violation of any provision of this paragraph shall be the basis for immediate
termination of this Agreement. The obligations set forth in this paragraph
shall survive the cancellation of this agreement. Liability for breach of this
clause shall not be limited to the dollar value of the contract.
Each party agrees that it shall not disclose to any third party the terms and
conditions of this Agreement or any information concerning the customers, trade
secrets, methods, processes or procedures or any other confidential, financial,
or business information of the other party which it learns during the course of
its performance of this Agreement, without the prior written consent of such
other party. This obligation shall survive the cancellation or other termination
of this Agreement.
5. TRAINING.
Medic will furnish Client with the number of training and implementation hours
identified on the Purchase Schedule attached
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
1
<PAGE> 2
hereto. Client shall be responsible for training key personnel and new staff
additions on proper use of the Software.
6. MAINTENANCE.
(a) Medic agrees, upon Client's request and payment of the applicable
maintenance fees, to provide the following maintenance support and services for
the Software: 1-800 Help Desk Support 8:00 A.M. - 9:00 P.M. Eastern Time,
Monday through Friday, Medic recognized holidays excluded; and Beeper service
9:00 A.M. - 6:00 P.M. ET Saturday and Sunday for emergency calls only. Beeper
service outside these hours and nonemergency calls are billable at Medic's then
prevailing rates.
(b) Helpdesk Support is defined as telephone support for Medic's Software.
This service ranges from simple application questions to in-depth technical
assistance. Help Desk Services does not provide unlimited training via phone
support. Examples of the in-depth services provided are rebuilding corrupted
data files and troubleshooting Medic equipment i.e. terminals and printers.
Network Support Services are not included in standard Help Desk Support, but
may be contracted for separately. If a hardware problem is diagnosed and cannot
be resolved over the phone, Medic Help Desk Support Staff will communicate the
problem to our Field Engineering Dispatcher who, if Client is covered by Medic
Hardware Maintenance, will contact Hardware Support for service.
(c) Medic shall use commercially reasonable efforts to provide periodic
Software releases that include enhancements, state and national insurance
changes and corrections to the Software, as applicable.
(d) Medic shall not be responsible for maintaining Client- or
third-party-modified portions of the Software or portions of the Software
affected by such modifications. Corrections for difficulties or defects
traceable to the Client's or a third party's errors or system changes may be
billed to Client at Medic's then standard time and material charges. Medic
shall be responsible for maintaining only the current and next most current
release of the Software.
7. CLIENT'S RESPONSIBILITIES.
In the event that Client requests maintenance services pursuant to Paragraph 7
herein,
(a) Client shall backup, without errors, its financial and medical data on a
daily basis per documentation and follow all standard practices and procedures
in accordance with the Software documentation when operating the computer
system, regardless of the Software, including the performance of all remedial
and corrective actions prior to seeking assistance from Medic.
(b) Client shall maintain hardware equipment on which the Software is
installed in good working order whether under Medic, third party or time and
material maintenance. If hardware is not covered under formal maintenance,
Client must maintain adequate maintenance logs to document on-going hardware
maintenance and service.
(c) Client shall identify and provide a "key" individual contact, who has been
trained by Medic staff, to act as a liaison between Client and Medic.
(d) Client shall provide Medic access to the Software via a support modem over
a dedicated, data quality telephone line. Such access shall allow Medic, from
time to time, to conduct an audit of the Software. As required by Medic, Client
shall provide Medic with sufficient documentation, information, assistance,
support and test time on Client's computer system, to duplicate the problem,
certify that the problem is with the Software, and certify that the problem has
been corrected.
(e) Client shall take all necessary steps to ensure that no virus is loaded on
the system running the Software from any outside source. Virus diagnosis and
removal services are not covered by Software maintenance and are billable at
the then prevailing rates.
(f) Client shall install all updates within thirty (30) days of receipt from
Medic thereby maintaining the system on Medic's most recent release.
8. CHARGES FOR MAINTENANCE SUPPORT AND TERM.
(a) The charges for software maintenance are those identified in the attached
Purchase Schedule. All invoices shall be due and payable in full thirty (30)
days from the date of such invoice. All invoices past due shall bear interest
thereafter until the date of payment at a rate equal to the lesser of (i) the
rate of one and one-half percent (1.5%) per month, or (ii) the maximum lawful
interest rate applicable. All charges are subject to change at any time after
the end of the initial one (1) year term. Appropriate taxes will be added to
the charges as necessary and applicable. If Client goes over sixty (60) days
without payment, Client's account will be put on support hold. No company
services, including EDI services, will be provided until account is brought
current. If Client elects not to purchase software maintenance or Client
discontinues maintenance and then subsequently elects to obtain maintenance,
maintenance will be available for the normal fee plus a one-time fee equal to
all missed maintenance fees and a one time charge of $[*], provided Medic can
bring Client up to the current release.
(b) The initial term of this Agreement shall be one year. All charges are
subject to change at any time after the end of the initial one (1) year term.
Thereafter, the term of this Agreement shall be automatically extended for
successive one year periods until terminated by either party upon prior written
notice to the other, which notice shall be given at least ninety (90) days
prior to the end of the applicable term. Maintenance for any additional options
or applications installed shall commence pursuant to this Agreement upon
installation of such software and upon payment of the applicable maintenance
fee shown on the Purchase Schedule, as such Schedule may be modified from time
to time.
9. CHARGES FOR EDI SERVICES AND TERM.
The charges for EDI services are those identified in the attached Purchase
Schedule. All invoices shall be due and payable in full thirty (30) days from
the date of such invoice. Medic will provide FastServices as outlined in the
attached Purchase Schedule for as long as the Client elects to utilize this
service. Either party may terminate FastServices by giving the other thirty
(30) days written notice prior to termination. Medic reserves the right to
terminate FastServices if an account is over sixty (60) days past due.
- - FastClaim
MEDIC shall not be responsible for any errors or omissions in any Claims
received from Client or transmitted to Payers. MEDIC shall not be responsible
for any unauthorized or other improper transmission by or on behalf of any Payee
or any other person and Payers shall be responsible to verify the authenticity
of each Claim.
Record Keeping and Transmission Verification
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
2
<PAGE> 3
CLIENT SHALL MAINTAIN A PERMANENT, COMPLETE, AND ACCURATE RECORD OF ALL CLAIMS
TRANSMITTED THROUGH THE MEDIC FASTCLAIM SYSTEM, INCLUDING THE NUMBER OF CLAIMS
PER TRANSMISSION AND THE TOTAL DOLLAR AMOUNT OF EACH TRANSMISSION. ALL SUCH
RECORDS SHALL BE RETAINED AND PRESERVED FOR AT LEAST EIGHTEEN (18) MONTHS FROM
THE DATE OF TRANSMISSION AND SHALL BE SUBJECT TO INSPECTION, COPYING, AND AUDIT
BY MEDIC AT ALL REASONABLE TIMES. IT IS ALSO THE RESPONSIBILITY OF CLIENT TO
REVIEW EACH TRANSMISSION REPORT SENT TO CLIENT BY MEDIC AND TO IMMEDIATELY
NOTIFY MEDIC OF ANY ERROR, OMISSION, OR OTHER DISCREPANCY BETWEEN THE REPORT AND
THE ACTUAL CLAIMS TRANSMITTED.
- - FastReceipt
Client agrees to reimburse Medic for any insufficient or returned checks that
appear in the FastReceipt process
- - FastBill
Client acknowledges that Medic is using the USPS FastForward Move update on
Client's records and Client agrees to comply with the USPS regulations. All
forward results would be utilized for the sole purpose of updating preexisting
addresses.
10. DATA CONVERSION.
Medic to use commercially reasonable efforts to convert data (if possible)
including patient demographics and associated balance forwards, only as
identified in the attached Purchase Schedule. Where a conversion is desired,
Client agrees to provide the contact person and the telephone number of its
current computer system vendor, and is responsible (through its vendor) for
providing to Medic all necessary and specified tapes, diskettes, and/or file
components and documentation necessary to perform an electronic conversion. All
costs associated with the electronic conversion (i.e. media, freight, current
vendor costs, readable data format, data conversion lab) are the responsibility
of Client. A conversion implementation schedule will be developed and mutually
agreed upon by Medic and Client.
11. INDEMNITY.
Medic at its own expense will defend and hold Client harmless from any claim
asserted against Client to the extent that it is based on a claim that any
Software used within the scope of this Agreement infringes any patents,
copyrights, license or other property right of a third party. Client shall
promptly notify Medic in writing of such claim. Medic shall have the right to
control the defense of all such claims, lawsuits and other proceedings. In no
event shall Client settle any such claim, lawsuit or proceeding without Medic's
prior written approval. In all events, Client shall have the right to
participate in the defense of any such suit or proceeding through counsel of
its own choosing. If, as a result of any claim of infringement against any
patent, copyright, license or other property right, Medic or Client is enjoined
from using the Software, or if Medic believes that the Software is likely to
become the subject of a claim of infringement, Medic at its option and expense
may (i) procure the right for Client to continue to use the Software, (ii)
replace or modify the Software so as to make it noninfringing, with similar
functionality, or (iii) discontinue the license granted herein and refund to
Client the license fees paid hereunder. The foregoing states the entire
liability of Medic with respect to infringement of any copyrights or patents by
the Software or any parts thereof. This indemnity shall not apply if the
infringement is caused in whole or in part by Software changes made by Client
or other non-Medic personnel.
12. WARRANTY AND DISCLAIMER OF WARRANTIES.
(a) Medic represents that for a period of ninety (90) days from the
installation of the Software, the Software will (i) conform, as to all
substantial operational features, to Medic's documentation provided with the
Software when installed and properly used in the operating environment
specified in such documentation and (ii) be free of defects under normal use
which substantially affect system performance. Medic does not represent that
the functions contained in the Software will meet Client's requirements or
that the operation of the Software will be uninterrupted or error free.
(b) The Client must notify Medic in writing, within ninety (90) days from
the date of installation of the Software of its claim of any such defect. If
the Software is found defective by Medic, Medic's sole obligation under this
warranty is to remedy such defect.
(c) With respect to maintenance services provided, Client agrees that
Medic's obligations under this Agreement are to use commercially reasonable
efforts to diagnose errors or malfunctions in the system, and to advise Client
of possible corrective measures.
(d) THE ABOVE IS A LIMITED WARRANTY AND IT IS THE ONLY WARRANTY MADE BY
MEDIC. MEDIC MAKES AND CLIENT RECEIVES NO OTHER WARRANTY, EXPRESS OR IMPLIED
AND THERE ARE EXPRESSLY EXCLUDED ALL WARRANTIES OF MERCHANTABILITY AND FITNESS
FOR A PARTICULAR PURPOSE. EXCEPT FOR CLAIMS BROUGHT UNDER PARAGRAPH 11, MEDIC
SHALL HAVE NO LIABILITY FOR SPECIAL, INDIRECT, CONSEQUENTIAL, EXEMPLARY, OR
INCIDENTAL DAMAGES OR FOR ANY DAMAGES WHATSOEVER RESULTING FROM LOSS OF USE,
DATA OR PROFITS, ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR THE USE
OR PERFORMANCE OF THE SOFTWARE, EVEN IF IT HAS BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES. IN NO EVENT SHALL MEDIC BE LIABLE IN THE AGGREGATE FOR ANY
CLAIMS OR DAMAGES IN AN AMOUNT EXCEEDING THE AMOUNT PAID BY CLIENT FOR THE
SOFTWARE LICENSE SET FORTH IN THE ATTACHED PURCHASE SCHEDULE.
(e) The warranty shall not apply if modifications to the Software made by
Client are the cause of any operational difficulties experienced. If
difficulties or defects are traceable to Client's errors or systems changes,
any repairs or corrections made by Medic may, at Medic's discretion, be billed
at Medic's then prevailing time and materials charges.
(f) Medic warrants that the Medic PM version 7.0.X, dated 12/15/97 or
later has been programmed to be year 2000 compatible, in addition IBM warrants
that AIX version 4.3.1 has been programmed to be year 2000 compatible.
Additionally, Client shall be entitled to any warranties which are afforded
Medic through its third party relationships.
Medic has defined "Y2K Compatible" as meaning that Medic applications (i) will
completely and accurately address, present, produce, store and calculate data
involving dates from, into and between the twentieth and twenty-first
centuries, which includes the years 1999 and 2000 and any leap year
calculations, and will not produce abnormally ending or incorrect results
involving such dates as used in any forward or regression date based function;
and (ii) will support both two and four digit years to be displayed where
<PAGE> 4
appropriate and will perform calculations which involve a four digit year field.
13. CANCELLATION.
If Client fails to pay any amount due hereunder or otherwise commits a breach
hereof, and persists in such failure for ten (10) days after receiving written
notice thereof from Medic, Medic may cancel this Agreement and declare any
unpaid amounts owed hereunder immediately due and payable. Thereupon Client
shall immediately return the Software and related documentation and all copies
thereof to Medic. Cancellation of the license granted hereunder shall be in
addition to and not in lieu of any other remedies available to Medic.
14. SOURCE CODE ESCROW.
A current version of the Software source code and all necessary documentation
has been put into escrow with the law firm of Wyrick Robbins Yates & Ponton LLC
in Raleigh, North Carolina. Source code is eligible for release in the event
Medic liquidates or shall be declared bankrupt. If Client receives source code
under the above circumstances, such source code shall be deemed to be Software
and subject to the term and conditions herein. The source code is to be used
solely for Client's maintenance of the Software.
15. HIRING OF EMPLOYEES.
During the term of the Agreement and for one year thereafter, Client will not,
without the prior written consent of Medic, offer employment to, employ or
subcontract work to any person employed then or within the preceding twelve
months by Medic. If this provision is violated, client agrees to pay as
damages, an amount equal to one times the annual compensation of the employee
or subcontractor to Medic.
16. GENERAL.
(a) The terms of this agreement will take precedence over the terms of any
present or future order from Client for any license or services hereunder. This
Agreement is a master software license and maintenance agreement. It is
contemplated that additional software may be licensed hereunder by supplementing
the Purchase Schedule attached hereto with later dated schedules upon agreement
by both parties hereto. Notwithstanding any revision of the Purchase Schedule,
this Agreement shall continue in full force and effect and shall govern all such
later dated schedules and transactions as if such schedules were part of this
Agreement on the date this Agreement was executed. Client agrees that the
installation of future software from Medic is conclusive evidence of its
agreement that the license for such software provided is governed by the terms
of this Agreement.
(b) Client shall, notwithstanding any assistance from Medic, bear the sole
risk and responsibility for 1) the selection of the Software to achieve the
Client's intended use; 2) proper use of the Software; 3) its satisfaction with
the results achieved through operation of the Software; and 4) any
modifications made to the Software by Client.
(c) If Software is lost or damaged during shipment from Medic, Medic shall
replace such Software at no additional charge to Client. If Software is lost or
destroyed while in the possession of the Client, Medic shall replace such
Software, upon Client's request, at Medic's then prevailing replacement charges.
(d) Each party acknowledges that it has read this Agreement, understands it,
and agrees to be bound by its terms, and further agrees that this Agreement
along with the Hardware Equipment and Maintenance Agreement and the Purchase
Schedule attached hereto is complete and exclusive statement of the Agreement
between the parties with respect to the license of the Software or otherwise
relating thereto, which supersedes all prior proposals, understandings and all
other agreements, oral and written. This Agreement may not be modified or
altered except by a written instrument duly executed by both parties.
(e) Neither party hereto shall be liable or deemed in default for any delay or
failure in performance hereunder resulting from any cause beyond its reasonable
control.
(f) This Agreement, and any action arising out of or related to it, shall be
governed by and construed in accordance with the laws of the State of North
Carolina. In the event that any action or proceeding is brought in connection
with this Agreement, the prevailing party shall be entitled to recover its
costs and reasonable attorneys' fees.
(g) If any provision of this Agreement shall be held to be invalid or
otherwise unenforceable, the validity, legality and enforceability of the
remaining provisions shall in no way be affected or impaired.
(h) This Agreement shall be binding upon and for the benefit only of the
parties hereto and their respective successors and permitted assigns. Client
may assign this Agreement and any of its rights, duties or obligations
hereunder only with the prior written consent of Medic. Transfer of Client's
rights and obligations under this Agreement will require an additional
Software license fee paid to Medic unless otherwise specified.
(i) The waiver or failure of Medic to exercise in any respects any right
provided for herein shall not be deemed a waiver of any further right
hereunder.
(j) All communications or notices permitted or required to be given or served
under this Agreement shall be in writing, shall be addressed to the parties at
the appropriate party's address as set forth below, and shall be deemed to have
been duly given or served if delivered in person or deposited in the United
States mail, certified mail, return receipt requested.
(k) Any dispute or claim arising out of, or in connection with, this Agreement
shall be finally settled by binding arbitration in Raleigh, North Carolina, in
accordance with N.C. Gen. Stat. Section 1-567.1 et seq. (the "Uniform
Arbitration Act") and the then-current rules and procedures of the American
Arbitration Association by one (1) arbitrator appointed by the American
Arbitration Association. The arbitrator shall apply the law of the State of
North Carolina, without reference to rules of conflict of law or statutory rules
of arbitration, to the merits of any dispute or claim. Judgment on the award
rendered by the arbitrator may be entered in any North Carolina court of
competent jurisdiction. The parties agree that, any provision of applicable law
notwithstanding, they will not request, and the arbitrator shall have no
authority to award punitive or exemplary damages against any party.
APPROVAL
4
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized representative.
Approved By: Approved By:
MEDIC COMPUTER SYSTEMS, INC. CLIENT
By: /s/ M.K. O'Leary By: /s/ Kerry M. Kearns
---------------------------- ----------------------
Signature Signature
Name: /s/ M.K. O'Leary Name: /s/ Kerry M. Kearns
------------------------- --------------------
Printed Printed
Title: CEO Title: Senior VP
------------------------ --------------------
Date: 5/3/99 Date: 5/3/99
------------------------ --------------------
5
<PAGE> 6
SOFTWARE LICENSE AND MAINTENANCE AGREEMENT ADDENDUM
This Software License and Maintenance Agreement Addendum is entered
into this 1st day of May, 1999, by and between Medic Computer Systems, Inc.
("Medic") and The TriZetto Group Inc. ("TriZetto"), to supplement and modify the
terms and conditions of the Software License and Maintenance Agreement
("Agreement") being executed concurrently herewith and to which this Addendum is
attached and incorporated by reference, as if fully set forth in such Agreement.
WITNESSETH:
WHEREAS, the parties intend to supplement and modify their Agreement to
the extent provided for herein.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and as set forth in the parties' Agreement, Medic and TriZetto do
hereby agree as follows:
1. [*]
2. [*]
3. Terms of payment are outlined as follows:
Initial payment due to execute Agreement is [*] of total investment or $[*].
Additional [*] payments each in the amount of [*] are due at the beginning
of each month following completion of the Agreement until total investment,
$[*] is paid in full. The first of the installment payments shall be made
on [*].
4. Set forth on Exhibit A hereto are Sections from the Agreement, which are
hereby amended to reflect the changes thereon and except as expressly
indicated on Exhibit A hereto, all other Sections of the Agreement shall
remain unchanged and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Addendum on the date
first written above.
MEDIC COMPUTER SYSTEMS, INC. THE TRIZETTO GROUP
By: /s/ M. K. O'Leary By: /s/ Kerry M. Kearns
--------------------------- ----------------------------
Its: CEO Its: SVP
--------------------------- ----------------------------
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
<PAGE> 7
EXHIBIT A
Revised TERMS OF AGREEMENT
1. Revised Section 1:
License.
In accordance with the terms herein, Medic grants to Client, and Client accepts
from Medic, a perpetual, nonexclusive and nontransferable license to use the
software and related documentation described on the Purchase Schedule attached
hereto (the "Software") for the number of users, and Medic companies as set
forth on the Purchase Schedule. All modifications, enhancements and updates to
the Software provided by Medic shall become part of the Software and subject to
the terms and conditions herein.
The Software shall be used only (i) for Client's internal business needs and
(ii) for Client's use on behalf of third parties in connection with Client's
provision of application support services to such third parties on a contract or
outsource basis, and shall be installed on no more than 6 Central Processing
Units ("CPUs"); provided that Client may transfer the Software to different CPUs
upon notification to Medic; provided that Client may be required to pay an
additional license fee in the event that Client installs the Software on more
than 6 CPUs, with the amount of such additional license fee to be determined by
Client and Medic after good faith negotiations. Client shall not permit any
third party to use the Software or grant a sublicense for the use of the
Software; or allow access to the licensed Software through terminals located
outside of premises controlled by or operated by or on behalf of Client or for
Customers of Client. Nothing in this section is intended to precluded Client's
ability to offer remote access to its customers for application services.
2. Revised Section 2:
Copies.
The license granted herein includes the right to copy the object code only in
non-printed, machine readable form in whole or in part as necessary for Client's
use as contemplated in Section 1 above, including the making of back-up copies.
In order to protect Medic's trade secret and copyrights in the Software, Client
agrees to reproduce and incorporate Medic's trade secret or copyright notice in
any allowed copies, compilations, modifications or partial copies. Client may
obtain additional copies from Medic at prices to be agreed to by Client and
Medic after good faith negotiations. Violation of any provision of this
paragraph shall be the basis for immediate termination of this Agreement.
3. Revised Section 3:
Price and Payment.
<PAGE> 8
Client shall pay Medic an initial payment of $[*] from the Total Purchase Price
as set forth in the Purchase Schedule upon execution of this Agreement and the
remaining $[*] of the Total Purchase Price shall be paid in [*] installments of
$[*] thereafter (the first installment being due on [*]), until paid in full. In
addition to the license fee, Client shall pay all transportation charges and all
taxes (including, but not limited to, sales, use, privilege, ad valorem or
excise taxes, but excluding all income taxes payable by or attributable to
Medic), however designated, levied or based on amounts payable to Medic under
this Agreement. All payments hereunder shall be made in United States Dollars.
All other payments shall be due and payable within thirty (30) days of date of
invoice. On any invoice not paid within thirty (30) days, Client shall pay a
service charge accruing thereafter until the date of payment equal to the lesser
of (i) the rate of one and one-half percent (1.5%) per month, or (ii) the
maximum lawful interest rate applicable. On noncredit sales, shipment shall be,
at Medic's election, either cash with order, C.O.D. or other normal commercial
means. All collection costs shall be borne by Client, including reasonable
attorneys' fees, in the event Medic commences litigation upon default by Client
of its obligations to pay any amounts owing to Medic under this Agreement.
4. Revised Section 4:
Title to Software and Confidentiality.
The Software, any modifications thereto, all programs developed hereunder, and
all copies thereof are proprietary to Medic (or to the third parties under whose
license Medic may distribute the Software) and title thereto remains in Medic or
in such third party. All applicable rights to patents, copyrights, trademarks
and trade secrets in the Software or any modifications made at Client's request
are and shall remain in Medic or in such third party. Client shall not reverse
assemble or decompile in whole or in part the Software. Client shall not sell,
license, transfer, publish, disclose, display or otherwise make available the
Software or copies thereof to others, except for individuals who may be agents,
independent contractors and/or consultants of Client who perform installation,
integration and/or support services on behalf of Client and who shall agree to
be bound by the provisions set forth in this Section 4. Client agrees to secure
and protect the Software, documentation and copies thereof in a manner
consistent with the maintenance of Medic's rights therein and to take
appropriate action by instruction or agreement with its employees, agents,
independent contractors or consultants who are permitted access to the Software
to satisfy its obligations hereunder. Violation of any provision of this
paragraph shall be the basis for immediate termination of this Agreement. The
obligations set forth in this paragraph shall survive the cancellation of this
Agreement. Liability for breach of this clause shall not be limited to the
dollar value of the contract.
Each party agrees that it shall not disclose to any third party the terms and
conditions of this Agreement or any information concerning the customers, trade
secrets, methods, processes or procedures or any other confidential, financial,
or business information of the other party which it learns during the course of
its performance of this Agreement, without the prior written consent of such
other party. This obligation shall survive the cancellation or other termination
of this Agreement.
5. Revised Sections 7(b), 7(d), 7(e) and 7(f):
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
<PAGE> 9
(b) Client shall maintain hardware equipment on which the Software is installed
in good working order whether under Medic, third party or time and material
maintenance. If hardware is not covered under formal maintenance, Client must
maintain reasonably adequate maintenance logs to document on-going hardware
maintenance and service.
(d) Client shall provide Medic access to the Software via a support modem over a
dedicated, data quality telephone line. Such access shall allow Medic, from time
to time, to conduct an audit of the Software. As reasonably required by Medic,
Client shall provide Medic with sufficient documentation, information,
assistance, support and test time on Client's computer system, to duplicate the
problem, certify that the problem is with the Software, and certify that the
problem has been corrected.
(e) Client shall take all necessary steps to reasonably ensure that no virus is
loaded on the system running the Software from any outside source. Virus
diagnosis and removal services are not covered by Software maintenance and are
billable at the then prevailing rates.
(f) Client shall install all updates within one hundred twenty (120) days of
receipt from Medic thereby maintaining the system on Medic's most recent
release.
6. Revised Section 8(b):
((b) The licenses granted pursuant to section 1 of this Exhibit A are perpetual,
however, as it relates to section 8 of The Master Software and Maintenance
Agreement, the initial term of this Agreement shall be [*]. All charges are
subject to change at any time after the end of the initial one (1) year term,
provided that Medic shall not increase any charges by more than the percentage
increase in the then current [*]. Thereafter, the term of this Agreement shall
be automatically extended for successive one year periods until terminated by
either party upon prior written notice to the other, which notice shall be given
at least ninety (90) days prior to the end of the applicable term. Maintenance
for any additional options or applications installed shall commence pursuant to
this Agreement upon installation of such software and upon payment of the
applicable maintenance fee shown on the Purchase Schedule, as such Schedule may
be modified in a writing signed by Medic and Client from time to time.
7. Revised Section 9:
Charges for EDI Services and Term.
The charges for EDI services are those identified in the attached Purchase
Schedule. All invoices shall be due and payable in full thirty (30) days from
the date of such invoice. Medic will provide FastServices as outlined in the
attached Purchase Schedule for as long as the Client elects to utilize this
service. Either party may terminate FastServices by giving the other thirty (30)
days written notice prior to termination. Medic reserves the right to terminate
FastServices if an account is over sixty (60) days past due.
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
<PAGE> 10
FastClaim
MEDIC shall not be responsible for any errors or omissions in any Claims
received from Client or transmitted to Payers. MEDIC shall not be responsible
for any unauthorized or other improper transmission by or on behalf of any Payee
or any other person and Payers shall be responsible to verify the authenticity
of each Claim.
Record Keeping and Transmission Verification
CLIENT SHALL MAINTAIN A PERMANENT, COMPLETE, AND ACCURATE RECORD OF ALL CLAIMS
TRANSMITTED THROUGH THE MEDIC FASTCLAIM SYSTEM, INCLUDING THE NUMBER OF CLAIMS
PER TRANSMISSION AND THE TOTAL DOLLAR AMOUNT OF EACH TRANSMISSION. ALL SUCH
RECORDS SHALL BE RETAINED AND PRESERVED FOR AT LEAST EIGHTEEN (18) MONTHS FROM
THE DATE OF TRANSMISSION AND SHALL BE SUBJECT TO INSPECTION, COPYING, AND AUDIT
BY MEDIC AT REASONABLE TIMES UPON REASONABLE PRIOR WRITTEN NOTICE. IT IS ALSO
THE RESPONSIBILITY OF CLIENT TO REVIEW EACH TRANSMISSION REPORT SENT TO CLIENT
BY MEDIC AND TO NOTIFY MEDIC OF ANY ERROR, OMISSION, OR OTHER DISCREPANCY
BETWEEN THE REPORT AND THE ACTUAL CLAIMS TRANSMITTED AS SOON AS REASONABLY
PRACTICABLE AFTER RECEIPT OF SUCH REPORT.
FastReceipt
Client agrees to reimburse Medic for any insufficient or returned checks that
appear in the FastReceipt process.
FastBill
Client acknowledges that Medic is using the USPS FastForward Move update on
Client's records and Client agrees to comply with the USPS regulations. All
forward results would be utilized for the sole purpose of updating preexisting
addresses.
8. Revised Section 11:
Indemnity.
Medic at its own expense will defend and hold Client harmless from any claim
asserted against Client to the extent that it is based on a claim that any
Software used within the scope of this Agreement infringes any patents,
copyrights, license or other property right of a third party. Client shall
promptly notify Medic in writing of such claim; provided that the failure to
give such prompt notice shall not affect Medic's obligations hereunder except to
the extent, and solely to the extent, Medic is prejudiced thereby. Medic shall
have the right to control the defense of all such claims, lawsuits and other
proceedings. In no event shall Client settle any such claim, lawsuit or
proceeding without Medic's prior written approval. In all events, Client shall
have the right to participate in the defense of any such suit or proceeding
through counsel of its own choosing. If, as a result of any claim of
infringement against any patent, copyright, license or other property right,
Medic or Client is enjoined from using the Software, or if Medic believes that
the Software is likely to become the subject of a claim of infringement, Medic
at its option and expense may (i) procure the right
<PAGE> 11
for Client to continue to use the Software, (ii) replace or modify the Software
so as to make it noninfringing, with similar functionality, or (iii) discontinue
the license granted herein and refund to Client the license fees paid hereunder.
The foregoing states the entire liability of Medic with respect to infringement
of any copyrights or patents by the Software or any parts thereof. This
indemnity shall not apply to the extent, and solely to the extent, the
infringement is caused in whole or in part by Software changes made by Client or
other non-Medic personnel.
9. Revised Section 12:
Warranty and Disclaimer of Warranties.
(a) Medic represents that for a period of ninety (90) days from the installation
of the Software, the Software will (i) conform, as to all substantial
operational features, to Medic's documentation provided with the Software when
installed and properly used in the operating environment specified in such
documentation and (ii) be free of defects under normal use which adversely
affect system performance. Medic does not represent that the functions contained
in the Software will meet Client's requirements or that the operation of the
Software will be uninterrupted or error free.
(b) The Client must notify Medic in writing, within ninety (90) days from the
date of execution of this Agreement of its claim of any such defect. If the
Software is found defective by Medic in Medic's reasonable judgment, Medic's
sole obligation under this warranty is to remedy such defect
(c) With respect to maintenance services provided, Client agrees that Medic's
obligations under this Agreement are to use commercially reasonable efforts to
diagnose errors or malfunctions in the system, and to advise Client of possible
corrective measures.
(d) THE ABOVE IS A LIMITED WARRANTY AND IT IS THE ONLY WARRANTY MADE BY MEDIC.
MEDIC MAKES AND CLIENT RECEIVES NO OTHER WARRANTY, EXPRESS OR IMPLIED AND THERE
ARE EXPRESSLY EXCLUDED ALL WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE. EXCEPT FOR CLAIMS BROUGHT UNDER PARAGRAPH 11, MEDIC SHALL
HAVE NO LIABILITY FOR SPECIAL, INDIRECT, CONSEQUENTIAL, EXEMPLARY, OR INCIDENTAL
DAMAGES OR FOR ANY DAMAGES WHATSOEVER RESULTING FROM LOSS OF USE, DATA OR
PROFITS, ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR THE USE OR
PERFORMANCE OF THE SOFTWARE, EVEN IF IT HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES. IN NO EVENT SHALL MEDIC BE LIABLE IN THE AGGREGATE FOR ANY CLAIMS
OR DAMAGES IN AN AMOUNT EXCEEDING THE AMOUNT PAID BY CLIENT FOR THE SOFTWARE
LICENSE SET FORTH IN THE ATTACHED PURCHASE SCHEDULE.
(e) This warranty shall not apply if modifications to the Software made by
Client are the cause of any operational difficulties experienced. If
difficulties or defects are traceable to Client's errors or systems changes, any
repairs or corrections made by Medic may, at Medic's discretion, be billed at
Medic's then prevailing time and materials charges.
<PAGE> 12
(f) Medic warrants that the Medic PM version 7.0.X, dated 12/15/97 or later has
been programmed to be Y2K Compatible (as defined below), in addition IBM
warrants that AIX version 4.3.1 has been programmed to be Y2K Compatible.
Additionally, Client shall be entitled to any warranties which are afforded
Medic through its third party relationships.
Medic has defined "Y2K Compatible" as meaning that Medic applications (i) will
completely and accurately address, present, produce, store and calculate data
involving dates from, into and between the twentieth and twenty-first centuries,
which includes the years 1999 and 2000 and any leap year calculations, and will
not produce abnormally ending or incorrect results involving such dates as used
in any forward or regression date based function; and (ii) will support both two
and four digit years to be displayed where appropriate and will perform
calculations which involve a four digit year field.
10. Revised Section 13:
Cancellation.
If Client fails to pay any amount due hereunder or otherwise commits a
material-breach hereof, and persists in such failure for [*] days after
receiving written notice thereof from Medic, Medic may cancel this Agreement and
declare any unpaid amounts owed hereunder immediately due and payable. Thereupon
Client shall immediately return the Software and related documentation and all
copies thereof to Medic. Cancellation of the license granted hereunder shall be
in addition to and not in lieu of any other remedies available to Medic.
11. Revised Section 14:
Source Code Escrow.
A current version of the Software source code and all necessary documentation
has been put into escrow with the law firm of [*]. Source code is eligible for
release in the event Medic liquidates or shall be declared bankrupt. If Client
receives source code under the above circumstances, such source code shall be
deemed to be Software and subject to the term and conditions herein. The source
code is to be used solely for Client's maintenance of the Software.
12. Revised Section 15:
Hiring of Employees.
During the term of the Agreement and for one year thereafter, neither party
will, without the prior written consent of the other, offer employment to (other
than general employment advertising), employ or subcontract work to any person
employed then or within the preceding twelve months by the other party. If this
provision is violated, the violating party agrees to pay as damages, an amount
equal to one times the annual compensation of the employee or subcontractor to
the other party.
<PAGE> 13
13. Revised Section 16(a), 16(d) and 16(h):
General.
(a) To the extent modified by the addendum attached hereto, the terms of this
agreement will take precedence over the terms of any present or future order
from Client for any license or services hereunder. This Agreement is a master
software license and maintenance agreement. It is contemplated that additional
software may be licensed hereunder by supplementing the Purchase Schedule
attached hereto with later dated schedules upon agreement by both parties
hereto. Notwithstanding any revision of the Purchase Schedule, this Agreement
shall continue in full force and effect and shall govern all such later dated
schedules and transactions as if such schedules were part of this Agreement on
the date this Agreement was executed. Client agrees that the installation of
future software from Medic is conclusive evidence of its agreement that the
license for such software provided is governed by the terms of this Agreement.
(d) Each party acknowledges that it has read this Agreement, understands it, and
agrees to be bound by its terms, and further agrees that this Agreement, to the
extent modified by the addendum attached hereto, and the Purchase Schedule
attached hereto is the complete and exclusive statement of the Agreement between
the parties with respect to the license of the Software or otherwise relating
thereto, which supersedes all prior proposals, understandings and all other
agreements, oral and written. This Agreement may not be modified or altered
except by a written instrument duly executed by both parties.
(h) This Agreement shall be binding upon and for the benefit only of the parties
hereto and their respective successors and permitted assigns. Client may assign
this Agreement and any of its rights, duties or obligations hereunder only with
the prior written consent of Medic, such consent shall not be unreasonably
withheld. Transfer of Client's rights and obligations under this Agreement will
require an additional Software license fee paid to Medic unless otherwise
specified.
<PAGE> 14
TriZetto Purchase Schedule 5/3/99
<TABLE>
<CAPTION>
S/W DISCOUNTED
ITEM # DESCRIPTION QUANTITY UNIT PRICE PRICE DISCOUNT TOTAL PRICE MAINT S/W MAINT
- ------ ----------- -------- ---------- ----- -------- ----------- ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
MEDIC SOFTWARE & SERVICES [*] [*] [*] [*] [*] [*] [*]
900016 BASE SOFTWARE LICENSE (NO USERS)
FOR RS6000
9000x [*]Medic PM User licenses
213501 Cobol Runtime
9301X AutoChart Text-based
90296 Medic Companies *
9332X Autochart Companies
9423TR Train the Trainer (1st Student)
[*]
</TABLE>
Reference library of documentation includes the following:
Operator's Manual, Manager's Manual, MEDIC Training Manual,
Instructor's Manual, Hardware Manuals, Operating System Manuals,
Troubleshooting Manuals, Videos of Selected Classes, Training Data
Bases, CBT's, Daily Routines Multimedia CD-ROM (future), and
unlimited observation of a MEDIC Trainer "in action" at a MEDIC
Training Center (if space is available). This highly specialized
training requires that the student has completed basic +Medic PM
training and is familiar with how to use all standard ????
TOTAL DISCOUNTED LICENSING FEES [*]
Discounted Annual S/W Maintenance [*]
Savings from [*] discount [*]
Prices valid for 30 days. Quote based on entire configuration.
Charges for EDI Services are as detailed in the three (3) pages
attached to this Purchase Schedule.
* = See the attached list of Medic Companies.
Medic Computers, Inc Confidential
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
1
<PAGE> 15
TriZetto Purchase Schedule 5/3/99
MONTHLY SOFTWARE MAINTENANCE.
The first 90 days of usage are at no charge. Maintenance includes the following:
1. Unlimited Use of Toll-Free support Hotline
2. All future upgrades and updates to the +Medic system
3. All federally or state-mandated insurance revisions
4. Use of Medic's Toll-Free User Bulletin Board
5. Monthly support newsletter (tips & software update news)
6. Access to Medic's user section on our website.
TERMS:
[*] of total payment upon contract signature $[*]
The [*] additional [*] payments of [*] post contract signing until total
investment of $[*] is paid in full. Payments are subject to applicable taxation.
ACCEPTED:
/s/ Kerry M. Kearns 5/3/99
- ------------------------------------- --------------
Authorized Customer Signature Date
/s/ M. K. O'Leary 5/3/99
- ------------------------------------- --------------
Authorized Medic Computers Date
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
Medic Computers, Inc Confidential
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
2
<PAGE> 16
<TABLE>
<CAPTION>
PRACTICE NAME PROVIDERS USERS CPU PRACTICE PHONE # Location
------------- --------- ----- --- ---------------- --------
<S> <C> <C> <C> <C> <C>
[*]
</TABLE>
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
<PAGE> 17
Amid pressures for cost containment, a growing need for more accurate
information as well as improved access to data, healthcare providers and
practice administrators are driving to move to EDI. Today, there is rapid
adoption of EDI in healthcare, as providers nationwide recognize the value of
electronic communications and are anxious to reap the rewards of moving from a
paper-based system to an electronic platform.
Medic's EDI Network Solutions generate tangible savings by:
[CHECK MARK] Dramatically reducing paperwork and follow-up calls;
[CHECK MARK] Promoting office efficiency and increasing productivity;
[CHECK MARK] Lowering administrative expenses and costs for postage and
paper forms;
[CHECK MARK] Streamlining billing and speeding up payments;
[CHECK MARK] Automating claim filing, assuring faster reimbursement, and
improving cash flow;
[CHECK MARK] Minimizing errors;
With Medic's EDI Network Solutions, your practice can be more responsive not
only to patient needs but also to the expectations of employers, insurers and
other payers.
[CHECK MARK] Verify eligibility for services, benefit information, and plan
enrollment or disenrollment;
[CHECK MARK] Customize patient communications;
[CHECK MARK] Document claims and encounters;
[CHECK MARK] Speed referrals and authorizations;
[CHECK MARK] Streamline coordination of benefits;
With the passage of the Health Insurance Portability and Accountability Act of
1996 (HIPAA), there will be increased market receptivity for EDI. This
legislation encourages the use of EDI as a means of reducing expense for
administration of healthcare information processing. Medic's EDI Network
Solutions will keep your practice in compliance with the EDI standards of the
American National Standards Institute (ANSI) or transaction standards as defined
by HIPAA. With government and private sectors encouraging providers to make the
move to EDI, Medic's EDI Network Solutions will position your practice for
success.
EDI Network Solutions Deliver a Full Range of Electronic Business Services:
FASTCLAIM(R) - provides faster processing and payment of insurance claims
through electronic filing.
FASTNOTES - provides instant access to information
contained in the FastClaim(R) reports.
FASTELIGIBILITY - offers on-line insurance eligibility and benefit data
verification.
FASTREMIT(TM) - collects insurance explanation of benefits reports
electronically, allowing automatic payment posting to patient accounts.
FASTBILL(R) - eliminates the need for the practice to print and mail billing
statements.
FASTRECEIPT(R) - eliminates the labor-intensive process of posting payments to
patient accounts.
FASTCOLLECT - provides a fast and easy way to send letters directly to patients
with past-due accounts.
FASTREMINDER - reduces the time and money spent by the practice on patient
reminders.
FASTCALL - provides practices with an automated service which places reminder
phone calls to patients concerning appointments.
<PAGE> 18
<TABLE>
================================================================================
================================================================================
<S> <C> <C> <C>
Electronic Claims $[*] Paper Claims $[*]
================================================================================
</TABLE>
NOTE: PAPERCLAIMS pricing includes the billing form, outgoing envelopes, and
postage.
<TABLE>
<CAPTION>
================================================================================
================================================================================
NUMBER OF PAGES PER MONTH PRICE PER PAGE
- --------------------------------------------------------------------------------
<S> <C>
Less Than [*] $[*]
[*] to [*] [*]
[*] to [*] [*]
[*] to [*] [*]
More Than [*] [*]
================================================================================
</TABLE>
NOTE: FASTBILL pricing includes billing form, outgoing envelop, return envelope,
and postage. For billing purposes, all transactions of FASTREMINDER,
FASTCOLLECT, and FASTBILL will be combined to give the best volume
discounts possible.
<TABLE>
<CAPTION>
================================================================================
================================================================================
NUMBER OF MAIL RECEIPTS PER MONTH PRICE PER RECEIPT
- --------------------------------------------------------------------------------
<S> <C>
Less Than [*] $[*]
More Than [*] [*]
- --------------------------------------------------------------------------------
</TABLE>
NOTE: In addition to the standard receipt fee, MasterCard and Visa transactions
will be processed for 1.95% of the transaction, plus a $0.20 processing
fee.
<TABLE>
<CAPTION>
================================================================================
================================================================================
NUMBER OF MEMOS PER MONTH PRICE PER MEMO
- --------------------------------------------------------------------------------
<S> <C>
Less Than [*] $[*]
[*] to [*] [*]
[*] to [*] [*]
[*] to [*] [*]
More Than [*] [*]
================================================================================
</TABLE>
NOTE: FASTCOLLECT pricing includes the form, outgoing envelope, return envelope,
and postage. For billing purposes, all transactions of FASTREMINDER,
FASTCOLLECT, and FASTBILL will be combined to give the best volume
discounts possible.
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
<PAGE> 19
<TABLE>
<CAPTION>
================================================================================
================================================================================
NUMBER OF PAGES PER MONTH PRICE PER PAGE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Less Than [*]
[*] to [*] [*]
[*] to [*] [*]
[*] to [*] [*]
More Than [*] [*]
================================================================================
NOTE: FASTREMINDER pricing includes the reminder form, outgoing envelope,
and postage. For billing purposes, all transactions of FASTREMINDER
FASTCOLLECT, and FASTBILL will be combined to give the best volume
discounts possible.
================================================================================
</TABLE>
<TABLE>
<CAPTION>
================================================================================
================================================================================
NUMBER OF ELIGIBILITY PER MONTH PRICE PER REQUEST
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Less Than [*] [*]
[*] to [*] [*]
More Than [*] [*]
================================================================================
</TABLE>
<TABLE>
<CAPTION>
================================================================================
================================================================================
NUMBER OF COMPANIES PRICE PER COMPANY PER
MONTH
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
[*] [*]
[*] to [*] [*]
More than [*] [*]
- --------------------------------------------------------------------------------
</TABLE>
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
<PAGE> 20
[MEDIC COMPUTER SYSTEMS LOGO]
CLIENT # _____________________
SALESPERSON __________________
SOFTWARE LICENSE AND MAINTENANCE AGREEMENT ADDENDUM # 2
This Software License and Maintenance Agreement Addendum # 2 ("Addendum")
is entered into this _ day of June, 1999, by and between Medic Computer Systems,
Inc. ("Medic") and The TriZetto Group Inc. ("TriZetto"), to supplement and
modify the terms and conditions of the Software License and Maintenance
Agreement ("Agreement") to which this Addendum is attached and incorporated by
reference, as if fully set forth in such Agreement.
WITNESSETH:
WHEREAS, the parties intend to supplement and modify their Agreement by
deleting the parties' Software License and Maintenance Agreement Addendum, dated
May 1, 1999, and replacing it in its entirety with this Addendum.
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and as set forth in the parties' Agreement, Medic and TriZetto do hereby agree
as follows:
1. In the event that any of the physician practices originally
licensed under this Agreement fail or cease to use the services of
TriZetto hereunder and become retired practices, then upon the
payment by TriZetto of an additional license fee equal to [*] of
the proportionate fee originally paid under this Agreement for the
same retired practices, then TriZetto shall be entitled to
reallocate those respective licenses, as many times as is
necessary, to any replacement physician practices.
2. TriZetto's terms of payment are outlined as follows:
[*].
3. That TriZetto shall be required to pay Medic Software maintenance
fees in accordance with the attached Purchase Schedule.
[*]
Page 1
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
<PAGE> 21
will immediately notify Medic. Upon receipt of the notification of
this termination, Medic will stop charging maintenance fees for
the licenses previously allocated to that clinic. [*]
4. Set forth on Exhibit A hereto are Sections from the Agreement,
which are hereby amended to reflect the changes thereon and,
except as expressly indicated on Exhibit A hereto, all other
Sections of the Agreement shall remain unchanged and in full force
and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Addendum on the
date first written above.
MEDIC COMPUTER SYSTEMS, INC. THE TRIZETTO GROUP
By: /s/ [ILLEGIBLE] By: /s/ Kerry M. Kearns 6-24-99
------------------------ ---------------------------
Its: CFO Its: Senior Vice President
----------------------- --------------------------
Page 2
<PAGE> 22
EXHIBIT A
REVISED TERMS OF AGREEMENT
1. Revised Section 1:
License.
In accordance with the terms herein, Medic grants to Client, and Client accepts
from Medic, a perpetual, nonexclusive and nontransferable license to use the
software and related documentation described on the Purchase Schedule attached
hereto (the "Software") for the number of users, and Medic companies as set
forth on the Purchase Schedule. All modifications, enhancements and updates to
the Software provided by Medic shall become part of the Software and subject to
the terms and conditions herein.
The Software shall be used only (i) for Client's internal business needs and
(ii) for Client's use on behalf of third parties in connection with Client's
provision of [*] to such third parties on a [*] basis, and shall be installed on
no more than [*] Central Processing Units ("CPUs"); provided that Client may
transfer the Software to different CPUs upon notification to Medic; provided
that Client may be required to pay an additional license fee in the event that
Client installs the Software on more than [*] CPUs, with the amount of such
additional license fee to be determined by Client and Medic after good faith
negotiations. Client shall not permit any third party to use the Software or
grant a sublicense for the use of the Software; or allow access to the licensed
Software through terminals located outside of premises controlled by or operated
by or on behalf of Client or for Customers of Client. [*]
2. Revised Section 2:
Copies.
The license granted herein includes the right to copy the object code only in
non-printed, machine readable form in whole or in part as necessary for Client's
use as contemplated in Section 1 above, including the making of back-up copies.
In order to protect Medic's trade secret and copyrights in the Software, Client
agrees to reproduce and incorporate Medic's trade secret or copyright notice in
any allowed copies, compilations, modifications or partial copies. Client may
obtain additional copies from Medic at prices to be agreed to by Client and
Medic after good faith negotiations. Violation of any provision of this
paragraph shall be the basis for immediate termination of this Agreement.
3. Revised Section 3:
Price and Payment.
<PAGE> 23
(b) Client shall maintain hardware equipment on which the Software is installed
in good working order whether under Medic, third party or time and material
maintenance. If hardware is not covered under formal maintenance, Client must
maintain reasonably adequate maintenance logs to document on-going hardware
maintenance and service.
(d) Client shall provide Medic access to the Software via a support modem over a
dedicated, data quality telephone line. Such access shall allow Medic, from time
to time, to conduct an audit of the Software. As reasonably required by Medic,
Client shall provide Medic with sufficient documentation, information,
assistance, support and test time on Client's computer system, to duplicate the
problem, certify that the problem is with the Software, and certify that the
problem has been corrected.
(e) Client shall take all necessary steps to reasonably ensure that no virus is
loaded on the system running the Software from any outside source. Virus
diagnosis and removal services are not covered by Software maintenance and are
billable at the then prevailing rates.
(f) Client shall install all updates within one hundred twenty (120) days of
receipt from Medic thereby maintaining the system on Medic's most recent
release.
6. Revised Section 8(b):
((b) The licenses granted pursuant to section 1 of this Exhibit A are perpetual,
however, as it relates to section 8 of The Master Software and Maintenance
Agreement, the initial term of this Agreement shall be [*]. All charges are
subject to change at any time after the end of the initial [*] term, provided
that Medic shall not increase any charges by more than the percentage increase
in the then current [*]. Thereafter, the term of this Agreement shall be
automatically extended for successive one year periods until terminated by
either party upon prior written notice to the other, which notice shall be given
at least ninety (90) days prior to the end of the applicable term. Maintenance
for any additional options or applications installed shall commence pursuant to
this Agreement upon installation of such software and upon payment of the
applicable maintenance fee shown on the Purchase Schedule, as such Schedule may
be modified in a writing signed by Medic and Client from time to time.
7. Revised Section 9:
Charges for EDI Services and Term.
The charges for EDI services are those identified in the attached Purchase
Schedule. All invoices shall be due and payable in full thirty (30) days from
the date of such invoice. Medic will provide FastServices as outlined in the
attached Purchase Schedule for as long as the Client elects to utilize this
service. Either party may terminate FastServices by giving the other thirty (30)
days written notice prior to termination. Medic reserves the right to terminate
FastServices if an account is over sixty (60) days past due.
FastClaim
<PAGE> 24
MEDIC shall not be responsible for any error or omissions in any Claims received
from Client or transmitted to Payers. MEDIC shall not be responsible for any
unauthorized or other improper transmission by or on behalf of any Payee or any
other person and Payers shall be responsible to verify the authenticity of each
Claim.
Record Keeping and Transmission Verification
CLIENT SHALL MAINTAIN A PERMANENT, COMPLETE, AND ACCURATE RECORD OF ALL CLAIMS
TRANSMITTED THROUGH THE MEDIC FASTCLAIM SYSTEM, INCLUDING THE NUMBER OF CLAIMS
PER TRANSMISSION AND THE TOTAL DOLLAR AMOUNT OF EACH TRANSMISSION. ALL SUCH
RECORDS SHALL BE RETAINED AND PRESERVED FOR AT LEAST EIGHTEEN (18) MONTHS FROM
THE DATE OF TRANSMISSION AND SHALL BE SUBJECT TO INSPECTION, COPYING, AND AUDIT
BY MEDIC AT REASONABLE TIMES UPON REASONABLE PRIOR WRITTEN NOTICE. IT IS ALSO
THE RESPONSIBILITY OF CLIENT TO REVIEW EACH TRANSMISSION REPORT SENT TO CLIENT
BY MEDIC AND TO NOTIFY MEDIC OF ANY ERROR, OMISSION, OR OTHER DISCREPANCY
BETWEEN THE REPORT AND THE ACTUAL CLAIMS TRANSMITTED AS SOON AS REASONABLY
PRACTICABLE AFTER RECEIPT OF SUCH REPORT.
FastReceipt
Client agrees to reimburse Medic for any insufficient or returned checks that
appear in the FastReceipt process
FastBill
Client acknowledges that Medic is using the USPS FastForward Move update on
Client's records and Client agrees to comply with the USPS regulations. All
forward results would be utilized for the sole purpose of updating preexisting
addresses.
8. Revised Section 11:
Indemnity.
Medic at its own expense will defend and hold Client harmless from any claim
asserted against Client to the extent that it is based on a claim that any
Software used within the scope of this Agreement infringes any patents,
copyrights, license or other property right of a third party. Client shall
promptly notify Medic in writing of such claim; provided that the failure to
give such prompt notice shall not affect Medic's obligations hereunder except to
the extent, and solely to the extent, Medic is prejudiced thereby. Medic shall
have the right to control the defense of all such claims, lawsuits and other
proceedings. In no event shall Client settle any such claim, lawsuit or
proceeding without Medic's prior written approval. In all events, Client shall
have the right to participate in the defense of any such suit or proceeding
through counsel of its own choosing. If, as a result of any claim of
infringement against any patent, copyright, license or other property right,
Medic or Client is enjoined from using the Software, or if Medic believes that
the Software is likely to become the subject of a claim of infringement, Medic
at its option and expense may (i) procure the right
<PAGE> 25
for Client to continue to use the Software, (ii) replace or modify the Software
so as to make it noninfringing, with similar functionality, or (iii) discontinue
the license granted herein and refund to Client the license fees paid hereunder.
The foregoing states the entire liability of Medic with respect to infringement
of any copyrights or patents by the Software or any parts thereof. This
indemnity shall not apply to the extent, and solely to the extent, the
infringement is caused in whole or in part by Software changes made by Client or
other non-Medic personnel.
9. Revised Section 12:
Warranty and Disclaimer of Warranties.
(a) Medic represents that for a period of ninety (90) days from the installation
of the Software, the Software will (i) conform, as to all substantial
operational features, to Medic's documentation provided with the Software when
installed and properly used in the operating environment specified in such
documentation and (ii) be free of defects under normal use which adversely
affect system performance. Medic does not represent that the functions contained
in the Software will meet Client's requirements or that the operation of the
Software will be uninterrupted or error free.
(b) The Client must notify Medic in writing, within ninety (90) days from the
date of execution of this Agreement of its claim of any such defect. If the
Software is found defective by Medic in Medic's reasonable judgment, Medic's
sole obligation under this warranty is to remedy such defect
(c) With respect to maintenance services provided, Client agrees that Medic's
obligations under this Agreement are to use commercially reasonable efforts to
diagnose errors or malfunctions in the system, and to advise Client of possible
corrective measures.
(d) THE ABOVE IS A LIMITED WARRANTY AND IT IS THE ONLY WARRANTY MADE BY MEDIC.
MEDIC MAKES AND CLIENT RECEIVES NO OTHER WARRANTY, EXPRESS OR IMPLIED AND THERE
ARE EXPRESSLY EXCLUDED ALL WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE. EXCEPT FOR CLAIMS BROUGHT UNDER PARAGRAPH 11, MEDIC SHALL
HAVE NO LIABILITY FOR SPECIAL, INDIRECT, CONSEQUENTIAL, EXEMPLARY, OR INCIDENTAL
DAMAGES OR FOR ANY DAMAGES WHATSOEVER RESULTING FROM LOSS OF USE, DATA OR
PROFITS, ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR THE USE OR
PERFORMANCE OF THE SOFTWARE, EVEN IF IT HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES. IN NO EVENT SHALL MEDIC BE LIABLE IN THE AGGREGATE FOR ANY CLAIMS
OR DAMAGES IN AN AMOUNT EXCEEDING THE AMOUNT PAID BY CLIENT FOR THE SOFTWARE
LICENSE SET FORTH IN THE ATTACHED PURCHASE SCHEDULE.
(e) This warranty shall not apply if modifications to the Software made by
Client are the cause of any operational difficulties experienced. If
difficulties or defects are traceable to Client's errors or systems changes, any
repairs or corrections made by Medic may, at Medic's discretion, be billed at
Medic's then prevailing time and materials charges.
<PAGE> 26
(f) Medic warrants that the Medic PM version 7.0.X, dated 12/15/97 or later has
been programmed to be Y2K Compatible (as defined below), in addition IBM
warrants that AIX version 4.3.1 has been programmed to be Y2K Compatible.
Additionally, Client shall be entitled to any warranties which are afforded
Medic through its third party relationships.
Medic has defined "Y2K Compatible" as meaning that Medic applications (i) will
completely and accurately address, present, produce, store and calculate data
involving dates from, into and between the twentieth and twenty-first centuries,
which includes the years 1999 and 2000 and any leap year calculations, and will
not produce abnormally ending or incorrect results involving such dates as used
in any forward or regression date based function; and (ii) will support both two
and four digit years to be displayed where appropriate and will perform
calculations which involve a four digit year field.
10. Revised Section 13:
Cancellation.
If Client fails to pay any amount due hereunder or otherwise commits a
material breach hereof, and persists in such failure for [*] days after
receiving written notice thereof from Medic, Medic may cancel this Agreement and
declare any unpaid amounts owed hereunder immediately due and payable. Thereupon
Client shall immediately return the Software and related documentation and all
copies thereof to Medic. Cancellation of the license granted hereunder shall be
in addition to and not in lieu of any other remedies available to Medic.
11. Revised Section 14:
Source Code Escrow.
A current version of the Software source code and all necessary
documentation has been put into escrow with the law firm of [*]. Source code is
eligible for release in the event Medic liquidates or shall be declared
bankrupt. If Client receives source code under the above circumstances, such
source code shall be deemed to be Software and subject to the term and
conditions herein. The source code is to be used solely for Client's maintenance
of the Software.
12. Revised Section 15:
Hiring of Employees.
During the term of the Agreement and for one year thereafter, neither party
will, without the prior written consent of the other, offer employment to (other
than general employment advertising), employ or subcontract work to any person
employed then or within the preceding twelve months by the other party. If this
provision is violated, the violating party agrees to pay as damages, an amount
equal to one times the annual compensation of the employee or subcontractor to
the other party.
<PAGE> 27
13. Revised Section 16(a), 16(d) and 16(h):
General.
(a) To the extent modified by the addendum attached hereto, the terms of this
agreement will take precedence over the terms of any present or future order
from Client for any license or services hereunder. This Agreement is a master
software license and maintenance agreement. It is contemplated that additional
software may be licensed hereunder by supplementing the Purchase Schedule
attached hereto with later dated schedules upon agreement by both parties
hereto. Notwithstanding any revision of the Purchase Schedule, this Agreement
shall continue in full force and effect and shall govern all such later dated
schedules and transactions as if such schedules were part of this Agreement on
the date this Agreement was executed. Client agrees that the installation of
future software from Medic is conclusive evidence of its agreement that the
license for such software provided is governed by the terms of this Agreement.
(d) Each party acknowledges that it has read this Agreement, understands it, and
agrees to be bound by its terms, and further agrees that this Agreement, to the
extent modified by the addendum attached hereto, and the Purchase Schedule
attached hereto is the complete and exclusive statement of the Agreement between
the parties with respect to the license of the Software or otherwise relating
thereto, which supersedes all prior proposals, understandings and all other
agreements, oral and written. This Agreement may not be modified or altered
except by a written instrument duly executed by both parties.
(h) This Agreement shall be binding upon and for the benefit only of the parties
hereto and their respective successors and permitted assigns. Client may assign
this Agreement and any of its rights, duties or obligations hereunder only with
the prior written consent of Medic, such consent shall not be unreasonably
withheld. Transfer of Client's rights and obligations under this Agreement will
require an additional Software license fee paid to Medic unless otherwise
specified.
<PAGE> 1
EXHIBIT 10.16
ADDENDUM TO THE MASTER LICENSE AGREEMENT
THIS ADDENDUM, made and entered into as of April 15, 1999, supplements and
amends the Masters License Agreement between Medical Manager Midwest, Inc.
("Licensor") and MTS, Inc. ("Customer") dated March 5, 1999 (hereinafter the
"Original Agreement").
NOW THEREFORE, Licensor and Customer further agree as follows:
1. This Addendum modifies and amends the Original Agreement, revoking portions
in whole and in part and creating additional covenants. Wherever discrepancies,
modifications or revocations appear, the agreements contained in this Addendum
shall prevail, any language in the Original Agreement to the contrary
notwithstanding. In all other respects the terms and conditions set forth in the
Original Agreement shall continue in full force and effect.
2. Section 1.02 shall be modified by inserting the following underlined
language:
"Customer is a provider of physician practice management and information
---------------
technology services to physicians, clinics, and other medical
----------
practitioners."
3. Section 2.04 shall be modified by inserting the following underlined
language:
"'Customer Practice' means an individual medical practice which is owned or
operated or serviced by Customer."
--------
4. Section 5.02, Third Party Interfaces, shall be moved in its entirety and
renumbered as Section 4.04.
5. Pursuant to Customer's right in Section 13.04, Assignment, Customer hereby
assigns the Original Agreement to The TriZetto Group in connection with the
sale of substantially all of Customer's assets to the TriZetto Group effective
March 26, 1999.
IN WITNESS WHEREOF, the parties hereto have executed this Addendum by a duly
authorized representative.
Medical Manager Medwest, Inc MTS, Inc.
By: /s/ [SIGNATURE ILLEGIBLE] By: /s/ [SIGNATURE ILLEGIBLE]
------------------------- ------------------------------
Title: Vice President Title: President
---------------------- ---------------------------
Date: 4-15-99 Date: 4/15/99
----------------------- ----------------------------
<PAGE> 2
[MEDICAL MANAGER LETTERHEAD]
THE MEDICAL MANAGER(R)
Date: March 1, 1998
Contract No.: pr-4544
Between
Licensor Name: MEDICAL MANAGER MIDWEST, INC.
Address: 53702 Generations Drive
South Bend, IN 46635
Principal Contact: Tom Liddell
And
Customer Name: MTS, INC.
Address: 9931 Corporate Service Drive
Louisville, KY 40223
Principal Contact: Gail Knopf
THIS AGREEMENT is entered into as of the date of the last signature hereto (the
"Effective Date"), by and between Medical Manager Midwest, Inc., having its
principal place of business at 53702 Generations Drive, South Bend, IN 46635
(hereinafter "Licensor"), and the above-named customer (hereinafter "Customer").
In consideration of the premises hereof, and the mutual obligations herein made
and undertaken, the parties hereto covenant and agree as follows:
I. RECITAL OF FACTS
SECTION 1.01 Licensor is the distributor of a certain computer software program
known as THE MEDICAL MANAGER(R) (hereinafter "THE MEDICAL MANAGER" software).
SECTION 1.02 Customer is a provider of physician practice management services to
physicians, clinics, and other medical practitioners.
SECTION 1.03 Customer desires to utilize THE MEDICAL MANAGER software to fulfill
the patient billing, managed care, and other practice management needs of
Customer's practices.
SECTION 1.04 Licensor desires to provide THE MEDICAL MANAGER software and
related services to Customer pursuant to the terms and conditions set forth
herein.
II. DEFINITIONS
For the purposes of this Agreement, the definitions set forth in this Article II
shall apply to the respective italicized terms:
SECTION 2.01 "AGREEMENT" means this Master License Agreement, including any
Exhibits attached hereto.
SECTION 2.02 "ANNIVERSARY DATE" means the annual recurrence of the Effective
Date.
SECTION 2.03 "CUSTOM PROGRAMS" means Data Merge Language ("DML") programs
developed by Personalized Programming, Inc., ("R&D") or developed by an
authorized DML programmer for use exclusively with THE MEDICAL MANAGER software,
approved by R&D, and licensed to Customer as described in Exhibit A.
SECTION 2.04 "CUSTOMER PRACTICE" means an individual medical practice which is
owned or operated by Customer.
SECTION 2.05 "CUSTOMER PRODUCTS" means one or more combinations of the Software
with other services and computer equipment and/or software independently
developed or procured by Customer, for use by Customer Practices as an integral
part of Customer's management services and not for sub-license or resale.
SECTION 2.06 "DOCUMENTATION" means the printed instructions provided by
Licensor, known as The Medical Manager Operators' Guide, Installation &
Appendices, Features & Reports, and Report Generator manuals, as well as other
materials created by Licensor and provided to Customer, in print form or on
diskette, as instructions to or guidelines for use of the Software.
<PAGE> 3
SECTION 2.07 "ERROR" means a defect in the Software that prevents the Software
from functioning in substantial conformity with the Documentation.
SECTION 2.08 "FILE SERVER" means a central computer system upon which the
Software resides and performs its primary data functions. Individual terminals,
PC workstations (using terminal emulation software), and/or X-Window
workstations, which are located in the Satellite Site locations, may be linked
to the File Server via telecommunications networks or other networks procured
and supported by Customer.
SECTION 2.09 "MAINTENANCE MODIFICATION(S)" means computer software changes to be
integrated with the Software, generally intended to correct Errors therein, but
which do not alter the functionality of the Software or add any new functions or
features thereto.
SECTION 2.10 "MARKETING TERRITORY" means the geographical territory within the
United States to encompass the USA.
SECTION 2.11 "MASTER TAPE" means a magnetic tape or diskettes containing the
non-Serialized version of the Software. Upon Serialization, the Software
contained on the Master Tape becomes a fully-operable version of the Software.
SECTION 2.12 "MSO SYSTEM" means THE MEDICAL MANAGER Management Service
Organization license which is located on a single File Server with five (5) or
more Satellite Sites. The system can be expanded to include multiple servers
working in conjunction to provide a flexible application environment for the MSO
system.
SECTION 2.13 "NEW PRODUCT" means any Optional Module(s) or other MEDICAL MANAGER
software product not duly licensed to Customer as set forth in Exhibit A. The
term "New Product" also refers to a New Version of the Software which, in
Licensor's reasonable discretion, requires new installation or training and
(a) the list price of such New Version is substantially higher
than the list price of the previous version, or
(b) the New Version constitutes a major change in the overall
underlying data base structure or the overall user interface;
or
(c) additional third party software is incorporated therein as an
integral part of such New Version thereby requiring a per site
purchase or license of the third party software, or requiring
Licensor to pay a royalty therefor.
(d) increases in current applications are capped at the cost plus
annual CPI computation.
SECTION 2.14 "NEW VERSION(S)" means improvements to the Software which create
additional features or enhance the value of the Software but which do not
constitute a New Product.
SECTION 2.15 "NORMAL BUSINESS HOURS AND SUPPORT" means 7:00 am. to 5:00 p.m.
CST, Monday through Friday, excluding Licensor holidays. Support to include 7X24
hour pager support for emergency service.
SECTION 2.16 "OBJECT CODE" means computer programs assembled or compiled in
magnetic or electronic binary form on software media, which are readable and
usable by machines, but not generally readable by humans without reverse
assembly, reverse compiling, or reverse engineering.
SECTION 2.17 "OPTIONAL MODULES" or "OPTIONS" means additional functions which
need not be present in order for The Medical Manager software to properly
operate, but which can be added at Customer's request to any MSO System at an
additional cost. Optional Modules are licensed to the MSO System and all
Satellite Sites in the MSO System. The Optional Modules included with the
Customer's system is described in Exhibit A hereto.
SECTION 2.18 "SATELLITE SITE" means an individual data set in an MSO System
which maintains the data files for an individual Customer Practice. The
Satellite Site includes the Optional Modules licensed to the MSO System and the
number of Users which are Serialized for that Satellite as requested by Customer
from the total Users licensed for the MSO System.
SECTION 2.19 "SOFTWARE" means the Object Code of THE MEDICAL MANAGER MSO System
computer software and Documentation as described in Exhibit A, including without
limitation Optional Modules and Custom Programs licensed to Customer.
SECTION 2.20 "SERIALIZATION" or "SERIALIZE" means the process whereby the
practice name is encoded into a unique, secret serial number which thereby
limits the usage of the Software to that practice name and the operating system,
version, number of Users, and Optional Modules set forth in the Serialization.
The Serialization process is the sole property and trade secret of Licensor.
SECTION 2.21 "SOURCE CODE" means THE MEDICAL MANAGER computer programs written
in higher-level programming languages, such as C and THE MEDICAL MANAGER Data
Merge Language, sometimes accompanied by English language comments. The Source
Code is intelligible to trained programmers and may be translated into Object
Code for operation on computer equipment through the process of compiling.
Specifically excluded from the Source Code are Customer-created report formats,
if any, and Customer's data. The Source Code for the Software is the exclusive
property and trade secret of R&D.
SECTION 2.22 "USER" means an individual session which is logged on to the
Software. The MSO System is licensed with a maximum number of simultaneous
Users, and these Users are allocated among the Satellite Sites and Customer's
central administration. The number of Users which are Serialized for any
Satellite Site data set is the maximum number of simultaneous Users who may
<PAGE> 4
log onto that data set (whether logged on from the remote site or the central
administrative location). The term, "Standard User," means an additional User
for a Satellite Site with the Optional Modules described in Exhibit A.
III. LICENSE AND ADMINISTRATION
SECTION 3.01 PURCHASE. Customer agrees to purchase, and Licensor agrees to
convey to Customer, the licenses, products and services set forth in this
Agreement under the terms and conditions set forth herein. The license fee shall
be due in accordance with the payment schedule set forth in Exhibit A. Customer
acknowledges that Licensor is assembling a support team to provide Customer with
the highest level of service and support for THE MEDICAL MANAGER software, as
well as assisting Customer in building its own internal support team for THE
MEDICAL MANAGER system. In exchange for these efforts, Customer agrees to
exclusively purchase THE MEDICAL MANAGER software, its optional modules and all
other software products related to THE MEDICAL MANAGER software, which are
proprietary to Licensor or R&D, from Licensor.
SECTION 3.02 GRANT OF LICENSE. Subject to the terms and conditions of this
Agreement and receipt by Licensor of the applicable license fee, Licensor grants
to Customer, a non-transferable, non-assignable, non-exclusive and indivisible
license to use the Software to operate Customer Practices, but not for resale or
sub-license to any third party. Pursuant to this grant, Customer shall purchase
a separate MSO license for each File Server housing the Software. Each separate
MSO license shall be issued under the terms and conditions of this Agreement.
The system can be expanded to include multiple servers working in conjunction to
provide a flexible application environment for the MSO system. Volume pricing
does not start over if additional servers are added.
SECTION 3.03 LICENSED CONFIGURATION.
(a) Each File Server shall be located in a regional Customer
office.
(b) Each File Server shall support one MSO System with five (5) or
more Satellite Sites. Subject to the limitations of the
computer hardware and operating system. Customer may Serialize
up to [*] Satellite Sites on any single MSO System for version
9.01 of THE MEDICAL MANAGER software. THE MEDICAL MANAGER
version 9.01 will enable Customer to Serialize up to [*]
Satellite Sites on any single MSO System. The system can be
expanded to include multiple servers working in conjunction to
provide a flexible application environment for the MSO
system.[*]
(c) Each Satellite Site will serve one medical practice, with one
or more locations.
(d) Each MSO System shall be Serialized under a name determined by
Customer with the Optional Modules set forth in Exhibit A, and
with the sum total of Users contained in each of the Satellite
Sites on the subject File Server.
(e) Each Satellite Site shall be Serialized for the individual
practice name it serves, with the same Optional Modules
contained on the MSO System.
SECTION 3.04 DELIVERABLES. Upon the execution of this Agreement, Licensor agrees
to deliver to Customer the number of published copies of the Documentation set
forth in Exhibit A. Additional bound, published copies of the Documentation may
be acquired by Customer from Licensor at Licensor's then current price.
SECTION 3.05 SALES TAX. Customer covenants and agrees to pay any and all
applicable sales taxes, duties, tariffs, or other assessments levied by or on
behalf of any taxing authority having jurisdiction over Client relating to any
transaction contemplated by this Agreement.
SECTION 3.06 UPDATES AND UPGRADES. The terms and conditions of this Agreement
shall apply to all Software and Documentation provided by Licensor to Customer
subsequent to the Effective Date, including without limitation, Maintenance
Modifications, new Optional Modules, New Versions, New Products, custom
programming, and all derivative works of such Software and Documentation,
provided, however, that New Products shall be subject to the then current
license agreement for such New Product. Upon the issuance of a new Serialization
for any Customer installation, the previously issued license for that
installation shall terminate.
SECTION 3.07 UNAUTHORIZED USE. Any use of the Software which is not in
compliance with the terms and conditions of this Agreement is unauthorized and
prohibited. In the event Customer learns of any unauthorized use of the
Software, Customer agrees to use all reasonable efforts to terminate such
unauthorized use and to immediately notify Licensor in writing of such
violation. Customer agrees to communicate the terms and conditions of the
license granted herein to all of Customer's agents and employees who may come in
contact with the Software, and to ensure that such agents and employees comply
with the restrictions contained herein.
<PAGE> 5
IV. TITLE
SECTION 4.01 TITLE TO SOFTWARE. Title to all copies of the Software and
Documentation, including Maintenance Modifications, new Optional Modules, New
Versions, New Products, custom programming, and all derivative works, shall at
all times remain and vest solely with the author of the Software, R&D. Customer
agrees that it will not claim or assert title to any such materials or attempt
to transfer any title to any third party.
SECTION 4.02 WARRANTY OF TITLE. Licensor warrants and represents that it has the
right to license or sublicense the Software to Customer without violating any
rights of any third party.
SECTION 4.03 TRANSFER OF SOFTWARE. Customer understands and agrees that it may
not act as a reseller or sell, assign, sub-license, or otherwise transfer the
Software or the license granted herein to any third party.
V. LIMITED WARRANTIES
SECTION 5.01 LIMITED WARRANTY. Licensor hereby warrants that, for a period of
six (6) months from the date the Serialization for each MSO System is first
installed on the Customer's File Server (the "Warranty Period"), that the
Software shall substantially perform in accordance with the related
Documentation, but Licensor does not warrant that the operation of the Software
shall be Error-free or uninterrupted. Customer shall promptly notify Licensor in
writing of the nature of the perceived Software defect(s) which causes the
Software not to perform substantially in accordance with the related
Documentation, and specifically describe the conditions under which the
perceived defect occurs. Customer shall provide Licensor with sufficient test
time and support to duplicate the problem, to verify that the problem is with
the Software, and to confirm that the problem has been corrected. Should any
component of the Software fail to perform substantially in accordance with the
related Documentation during the Warranty Period, Licensor shall at its expense,
correct the defect(s) by bringing the performance of the Software into
substantial compliance with the related Documentation. Should Licensor be unable
to correct such defect, then Customer's exclusive remedy for the failure of the
Software to substantially conform with the Documentation shall be to return such
affected software product to Licensor within the Warranty Period, whereupon
Licensor, at its sole option, shall either provide Customer with software that
conforms to the Documentation or refund the license fee for such affected
software product. In the event such non-conformity is found in a New Version or
New Product, then any refund shall be based upon the license fee for such New
Version or New Product, if any. Prior to the issuance of any refund, Customer
shall destroy or deliver to Licensor any and all copies of the affected software
product, including any copies contained in any memory device under Customer's
control, and shall warrant that all such copies have been delivered to Licensor
or destroyed. Upon the issuance of a refund to Customer, the license to such
affected software product granted herein shall terminate.
THE FOREGOING WARRANTIES ARE FOR CUSTOMER'S EXCLUSIVE BENEFIT AND ARE
NONTRANSFERABLE. THE FOREGOING WILL BE CUSTOMER'S EXCLUSIVE REMEDIES FOR BREACH
OF WARRANTY BY LICENSOR OR R&D. LICENSOR AND R&D DISCLAIM ALL OTHER WARRANTIES,
EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, ANY WARRANTIES AS TO THE
SOFTWARE OR ANY PRODUCTS, SERVICES OR OTHER SOFTWARE FURNISHED HEREUNDER, THEIR
QUALITY, PERFORMANCE, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE.
THERE IS NO WARRANTY BY LICENSOR OR R&D THAT THE FUNCTIONS CONTAINED IN THE
SOFTWARE WILL MEET CUSTOMER'S REQUIREMENTS, GOVERNMENTAL REGULATIONS OR THAT THE
OPERATION OF THE SOFTWARE WILL BE UNINTERRUPTED OR ERROR FREE. CUSTOMER ASSUMES
ALL RESPONSIBILITY FOR THE SELECTION OF THE SOFTWARE TO ACHIEVE CUSTOMER'S
INTENDED RESULTS, AND FOR THE INSTALLATION, USE AND RESULTS OBTAINED FROM SUCH
INSTALLATION AND USE.
EXCEPT AS EXPRESSLY SET FORTH IN SECTION 10.01 BELOW, IN NO EVENT WILL LICENSOR
OR R&D BE LIABLE FOR ANY DIRECT, INCIDENTAL, INDIRECT, SPECIAL, CONSEQUENTIAL,
OR OTHER SIMILAR DAMAGES IN CONNECTION WITH OR ARISING OUT OF THE EXISTENCE,
FURNISHING, FAILURE TO FURNISH OR USE OF THE SOFTWARE, PRODUCTS, OR SERVICES
FURNISHED HEREUNDER, INCLUDING ANY RELATED THIRD PARTY SOFTWARE, PRODUCT OR
SERVICE, WHETHER OR NOT LICENSOR OR R&D HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES. THE ABSOLUTE LIABILITY OF LICENSOR AND R&D SHALL NOT EXCEED THE
TOTAL AMOUNT OF ALL FEES PAID TO LICENSOR BY CUSTOMER FOR THE SOFTWARE.
SECTION 5.02 THIRD PARTY INTERFACES. The Software may include the ability to
electronically interface directly with one or more third party products or
services. Customer understands and agrees that, THE MEDICAL MANAGER interface
software is part of the Software, but (i) such third party products and services
are not part of the Software, (ii) Licensor makes no warranties or
representations of any kind with respect to such third party products and
services, and (iii) Customer assumes all risk of loss arising from the use of
such third party products. The license to use any Optional Module which is a
third party interface shall immediately terminate without further notice or
obligation of Licensor upon termination of Customer's or Licensor's agreement
with such third party.
<PAGE> 6
SECTION 5.03 DATA MERGE OPTION. The DML Option permits the Software to run
custom applications written by Licensor and authorized DML Developers. Customer
understands and agrees that DML programs, except for such programs written
entirely by R&D, may alter the normal operation of the Software and thereby void
the limited warranty set forth in Section 5.01 herein. Customer further agrees
to use such DML programs at its own risk and hereby indemnifies and holds
Licensor harmless from and against any claims arising from Customer's use of
such programs. Any DML code supplied by MMMW is fully warranted.
SECTION 5.04 LIMITATION OF ACTIONS. No action arising or resulting from this
Agreement, regardless of its form, may be brought by any party more than one (1)
year after expiration of the warranty on the affected Software as set forth in
Section 5.01 above.
VI. SOURCE CODE
SECTION 6.01 SOURCE CODE. Nothing contained herein shall be construed as a grant
of the copyright or other proprietary rights in Licensor's products or services,
including without limitation the Software. Customer agrees that it shall not
modify reverse engineer, translate or disassemble the Software, or prepare or
develop any derivative works thereof. Customer acknowledges and agrees that the
Source Code is a trade secret of R&D and that Customer is expressly prohibited
from altering the Source Code in any way, or soliciting another to do so.
SECTION 6.02 SOURCE CODE DEPOSIT. The magnetic tapes containing the Source Code
have been deposited with the law firm of Cobb, Cole & Bell, P.A., 150 Magnolia
Avenue, Daytona Beach, Florida 32115, in accordance with the Source Code Deposit
Agreement attached hereto as Exhibit B.
SECTION 6.03 [*]. Customer understands and agrees that [*] owns complete right,
title and interest in the [*] (the "Executable Server"), and that Customer is
licensed only to use the Executable Server. Customer agrees not to distribute
and/or transfer the Executable Server (whether alone or in conjunction with any
other products) to any third party. Customer shall not distribute and/or
transfer to any third party any program whose main purpose is to cause an
Executable Server to perform its storage and retrieval operations.
SECTION 6.04 COMPUTER VIRUSES. Licensor agrees that it shall take reasonable
precautions to ensure that at the time the Master Tape is provided to Customer
it is free of any concealed program code which has been intentionally and
surreptitiously created by a third party for the purpose of damaging or
destroying data files or computer equipment. Licensor agrees the Software will
not deactivate itself without the control of a person operating the computing
equipment on which it resides.
SECTION 6.05 MILLENNIUM COMPLIANCE. Version 9.01 of The Medical Manager software
shall be year 2000 compliant to include (I) calculations using a four digit
year. (specifically including, without limitation, the year 2000 and following);
(ii) functionality for on-line and batch processing including, but not limited
to, entry, inquiry, maintenance and update support four-digit year processing;
(iii) interfaces and reports support four-year digit year processing; (iv)
translation into year 2000 with the correct system data ( e.g. 1/ 1/2000)
without human intervention; (v) processing with a four-year digit year after
transition to and beyond the year 2000 without human intervention; (vi)
providing correct results in forward and backwards data calculations spanning
century boundaries.
VII. SUPPORT MAINTENANCE AND SERVICES
SECTION 7.01 TRAINING. During the term of this Agreement, Licensor shall provide
to Customer initial training services at the then current initial training
rates, as described in Exhibit A. Licensor agrees to provide additional training
on the use of the Software to Customer's central support staff at Licensor's
facilities, at the then current training rates. Additionally, if the training is
to be held at a location requiring travel, Customer agrees to reimburse Licensor
for reasonable expenses of travel, food and lodging. Customer agrees that all
requests for training shall clearly specify the type of training desired and
shall be scheduled a reasonable time in advance.
SECTION 7.02 SOFTWARE MAINTENANCE. During the term of this Agreement and subject
to Customer's payment of the maintenance fees described on Exhibit A hereto,
Licensor agrees to provide Customer's central administration support staff with
one copy of all published Maintenance Modifications in the form of individual
update diskettes or a new Master Tape for each operating system version of the
Software licensed to Customer. Customer understands and agrees that Maintenance
Modifications which correct Software Errors shall be provided only on the then
current version of the Software. MMMW will support two prior versions of The
Medical Manager system.
SECTION 7.03 SOFTWARE VERSION MAINTENANCE. Customer agrees to pay the annual
"Software Version Maintenance Fee" described in Exhibit A hereto, which will
entitle Customer to receive all New Versions of the Software when released by
Licensor. Customer understands and agrees that such Software Version Maintenance
Fee must be paid in advance as invoiced by Licensor. Failure of Customer to
timely remit payment for the New Version Maintenance Fee shall terminate
Licensor's obligation to provide New Versions to Customer.
SECTION 7.04 SUPPORT SERVICES. During the term of this Agreement, and subject to
Customer's payment of the maintenance fees described on Exhibit A hereto, during
Normal Business and Support Hours, Licensor shall provide to a staff of key
Customer employees, who are highly trained and experienced in THE MEDICAL
MANAGER software, voice and/or modem (if requested) telephone consultation and
support. Customer shall provide and maintain a list of key Customer employees
who are authorized
<PAGE> 7
to contact Licensor for support. (A grace period of 6 months is granted for MTS
to complete operations structure.) If a system is not able to be on-line after
hours, on-site help will be made available.
SECTION 7.05 MAINTENANCE FEES. In consideration of the software maintenance and
support services described in Sections 7.02 and 7.04, Customer agrees to pay to
Licensor an annual support maintenance fee at the then current support
maintenance rate as set forth in Exhibit A. The support maintenance fee is
payable in advance on the first day of each month, based upon the Software and
number of Users which have been serialized as of the first day of such month.
VIII. CONFIDENTIALITY OF INFORMATION
Licensor may disclose information to Customer concerning its confidential
business information, inventions, confidential know-how and trade secrets. Such
confidential business information, inventions, confidential know-how and trade
secrets disclosed hereunder shall remain the sole property of Licensor and/or
R&D, and Customer shall have no interest or right with respect thereto. Except
as expressly set forth herein, Customer agrees that it shall not use or
commercially exploit any such confidential information without the express prior
written consent of Licensor. Among other things, the Source Code for R&D's
software, R&D's internal developmental documents, preliminary Object Code, any
test copies of the Software, the Data Merge Language, the GenDML routine, any
Data Merge programs written in whole or in part by R&D, any derivative works,
EMC Formats, ERS Formats, prices and/or discounts are all regarded as
confidential information by Licensor. Customer covenants and agrees that, during
the term of this Agreement and for a period of three (3) years after
termination, it shall use all reasonable efforts to protect Licensor's and R&D's
trade secrets and the proprietary aspects of THE MEDICAL MANAGER products from
unauthorized disclosure and use, including but not limited to the confidential
information described herein.
Customer may disclose information to Licensor concerning its confidential
business information, confidential patient records, inventions, confidential
know-how and trade secrets. Such confidential business information, inventions,
confidential know-how and trade secrets disclosed hereunder shall remain the
sole property of Customer, and Licensor shall have no interest or right with
respect thereto. Except as expressly set forth herein, Licensor agrees that it
shall not use or commercially exploit any such confidential information without
the express prior written consent of Customer. Licensor covenants and agrees
that, during the term of this Agreement and for a period of three (3) years
after termination, it shall use all reasonable efforts to protect Customer's
trade secrets and confidential materials from unauthorized disclosure and use.
Any party may bring an action in a court of competent jurisdiction to enjoin
another party from violating this provision, and/or to obtain damages for the
breach thereof. In the event such action is brought by a party hereto, the
prevailing party shall be entitled to an award of reasonable attorneys' fees,
including appellate fees.
The obligation of this Article VIII shall terminate with respect to confidential
information when the party receiving such confidential information (the
"Recipient") can document that the information:
(a) was in the public domain at the time the disclosing party (the
"Discloser") communicated such information to the Recipient;
(b) entered the public domain through no fault of the Recipient
subsequent to the time of the Discloser's communication
thereof to the Recipient;
(c) was in the Recipient's possession free of any obligation of
confidence at the time of the Discloser's communication
thereof to the Recipient;
(d) was rightfully communicated to the Recipient by a third party
free of any obligation of confidence subsequent to the time of
the Discloser's communication thereof to the Recipient,
(e) was developed by employees or agents of the Recipient
independently of and without any reference to any information
that the Discloser has disclosed in confidence to any third
party; or
(f) was required pursuant to applicable law, provided that the
Recipient uses reasonable efforts to allow the Discloser an
opportunity to resist such communication or seek a protective
order.
IX. LIMITATION OF REPRESENTATIONS AND USE OF NAME
Customer agrees to make no representations concerning the Software except as set
forth in the printed Documentation furnished to Customer by Licensor. Customer
shall not reproduce, reference, distribute, or utilize any trade name or
trademark of Licensor and/or R&D, except solely for purposes of identifying
Licensor's products and software, without the prior written approval of
Licensor. Each party agrees to submit to the other party for approval, prior to
use, distribution, or disclosure, any advertising, promotion, or publicity in
which the trade names or trademarks of the other party are used, or which is
otherwise undertaken pursuant to this Agreement.
<PAGE> 8
X. INDEMNIFICATION
SECTION 10.01 INDEMNIFICATION BY LICENSOR. Licensor shall indemnify Customer
against the liabilities and costs, including reasonable attorneys' fees based
upon defending any claim or suit arising from the alleged infringement by THE
MEDICAL MANAGER Software of any registered United States copyright or trademark,
or the trade secret rights of a third party, provided Customer promptly notifies
Licensor in writing of the suit or any claim of infringement and that Licensor
is permitted to control fully the defense and settlement of any claim or suit.
Customer shall have the right, at its own expense, to appear through counsel of
its own choosing. Licensor shall have the right, in its sole discretion, to
settle any such claim or suit. If an infringement claim is asserted, or if
Licensor believes one likely, Licensor will have the right but not the
obligation to (a) procure a license for Customer from the party claiming or
likely to claim infringement, or (b) modify the Software to avoid the claim of
infringement so long as such modification does not materially impair the
operation of the Software. Licensor shall have no obligation hereunder for or
with respect to claims, actions, or demands alleging infringement which arise by
reason of combination of non-infringing items with any items which are not
Software. THE FOREGOING IS LICENSOR'S EXCLUSIVE OBLIGATION WITH RESPECT TO
CLAIMS OF INFRINGEMENT OF PROPRIETARY RIGHTS OF ANY KIND.
SECTION 10.02 INDEMNIFICATION BY CUSTOMER. Customer hereby indemnifies and holds
harmless Licensor from and against any and all claims, actions, or demands
arising with respect to any use or misuse of the Software or any Customer
Products with the sole exception of those matters for which Licensor bears
responsibility under Section 10.01 herein.
SECTION 10.03 SALES TAX. Customer covenants and agrees that it shall indemnify
and hold harmless Licensor from and against any sales taxes, duties, tariffs, or
other assessments levied by or on behalf of any taxing jurisdiction or entity
relating to any transaction contemplated by this Agreement.
SECTION 10.04 NOTICE REQUIRED. The foregoing indemnities are conditioned on
prompt written notice of any claim, action, or demand for which indemnity is
claimed, complete control of the defense and settlement thereof by the
indemnifying party, and cooperation of the other party in such defense.
XI. TERM AND TERMINATION
SECTION 11.01 TERM. This Agreement shall commence as of the Effective Date and
shall continue until terminated as set forth herein.
SECTION 11.02 TERMINATION BY LICENSOR. Licensor may terminate this Agreement
upon forty five (45) days notice in the event one or more of the following
occurs and, if capable of being cured, is not cured within such forty five (45)
day cure period:
(a) The failure of Customer at any time to timely make any payment
required herein (Payment is considered late if not paid with
in thirty (30) days of the invoice date);
(b) The failure of Customer to protect Licensor's proprietary
rights in the Software as set forth in this Agreement; or
(c) The failure of Customer to cure a breach of a material term of
this Agreement.
SECTION 11.03 TERMINATION BY CUSTOMER. Customer may terminate this Agreement in
the event Licensor fails to cure a breach of a material term of this Agreement
within forty five (45) days after receiving written notice thereof from
Customer.
SECTION 11.04 INSOLVENCY. Should any party admit in writing its inability to pay
its debts generally as they become due, or make a general assignment for the
benefit of creditors, or institute proceedings to be adjudicated a voluntary
bankrupt, or consent to the filing of a petition of bankruptcy against it, or be
adjudicated by a court of competent jurisdiction as bankrupt or insolvent; or
should any party seek reorganization under any bankruptcy act, or consent to the
filing of a petition seeking such reorganization; or should any party have a
decree entered against it by a court of competent jurisdiction appointing a
receiver, liquidator, trustee, or assignee in bankruptcy or in insolvency
covering all or substantially all of such party's property or providing for the
liquidation of such party's property or business affairs, then the other party
may, at its option and without notice, terminate this Agreement, effective
immediately.
SECTION 11.05 EFFECT OF TERMINATION. Termination of this Agreement shall not
relieve any party of the obligations incurred hereunder pursuant to Article IV
(Title), Article V (Limited Warranties), Article VI (Source Code), Article VIII
(Confidentiality of Information), Article X (Indemnification), Section 11.05
(Effect of Termination), Section 11.06 (Use of Software After Termination), and
Article XII (Arbitration), which provisions shall survive such termination. Upon
termination of this Agreement, any and all amounts or fees due under this
Agreement or otherwise due to Licensor shall immediately be paid in full without
further demand by Licensor.
SECTION 11.06 USE OF SOFTWARE AFTER TERMINATION. Customer's license to use the
Software Serialized prior to termination, shall survive termination of this
Agreement and shall continue in full force and effect under the terms and
conditions of the then current license agreement for THE MEDICAL MANAGER
software, unless termination is pursuant to Section 11.02, 11.03, 11.04, or
based upon a violation of Section 3.01 (Grant of License), Section 3.02
(Licensed Configuration), or any other violation of Licensor's intellectual
property rights whereupon Customer's right and license to use the Software shall
immediately terminate.
<PAGE> 9
XII. ARBITRATION
Any controversy or claim arising out of or relating to this contract or breach
thereof, except as specifically set forth in Article VIII hereof, shall be
submitted to arbitration by giving written notice to that effect to the other
parties.
(a) Within ten (10) days after delivery of such written notice,
each party shall designate one arbitrator each of whom shall
be knowledgeable in the computer software industry. The two
arbitrators so named shall designate a third arbitrator, who
shall be an attorney knowledgeable in the computer software
industry to act as the head arbitrator. Should the partisan
arbitrators be unable to agree upon a third arbitrator, then
the third arbitrator shall be named by a Judge of a United
States District Court, upon the application of either party;
provided, however, that such selection shall be made solely on
the basis of the arbitrator's knowledge of the computer
software industry.
(b) The arbitration shall be conducted in accordance with the then
prevailing rules of the American Arbitration Association. The
first and third week of arbitration shall be conducted in
South Bend, Indiana and the second and fourth week, if
necessary, shall be conducted in South Bend, Indiana. Other
locations may be selected upon the unanimous agreement of the
parties hereto.
(c) In connection with the arbitration, the arbitrators shall, at
the request of either party, direct that discovery be
provided. In the event information of a confidential nature is
obtained by either party during discovery, the other party
shall not disclose such information to any third party and
shall take all steps reasonably necessary for the protection
of any such information.
(d) In rendering their decision and award, the arbitrators shall
not add to, nor subtract from or otherwise modify the
provisions of this Agreement, but rather shall be bound
thereby. Each party shall bear its own costs and expenses in
connection with the arbitration and the costs and expenses of
the arbitrators shall be borne equally. Judgment upon the
award rendered by the arbitrators may be entered by any court
having jurisdiction thereof.
XIII. MISCELLANEOUS PROVISIONS
SECTION 13.01 ENTIRE AGREEMENT. Each of the parties hereto acknowledges that it
read this Agreement, understands it, and agrees to be bound by its terms. The
parties further agree that this Agreement is the complete and exclusive state of
Agreement and supersedes all proposals (oral or written), understandings,
representations, conditions, warranties, covenants, and all other communications
between the parties relating thereto. This Agreement may be amended only by a
writing that refers to this Agreement and is signed by both parties.
SECTION 13.02 FORCE MAJEURE. In the event that either party is prevented from
performing, or is unable to perform, any of its obligations under this Agreement
due to any act of God, fire, casualty, flood, war, strike, lock out, failure of
public utilities, injunction or any act, exercise, assertion or requirement of
governmental authority, epidemic, destruction of production facilities,
insurrection, or any other cause beyond the reasonable control and without the
fault or negligence of the party invoking this provision, and if such party
shall have used its best efforts to avoid such occurrence and minimize its
duration and has given prompt written notice to the other party, then the
affected party's performance shall be excused for the period of delay or
inability to perform due to such occurrence.
SECTION 13.03 NO IMPLIED RIGHTS. Except for any licenses and immunities that are
expressly granted by this Agreement, nothing in this Agreement or course of
dealing between the parties will be deemed to create a license from any party to
the other of any intellectual property right, whether by estoppel, implication,
or otherwise.
SECTION 13.04 ASSIGNMENT. Customer represents that it is acting on its own
behalf and is not acting as an agent for or on behalf of any third party.
Neither party may assign or delegate this Agreement without the other party's
prior written consent, which consent shall not be unreasonably withheld, except
that either party may assign this Agreement without the other party's consent to
a parent, affiliate, subsidiary, successor in interest, or in connection with an
acquisition, merger, or sale of substantially all assets of a party which does
not materially and adversely affect its business activities or its abilities to
carry out its obligations under this Agreement.
SECTION 13.05 SEVERANCE. If any provision of this Agreement shall be held
illegal, unenforceable, or in conflict with any law of a federal, state, or
local government having jurisdiction over this Agreement, the validity of the
remaining portions or provisions hereof shall not be affected.
SECTION 13.06 REFORMATION. To the extent that any provision of this Agreement
shall be held illegal, unenforceable, or in conflict with any law of a federal,
state, or local government having jurisdiction over this Agreement, a court of
competent jurisdiction may modify such provision to achieve a provision that is
consistent with the parties' intent.
<PAGE> 10
SECTION 13.07 WAIVER. Except as specifically provided herein, neither party
shall by mere lapse of time without giving notice or taking other action
hereunder be deemed to have waived any breach by the other party of any of the
provisions of this Agreement. Furthermore, the waiver by either party of a
particular breach of this Agreement by the other party shall not be construed
as, or constitute, a continuing waiver of such breach, or of other breaches of
the same or other provisions of this Agreement.
SECTION 13.08 HEADINGS. The headings of paragraphs hereof are for the purpose of
reference only and shall not limit or otherwise affect any of the terms or
provisions hereof
SECTION 13.09 PARTIES BOUND. This Agreement shall bind and inure to the benefit
of the parties hereto, and their respective successors, subsidiaries and
authorized assigns.
SECTION 13.10 INTERPRETATION. The parties hereto acknowledge and agree that they
have each had the benefit of counsel and have participated in the drafting of
this Agreement. Therefore, the rule of law which provides that, if an ambiguity
is found to exist in an agreement, the ambiguity is construed against the party
who drafted the agreement, shall not apply to the interpretation of this
Agreement.
SECTION 13.11 NOTICE. All notices and other communications required or permitted
to be given under this Agreement shall be in writing and shall be considered
effective one (1) day after deposit with a nationally-recognized overnight
carrier, or five (5) days after deposit in the U.S. mail as certified or
registered mail, return receipt requested, postage prepaid, and addressed to the
party at the address noted above, unless by such notice a different address
shall have been designated in writing.
SECTION 13.12 GOVERNING LAW. All questions concerning the validity, operation,
interpretation, and construction of this Agreement will be governed by and
determined in accordance with the laws of the State of Indiana without regard to
conflict of laws principles.
IN WITNESS WHEREOF, the parties have caused the Agreement to be duly executed by
their authorized representatives as set forth below.
CUSTOMER LICENSOR
MTS, Inc. Medical Manager Midwest, Inc.
By: /s/ Illegible By: /s/ Illegible
-------------------------------- --------------------------------
Company: MTS Company: MMMW
--------------------------- ---------------------------
Date: Mar. 4, 1998 Date: 3-5-98
------------------------------ ------------------------------
Contingent upon lease approval as discussed with Tom Liddel
<PAGE> 1
EXHIBIT 10.17
[MEDICAL MANAGER LETTERHEAD]
TECHNICAL INFRASTRUCTURE MAINTENANCE AGREEMENT
Date: March 1, 1998
Contract No.: pr-4544
Between
Client Name: MEDICAL MANAGER MIDWEST, INC.
53702 Generations Drive
South Bend, IN 46635
Principle Contact: Tom Liddell
And
Customer Name: MTS, INC.
9931 Corporate Service Drive
Louisville, KY 40223
Principle Contact: Gail Knopf
ANNUAL FEE. [ ] Technical Support Hours Maximum: [*]; If
Retainer $[*] support extends beyond [*] hours,
Support will be charged at [*] per
hour.
[*].
MEDICAL MANAGER, MIDWEST, INC., hereinafter referred to as "MMMW", hereby agrees
to provide service with respect to the technical infrastructure and MTS, INC.,
hereinafter referred to as "Customer", agrees to accept such service, subject to
the following terms and conditions:
THE ATTACHED TERMS AND CONDITIONS ARE PART OF THIS AGREEMENT. THIS AGREEMENT IS
THE SOLE AND EXCLUSIVE AGREEMENT BETWEEN THE PARTIES RELATING TO SERVICES FOR
THE ABOVE ITEMS. THE "Customer" HAS READ THIS AGREEMENT, UNDERSTANDS IT AND
AGREES TO BE BOUND BY IT.
TERMS AND CONDITIONS
1. TECHNICAL INFRASTRUCTURE
(a) Technical Infrastructure Maintenance Agreement covers
applicable items that make up the underlying technical
infrastructure that is required to run an application. This
would include items such as hardware, operating system,
network connections, etc.
(b) Maintenance refers to the services involved in maintenance of
equipment already purchased.
(c) This Agreement shall be effective on the date of signed
acceptance ("Effective Date") by MMMW.
(d) Renewal agreement shall be effective on the "Effective Date"
if it is signed and returned to MMMW by the "Effective Date."
(e) Renewal agreement not signed and received by MMMW by the
"Effective Date" will suspend all coverage of technical
infrastructure support between the "Effective Date" and the
actual date of receival of the renewal technical
infrastructure maintenance agreement. Services provided
between these two dates are billable.
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
<PAGE> 2
2. TERM
(a) MMMW provided Customer with an all inclusive warranty for a period of
12 months commencing on the date of installation to include system
purchased by Customer from MMMW. Upon expiration of that 12 months,
MMMW affords the Customer the opportunity of a continuation of support
on an annual basis as follows: The Initial Term of this Technical
Infrastructure Maintenance Agreement is twelve months, commencing on
the Effective Date. The support agreement will be subject to prior
inspection and acceptance of the hardware for service and to the
Customer's payment of any charges for the inspection and/or the
pre-agreement servicing and repair of the hardware, such estimates to
be approved in advance by Customer.
(b) MMMW shall make two options of hardware support available to Customer:
TECHNICAL SUPPORT RETAINER is a Support Plan that allows the Customer
to pay a Retainer that provides technical Related Support by qualified
Support Analysts and Field Technicians. This Support Plan covers a 12
Month period, with a Maximum Cap of hours for that period. If the Cap
of Hours is met before the end of the 12 Month period, Customer may
choose to purchase an additional Retainer Support Plan at the same
rates. This Support Plan is to include all necessary labor in a repair
situation, but Customer is to incur the cost of components to replace
broken or faulty equipment. Customer is to incur reasonable cost of
travel time/expenses of MMMW personal. MMMW accepts the responsibility
for payment of shipping and handling costs of the components. Customer
is to incur the cost for any swap equipment. Fee for swap equipment is
a flat-rate, one time fee as follows (not applicable from the central
site): terminal $[*], color terminal $[*], [*] printer $[*], [*]
printer $[*], personal computer $[*]. Cluiterports $[*], muxes $[*],
multiport boards $[*], power supplies $[*], and [*] printers $[*] are
subject to availability. All other equipment is subject to
availability. Phone calls to the MMMW Support Department or Technical
Department related to Technical Issues are also charged against your
Technical Support Retainer in 15 minute increments. Example: If your
office places a call to the MMMW Support Desk to receive help for a
non-functioning printer, our Support Analyst will track and log the
length of the call to deduct from the total of your available
Technical Support Retainer.
(c) If customer elects to not accept the Technical Support Retainer
Contract, MMMW will make available to Customer support on their
Technical Infrastructure in the following manner. MMMW will take
Customer Technical related calls and process through MMMW Support
Department. The Customers issue will then be queued and handled as
soon as possible directly behind contracted Technical Supported
clients. Customer is to be billed an Hourly rate of $[*] per hour on
all Technical Related Issues, unless notified otherwise by MMMW.
Customer is to incur the cost of swap equipment. Swap equipment is
subject to availability. Customer is to incur the cost of travel
time/expenses of MMMW Personal.
(d) Customer, upon thirty days prior written notice, may cancel this
Agreement at the end of the Initial Term and thereafter on each
anniversary of the end of the Initial Term. MMMW may cancel this
Agreement if the Customer does not remit payment according to the
terms of MMMW's invoice.
(e) The term of this Agreement consists of the Initial Term and any
continuations.
(f) Equipment under Warranty: A Manufacturer's Warranty accompanies most
items, pleas refer to the Warranty for specific coverage. Copies of
Warranty will be provided to Customer. Where applicable, Customer is
to incur the cost for labor, travel time/expenses of MMMW personnel,
swap equipment rental fees, and Phone Support from the MMMW Support
Desk.
3. SERVICE
(a) MMMW will provide on-call service for the Technical Infrastructure
during the term of this Agreement from 7:00am to 5:00pm CST, with a
guaranteed response time of 3 hours with a goal of on site within 2
hours. Support to include 7X24 hour pager support for emergency
services. After the customer has 30 locations, MMMW will locate
technical personnel in the current geography. If a system is not able
to be on-line after hours, on-site help will be made available.
(b) The Customer shall provide a suitable environment for the Technical
Infrastructure in accordance with MMMW specifications of non-humid
environment, between the temperature range of 60 degrees F and 80
degrees F.
(c) MMMW may elect to: repair a failing hardware with new or serviceable
used parts; or exchange the hardware with a hardware that is new or
used but in good working order, cleaned, lubricated, adjusted and
tested.
(d) Replaced parts and hardware become MMMW's property or at clients
discretion.
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
<PAGE> 3
(e) All programs (excluding any MMMW supplied), data, storage
media not requiring service, parts, options, attachments or
alterations not provided by MMMW shall be removed before
hardware is submitted to MMMW for service. The Customer agrees
that if any such material is not removed, it will be deemed to
have been discarded by the Customer and shall not be liability
of MMMW.
(f) The Customer is responsible to implement appropriate
safeguards to protect and/or recreate the Customer's data,
should it be destroyed through hardware malfunction or
otherwise (see exclusions 4b).
(g) On Call Service Selection:
At the time this Agreement is agreed to by the Customer, the
Customer will have notified MMMW of the location(s) of the
hardware. MMMW shall not be required to furnish On Call
service at any other location. The Customer shall notify MMMW
of any change in location and MMMW may elect not to provide On
Call service at the changed location.
i) The Customer shall provide full, free,
timely and safe access to the hardware for
MMMW to provide the service.
ii) MMMW may elect to exchange or repair the
hardware requiring remedial service during
MMMW's normal service hours at the hardware
location. MMMW may use a MMMW selected
independent contractor for exchange service.
MMMW accepts responsibility for all work
performed.
4. EXCLUSIONS
(a) There could be an increase in service time caused by accident,
misuse, disaster, abuse, alterations, attachments, parts,
options, or repairs not provided by MMMW, failure to provide a
suitable operating environment, relocation of the equipment by
non-Medical Manager, Midwest, Inc. personnel, or use of the
hardware for purposes other than intended.
(b) Service does not include repair or replacement of normally
dispensable items such as diskettes, tapes, printer ribbons,
cartridges, toners, etc.
5. CHARGES
(a) Charges will be invoiced and are payable within thirty (30)
days after the date of the invoice. All charges are subject to
change by MMMW for the forthcoming period capped at the CPI
annually, on thirty days written notice. MMMW reserves the
right to apply [*] finance charges.
(b) If MMMW notifies the Customer of any increase in charges in
accordance with paragraph (a) above, the Customer may cancel
the forthcoming service by advising MMMW in writing within
thirty (30) days after notification of the change. If MMMW is
not so advised, it is conclusively presumed that the Customer
has accepted such change.
(c) The charges do not include applicable taxes. Any applicable
taxes or amounts in lieu thereof and interest thereon paid or
payable by MMMW, shall be borne by the Customer.
6. NON-DISCLOSURE
While this Agreement is in effect and thereafter, the Customer shall
keep confidential and protect from disclosure to others any materials
designated as containing information confidential or proprietary to
MMMW and/or its licensor. On the ending or cancellation of this
Agreement any proprietary information shall be destroyed or returned to
MMMW.
7. SAFETY CHANGES
If MMMW determines that changes in safety are required for the
Technical Infrastructure, MMMW has the right to install them and to
select the method of installation.
8. WARRANTY
(a) MMMW warrants that the Technical Infrastructure remains in
satisfactory operating condition provided it is:
1) continuously subject to MMMW's inspection and acceptance of
the hardware for service; and
2) subject to normal use and conditions. MMMW's sole and
exclusive obligation under this warranty shall be at its
option to repair or exchange any hardware not in satisfactory
operating condition. Said obligation shall be subject to the
conditions and charges of Section 3, 4 and 5 and the prompt
submission of (or notification to MMMW of the problem) the
hardware to MMMW for service.
(b) EXCEPT AS EXPRESSLY STATED IN THIS AGREEMENT, THERE ARE NO
WARRANTIES, EXPRESS OR
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission.
<PAGE> 4
IMPLIED, BY OPERATI0N OF LAW OR OTHERWISE. MMMW DISCLAIMS ANY
IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR PARTICULAR
PURPOSE.
(c) MMMW's warranties extend only to the Customer and may not be
changed except by an instrument in writing as provided in
Section 11(g).
9. LIMITATION OF LIABILITY
(a) MMMW's entire liability and the Customer's sole and exclusive
remedy for claims related to or arising out of this Agreement
for any cause and regardless of the form of action, whether in
contract or tort, including negligence and strict liability,
shall be the remedies set forth in Section 8, provided that if
MMMW fails after repeated attempts to perform those remedies,
MMMW's entire liability shall be the Customer's actual, direct
damages such as would be provided in a court of law, not to
exceed the charge for service for the item that caused the
damages.
(b) MMMW shall NOT be liable for INCIDENTAL or CONSEQUENTIAL
DAMAGES, even if MMMW has been advised, knew or should have
known of the possibility of such damages.
(c) SOME STATES HAVE LAWS REQUIRING WARRANTY AND LIABILITY RIGHTS
DIFFERENT FROM THOSE STATED IN THIS AGREEMENT. IN SUCH STATES,
THE MINIMUM REQUIRED WARRANTY AND LIABILITY TERMS WILL APPLY.
10. GENERAL PROVISIONS
(a) MMMW is not responsible for failure to provide services due to
cases beyond its reasonable control.
(b) The Customer is solely responsible for the acquisition, use
and results of any products or services not provided by MMMW,
not withstanding any MMMW recommendation of or referral to
such products or services.
(c) The Customer shall not assign or transfer its rights or
obligations under this Agreement except with MMMW's prior
written consent; any prohibited assignment or transfer shall
be void.
(d) This Agreement shall be interpreted in accordance with the
laws of the State of Indiana.
(e) No action, regardless of form, related to, or arising out of
this Agreement may be brought by either party more than two
(2) years after the cause of action has arisen.
(f) The customer represents that the Customer is either the owner
of the hardware, or if not, that the Customer has the
authority from the owner to include the hardware under this
Agreement. Also, the Customer warrants that no liens, security
interest or encumbrances upon the hardware exist, or will
exist when the hardware is submitted to MMMW for services, or
if any encumbrance does exist, that the holder thereof has
consented to this agreement and the service.
(g) This Agreement may not be changed, released or discharged
except by a written agreement entered into by duly authorized
representatives of the parties.
MMMW and Customer accept and agree to the terms and conditions of this
Agreement.
MTS, INC. MEDICAL MANAGER, MIDWEST, INC.
By: /s/ Gail Knopf By: /s/ Tom Liddell
-------------------------------- --------------------------------
Date: March 4, 1998 Date: 3-5-98
------------------------------ ------------------------------
<PAGE> 1
[BANK ONE LOGO]
PROMISSORY NOTE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO. CALL COLLATERAL ACCOUNT OFFICER INITIALS
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$1,500,000.00 03-04-1999 03-04-2000 098053 010 2756603893 00480
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.
<TABLE>
<CAPTION>
<S> <C>
BORROWER: THE TRIZETTO GROUP, INC. A DELAWARE LENDER: BANK ONE, COLORADO, NA
CORPORATION CORPORATE LENDING - BOULDER
567 SAN NICOLAS DRIVE, SUITE 360 1125 17TH STREET
NEWPORT BEACH, CA 92660 DENVER, CO 80217
</TABLE>
================================================================================
PRINCIPAL AMOUNT: $1,500,000.00 DATE OF NOTE: MARCH 4, 1999
PROMISE TO PAY. For value received, THE TRIZETTO GROUP, INC., A DELAWARE
CORPORATION ("Borrower") promises to pay to Bank One, Colorado, NA {"Lender"),
or order, in lawful money of the United States of America, the principal amount
of One Million Five Hundred Thousand & 00/100 Dollars ($1,500,000.00) ("Total
Principal Amount") or so much as may be outstanding, together with interest on
the unpaid outstanding principal balance from the date advanced until paid in
full.
PAYMENT. This Note shall be payable as follows: Interest shall be due and
payable monthly as it accrues, commencing on April 4, 1999 and continuing on
the same day of each month thereafter during the term of this Note, and the
outstanding principal balance of this Note, together with all accrued but
unpaid interest, shall be due and payable on March 4, 2000. The annual interest
rate for this Note is computed on a 365/360 basis; that is, by applying the
ratio of the annual interest rate over a year of 360 days, multiplied by the
outstanding principal balance, multiplied by the actual number of days the
principal balance is outstanding. Borrower will pay Lender at the address
designated by Lender from time to time in writing. If any payment of principal
of or interest on this Note shall become due on a day which is not a Business
Day, such payment shall be made on the next succeeding Business Day. As used
herein, the term "BUSINESS DAY" shall mean any day other than a Saturday,
Sunday or any other day on which national banking associations are authorized to
be closed. Unless otherwise agreed to, in writing, or otherwise required by
applicable law, payments will be applied first to accrued, unpaid interest, then
to principal, and any remaining amount to any unpaid collection costs, late
charges and other charges, provided, however, upon delinquency or other
default, Lender reserves the right to apply payments among principal, interest,
late charges, collection costs and other charges at its discretion. The books
and records of Lender shall be prima facie evidence of all outstanding
principal of and accrued but unpaid interest on this Note. This Note may be
executed in connection with a loan agreement. Any such loan agreement may
contain additional rights, obligations and terms.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to
fluctuation based upon the Prime Rate of interest in effect from time to time
(the "Index") (which rate may not be the lowest, best or most favorable rate of
interest which Lender may charge on loans to its customers). "Prime Rate" shall
mean the rate announced from time to time by Lender as its prime rate. Each
change in the rate to be charged on this Note will become effective without
notice on the same day as the Index changes. Except as otherwise provided
herein, the unpaid principal balance of this Note will accrue interest at a
rate per annum which will from time to time be equal to the sum of the Index,
plus 0.500%. NOTICE: Under no circumstances will the interest rate on this Note
be more than the maximum rate allowed by applicable law.
PREPAYMENT. Borrower agrees that all loan fees and other prepaid finance
charges are earned fully as of the date of the loan and will not be subject to
refund upon early payment (whether voluntary or as a result of default), except
as otherwise required by law. Except for the foregoing, Borrower may pay
without fee all or a portion of the principal amount owed hereunder earlier
than it is due. All prepayments shall be applied to the indebtedness owing
hereunder in such order and manner as Lender may from time to time determine in
its sole discretion.
LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged
5.000% of the regularly scheduled payment of $25.00, whichever is greater.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment of principal or interest when due under this
Note or any other indebtedness owing now or hereafter by Borrower to Lender;
(b) failure of Borrower or any other party to comply with or perform any term,
obligation, covenant or condition contained in this Note or in any other
promissory note, credit agreement, loan agreement, guaranty, security
agreement, mortgage, deed of trust or any other instrument, agreement or
document, whether now or hereafter existing, executed in connection with this
Note (the Note and all such other instruments, agreements, and documents shall
be collectively known herein as the "RELATED DOCUMENTS"); (c) Any
representation or statement made or furnished to Lender herein, in any of the
related Documents or in connection with any of the foregoing is false or
misleading in any material respect; (d) Borrower or any other party liable for
the payment of this Note, whether as maker, endorser, guarantor, surety or
otherwise, becomes insolvent or bankrupt, has a receiver or trustee appointed
for any part of its property, makes an assignment for the benefit of its
creditors, or any proceeding is commenced either by any such party or against
it under any bankruptcy or insolvency laws; (e) the occurrence of any event of
default specified in any of the other Related Documents or in any other
agreement now or hereafter arising between Borrower and Lender; (f) the
occurrence of any event which permits the acceleration of the maturity of any
indebtedness owing now or hereafter by Borrower to any third party; or (g) the
liquidation, termination, dissolution, death or legal incapacity of Borrower
or any other party liable for the payment of this Note, whether as maker,
endorser, guarantor, surety, or otherwise.
LENDER'S RIGHTS. Upon default, Lender may at its option, without further notice
or demand (i) declare the entire unpaid principal balance on this Note, all
accrued unpaid interest and all other costs and expenses for which Borrower is
responsible for under this Note and any other Related Document immediately due,
(ii) refuse to advance any additional amounts under this Note, (iii) foreclose
all liens securing payment hereof, (iv) pursue any other rights, remedies and
recourses available to the Lender, including without limitation, any such
rights, remedies or recourses under the Related Documents, at law or in equity,
or (v) pursue any combination of the foregoing. Upon default, including failure
to pay upon final maturity, Lender, at its option, may also, if permitted under
applicable law, do one or both of the following: (a) increase the variable
interest rate on this Note to 3.500 percentage points over the Index, and (b)
add any unpaid accrued interest to principal and such sum will bear interest
therefrom until paid at the rate provided in this Note (including any
increased rate). The interest rate will not exceed the maximum rate permitted
by applicable law. Lender may hire an attorney to help collect this Note if
borrower does not pay and borrower will pay Lender's reasonable attorneys' fees
and all other costs of collection, unless prohibited by applicable law. This
Note has been delivered to Lender and accepted by Lender in the State of
Colorado. Subject to the provisions on arbitration, this Note shall be governed
by and construed in accordance with the laws of the State of Colorado without
regard to any conflict of laws or provisions thereof.
PURPOSE. Borrower agrees that no advances under this Note shall be used for
personal, family, or household purposes and that all advances hereunder shall
be used solely for business, commercial, agricultural or other similar purposes.
JURY WAIVER. THE BORROWER AND LENDER (BY ITS ACCEPTANCE HEREOF) HEREBY
VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE
A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED UPON CONTRACT, TORT
OR OTHERWISE) BETWEEN OR AMONG THE BORROWER AND LENDER ARISING OUT OF OR IN ANY
WAY RELATED TO THIS NOTE, ANY OTHER RELATED DOCUMENT, OR ANY RELATIONSHIP
BETWEEN LENDER AND BORROWER. THIS PROVISION IS A MATERIAL INDUCEMENT TO LENDER
TO PROVIDE THE FINANCING EVIDENCED BY THIS NOTE.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $20.00 if Borrower
makes a payment on Borrower's loan and the check or preauthorized charge with
which Borrower pays is later dishonored.
RIGHT OF SETOFF. Unless a lien would be prohibited by law or would render a
nontaxable account taxable, Borrower grants to Lender a contractual security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or any other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future. Borrower authorizes Lender, to the extent
permitted by applicable law, to charge or setoff all sums owing on this Note
against any and all such accounts.
LINE OF CREDIT. This Note evidences a revolving line of credit. Borrower may
request advances and make payments hereunder from time to time, provided that it
is understood and agreed that the aggregate principal amount outstanding from
time to time hereunder shall not at any time exceed the Total Principal Amount.
The unpaid principal balance of this Note shall increase and decrease with each
new advance or payment hereunder, as the case may be. Subject to the terms
hereof, Borrower may borrow, repay and reborrow hereunder. Advances under this
Note, as well as directions for payment from Borrower's accounts, may be
requested orally or in writing by Borrower or by an authorized person. Lender
may, but need not, require that all oral requests be confirmed in writing.
Borrower agrees to be liable for all sums either: (a) advanced in accordance
with the instructions of an authorized person or (b) credited to any of
Borrower's accounts with Lender.
ARBITRATION. Lender and Borrower agree that upon the written demand of either
party, whether made before or after the institution of any legal proceedings,
but prior to the rendering of any judgment in that proceeding, all disputes,
claims and controversies between them, whether individual, joint or class in
nature, arising from this Notice, any Related Document or otherwise, including
without limitation control disputes and tort claims, shall be resolved by
binding arbitration pursuant to the Commercial Rules of the American
Arbitration Association ("AAA"). Any arbitration proceeding held pursuant to
this arbitration provision shall be conducted in the city nearest the
Borrower's address having an AAA regional office, or at any other place
selected by mutual agreement of the parties. No act to take or dispose of any
collateral shall constitute a
<PAGE> 2
03-04-1999 PROMISSORY NOTE Page 2
Loan No (Continued)
================================================================================
waiver of this arbitration agreement or be prohibited by this arbitration
agreement. This arbitration provision shall not limit the right of either party
during any dispute, claim or controversy to seek, use, and employ ancillary, or
preliminary rights and/or remedies, judicial or otherwise, for the purposes of
realizing upon, preserving, protecting, foreclosing upon or proceeding under
forcible entry and detainer for possession of, any real or personal property,
and any such action shall not be deemed an election of remedies. Such remedies
include, without limitation, obtaining injunctive relief or a temporary
restraining order, invoking a power of sale under any deed of trust or
mortgage, obtaining a writ of attachment or imposition of a receivership, or
exercising any rights relating to personal property, including exercising the
right of set-off, or taking or disposing of such property with or without
judicial process pursuant to the Uniform Commercial Code. Any disputes, claims,
or controversies concerning the lawfulness or reasonableness of an act, or
exercise of any right or remedy, concerning any collateral, including any claim
to rescind, reform, or otherwise modify any agreement relating to the
collateral, shall also be arbitrated; provided, however that no arbitrator
shall have the right or the power to enjoin or restrain any act of either
party. Judgment upon any award rendered by any arbitrator may be entered in any
court having jurisdiction. The statute of limitations, estoppel, waiver, laches
and similar doctrines which would otherwise be applicable in an action brought
by a party shall be applicable in any arbitration proceeding, and the
commencement of an arbitration proceeding shall be deemed the commencement of
any action for these purposes. The Federal Arbitration Act (Title 9 of the
United States Code) shall apply to the construction, interpretation, and
enforcement of this arbitration provision.
ADDITIONAL PROVISION REGARDING LATE CHARGES. In the "Late Charge" provision set
forth above, the following language is hereby added after the word "greater":
"up to the maximum amount of One Thousand Five Hundred Dollars ($1500.00) per
late charge".
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person who
signs, guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, protest and notice of dishonor. Upon any
change in the terms of this Note, and unless otherwise expressly stated in
writing, no party who signs this Note, whether as maker, guarantor,
accommodation maker or endorser, shall be released from liability. All such
parties agree that Lender may renew or extend (repeatedly and for any length of
time) this Note, or release any party or guarantor or collateral; or
unjustifiably impair, fail to realize upon or perfect Lender's security
interest in the collateral; and take any other action deemed necessary by
Lender without the consent of or notice to anyone. All such parties also agree
that Lender may modify this Note without the consent of or notice to anyone
other than the party with whom the modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.
BORROWER:
THE TRIZETTO GROUP, INC., A DELAWARE CORPORATION
By: /s/ JEFFREY H. MARGOLIS
----------------------------------------------
JEFFREY H. MARGOLIS, PRESIDENT AND CEO
================================================================================
<PAGE> 3
BANK ONE.
LOAN AGREEMENT
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO. CALL COLLATERAL ACCOUNT OFFICER INITIALS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1,500,000.00 03-04-1999 03-04-2000 098053 010 2756603893 00480
- ------------------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular
loan or item
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
BORROWER: THE TRIZETTO GROUP, INC., LENDER: BANK ONE, COLORADO, NA
A DELAWARE CORPORATION CORPORATE LENDING-BOULDER
567 SAN NICOLAS DRIVE, SUITE 360 1125 17TH STREET
NEWPORT BEACH, CA 92660 DENVER, CO. 80217
================================================================================================================================
</TABLE>
THIS LOAN AGREEMENT BETWEEN THE TRIZETTO GROUP, INC., A DELAWARE CORPORATION
("BORROWER") AND BANK ONE, COLORADO, NA {"LENDER"} IS MADE AND EXECUTED AS OF
MARCH 4, 1999. THIS AGREEMENT GOVERNS ALL LOANS, CREDIT FACILITIES AND/OR OTHER
FINANCIAL ACCOMMODATIONS DESCRIBED HEREIN AND, UNLESS OTHERWISE AGREED TO IN
WRITING BY LENDER AND BORROWER, ALL OTHER PRESENT AND FUTURE LOANS, CREDIT
FACILITIES AND OTHER FINANCIAL ACCOMMODATIONS PROVIDED BY LENDER TO BORROWER.
ALL SUCH LOANS, CREDIT FACILITIES AND OTHER FINANCIAL ACCOMMODATIONS, TOGETHER
WITH ALL RENEWALS, EXTENSIONS AND MODIFICATIONS THEREOF, ARE REFERRED TO IN
THIS AGREEMENT INDIVIDUALLY AS THE "LOAN" AND COLLECTIVELY AS THE "LOANS."
BORROWER UNDERSTANDS AND AGREES THAT: (A) IN GRANTING, RENEWING, OR EXTENDING
ANY LOAN, LENDER IS RELYING UPON BORROWER'S REPRESENTATIONS, WARRANTIES, AND
AGREEMENTS, AS SET FORTH IN THIS AGREEMENT; AND (B) ALL SUCH LOANS SHALL BE AND
SHALL REMAIN SUBJECT TO THE FOLLOWING TERMS AND CONDITIONS OF THIS AGREEMENT.
TERM. This Agreement shall be effective as of March 4, 1999, and shall continue
thereafter until all Loans and other obligations owing by Borrower to Lender
hereunder have been paid in full and Lender has no commitments or obligations
to make further Advances under the Loans to Borrower.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code as adopted in
the State of Colorado. All references to dollar amounts shall mean amounts in
lawful money of the United States of America.
AGREEMENT. The word "Agreement" means this Loan Agreement, as may be
amended or modified from time to time, together with all exhibits and
schedules attached hereto from time to time.
ACCOUNT. The word "Account" means a trade account receivable of Borrower
for goods sold or leased or for services rendered by Borrower in the
ordinary course of its business.
ACCOUNT DEBTOR. The words "Account Debtor" mean the person or entity
obligated upon an Account.
ADVANCE. The word "Advance" means any advance or other disbursement of Loan
proceeds under this Agreement.
BORROWER. The word "Borrower" means THE TRIZETTO GROUP, INC., A DELAWARE
CORPORATION.
BORROWING BASE. The words "Borrowing Base" mean 75% of the aggregate
account of eligible accounts, less the aggregate amount of Letters of
Credit issued under the Line.
COLLATERAL. The word "Collateral" means and includes without limitation all
property and assets granted as collateral for any Loan, whether real or
personal property, whether granted directly or indirectly, whether granted
now or in the future, and whether granted in the form of a security
interest, mortgage, deed of trust, assignment, pledge, chattel mortgage,
chattel trust, factor's lien, equipment trust, conditional sale, trust
receipt, lien, charge, lien or title retention contract, lease or
consignment intended as a security device, or any other security or lien
interest whatsoever, whether created by law, contract, or otherwise.
COMMITTED SUM. The words "Committed Sum" mean an amount equal to
$1,500,000.00.
ELIGIBLE ACCOUNTS. The words "Eligible Accounts" means, at any time, all of
Borrower's Accounts which contain terms and conditions acceptable to Lender
and in which Lender has a first lien security interest, less the amount of
all returns, discounts, credits, and offsets of any nature; provided,
however, unless otherwise agreed to by Lender in writing, Eligible Accounts
do not include:
(a) Accounts with respect to which the Account Debtor is an officer,
an employee or agent of Borrower and to which the Account Debtor is a
subsidiary of, or affiliated with or related to Borrower or its
shareholders, officers, or directors.
(b) All Accounts with respect to which Borrower has furnished a
payment and/or performance bond and that portion of any Accounts for
or representing retainage, if any, until all prerequisites to the
immediate payment of such retainage have been satisfied.
(c) Accounts with respect to which goods are placed on consignment or
subject to a guaranteed sale or other terms by reason of which the
payment by the Account Debtor may be conditional.
(d) Accounts with respect to which the Account Debtor is not a
resident of, or whose principal place of business is located outside
of, the United States or its territories, except to the extent such
Accounts are supported by insurance, bonds or other assurances
satisfactory to Lender in its sole and absolute discretion.
(e) Accounts with respect to which Borrower is or may become liable
to the Account Debtor for goods sold or services rendered by the
Account Debtor to Borrower.
(f) Accounts which are subject to dispute, counterclaim, or setoff.
(g) Accounts with respect to which all goods have not been shipped or
delivered, or all services have not been rendered, to the Account
Debtor
(h) Accounts with respect to which Lender, in its sole discretion,
deems the creditworthiness or financial condition of the Account
Debtor to be unsatisfactory.
(i) Accounts of any Account Debtor who has filed or has had filed
against it a petition in bankruptcy or an application for relief under
any provision of any state or federal bankruptcy, or debtor-in-relief
acts; or who has had appointed a trustee, custodian, or receiver for
the assets of such Account Debtor; or who has made an assignment for
the benefit of creditors or has become insolvent or fails generally to
pay its debts (including its payrolls) as such debts become due.
(j) Accounts with respect to which the Account Debtor is the United
States government or any department or agency of the United States,
except to the extent an acknowledgement of assignment to Lender of any
such Accounts in compliance with the Federal Assignment of Claims Act
and other applicable laws has been received by Lender.
(k) Accounts which have not been paid or are not due and payable in
full within ninety (90) days from the original invoice date. The
entire balance of all Accounts of any single Account Debtor will be
ineligible whenever 10.000% or more of the total amount outstanding on
all Accounts owing by such Account Debtor is past due ninety (90) days
or more.
ERISA. The "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
GRANTOR. The word "Grantor" means and includes each and all of the persons
or entities granting a Security Interest in any Collateral to any of the
Loans.
GUARANTOR. The word "Guarantor" means and includes without limitation, each
and all of the guarantors, sureties, and accommodation parties for any of
the Loans.
INDEBTEDNESS. The word "Indebtedness" means the indebtedness evidenced by
the Note, including all principal and accrued interest thereon, together
with all other liabilities, costs and expenses for which Borrower is
responsible under this Agreement or under any of the Related Documents. In
addition, the word "Indebtedness" includes all other obligations, debts and
liabilities, plus any accrued interest thereon, owing by Borrower, or any
one or more of them, to Lender of any kind or character, now existing or
hereafter arising, as well as all present and future claims by Lender
against Borrower, or any one or more of them, and all renewals, extensions,
modifications, substitutions and rearrangements of any of the foregoing;
whether such indebtedness arises by note, draft, acceptance, guaranty,
endorsement, letter of credit, assignment, overdraft,indemnity agreement or
otherwise; whether such indebtedness is voluntary or involuntary, due or
not due, direct or indirect, absolute or contingent, liquidated or
unliquidated; whether Borrower may be liable individually or jointly with
others; whether Borrower may be liable primarily or secondarily or as
debtor, maker, comaker, drawer, endorser, guarantor surety, accommodation
party or otherwise.
LENDOR. The word "Lender" meant Bank One, Colorado, NA, its successors and
assigns.
LINE OF CREDIT. The words "Line of Credit" mean the credit facility
described in the Section titled "LINE OF CREDIT" below.
NOTE. The word "Note" means any and all promissory note or notes which
evidenced Borrower's Loans in favor of Lender, as well as any
<PAGE> 4
03-04-1999 LOAN AGREEMENT Page 2
Loan No (Continued)
================================================================================
amendment, modification, renewal or replacement thereof.
PERMITTED LIENS. The words "Permitted Liens" mean: (a) liens and security
interests securing indebtedness owed by Borrower to Lender; (b) liens for
taxes, assessments, or similar charges either (i) not yet due, or (ii)
being contested in good faith by appropriate proceedings and for which
Borrower has established adequate reserves; (c) purchase money liens or
purchase money security interests upon or in any property acquired or held
by Borrower in the ordinary course of business to secure any indebtedness
permitted under this Agreement; and (d) liens and security interests
which, as of the date of this Agreement, have been disclosed to and
approved by the Lender in writing.
RELATED DOCUMENTS. The words "Related Documents" mean and include without
limitation the Note and all credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages,
deeds of trust, and all other instruments, agreements and documents,
whether now or hereafter existing, executed in connection with the Note.
SECURITY AGREEMENT. The words "Security Agreement" mean and include
without limitation any agreements, promises, covenants, arrangements,
understandings or other agreements, whether created by law, contract, or
otherwise, evidencing, governing, representing, or creating a Security
Interest.
SECURITY INTEREST. The words "Security Interest" mean and include without
limitation any type of security interest, whether in the form of a lien,
charge, mortgage, deed of trust, assignment, pledge, chattel mortgage,
chattel trust, factor's lien, equipment trust, conditional sale, trust
receipt, lien or title retention contract, lease or consignment intended
as a security device, or any other security or lien interest whatsoever,
whether created by law, contract, or otherwise.
LINE OF CREDIT. Subject to the other terms and conditions herein, Lender hereby
establishes a Line of Credit for Borrower through which Lender agrees to make
advances to Borrower from time to time from the effective date of this
Agreement until the maturity date of the Note evidencing the Line of Credit,
provided the aggregate amount of such advances outstanding at any time does not
exceed the lesser of the amount equal to the Borrowing Base or an amount equal
to the Committed Sum. Within the foregoing limits, Borrower may borrow,
partially or wholly prepay, and reborrow under this Agreement.
BORROWING BASE COMPLIANCE. If at any time the aggregate principal amount
outstanding under the Line of Credit shall exceed the applicable
Borrowing Base, Borrower shall pay to Lender an amount equal to the
difference between the outstanding principal balance under the Line of
Credit and the Borrowing Base.
REPRESENTATIONS AND WARRANTIES CONCERNING ACCOUNTS. With respect to the
Accounts, Borrower represents and warrants to Lender: (a) Each Account
represented by Borrower to be an Eligible Account for purposes of this
Agreement conforms to the requirements of the definition of an Eligible
Account; and (b) All Account information listed on reports and schedules
delivered to Lender will be true and correct, subject to immaterial
variance.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender as
of the date of this Agreement, as of the date of each request for an Advance,
as of the date of any renewal, extension or modification of any Loan, and at
all times any Loans or Lender's commitment to make Loans hereunder is
outstanding:
ORGANIZATION. Borrower is a corporation which is duly organized, validly
existing, and in good standing under the laws of the State of Delaware
and is duly qualified and in good standing in all other states in which
Borrower is doing business. Borrower has the full power and authority to
own its properties and to transact the businesses in which it is
presently engaged or presently proposes to engage.
AUTHORIZATION. The execution, delivery, and performance of this Agreement
and all Related Documents to which Borrower is a party have been duly
authorized by all necessary action by Borrower; do not require the
consent or approval of any other person, regulatory authority or
governmental body; and do not conflict with, result in a violation of, or
constitute a default under (a) any provision of its articles of
incorporation or organization, or bylaws, or any agreement or other
instrument binding upon Borrower or (b) any law, governmental regulation,
court decree, or order applicable to Borrower. Borrower has all requisite
power and authority to execute and deliver this Agreement and all other
Related Documents to which Borrower is a party.
FINANCIAL INFORMATION. Each financial statement of Borrower supplied to
Lender truly and completely discloses Borrower's financial condition as
of the date of the statement, and there has been no material adverse
change in Borrower's financial condition subsequent to the date of the
most recent financial statement supplied to Lender. Borrower has no
material contingent obligations except as disclosed in such financial
statements.
LEGAL EFFECT. This Agreement and all other Related Documents to which
Borrower is a party constitute legal, valid and binding obligations of
Borrower enforceable against Borrower in accordance with their respective
terms, except as limited by bankruptcy, insolvency or similar laws of
general application relating to the enforcement of creditors' rights and
except to the extent specific remedies may generally be limited by
equitable principles.
PROPERTIES. Except for Permitted Liens, Borrower is the sole owner of,
and has good title to, all of Borrower's properties free and clear of
all Security Interests, and has not executed any security documents or
financing statements relating to such properties. All of Borrower's
properties are titled in Borrower's legal name, and Borrower has not
used, or filed a financing statement under, any other name for at least
the last six (6) years.
COMPLIANCE. Except as disclosed in writing to Lender (a) Borrower is
conducting Borrower's businesses in material compliance with all
applicable federal, state and local laws, statutes, ordinances, rules,
regulations, orders, determinations and court decisions, including
without limitation, those pertaining to health or environmental matters,
and (b) Borrower otherwise does not have any known material contingent
liability in connection with the release into the environment, disposal
or the improper storage of any toxic or hazardous substance or solid
waste.
LITIGATION AND CLAIMS. No litigation, claim, investigation,
administrative proceeding or similar action (including those for unpaid
taxes) against Borrower is pending or threatened, and no other event has
occurred which may in any one case or in the aggregate materially
adversely affect the Borrower's financial condition or properties, other
than litigation, claims, or other events, if any, that have been
disclosed to and acknowledged by Lender in writing.
TAXES. All tax returns and reports of Borrower that are or were required
to be filed, have been filed, and all taxes, assessments and other
governmental charges have been paid in full, except those that have been
disclosed in writing to Lender which are presently being or to be
contested by Borrower in good faith in the ordinary course of business
and for which adequate reserves have been provided.
LIEN PRIORITY. Unless otherwise previously disclosed to and approved by
Lender in writing, Borrower has not entered into any Security Agreements,
granted a Security Interest or permitted the filing or attachment of any
Security Interests on or affecting any of the Collateral, except in favor
of Lender.
LICENSES, TRADEMARKS AND PATENTS. Borrower possesses and will continue to
possess all permits, licenses, trademarks, patents and rights thereto
which are needed to conduct Borrower's business and Borrower's business
does not conflict with or violate any valid rights of others with respect
to the foregoing.
COMMERCIAL PURPOSES. Borrower intends to use the Loan proceeds solely for
business or commercial related purposes approved by Lender and such
proceeds will not be used for the purchasing or carrying of "margin
stock" as defined in Regulation U issued by the Board of Governors of the
Federal Reserve System.
INELIGIBLE SECURITIES. No portion or any advance or Loan made hereunder
shall be used directly or indirectly to purchase ineligible securities
as defined by applicable regulations of the Federal Reserve Board,
underwritten by Lender or any other affiliate of Banc One Corporation
during the underwriting period and for 30 days thereafter.
EMPLOYEE BENEFIT PLANS. Each employee benefit plan as to which Borrower
may have any liability complies in all material respects with all
applicable requirements of law and regulations, and (i) no Reportable
Event nor Prohibited Transaction (as defined in ERISA) has occurred with
respect to any such plan, (ii) Borrower has not withdrawn from any such
plan or initiated steps to do so, (iii) no steps have been taken to
terminate any such plan, and (iv) there are no unfunded liabilities other
than those previously disclosed to Lender in writing.
LOCATION OF BORROWER'S OFFICES AND RECORDS. Borrower's place of business,
or Borrower's chief executive office if Borrower has more than one place
of business, is located at 567 SAN NICOLAS DRIVE, SUITE 360, NEWPORT
BEACH, CA 92660. Unless Borrower has designated otherwise in writing this
location is also the office or offices where Borrower keeps its records
concerning the Collateral.
INFORMATION. All information heretofore or contemporaneously herewith
furnished by Borrower to Lender for the purpose of or in connection with
this Agreement or any transaction contemplated hereby is, and all
information hereafter furnished by or on behalf of Borrower to Lender
will be, true and accurate in every material respect on the date as of
which such information is dated or certified; and none of such
information is or will be incomplete by omitting to state any material
fact necessary to make such information not misleading.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Borrower understands and
agrees that Lender, without independent investigation, is relying upon the
above representations and warranties in extending the Loans to Borrower.
Borrower further agrees that the foregoing representations and warranties
shall be continuing in nature and shall remain in full force and effect
during the term of this Agreement.
<PAGE> 5
03-04-1999 LOAN AGREEMENT PAGE 3
LOAN NO (CONTINUED)
================================================================================
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while
this Agreement is in effect, Borrower will:
DEPOSITORY RELATIONSHIP. Establish and maintain its primary operating
account(s) with Lender.
LITIGATION. Promptly inform Lender in writing of (a) all material adverse
changes in Borrower's financial condition, (b) all existing and all
threatened litigation, claims, investigations, administrative proceedings
or similar actions affecting Borrower or any Guarantor which could
materially affect the financial condition of Borrower or the financial
condition of any Guarantor, and (c) the creation, occurrence or assumption
by Borrower of any actual or contingent liabilities not permitted under
this Agreement.
FINANCIAL RECORDS. Maintain its books and records in accordance with
generally accepted accounting principles, applied on a consistent basis,
and permit Lender to examine, audit and make and take away copies or
reproductions of Borrower's books and records at all reasonable times. If
Borrower now or at any time hereafter maintains any records (including
without limitation computer generated records and computer software
programs for the generation of such records) in the possession of a third
party, Borrower, upon request of Lender, shall notify such party to permit
Lender free access to such records at all reasonable times and to provide
Lender with copies of any records it may request, all at Borrower's
expense.
FINANCIAL STATEMENTS. Furnish Lender with, as soon as available, but in no
event later than one hundred twenty (120) days after the end of each fiscal
year, Borrower's balance sheet, income statement, and statement of changes
in financial position for the year ended, audited by a certified public
accountant satisfactory to Lender, and, as soon as available, but in no
event later than thirty five (35) days after the end of each month,
Borrower's balance sheet, income statement, and statement of changes in
financial position for the period ended, prepared and certified, subject to
year-end review adjustments, as correct to the best knowledge and belief by
Borrower's chief financial officer or other officer or person acceptable to
Lender. All financial reports required to be provided under this Agreement
shall be prepared in accordance with generally accepted accounting
principles, applied on a consistent basis, and certified by Borrower as
being true and correct.
ADDITIONAL INFORMATION. Furnish such additional information and statements,
lists of assets and liabilities, agings of receivables and payables,
inventory schedules, budgets, forecasts, tax returns, and other reports
with respect to Borrower's financial condition and business operations as
Lender may request from time to time.
FINANCIAL COVENANTS AND RATIOS. Comply at all times with the following
covenants and ratios:
CURRENT RATIO. Maintain, at all times, a ratio of Liquid Assets plus
inventory, to current liabilities in excess of 1.50 to 1.00.
For purposes of this Agreement and to the extent the following terms are
utilized in this Agreement, the term "Tangible Net Worth" shall mean
borrower's total assets excluding all intangible assets (including, without
limitation, goodwill, trademarks, patents, copyrights, organization
expenses, and similar intangible items) less total liabilities excluding
Subordinated Debt. The term "Subordinated Debt" shall mean all indebtedness
owing by Borrower which has been subordinated by written agreement to all
indebtedness now or hereafter owing by Borrower to Lender, such agreement
to be in form and substance acceptable to Lender. The term "Working
Capital" shall mean Borrower's Liquid Assets plus inventory, less current
liabilities. The term "Liquid Assets" shall mean borrower's unencumbered
cash, marketable securities and accounts receivable net of reserves. The
term "Cash Flow" shall mean net income after taxes, and exclusive of
extraordinary items, plus depreciation and amortization. Except as provided
above, all computations made to determine compliance with the requirements
contained in this paragraph shall be made in accordance with generally
accepted accounting principles, applied on a consistent basis, and
certified by Borrower as being true and correct.
INSURANCE. Maintain fire and other risk insurance, public liability
insurance, and such other insurance as Lender may require with respect to
Borrower's properties and operations, in form, amounts, coverages and with
insurance companies reasonably acceptable to Lender. Borrower, upon request
of Lender, will deliver to Lender from time to time the policies or
certificates of insurance in form satisfactory to Lender, including
stipulations that coverages will not be cancelled or diminished without at
least thirty (30) days' prior written notice to Lender. In connection with
all policies covering assets in which Lender holds or is offered a Security
Interest for the Loans, Borrower will provide Lender with such loss payable
or other endorsements as Lender may require.
INSURANCE REPORTS. Furnish to Lender, upon request of Lender, reports on
each existing insurance policy showing such information as Lender may
reasonably request, including without limitation the following: (a) the
name of the insurer; (b) the risks insured; (c) the amount of the policy;
(d) the properties insured; (e) the then current property values on the
basis of which insurance has been obtained, and the manner of determining
those values; and (f) the expiration date of the policy.
OTHER AGREEMENTS. Comply with all terms and conditions of all other
agreements, whether now or hereafter existing, between Borrower and any
other party and notify Lender immediately in writing of any default in
connection with any other such agreements.
LOAN FEES AND CHARGES. In addition to all other agreed upon fees and
charges, pay the following: .25% PER ANNUM.
LOAN PROCEEDS. Use all Loan proceeds solely for Borrower's business
operations, unless specifically consented to the contrary by Lender in
writing.
TAXES, CHARGES AND LIENS. Pay and discharge when due all of its
indebtedness and obligations, including without limitation all assessments,
taxes, governmental charges, levies and liens, of every kind and nature,
imposed upon Borrower or its properties, income, or profits, prior to the
date on which penalties would attach, and all lawful claims that, if
unpaid, might become a lien or charge upon any of Borrower's properties,
income, or profits; provided however, Borrower will not be required to pay
and discharge any such assessment, tax, charge, levy, lien or claim so long
as (a) the legality of the same shall be contested in good faith by
appropriate proceedings, and (b) Borrower shall have established on its
books adequate reserves with respect to such contested assessment, tax,
charge, levy, lien, or claim in accordance with generally accepted
accounting principles. Borrower, upon demand of Lender, will furnish to
Lender evidence of payment of the assessments, taxes, charges, levies,
liens and claims and will authorize the appropriate governmental official
to deliver to Lender at any time a written statement of any assessments,
taxes, charges, levies, liens and claims against Borrower's properties,
income, or profits.
PERFORMANCE. Perform and comply with all terms, conditions, and provisions
set forth in this Agreement and in the Related Documents in a timely
manner, and promptly notify Lender if Borrower learns of the occurrence of
any event which constitutes an Event of Default under this Agreement or
under any of the Related Documents.
OPERATIONS. Conduct its business affairs in a reasonable and prudent manner
and in compliance with all applicable federal, state and municipal laws,
ordinances, rules and regulations respecting its properties, charters,
businesses and operations, including without limitation compliance with the
Americans With Disabilities Act, all applicable environmental statutes,
rules, regulations and ordinances and with all minimum funding standards
and other requirements of ERISA and other laws applicable to Borrower's
employee benefit plans.
COMPLIANCE CERTIFICATE. Unless waived in writing by Lender, provide Lender
THIRTY FIVE (35) DAYS AFTER EACH CALENDAR MONTH with a certificate executed
by Borrower's chief financial officer, or other officer or person
acceptable to Lender, (a) certifying that this representations and
warranties set forth in this Agreement are true and correct as of the date
of the certificate and that, as of the date of the certificate, no Event of
Default exists under this Agreement, and (b) demonstrating compliance with
all financial covenants set forth in this Agreement.
ENVIRONMENTAL COMPLIANCE AND REPORTS. Borrower shall comply in all respects
with all federal, state and local environmental laws, statutes, regulations
and ordinances; not cause or permit to exist, as a result of an intentional
or unintentional action or omission on its part or on the part of any third
party, on property owned and/or occupied by Borrower, any environmental
activity where damage may result to the environment, unless such
environmental activity is pursuant to and in compliance with the conditions
of a permit issued by the appropriate federal, state or local governmental
authorities; and furnish to Lender promptly and in any event within thirty
(30) days after receipt thereof, a copy of any notice, summons, lien,
citation, directive, letter or other communication from any governmental
agency or instrumentality concerning any intentional or unintentional
action or omission on Borrower's part in connection with any environmental
activity whether or not there is damage to the environment and/or other
natural resources.
BORROWING BASE CERTIFICATE. Within 35 days after each month, Borrower shall
deliver to Lender a borrowing base certificate, in form and detail
satisfactory to Lender, along with such supporting documentation as Lender
may request, including without limitation, an account receivable aging
report and/or a list or schedule of Borrower's accounts receivable,
inventory and/or equipment.
ADDITIONAL ASSURANCES. Make, execute and deliver to Lender such promissory
notes, mortgages, deeds of trust, security agreements, financing
statements, instruments, documents and other agreements as Lender or its
attorneys may reasonably request to evidence and secure the Loans and to
perfect all Security Interests.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent
of Lender:
MAINTAIN BASIC BUSINESS. Engage in any business activities substantially
different than those in which Borrower is presently engaged.
CONTINUITY OF OPERATIONS. Cease operations, liquidate, dissolve or merge or
consolidate with or into any other entity.
<PAGE> 6
03-04-1999 LOAN AGREEMENT Page 4
(Continued)
================================================================================
INDEBTEDNESS. Create, incur or assume additional indebtedness for borrowed
money, including capital leases, or guarantee any indebtedness owing by
others, other than (a) current unsecured trade debt incurred in the
ordinary course of business, (b) indebtedness owing to Lender, (c)
borrowings outstanding as of the date hereof and disclosed to Lender in
writing, and (d) any borrowings otherwise approved by Lender in writing.
LIENS. Mortgage, assign, pledge, grant a security interest in or otherwise
encumber Borrower's assets, except as allowed as a Permitted Lien.
TRANSFER OF ASSETS. Transfer, sell or otherwise dispose of any of
Borrower's assets other than in the ordinary course of business.
CHANGE IN MANAGEMENT. Permit a change in the senior executive or management
personnel of Borrower.
TRANSFER OF OWNERSHIP. Permit the sale, pledge or other transfer of any
ownership interest in Borrower.
INVESTMENTS. Invest in, or purchase, create, form or acquire any interest
in, any other enterprise or entity.
LOANS. Make any loans to any person or entity.
DIVIDENDS. Pay any dividends on Borrower's capital stock or purchase,
redeem, retire or otherwise acquire any of Borrower's capital stock or
alter or amend Borrower's capital structure.
AFFILIATES. Enter into any transaction, including, without limitation, the
purchase, sale, or exchange of property or the rendering of any service,
with any Affiliate of Borrower, except in the ordinary course of and
pursuant to the reasonable requirements of Borrower's business and upon
fair and reasonable terms no less favorable than would be obtained in a
comparable arm's length transaction with a person or entity not an
Affiliate or Borrower. As used herein, the term "Affiliate" means any
individual or entity directly or indirectly controlling, controlled by or
under common control with, another entity or individual.
CONDITIONS PRECEDENT TO ADVANCES. Lender's obligation to make any Advances or
to provide any other financial accommodations to or for the benefit of Borrower
hereunder shall be subject to the conditions precedent that as of the date of
such advance or disbursement and after giving effect thereto (a) all
representations and warranties made to Lender in this Agreement and the Related
Documents shall be true and correct as of and as if made on such date, (b) no
material advance change in the financial condition of Borrower or any Guarantor
since the effective date of the most recent financial statements furnished to
Lender, or in the value of any Collateral, shall have occurred and be
continuing, (c) no event has occurred and is continuing, or would result from
the requested advance or disbursement, which with notice or lapse of time, or
both, would constitute an Event of Default, (d) no Guarantor has sought,
claimed or otherwise attempted to limit, modify or revoke such Guarantor's
guaranty of any Loan, and (a) Lender has received all Related Documents
appropriately executed by Borrower and all other proper parties.
ADDENDUM. An addendum, titled "ADDENDUM", is attached to this document and by
this document and by this reference is made a part of this document just as if
all the provisions, terms and conditions of the ADDENDUM had been fully set
forth in this document.
RIGHT OF SETOFF. Unless a lien would be prohibited by law or would render a
nontaxable account taxable, Borrower grants to Lender a contractual security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or any other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future. Borrower authorizes Lender, to the extent
permitted by applicable law, to charge or setoff all sums owing on the
Indebtedness against any and all such accounts.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
DEFAULT ON INDEBTEDNESS. Failure of Borrower to make any payment when due
on any of the Indebtedness.
OTHER DEFAULTS. Failure of Borrower, any Guarantor or any Grantor to comply
with or to perform when due any other term, obligation, covenant or
condition contained in this Agreement, the Note or in any of the other
Related Documents, or failure of Borrower to comply with or to perform any
other term, obligation, covenant or condition contained in any other
agreement now existing or hereafter arising between Lender and Borrower.
FALSE STATEMENTS. Any warranty, representation or statement made or
furnished to Lender under this Agreement or the Related Documents is false
or misleading in any material respect.
DEFAULT TO THIRD PARTY. The occurrence of any event which permits the
acceleration of the maturity of any indebtedness owing by Borrower, Grantor
or any Guarantor to any third party under any agreement or undertaking.
BANKRUPTCY OR INSOLVENCY. If the Borrower, Grantor or Guarantor: (i)
becomes insolvent, or makes a transfer in fraud of creditors, or makes an
assignment for the benefit of creditors, or admits in writing its inability
to pay its debts as they become due; (ii) generally is not paying its debts
as such debts become due; (iii) has a receiver, trustee or custodian
appointed for, or take possession of, all or substantially all of the
assets of such party or any of the Collateral, either in a proceeding
brought by such party or in a proceeding brought against such party and
such appointment is not discharged or such possession is not terminated
within sixty (60) days after the effective date thereof or such party
consents to or acquiesces in such appointment or possession; (iv) files a
petition for relief under the United States Bankruptcy Code or any other
present or future federal or state insolvency, bankruptcy or similar laws
(all of the foregoing hereinafter collectively called "APPLICABLE
BANKRUPTCY LAW") or an involuntary petition for relief is filed against
such party under any Applicable Bankruptcy Law and such involuntary
petition is not dismissed within sixty (60) days after the filing thereof,
or an order for relief naming such party is entered under any Applicable
Bankruptcy Law, or any composition, rearrangement, extension,
reorganization or other relief of debtors now or hereafter existing is
requested or consented to by such party; (v) fails to have discharged
within a period of sixty (60) days any attachment, sequestration or similar
writ levied upon any property of such party; or (vi) fails to pay within
thirty (30) days any final money judgment against such party.
LIQUIDATION, DEATH AND RELATED EVENTS. If Borrower, Grantor or any
Guarantor is an entity, the liquidation, dissolution, merger or
consolidation of any such entity or, if any of such parties is an
individual, the death or legal incapacity of any such individual.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help
repossession or any other method, by any creditor of Borrower, any creditor
of any Grantor against any collateral securing the indebtedness, or by any
governmental agency.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, Lender may,
at its option, without further notice or demand, (a) terminate all commitments
and obligations of Lender to make Loans to Borrower, if any, (b) declare all
Loans and any other Indebtedness immediately due and payable, (c) refuse to
advance any additional amounts under the Note or to provide any other financial
accommodations under this Agreement, or (d) exercise all the rights and
remedies provided in the Note or in any of the Related Documents or available
at law, in equity, or otherwise; provided, however, if any Event of Default of
the type described in the "Bankruptcy or Insolvency" subsection above shall
occur, all Loans and any other Indebtedness shall automatically become due and
payable, without any notice, demand or action by Lender. Except as may be
prohibited by applicable law, all of Lender's rights and remedies shall be
cumulative and may be exercised singularly or concurrently. Election by Lender
to pursue any remedy shall not exclude pursuit of any other remedy, and an
election to make expenditures or to take action to perform an obligation of
Borrower or of any Grantor shall not affect Lender's right to declare a default
and to exercise its rights and remedies.
MISCELLANEOUS PROVISIONS.
AMENDMENTS. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to the
matters set forth in this Agreement. No alteration of or amendment to this
Agreement shall be effective unless given in writing and signed by the
party or parties sought to be charged or bound by the alteration or
amendment.
APPLICABLE LAW. This Agreement has been delivered to Lender and accepted by
Lender in the State of Colorado. Subject to the provisions on arbitration,
this Agreement shall be governed by and construed in accordance with the
laws of the State of Colorado without regard to any conflict of laws or
provisions thereof.
JURY WAIVER. THE UNDERSIGNED AND LENDER (BY ITS ACCEPTANCE HEREOF) HEREBY
VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO
HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED UPON
CONTRACT, TORT OR OTHERWISE) BETWEEN OR AMONG THE UNDERSIGNED AND LENDER
ARISING OUT OF OR IN ANY WAY RELATED TO THIS DOCUMENT, AND ANY OTHER
RELATED DOCUMENT, OR ANY RELATIONSHIP BETWEEN LENDER AND THE BORROWER, THIS
PROVISION IS A MATERIAL INDUCEMENT TO LENDER TO PROVIDE THE FINANCING
DESCRIBED HEREIN OR IN THE OTHER RELATED DOCUMENTS.
ARBITRATION. Lender and Borrower agree that upon the written demand of
either party, whether made before or after the institution of any legal
proceedings, but prior to the rendering of any judgment in that proceeding,
all disputes, claims and controversies between them, whether individual,
joint, or class in nature, arising from this Agreement, any Related
Document or otherwise, including without limitation contract disputes and
tort claims, shall be resolved by binding arbitration pursuant to the
Commercial Rules of the American Arbitration Association ("AAA"). Any
arbitration proceeding held pursuant to the arbitration provision shall be
conducted in the city nearest the
<PAGE> 7
LOAN AGREEMENT
03-04-1999 PAGE 5
LOAN NO (CONTINUED)
================================================================================
Borrower's address having an AAA regional office, or at any other place
selected by mutual agreement of the parties. No act to take or dispose of
any Collateral shall constitute a waiver of this arbitration agreement or
be prohibited by this arbitration agreement. This arbitration provision
shall not limit the right of either party during any dispute, claim or
controversy to seek, use, and employ ancillary, or preliminary rights
and/or remedies, judicial or otherwise, for the purposes of realizing upon,
preserving, protecting, foreclosing upon or proceeding under forcible entry
and detainer for possession of, any real or personal property, and any such
action shall not be deemed an election of remedies. Such remedies include,
without limitation, obtaining injunctive relief or a temporary restraining
order, invoking a power of sale under any deed of trust or mortgage,
obtaining a writ of attachment or imposition of a receivership, or
exercising any rights relating to personal property, including exercising
the right of set-off, or taking or disposing of such property with or
without judicial process pursuant to the Uniform Commercial Code. Any
disputes, claims, or controversies concerning the lawfulness or
reasonableness of an act, or exercise of any right or remedy, concerning
any Collateral, including any claim to rescind, reform, or otherwise modify
any agreement relating to the Collateral, shall also be arbitrated;
provided, however that no arbitrator shall have the right or the power to
enjoin or restrain any act of either party. Judgment upon any award
rendered by any arbitrator may be entered in any court having jurisdiction.
The statute of limitations, estoppel, waiver, laches and similar doctrines
which would otherwise be applicable in an action brought by a party shall
be applicable in any arbitration proceeding, and the commencement of an
arbitration proceeding shall be deemed the commencement of any action for
these purposes. The Federal Arbitration Act (Title 9 of the United States
Code) shall apply to the construction, interpretation, and enforcement of
this arbitration provision.
CAPTION HEADINGS. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions
of this Agreement.
CONSENT OF LOAN PARTICIPATION. Borrower agrees and consents to Lender's
sale or transfer, whether now or later, of one or more participation
interests in the Loans to one or more purchasers, whether related or
unrelated to Lender. Lender may provide, without any limitation whatsoever,
to any one or more purchasers, or potential purchasers, any information or
knowledge Lender may have about Borrower or about any other matter relating
to the Loan, and Borrower hereby waives any rights to privacy it may have
with respect to such matters. Borrower additionally waives any and all
notices of sale of participation interests, was well as all notices of any
repurchase of such participation interests.
COSTS AND EXPENSES. Borrower agrees to pay upon demand all of Lender's
expenses, including attorneys' fees, incurred in connection with the
preparation, execution, enforcement, modification and collection of this
Agreement or in connection with the Loans made pursuant to this Agreement.
Lender may hire one or more attorneys to help collect the Indebtedness if
Borrower does not pay, and Borrower will pay Lender's reasonable attorneys'
fees.
NOTICES. All notices required to be given under this Agreement shall be
given in writing, and shall be effective when actually delivered or when
deposited with a nationally recognized overnight courier or deposited in
the United States mail, first class, postage prepaid, addressed to the
party to whom the notice is to be given at the address shown above. Any
party may change its address for notices under this Agreement by giving
formal written notice to the other parties, specifying that the purpose of
the notice is to change the party's address. To the extent permitted by
applicable law, if there is more than one Borrower, notice to any Borrower
will constitute notice to all Borrowers. For notice purposes, Borrower will
keep Lender informed at all times of Borrower's current address(es).
SEVERABILITY. If a court of competent jurisdiction finds any provision of
this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible, any
such offending provision shall be deemed to be modified to be within the
limits of enforceability or validity; however, if the offending provision
cannot be so modified, it shall be stricken and all other provisions of
this Agreement in all other respects shall remain valid and enforceable.
COUNTERPARTS. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original and all of which together shall
constitute the same document. Signature pages may be detached from the
counterparts to a single copy of this Agreement to physically form one
document.
SUCCESSORS AND ASSIGNS. All covenants and agreements contained by or on
behalf of Borrower shall bind its successors and assigns and shall inure to
the benefit of Lender, its successors and assigns. Borrower shall not,
however, have the right to assign its rights under this Agreement or any
interest therein, without the prior written consent of Lender.
SURVIVAL. All warranties, representations, and covenants made by Borrower
in this Agreement or in any certificate or other instrument delivered by
Borrower to Lender under this Agreement shall be considered to have been
relied upon by Lender and will survive the making of the Loan and delivery
to Lender of the Related Documents, regardless of any investigation made by
Lender or on Lender's behalf.
TIME IS OF THE ESSENCE. Time is of the essence in the performance of this
Agreement.
WAIVER. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall
operate as a waiver of such right or any other right. A waiver by Lender of
a provision of this Agreement shall not prejudice or constitute a waiver of
Lender's right otherwise to demand strict compliance with that provision or
any other provision of this Agreement. No prior waiver by Lender, nor any
course of dealing between Lender and Borrower, or between Lender and any
Grantor or Guarantor, shall constitute a waiver of any of Lender's rights
or of any obligations of Borrower or of any Grantor as to any future
transactions. Whenever the consent of Lender is required under this
Agreement, the granting of such consent by Lender in any instance shall not
constitute continuing consent in subsequent instances where such consent is
required, and in all cases such consent may be granted or withheld in the
sole discretion of Lender.
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT, AND
BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS EXECUTED AS OF THE DATE SET
FORTH ABOVE.
BORROWER:
THE TRIZETTO GROUP, INC., A DELAWARE CORPORATION
By: /s/ JEFFREY H. MARGOLIS
--------------------------------------
JEFFREY H. MARGOLIS, PRESIDENT AND CEO
LENDER:
BANK ONE, COLORADO, NA
By: [Signature Illegible]
--------------------------------------
Authorized Officer
================================================================================
<PAGE> 8
ADDENDUM
================================================================================
BORROWER: THE TRIZETTO GROUP, INC., LENDER: BANK ONE, COLORADO, NA
A DELAWARE CORPORATION CORPORATE LENDING - BOULDER
567 SAN NICOLAS DRIVE, 1125 17TH STREET
SUITE 360 DENVER, CO 80217
NEWPORT BEACH, CA 92660
================================================================================
This ADDENDUM is attached to and by this reference is made a part of the
Business Loan Agreement dated March 4, 1999, and executed by BANK ONE,
COLORADO, NA and THE TRIZETTO GROUP, INC., A DELAWARE CORPORATION.
LETTERS OF CREDIT. Letters of credit may be issued under the Line of Credit
from time to time provided the expiration date of the letter of credit is prior
to the maturity date of the Line of Credit.
LINE OF CREDIT CLEARANCE. Borrower shall, at least once during the term of the
Line of Credit, reduce and maintain the outstanding principal balance of the
Line of Credit to $0.00 for a period of at least thirty (30) consecutive
calendar days.
ADDITIONAL AFFIRMATIVE COVENANT - TANGIBLE NET WORTH. Borrower further
covenants and agrees with Lender that, while this Agreement is in effect,
Borrower will comply at all times with the following covenant: Maintain as of
each fiscal month end a minimum Tangible Net Worth of not less than the
following amounts for the following periods: for the period 03/01/99 to
07/31/99, $5,100,000.00; for the period 08/01/99 to 12/31/99, $5,500,000.00;
and for the period 01/01/00 and thereafter, $6,000,000.00.
ADDITIONAL AFFIRMATIVE COVENANT - DEBT TO TANGIBLE NET WORTH RATIO. Borrower
further covenants and agrees with Lender that, while this Agreement is in
effect, Borrower will comply at all times with the following ratio: Maintain as
of each fiscal month end, a ratio of (a) total liabilities, to (b) Tangible Net
Worth of less than the following ratios for the following periods: for the
period 03/01/99 to 09/30/99, 1.00 to 1.00; and for the period 10/01/99 and
thereafter, 1.20 to 1.00.
ADDITIONAL AFFIRMATIVE COVENANT - ADDITIONAL REPORTING. Borrower further
covenants and agrees with Lender that, while this Agreement is in effect,
Borrower will provide Lender (a) within thirty five (35) days of the end of
each month (i) an aging and listing of all accounts receivable prepared in
accordance with generally accepted accounting principles which itemizes each
account debtor by name and which states the total amount payable to Borrower and
contains a breakdown indicating future amounts due and when due, current
amounts due, amounts thirty (30) days past due, sixty (60) days past due and
ninety (90) or more days past due, and reflecting any credit adjustments,
returns and allowances; (ii) an aging and listing of all account payable trade
prepared in a similar manner; (b) within thirty five (35) days of the end of
each fiscal year and, (i) a listing of all accounts receivable which itemizes
each account debtor by name and address; (ii) Borrower's annual operating
budget showing monthly activity forecast; (iii) Borrower's annual projections
for the year immediately following (balance sheet, income statement, cash flow)
showing monthly activity forecast.
ADDITIONAL AFFIRMATIVE COVENANT - LIQUIDITY. Borrower further covenants and
agrees with Lender that, while this Agreement is in effect, Borrower will
maintain Liquid Assets of not less than $1,000,000.00.
ADDITIONAL AFFIRMATIVE COVENANT - FINANCIAL STATEMENTS. Borrower further
covenants and agrees with Lender that, while this Agreement is in effect,
Borrower will furnish Lender with its annual financial statements, including a
balance sheet, income statement and statement of changes in financial position,
on or before June 1, 1999, for the fiscal years ended 12/31/97 and 12/31/98
audited by certified public accountant(s) reasonably acceptable to Lender.
THIS ADDENDUM IS EXECUTED MARCH 4, 1999.
BORROWER:
THE TRIZETTO GROUP, INC., A DELAWARE CORPORATION
By: /s/ JEFFREY H. MARGOLIS
---------------------------------------
JEFFREY H. MARGOLIS, PRESIDENT AND CEO
LENDER:
Bank One, Colorado, NA
By: /s/ [Signature Illegible]
----------------------------------------
Authorized Officer
<PAGE> 9
BANK(1)ONE
COMMERCIAL SECURITY AGREEMENT
<TABLE>
<CAPTION>
Principal Loan Date Maturity Loan No. Call Collateral Account Officer Initials
<S> <C> <C> <C> <C> <C> <C> <C>
$1,500,000.00 03-04-1999 03-04-2000 098053 010 2756603893 00480
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular loan
or item.
</TABLE>
<TABLE>
<S> <C>
BORROWER: THE TRIZETTO GROUP, INC., A DELAWARE LENDER: Bank One, Colorado, NA
CORPORATION Corporate Lending - Boulder
567 SAN NICOLAS DRIVE, SUITE 360 1125 17th Street
NEWPORT BEACH, CA 92660 Denver, CO 80217
</TABLE>
THIS COMMERCIAL SECURITY AGREEMENT is entered into by THE TRIZETTO GROUP, INC.,
A DELAWARE CORPORATION (referred to below as "Grantor") for the benefit of Bank
One, Colorado, NA (referred to below as "Lender"). For valuable consideration,
Grantor grants to Lender a security interest in the Collateral to secure the
Indebtedness and agrees that Lender shall have the rights stated in this
Agreement with respect to the Collateral, in addition to all other rights which
Lender may have by law.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code as adopted in
the State of Colorado ("Code"). All references to dollar amounts shall mean
amounts in lawful money of the United States of America.
AGREEMENT. The word "Agreement" means this Commercial Security Agreement,
as this Commercial Security Agreement may be amended or modified from time
to time, together with all exhibits and schedules attached to this
Commercial Security Agreement from time to time.
COLLATERAL. The word "Collateral" means the following described property of
Grantor, whether now owned or hereafter acquired, whether now existing or
hereafter arising, and wherever located:
ALL INVENTORY, CHATTEL PAPER, ACCOUNTS, EQUIPMENT AND GENERAL
INTANGIBLES
In addition, the word "Collateral" includes all the following, whether now
owned or hereafter acquired, whether now existing or hereafter arising, and
wherever located:
(a) All attachments, accessions, accessories, tools, parts, supplies,
increases, and additions to and all replacements of and substitutions
for any property described above.
(b) All products and produce of any of the property described in this
Collateral section.
(c) All proceeds (including, without limitation, insurance proceeds)
from the sale, lease, destruction, loss, or other disposition of any
of the property described in this Collateral section.
(d) All records and data relating to any of the property described in
this Collateral section, whether in the form of a writing, photograph,
microfilm, microfiche, or electronic media, together with all of
Grantor's right, title, and interest in and to all computer software
required to utilize, create, maintain, and process any such records or
data on electronic media.
EVENT OF DEFAULT. The words "Event of Default" mean and include any of the
Events of Default set forth below in the section titled "Events of
Default."
GRANTOR. The word "Grantor" means THE TRIZETTO GROUP, INC., A DELAWARE
CORPORATION, its successors and assigns (which is a debtor under the Code).
GUARANTOR. The word "Guarantor" means and includes without limitation, each
and all of the guarantors, sureties, and accommodation parties in
connection with the indebtedness.
INDEBTEDNESS. The word "Indebtedness" means the indebtedness evidenced by
the Note, including all principal and accrued interest thereon, together
with all other liabilities, costs and expenses for which Grantor is
responsible under this Agreement or under any of the Related Documents. In
addition, the word "Indebtedness" includes all other obligations, debts and
liabilities, plus any accrued interest thereon, owing by Grantor, or any
one or more of them, to Lender of any kind or character, now existing or
hereafter arising, as well as all present and future claims by Lender
against Grantor, or any one or more of them, and all renewals, extensions,
modifications, substitutions and rearrangements of any of the foregoing;
whether such Indebtedness arises by note, draft, acceptance, guaranty,
endorsement, letter of credit, assignment, overdraft, indemnity agreement
or otherwise; whether such Indebtedness is voluntary or involuntary, due or
not due, direct or indirect, absolute or contingent, liquidated or
unliquidated; whether Grantor may be liable individually or jointly with
others; whether Grantor may be liable primarily or secondarily or as
debtor, maker, comaker, drawer, endorser, guarantor, surety, accommodation
party or otherwise.
LENDER. The word "Lender" means Bank One, Colorado, NA, its successors and
assigns (which is a secured party under the Code).
NOTE. The word "Note" means the promissory note dated March 4, 1999, in the
principal amount of $1,500,000.00 from THE TRIZETTO GROUP, INC., A DELAWARE
CORPORATION to Lender, together with all renewals of, extensions of,
modifications of, refinancings of, consolidations of and substitutions for
such promissory note.
RELATED DOCUMENTS. The words "Related Documents" mean and include without
limitation the Note and all credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages, deeds
of trust, and all other instruments, agreements and documents, whether now
or hereafter existing, executed in connection with the Note.
OBLIGATIONS OF GRANTOR. Grantor represents, warrants and covenants to Lender as
follows:
PERFECTION OF SECURITY INTEREST. Grantor agrees to execute such financing
statements and to take whatever other actions are requested by Lender to
perfect and continue Lender's security interest in the Collateral. Upon
request of Lender, Grantor will deliver to Lender any and all of the
documents evidencing or constituting the Collateral, and Grantor will note
Lender's interest upon any and all chattel paper if not delivered to Lender
for possession by Lender. Grantor hereby irrevocably appoints Lender as its
attorney-in-fact for the purpose of executing any documents necessary to
perfect or to continue the security interest granted in this Agreement.
Lender may at any time, and without further authorization from Grantor,
file a carbon, photographic or other reproduction of any financing
statement or of this Agreement for use as a financing statement. Grantor
will reimburse Lender for all expenses for the perfection and the
continuation of the perfection of Lender's security interest in the
Collateral. Grantor has disclosed to Lender all tradenames and assumed
names currently used by Grantor, all tradenames and assumed names used by
Grantor within the previous six (6) years and all of Grantor's current
business locations. Grantor will notify Lender in writing at least thirty
(30) days prior to the occurrence of any of the following: (i) any changes
in Grantor's name, tradename(s) or assumed name(s), or (ii) any change in
Grantor's business location(s) or the location of any of the Collateral.
NO VIOLATION. The execution and delivery of this Agreement will not violate
any law or agreement, governing Grantor or to which Grantor is a party, and
its certificate or articles of incorporation and bylaws do not prohibit any
term or condition of this Agreement.
ENFORCEABILITY OF COLLATERAL. To the extent the Collateral consists of
accounts, chattel paper, or general intangibles, the Collateral is
enforceable in accordance with its terms, is genuine, and complies with
applicable laws concerning form, content and manner of preparation and
execution, and all persons appearing to be obligated on the Collateral have
authority and capacity to contract and are in fact obligated as they appear
to be on the Collateral. At the time any account becomes subject to a
security interest in favor of Lender, the account shall be a good and valid
account representing an undisputed, bona fide indebtedness incurred by the
account debtor, for merchandise held subject to delivery instructions or
theretofore shipped or delivered pursuant to a contract of sale, or for
services theretofore performed by Grantor with or for the account debtor;
Grantor will not adjust, settle, compromise, amend or modify any account,
except in good faith and in the ordinary course of business; provided,
however, this exception shall automatically terminate upon the occurrence
of an Event of Default or upon Lender's written request.
LOCATION OF THE COLLATERAL. Grantor, upon request of Lender, will deliver
to Lender in form satisfactory to Lender a schedule of real properties and
Collateral locations relating to Grantor's operations, including without
limitation the following: (a) all real property owned or being purchased by
Grantor; (b) all real property being rented or leased by Grantor; (c) all
storage facilities owned, rented, leased, or being used by Grantor; and (d)
all other properties where Collateral is or may be located. Except in the
ordinary course of its business, Grantor shall not remove the Collateral
for its existing locations without the prior written consent of Lender.
REMOVAL OF COLLATERAL. Grantor shall keep the Collateral for to the extent
the Collateral consists of intangible property such as accounts, the
records concerning the Collateral at Grantor's address shown above, or at
such other locations as are acceptable to Lender. Except in the ordinary
course of its business, including the sales of inventory, Grantor shall not
remove the Collateral from its existing locations.
<PAGE> 10
03-04-1999 COMMERCIAL SECURITY AGREEMENT Page 2
Loan No (Continued)
===============================================================================
without the prior written consent of Lender. To the extent that the
Collateral consists of vehicles, or other titled property, Grantor shall
not take or permit any action which would require application for
certificates of title for the vehicles outside the State of Colorado,
without the prior written consent of Lender.
TRANSACTIONS INVOLVING COLLATERAL. Except for inventor sold or accounts
collected in the ordinary course of Grantor's business, Grantor shall not
sell, offer to sell, or otherwise transfer or dispose of the Collateral.
While Grantor is not in default under this Agreement, Grantor may sell
inventory, but only in the ordinary course of its business and only to
buyers who qualify as a buyer in the ordinary course of business. A sale in
the ordinary course of Grantor's business does not include a transfer in
partial or total satisfaction of a debt or any bulk sale. Grantor shall not
pledge, mortgage, encumber or otherwise permit the Collateral to be subject
to any lien, security interest, encumbrance, or charge, other than the
security interest provided for in this Agreement, without the prior written
consent of Lender. This includes security interests even if junior in right
to the security interests granted under this Agreement. Unless waived by
Lender, all proceeds from any disposition of the Collateral (for whatever
reasons) shall be held in trust for Lender and shall not be commingled with
any other funds; provided however, this requirement shall not constitute
consent by Lender to any sale or other disposition. Upon receipt, Grantor
shall immediately deliver any such proceeds to Lender.
TITLE. Grantor represents and warrants to Lender that it is the owner of
the Collateral and holds good and marketable title to the Collateral, free
and clear of all liens and encumbrances except for the lien of this
Agreement. No financing statement covering any of the Collateral is on file
in any public office other than those which reflect the security interest
created by this Agreement or to which Lender has specifically consented.
Grantor shall defend Lender's rights in the Collateral against the claims
and demands of all other persons.
COLLATERAL SCHEDULES AND LOCATIONS. As often as Lender shall require, and
insofar as the collateral consists of accounts and general intangibles,
Grantor shall deliver to Lender schedules of such Collateral, including
such information as Lender may require, including without limitation names
and addresses of account debtors and agings of accounts and general
intangibles. Insofar as the Collateral consists of inventory and equipment,
Grantor shall deliver to Lender, as often as Lender shall require, such
lists, descriptions, and designations of such Collateral as Lender may
require to identify the nature, extent, and location of such Collateral.
MAINTENANCE AND INSPECTION OF COLLATERAL. Grantor shall maintain all
tangible Collateral in good condition and repair. Grantor will not commit
or permit damage to or destruction of the Collateral or any part of the
Collateral. Lender and its designated representatives and agents shall have
the right at all reasonable times to examine, inspect, and audit the
Collateral wherever located. Grantor shall immediately notify Lender of all
cases involving the return, rejection, repossession, loss or damage of or
to any Collateral; of any request for credit or adjustment or of any other
dispute arising with respect to the Collateral; and generally of all
happenings and events affecting the Collateral or the value or the amount
of the Collateral.
TAXES, ASSESSMENTS AND LIENS. Grantor will pay when due all taxes,
assessments and governmental charges or levies upon the Collateral and
provide Lender evidence of such payment upon its request. Grantor may
withhold any such payment or may elect to contest any lien if Grantor is in
good faith conducting an appropriate proceeding to contest the obligation
to pay and so long as Lender's interest in the Collateral is not
jeopardized in Lender's sole opinion. If the Collateral is subjected to a
lien which is not discharged within fifteen (15) days, Grantor shall
deposit with Lender cash, a sufficient corporate surety bond or other
security satisfactory to Lender in an amount adequate to provide for the
discharge of the lien plus any interest, costs, attorneys' fees or other
charges that could accrue as a result of foreclosure or sale of the
Collateral. In any contest Grantor shall defend itself and Lender and shall
satisfy any final adverse judgment before enforcement against the
Collateral. Grantor shall name Lender as an additional obligee under any
surety bond furnished in the contest proceedings.
COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. Grantor is conducting and will
continue to conduct Grantor's businesses in material compliance with all
federal, state and local laws, statutes, ordinances, rules, regulations,
orders, determinations and court decisions applicable to Grantor's
businesses and to the production, disposition or use of the Collateral,
including without limitation, those pertaining to health and environmental
matters such as the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986 (collectively, together with any subsequent
amendments, hereinafter called "CERCLA"), the Resource Conservation and
Recovery Act of 1976, as amended by the Used Oil Recycling Act of 1980, the
Solid Waste Disposal Act Amendments of 1980, and the Hazardous Substance
Waste Amendments of 1984 (collectively, together with any subsequent
amendments, hereinafter called "RCRA"). Grantor represents and warrants
that (i) none of the operations of Grantor is the subject of a federal,
state or local investigation evaluating whether any material remedial
action is needed to respond to a release or disposal of any toxic or
hazardous substance or solid waste into the environment; (ii) Grantor has
not filed any notice under any federal, state or local law indicating that
Grantor is responsible for the release into the environment, the disposal
on any premises in which Grantor is conducting its businesses or the
improper storage, of any material amount of any toxic or hazardous
substance or solid waste or that any such toxic or hazardous substance or
solid waste has been released, disposed of or is improperly stored, upon
any premises on which Grantor is conducting its businesses; and (iii)
Grantor otherwise does not have any known material contingent liability in
connection with the release into the environment, disposal or the improper
storage, of any such toxic or hazardous substance or solid waste. The terms
"hazardous substance" and "release", as used herein, shall have the
meanings specified in CERCLA, and the terms "solid waste" and "disposal",
as used herein, shall have the meanings specified in RCRA; provided,
however, that to the extent that the laws of the State of Colorado
establish meanings for such terms which are broader than that specified in
either CERCLA or RCRA, such broader meanings shall apply. The
representations and warranties contained herein are based on Grantor's due
diligence in investigating the Collateral for hazardous wastes and
substances. Grantor hereby (a) releases and waives any future claims
against Lender for indemnity or contribution in the event Grantor becomes
liable for cleanup or other costs under any such laws, and (b) agrees to
indemnify and hold harmless Lender against any and all claims and losses
resulting from a breach of this provision of this Agreement. This
obligation to indemnify shall survive the payment of the indebtedness and
the termination of this Agreement.
MAINTENANCE OF CASUALTY INSURANCE. Grantor shall procure and maintain all
risk insurance, including without limitation fire, theft and liability
coverage together with such other insurance as Lender may require with
respect to the Collateral, in form , amounts, coverages and basis
reasonably acceptable to Lender and issued by a company or companies
reasonably acceptable to Lender. Grantor, upon request of Lender, will
deliver to Lender from time to time the policies or certificates of
insurance in form satisfactory to Lender, including stipulations that
coverages will not be cancelled or diminished without at least thirty (30)
days' prior written notice to Lender and not including any disclaimer of
the insurer's liability for failure to give such a notice. Each insurance
policy also shall include an endorsement providing that coverage in favor
of Lender will not be impaired in any way by any act, omission or default
of Grantor or any other person. In connection with all policies covering
assets in which Lender holds or is offered a security interest, Grantor
will provide Lender with such loss payable or other endorsements as Lender
may require. If Grantor at any time fails to obtain or maintain any
insurance as required under this Agreement, Lender may (but shall not be
obligated to) obtain such insurance as Lender deems appropriate, including
if it so chooses "single interest insurance," which will cover only
Lender's interest in the Collateral.
APPLICATION OF INSURANCE PROCEEDS. Grantor shall promptly notify Lender of
any loss or damage to the Collateral. Lender may make proof of loss if
Grantor fails to do so within fifteen (15) days of the casualty. All
proceeds of any insurance on the Collateral, including accrued proceeds
thereon, shall be held by Lender as part of the Collateral. If Lender
consents to repair or replacement of the damaged or destroyed Collateral,
Lender shall, upon satisfactory proof of expenditure, pay or reimburse
Grantor from the proceeds for the reasonable cost of repair or restoration.
If Lender does not consent to repair or replacement of the Collateral,
Lender shall retain a sufficient amount of the proceeds to pay all of the
Indebtedness, and shall pay the balance to Grantor. Any proceeds which have
not been disburse within six (6) months after their receipt and which
Grantor has not committed to the repair or restoration of the Collateral
shall be used to prepay the Indebtedness. Application of insurance proceeds
to the payment of the Indebtedness will not extend, postpone or waive any
payments otherwise due, or change the amount of such payments to be made
and proceeds may be applied in such order and such amounts a Lender may
elect.
SOLVENCY OF GRANTOR. As of the date hereof, and after giving effect to this
Agreement and the completion of all other transactions contemplated by
Grantor at the time of the execution of this Agreement, (i) Grantor is and
will be solvent, (ii) the fair salable value of Grantor's assets exceeds
and will continue to exceed Grantor's liabilities (both fixed and
contingent), (iii) Grantor is paying and will continue to be able to pay
its debts as they mature, and (iv) if Grantor is not an individual, Grantor
has and will have sufficient capital to carry on Grantor's businesses and
all businesses in which Grantor is about to engage.
LIEN NOT RELEASED. The lien, security interest and other security rights of
Lender hereunder shall not be impaired by any indulgence, moratorium or
release granted by Lender, including but not limited to, the following: (a)
any renewal, extension, increase or modification of any of the
Indebtedness; (b) any surrender, compromise, release, renewal, extension,
exchange or substitution granted in respect of any of the Collateral; (c)
any release or indulgence granted to any endorser, guarantor or surety of
any of the Indebtedness; (d) any release of any other collateral for any of
the indebtedness; (e) any acquisition of any additional collateral for any
of the Indebtedness; and (f) any waiver or failure to exercise any right,
power or remedy granted herein, by law or in any of the Related Documents.
REQUEST FOR ENVIRONMENTAL INSPECTIONS. Upon Lender's reasonable request
from time to time, Grantor will obtain at Grantor's expense an inspection
or audit report(s) addressed to Lender of Grantor's operations from an
engineering or consulting firm approved by Lender, indicating the presence
or absence of toxic and hazardous substances, underground storage tanks and
solid waste on any premises in which Grantor is conducting a business;
provided, however, Grantor will be obligated to pay for the cost of any
such inspection or audit no more than one time in any twelve (12) month
period unless Lender has reason to believe that toxic or hazardous
substance or solid
<PAGE> 11
03-04-1999 COMMERCIAL SECURITY AGREEMENT Page 3
LOAN NO (CONTINUED)
================================================================================
wastes have been dumped or released on any such premises. If Grantor fails
to order or obtain an inspection or audit within ten (10) days after
Lender's request, Lender may at its option order such inspection or audit,
and Grantor grants to Lender and its agents, employees, contractors and
consultants access to the premises in which it is conducting its business
and a license (which is coupled with an interest and is irrevocable) to
obtain inspections and audits. Grantor agrees to promptly provide Lender
with a copy of the results of any such inspection or audit received by
Grantor. The cost of such inspections and audits by Lender shall be a part
of the Indebtedness, secured by the Collateral and payable by Grantor on
demand.
CHATTEL PAPER. To the extent a security interest in the chattel paper of
Grantor is granted hereunder, Grantor represents and warrants that all
such chattel paper have only one original counterpart and no other party
other than Grantor or Lender is in actual or constructive possession of
any such chattel paper. Grantor agrees that at the option of and on the
request by Lender, Grantor will either deliver to Lender all originals of
the chattel paper which is included in the Collateral or will mark all
such chattel paper with a legend indicating that such chattel paper is
subject to the security interest granted hereunder.
LANDLORD'S WAIVERS. Grantor agrees that upon the request of Lender,
Grantor shall cause each landlord of real property leased by Grantor at
which any of the Collateral is located from time to time to execute and
deliver agreements satisfactory in form and substance to Lender by which
such landlord waives or subordinates any rights it may have in the
Collateral.
GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until default and except
as otherwise provided below with respect to accounts, Grantor may have
possession of the tangible personal property and beneficial use of all the
Collateral and may use it in any lawful manner not inconsistent with this
Agreement or the Related Documents, provided that Grantor's right to possession
and beneficial use shall not apply to any Collateral where possession of the
Collateral by Lender is required by law to perfect Lender's security interest
in such Collateral. Until otherwise notified by Lender, Grantor may collect any
of the Collateral consisting of accounts. At any time and even though no Event
of Default exists, Lender may collect the accounts, notify account debtors to
make payments directly to Lender for application to the indebtedness and to
verify the accounts with such account debtors. Lender also has the right, at
the expense of Grantor, to enforce collection of such accounts and adjust,
settle, compromise, sue for or foreclose on the amount owing under any such
account, in the same manner and to the same extent as Grantor. If Lender at any
time has possession of any Collateral, whether before or after an Event of
Default, Lender shall be deemed to have exercised reasonable care in the custody
and preservation of the Collateral if Lender takes such action for that
purpose as Grantor shall request or as Lender, in Lender's sole discretion,
shall deem appropriate under the circumstances, but failure to honor any
request by Grantor shall not of itself be deemed to be a failure to exercise
reasonable care. Lender shall not be required to take any steps necessary to
preserve any rights in the Collateral against prior parties, nor to protect,
preserve or maintain any security interest given to secure the Indebtedness.
EXPENDITURES BY LENDER. If not discharged or paid when due, Lender may (but
shall not be obligated to) discharge or pay any amounts required to be
discharged or paid by Grantor under this Agreement, including without
limitation all taxes, liens, security interests, encumbrances, and other
claims, at any time levied or placed on the Collateral. Lender also may (but
shall not be obligated to) pay all costs for insuring, maintaining and
preserving the Collateral. All such expenditures incurred or paid by Lender for
such purposes will then bear interest at the rate charged under the Note from
the date incurred or paid by Lender to the date of repayment by Grantor. All
such expenses shall become a part of the Indebtedness and be payable on demand
by Lender. Such right shall be in addition to all other rights and remedies to
which Lender may be entitled upon the occurrence of an Event of Default.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
DEFAULT ON INDEBTEDNESS. Failure of Grantor to make any payment when due
on the Indebtedness.
OTHER DEFAULTS. Failure of Grantor to comply with or to perform any other
term, obligation, covenant or condition contained in this Agreement, the
Note, any of the other Related Documents or in any other agreement now
existing or hereafter arising between Lender and Grantor.
FALSE STATEMENTS. Any warranty, representation or statement made or
furnished to Lender under this Agreement, the Note or any of the other
Related Documents is false or misleading in any material respect.
DEFAULT TO THIRD PARTY. The occurrence of any event which permits the
acceleration of the maturity of any indebtedness owing by Grantor or any
Guarantor to any third party under any agreement or undertaking.
BANKRUPTCY OR INSOLVENCY. If the Grantor or any Guarantor: (i) becomes
insolvent, or makes a transfer in fraud of creditors, or makes an
assignment for the benefit of creditors, or admits in writing its
inability to pay its debts as they become due; (ii) generally is not
paying its debts as such debts become due; (iii) has a receiver, trustee
or custodian appointed for, or take possession of, all or substantially
all of the assets of such party or any of the Collateral, either in a
proceeding brought by such party or in a proceeding brought against such
party and such appointment is not discharged or such possession is not
terminated within sixty (60) days after the effective date thereof or such
party consents to or acquiesces in such appointment or possession; (iv)
files a petition for relief under the United States Bankruptcy Code or any
other present or future federal or state insolvency, bankruptcy or similar
laws (all of the foregoing hereinafter collectively called "APPLICABLE
BANKRUPTCY LAW") or an involuntary petition for relief is filed against
such party under any Applicable Bankruptcy Law and such involuntary
petition is not dismissed within sixty (60) days after the filing thereof,
or an order for relief naming such party is entered under any Applicable
Bankruptcy Law, or any composition, rearrangement, extension,
reorganization or other relief of debtors now or hereafter existing is
requested or consented to by such party; (v) fails to have discharged
within a period of sixty (60) days any attachment, sequestration or
similar writ levied upon any property of such party; or (vi) fails to pay
within thirty (30) days any final money judgment against such party.
LIQUIDATION, DEATH AND RELATED EVENTS. If Grantor or any Guarantor is an
entity, the liquidation, dissolution, merger or consolidation of any such
entity or, if any of such parties is an individual, the death or legal
incapacity of any such individual.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Grantor or by any
governmental agency against the Collateral or any other collateral
securing the indebtedness.
RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights of a secured
party under the Code. In addition and without limitation, Lender may exercise
any one or more of the following rights and remedies:
ACCELERATE INDEBTEDNESS. Lender may declare the entire indebtedness,
including any prepayment penalty which Grantor would be required to pay,
immediately due and payable, without notice.
ASSEMBLE COLLATERAL. Lender may require Grantor to deliver to Lender all
or any portion of the Collateral and any and all certificates of title and
other documents relating to the Collateral. Lender may require Grantor to
assemble the Collateral and make it available to Lender at a place to be
designated by Lender. Lender also shall have full power to enter upon the
property of Grantor to take possession of and remove the Collateral. If
the Collateral contains other goods not covered by this Agreement at the
time of repossession, Grantor agrees Lender may take such other goods,
provided that Lender makes reasonable efforts to return them to Grantor
after repossession.
SELL THE COLLATERAL. Lender shall have full power to sell, lease,
transfer, or otherwise dispose of the Collateral or the proceeds thereof
in its own name or that of Grantor. Lender may sell the Collateral (as a
unit or in parcels) at public auction or private sale. Lender may buy the
Collateral, or any portion thereof, (i) at any public sale, and (ii) at
any private sale if the Collateral is of a type customarily sold in a
recognized market or is of a type which is the subject of widely
distributed standard price quotations. Lender shall not be obligated to
make any sale of Collateral regardless of a notice of sale having been
given. Lender may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned. Unless the Collateral is perishable or threatens to decline
speedily in value or is of a type customarily sold on a recognized market,
Lender will give Grantor reasonable notice of the time and place of any
public sale thereof or of the time after which any private sale or any
other intended disposition of the Collateral is to be made. The
requirements of reasonable notice shall be met if such notice is given at
least ten (10) days prior to the date any public sale, or after which a
private sale, of any such Collateral is to be held. All expenses relating
to the disposition of the Collateral, including without limitation the
expenses of retaking, holding, insuring, preparing for sale and selling
the Collateral, shall become a part of the Indebtedness secured by this
Agreement and shall be payable on demand, with interest at the Note rate
from date of expenditure until repaid. Any sale of Collateral through the
public trustee shall be deemed a commercially reasonable sale.
APPOINT RECEIVER. To the extent permitted by applicable law, Lender shall
have the following rights and remedies regarding the appointment of a
receiver: (a) Lender may have a receiver appointed as a matter of right,
(b) the receiver may be an employee of Lender and may serve without bond,
and (c) all fees of the receiver and his or her attorney shall become
part of the Indebtedness secured by this Agreement and shall be payable on
demand, with interest at the Note rate from date of expenditure until
repaid. The receiver may be appointed by a court of competent
jurisdiction upon ex parte application and without notice, notice being
expressly waived.
COLLECT REVENUES, APPLY ACCOUNTS. Lender, either itself or through a
receiver, may collect the payments, rents, income, and revenues from the
Collateral. Lender may transfer any Collateral into its own name or that
of its nominee and receive the payments, rents, income and revenues
therefrom and hold the same as security for the Indebtedness or apply it
to payment of the Indebtedness in such order of
<PAGE> 12
03-04-1999 PROMISSORY NOTE Page 2
Loan No (Continued)
================================================================================
preference as Lender may determine. Insofar as the Collateral consists of
accounts, general intangibles, insurance policies, instruments, chattel paper,
chooses in action, or similar property, Lender may demand, collect, receipt for,
settle, compromise, adjust, sue for, foreclose, or realize on the Collateral as
Lender may determine. For these purposes, Lender may, on behalf of and in the
name of Grantor, receive, open and dispose of mail addressed to Grantor; change
any address to which mail and payments are to be sent; and endorse notes,
checks, drafts, money orders, documents of title, instruments and items
pertaining to payment, shipment, or storage of any Collateral. To facilitate
collection, Lender may notify account debtors and obligors on any Collateral to
make payments directly to Lender.
OBTAIN DEFICIENCY. If Lender chooses to sell any or all of the Collateral,
Lender may obtain a judgment against Grantor for any deficiency remaining on the
Indebtedness due to Lender after application of all amounts received from the
exercise of the rights provided in this Agreement. Grantor shall be liable for
a deficiency even if the transaction described in this subsection is a sale of
accounts or chattel paper.
OTHER RIGHTS AND REMEDIES. Lender shall have all the rights and remedies
of a secured creditor under the provisions of the Code, as may be amended from
time to time. In addition, Lender shall have and may exercise any or all other
rights and remedies it may have available at law, in equity, or otherwise.
Grantor waives any right to require Lender to proceed against any third party,
exhaust any other security for the Indebtedness or pursue any other right or
remedy available to Lender.
CUMULATIVE REMEDIES. All of Lender's right and remedies, whether evidenced
by this Agreement or the Related Documents or by any other writing, shall be
cumulative and may be exercised singularly or concurrently. Election by Lender
to pursue any remedy shall not exclude pursuit of any other remedy, and an
election to make expenditures or to take action to perform an obligation of
Grantor under this Agreement, after Grantor's failure to perform, shall not
affect Lender's right to declare a default and to exercise its remedies.
MISCELLANEOUS PROVISIONS.
AMENDMENTS. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to the
matters set forth in this Agreement and supercedes all prior written and oral
agreements and understandings, if any, regarding same. No alteration of or
amendment to this Agreement shall be effective unless given in writing and
signed by the party or parties sought to be changed or bound by the alteration
or amendment.
APPLICABLE LAW. This Agreement has been delivered to Lender and accepted by
Lender in the State of Colorado. Subject to the provisions on arbitration in
any Related Document, this Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado without regard to any conflict
of laws or provisions thereof.
JURY WAIVER. THE UNDERSIGNED AND LENDER (BY ITS ACCEPTANCE HEREOF) HEREBY
VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE
A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED UPON CONTRACT, TORT
OR OTHERWISE) BETWEEN OR AMONG THE UNDERSIGNED AND LENDER ARISING OUT OF OR IN
ANY WAY RELATED TO THIS DOCUMENT, AND ANY OTHER RELATED DOCUMENT, OR ANY
RELATIONSHIP BETWEEN LENDER AND THE BORROWER. THIS PROVISION IS A MATERIAL
INDUCEMENT TO LENDER TO PROVIDE THE FINANCING DESCRIBED HEREIN OR IN THE OTHER
RELATED DOCUMENTS.
ATTORNEYS' FEES; EXPENSES. Grantor will upon demand pay to Lender the
amount of any and all costs and expenses (including without limitation,
reasonable attorneys' fees and expenses) which Lender may incur in connection
with (i) the perfection and preservation of the collateral assignment and
security interests created under this Agreement, (ii) the custody,
preservation, use or operation of, or the sale of, collection from, or other
realization upon, the Collateral, (iii) the exercise or enforcement of any of
the rights of Lender under this Agreement, or (iv) the failure by Grantor to
perform or observe any of the provisions hereof.
TERMINATION. Upon (i) the satisfaction in full of the Indebtedness and all
obligations hereunder, (ii) the termination or expiration of any commitment of
Lender to extend credit that would become Indebtedness hereunder, and (iii)
Lender's receipt of a written request from Grantor for the termination hereof,
this Agreement and the security interests created hereby shall terminate. Upon
termination of this Agreement and Grantor's written request, Lender will, at
Grantor's sole cost and expense, return to Grantor such of the Collateral as
shall not have been sold or otherwise disposed of or applied pursuant to the
terms hereof and execute and deliver to Grantor such documents as Grantor shall
reasonably request to evidence such termination.
INDEMNITY. Grantor hereby agrees to indemnify, defend and hold harmless
Lender, and its officers, directors, shareholders, employees, agents and
representatives (each an "INDEMNIFIED PERSON") from and against any and all
liabilities, obligations, claims, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
(collectively, the "CLAIMS") which may be imposed on, incurred by or asserted
against, any Indemnified Person (whether or not caused by any Indemnified
Person's sole, concurrent or contributory negligence) arising in connection
with the Related Documents, the Indebtedness or the Collateral (including,
without limitation, the enforcement of the Related Documents and the defense of
any Indemnified Person's action and/or inactions in connection with the Related
Documents), except to the limited extent that the Claims against the
Indemnified Person are proximately caused by such Indemnified Person's willful
misconduct. The indemnification provided for in this Section shall survive the
termination of this Agreement and shall extend and continue to benefit each
individual or entity who is or has at any time been an Indemnified Person
hereunder.
CAPTION HEADINGS. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions of
this Agreement.
NOTICES. All notices required to be given under this Agreement shall be
given in writing, and shall be effective when actually delivered or when
deposited with a nationally recognized overnight courier or deposited in the
United States mail, first class, postage prepaid, addressed to the party to
whom the notice is to be given at the address shown above. Any party may change
its address for notices under this Agreement by giving formal written notice to
the other parties, specifying that the purpose of the notice is to change the
party's address. To the extent permitted by applicable law, if there is more
than one Grantor, notice to any Grantor will constitute notice to all Grantors.
For notice purposes, Grantor will keep Lender informed at all times of
Grantor's current address(es).
POWER OF ATTORNEY. Grantor hereby irrevocably appoints Lender as its true
and lawful attorney-in-fact, such power of attorney being coupled with an
interest, with full power of substitution to do the following in the place and
stead of Grantor and in the name of Grantor: (a) to demand, collect, receive,
receipt for, sue and recover all sums of money or other property which may now
or hereafter become due, owing or payable from the Collateral; (b) to execute,
sign and endorse any and all claims, instruments, receipts, checks, drafts or
warrants issued in payment for the Collateral; (c) to settle or compromise any
and all claims arising under the Collateral, and, in the place and stead of
Grantor, to execute and deliver its release and settlement for the claim; and
(d) to file any claim or claims or to take any action or institute or take part
in any proceedings, either in its own name or in the name of Grantor, or
otherwise, which in the discretion of Lender may seem to be necessary or
advisable. This power is given as security for the Indebtedness, and the
authority hereby conferred is and shall be irrevocable and shall remain in full
force and effect until renounced by Lender.
SEVERABILITY. If a court of competent jurisdiction finds any provision of
this Agreement to be invalid or unenforceable as to any person or circumstance,
such finding shall not render that provision invalid or unenforceable as to any
other persons or circumstances. If feasible, any such offending provision shall
be deemed to be modified to be within the limits of enforceability or validity;
however, if the offending provision cannot be so modified, it shall be stricken
and all other provisions of this Agreement in all other respects shall remain
valid and enforceable.
SUCCESSOR INTERESTS. Subject to the limitations set forth above on
transfer of the Collateral, this Agreement shall be binding upon and inure to
the benefit of the parties, their successors and assigns; provided, however,
Grantor's rights and obligations hereunder may not be assigned or otherwise
transferred without the prior written consent of Lender.
WAIVER. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No delay
or omission on the part of Lender in exercising any right shall operate as a
waiver of such right or any other right. A waiver by Lender of a provision of
this Agreement shall not prejudice or constitute a waiver of Lender's right to
thereafter demand strict compliance with that provision or any other provision
of this Agreement. No prior waiver by Lender, nor any course of dealing between
Lender and Grantor, shall constitute a waiver of any Lender's rights or of any
of Grantor's obligations as to any future transactions. Whenever the consent of
Lender is required under this Agreement, the granting of such consent by Lender
in any instance shall not constitute continuing consent to subsequent instances
where such consent is required and in all cases such consent may be granted or
withheld in the sole discretion of Lender.
<PAGE> 13
03-04-1999 COMMERCIAL SECURITY AGREEMENT PAGE 5
LOAN NO. (Continued)
================================================================================
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY
AGREEMENT, AND GRANTOR AGREES TO ITS TERMS. THIS AGREEMENT IS DATED MARCH 4,
1999.
GRANTOR:
THE TRIZETTO GROUP, INC., A DELAWARE CORPORATION
By: /s/JEFFREY M. MARGOLIS
--------------------------------------
Jeffrey M. Margolis, President and CEO
================================================================================
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Amendment
No. 1 to Form S-1 of our reports dated August 3, 1999 relating to the financial
statements and financial statement schedule of The Trizetto Group, Inc. and its
subsidiaries, which appear in such Registration Statement. We also consent to
the reference to us under the heading "Experts" in such Registration Statement.
PRICEWATERHOUSECOOPERS LLP
San Jose, CA
August 18, 1999
