<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 2, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
XCARE.NET, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7374 85-0373486
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
6400 S. FIDDLER'S GREEN CIRCLE, SUITE 540
ENGLEWOOD, CO 80111
(303) 488-2019
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
LORINE R. SWEENEY
PRESIDENT AND CHIEF EXECUTIVE OFFICER
XCARE.NET, INC.
6400 S. FIDDLER'S GREEN CIRCLE, SUITE 540
ENGLEWOOD, CO 80111
(303) 488-2019
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
<TABLE>
<S> <C>
ARTHUR F. SCHNEIDERMAN NORA L. GIBSON
HERBERT P. FOCKLER LAURA M. DE PETRA
STEPHEN E. KIM ANGELA C. HILT
WILSON SONSINI GOODRICH & ROSATI BROBECK PHLEGER & HARRISON LLP
PROFESSIONAL CORPORATION SPEAR STREET TOWER
650 PAGE MILL ROAD ONE MARKET
PALO ALTO, CA 94304 SAN FRANCISCO, CA 94105
(650) 493-9300 (415) 442-0900
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration
Statement.
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, please 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,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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<S> <C> <C>
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PROPOSED MAXIMUM
AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
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Common Stock, $0.01 par value............................... $60,000,000 $16,680
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</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(o).
------------------------
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.
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<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL SECURITIES, AND WE ARE NOT SOLICITING
OFFERS TO BUY THESE SECURITIES, IN ANY STATE WHERE THE OFFER OR SALE IS
NOT PERMITTED.
SUBJECT TO COMPLETION, DATED NOVEMBER 2, 1999
LOGO
SHARES
COMMON STOCK
XCare.net, Inc. is offering shares of its common stock. This is
our initial public offering and no public market currently exists for our
shares. We have applied for approval for quotation of our common stock on the
Nasdaq National Market under the symbol "XCAR." We anticipate that the initial
public offering price will be between $ and $ per share.
------------------------------
INVESTING IN OUR COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 6.
------------------------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- ------
<S> <C> <C>
Public Offering Price:...................................... $ $
Underwriting Discounts and Commissions:..................... $ $
Proceeds to XCare.net:...................................... $ $
</TABLE>
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE
NOT APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS
IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
XCare.net has granted the underwriters a 30-day option to purchase up to an
additional shares of common stock to cover over-allotments.
------------------------------
ROBERTSON STEPHENS
SG COWEN
E*OFFERING
ADVEST, INC.
THE DATE OF THIS PROSPECTUS IS , 2000.
<PAGE> 3
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO
BUY, SHARES OF A COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF TIME OF DELIVERY OF THIS PROSPECTUS
OR OF ANY SALE OF OUR COMMON STOCK.
UNTIL , 2000 (25 DAYS AFTER COMMENCEMENT OF THE OFFERING),
ALL DEALERS THAT BUY, SELL, OR TRADE OUR COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS
REQUIREMENT IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
------------------------------
TABLE OF CONTENTS
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PAGE
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Summary..................................................... 1
Risk Factors................................................ 6
Use of Proceeds............................................. 18
Dividend Policy............................................. 18
Capitalization.............................................. 19
Dilution.................................................... 20
Selected Financial Data..................................... 21
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 23
Business.................................................... 32
Management.................................................. 48
Certain Transactions........................................ 56
Principal Stockholders...................................... 59
Description of Capital Stock................................ 62
Shares Eligible for Future Sale............................. 65
Underwriting................................................ 67
Legal Matters............................................... 69
Change in Independent Accountants........................... 69
Experts..................................................... 70
Available Information....................................... 70
Index to Financial Statements............................... F-1
</TABLE>
------------------------------
XCare.net is a trademark of XCare.net, Inc. Trade names, trademarks and
service marks of other companies appearing in this prospectus are the property
of the respective holders.
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<PAGE> 4
SUMMARY
This summary highlights information contained elsewhere in this prospectus.
You should read the entire prospectus, including the financial statements and
related notes, before deciding to invest in shares of our common stock.
XCARE.NET, INC.
XCare.net, Inc. is a leading provider of Internet-based,
business-to-business connectivity, information exchange and electronic commerce
solutions for health care. We have developed an Internet-based information and
transaction technology platform, which we call the XCare.net platform. Using the
XCare.net platform, we connect health care participants together into a
community structure and deliver applications, services and electronic commerce
product offerings that are designed to improve process efficiencies, reduce
administrative costs and create new revenue opportunities for our customers. The
XCare.net platform has been adopted by health care providers, payers and
suppliers. In addition, we have entered into strategic relationships that we
believe will enhance our portfolio of solutions, provide important specialized
industry expertise to us and our customers and create additional revenue
sources.
We believe that the XCare.net platform is the first infrastructure based on
extensible mark-up language, or XML, using the Topic Navigation Mapping standard
that is specifically tailored to meet the demands of health care industry
participants. We take advantage of the benefits of both XML and Topic Navigation
Mapping technologies to process data previously trapped in legacy systems, allow
for automation of health care processes and integrate a wide variety of health
care data including audio, video and text.
MARKET OPPORTUNITY
The health care market is highly fragmented through geographic dispersion,
a large number of participants and significant differences in technology
infrastructure. Furthermore, health care is delivered in a marketplace which has
become increasingly complex given the transition to managed care, the data-
intensive nature of health care transactions, the lack of standard data formats,
the complicated procurement process and the pervasiveness of government
regulation. As a result of this fragmentation and complexity, health care market
participants are unable to cost-effectively manage, communicate and exchange
information in real-time.
The Internet has emerged as the fastest growing communication medium in
history. The ubiquitous nature, low cost and scalability of the Internet have
created new opportunities for conducting secure commerce. Recently, the
widespread adoption of intranets and the acceptance of the Internet as a
business communications platform have created a foundation for
business-to-business electronic commerce that should enable organizations to
streamline complex processes, lower costs and improve productivity.
Although the Internet can speed and streamline transactions, we believe
that current, Internet-based health care solutions are significantly limited in
their ability to search, structure, integrate and filter vast amounts of
disparate data and dynamically customize and display information in contexts
relevant to particular users. These limitations are particularly critical in the
health care industry, where information and transaction connectivity among all
participants is necessary to reduce process inefficiencies and costs.
SOLUTION
We believe that the XCare.net platform and our solutions can reduce
administrative and transaction inefficiencies and simplify the way business is
conducted in health care, which may ultimately enhance
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the quality of health care delivery in the U.S. We believe that our solutions
have the following advantages:
- Use of new standard for information exchange. The XCare.net platform is
based on XML, which we believe can process data trapped in legacy
systems, automate health care processes, integrate a wide array of health
care data and dynamically retrieve and update data in a manner that can
be customized for each health care participant.
- Disciplined approach to creating customer solutions. We have developed a
step-by-step approach to assist our customers to envision, evaluate and
execute an Internet-based, health care strategy.
- Complete, turnkey solutions. Our solutions, which are delivered through a
low cost, low maintenance platform, are designed to provide a
comprehensive set of applications, services and product offerings while
preserving previous technology investments by integrating diverse
multimedia content, including data and information from legacy systems.
- Value-added Solution Channels. Our business model is based on a
multi-faceted network of collaborative relationships, which we call
Solution Channels, among our company, our customers and our vendors to
leverage our customers' and vendors' core competencies to promote the
exchange of health care related services.
STRATEGY
Our objective is to become the leading provider of health care solutions
for Internet-based, business-to-business connectivity, information exchange and
electronic commerce. Our strategy is based on five main elements. First, we
believe that our Solution Channels represent an opportunity for deploying new
applications, services and electronic commerce product offerings that are
developed by us or obtained through customer and vendor relationships. Second,
we intend to pursue payer/third-party administrator and at-risk provider
customers, which are well positioned to influence and drive change in health
care processes. Third, as Internet strategies in the health care industry evolve
and new relationships between organizations develop, we will seek to identify
new application development opportunities. Fourth, we plan to identify key
functions that are critical to particular industry participants and develop
solutions, services and products supporting these functions. Fifth, we are
aggressively pursuing strategic relationships with leaders in key health care
industry segments to increase our portfolio of applications, services and
product offerings, increase the scope of the community of users of our
technology platform and provide specialized industry expertise for new
solutions.
OUR HISTORY
We were incorporated in Delaware in March 1989 under the name Reilly Dike
Dosher Corporation, Inc. In December 1996, we changed our name to MPower
Solutions, Inc. In April 1999, we changed our name to XCare.net, Inc. We have
historically derived a significant portion of our revenue from sales of
mainframe and client-server software for managed health care systems and from
providing services to health care organizations seeking to outsource
administrative functions. Beginning in mid-1998, we began to focus on
Internet-based health care solutions. We intend to derive an increasing portion
of our future revenue from our Internet-based applications, services and product
offerings. Our principal executive office is located at 6400 S. Fiddler's Green
Circle, Suite 540, Englewood, CO 80111, and our telephone number at that office
is (303) 488-2019. Our World Wide Web address is www.xcare.net. Information
contained in our Web site does not constitute part of this prospectus.
2
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THE OFFERING
Common stock offered by us...................... shares
Common stock to be outstanding after the
offering........................................ shares
Use of proceeds................................. General corporate purposes,
working capital and capital
expenditures for operations,
including for research and
development, sales and
marketing, hardware and
software purchases and
general and administrative
expenses.
Proposed Nasdaq National Market symbol.......... XCAR
The number of shares of our common stock to be outstanding after this
offering is based on shares outstanding as of September 30, 1999, but does not
reflect a reverse stock split we intend to effect prior to this offering. It
excludes 14,914,921 shares issuable upon exercise of outstanding options at
September 30, 1999, with a weighted average exercise price of $0.13 per share,
5,413,454 shares reserved for future issuance under our stock plan, and
5,250,000 shares reserved for future issuance under our director plan and
employee stock purchase plan, both of which become effective upon the closing of
the offering. See "Capitalization," "Management -- Employee Benefit Plans" and
notes 4, 6 and 9 of notes to the financial statements.
Generally, unless otherwise indicated in this prospectus, the number of
shares of common stock to be outstanding after the offering, pro forma and pro
forma as adjusted information gives effect to the conversion of all outstanding
convertible preferred stock to common stock, including convertible preferred
stock issuable upon the assumed exercise of all outstanding convertible
preferred stock warrants, and the assumed exercise of all outstanding common
stock warrants with exercise prices below an assumed initial public offering
price. Information in this prospectus also assumes no exercise of the
underwriters' over-allotment option.
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SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
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1994 1995 1996 1997 1998 1998 1999
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(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue......................... $4,310 $7,708 $ 9,726 $ 5,984 $ 2,270 $ 1,042 $ 1,841
Total costs and expenses........ 4,120 6,083 10,523 14,641 5,915 3,147 2,517
Income (loss) from operations... 190 1,625 (797) (8,657) (3,645) (2,105) (676)
Total other income (expense).... (77) (42) 2,250 255 (437) (180) (258)
Income (loss) before income
taxes......................... 113 1,583 1,453 (8,402) (4,082) (2,285) (934)
Net income (loss)............... $ 113 $1,583 $ 253 $(7,324) $(4,082) $(2,285) $ (934)
Net income (loss) per common
share -- basic and diluted.... $ 0.02 $ 0.26 $ 0.05 $ (1.89) $ (1.06) $ (0.59) $ (0.24)
Weighted average common shares
outstanding -- basic and
diluted....................... 5,955 5,987 4,760 3,900 3,900 3,900 3,949
Pro forma:
Income before income taxes.... $ 113 $1,583
Net income.................... $ 65 $ 980
Pro forma net income (loss) per
common share -- basic and
diluted....................... $ 0.01 $ 0.16 $ (0.10) $ (0.02)
Pro forma weighted average
common shares
outstanding -- basic and
diluted....................... 5,955 5,987 40,584 52,601
</TABLE>
<TABLE>
<CAPTION>
AT JUNE 30, 1999
------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
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BALANCE SHEET DATA:
Cash and cash equivalents............................ $ 6,518 $6,518 $
Working capital...................................... 4,680 4,680
Total assets......................................... 8,270 8,270
Long-term debt....................................... 71 71 71
Mandatorily redeemable convertible preferred stock... 17,384 --
Stockholders' equity (deficit)....................... (11,581) 5,803
</TABLE>
- During 1996, a major customer terminated its contract with us and paid
$2.3 million to settle all claims arising under the termination. During
1997, another major customer terminated its contract with us and paid
$250,000 to settle all claims associated with the termination. These
amounts are included above in total other income (expense).
- As a result of the contract terminations referred to above, during 1997
we abandoned an operating lease and incurred impairment charges for
related fixed assets aggregating $887,000. This amount is included above
in total costs and expenses.
- Prior to January 1, 1996, XCare.net was an S corporation for federal and
state income tax purposes, and accordingly, our income was taxed directly
to our stockholders. Pro forma income before income taxes, pro forma net
income and pro forma net income per common share for the years ended
December 31, 1994 and 1995 give effect to pro forma adjustments that
reflect the estimated federal and state income taxes that would have been
recorded if XCare.net had been a C corporation prior to January 1, 1996.
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- See note 1 of notes to the financial statements for a description of the
method used to compute net income (loss) per common share and pro forma
net income (loss) per common share for all periods presented.
- Pro forma balance sheet data reflect the conversion of convertible
preferred stock, which will occur automatically upon the closing of this
offering, the assumed cashless exercise of all outstanding common stock
warrants and convertible preferred stock warrants with exercise prices
below an assumed initial public offering price, and the conversion of the
convertible preferred stock issued upon assumed exercise of the latter
warrants into common stock. See note 1 of notes to the financial
statements.
- Pro forma as adjusted balance sheet data reflect the receipt of the
estimated net proceeds from this offering at an assumed initial public
offering price of $ per share, after deducting estimated
underwriting discounts and offering expenses. See "Capitalization" and
"Use of Proceeds."
5
<PAGE> 9
RISK FACTORS
You should carefully consider these risk factors, together with all of the
other information included in this prospectus, before you decide whether to
purchase shares of our common stock. The risks set out below may not be
exhaustive. If any of the following risks actually occur, our business,
financial condition or results of operations could be harmed, the value of our
common stock could decline and you may lose all or part of your investment.
OUR BUSINESS AND PROSPECTS ARE DIFFICULT TO EVALUATE BECAUSE WE ARE IN A
TRANSITIONAL STAGE OF DEVELOPMENT
It is difficult to evaluate our business and our prospects because our
business model is new and unproven. We commenced operations in March 1989, but
we did not begin focusing on Internet-based health care solutions until early
1999. As a result, we are prone to the risks and difficulties frequently
encountered by early stage companies, particularly companies in new and rapidly
evolving technology-related markets. We have historically derived a significant
portion of our revenue from sales of maintenance and client/server software for
managed health care systems and from providing services to health care
organizations seeking to outsource administrative functions. We intend to derive
an increasing portion of our future revenue from our Internet-based
applications, services and product offerings. In addition, due to our limited
operating history in the Internet-based health care market, it is difficult for
us to predict with any accuracy our future results of operations. For example,
we cannot accurately forecast expenses based on our historical results because
our experience in our current market is limited, and we are required to forecast
expenses in part on future revenue projections. The provision of services using
Internet technology in the health care industry is a developing business that is
inherently riskier than business in industries where companies have established
operating histories. Accordingly, we believe that our historical financial
results are not necessarily indicative of our future financial performance.
WE HAVE INCURRED LOSSES SINCE CHANGING OUR FOCUS TO INTERNET-BASED SOLUTIONS AND
WE MAY NOT BE ABLE TO ACHIEVE OR SUSTAIN PROFITABILITY
We incurred net losses and losses from operations for the six months ended
June 30, 1999 and the years ended December 31, 1998 and 1997. As of June 30,
1999, we had an accumulated deficit of approximately $12.1 million. Since we
began developing and marketing our Internet-based health care products and
services in early 1999, we have funded our business primarily by borrowing funds
and from the sale of our stock, not from cash generated by our business. We
expect to continue to incur significant sales and marketing, research and
development and general and administrative expenses. As a result, we will
experience losses and negative cash flows for the foreseeable future. Factors
which may prevent us from achieving or maintaining profitability and cause our
stock price to decline include the demand for and acceptance of our products,
product enhancements and services, and our ability to attract new customers, as
well as a number of other factors described elsewhere in this "Risk Factors"
section.
OUR QUARTERLY OPERATING RESULTS ARE LIKELY TO FLUCTUATE SIGNIFICANTLY AND MAY
FAIL TO MEET THE EXPECTATIONS OF SECURITIES ANALYSTS AND INVESTORS, CAUSING OUR
SHARE PRICE TO DECLINE
Our quarterly operating results have fluctuated significantly in the past
and are likely to fluctuate in the future depending on a number of factors
described below and elsewhere in this "Risk Factors" section of the prospectus,
including:
- any delay in the introduction of new applications, services and product
offerings and enhancements of existing solutions;
- the loss of a major customer;
- reductions in the average selling prices of our applications, services
and product offerings;
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- cost pressures from shortages of skilled technical employees, increased
product development and engineering expenditures; and
- changes in industry market conditions.
Due to the factors described above and other factors, our results of
operations could fluctuate substantially in the future, and quarterly
comparisons may not indicate reliable trends of future performance. If our
operating results do not meet the expectations of securities analysts and
investors, our share price is likely to decline.
FAILURE TO DEVELOP AND MAINTAIN STRATEGIC RELATIONSHIPS WOULD DELAY THE GROWTH
OF OUR BUSINESS
Strategic relationships, especially with our customers and vendors, are
critical to our success. Entering into strategic relationships is complicated
because it involves identifying opportunities and collaborating with a number of
our customers, vendors and competitors. In addition, we may not be able to
establish relationships with particular key participants in the health care
industry if we have established relationships with competitors. It is important
that we are perceived as independent of any particular customer or partner.
Moreover, many potential customers and vendors may resist working with us until
our applications, services and product offerings have been successfully
introduced and have achieved market acceptance.
Once we have established strategic relationships, we will depend on our
customers' and vendors' ability to assist us in generating increased acceptance
and use of our solutions. To date, we have established only a limited number of
strategic relationships, and these relationships are in the early stages of
development. We have limited experience in establishing and maintaining
strategic relationships with health care industry participants. If we were to
lose any of these strategic relationships or fail to establish additional
relationships, or if our strategic customers and vendors fail to collaborate
with us to pursue additional business relationships and partnerships, we would
not be able to execute our business plans and our business would suffer
significantly. Moreover, we may not experience increased use of our
applications, services and product offerings even if we establish and maintain
these strategic relationships.
Although we view our strategic relationships as a key factor in our overall
business strategy, our partners may not view their relationships with us as
significant to their own business, and they may reassess their commitment to us
or decide to compete directly with us in the future. We generally do not have
agreements that prohibit our strategic partners from competing against us
directly or from contracting with our competitors. We cannot guarantee that any
strategic partner will perform its obligations as agreed or contemplated or that
we would be able to specifically enforce any strategic agreement. Our
arrangements with our strategic partners generally do not establish minimum
performance requirements, but instead rely on the voluntary efforts of our
strategic partners. Therefore, we cannot guarantee that these relationships will
be successful.
We also expect to compete with other companies, including those that have
greater financial resources than our company, for the right to enter into
strategic relationships. This competition for strategic relationships in the
health care electronic commerce industry could affect our ability to consummate
future relationships on acceptable terms, or at all. For additional information
regarding strategic relationships, see "Business -- Strategy" and "-- Strategic
Relationships."
THE HEALTH CARE INDUSTRY MAY NOT ACCEPT OUR SOLUTIONS
To be successful and to grow, we must attract a significant number of
customers throughout the health care industry. To date, the health care industry
has been resistant to adopting new information technology solutions. Electronic
information exchange and transaction processing by the health care industry is
still developing. We believe that complexities in the nature of health care
transactions and lack of a common technology platform have hindered the
development and acceptance of information technology solutions by the industry.
There are currently hundreds of different incompatible hardware,
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<PAGE> 11
software and database components. Issues still remain as to integrating these
traditional systems with the real-time transactional capabilities of our
technologies. Even if this integration can be achieved as rapidly as we expect,
health care industry participants may use products and services offered by
others.
Acceptance of Internet technology by physicians and other providers into
daily administrative and clinical workflow is a key factor in our ability to
meet our anticipated deployment levels for transaction services and process
automation components. We have taken the initial steps to meeting the challenge
of provider acceptance by deploying solutions that we believe lower their cost
of health care administration. In addition, our sales and marketing strategy
concentrates on targeting customers' back-office processing needs, bypassing the
provider as decision makers and focusing on a return-on-investment approach for
cost justification. However, without the acceptance by physicians and providers
of workflow modifications, new installation projects, such as our solutions, may
be stalled.
IF THE EXTENSIBLE MARKUP LANGUAGE FAILS TO BECOME A STANDARD DATA EXCHANGE
PROTOCOL FOR THE INTERNET, THE MARKETABILITY OF OUR PRODUCTS MAY BE LIMITED
Our XCare.net platform operates with the extensible markup language, or
XML. We expect XML to be a predominant protocol for exchanging data for
electronic commerce on the Internet in the future. The failure of XML to become
well-accepted would seriously impede the marketability of our products and force
us to adapt our products to other data exchange protocols. Any such adjustments
may entail substantial costs, may require substantial time and effort, and may
not necessarily lead to marketable and competitive products. In addition, if
incompatible versions of the XML standard are developed, the market for
XML-based applications may fail to grow or grow more slowly than we anticipate.
If we develop our applications, services and product offerings based on a
version of XML that does not gain widespread acceptance, we may have to adapt
our products to another version of XML, which would cause delays in shipments of
our application and product offerings and impede our ability to provide
services.
OUR REVENUE IS CONCENTRATED IN A FEW CUSTOMERS, WHICH PUTS OUR REVENUE AT RISK
We receive a substantial majority of our revenue from a limited number of
customers. In 1998, sales to Employers Mutual, Inc. accounted for 29% of
revenue, sales to Brokerage Services, Inc. accounted for 20% of revenue, sales
to Quest Diagnostics Incorporated accounted for 12% of revenue and sales to ADIS
International accounted for 11% of revenue. For the six months ended June 30,
1999, sales to American Medical Pathways, Inc. a subsidiary of American Medical
Response, Inc., accounted for 26% of revenue, sales to Methodist Care, Inc.
accounted for 24% of revenue, sales to Quest Diagnostics Incorporated accounted
for 20% of revenue and sales to Brokerage Services Incorporated accounted for
11% of revenue. We expect that a significant portion of our revenue will
continue to depend on sales to a small number of customers. If we do not
generate as much revenue from these major customers as we expect to, or if we
lose any of them as customers, our total revenue will be significantly reduced.
We have a contract with American Medical Pathways, Inc., a wholly owned
subsidiary of American Medical Response, Inc., to provide third-party
administrative services in connection with its contracts to provide medical
transportation services. Our revenue under this contract accounted for 26% of
our revenue during the six month period ended June 30, 1999. American Medical
Pathways, Inc. may terminate our contract on 120 days notice. In addition,
Laidlaw, Inc., the owner of American Medical Response, Inc., recently announced
its decision to seek a buyer for American Medical Response, Inc. A new owner of
American Medical Response, Inc. may not continue to provide the same level of
medical transportation services or may seek to terminate our contract. Any
termination of the contract or reduction in license fees earned under the
contract would reduce our revenue and could slow our growth. American Medical
Response, Inc. is the largest provider of private ambulance service in the
United States. Therefore, if we lose revenue due to termination of the contract
or reduction in license fees, it will be difficult to replace such revenue
through contracts with other providers of medical transportation services.
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IF WE LOSE KEY LICENSES WE MAY BE REQUIRED TO DEVELOP OR LICENSE ALTERNATIVE
TECHNOLOGY, WHICH MAY CAUSE DELAYS, ADD CONSIDERABLE EXPENSE OR REDUCE SALES
We currently rely on software that we have licensed from Sinclair Montrose
Healthcare plc of London, England for our Match.Net Staffing and Scheduling. We
will integrate this software with our software applications, services and
product offerings to centralize the scheduling and staffing functions for health
care providers in a secure Internet environment. We currently have an exclusive
license to the software, although exclusivity may terminate if we are unable to
meet milestones. This license may not continue to be available to us on
commercially reasonable terms in the future. The loss of this license could
result in delays or reductions of shipments of our MatchNet Staffing &
Scheduling product until equivalent software could be identified, developed,
licensed and integrated. In addition, other products and services we may offer
in the future may rely on licensed software. The loss of any current or future
license could result in delays in the introduction of our products and services,
add additional expense, and reduce sales of our products and services until
equivalent software could be developed, identified, licensed and integrated.
WE FACE SECURITY AND NETWORK RISKS THAT COULD RESULT IN LIABILITY TO US OR COULD
DAMAGE OUR REPUTATION
We currently process substantially all of our customer transactions and
data at our facility in Albuquerque, New Mexico. Although we have safeguards for
emergencies, we do not have back-up facilities to process information if this
facility is not functioning. The occurrence of a major catastrophic event or
other system failure at our Albuquerque, New Mexico facility could interrupt
data processing or result in the loss of stored data. In addition, we depend on
the efficient operation of Internet connections from customers to our systems.
These connections, in turn, depend on the efficient operation of Web browsers,
Internet service providers and Internet backbone service providers, all of which
have had periodic operational problems or experienced outages. Any system
delays, failures or loss of data, whatever the cause, could reduce customer
satisfaction with our applications, services and product offerings.
We retain confidential customer and patient information in our processing
centers. Therefore, it is critical that our facilities and infrastructure remain
secure and that our facilities and infrastructure are perceived by the
marketplace to be secure. Despite the implementation of security measures, our
infrastructure may be vulnerable to physical break-ins, computer viruses,
programming errors, attacks by third parties or similar disruptive problems. If
we fail to meet our clients' expectations, we could be liable for damages and
our reputation could suffer. In addition, patient care could suffer and we could
be liable if our systems fail to deliver correct information in a timely manner.
Our insurance may not protect us from this risk.
Our customers have in the past experienced some interruptions with our
transaction hosting services. We believe that these interruptions will continue
to occur from time to time. These interruptions could be due to hardware and
operating system failures. We expect a large portion of our revenue to be
derived from customers who use our transaction hosting services. As a result,
our business will suffer if we experience frequent or long system interruptions
that result in the unavailability or reduced performance of our hosting. We
expect to experience occasional temporary capacity constraints due to sharply
increased traffic, which may cause unanticipated system disruptions, slower
response times, impaired quality and degradation in levels of customer service.
If this were to continue to happen, our business and reputation could be
seriously harmed.
OUR MARKETS ARE HIGHLY COMPETITIVE AND COMPETITION COULD HARM OUR ABILITY TO
SELL APPLICATIONS, SERVICES AND PRODUCT OFFERINGS
Competition could seriously harm our ability to sell additional products
and services. The emerging Internet-based health care market is undergoing rapid
technological change. The ubiquitous reach of the Internet, coupled with the
availability and acceptability of new Internet-based technologies, has created
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significant opportunities in health care for both legacy and new Internet-based
system vendors. Potential competitors fall into three primary categories: health
care Internet companies focused on providing connectivity and transactions
within business-to-business and business-to-consumer frameworks; traditional
health care information system vendors who seek to extend the services of their
core products using Internet-based technology; and traditional managed care
information system and outsourcing vendors who generally sell legacy systems and
are focusing on extending the services of their core products to the Internet.
In addition, from time to time our customers may develop applications, services
and product offerings competitive with those offered by us.
Many of our competitors have longer operating histories, significantly
greater financial, technical, marketing or other resources, or greater name
recognition than we do. Our competitors may be able to respond more quickly than
we can to new or emerging technologies and changes in customer requirements. Our
competitors may develop and successfully market Internet-based health care
products and services in a manner that could have an adverse effect on our
business model. See "Business -- Competition."
WE NEED TO EXPAND OUR MANAGEMENT SYSTEMS AND NETWORK INFRASTRUCTURE TO SUPPORT
GROWTH
In order to grow, we intend to rapidly expand our management, product
development, testing, network operations, marketing, sales and customer service
personnel over the next year. This growth has and will continue to place a
significant strain on our managerial, operational, financial and information
systems resources. We may not be able to effectively manage expansion of our
operations, and our facilities, systems, procedures or controls may not be
adequate to support our operations. Moreover, our systems may not accommodate
increased use while maintaining acceptable overall performance.
As we grow, we will also need to expand and adapt our network
infrastructure to accommodate additional users, increased transaction volumes
and changing customer requirements. So far, we have processed a limited number
and variety of transactions over our network infrastructure and only a limited
number of health care participants use our infrastructure. Many of our service
agreements contain performance standards. If we fail to meet these standards,
our customers could terminate their agreements with us. The loss of any of our
service agreements would cause a decline in our revenues. We may be unable to
expand or adapt our network infrastructure to meet additional demand or our
customers' changing needs on a timely basis and at a commercially reasonable
cost, or at all.
OUR OPERATING RESULTS MAY VARY SIGNIFICANTLY DUE TO THE LENGTHY SALES AND
IMPLEMENTATION CYCLES FOR OUR PRODUCTS AND SERVICES
Because our applications, services and product offerings have lengthy sales
and implementation cycles, it is difficult for us to forecast the timing and
recognition of revenues from sales of our solutions. Since we are unable to
control many of the factors that will influence our customers' buying decisions,
the lengthy sales cycle could cause our operating results to be below the
expectations of analysts and investors.
A key element of our strategy is to market our solutions to large
organizations with significant data management and access needs. The sales
process normally involves a significant evaluation process, and commitment of
budgets may be subject to delays due to a customer's internal procedures for
approving new expenditures and deploying new technologies. The period of time
between initial customer contact and a purchase order can span up to three
months or more.
In addition, we often must provide a significant level of education to our
prospective customers regarding the use and benefit of our applications,
services and product offerings, which may cause additional delays during the
evaluation and acceptance process. General concerns regarding year 2000
compliance may further delay purchasing decisions by prospective customers. Our
long and unpredictable sales cycle can result in delayed revenues, difficulty in
matching revenues with expenses and increased expenditures, which together may
contribute to fluctuations in our results of operations and share price.
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WE MAY LOSE EXISTING CUSTOMERS OR BE UNABLE TO ATTRACT NEW CUSTOMERS IF WE DO
NOT DEVELOP NEW APPLICATIONS, SERVICES AND PRODUCTS OR IF THESE SOLUTIONS DO NOT
KEEP PACE WITH TECHNOLOGICAL CHANGES
Internet technologies are evolving rapidly and the technology used by any
electronic commerce business is subject to rapid change and obsolescence. If we
are not able to maintain and improve our products and develop new products that
keep pace with competitive product introductions and technological developments,
satisfy diverse and evolving customer requirements and achieve market
acceptance, we may lose existing customers or be unable to attract new
customers. For example, we currently are developing Physician Credentialing,
Electronic Medical Record, Case Management, Medication and Medical Assessment
Inquiry Systems, Physician Practice Management, MD Pay Accelerator, Online Drug
Store, Medical Supply Product, Health and Medical Bookstore products. We may not
be successful in developing and marketing these or other product enhancements or
new products that respond to technological advances by others on a timely or
cost-effective basis. In addition, such solutions may contain licensed
components which may be difficult to integrate or may cause the solutions to be
ineffective. These products, if developed, may not achieve market acceptance.
Any delay or problems in the installation or implementation of new products or
services may cause customers to forego purchases from us and could cause them to
purchase from our competitors.
IF WE ARE REQUIRED TO COMMIT UNANTICIPATED RESOURCES TO COMPLETE FIXED-PRICE
CONTRACTS, OUR OPERATING RESULTS MAY DECLINE
We had historically derived a majority of our revenue from contracts that
were billed on a time-and-materials basis. Beginning in 1998, a significant
portion of our revenue has been derived from contracts that were billed on a
fixed-price basis. These contracts specify certain obligations and deliverables
to be met by us regardless of our actual costs incurred. We cannot assure you
that we can successfully complete these contracts on budget, and our inability
to do so could seriously harm our business, financial condition and results of
operations.
Our failure to accurately estimate the resources required for a fixed-price
contract could cause our operating results to decline. In the past, we have been
required to commit unanticipated additional resources to complete certain
project plans during the project to ensure that the project was completed on
schedule. We may experience similar situations in the future.
GOVERNMENT REGULATION OF HEALTH CARE MAY IMPACT OUR BUSINESS
Our business may be affected by current government regulations as well as
future regulations. Participants in the health care industry are subject to
extensive and frequently changing regulation under numerous laws administered by
governmental entities at the federal, state and local levels. Many current laws
and regulations, when enacted, did not anticipate the methods of Internet-based,
business-to-business, health care connectivity, information exchange and
electronic commerce that we are developing. We believe, however, that these laws
and regulations may be applicable to our business. Furthermore, the impact of
regulatory developments in the health care industry is complex and difficult to
predict, and we cannot guarantee that we will not be seriously harmed by
existing or new regulatory requirements or interpretations.
Furthermore, our health care service provider, payer and plan customers are
also subject to a wide variety of laws and regulations that could affect the
nature and scope of their relationships with us. Laws regulating health
insurance, health maintenance organizations and similar organizations, as well
as employee benefit plans, cover a broad array of subjects, including
confidentiality, financial relationships with suppliers, mandated benefits and
grievance and appeal procedures. Laws governing health care providers, payers
and plans are often not uniform between states, and could require us to
undertake the
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expense and difficulty of tailoring our business procedures, information
systems, or financial relationships in order for our customers to be in
compliance with applicable laws and regulations. Compliance with such laws could
also interfere with the scope of our applications, services and product
offerings, or make them less cost-effective for our customers.
Current laws and regulations which may affect our health care business
include:
- the Health Insurance Portability and Accountability Act of 1996, which
mandates the use of standard transactions, standard identifiers, security
and other provisions by the year 2000;
- the regulation of confidential patient medical record information;
- laws relating to the licensing and regulation of third-party
administrators, private review agents, utilization review agents and
others providing administrative services to health plans and health care
providers;
- laws relating to the billing, collection and reimbursement of health care
services;
- laws relating to the practice of medicine and other healing arts
professions;
- laws relating to the relationships between or among health care providers
and health care providers and third parties;
- laws governing the prescribing, including electronic transmission of
prescriptions, dispensing and delivery of prescription drugs; and
- laws relating to the advertising and sale of health care products.
Additional government regulation and health care reform laws and
regulations may be adopted with respect to the Internet or other online services
covering issues such as user privacy, pricing, content, copyrights,
distribution, and the characteristics and quality of products and services. The
adoption of any new laws or regulations may impede the growth of the Internet or
other online services. This could, in turn, decrease the demand for our
applications, services and product offerings and increase our cost of doing
business. Moreover, the applicability to the Internet of existing laws in
various jurisdictions governing issues such as property ownership, sales and
other taxes, libel and personal privacy is uncertain and may take years to
resolve. Any such new legislation or regulation, the application of laws and
regulations from jurisdictions whose laws do not currently apply to our
business, or the application of existing laws and regulations to the Internet
and other online services could limit our growth and cause a substantial
compliance burden. We expect to conduct our business in substantial compliance
with all material federal, state and local laws and regulations governing our
operations.
Some computer applications and software are considered medical devices and
are subject to regulation by the United States Food and Drug Administration, or
FDA, although the FDA could take a contrary view. In addition, we do not believe
that our current applications, services or product offering are subject to FDA
regulation. We may expand our applications, services and product offerings into
areas subject to FDA regulation. We have no experience in complying with FDA
regulations. We believe that complying with FDA regulations would be time
consuming, burdensome and expensive and could delay our introduction of new
solutions. For more information on government regulation affecting our business,
see "Business -- Government Regulation."
WE MAY INCUR LIABILITY AS A RESULT OF PROVIDING UTILIZATION REVIEW SERVICES
One of the functions of our applications is automatic adjudication of
whether or not a claim for payment or service should be denied or whether
existing coverage should be continued based upon particular plans or contracts
and industry-standard, clinical-support criteria. Our payer customers are
ultimately responsible for deciding whether to deny claims for payment or
medical services. It is possible, however, that liability may be asserted
against us for denial of payment of medical claims or medical service. The
contractual protections included in our customer contracts and our insurance
coverage may not be sufficient to protect us against such liability.
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OUR EXECUTIVE OFFICERS AND KEY PERSONNEL ARE CRITICAL TO OUR BUSINESS AND THESE
OFFICERS AND KEY PERSONNEL MAY NOT REMAIN WITH US IN THE FUTURE
Our future success depends upon the continued service of our executive
officers and other key employees as well as our ability to hire a significant
number of new employees. In particular, it would be difficult for us to replace
the services of our President and Chief Executive Officer, Lorine Sweeney. In
addition, we are particularly dependent on the continued services of software
developers with programming skills in XML, Java and Oracle. Competition for
these individuals is intense, and we may not be able to attract, assimilate or
retain additional highly qualified personnel in the future. None of our
executive officers or key personnel have employment agreements with us, except
for standard agreements we have with all of our employees providing for
confidentiality and invention assignment obligations. We plan to obtain
"key-person" life insurance policies covering key executive officers.
WE MAY FACE PRODUCT-RELATED LIABILITIES THAT COULD FORCE US TO PAY DAMAGES WHICH
WOULD HURT OUR REPUTATION
While we and our customers test our applications, services and product
offerings, they may contain defects or result in system failures. These defects
or problems could result in the loss of or delay in generating revenue, loss of
market share, failure to achieve market acceptance, diversion of development
resources, injury to our reputation or increased insurance costs.
Our contracts limit our liability arising from our errors; however, these
provisions may not be enforceable and may not protect us from liability. While
we have general liability insurance that we believe is adequate, including
coverage for errors and omissions, we may not be able to maintain this insurance
on reasonable terms in the future. In addition, our insurance may not be
sufficient to cover large claims and our insurer could disclaim coverage on
claims. If we are liable for an uninsured or underinsured claim or if our
premiums increase significantly, our financial condition could be materially
harmed.
IF WE DO NOT ESTABLISH AND MAINTAIN THE XCARE.NET BRAND, OUR REPUTATION COULD BE
ADVERSELY AFFECTED
In order to increase our customer base and expand our online traffic, we
must establish, maintain and strengthen the XCare.net brand. For us to be
successful in establishing our brand, health care professionals must perceive us
as offering quality, cost-effective, communications, information and
administrative services. Our reputation and brand name could be adversely
affected if we experience difficulties in introducing new applications, services
and product offerings, if these applications, services and product offerings are
not accepted by customers, if we are required to discontinue existing
applications, services and product offerings or if our products and services do
not function properly.
OUR GROWTH AND OPERATING RESULTS WOULD BE IMPAIRED IF WE WERE UNABLE TO MEET OUR
FUTURE CAPITAL REQUIREMENTS
We expect that the money generated from this offering, combined with our
current cash resources, will be sufficient to meet our requirements for
approximately 12 months. However, we expect that we will continue to experience
negative cash flow in the near term. Accordingly, we may need to raise
additional capital to support expansion, develop new or enhanced applications,
services and product offerings, respond to competitive pressures, acquire
complementary businesses or technologies or take advantage of unanticipated
opportunities. We may need to raise additional funds by selling debt or equity
securities, by entering into strategic relationships or through other
arrangements. We cannot assure you that we will be able to raise any additional
amounts on reasonable terms, or at all, when they are needed.
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ACQUISITIONS COULD BE DIFFICULT TO INTEGRATE, DISRUPT OUR BUSINESS AND DILUTE
STOCKHOLDER VALUE
We expect to acquire technologies and other health care technology
companies to increase the number and variety of applications, services and
product offerings we offer and to increase our customer base. To be successful,
we will need to identify applications, technologies and businesses that are
complementary to ours, integrate disparate technologies and corporate cultures
and manage a geographically dispersed company. Acquisitions could divert our
attention from other business concerns and expose us to unforeseen liabilities
or risks associated with entering new markets. Finally, we may lose key
employees while integrating these new companies. Integrating newly acquired
organizations and technologies into XCare.net could be expensive, time consuming
and may strain our resources. In addition, we may lose our current customers if
any acquired companies have relationships with competitors of our customers.
Consequently, we may not be successful in integrating any acquired businesses or
technologies and may not achieve anticipated revenue and cost benefits. The
health care industry is consolidating and we expect that we will face
intensified competition for acquisitions, especially from larger, better-funded
organizations. If we fail to execute our acquisition strategy successfully for
any reason, our business will suffer significantly.
We intend to pay for some of our acquisitions by issuing additional common
stock and this could dilute our stockholders. We may also use cash to buy
companies or technologies in the future. If we do use cash, we may need to incur
debt to pay for these acquisitions. Acquisition financing may not be available
on favorable terms or at all. In addition, we may be required to amortize
significant amounts of goodwill and other intangible assets in connection with
future acquisitions, which would seriously harm our results of operations.
OUR PROPRIETARY TECHNOLOGY MAY BE SUBJECTED TO INFRINGEMENT CLAIMS OR MAY BE
INFRINGED UPON
Our intellectual property is important to our business. We expect that we
could be subject to intellectual property infringement claims as the number of
our competitors grows and the functionality of our applications overlap with
competitive offerings. These claims, whether or not meritorious, could be
expensive and divert our attention from operating our company. If we become
liable to third parties for infringing their intellectual property rights, we
would be required to pay a substantial damage award and to develop noninfringing
technology, obtain a license or cease selling the applications that contain the
infringing intellectual property. We may be unable to develop noninfringing
technology or obtain a license on commercially reasonable terms, or at all. In
addition, we may not be able to protect against misappropriation of our
intellectual property. Third parties may infringe upon our intellectual property
rights, we may not detect this unauthorized use and we may be unable to enforce
our rights. See "Business -- Intellectual Property."
WE MAY NOT BE ABLE TO PROTECT AND ENFORCE OUR TRADENAMES, INTERNET ADDRESS AND
INTELLECTUAL PROPERTY RIGHTS.
We seek to protect our brand and our other intellectual property through a
combination of copyright, trade secret and trademark laws. Our XCare.net brand
and our Internet address, www.xcare.net are important components of our business
strategy. We have recently filed federal trademark applications for "XCare.net,"
"XCare," "Solution Channels" and "the Business to Business Platform for
eHealth." We cannot guarantee that any of these trademark applications will be
granted. If we are unable to secure registration of these marks or otherwise
obtain the right to use these marks under contract or common law, we may be
required to stop using these marks. This could cause confusion to our customers
and in the marketplace and harm our business, financial condition and results of
operations.
In addition, our future success and ability to compete in our markets may
be dependent in part on our proprietary rights to products and services which we
develop. We rely on copyright, trademark and
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trade secret laws and contractual restrictions. We also expect to rely on
patents to protect our proprietary technology and to rely on similar proprietary
rights of any of our technology providers. We intend to file patent applications
to protect certain of our proprietary technology. We cannot assure you that such
applications will be approved or, if approved, will be effective in protecting
our proprietary technology. We enter into confidentiality agreements with all of
our employees, as well as with our customers and potential customers seeking
proprietary information, and limit access to and distribution of our software,
documentation and other proprietary information. We cannot assure you that the
steps we take or the steps such providers take would be adequate to prevent
misappropriation of our respective proprietary rights.
POTENTIAL YEAR 2000 PROBLEMS WITH OUR PRODUCTS OR INTERNAL SYSTEMS MAY INVOLVE
SIGNIFICANT TIME AND EXPENSE AND MAY REDUCE OUR FUTURE SALES
Many currently installed computer systems and software products store dates
using only the last two digits of the calendar year. As a result, such systems
may not be able to distinguish whether "00" means 1900 or 2000, which may cause
system failures or erroneous results. Year 2000 problems could subject us to
liability claims and disrupt our customers' purchasing patterns, either of which
could harm our business.
Our applications, services and product offerings operate in complex network
environments and directly or indirectly interact with a number of other hardware
and software systems that we cannot adequately evaluate for year 2000
compliance. We may face claims based on year 2000 problems in other companies'
products, or issues arising from the integration of multiple products within an
overall system. Although we have not been a party to any litigation or
arbitration proceeding involving our solutions related to year 2000 compliance
issues, we may in the future be required to defend our applications, services
and product offerings in such proceedings, or to negotiate resolutions of claims
based on year 2000 issues. Defending and resolving year 2000-related disputes,
regardless of the merits of such disputes, and any liability we have for year
2000-related damages, including consequential damages, could be expensive to us.
In addition, we believe that customers and potential customers limit purchases
of new applications, services and product offerings due to year 2000 issues as
companies expend significant resources to correct or upgrade their current
software systems for year 2000 compliance. These expenditures may result in
reduced funds available to purchase our applications, services and product
offerings. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
GOVERNMENT REGULATION OF INTERNET COMMUNICATIONS MAY IMPACT OUR BUSINESS BY
DIRECTLY OR INDIRECTLY INCREASING OUR COSTS
We provide Internet services, in part, through data transmissions over
public telephone lines. These transmissions are governed by regulatory policies
establishing charges and terms for wireline communications. We currently are not
subject to direct regulation by the Federal Communications Commission or any
other governmental agency, other than regulations applicable to businesses
generally.
However, in the future we could become subject to regulation by the Federal
Communications Commission or another regulatory agency as a provider of basic
telecommunications services. Changes in the regulatory environment relating to
the application of access charges and Universal Service Fund support payments to
Internet and Internet telephony providers, regulation of Internet services,
including Internet telephony, and other regulatory changes that directly or
indirectly affect costs imposed on Internet or Internet telephony providers,
telecommunications costs or increase in the likelihood or scope of competition,
could harm our business and financial results.
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OUR OFFICERS, DIRECTORS AND AFFILIATED ENTITIES WILL HAVE SIGNIFICANT CONTROL
OVER US AND MAY APPROVE OR REJECT MATTERS CONTRARY TO OUR STOCKHOLDERS' VOTE
Our executive officers and directors, together with their affiliates, will
beneficially own an aggregate of approximately % of our outstanding common
stock following the completion of the offering. These stockholders, if acting
together, will be able to significantly influence all matters requiring approval
by our stockholders, including the election of directors and the approval of
mergers or similar transactions even if other stockholders disagree. See
"Principal Stockholders."
WE HAVE ANTI-TAKEOVER DEFENSES THAT COULD DELAY OR PREVENT AN ACQUISITION OF OUR
COMPANY
Provisions of our certificate of incorporation, bylaws, other agreements
and Delaware law could make it more difficult for a third-party to acquire us,
even if doing so would be beneficial to our stockholders. See "Description of
Capital Stock."
WE HAVE BROAD DISCRETION TO USE THE OFFERING PROCEEDS AND OUR INVESTMENT OF
THESE PROCEEDS MAY NOT YIELD A FAVORABLE RETURN
We intend to use the proceeds from the offering for general corporate
purposes, including working capital, capital expenditures and repayment of
long-term indebtedness, and may use a portion of proceeds to acquire other
businesses, products or technologies. Our management will have considerable
discretion in the application of the net proceeds of this offering, and you will
not have the opportunity, as part of your investment decision, to assess whether
the proceeds are being used appropriately. The net proceeds of this offering may
be used for corporate purposes that do not increase our results of operations or
our market value. Pending any such uses, we plan to invest the net proceeds of
the offering in investment-grade, interest-bearing securities. We cannot predict
that such investments will yield a favorable return. See "Use of Proceeds."
OUR SECURITIES HAVE NO PRIOR MARKET AND WE CANNOT ASSURE YOU THAT OUR STOCK
PRICE WILL NOT DECLINE AFTER THE OFFERING
Our common stock has never been sold in a public market. An active trading
market for our common stock may not develop or be sustained after completion of
the offering. The initial public offering price may not be indicative of the
prices that will prevail in the public market after the offering, and the market
price of the common stock could fall below the initial public offering price. In
addition, the stock market has experienced extreme price and volume
fluctuations, which have particularly affected the market prices of many
technology companies and which have often been unrelated to the operating
performance of such companies. See "Underwriting."
WE MAY BE SUBJECT TO LITIGATION IF OUR COMMON STOCK PRICE IS VOLATILE
In the past, following periods of volatility in the market price of a
company's securities, securities class action litigation has often been
instituted against the company. The institution of class action litigation
against us could result in substantial costs to us and a diversion of our
management's attention and resources which would harm our business, financial
condition and results of operations. Any adverse determination in this
litigation could also subject us to significant liabilities.
SHARES ELIGIBLE FOR FUTURE SALE AFTER THE OFFERING COULD CAUSE OUR STOCK PRICE
TO FALL
If our stockholders sell substantial amounts of our common stock in the
public market following the offering, the market price of our common stock could
fall. Such sales also might make it more difficult for XCare.net to sell equity
or equity-related securities in the future at a time and price that we deem
appropriate. Based upon the number of our shares outstanding as of September 30,
1999, upon completion of the offering, we will have outstanding shares of
common stock, assuming no
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exercise of the underwriters' option to purchase additional shares and no
exercise of outstanding options after September 30, 1999. Of these shares, the
shares sold in the offering will be freely tradable. shares of common stock
will be available for sale in the public 180 days after the date of this
prospectus or afterwards.
Based on the number of our shares outstanding as of September 30, 1999,
after the offering, the holders of approximately 97,987,462 shares of common
stock, which represent % of our outstanding stock after completion of the
offering, will be entitled to certain rights to have the resale of their shares
registered under the Securities Act of 1933. If these holders, by exercising
their registration rights, cause a large number of securities to be registered
and sold in the public market, such sales could materially and adversely affect
the market price for our common stock. In addition, if we were to include in a
registration statement shares held by these holders pursuant to the exercise of
their registration rights, such sales may impede our ability to raise needed
capital. See "Shares Eligible for Future Sale" and "Underwriting."
WE DO NOT INTEND TO PAY DIVIDENDS, AND YOU MAY NOT EXPERIENCE A RETURN ON
INVESTMENT WITHOUT SELLING SHARES
Except for dividends declared in connection with our status as an S
corporation prior to January 1996, we have not declared or paid any cash
dividends on our capital stock. You will not experience a return on your
investment in our common stock without selling your shares because we currently
intend on retaining future earnings to fund our growth and do not expect to pay
dividends in the foreseeable future. See "Dividend Policy."
NEW INVESTORS IN OUR COMMON STOCK WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL
DILUTION
If you purchase shares of our common stock, you will incur immediate and
substantial dilution in pro forma net tangible book value. Investors
participating in the offering of our common stock will pay a price per share,
which substantially exceeds the value of our assets after subtracting our
liabilities. These investors will contribute % of the total amount paid to
fund us but will own only % of our outstanding shares. If the holders of
outstanding options or warrants exercise those options or warrants, you will
suffer further dilution. See "Dilution."
YOU SHOULD NOT RELY ON FORWARD-LOOKING STATEMENTS BECAUSE THEY ARE INHERENTLY
UNCERTAIN
This prospectus contains forward-looking statements that relate to future
events or our future financial performance, which involve risks and
uncertainties. We use words such as "anticipates," "believes," "plans,"
"expects," "future," "intends" and similar expressions to identify such forward-
looking statements. You should not place undue reliance on these forward-looking
statements, which apply only as of the date of this prospectus. These statements
are only predictions. Our actual results could differ materially from those
anticipated in these forward-looking statements for many reasons, including the
risks faced by us described throughout this "Risk Factors" section and elsewhere
in this prospectus.
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USE OF PROCEEDS
The net proceeds to us from the sale of shares of our common stock in the
offering at an estimated initial public offering price of $ per share,
after deducting estimated expenses of $ and underwriting discounts and
commissions, are estimated to be approximately $ (approximately
$ if the underwriters' over-allotment option is exercised in full).
We expect to use the net proceeds from this offering for general corporate
purposes, working capital and capital expenditures to fund our operations,
including to continue expanding and enhancing our sales and marketing operations
and to continue expanding our product offerings. We have not yet determined our
expected use of these proceeds, but we currently anticipate that we will incur
approximately $3 million in research and development expenses, $7 million in
sales and marketing expenses, $1 million in hardware and software purchases and
$6 million in general and administrative expenses over the next 12 months.
Actual expenditures may vary substantially from these estimates. The amounts and
timing of our actual expenditures will depend upon numerous factors, including
the status of our product development efforts, marketing and sales activities,
and the amount of cash generated by our operations and competition. We may find
it necessary or advisable to use portions of the proceeds for other purposes.
A portion of the proceeds may also be used to acquire or invest in
complementary businesses or products or to obtain the right to use complementary
technologies, although there are no current plans, negotiations or discussions
for any such transactions. Pending use of the net proceeds for the above
purposes, we intend to invest such funds in short-term, interest-bearing,
investment grade obligations.
DIVIDEND POLICY
Except for dividends declared in connection with our status as an S
corporation prior to January 1996, we have never declared or paid any cash
dividends on our common stock or other securities. We currently anticipate that
we will retain all of our future earnings for use in the expansion and operation
of our business and do not anticipate paying any cash dividends in the
foreseeable future.
18
<PAGE> 22
CAPITALIZATION
The following table sets forth our total capitalization as of June 30, 1999
on an actual, pro forma and pro forma as adjusted basis. The pro forma
capitalization reflects the automatic conversion of all outstanding shares of
our convertible preferred stock into common stock upon the closing of this
offering, the assumed cashless exercise of all outstanding common and
convertible preferred stock warrants with exercise prices below an assumed
initial public offering price, the conversion of the convertible preferred stock
issued upon the assumed exercise of the latter warrants into common stock, and
amendments to our certificate of incorporation effective after June 30, 1999.
The pro forma as adjusted capitalization reflects our receipt of estimated net
proceeds from the sale of the shares of common stock in this offering (at
an estimated initial public offering price of $ per share and after
deducting estimated underwriting discounts and commissions and estimated
offering expenses):
<TABLE>
<CAPTION>
JUNE 30, 1999
------------------------------------
PRO FORMA
PRO AS
ACTUAL FORMA ADJUSTED
-------- -------- ------------
(IN THOUSANDS, EXCEPT SHARE AND PER
SHARE DATA)
<S> <C> <C> <C>
Long-term debt.......................................... $ 71 $ 71 $ 71
------- ------- -------
Series A mandatorily redeemable convertible preferred
stock, $0.01 par value; 6,000,000 shares authorized;
2,450,000 shares outstanding, actual; no shares
authorized or outstanding, pro forma and pro forma as
adjusted................................................ 6,776 -- --
Series B mandatorily redeemable convertible preferred
stock, $0.01 par value; 75,000,000 shares authorized;
38,979,070 shares outstanding, actual; no shares
authorized or outstanding, pro forma and pro forma as
adjusted.............................................. 10,524 -- --
Value ascribed to mandatorily redeemable convertible
preferred stock warrants.............................. 84 -- --
------- ------- -------
17,384 -- --
------- ------- -------
Stockholders' equity (deficit):
Preferred stock, $0.01 par value, no shares authorized
or outstanding, actual; 5,000,000 shares
authorized, no shares outstanding, pro forma and
pro forma as adjusted.............................. -- -- --
Common stock, $0.01 par value; 125,000,000 shares
authorized, actual; shares authorized,
pro forma and pro forma as adjusted; 4,148,875
shares outstanding, actual; 78,062,263 shares
outstanding, pro forma; shares
outstanding, pro forma as adjusted................. 41 781
Additional paid-in capital............................ 465 17,109
Accumulated deficit................................... (12,087) (12,087)
------- ------- -------
Total stockholders' equity (deficit)............. (11,581) 5,803
------- ------- -------
Total capitalization............................. $ 5,874 $ 5,874 $
======= ======= =======
</TABLE>
Outstanding shares in the above table excludes 9,831,167 shares issuable
upon exercise of outstanding options at June 30, 1999, with a weighted average
exercise price of $0.03 per share, 4,376,958 shares available for future
issuance under our stock plan at June 30, 1999, an additional 7,543,000 shares
reserved for future issuance under our stock plan after June 30, 1999, and
5,250,000 shares reserved for future issuance under our director option plan and
employee stock purchase plan, both of which become effective upon the closing of
the offering. See "Management -- Employee Benefit Plans" and notes 4, 6 and 9 of
notes to the financial statements.
19
<PAGE> 23
DILUTION
Our pro forma net tangible book value as of June 30, 1999 was approximately
$5.0 million or $0.06 per share of common stock, after giving effect to the
conversion of our outstanding convertible preferred stock, the assumed cashless
exercise of all outstanding common and convertible preferred stock warrants with
exercise prices below an assumed initial public offering price, and the
conversion of the convertible preferred stock issued upon assumed exercise of
the warrants into common stock. Pro forma net tangible book value per share
represents total tangible assets less total liabilities, divided by the number
of outstanding shares of common stock after giving effect to the transactions
described in the previous sentence.
Dilution in net tangible book value per share represents the difference
between the amount per share paid by purchasers of shares of our common stock in
this offering and the net tangible book value per share of our common stock
immediately afterwards. After giving effect to our sale of the shares of
common stock in this offering at an assumed initial public offering price
of $ per share, and after deducting estimated underwriting discounts and
commissions and estimated offering expenses, our pro forma net tangible book
value at June 30, 1999 would have been approximately $ or $ per
share. This represents an immediate increase in net tangible book value to
existing stockholders of $ per share and an immediate dilution to new public
investors of $ per share. The following table illustrates the per share
dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Pro forma net tangible book value per share as of June 30,
1999........................................................ $0.06
Increase per share attributable to new public investors...
-----
Pro forma net tangible book value per share after
offering..................................................
-----
Dilution per share to new public investors.................. $
=====
</TABLE>
The following table sets forth, on a pro forma basis as of June 30, 1999,
the difference between the number of shares of common stock purchased from us,
the total consideration paid, and the average price per share paid by existing
stockholders and by new public investors before deducting estimated underwriting
discounts and commissions and offering expenses payable by us, using an assumed
initial public offering price of $ per share:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders......... 78,062,263 % $17,550,000 % $0.22
New public investors..........
---------- ------ ----------- ------ -----
Total.................... 100.0% $ 100.0%
========== ====== =========== ======
</TABLE>
As of June 30, 1999, we had outstanding options to purchase 9,831,167
shares of common stock at a weighted average exercise price of $ 0.03 per share.
In addition, we have reserved 4,376,958 additional shares for future issuance
under our stock plan at June 30, 1999, an additional 7,543,000 shares reserved
for future issuance under our stock plan after June 30, 1999, and 5,250,000
shares reserved for future issuance under our director option plan and employee
stock purchase plan, both of which become effective upon the closing of the
offering. To the extent that any of these options or warrants are exercised,
there will be further dilution to new investors. See "Management -- Employee
Benefit Plans" and notes 4, 6 and 9 of notes to the financial statements.
20
<PAGE> 24
SELECTED FINANCIAL DATA
The following selected financial data are qualified by reference to, and
should be read in conjunction with, our financial statements and notes thereto
and Management's Discussion and Analysis of Financial Condition and Results of
Operations included elsewhere in this prospectus. The balance sheet data as of
December 31, 1997 and 1998 and statement of operations data for each of the
three years ended December 31, 1998 have been derived from our audited financial
statements and the notes thereto included elsewhere in this prospectus. The
statement of operations data for the years ended December 31, 1994 and 1995 and
the balance sheet data as of December 31, 1994, 1995 and 1996 are derived from
our historical financial statements not included in this prospectus. The
unaudited statement of operations data for the six-month periods ended June 30,
1998 and 1999 and the balance sheet data as of June 30, 1999 are derived from
unaudited financial statements included in this prospectus which have been
prepared on the same basis as the audited financial statements and, in our
opinion, include all adjustments, consisting only of normal recurring
adjustments, which are necessary to present fairly the results of operations and
financial position of XCare.net for the period in accordance with generally
accepted accounting principles. Historical results are not necessarily
indicative of results for any future period.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
--------------------------------------------- ----------------
1994 1995 1996 1997 1998 1998 1999
------ ------ ------- ------- ------- ------- ------
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue....................................... $4,310 $7,708 $ 9,726 $ 5,984 $ 2,270 $ 1,042 $1,841
------ ------ ------- ------- ------- ------- ------
Costs and expenses:
Cost of revenue............................. 1,450 2,593 3,744 4,575 2,086 992 1,637
Sales and marketing......................... 181 236 1,369 2,531 965 566 293
General and administrative.................. 1,121 1,465 2,220 2,436 2,194 1,043 426
Research and development.................... 1,368 1,789 3,190 4,212 670 546 161
Impairment of long-lived assets and
abandonment of operating lease............ -- -- -- 887 -- -- --
------ ------ ------- ------- ------- ------- ------
Total costs and expenses............. 4,120 6,083 10,523 14,641 5,915 3,147 2,517
Income (loss) from operations................. 190 1,625 (797) (8,657) (3,645) (2,105) (676)
Settlements received from contract
terminations................................ -- -- 2,250 250 -- -- --
Interest income (expense), net................ (77) (42) -- 5 (437) (180) (258)
------ ------ ------- ------- ------- ------- ------
Income (loss) before income taxes............. 113 1,583 1,453 (8,402) (4,082) (2,285) (934)
Income tax (benefit) expense.................. -- -- 1,200 (1,078) -- -- --
------ ------ ------- ------- ------- ------- ------
Net income (loss)............................. $ 113 $1,583 $ 253 $(7,324) $(4,082) $(2,285) $ (934)
====== ====== ======= ======= ======= ======= ======
Net income (loss) per common share -- basic
and diluted................................. $ 0.02 $ 0.26 $ 0.05 $ (1.89) $ (1.06) $ (0.59) $(0.24)
====== ====== ======= ======= ======= ======= ======
Weighted average common shares
outstanding -- basic and diluted............ 5,955 5,987 4,760 3,900 3,900 3,900 3,949
====== ====== ======= ======= ======= ======= ======
Pro forma:
Income before income taxes.................. $ 113 $1,583
Net income.................................. $ 65 $ 980
Pro forma net income (loss) per common
share -- basic and diluted.................. $ 0.01 $ 0.16 $ (0.10) $(0.02)
====== ====== ======= ======
Pro forma weighted average common shares
outstanding -- basic and diluted............ 5,955 5,987 40,584 52,601
====== ====== ======= ======
</TABLE>
21
<PAGE> 25
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
--------------------------------------------- -----------
1994 1995 1996 1997 1998 1999
------ ------ ------ ------- -------- -----------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents..................... $ 123 $ 172 $1,394 $ 697 $ 198 $ 6,518
Working capital............................... 61 840 243 (952) (5,335) 4,680
Total assets.................................. 1,266 4,190 4,492 4,026 2,805 8,270
Long-term debt................................ 402 1,012 1,317 939 284 71
Mandatorily redeemable convertible preferred
stock....................................... -- -- -- 6,728 6,827 17,384
Stockholders' equity (deficit)................ 347 1,770 842 (6,537) (10,620) (11,581)
</TABLE>
In reviewing the above data, you should consider the following:
- During 1996, a major customer terminated its contract with us and paid
$2.3 million to settle all claims arising from the termination. During
1997, another major customer terminated its contract with us and paid
$250,000 to settle all claims associated with the termination.
- As a result of the contract terminations referred to above, during 1997
we abandoned an operating lease and incurred impairment charges for
related fixed assets aggregating $887,000.
- Prior to January 1, 1996, XCare.net was an S corporation for federal and
state income tax purposes, and, accordingly, our income was taxed
directly to our stockholders. Pro forma income before income taxes and
pro forma net income and pro forma net income (loss) per common share for
the years ended December 31, 1994 and 1995 give effect to pro forma
adjustments that reflect the federal and state income taxes that would
have been recorded if XCare.net had been a C corporation prior to January
1, 1996.
- See note 1 of notes to the financial statements for a description of the
method used to compute net income (loss) per share and pro forma net loss
per common share for all periods presented.
22
<PAGE> 26
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
All statements, trend analysis and other information contained in the
following discussion relative to markets for our products and trends in revenue,
gross margins and anticipated expense levels, as well as other statements
including words such as "anticipate," "believe," "plan," "estimate," "expect"
and "intend" and other similar expressions constitute forward-looking
statements. These forward-looking statements are subject to business and
economic risks and uncertainties, and our actual results of operations may
differ materially from those contained in the forward-looking statements.
Factors that could cause or contribute to such differences include, but are not
limited to, those discussed in "Risk Factors" as well as other risks and
uncertainties referenced in this prospectus.
OVERVIEW
XCare.net, Inc. is a leading provider of Internet-based,
business-to-business connectivity, information exchange and electronic commerce
solutions for health care. We have developed an Internet-based information and
transaction technology platform, which we call the XCare.net platform. Using the
XCare.net platform, we connect health care participants together into a
community structure and deliver applications, services and electronic commerce
product offerings that are designed to improve process efficiencies, reduce
administrative costs and create new revenue opportunities for our customers.
We commenced operations in March 1989, but we did not begin to focus on
Internet-based health care solutions until mid-1998. We have historically
derived a significant portion of our revenue from sales of mainframe and
client-server software for managed health care systems and from providing
services to health care organizations seeking to outsource administrative
functions. We intend to derive an increasing portion of our future revenue from
our Internet-based applications, services and product offerings. Due to our
limited operating history in the Internet-based health care market, it is
difficult for us to predict with any accuracy our future results of operations.
Accordingly, we believe that our historical financial results are not
necessarily indicative of our future financial performance.
At the end of the first quarter of 1996, our largest customer at the time,
who accounted for approximately 67% of 1996 revenue, changed its information
technology strategy and terminated its contract with us. In June 1996, the
customer paid approximately $2.3 million to settle all claims arising under the
termination.
In the first quarter of 1997, we obtained financing from new investors
through the issuance of Series A convertible preferred stock. This financing
enabled us to develop and pursue a new strategic plan to supplement our
mainframe-based business with client-server applications and services. In
pursuing this strategy, we increased our expenditures in marketing, research and
development, and general administration.
At the beginning of the third quarter of 1997, our largest customer at the
time, who accounted for approximately 74% of 1997 revenue, decided to pursue an
alternative software approach and terminated its contract with us. In August
1997, the customer paid $250,000 to settle all claims arising under the
termination. In response, we reduced headcount and other expenditures during the
fourth quarter of 1997 and the first quarter of 1998.
Also at the end of 1997 and during the first quarter of 1998, we obtained
additional financing through the issuance of convertible promissory notes. This
financing allowed us to continue to license and implement our client-server
based product to new customers and begin development of our Internet-based
applications and services. Notwithstanding this financing, we had limited
available working capital during the latter part of 1998 through the first part
of 1999, causing us to reduce our sales and marketing, research and development,
and general and administration expenditures from 1997 levels.
At the end of 1998, we obtained additional financing from our existing
investors through the issuance of convertible promissory notes, and in June and
July 1999, we obtained financing through the
23
<PAGE> 27
issuance of Series B convertible preferred stock. These financings have enabled
us to add personnel and other resources to facilitate the development and
marketing of the new Internet-based applications, services and product
offerings.
For contracts entered into subsequent to January 1, 1998, we recognize
revenue in accordance with the provisions of Statement of Position 97-2,
"Software Revenue Recognition." We derive revenue from license fees and related
services under the terms of fixed price contracts. Maintenance revenue is
derived from agreements for supporting and providing periodic updates to
licensed software. Consulting revenue consists of revenue from consulting
services provided pursuant to time and materials contracts. Transaction
processing revenue is derived from outsourcing and transaction hosting services
and is recognized on a per-transaction basis as services are performed.
License fees and related services revenue is generally recognized from
fixed price contracts using the percentage-of-completion method of accounting
where collectibility of fees is reasonably assured. Where collectibility of fees
is not reasonably assured, we defer revenue and related costs as deferred
contract costs and recognize revenue and cost of revenue as cash is collected.
We may encounter budget and schedule overruns on fixed price contracts
caused by increased material, labor or overhead costs. Adjustments to cost
estimates are made in the periods in which the facts requiring such revisions
become known. Estimated losses, if any, are recorded in the period in which
current estimates of total contract revenue and contract costs indicate a loss.
We do not require collateral for our receivables and an allowance is maintained
for potential credit losses.
Maintenance revenue is recorded as unearned revenue and is recognized
ratably over the service period, which is generally 12 months. When maintenance
is bundled with the original license fee arrangement, its fair value is deferred
and recognized during the period such services are provided.
Revenue from consulting services provided pursuant to time-and-materials
contracts is recognized as the services are performed.
For contracts entered into prior to January 1, 1998, we recognized revenue
in accordance with Statement of Position 91-1, "Software Revenue Recognition."
Our revenue recognition for such pre-1998 contracts was substantially the same
as that discussed above.
For the six months ended June 30, 1999, sales to American Medical Pathways,
Inc. accounted for 26% of revenue, sales to Methodist Care, Inc. accounted for
24% of revenue, sales to Quest Diagnostics Incorporated accounted for 20% of
revenue and sales to Brokerage Services, Inc. accounted for 11% of revenue. If
we do not generate as much revenue from these major customers as we expect to,
or if we lose any of them as customers, our revenue will be significantly
reduced.
We incurred net losses and losses from operations for the six months ended
June 30, 1999 and the years ended December 31, 1998 and 1997. As of June 30,
1999, we had an accumulated deficit of approximately $12.1 million. Since we
began developing and marketing our Internet-based health care applications,
services, and product offerings in early 1999, we have funded our business
primarily by borrowing funds and from the sale of convertible preferred stock,
not from cash generated by our business. We expect to continue to incur
significant sales and marketing, research and development and general and
administrative expenses. As a result, we will experience losses and negative
cash flows for the foreseeable future. Factors which may prevent us from
achieving or maintaining profitability and cause our stock price to decline
include the demand for and acceptance of our solutions, and our ability to
attract new customers, as well as a number of other factors described in the
"Risk Factors" section.
Subsequent to June 30, 1999, in connection with stock options granted to
certain employees under the stock plan, we will record deferred stock
compensation representing the difference between the exercise price of the
options and the deemed fair value of our common stock at the date of grant. This
deferred stock compensation will be amortized to expense over the period during
which the options or
24
<PAGE> 28
common stock subject to repurchase vest, generally four years, using an
accelerated method as described in Financial Accounting Standards Board
Interpretation No. 28.
RESULTS OF OPERATIONS
The following table sets forth financial data for the periods indicated as
a percentage of revenue.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------- -----------------
1996 1997 1998 1998 1999
----- ------ ------ ------- ------
<S> <C> <C> <C> <C> <C>
Revenue...................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Cost of revenue............................ 38.5 76.5 91.9 95.2 88.9
Sales and marketing........................ 14.1 42.3 42.5 54.3 15.9
General and administrative................. 22.8 40.7 96.7 100.1 23.1
Research and development................... 32.8 70.4 29.5 52.4 8.8
Impairment of long-lived assets and
abandonment of operating lease.......... 0.0 14.8 0.0 0.0 0.0
----- ------ ------ ------ -----
Total costs and expenses........... 108.2 244.7 260.6 302.0 136.7
----- ------ ------ ------ -----
Loss from operations......................... (8.2) (144.7) (160.6) (202.0) (36.7)
Settlements received from contract
terminations............................... 23.1 4.2 -- -- --
Interest income (expense), net............... -- 0.1 (19.2) (17.3) (14.0)
----- ------ ------ ------ -----
Income (loss) before income taxes............ 14.9 (140.4) (179.8) (219.3) (50.7)
----- ------ ------ ------ -----
Income tax (benefit) expense................. 12.3 (18.0) 0.0 0.0 0.0
----- ------ ------ ------ -----
Net income (loss)............................ 2.6% (122.4)% (179.8)% (219.3)% (50.7)%
===== ====== ====== ====== =====
</TABLE>
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
Revenue. Revenue increased 77% to $1.8 million for the six months ended
June 30, 1999 from $1.0 million for the six months ended June 30, 1998. This
increase reflects growth in the number of licenses to new customers, larger
transaction size and new custom software development projects, partially offset
by decreased transaction processing revenue, as two mainframe and client-server
software customers ceased to outsource transition processing to us after they
completed implementation of our software.
Cost of revenue. Cost of revenue includes personnel and related overhead
costs, payments to third party consultants who assist with providing
implementation and support services, facilities costs and equipment
depreciation. Cost of revenue increased 65% to $1.6 million for the six months
ended June 30, 1999 from $992,000 for the six months ended June 30, 1998. This
increase reflects the hiring of additional customer service personnel and third
party consultants to support and execute the current license implementation
contracts and custom development projects as well as the amortization of
purchased software. Cost of revenue as a percentage of revenue was relatively
consistent between the two six-month periods.
Sales and marketing. Sales and marketing expenses consist of personnel and
related overhead costs, including commissions and travel expenses, field sales
office expenses, and advertising and promotion costs. Sales and marketing
expenses decreased 48% to $293,000 for the six months ended June 30, 1999 from
$566,000 for the six months ended June 30, 1998, representing 16% and 54% of
revenue, respectively. The decrease in sales and marketing expenses in absolute
dollars and as a percentage of revenue reflects a significant reduction in sales
force personnel and other promotional marketing activities as a result of the
limited working capital available during the six months ended June 30, 1999 as
compared to the six months ended June 30, 1998. The majority of sales and
marketing activities during the six months ended June 30, 1999 were performed by
our senior management.
25
<PAGE> 29
Subsequent to June 30, 1999, we have been expanding our sales and marketing
organization using the proceeds from the issuance of the Series B convertible
preferred stock received in June and July 1999.
General and administrative. General and administrative expenses include
personnel and related overhead costs for our executive, administrative, finance
and human resources functions, as well as legal and accounting fees. General and
administrative expenses decreased 59% to $426,000 for the six months ended June
30, 1999 from $1.0 million for the six months ended June 30, 1998, representing
23% and 100% of revenue, respectively. The decrease in general and
administrative expenses in absolute dollars and as a percentage of revenue
reflects a significant reduction in average headcount during the six months
ended June 30, 1999 as compared to the six months ended June 30, 1998 as a
result of the limited working capital available during the 1999 period.
Research and development. Research and development expenses include
personnel and related overhead costs for product development, enhancements to
existing applications and services and quality assurance activities. Research
and development expenses decreased 71% to $161,000 for the six months ended June
30, 1999 from $546,000 for the six months ended June 30, 1998, representing 9%
and 52% of total revenue, respectively. The decrease in research and development
expenses in absolute dollars and as a percentage of revenue reflects significant
reduction in research and development personnel in the six months ended June 30,
1999 as compared to the six months ended June 30, 1998 as a result of the
limited working capital available during the 1999 period. During the six months
ended June 30, 1998, we maintained additional staffing and incurred related
costs in connection with our strategic commitment to the development of the
XCare.net platform.
Interest income (expense), net. Interest income (expense), net includes
interest expense on our convertible promissory notes and capital lease
obligations partially offset by interest income on cash and cash equivalent
balances. Interest expense, net of interest income, increased 43% to $258,000
for the six months ended June 30, 1999 from $180,000 for the six months ended
June 30, 1998 due to the issuance of additional convertible promissory notes in
late 1998.
Provision for (benefit from) income taxes. No provision for federal and
state income taxes has been recorded for the six months ended June 30, 1999 or
1998 as we have incurred net operating losses for each of these periods. We
believe that, based on the history of losses and other factors, the weight of
available evidence indicates that it is more likely than not that we will not be
able to realize our deferred tax assets, and thus a full valuation allowance has
been recorded against such assets as of June 30, 1999 and 1998.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Revenue. Revenue decreased 62% to $2.3 million for the year ended December
31, 1998 from $6.0 million for the year ended December 31, 1997. This decrease
reflects a significant reduction in consulting revenue due to the loss of a
major customer during July 1997 that accounted for approximately $4.4 million,
or 74%, of total 1997 revenue.
Cost of revenue. Cost of revenue decreased 54% to $2.1 million for the year
ended December 31, 1998 from $4.6 million for the year ended December 31, 1997.
As a percentage of revenue, cost of revenue increased to 92% in 1998 from 77% in
1997. The decrease in absolute dollars reflects significant reductions in
employee headcount due to limited availability of working capital in 1998. The
increase in cost of revenue as a percentage of revenue reflects decreased
revenue associated with a major contract termination in 1997 which was not
completely offset by a decline in cost of revenue due to certain fixed
infrastructure costs which are included in cost of revenue.
Sales and marketing. Sales and marketing expenses decreased 62% to $965,000
for the year ended December 31, 1998 from $2.5 million for the year ended
December 31, 1997, representing 43% and 42% of revenue, respectively. The
decrease in absolute dollars reflects reductions in sales and marketing
personnel and decreased travel and entertainment costs due to the loss of the
significant customer described above. In addition, we incurred higher costs for
marketing, consulting, advertising and
26
<PAGE> 30
promotion and attendance at trade shows in 1997 as compared to 1998 in
connection with our new strategic focus on client-server applications and
services, including various marketing studies and analyst research projects on
the client-server market.
General and administrative. General and administrative expenses decreased
10% to $2.2 million for the year ended December 31, 1998 from $2.4 million for
the year ended December 31, 1997, representing 97% and 41% of revenue,
respectively. The increase as a percentage of revenue is due to significantly
reduced revenue and losses on the disposal of fixed assets from facilities that
were abandoned in 1998. The decrease in absolute dollars reflects a significant
reduction in management personnel due to the loss of the significant customer
described above, which was partially offset by charges relating to the loss on
disposal of property and equipment referred to above.
Research and development. Research and development expenses decreased 84%
to $670,000 for the year ended December 31, 1998 from $4.2 million for the year
ended December 31, 1997, representing 30% and 70% of revenue, respectively. The
decrease in absolute dollars reflects management's decision to reduce staff and
support costs, as a result of the significant decrease in revenue. In addition,
during 1997, we had focused on developing and maintaining two separate software
applications, one for the mainframe market and one for the client-server market,
while in 1998 we were developing only the client-server product.
Interest income (expense), net. Interest income (expense), net,
significantly increased to $437,000 for the year ended December 31, 1998 from
$5,000 of interest income for the year ended December 31, 1997, as a result of
interest expense incurred on the December 1997 and April 1998 convertible
promissory notes.
Provision for (benefit from) income taxes. No provision for federal and
state income taxes has been recorded for the year ended December 31, 1998, as we
incurred a net operating loss. We believe that based on the history of losses
and other factors, the weight of available evidence indicates that it is more
likely than not that we will not be able to realize our deferred tax assets, and
thus a full valuation allowance has been recorded as of December 31, 1998.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Revenue. Revenue decreased 38% to $6.0 million for the year ended December
31, 1997 from $9.7 million for the year ended December 31, 1996. This decrease
reflects a significant reduction in consulting revenue due to the loss of a
major customer, who accounted for approximately $6.5 million, or 67%, of 1996
revenue.
Cost of revenue. Cost of revenue increased 22% to $4.6 million for the year
ended December 31, 1997 from $3.7 million for the year ended December 31, 1996.
As a percentage of revenue, cost of revenue increased to 77% in 1997 from 39% in
1996. This increase in absolute dollars and as a percentage of revenue is due to
an increase in average headcount and travel expenses during 1997 and the
decrease in revenue associated with a major contract termination during 1997. In
addition, the number of third party consultants hired during 1997 increased
prior to the contract termination.
Sales and marketing. Sales and marketing expenses increased 85% to $2.5
million for the year ended December 31, 1997 from $1.4 million for the year
ended December 31, 1996, representing 42% and 14% of revenue, respectively.
After we received the proceeds from the issuance of convertible preferred stock
in the first quarter of 1997, we focused on increasing our marketing
expenditures in an attempt to bring in new customers. The increase in absolute
dollars and as a percentage of revenue reflects decreased revenue, increased
average sales and marketing headcount, increased advertising and promotional
activities, and increased travel expenses during 1997.
General and administrative. General and administrative expenses increased
10% to $2.4 million for the year ended December 31, 1997 from $2.2 million for
the year ended December 31, 1996, representing 41% and 23% of revenue,
respectively. The increase in absolute dollars and as a percentage
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of revenue reflects the decreased revenue during 1997 and increased average
headcount during 1997, as several executive level employees were hired and
relocated to Albuquerque, New Mexico after we received proceeds from the
issuance of convertible preferred stock in the first quarter of 1997.
Research and development. Research and development expenses increased 32%
to $4.2 million for the year ended December 31, 1997 from $3.2 million for the
year ended December 31, 1996, representing 70% and 33% of revenue, respectively.
During 1997, we hired additional personnel to continue development of our
software applications after the issuance of convertible preferred stock in the
first quarter of 1997.
Impairment of long-lived assets and abandonment of operating
lease. Impairment of long-lived assets and abandonment of operating lease
increased 100% to $887,000 for the year ended December 31, 1997 from $0 for the
year ended December 31, 1996. During 1997, due to the loss of our largest
customer, we abandoned an operating lease and incurred impairment charges for
related fixed assets aggregating $887,000.
Settlement received from contract termination. During 1996, our largest
customer terminated its contract with us and paid $2.3 million to settle all
claims arising under the termination. During 1997, another major customer
terminated its contract with us and paid $250,000 to settle all claims
associated with the termination.
Interest income (expense), net. Interest income (expense), net did not
change significantly in the year ended December 31, 1997 from the year ended
December 31, 1996.
Provision for (benefit from) income taxes. The 1997 tax benefit was
primarily due to net operating losses generated in 1997 which were partially
realized through a carryback of the net operating loss against income taxes paid
in 1996. The 1996 tax expense was related to taxable income generated in 1996.
The effective tax rate for 1997 was approximately 12.8% which was lower
than the Federal statutory rate primarily because of the effect of recording a
valuation allowance against all of our remaining deferred tax assets at December
31, 1997. The effective tax rate for 1996 was approximately 82.6% which was
higher than the Federal statutory rate primarily because of the effect of our
conversion to a taxable corporation on January 1, 1996.
QUARTERLY RESULTS OF OPERATIONS
We have experienced quarterly fluctuations in our operating and financial
results due to the timing and relative size of new custom software development
projects, cancellations of contracts, and fluctuations in costs, including
personnel, equipment and facilities costs. We expect quarterly results to
fluctuate in the future due to the timing and introduction of new applications
and services and other market factors. See "Risk Factors."
The following tables set forth unaudited statement of operations data for
each of the six quarters ended June 30, 1999, as well as the percentage of our
revenue represented by each line item. This information has been derived from
our unaudited financial statements. The unaudited financial statements have been
prepared on the same basis as the audited financial statements contained in this
prospectus and include all adjustments, consisting only of normal recurring
adjustments, that we consider necessary for a fair presentation of this
information. These unaudited quarterly results should be read in conjunction
with the financial statements and notes thereto appearing elsewhere in the
prospectus. Our
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operating results are expected to vary significantly from quarter to quarter and
are not necessarily indicative of results for any future period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1998 1998 1998 1998 1999 1999
--------- -------- ------------- ------------ --------- --------
(IN THOUSANDS, EXCEPT AS A PERCENTAGE OF REVENUE)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue................................ $ 521 $ 521 $ 522 $ 706 $1,311 $ 530
Costs and expenses:
Cost of revenue...................... 547 445 448 646 923 714
Sales and marketing.................. 334 232 226 173 155 138
General and administrative........... 612 431 346 805 144 282
Research and development............. 396 150 48 76 104 57
------- ------- ------- ------- ------ -------
Total costs and expenses...... 1,889 1,258 1,068 1,700 1,326 1,191
------- ------- ------- ------- ------ -------
Income (loss) from operations.......... (1,368) (737) (546) (994) (15) (661)
Interest expense, net.................. (74) (106) (126) (131) (136) (122)
------- ------- ------- ------- ------ -------
Loss before income taxes............... (1,442) (843) (672) (1,125) (151) (783)
Income tax (benefit) expense........... -- -- -- -- -- --
------- ------- ------- ------- ------ -------
Net loss............................... $(1,442) $ (843) $ (672) $(1,125) $ (151) $ (783)
======= ======= ======= ======= ====== =======
AS A PERCENT OF REVENUE:
Revenue................................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Cost of revenue...................... 105.0 85.4 85.8 91.5 70.4 134.7
Sales and marketing.................. 64.1 44.5 43.3 24.5 11.8 26.0
General and administrative........... 117.5 82.7 66.3 114.0 11.0 53.2
Research and development............. 76.0 28.8 9.2 10.8 7.9 10.8
------- ------- ------- ------- ------ -------
Total costs and expenses...... 362.6 241.4 204.6 240.8 101.1 224.7
------- ------- ------- ------- ------ -------
Income (loss) from operations.......... (262.6) (141.4) (104.6) (140.8) (1.1) (124.7)
------- ------- ------- ------- ------ -------
Interest expense net................... (14.2) (20.4) (24.1) (18.5) (10.4) (23.0)
------- ------- ------- ------- ------ -------
Loss before income taxes............... (276.8) (161.8) (128.7) (159.3) (11.5) (147.7)
Income tax (benefit) expense........... 0.0 0.0 0.0 0.0 0.0 0.0
------- ------- ------- ------- ------ -------
Net loss............................... (276.8)% (161.8)% (128.7)% (159.3)% (11.5)% (147.7)%
======= ======= ======= ======= ====== =======
</TABLE>
Revenue increased significantly during the quarter ended March 31, 1999 due
to the progress made in completing several custom software development projects.
Revenue for the quarter ended June 30, 1999 decreased relative to the prior
quarter as limited working capital available during the six months ended June
30, 1999 resulted in a reduction in our sales force personnel and other
promotional marketing activities, which impeded our ability to generate new
sales leads.
Cost of revenue as a percentage of revenue has varied from quarter to
quarter due to fluctuations in quarterly revenue and changes in associated
personnel costs. During the quarter ended March 31, 1999, cost of revenue
decreased as a percentage of revenue due to increased revenue from the
completion of several custom software development projects during the quarter.
During the quarter ended June 30, 1999, the increase in cost of revenue as a
percentage of revenue reflects the decreased revenue recognized during the
quarter, the amortization of purchased software and the transfer of certain
personnel from research and development to custom software development projects.
During the quarter ended December 31, 1998, general and administrative
expense increased in absolute dollars and as a percentage of revenue due to an
approximate $360,000 loss on disposal of fixed assets. During the quarter ended
March 31, 1999, sales and marketing and general administrative expense declined
in both dollars and as a percentage of revenue due to substantial reductions of
personnel costs.
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Research and development expenses sharply declined following the quarter
ended March 31, 1998 due to reduction of research and development personnel
caused by limited working capital.
LIQUIDITY AND CAPITAL RESOURCES
We have historically financed our operations through a combination of cash
flow from operations, private sales of common and convertible preferred stock,
and issuances of convertible promissory notes.
During March 1997, we completed a sale of Series A convertible preferred
stock for net proceeds of $6.6 million. From the period December 1997 through
December 1998, we issued $2.7 million of convertible promissory notes. During
June and July 1999, we completed a sale of Series B convertible preferred stock
with net proceeds totaling $13.8 million of which $7.3 million was received in
June 1999 and $6.5 million was received in July 1999.
At June 30, 1999, our principal sources of liquidity included $4.7 million
in working capital with $697,000 in outstanding debt. Outstanding debt at June
30, 1999 consists primarily of capital leases and unsecured notes payable to
former employees. Capital leases are secured by the underlying equipment, bear
interest at rates ranging from 9.3% to 11.0% and have maturity dates through
2000. Certain equipment financing agreements recorded as capital lease
obligations are subject to restrictive covenants that require us to maintain
certain financial ratios. We were not in compliance with the covenants as of
December 31, 1998 and June 30, 1999 and obtained a waiver of compliance for all
covenants through September 30, 1999. The capital lease obligations under the
financing arrangements that included the restrictive covenants were paid off
during September 1999.
Net cash used in operating activities was $793,000 in the six months ended
June 30, 1999, $2.2 million in 1998 and $6.6 million in 1997. Net cash provided
by operating activities was $2.8 million in 1996. Net cash used in operating
activities is primarily attributable to net losses.
Net cash provided by investing activities was $7,000 in the six months
ended June 30, 1999 and $167,000 in 1998. Net cash used in investing activities
was $318,000 in 1997 and $330,000 in 1996. Investing activities consist
primarily of purchases of computer hardware and software, office furniture and
equipment, offset by proceeds from the sale of property and equipment.
Net cash provided by financing activities was $7.1 million in the six
months ended June 30, 1999, $1.5 million in 1998, and $6.2 million in 1997 and
consists primarily of net proceeds from the issuance of convertible preferred
stock and convertible promissory notes. Net cash used in financing activities
was $1.3 million in 1996, which reflects principal payments on debt and cash
paid for the repurchase of common stock from former employees.
We believe that the net proceeds from the offering, together with existing
sources of liquidity, will be sufficient to meet our working capital and
anticipated capital expenditure requirements for at least the next 12 months.
Thereafter, we may require additional funds to support our working capital
requirements or for other purposes, and we may seek, even before such time, to
raise additional funds through public or private equity financing or from other
sources. Such additional financing may not be available at all or, if available,
on terms acceptable to us and that are not dilutive to our stockholders.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
We recognize revenue in accordance with Statement of Position ("SOP") 97-2,
"Software Revenue Recognition," which provides guidance on recognizing revenue
from software transactions, as amended by SOP 98-4, "Deferral of the Effective
Date of a Provision of SOP 97-2, Software Revenue Recognition." We applied the
provisions of SOP 97-2 on a prospective basis for new software transactions
entered into as of January 1, 1998. The adoption of this guidance did not have a
material impact on our financial condition or results of operations.
Further guidance was published during 1998 in SOP 98-9, "Modification of
SOP 97-2, Software Revenue Recognition, With Respect to Certain Transactions."
Additionally, the AICPA issued technical
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questions and answers on financial and reporting issues related to SOP 97-2 in
January 1999. The adoption of this guidance is not expected to have a material
impact on our financial condition or results of operations.
QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
We currently develop and market our products in the United States. As all
sales are currently made in U.S. dollars, a strengthening of the dollar could
make our product less competitive in foreign markets. Our interest income is
sensitive to changes in the general level of U.S. interest rates. Due to the
short-term nature of our investments, we believe that there is no material risk
exposure. Based on the foregoing, no quantitative disclosures have been
provided.
YEAR 2000 ISSUES
We have completed our initial assessment of the potential overall impact of
the impending century change on our business, financial condition and operating
results. Based on our current assessment, we believe the current versions of our
applications are year 2000 ready -- that is, they are capable of adequately
distinguishing 21st century dates from 20th century dates. However, our
applications operate in complex network environments and directly or indirectly
interact with a number of other hardware and software systems that we cannot
completely evaluate for year 2000 readiness.
We may face claims based on year 2000 problems in other companies'
products, or issues arising from the integration of multiple products within an
overall system, although we have not been a party to any litigation or
arbitration proceeding or services involving our applications related to year
2000 readiness issues or services. We may in the future be required to defend
our applications or services in such proceedings, or to negotiate resolutions of
claims based on year 2000 issues. The costs of defending and resolving year
2000-related disputes, regardless of the merits of such disputes, and any
liability we have for year 2000-related damages, including consequential
damages, could harm our business. In addition, we believe that the purchasing
patterns of customers and potential customers may be affected by year 2000
issues, as companies expend significant resources to correct or upgrade their
current software systems for year 2000 readiness. These expenditures may result
in reduced funds available to purchase applications and services like those we
offer. To the extent year 2000 issues cause a significant delay in, or
cancellation of, decisions to purchase our applications, services or product
offerings, our business would suffer.
We have reviewed our internal management information and other critical
business systems to identify any year 2000 problems. We also have communicated
with the external vendors that supply us with material software and information
systems to determine their year 2000 readiness. Based on our vendors'
representations, we believe that the third-party hardware and software we use is
year 2000 ready.
To date, we have not incurred any material costs directly associated with
year 2000 readiness efforts, except for compensation expense associated with
salaried employees who have devoted some of their time to year 2000 assessment
and remediation efforts. As discussed above, we do not expect the total cost of
year 2000 problems to be material to our business, financial condition and
operating results. However, we will continue to evaluate new versions of our
applications and services, software and information systems provided by third
parties, and any new infrastructure systems that we acquire, to determine
whether they are year 2000 ready. Despite our current assessment, we may not
identify and correct all significant year 2000 problems on a timely basis. Year
2000 readiness efforts may involve significant time and expense and unremediated
problems could harm our business, financial condition and operating results. We
currently have no contingency plans to address the risks associated with
unremediated year 2000 problems.
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BUSINESS
The following description of our business should be read in conjunction
with the information included elsewhere in this prospectus. This description
contains certain forward-looking statements that are based largely on our
current expectations and are subject to a number of risks and uncertainties. Our
actual results could differ significantly from the results discussed in the
forward-looking statements as a result of certain of the factors set forth below
and elsewhere in this prospectus.
OVERVIEW
XCare.net, Inc. is a leading provider of Internet-based,
business-to-business connectivity, information exchange and electronic commerce
solutions for health care. We have developed an Internet-based information and
transaction technology platform, which we call the XCare.net platform. Using the
XCare.net platform, we connect health care participants together into a
community structure and deliver applications, services and electronic commerce
product offerings that are designed to improve process efficiencies, reduce
administrative costs and create new revenue opportunities for our customers. The
XCare.net platform has been adopted by health care providers, payers and
suppliers. In addition, we have entered into strategic relationships that we
believe will enhance our portfolio of solutions, provide important specialized
industry expertise to us and our customers and create additional revenue
sources.
We believe that the XCare.net platform is the first infrastructure based on
extensive mark-up language, or XML, using the Topic Navigation Mapping standard
that is specifically tailored to meet the demands of health care industry
participants. We expect XML to be a predominant protocol for exchanging data for
electronic commerce in the future. Topic Navigation Mapping provides a standard
format for indexing and structuring the XML-formatted content. We take advantage
of the benefits of both XML and Topic Navigation Mapping technologies to process
data previously trapped in legacy systems, allow for automation of health care
processes and integrate a wide variety of health care data including audio,
video and text.
Health Care Market Overview
The U.S. Health Care Finance Administration estimates that health care
expenditures currently represent $1.2 trillion, or 14% of the U.S. economy, and
that these expenditures will increase to $2.0 trillion by 2007 due both to
rising health care costs and an aging population. Health care claims, which
totalled approximately 4.4 billion in 1998, generally are processed through
antiquated legacy systems via paper, fax or phone. These systems can be
inefficient and lead to unnecessary and duplicative costs. We believe that
providing new, Internet-based, business-to-business connectivity, information
exchange and electronic commerce solutions that effectively address processing
inefficiencies is one of the largest market opportunities in health care today.
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The health care industry is currently one of the most complex markets due
to the numerous interrelationships among health care participants.
Marketing Participants Graphic
The payment for and delivery of health care requires that consistent,
accurate information be shared confidentially among health care participants
across a large and fragmented industry. Employers select health plans, determine
benefit levels, enroll employees and maintain employee eligibility data.
Individuals compare medical plans, choose physicians and submit claims for
reimbursement. Physicians, hospitals and other providers verify patient
eligibility, collect patient histories, order diagnostic tests and x-rays,
receive and interpret test results, render diagnoses, issue referrals and submit
claims to payers. Payers manage referrals, establish medical care protocols and
reimbursement policies and process claims. Laboratories analyze and process
patient samples or tests, provide results and submit claims for reimbursement.
Pharmacies fill prescriptions and submit claims for reimbursement. Medical
supply companies distribute medical devices and pharmaceutical supplies. These
health care transactions all are highly dependent on the collection and
communication of information, and each participant is dependent on the others
for portions of that information.
Market Characteristics
Market fragmentation. The health care market is highly fragmented with wide
geographic dispersion, a large number of participants and significant
differences in technology infrastructure.
- Geographic fragmentation. Because health care is delivered locally, there
are hundreds of thousands of market participants in different locations.
For example, there are approximately 750 HMOs in the United States,
644,000 active physicians and 6,200 hospitals. Additionally, there are
over 16,500 nursing homes, 8,000 home health agencies and 4,500
independent laboratories.
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- Technological fragmentation. Information technology investment has not
been coordinated among health care participants. Current technology
infrastructure in health care is characterized by numerous, incompatible
and, in many cases, antiquated legacy systems. Consequently,
communication of information generally takes place via paper, fax and
telephone.
Complex processes. Health care is delivered in a marketplace which has
become increasingly complex given the transition to managed care, the
data-intensive nature of health care transactions, the lack of standard data
formats, the complicated procurement process and the pervasiveness of government
regulation.
- Transition to managed care. One of the most important changes in the U.S.
health care system since the 1980s has been the shift away from
fee-for-service indemnity plans to managed care organizations. Currently,
67.1% of the U.S. population is covered through some form of managed
care, and we believe that this proportion is likely to increase. As
managed care has become more prevalent and the number of payers has
increased, provider reimbursement and general administration has become
increasingly burdensome.
- Intensive data management. Upkeep of health care data is largely a
labor-intensive, paper-based and error-prone process in which data are
manually collected, authenticated, edited, categorized and updated. For
example, eligibility and plan information, which is basic information
about an individual and his or her dependents, is cumbersome to manage,
given that the data must be constantly updated to reflect any changes
affecting coverage status, such as marriage, child births and address
changes. However, this information is required at all points of health
care delivery.
- No standard data format or business rules. Data formats vary considerably
throughout the health care industry and typically are unique to each
particular health plan or provider. The data are stored in different
formats and health care participants often rely on proprietary business
rules for information such as plan coverage, eligibility and physician
co-payments.
- Complexity of procurement, purchasing and payment processes. There are
numerous types of health care transactions due to the large number of
both suppliers and buyers of care. In addition, there are multiple
payment mechanisms depending on who has assumed the health care coverage
risk. Payment mechanisms can range from fee-for-service to a fully
insured health care maintenance organization, known as an HMO, and may be
paid for by the individual, the individual's employer, the government, or
a combination of all three.
- Increasing government regulation. Numerous federal, state and local laws
and regulations govern the health care industry, which change frequently
depending on political and economic influences. For example, the Health
Insurance Portability and Accountability Act of 1996 has recently placed
substantial new administrative requirements on many health care
participants, including rules regarding compliance with industry
standards, data formats, portability of insurance and data security.
Current Health Care Market Issues
As a result of the fragmentation and complexity of the health care market,
participants are unable to cost-effectively manage, communicate and exchange
information in real-time. This fragmentation and complexity has resulted in
increasing dissatisfaction among health care participants.
- Inability to manage and exchange data. In order to achieve efficient
delivery of health care, information must flow within and between health
care participants. The enrollment and eligibility process requires shared
employee information among employers, health plans and provider groups.
The referral and authorization process involves physicians seeking
approval from health plans and patients scheduling appointments with
other physicians. To diagnose and treat patients, physicians need access
to clinical information, such as medical history data or lab results,
from various hospitals, laboratories or other providers. Prescription
services require communication of
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medication histories and payer rules among patients, physicians, pharmacy
benefit managers, pharmacies and payers. Finally, for the health care
supply chain to generate and fulfill transactions, medical supply vendors
and laboratories require information about the availability and pricing
of supplies. The inability to transfer information between participants
is exacerbated by the fact that several different data formats can exist
even within one health plan.
- Lack of real-time and secure communication. The current, paper-based
processes do not allow for automated, daily workflow or the secure
exchange of time-sensitive and critical information. This often results
in administrative inefficiencies related to the manual retrieval of
information, delivery of unnecessary care and the performance of
redundant tests and procedures.
- Rising costs. Despite payers' use of a number of techniques designed to
control the cost of care and administration -- such as lowering
reimbursement rates, shifting costs to providers and restricting coverage
for services -- health care costs are continuing to escalate. To
compensate for operating margin pressures, payers are raising premiums.
This, in turn, is increasing the costs of health care for individuals and
their employers.
Growth of the Internet and Applicability to Health Care
The Internet has emerged as the fastest growing communication medium in
history. We estimate that the total number of Internet users worldwide will grow
from 150 million in 1998 to 500 million by 2003. The ubiquitous nature, low cost
and scalability of the Internet have created new opportunities for conducting
secure commerce. Recently, the widespread adoption of intranets and the
acceptance of the Internet as a business communications platform have created a
foundation for business-to-business electronic commerce that should enable
organizations to streamline complex processes, lower costs and improve
productivity.
We believe that business-to-business electronic commerce represents a
significantly larger opportunity than business-to-consumer or person-to-person
electronic commerce. We believe that the Internet can serve as a catalyst to
lower the cost of business-to-business commerce and bring market participants
across industry lines together in more efficient and productive relationships.
Forrester Research, Inc. estimates that business-to-business electronic commerce
will grow from $43.1 billion in the United States in 1998 to $1.3 trillion in
2003 while business-to-consumer electronic commerce will grow from $7.8 billion
in 1998 to $108.0 billion in 2003.
Although the Internet can speed and streamline transactions, we believe
that current Internet-based health care solutions are significantly limited in
their ability to search, structure, integrate and filter vast amounts of
disparate data and dynamically customize and display information in contexts
relevant to particular users. These limitations are particularly critical in the
health care industry, where information and transaction connectivity among all
participants is necessary to reduce process inefficiencies and costs. In order
for an Internet-based health care solution to be successful, we believe it must
contain the following key technology and business components:
- a common, secure and scaleable platform for structuring information
exchange and commerce among multiple market participants;
- an effective and cost-efficient interface with legacy systems;
- automation of health care transaction processes to reduce paper, improve
work flow and streamline administration;
- integration of disparate data from a variety of multimedia sources such
as audio, video and written documents;
- ability to dynamically retrieve and update data in a view customizable
for each particular health care participant; and
- quick returns on investment to facilitate adoption by health care
participants.
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OUR SOLUTION
We are a leading provider of Internet-based, business-to-business
connectivity, information exchange and electronic commerce solutions for health
care. We have developed an Internet-based, information and transaction
technology platform, which we call the XCare.net platform. Using the XCare.net
platform, we connect health care participants together into a community
structure and deliver applications, services and electronic commerce product
offerings that are designed to improve process efficiencies, reduce
administrative costs and create new revenue opportunities for our customers. Our
applications consist of software modules facilitating health care transactions
such as eligibility checks, referrals and health plan enrollment. Our services
include formulating and implementing Internet strategies for our customers,
administering back office operations and operating and hosting their technology
environments in our electronic commerce operations center. We currently are
developing electronic commerce product offerings such as drug store products,
medical supplies and credit cards with smart card technology for claims payment.
We believe that the XCare.net platform and our solutions can reduce
administrative and transaction inefficiencies and simplify the way business is
conducted in health care, which may ultimately enhance the quality of health
care delivery in the U.S. We believe that our solutions have the following
advantages:
Use of new standard for information exchange. The XCare.net platform and
associated applications and services are based on XML. We expect XML to be a
predominant protocol for exchanging multimedia data for information exchange and
electronic commerce on the Internet in the future. XML provides a rich document
structure that allows complex data from multiple sources to be dynamically
processed and displayed to users in personalized ways. We believe that these
capabilities are particularly applicable to the health care industry because XML
can process data previously trapped in legacy systems, allow for automation of
health care processes and integrate a wide array of health care data including
audio, video and text.
Disciplined approach to creating customer solutions. We have developed a
step-by-step approach to assist our customers to envision, evaluate and execute
an Internet-based health care strategy. The resulting strategies are tailored to
the particular customer to improve efficiency, reduce costs and create new
opportunities for revenue generation.
Complete, turnkey solutions. Our solutions are designed to provide a
comprehensive set of applications, services and product offerings while
preserving previous technology investments by integrating diverse multimedia
content, including content from legacy systems. These solutions are delivered in
a low cost, low maintenance environment provided through our electronic commerce
operations center.
Value-added Solution Channels. Our business model is based on a
multi-faceted network of collaborative relationships, which we call Solution
Channels, among our company, our customers and our vendors. Our Solution
Channels leverage our customers' and vendors' core competencies to promote the
exchange of health care related services and products. XCare.net Solution
Channels create a community which enables our customers to also act as vendors
of applications, services and products to other XCare.net community
participants. Solution Channels allow us to:
- Create new revenue opportunities for others. Customers and vendors can
utilize our Solution Channels as distribution channels for existing as
well as new products and services that allow them to generate new sources
of incremental revenue. For example, we package our eXtensible CARE
applications system with medical management and third party
administration services provided by Employers Mutual, Inc. for
distribution to members of the XCare.net community such as American
Medical Pathways, Inc., a subsidiary of American Medical Response, Inc.
- Identify new revenue opportunities for us. Our customers can produce
complementary applications or services that operate on the XCare.net
platform and enhance the value of the specific solutions we have
developed. We can deliver these new applications and services to the
XCare.net community through our Solution Channels, generating additional
revenue for us. For
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example, we can license credentialing applications from one existing
customer, and then resell these applications through our Solution
Channels to other community members.
- Establish growing communities connected through the XCare.net
platform. Our customers can extend the scope and reach of the XCare.net
platform by distributing our applications, services and product offerings
to their customers. By leveraging our customer base as channels for wider
deployment of our solutions, we encourage increased usage of the
XCare.net platform as well as extend the community to new users.
STRATEGY
Our objective is to become the leading provider of health care solutions
for Internet-based, business-to-business connectivity, information exchange and
electronic commerce. Our strategy focuses on the following:
Cross-sell applications, services and electronic commerce product offerings
in our Solution Channels. We believe that our Solution Channels represent an
opportunity for deploying new applications, services and electronic commerce
product offerings that are either internally developed or obtained through our
growing number of customer and vendor relationships. We intend to continue to
sell additional applications, services and product offerings to existing
customers. We believe this cross-selling approach simplifies the sales process
and may shorten our sales cycle and reduce our cost of sales.
Penetrate target market segments. We estimate that there are approximately
12,000 entities operating within the payer/third-party administrator and at-risk
provider market segments. We intend to penetrate these markets because these
potential customers are well positioned to influence and drive change in health
care processes. We believe that these organizations have both the funding to
adopt new Internet-based process improvements and the incentive to lower ongoing
operating costs in order to improve their margins.
Develop new applications, services and product offerings. We have developed
a variety of applications, services and product offerings to address operational
inefficiencies in the health care industry. We are also developing additional
applications and services and are planning new product offerings that we expect
to launch commercially during the next six to 12 months. As Internet strategies
in the health care industry evolve and new relationships between organizations
are formed, we intend to continue to identify new development opportunities.
Leverage existing applications, services and product offerings. We seek to
identify key functions that are critical to particular industry participants and
develop solutions supporting these functions. We intend to regularly review
existing applications, services and product offerings to extend their
functionality, transaction capabilities and features as customer needs dictate.
In addition, we may modify existing solutions to pursue new market
opportunities. We plan to accomplish this by building XML-based applications
encompassing the identified functionality, by acquiring businesses or
technologies, by enabling industry-leading, third-party applications to operate
on our platform, and by increasing our product offerings. We have initially
targeted those needs we believe are most critical to each business segment of
the health care industry, offer the highest value to health care participants
and are readily adaptable to our XCare.net platform.
Form strategic relationships with leading health care participants. We are
aggressively pursuing strategic relationships with leaders in key health care
industry segments to increase our portfolio of applications, services and
product offerings, to increase the scope of our XCare.net community of users and
to provide specialized industry expertise for new solutions. We believe this
will result in accelerated market awareness and demand for our applications,
services and product offerings, through the influence of these partners both
directly, through their use of our solutions and sales efforts, and indirectly,
through their relationships with other potential customers.
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TECHNOLOGY
We believe that the XCare.net platform is the first XML-based
infrastructure using the Topic Navigation Mapping standard that is specifically
tailored to meet the demands of health care industry participants. Unlike the
current Internet standard, hypertext mark-up language, or HTML, XML in
combination with Topic Navigation Mapping allows a higher degree of flexibility
for customized data exchange between health care participants. We expect XML to
be a predominant protocol for exchanging multimedia data for information
exchange and electronic commerce in the future. Topic Navigation Mapping
provides a standard format for indexing and structuring the XML formatted
content. We call the resulting indices and structures Topic Maps. We take
advantage of the benefits of both XML and Topic Navigation Mapping technologies
to process data previously trapped in legacy system allow for automation of
health care processes and integrate a wide variety of health care data including
data in audio, video and text form.
We use a set of software applications, known as brokering components, to
find, integrate and present relevant, customized information to individual
users.
Graphic
Context Broker. The Context Broker acts as a user's personal information
manager and transaction assistant. It stores information about the user and
learns personal preferences. With each use, the Context Broker further refines a
user's personal preferences, and, as a result, the user's experience with the
Web site is continually tailored to his or her particular needs based on current
and past sessions. As the user moves from one transaction to another, the
Context Broker also ensures that information is carried through and remains
consistent across multiple transactions.
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DataFabric. The DataFabric is a map formed by linking data and weighting
relationships. This fabric filters out irrelevant information and allows for
more intelligent searching.
LogicFabric. The LogicFabric is a map assembled by the rules and workflow
associated with the data relationships. This fabric provides the order and
assembly instructions for the information.
Semantic Broker. The Semantic Broker is responsible for interpreting a
user's request and finding the relevant information. It does this by reading the
DataFabric and LogicFabric for interpretation, location and assembly
instructions. It then dispatches the Service Broker to obtain the information
from any location throughout the Web. The final integration of data may involve
multi-media content, transactions and associated rules and workflow.
Service Broker. The Service Broker is the gateway out to the Internet,
locating and collecting the information as specified by the Semantic Broker. The
Service Broker then returns the information to the Context Broker, which
presents the relevant information in a manner customized to individual users.
The technology components which comprise our platform are developed using
the Oracle 8i relational database management system, Enterprise JavaBeans
programming language and Object Store, a global object-oriented database
management system. To support the ability of our technology platform to enable
and facilitate electronic commerce, we have built and maintain an electronic
commerce operations center designed for high performance, scalability and
stability utilizing Sun Microsystems, Inc.'s Solaris operating system.
Our platform architecture was designed for use in highly confidential,
health care computing environments where security is a high priority. A Web
server authenticates the identity of the end-users to ensure only authorized
end-users have access to our Web applications. Users are authenticated by a
valid user identification and password, a security token or a digital
certificate, or a certificate authority. We address data security using digital
certificate technology signed with private keys and verified with public keys.
Our facilities and operations utilize redundancy and back-up to minimize
exposure to systems failure. Telecommunications and server infrastructures
support redundant processing and data back-up capabilities. Our routine back-up
procedures are performed incrementally on a daily basis with a full system
back-up performed monthly. In addition, we use RAID5 systems which provide
real-time back-up of data. All back-ups are maintained in fire proof storage
with critical support information. Technical and operations support staff are
available on a 24-hours-a-day, seven-days-a-week basis to assist with any
critical processing incidents or failures.
The XCare.net platform provides our customers with the capability to scale
their solutions as their business grows. This scalability can extend these
solutions across multiple organizations in diverse geographic settings
supporting high volumes of users. Our flexible XML-based technology brokering
architecture can also accommodate high volumes of transactions and dynamic
customization for the multiple participants within the health care marketplace.
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<PAGE> 43
APPLICATIONS, SERVICES AND PRODUCT OFFERINGS
We provide a range of applications, services and product offerings that
support the management of health care data and facilitate business-to-business
connectivity, information exchange and electronic commerce among health care
industry participants. Our applications, services and product offerings, which
may incorporate licensed components, are designed to enable our customers to
preserve investments in existing legacy systems while integrating new
Internet-based products and services.
<TABLE>
---------------------------------------------------------------------------------------------
APPLICATION DESCRIPTION STATUS
<S> <C> <C>
eXtensible CARE System Provides back-office processing for Currently available
managed care transactions by health plan
payers and at-risk provider
organizations.
- ----------------------------------------------------------------------------------------------
eXtensible CARE Transactions Facilitates submission, adjudication, Currently available
remittance and verification transactions
for a variety of managed care functions
such as claims, capitation,
authorizations, referrals, eligibility,
enrollment, and benefits.
- ----------------------------------------------------------------------------------------------
MatchNet Staffing & Scheduling Facilitates staffing, scheduling, Currently available
management and reporting transactions.
- ----------------------------------------------------------------------------------------------
Physician Credentialing Stores physician credentialing data with In development
the ability to automatically populate
fields of associated managed care
applications.
- ----------------------------------------------------------------------------------------------
Electronic Medical Record Facilitates the data collection and In development
review of patient-level medical
conditions based on access to disease,
allergy, medication and other related
historical data and clinical
observations.
- ----------------------------------------------------------------------------------------------
Case Management Integrates case/disease/utilization In development
management, wellness promotion, survey
and assessment functions.
- ----------------------------------------------------------------------------------------------
Medication and Medical Provides comprehensive patient-level In development
Assessment Inquiry Systems information on prescription and
over-the-counter medications, as well as
common medical conditions.
- ----------------------------------------------------------------------------------------------
Physician Practice Management Automates physician practice management In development
functions including patient scheduling,
third-party billing, contract
maintenance, receivables management,
accounting and reporting.
- ----------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 44
<TABLE>
---------------------------------------------------------------------------------------------
SERVICES DESCRIPTION STATUS
<S> <C> <C>
eHealth Development Discipline Provides a framework for development and Currently available
design Internet strategies.
- ----------------------------------------------------------------------------------------------
Third-Party Administration/ Provides outsourcing services for health Currently available
Management Service care organizations not utilizing
Organization Outsourcing internally managed information systems,
Services including back-office administration,
timesharing services and additional
service bureau functions.
- ----------------------------------------------------------------------------------------------
eHealth Operations Management Provides a secure, 24 hours a day, seven Currently available
days a week environment for web hosting
of transactions and multi-media content,
application maintenance and customer
service for Solution Channels.
- ----------------------------------------------------------------------------------------------
Custom Portal Integration & Provides professional services and Currently available
Hosting operations management for customers
through the analysis of business,
operational and technology needs,
including next generation information
and transaction portal customizations
for virtual health care organizations.
- ----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
---------------------------------------------------------------------------------------------
PRODUCT OFFERINGS DESCRIPTION STATUS
<S> <C> <C>
MDPay Accelerator Links eligibility verification, claims Future offering
submission, co-pay collection and
receivables management within the
physician's or hospital's
point-of-service environment.
- ----------------------------------------------------------------------------------------------
Online Drug Store Facilitates the purchase of brand-name Future offering
pharmaceutical and personal healthcare
products, as well as access to
decision-making resources.
- ----------------------------------------------------------------------------------------------
Medical Supply Product Provides web-based medical supply Future offering
ordering service for use by healthcare
buyers and suppliers.
- ----------------------------------------------------------------------------------------------
Health and Medical Bookstore Provides online bookstore for the Future offering
purchase of health and medical books and
other resources.
- ----------------------------------------------------------------------------------------------
</TABLE>
We are actively developing new applications, services and product
offerings, and from time to time, we license technology necessary for such
development. Nonetheless, new applications, services and product offerings may
not be introduced as scheduled, and we may not be able to enter into needed
licensing arrangements in a timely manner or at all. As a result, the schedule
of the applications, services and product offerings slated for introduction may
be delayed.
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<PAGE> 45
CUSTOMERS
The following is a representative list of our customers that have purchased
applications or services:
<TABLE>
<CAPTION>
MARKET SEGMENT CUSTOMERS
-------------- ---------
<S> <C>
Health Care Providers American Medical Pathways, Inc., a subsidiary of American
Medical Response, Inc.
Asthma Management Services, Inc.
Methodist Care, Inc.
Provider Services Incorporated
Quest Diagnostics Incorporated
Health Care Payers Advica Health Resources
Employers Mutual, Inc., a wholly owned subsidiary of Florida
Physicians Insurance Company and Brokerage Services, Inc., a
division of Employers Mutual, Inc.
Kaiser Permanente
Provider Services, Inc.
Health Care Suppliers ADIS International Ltd
Digital Medical Registrar
</TABLE>
In 1998, sales to Employers Mutual, Inc. accounted for 29% of revenue,
sales to Brokerage Services, Inc. accounted for 20% of revenue, sales to Quest
Diagnostics Incorporated accounted for 12% of revenue and sales to ADIS
International Ltd accounted for 11% of revenue. For the six months ended June
30, 1999, sales to American Medical Pathways, Inc. accounted for 26% of revenue,
sales to Methodist Care, Inc. accounted for 24% of revenue, sales to Quest
Diagnostics Incorporated accounted for 20% of total revenues, and sales to
Brokerage Services, Inc. accounted for 11% of revenue.
STRATEGIC RELATIONSHIP
We have entered into a strategic relationship with ADIS International, Ltd
that we believe will enhance our application portfolio, provide important
specialized industry expertise and create additional revenue sources. ADIS
International Ltd, a subsidiary of Wolters Kluwer, focuses on development of
drug/disease clinical decision support tools deployed through Internet-based
technology. We have collaborated with ADIS International Ltd on the introduction
of its ClinAssist product. In addition, ADIS International Ltd provided clinical
expertise to assist us in the creation of our Topic Navigation Mapping
technology. Finally, we are co-developing a new Web site supporting the
ClinAssist product.
SALES AND MARKETING
Sales. We sell our products and services through our direct sales and
business development groups, targeting the payer/third-party administrator and
risk-bearing provider segments of the health care market. Our sales office is
located at our principal offices in Englewood, Colorado. The direct sales
process involves the generation of sales leads through direct marketing,
tele-prospecting, public relations, Web advertising and promotion, attendance
and presentations at major health care and technology-oriented trade shows and
industry conferences. The time between initial customer contact and an actual
sales order may span three months or more. See "Risk Factors -- Our operating
results may vary significantly due to the lengthy sales and implementation
cycles for our products and services.
In addition, our direct sales and business development groups use our
Solution Channels to cultivate strategic relationships with our customers and
vendors to encourage them to provide value-added applications, services and
products for redistribution through the network of users of the XCare.net
platform.
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<PAGE> 46
Marketing. Our primary marketing initiatives include public relations,
direct mail and outreach programs to customers and vendors. We use our Web site,
www.xcare.net, to establish our market presence, generate leads and extend our
program offerings to health care industry participants.
As of September 30, 1999, we had 11 employees in sales and marketing
functions.
CUSTOMER SUPPORT
We believe that a high level of customer support is necessary to achieve
wide acceptance of our solutions. We provide a range of customer support
services through our staff of customer service personnel, multiple call centers
and an e-mail help desk all of which are available 24 hours a day, seven days a
week and are frequently updated to improve existing information and to support
new services. We also employ technical support personnel who work directly with
our direct sales force and customers of our applications and services. We
provide our customers with the ability to purchase maintenance for our
applications and services, which includes technical support and upgrades. We
also provide training programs for our customers. As of September 30, 1999, we
had 22 employees in addition to independent contractors in customer support
functions.
RESEARCH AND DEVELOPMENT
As of September 30, 1999, our development and engineering group consisted
of 11 employees divided into Topic Navigation Mapping, XML and infrastructure
groups. For the years ended December 31, 1996, 1997 and 1998, we incurred $3.2
million, $4.2 million and $670,000 in research and development expenses
respectively. In addition, for the six month period ended June 30, 1999, we had
incurred $161,000 in research and development expenses. We believe that timely
development of new and enhanced applications and technology is necessary to
remain competitive in the marketplace. Accordingly, we intend to continue
recruiting and hiring experienced development personnel and to make investments
in development and engineering.
COMPETITION
The emerging Internet-based health care market is undergoing rapid
technological change. The ubiquitous reach of the Internet, coupled with the
availability and acceptability of new Internet-based technologies, has created
significant opportunities in health care for both legacy and new Internet-based
system vendors. Potential competitors fall into three primary categories: health
care Internet companies focused on providing connectivity and transactions
within business-to-business and business-to-consumer frameworks; traditional
health care information system vendors who seek to extend the services of their
core products using Internet-based technology; and traditional managed care
information system and outsourcing vendors who generally sell legacy systems and
are focusing on extending the services of their core products to the Internet.
In addition, from time to time our customers may develop products and services
competitive with those offered by us.
We believe that our main competitors are Healtheon Corporation, CareInsite,
Inc., IDX Systems Corporation, McKesson HBOC Inc., and Computer Sciences
Corporation, and that the principal competitive factors in the Internet-based
health care market are:
- the ability of technology to integrate data from legacy systems and other
multimedia content;
- the timeliness and price of new applications, services and electronic
commerce product offerings;
- the degree of customer service offered to purchasers of Internet health
care solutions;
- the scope of industry knowledge and familiarity with needs of health care
market participants; and
- the size and scope of a solution's user base.
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<PAGE> 47
INTELLECTUAL PROPERTY
We seek to protect our software, documentation and other written materials
primarily through a combination of trade secret, trademark and copyright laws,
confidentiality procedures and contractual provisions. For example, we license
rather than sell our software applications and require licensees to enter into
license agreements that impose certain restrictions on the licensees' ability to
utilize the software code. In addition, we seek to avoid disclosure of our trade
secrets, by, among other things, requiring those persons with access to our
proprietary information to execute confidentiality agreements with us and
restricting access to our source code.
We intend to file patent applications in the United States with respect to
certain aspects of our content brokering technology. Despite our efforts to
protect our proprietary rights, unauthorized parties may attempt to copy aspects
of our products or obtain and use information that we regard as proprietary.
Policing unauthorized use of our products is difficult. While we are unable to
determine the extent to which piracy of our products exists, software piracy can
be expected to be a persistent problem, particularly in foreign countries where
the laws may not protect our proprietary rights as fully as in the United
States.
From time to time, we may be involved in intellectual property disputes. We
have not been notified that any of our products infringe the proprietary rights
of third parties. However, in the future, third parties may claim infringement
against us with respect to current or future products. We expect that providers
of Internet health care solutions will increasingly be subject to infringement
claims as the number of products and competitors in our industry grows and
traditional suppliers of health care data and transaction solutions begin to
offer Internet-based products. See "Risk Factors -- Our proprietary technology
may be subjected to infringement claims or may be infringed upon."
We rely upon software we have licensed from Sinclair Montrose Healthcare
PLC to perform key functions of our MatchNet Staffing & Scheduling product. We
currently have an exclusive license to the software, although exclusivity may
terminate if we are unable to meet milestones. This license may not continue to
be available to us on commercially reasonable terms. The loss of this license
could result in delays or reductions of shipments of the MatchNet Staffing &
Scheduling application until equivalent software could be identified, developed,
licensed and integrated. See "Risk Factors -- If we lose key licenses we may be
required to develop or license alternative technology which may cause delays, at
considerable expense or reduce sales."
GOVERNMENT REGULATION
Standards
The Health Insurance Portability and Accountability Act of 1996 mandates
the use of standard transactions, standard identifiers, security and other
provisions by the year 2000. We are designing our XCare.net platform and
solutions to enable compliance with the proposed regulations. However, until
such regulations become final, they could change, which could require us to
expend additional resources to comply with the revised standards. In addition,
the success of our compliance efforts may be dependent on the success of health
care participants in dealing with the standards.
Confidentiality
The confidentiality of patient records and the circumstances under which
such records may be released for inclusion in our databases are subject to
substantial regulation by state governments. These state laws and regulations
govern both the disclosure and the use of confidential patient medical record
information. Additional legislation governing the dissemination of medical
record information has been proposed at both the state and federal level. This
legislation may require holders of such information to implement security
measures that may require substantial expenditures by us. Changes to state or
federal
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<PAGE> 48
laws may materially restrict the ability of health care providers to submit
information from patient records using our applications.
We utilize an architecture that incorporates a secured socket layer
encryption which surpasses required security protection. Additionally the use of
firewalls and other security schemes assure customers of a compliant and secure
computing environment. Additionally, we utilize a formal, authority-based use of
digital certificates to assure the identity of electronic trading partners. For
support of identification requirements we utilize an exchange of passwords and
identities by U.S. certified mail or telephonic identification. If unauthorized
persons were to gain access to patient records notwithstanding our efforts to
maintain their security, this could result in our liability for these security
breaches and damage to our reputation.
Third Party Administration and Utilization Review Licensure and Registration
Certain of the administrative services we provide health plans, payers and
providers, including our third-party administration and utilization review
operations, are regulated by the statutes and regulations of various states and
require that we obtain appropriate licensure or registration. We believe that we
are in substantial compliance with the licensing and registration laws of each
state in which we conduct business.
False Claims Act
Under the federal False Claims Act, liability may be imposed on any
individual or entity who knowingly submits or participates in submitting claims
for payment to the federal government which are false or fraudulent, or which
contain false or misleading information. Liability may also be imposed on any
individual or entity who knowingly make or use a false record or statement to
avoid an obligation to pay the federal government. Various state laws impose
liability for similar acts. Claims under the federal False Claims Act may be
brought by the federal government or private whistleblowers. If we are found
liable for a violation of the federal False Claims Act, or any similar state
law, it may result in substantial civil and criminal penalties. In addition, we
could be prohibited from processing Medicaid or Medicare claims for payment.
Prompt Payment Laws
Various states have passed laws regarding the prompt payment of medical
claims by health plans. If a claim is brought against us and we are found to
have violated a law regarding the prompt processing of claims for payment, we
may incur civil or other penalties.
Government Investigations
There is increasing scrutiny by law enforcement authorities, the U.S.
Department of Health and Human Services Office of Inspector General, the courts
and Congress of agreements between health care providers and suppliers or other
contractors which have a potential to increase utilization of government health
care resources. In particular, scrutiny has been placed on the coding of claims
for payment and contracted billing arrangements. Investigators have demonstrated
a willingness to look beyond the formalities of business arrangements to
determine the underlying purposes of payments between health care participants.
Although, to our knowledge, neither we nor any of our customers is the subject
of any investigation, we cannot tell whether we or our customers will be the
target of governmental investigations in the future.
Regulation of the Practice of Medicine and Other Health Care Professions
The practices of medicine, nursing and pharmacology are generally defined
by state law and vary from state to state. These practices require a license
under state law and, depending on state law, practicing without a license can be
a civil or criminal violation. We have endeavored to structure our
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<PAGE> 49
existing operations to be in substantial compliance with state health care
professional licensing requirements. However, the application of this area of
the law to Internet services such as ours is new. Also, we have not conducted a
state by state survey of licensing requirements and policies. Accordingly, a
state regulatory authority and/or one or more licensed professionals or advocacy
groups or consumers may allege that one or more elements of our business
requires a license to practice under existing or future laws or statutes. Any
application of professional practice regulations to our business could
negatively impact our business. Further, liability based on a determination that
we engaged in a professional practice without a license may cause us to be
excluded from coverage under the terms of our current general liability
insurance policy and may also subject us to a higher standard of care than would
be applicable to activities which do not require a professional license.
Regulation of Pharmacy Prescription Drug Activities
The business of providing prescription drugs and other medical products is
subject to federal, state and local regulations, many of which are specific to
pharmacies. In addition, the Federal Trade Commission and many state agencies
regulate advertising and product performance claims for prescription drugs.
Pharmacy operations are subject to federal, state and local licensing and
registration regulations with respect to the Controlled Substances Act and
federal Drug Enforcement Agency regulations, as well as related state and local
laws and regulations relating to pharmacy operations, including registration,
security, recordkeeping, and reporting requirements related to the purchase,
storage and dispensing of controlled substances, prescription drugs and certain
over-the-counter drugs.
The U.S. House of Representatives Committee on Commerce and the General
Accounting Office are currently investigating online pharmacies and online
prescribing, especially focusing on those who prescribe drugs online and
pharmacies that fill invalid prescriptions, including those that are written
online. The committee on commerce requested that the General Accounting Office
undertake a formal review of a number of issues pertaining to online pharmacies,
including an assessment of mechanisms to ensure that online pharmacies are
obeying the various state and federal regulations for the industry. In addition,
various state legislatures are considering new legislation related to the
regulation of nonresident pharmacies. The inclusion of prescription drugs as a
Medicare benefit has been the subject of numerous bills in the U.S. Congress.
Should we commence providing prescription drugs to consumers, we will be
required to comply with many of the laws, regulations and initiatives described
above. These efforts may require the commitment of additional resources by us.
Federal and State Anti-Kickback Laws
Provisions of the Social Security Act, which are commonly known as the
Federal Anti-Kickback Law, prohibit knowingly or willfully, directly or
indirectly, paying or offering to pay, or soliciting or receiving, any
remuneration in exchange for the referral of patients to a person participating
in, or for the order, purchase or recommendation of items or services that are
subject to reimbursement by, Medicare, Medicaid and similar other federal or
state healthcare programs. Violations may result in civil and criminal sanctions
and penalties. Applications, services or product offerings. If any of our health
care communications or electronic commerce activities were deemed to be
inconsistent with the Federal Anti-Kickback Law or with state anti-kickback or
illegal remuneration laws, we could face civil and criminal penalties or be
barred from such activities. Further, we could be required to restructure our
existing or planned sponsorship compensation arrangements and electronic
commerce activities in a manner which could harm our business.
Regulation of the Sale of Over-the-Counter Drugs, Nutritional Supplements,
Cosmetics and Medical Devices
The U.S. Food and Drug Administration and Federal Trade Commission and
similar state agencies regulate drug and cosmetic advertising and promotion,
including direct-to-consumer advertising, done by
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<PAGE> 50
or on behalf of drug and cosmetic manufacturers and marketers. In addition, the
Federal Trade Commission regulates product safety for nutritional supplements as
well as over-the-counter drugs, medical devices and prescription drugs. In the
event that we provide such products or services, we will be subject to U.S. Food
and Drug Administration and Federal Trade Commission regulation and enforcement
for false advertising and misleading advertising, including overstatements
regarding product performance, especially regarding nutritional supplements.
While we have rights against the manufacturer as to adulteration issues and
product claims to the extent we have received the claims from the manufacturer,
we may have liability if the manufacturer cannot or will not indemnify us in a
specific situation.
FDA Regulation of Medical Devices
The FDA is responsible for assuring the safety and effectiveness of medical
devices under the Federal Food, Drug and Cosmetic Act. Computer applications and
software are considered medical devices and subject to regulation by the FDA
when they are indicated, labeled or intended to be used in the diagnosis of
disease or other conditions, or in the cure, mitigation, treatment or prevention
of disease, or are intended to affect the structure or function of the body. We
do not believe that any of our current applications, services or product
offerings are subject to FDA jurisdiction or regulation; however, we may expand
our applications, services and offerings into areas that may subject it to FDA
regulation. We have no experience in complying with FDA regulations and
compliance with FDA regulations could prove to be time consuming, burdensome and
expensive, which could impede our ability to introduce new applications,
services or product offerings in a timely manner.
Please see "Risk Factors -- Government regulation of health care may impact
our business" for more information regarding the risks government regulation
pose for our business.
LEGAL PROCEEDINGS
There are no material legal proceedings pending against us. We could become
involved in litigation from time to time relating to claims arising out of our
ordinary course of business.
EMPLOYEES
As of September 30, 1999, we had a total of 57 employees, of whom 22 are
engaged in professional services and customer support functions, 11 in product
development, seven in the electronic commerce operations center, 11 in sales and
marketing and six in management, finance and administration. None of our
employees is represented by a labor union. We have not experienced any work
stoppages, and we consider our relations with our employees to be good.
Our future performance depends in significant part upon the continued
service of our key personnel, none of whom is bound by an employment agreement
requiring service for any defined period of time. Our future success also
depends on our continued ability to attract, integrate, retain and motivate
highly qualified sales, technical and managerial personnel. Competition for such
qualified personnel is intense. See "Risk Factors -- Our executive officers and
key personnel are critical to our business and these officers and key personnel
may not remain with us in the future."
FACILITIES
Our principal executive and corporate offices are located in Englewood,
Colorado, in approximately 7,812 square feet of subleased office space under a
sublease that expires on November 30, 1999 as to 3,667 square feet and December
2002 as to 4,145 square feet. We believe that the lease expiring on November 30,
1999 can be extended on commercially reasonable terms. We also maintain an
electronic commerce operations center in Albuquerque, New Mexico, in 6,800
square feet of subleased office space under a lease that expires in January
2000. We believe our space is adequate for our current operations and that
additional leased space can be obtained on commercially reasonable terms if
needed.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Our executive officers and directors as of September 30, 1999, are as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Lorine R. Sweeney........................ 42 President and Chief Executive Officer, Director
Peter H. Cheesbrough..................... 47 Senior Vice President, Finance and Chief
Financial Officer
Lawrence S. Dike......................... 52 Senior Vice President and Chief Scientist
Mark Rangell............................. 35 Senior Vice President, Sales and Marketing
Tammy McLaren............................ 33 Vice President, Professional Services
Jon B. Wisda............................. 33 Vice President, Product Development
Jeffrey M. Krauss(1)..................... 42 Chairman of the Board of Directors
J. Andrew Cowherd(2)..................... 46 Director
James B. Hoover(2)....................... 44 Director
Daniel J. Mitchell(1).................... 42 Director
William F. Reilly(1)..................... 57 Director
Robert Tsao(2)........................... 27 Director
</TABLE>
- -------------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
Lorine R. Sweeney. Ms. Sweeney has been President, Chief Executive Officer
and a director of XCare.net since October 1997. From November 1994 until
September 1997, Ms. Sweeney was Vice President of Software Development and
Technology and Vice President of the UltiMedex Business Unit of Micromedex,
Inc., an international supplier of clinical reference information to the health
care and environmental industries. From August 1993 until November 1994, Ms.
Sweeney was a Managing Consultant for Microsoft Consulting Services, the
management consulting division of Microsoft Corporation. Ms. Sweeney has over 19
years of executive leadership experience in the commercial software, CD-ROM,
online information services, consulting and systems integration industries. Ms.
Sweeney received her B.S. degree in Engineering from the University of Arizona
and her M.B.A. from the University of Phoenix.
Peter H. Cheesbrough. Mr. Cheesbrough has been Senior Vice President of
Finance and Chief Financial Officer of XCare.net since September 1999. From
April 1993 until August 1999, Mr. Cheesbrough was Senior Vice President of
Finance and Chief Financial Officer of Echo Bay Mines, Ltd., a gold mining and
exploration company. Mr. Cheesbrough is a director of Specialty Care Network,
Inc., an Internet company that provides on-line health care ratings and
information. Mr. Cheesbrough was educated in England and qualified as a
Chartered Accountant (equivalent to the CPA designation) in the United Kingdom
in 1974 and in Canada in 1977.
Lawrence S. Dike. Mr. Dike was one of three founders of Reilly Dike Dosher
Corporation, XCare.net's predecessor company. From April 1989 until April 1999,
Mr. Dike was Senior Vice President of Technology Platforms and a director of
Reilly Dike Dosher Corporation. Mr. Dike received his B.S. degree in Mathematics
and his M.S. degree in Computing Science from the University of New Mexico.
Mark Rangell. Mr. Rangell has been Senior Vice President of Sales and
Marketing of XCare.net since January 1998. From May 1997 until December 1997,
Mr. Rangell was Vice President of Marketing at GreenPages Data Services, LLC, a
development stage organization focused on building an electronic commerce
network for pharmaceutical contracting and negotiation. From January 1996 until
May 1997, Mr. Rangell was Director of Marketing for the Ultimedex Business Unit
of Micromedex, Inc. From November 1992 until December 1995, Mr. Rangell was
Product Manager at Medical Economics
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<PAGE> 52
Co., a publisher/database supplier to pharmaceutical, medical device and health
care delivery sectors. Mr. Rangell received his B.S. degree in Computer
Information Systems and Economics at New York University and his M.S. degree in
Marketing and Corporate Strategy at the MIT Sloan School of Management.
Tammy McLaren. Ms. McLaren has been Vice President of Professional Services
of XCare.net since July 1998. From January 1998 until June 1998, Ms. McLaren was
a Manager in the management consulting branch of Ernst & Young, L.L.P. From May
1996 until January 1997, Ms. McLaren was a Program Manager for Commercial
Software at Micromedex, Inc. From January 1989 until May 1996, Ms. McLaren was a
Manager of Business Systems at AtlanticRichfield Corporation, a natural resource
company. Ms. McLaren received her B.A. in Computer Information Systems from the
University of Texas.
Jon B. Wisda. Mr. Wisda has been Vice President of Product Development of
XCare.net since February 1999. From February 1995 until February 1999, Mr. Wisda
was Director of Information Technology for Toxicology and Environmental Health
at Micromedex, Inc. From August 1994 until February 1995, Mr. Wisda was a Senior
Consultant at Raymond James Consulting Inc., an information systems consulting
firm. Mr. Wisda received his B.S. in Engineering and Mathematics from Colorado
School of Mines.
Jeffrey M. Krauss. Mr. Krauss has been Chairman of the Board of Directors
of XCare.net since March 1997. Since May 1990, Mr. Krauss has been a General
Partner of Nazem & Company, a venture capital firm. From January 1983 until
April 1990, Mr. Krauss was an attorney with the law firm of Simpson Thatcher &
Bartlett. Mr. Krauss is a director of Tegal Corporation, a publicly traded
company engaged in the manufacture of semi-conductor capital equipment. Mr.
Krauss received his B.S. in Accounting from the State University of New York and
his J.D. from Harvard Law School.
J. Andrew Cowherd. Mr. Cowherd has been a director of XCare.net since March
1997. Since July 1996, Mr. Cowherd has been a Managing Member of the general
partner of Atlantic Medical Capital, L.P., a venture capital firm that is
managed by Atlantic Medical Management, L.L.C. From April 1991 until January
1993, Mr. Cowherd was a Managing Director in the Global Merchant Banking Group
at BT Securities, a division of Bankers Trust Company. From September 1977 until
March 1991, Mr. Cowherd was an investment banker at Salomon Brothers, where he
served as Managing Director in Corporate Finance from January 1989 until March
1991. Mr. Cowherd is a director of Nursefinders, Inc., a privately-held company
providing health care staffing and home health care services and NotifyMD, a
privately-held company providing unified messaging and other communications
services to physicians. Mr. Cowherd received his A.B. in History from Princeton
University and his M.B.A. from the Graduate School of Business at Stanford
University.
James B. Hoover. Mr. Hoover has been a director of XCare.net since June
1999. Mr. Hoover is the Managing Member of Dauphin Capital Partners I, L.P., a
venture capital firm that he founded in June 1998. From November 1992 until June
1998, Mr. Hoover was a General Partner of Welsh, Carson, Anderson & Stowe, a
private equity firm specializing in the acquisition of healthcare and
information services businesses. Prior to joining Welsh, Carson, Anderson &
Stowe, Mr. Hoover was a General Partner of Robertson, Stephens & Company from
February 1984 until October 1992. From June 1977 until February 1984, Mr. Hoover
was a Vice President of Citibank N.A. Mr. Hoover is a director of Centennial
Healthcare, New American Healthcare and U.S. Physical Therapy, three publicly
traded health care companies. Mr. Hoover received his B.S. in Business
Administration from Elizabethtown College and his M.B.A. from the Graduate
School of Business at Indiana University.
Daniel J. Mitchell. Mr. Mitchell has been a director of XCare.net since
August 1999. Since January 1997, Mr. Mitchell has been a Manager of Sequel
Venture Partners, LLC, a venture capital firm. Since June 1992, Mr. Mitchell has
been a General Partner of Capital Health Venture Partners, a venture capital
firm. From July 1981 until August 1985, Mr. Mitchell was an investment officer
at Institutional Venture Capital Fund at the First National Bank of Chicago. Mr.
Mitchell received his B.S. degree in
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<PAGE> 53
Finance from the University of Illinois at Urbana-Champaign and his M.B.A. in
Finance from the Haas School of Business at the University of
California -- Berkeley.
William F. Reilly. Mr. Reilly has been a director of XCare.net since May
1989. Mr. Reilly was one of the three founders of Reilly Dike Dosher
Corporation, XCare.net's predecessor company. From May 1989 until October 1997,
Mr. Reilly was President and Chief Executive Officer of XCare.net. Since June
1998, Mr. Reilly has been an independent consultant. Mr. Reilly received his
A.B. degree in Philosophy from Stonehill College and his M.B.A. from Harvard
University.
Robert Tsao. Mr. Tsao has been a director of XCare.net since June 1999.
Since August 1997, Mr. Tsao has been an Investment Manager at Vertex Management,
Inc., a venture capital firm. From July 1995 until July 1997, Mr. Tsao was a
Corporate Finance Analyst at SoundView Technology Group, Inc., an investment
banking firm. Mr. Tsao received his B.A. degree in Physics and Economics from
the University of California -- Berkeley.
BOARD OF DIRECTORS AND COMMITTEES
Following the offering, XCare.net's board of directors will consist of
seven directors divided into three classes with each class serving for a term of
three years. At each annual meeting of stockholders, directors will be elected
to succeed those directors whose terms are expiring. Daniel J. Mitchell is the
Class I director whose term expires in 2000. William F. Reilly, James B. Hoover
and Robert Tsao are Class II directors whose terms will expire in 2001. Jeffrey
M. Krauss, J. Andrew Cowherd and Lorine R. Sweeney are Class III directors whose
terms will expire in 2002.
The board of directors has a compensation committee and an audit committee.
The compensation committee, which is comprised of James B. Hoover, J. Andrew
Cowherd and Robert Tsao, administers the stock option plan and all matters
concerning executive compensation. The audit committee, which is comprised of
Daniel J. Mitchell, Jeffrey M. Krauss and William F. Reilly, approves the
selection of XCare.net's independent auditors, reviews the results and scope of
annual audits and other accounting related services, and evaluates our internal
audit and control functions. Each of these committees was established in July
1999.
DIRECTOR COMPENSATION
We do not pay any cash compensation to directors for serving in that
capacity. The board has the discretion to grant options to non-employee
directors pursuant to the director plan. In September 1999, each director other
than Lorine R. Sweeney, our President and Chief Executive Officer, was granted
an option to purchase 100,000 shares of common stock. See "Management -- 1999
Director Option -- Director Plan" and "Certain Transactions."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The compensation committee is currently comprised of Messrs. Hoover,
Cowherd and Tsao. None of these individuals has at any time been an officer or
employee of XCare.net. Prior to formation of the compensation committee, all
decisions regarding executive compensation were made by the full board. No
interlocking relationship exists between the board of directors or compensation
committee and the board of directors or compensation committee of any other
company, nor has any such interlocking relationship existed in the past.
LIMITATION ON LIABILITY AND INDEMNIFICATION MATTERS
Our certificate of incorporation limits the liability of directors to the
maximum extent permitted by Delaware law. Delaware law provides that directors
of a corporation will not be held personally liable for monetary damages for
breach of their fiduciary duties as directors, except for breaches of the
director's duty of loyalty to XCare.net or its stockholders, acts or omissions
not in good faith or that involve intentional misconduct or a knowing violation
of law, unlawful payments of dividends or
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<PAGE> 54
unlawful stock repurchases, redemptions or other distributions, and transactions
from which a director derives an improper personal benefit.
Our bylaws provide that we must indemnify our directors and executive
officers and may indemnify our other officers and employees and agents to the
fullest extent permitted by law. We believe that indemnification under our
bylaws covers at least negligence and gross negligence on the part of
indemnified parties. Our bylaws also permit us to obtain insurance on behalf of
any officer, director, employee or other agent for any liability arising out of
his or her actions in such capacity, regardless of whether the bylaws would
permit indemnification.
We have entered into agreements to indemnify our directors and officers, in
addition to indemnification provided for in our bylaws. These agreements, among
other things, provided that we will indemnify each of our directors and officers
for various expenses, including attorneys' fees, judgments, fines and settlement
amounts incurred by them in any action or proceeding, including any action by or
arising out of their services as one of our directors or officers, any
subsidiaries or any other company or enterprise to which he or she provides
services at our request. In addition, we intend to obtain directors' and
officers' insurance providing indemnification for our directors and officers. We
believe that these provisions, agreements and insurance are necessary to attract
and retain qualified directors and officers.
At present, there is no pending litigation or proceeding involving any of
our directors, officers, employees or agents where indemnification will be
required or permitted. We are not aware of any threatened litigation or
proceeding that might result in a claim for such indemnification.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation that
we paid during the year ended December 31, 1998 to our Chief Executive Officer
and the only other executive officers whose salary and bonus exceeded $100,000
during such fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------- ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION(1)
--------------------------- --------- -------- ---------------
<S> <C> <C> <C>
Lorine R. Sweeney.................................. $175,000 $30,000 $2,909
President and Chief Executive Officer
Lawrence S. Dike................................... 135,000 -- 2,785
Senior Vice President and Chief Scientist
Mark Rangell....................................... 135,000 -- 3,167
Senior Vice President, Sales and Marketing
Tammy McLaren...................................... 115,000 -- 1,101
Vice President, Professional Services
</TABLE>
- -------------------------
(1) Consists of premiums we paid for life insurance, dental insurance, health
insurance and long-term disability insurance for each executive officer.
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<PAGE> 55
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information with respect to stock
options granted in 1998 to each of the officers named in the above table,
including the potential realizable value over the ten-year term of the options,
based on assumed rates of stock appreciation of 5% and 10%, compounded annually.
These assumed rates of appreciation comply with the rules of the Securities and
Exchange Commission and do not represent our estimate of our future stock price.
Actual gains, if any, on stock option exercises will be dependent on the future
performance of our common stock.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------ VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES % OF TOTAL PRICE APPRECIATION FOR
UNDERLYING OPTIONS EXERCISE OPTION TERM
OPTIONS GRANTED TO PRICE PER EXPIRATION -----------------------
NAME GRANTED EMPLOYEES SHARE DATE 5% 10%
---- ---------- ---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Lorine R. Sweeney............ 4,319,000 38.5% $0.025 07/14/08 $175,880 $280,059
Lawrence S. Dike............. -- -- -- -- -- --
Mark Rangell................. 1,729,000 15.4 0.025 07/14/08 70,409 112,115
Tammy McLaren................ 60,000 0.5 0.025 11/11/08 2,443 3,891
</TABLE>
In 1998, we granted options to purchase an aggregate of 11,206,000 shares
to employees, directors and consultants. All options were granted under our
stock option plan at exercise prices equal to the fair market value of our
common stock on the date of grant, as determined in good faith by our board of
directors, based on our financial results and prospects and at the share prices
paid in arms-length transactions. All options typically vest over four years and
are exercisable for up to ten years. In July 1999, we amended our option
agreements so that all options are immediately exercisable upon grant; however,
any unvested shares are subject to repurchase by us at their cost in the event
of the optionee's termination of employment.
OPTION EXERCISES AND HOLDINGS
The following table sets forth for each of the named officers information
concerning exercisable and unexercisable options held as of December 31, 1998.
The value of in-the-money options is based on a value of $0.025 per share, the
fair market value of our common stock at December 31, 1998, as determined by our
board, and net of the option exercise price.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
SHARES VALUE DECEMBER 31, 1998 AT DECEMBER 31, 1998
ACQUIRED ON REALIZED --------------------------- ---------------------------
NAME EXERCISE ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Lorine R. Sweeney........... -- -- 4,319,000 -- $ 0 --
Lawrence S. Dike............ -- -- -- -- -- --
Mark Rangell................ -- -- 1,729,000 -- 0 --
Tammy McLaren............... -- -- 60,000 -- 0 --
</TABLE>
The number of unexercised options at December 31, 1998 which are
exercisable reflects an amendment to the option agreements effected in July 1999
so that all options are immediately exercisable upon grant.
EMPLOYMENT AGREEMENTS
We require each of our employees to enter into confidentiality agreements
prohibiting the employee from disclosing any of our confidential or proprietary
information. In addition, the agreements generally
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<PAGE> 56
provide that upon termination the employee will not work for a competitor and
may not solicit our customers and employees. At the time of commencement of
employment, our employees also generally sign offer letters specifying basic
terms and conditions of employment. Each of Lorine R. Sweeney, Mark Rangell and
Tammy McLaren have signed offer letters with of this type, see "Certain
Transactions -- Offers of Employment."
1997 STOCK PLAN
Our stock plan provides for the grant of incentive stock options to
employees, including officers and employee directors, and for the grant of
nonstatutory stock options and stock purchase rights to employees, officers,
directors and consultants. The stock plan was adopted by our board of directors
in March 1997 and approved by the stockholders in March 1997. The board of
directors approved amendments to the stock plan to increase the number of shares
reserved under the stock plan in December 1997, April 1998, July 1998, May 1999
and September 1999. The stockholders also approved these amendments to the stock
plan in December 1997, April 1998, July 1998, May 1999 and September 1999.
As of September 30, 1999 a total of 22,000,000 shares of our common stock
has been reserved for issuance under the stock plan. As of September 30, 1999,
options to purchase 14,914,921 shares of common stock were outstanding under the
stock plan and 5,413,454 were available for future issuance.
Unless terminated sooner, the stock plan terminates in 2007.
The administrator of our stock plan has the power to determine among other
things:
- the terms of the options or stock purchase rights granted, including
exercise price;
- the number of shares subject to each option or stock purchase right;
- the exercisability of each option or stock purchase right; and
- the form of consideration payable upon the exercise of each option or
stock purchase right.
In addition, the administrator has the authority to amend, suspend or
terminate the stock plan, so long as no such action affects any shares
previously issued or any option previously granted under the stock plan. During
any fiscal year, no optionee may be granted options to purchase more than
10,500,000 shares, although, in connection with an optionee's initial employment
with us, such optionee may be granted an option covering an additional
10,500,000 shares.
Options and stock purchase rights granted under our stock plan are
generally not transferable by the optionee, and each option and stock purchase
right is exercisable during the lifetime of the optionee only by the optionee.
Options granted under the stock plan must generally be exercised within three
months after the end of the optionee's status as an employee, director or
consultant of XCare.net, or within 12 months after termination by death or
disability, but in no event later than the expiration of the option's term.
In the case of stock purchase rights, unless the administrator determines
otherwise, we retain a repurchase option exercisable upon the voluntary or
involuntary termination of the purchaser's employment or consulting relationship
with XCare.net for any reason, including death or disability. The repurchase
price is the original price paid by the purchaser and may be paid by
cancellation of any indebtedness of the purchaser to XCare.net. The repurchase
option shall lapse at a rate determined by the administrator.
The exercise price of all incentive stock options granted under the stock
plan must be at least equal to the fair market value of the common stock on the
date of grant. The exercise price of nonstatutory stock options and stock
purchase rights is determined by the administrator, but for nonstatutory stock
options intended to qualify as "performance-based compensation" under Section
162(m) of the Internal Revenue Code, the exercise price must be at least equal
to the fair market value of our common stock on the date of grant. For any
participant who possesses more than 10% of the voting power of all
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<PAGE> 57
classes of the our outstanding stock, the exercise price of any incentive stock
option must be at least equal to 110% of the fair market value on the grant date
and the term of the incentive stock option must not exceed five years. The term
of all other options granted under the stock plan may not exceed ten years.
The stock plan provides that if we merge with another corporation, or sell
substantially all our assets, each option and stock purchase right will be
assumed or an equivalent option will be substituted by the successor
corporation. If the outstanding options and stock purchase rights are not
assumed or substituted for, the optionees will become fully vested in and have
the right to exercise their options or stock purchase rights in full. In such
case, the administrator will notify the optionees that their options or stock
purchase rights are fully exercisable for a period of 15 days from the date of
the notice, and the options or stock purchase rights will terminate upon the
expiration of that period.
1999 EMPLOYEE STOCK PURCHASE PLAN
Our employee stock purchase plan was adopted by our board of directors in
October 1999, and will be submitted to our stockholders for approval in November
1999, although it will not become effective until the date of this offering. A
total of 3,500,000 shares of our common stock has been reserved for issuance
under the 1999 purchase plan.
The employee stock purchase plan, which is intended to qualify under
Section 423 of the Internal Revenue Code, contains consecutive, overlapping, 12
month offering periods. Each offering period includes two six-month purchase
periods. The offering periods generally start on the first trading day on or
after November 1 and May 1 of each year, except for the first offering period,
which commences on the first trading day on or after the effective date of this
offering and ends on the last trading day on or before April 30, 2001.
Employees are eligible to participate if they are customarily employed by
us for at least 20 hours per week and more than five months in any calendar
year. However, employees may not participate in the employee stock purchase plan
if at the beginning of a purchase period, they own 5% or more of the total
combined voting power or value of all classes of our stock. In addition, no
employee may participate in the employee stock purchase plan at a rate which
would exceed $25,000 worth of stock in any calendar year.
The employee stock purchase plan permits employees to purchase our common
stock through payroll deductions of up to 15% of the employee's "compensation."
Compensation is defined as the employee's base straight time gross earnings and
commissions, but excluding payments for overtime, profit sharing payments, shift
premium payments, incentive compensation and bonuses. The maximum number of
shares a participant may purchase during a single purchase period is 20,000
shares.
Amounts deducted and accumulated by the participant are used to purchase
shares of common stock at the end of each purchase period. The price of stock
purchased is generally 85% of the lower of the fair market value of our common
stock either at the beginning of the offering period or at the end of that
purchase period. In the event the fair market value at the end of a purchase
period is less than the fair market value at the beginning of the offering
period, all participants will be withdrawn from the current offering period
following exercise and automatically re-enrolled in a new offering period. The
new offering period will use the lower fair market value as of the first date of
the new offering period to determine the purchase price for future purchase
periods.
Participants may end their participation at any time during an offering
period, and they will be paid their payroll deductions to date. Participation
ends automatically upon termination of employment.
Rights granted under the employee stock purchase plan are not transferable
by a participant other than by will, the laws of descent and distribution, or as
otherwise provided under the employee stock purchase plan. The employee stock
purchase plan provides that, in the event we merge with another corporation or
sell substantially all of our assets, each outstanding option may be assumed or
substituted for by the successor corporation. If the successor corporation
refuses to assume or substitute for the
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<PAGE> 58
outstanding options, the offering period then in progress will be shortened and
a new exercise date will be set.
The employee stock purchase plan will terminate in 2009. Our board of
directors has the authority to amend or terminate the employee stock purchase
plan, except that no such action may adversely affect any outstanding rights to
purchase stock under the employee stock purchase plan.
1999 DIRECTOR OPTION PLAN
All non-employee directors are entitled to participate in our director
option plan. The director option plan was adopted by our board of directors in
October 1999 and will be submitted to our stockholders for their approval in
November 1999, although it will not become effective until the date of this
offering. The director option plan has a term of ten years, unless terminated
sooner by our board of directors. A total of 1,750,000 shares of our common
stock have been reserved for issuance under the 1999 director option plan.
The director option plan generally provides for an automatic initial grant
of an option to purchase 175,000 shares of our common stock to each non-employee
director on the date that person first becomes a non-employee director. After
the initial grant, a non-employee director will automatically be granted
subsequent options to purchase 70,000 shares of our common stock each year on
the date of our annual stockholder's meeting, if on such date he or she has
served on our board of directors for at least six months. Each initial option
grant and each subsequent option has a term of 10 years. Each initial option,
vests as to 25% of the shares subject to the option on each anniversary of the
date of grant, and each subsequent option grant vests as to 100% of the shares
subject to the option on the first anniversary of the date of grant. The
exercise price of all options will be 100% of the fair market value of our
common stock on the date of grant.
The director option plan provides that if we merge with another
corporation, or sell substantially all our assets, each option will become fully
vested and exercisable for a period of thirty days from the date our board of
directors notifies the optionee of the option's full exercisability, after which
period the option will terminate. Options granted under the director option plan
must be exercised within three months of the end of the optionee's tenure as a
director of the Company, or within 12 months after termination by death or
disability, but in no event later than the expiration of the option's ten year
term. Options granted under the director option plan are not transferable by the
optionee other than by will or the laws of descent and distribution, and each
option is exercisable, during the lifetime of the optionee, only by the
optionee.
401(K) PLAN
We have a 401(k) plan covering full-time employees located in the United
States who are at least 21 years of age. The 401(k) plan is intended to qualify
under Section 401(k) of the Internal Revenue Code. Contributions to the 401(k)
plan by employees or by us, and the investment earnings on these contributions,
are not taxable until withdrawn from the 401(k) plan. Employees may elect to
reduce their pre-tax earnings up to a statutorily prescribed annual limit, which
was $10,000 in 1998, and to have the amount of that reduction contributed to the
401(k) plan. The 401(k) plan permits, but does not require, additional matching
contributions by us on behalf of all participants in the 401(k) plan. To date,
we have not made any contributions to the 401(k) plan.
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CERTAIN TRANSACTIONS
Since January 1996, there has not been nor is there currently proposed any
transaction or series of similar transactions to which we were or are to be a
party in which the amount involved exceeds $60,000 and in which any of our
directors, executive officers, holders of more than five percent of our stock or
any member of their immediate families had or will have a direct or indirect
material interest other than compensation agreements and other arrangements,
which are described where required in "Management," and the transactions
described below.
EQUITY INVESTMENT TRANSACTIONS
On March 12, 1997, we sold an aggregate of 2,450,000 shares of our Series A
convertible preferred stock at a price per share of $2.86. In June and July
1999, we sold an aggregate of 63,053,144 shares of our Series B convertible
preferred stock at a price per share of $0.27, including 11,867,959 shares of
Series B convertible preferred stock issued upon conversion of convertible
promissory notes. Upon the closing of this offering, all shares of preferred
stock will be converted into shares of common stock. The holders of Series A
convertible preferred stock are entitled to convert their shares into an
aggregate of 28,028,000 shares of common stock, based on a conversion price of
$0.25 per common share. The holders of Series B convertible preferred stock are
entitled to convert their holdings into an equal number of shares of common
stock, based on a conversion price of $0.27 per common share. Listed below are
those directors, executive officers and stockholders who beneficially own five
percent or more of our securities who participated in the preferred stock
financings. We believe that the shares issued in these transactions were sold at
the then fair market value and that the terms of these transactions were no less
favorable than we could have obtained from unaffiliated third parties.
<TABLE>
<CAPTION>
SERIES A CONVERTIBLE SERIES B CONVERTIBLE AGGREGATE
STOCKHOLDER PREFERRED PREFERRED CONSIDERATION
----------- -------------------- -------------------- --------------
<S> <C> <C> <C>
Atlantic Medical Capital, L.P. ............. 1,225,000 6,401,921 $5,232,019
C.B. Healthcare Fund, L.P. ................. -- 11,111,111 3,000,000
Dauphin Capital Partners I, L.P. ........... -- 9,259,259 2,500,000
Entities Affiliated with Nazem & Company IV,
L.P. ..................................... 1,225,000 11,422,335 6,587,530
Entities affiliated with Sequel Venture
Partners II, LLC.......................... -- 11,111,111 3,000,000
Vertex Technology Fund (II) Ltd. ........... -- 11,111,111 3,000,000
</TABLE>
J. Andrew Cowherd, one of our directors, is a member of Atlantic Medical
Management LLC. Atlantic Medical Management LLC is the Management Services
Company for Atlantic Medical Capital L.P. James B. Hoover, one of our directors,
is a Managing Member of Dauphin Capital Partners I, L.P. The shares purchased by
entities affiliated with Nazem & Company IV, L.P. include 5,555,556 shares of
Series B convertible preferred stock purchased by Transatlantic Venture Fund
C.V. Jeffrey M. Krauss, one of our directors, is a general partner of Nazem &
Company IV, L.P. Mr. Krauss is also an investment manager of Transatlantic
Venture Fund C.V. The Series B convertible preferred stock purchased by entities
affiliated with Sequel Venture Partners II, LLC includes 10,740,741 shares
purchased by Sequel Limited Partnership II and 370,370 shares purchased by
Sequel Entrepreneurs Fund II, L.P. Daniel J. Mitchell, one of our directors, is
a manager of Sequel Venture Partners II, LLC. Robert Tsao, one of our directors,
is an investment manager with Vertex Technology Fund.
Holders of preferred stock are entitled to registration rights with respect
to the common stock issued or issuable upon conversion of these shares. See
"Description of Capital Stock -- Registration Rights."
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<PAGE> 60
LOAN AND WARRANT AGREEMENTS
On December 29, 1997, we entered into a loan agreement pursuant to which,
during 1997 and 1998, we borrowed $750,000 from Atlantic Medical Capital, L.P.
at an interest rate of 12% per year. In connection with the loan, Atlantic
Medical Capital, L.P. received warrants to purchase 131,119 shares of Series A
convertible preferred stock at an exercise price of $0.50 per share. On April
10, 1998, we entered into a loan agreement pursuant to which we borrowed
$500,000 from Atlantic Medical Capital, L.P. at an interest rate of 12% per
year. In connection with the loan, Atlantic Medical Capital, L.P. received
warrants to purchase 87,412 shares of Series A convertible preferred stock at an
exercise price of $0.25 per share. Also in connection with the April 10, 1998
loan, the exercise price of the warrants issued on December 29, 1997 was
decreased from $0.50 to $0.25 per share. On November 20, 1998, we entered into a
loan agreement pursuant to which we borrowed $150,000 from Atlantic Medical
Capital, L.P. at an interest rate of 12% per year. In connection with the loan,
Atlantic Medical Capital, L.P. received warrants to purchase 1,000,000 shares of
common stock at an exercise price of $0.01 per share. On June 4, 1999, Atlantic
Medical Capital, L.P. converted all principal and accrued interest into
6,001,180 shares of Series B convertible preferred stock. J. Andrew Cowherd, one
of our directors, is a member of Atlantic Medical Management LLC, the management
services company of Atlantic Medical Capital, L.P.
On December 29, 1997, we entered into a loan agreement pursuant to which,
during 1997 and 1998, we borrowed $750,000 from Nazem & Company IV, L.P. at an
interest rate of 12% per year. In connection with the loan, Nazem & Company IV,
L.P. received warrants to purchase 131,119 shares of Series A convertible
preferred stock at an exercise price of $0.50 per share. On April 10, 1998, we
entered into a loan agreement pursuant to which we borrowed $500,000 from Nazem
& Company IV, L.P. at an interest rate of 12% per year. In connection with the
loan, Nazem & Company IV, L.P. received a warrant to purchase 87,412 shares of
Series A convertible preferred stock at an exercise price of $0.25 per share.
Also in connection with the April 10, 1998 loan, the exercise price of the
warrants issued on December 29, 1997 was decreased from $0.50 to $0.25 per
share. On November 20, 1998, we entered into a loan agreement pursuant to which
during 1998 and 1999 we borrowed $115,000 from Nazem & Company IV, L.P. at an
interest rate of 12% per year. In connection with the loan, Nazem & Company IV,
L.P. received a warrant to purchase 1,000,000 shares of common stock at an
exercise price of $0.01 per share. On June 4, 1999, Nazem & Company IV, L.P.
converted all principal and accrued interest into 5,866,779 shares of Series B
convertible preferred stock. Jeffrey M. Krauss, one of our directors, is a
general partner of Nazem & Company IV, L.P.
OPTION GRANTS TO DIRECTORS
On September 1, 1999, we granted an option to purchase 100,000 shares of
common stock to each of Jeffrey M. Krauss, Robert Tsao, and William F. Reilly,
each of whom is one of our directors. In addition, on September 1, 1999, we
granted an option to purchase 100,000 shares of common stock to each of Atlantic
Medical Management LLC with which J. Andrew Cowherd, one of our directors, is
affiliated; to Sequel Venture Partners II, LLC, with which Daniel J. Mitchell,
one of our directors, is affiliated; and to Dauphin Management L.L.C., with
which James B. Hoover, one of our directors, is affiliated. The options each
have an exercise price of $0.27 per share. Twenty-five percent of the shares
subject to each option vests on September 7, 2000, and 1/48th of the shares
subject to each option vests at the end of each month after September 7, 2000.
OFFERS OF EMPLOYMENT
Ms. Lorine R. Sweeney, our President and Chief Executive Officer, is a
party to an offer letter dated September 27, 1997. Pursuant to the offer letter,
Ms. Sweeney received an annual salary of $175,000, a bonus of $30,000 payable on
the first anniversary of her employment with XCare.net, and an option to
purchase 3% of our then outstanding shares.
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<PAGE> 61
Mr. Mark Rangell, our Senior Vice President of Sales and Marketing, is a
party to an offer letter dated December 12, 1997. Pursuant to the offer letter,
Mr. Rangell received an annual salary of $135,000, sales commissions based on
achieving planned sales objectives and an option to purchase 2.5% of our then
outstanding shares.
Ms. Tammy McLaren, our Vice President of Professional Services, is a party
to an offer letter dated June 12, 1998. Pursuant to the offer letter, Ms.
McLaren received an annual salary of $95,000, which has since been increased to
$115,000.
OTHER TRANSACTIONS
We have entered into an indemnification agreement with each of our
executive officers and directors.
We have granted options to certain of our executive officers. See
"Management -- Option Grants in Last Fiscal Year."
------------------------------
XCare.net believes that all related-party transactions described above were
on terms no less favorable than could have been otherwise obtained from
unrelated third parties. All future transactions between XCare.net and its
principal officers, directors and affiliates will be approved by a majority of
the independent and disinterested members of the Board and will be on terms no
less favorable that could be obtained from unrelated third parties.
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<PAGE> 62
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to beneficial
ownership of our common stock as of September 30, 1999, as adjusted to reflect
the sale of common stock in this offering, the conversion of our outstanding
convertible preferred stock, including convertible preferred stock issuable upon
the assumed exercise of all outstanding convertible preferred stock warrants,
and the exercise of all outstanding common stock warrants with exercise prices
below an assumed initial public offering price. Information is given for:
- each person who is known by us to beneficially own more than five percent
of our common stock;
- each of our directors;
- each of our officers; and
- all of our directors and officers as a group.
Percentages of the outstanding shares of common stock are based on
103,559,087 shares outstanding as of September 30, 1999, plus all shares of
common stock issuable on exercise of options within 60 days of September 30,
1999 held by the particular beneficial owner.
All percentages assume no exercise of the underwriter's over-allotment
option. The number and percentage of shares beneficially owned is determined in
accordance with Rule 13d-3 of the Securities Exchange Act of 1934, and the
information is not necessarily indicative of beneficial ownership for any other
purpose. Under such rule, beneficial ownership includes any shares as to which
the individual or entity has voting power or investment power and any shares
which the individual has the right to acquire within 60 days of September 30,
1999 through the exercise of any stock option or other right. Except pursuant to
applicable community property laws or as indicated in the footnotes to this
table, to our knowledge, each stockholder identified in the table possesses sole
voting and investment power with respect to all shares of common stock shown as
beneficially owned by such stockholder.
Unless otherwise indicated, the principal address of each of the
stockholders below is c/o XCare.net, Inc., 6400 South Fiddler's Green Circle,
Suite 540, Englewood, Colorado 80111.
<TABLE>
<CAPTION>
PERCENTAGE
SHARES OWNED BENEFICIALLY OWNED
PRIOR TO THE ---------------------------------
NAME OF BENEFICIAL OWNER OFFERING BEFORE OFFERING AFTER OFFERING
------------------------ ------------ --------------- --------------
<S> <C> <C> <C>
Entities affiliated with Nazem & Company IV,
L.P.(1)....................................... 28,989,494 28.0% %
Jeffrey M. Krauss
645 Madison Avenue, 12th Floor
New York, New York 10022-1010
Atlantic Medical Capital, L.P.(2)............... 23,969,080 23.1
J. Andrew Cowherd
156 West 56th Street, Suite 1605
New York, New York 10019-3800
Entities affiliated with Sequel Venture
Partners II, LLC(3)........................... 11,211,111 10.8
Daniel J. Mitchell
4430 Arapahoe Avenue, Suite 220
Boulder, Colorado 80303
Vertex Technology Fund (II) Ltd.(4)............. 11,211,111 10.8
Robert Tsao
3 Lagoon Drive, Suite 220
Redwood City, California 94065
</TABLE>
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<PAGE> 63
<TABLE>
<CAPTION>
PERCENTAGE
SHARES OWNED BENEFICIALLY OWNED
PRIOR TO THE ---------------------------------
NAME OF BENEFICIAL OWNER OFFERING BEFORE OFFERING AFTER OFFERING
------------------------ ------------ --------------- --------------
<S> <C> <C> <C>
CB Healthcare Fund, L.P......................... 11,111,111 10.7
One Boston Place, Suite 4010
Boston, MA 02108
Dauphin Capital Partners I, L.P.(5)............. 9,359,259 9.0
James B. Hoover
108 Forest Avenue
Locust Valley, New York 11560
Lorine R. Sweeney(6)............................ 8,687,254 7.8
Peter H. Cheesbrough(7)......................... 1,000,000 1.0
Lawrence S. Dike................................ 1,200,000 1.2
Tammy McLaren(8)................................ 1,000,000 1.0
Mark Rangell(9)................................. 3,000,000 2.8
William F. Reilly(10)........................... 2,050,000 2.0
Jon B. Wisda(11)................................ 800,000 *
All directors and officers as a group (12
persons)(12).................................. 102,477,309 87.3
</TABLE>
- -------------------------
* Represents less than one percent of the total.
(1) Represents 23,333,938 shares held by Nazem & Company IV, L.P., 5,555,556
shares held by Transatlantic Venture Fund C.V. and 100,000 shares subject
to stock options exercisable within 60 days of September 30, 1999 held by
Jeffrey M. Krauss. Mr. Krauss, one of our directors, is a general partner
of Nazem & Company IV, L.P. Nazem & Company IV, L.P. has four general
partners, each of whom shares voting and investment power over the shares
held by Nazem & Company IV, L.P. Mr. Krauss is also an investment manager
of Transatlantic Venture Fund C.V. Transatlantic Venture Fund C.V.'s
investment managers each shares voting and investment power over the shares
held by Transatlantic Venture Fund C.V. Mr. Krauss disclaims beneficial
ownership of the shares held by these entities except to the extent of his
proportionate pecuniary interest.
(2) Represents 23,869,080 shares held by Atlantic Medical Capital, L.P. and
100,000 shares subject to stock options exercisable within 60 days of
September 30, 1999 held by Atlantic Medical Management, LLC. J. Andrew
Cowherd, one of our directors, is a member of Atlantic Medical Management
LLC. Atlantic Medical Management LLC is the management services company of
Atlantic Medical Capital L.P. Atlantic Medical Management LLC has three
members, each of whom shares voting and investment power over the shares
held by Atlantic Medical Capital, L.P. Mr. Cowherd disclaims beneficial
ownership of the shares held by that entity except to the extent of his
proportionate pecuniary interest.
(3) Represents 10,740,741 shares held by Sequel Limited Partnership II, 370,370
shares held by Sequel Entrepreneurs Fund II, L.P. and 100,000 shares
subject to stock options exercisable within 60 days of September 30, 1999
held by Sequel Venture Partners II, L.L.C. Sequel Venture Partners II,
L.L.C., the general partner of Sequel Limited Partnership II and Sequel
Entrepreneurs Fund II, L.P., has five managers, including Daniel J.
Mitchell, one of our directors. Each of these managers shares voting and
investment power over the shares held by Sequel Limited Partnership II and
Sequel Entrepreneurs Fund II, L.P. Mr. Mitchell disclaims beneficial
ownership of the shares held by these entities except to the extent of his
proportionate pecuniary interest.
(4) Represents 11,111,111 shares held by Vertex Technology Fund (II) Ltd. and
100,000 shares subject to stock options exercisable within 60 days of
September 30, 1999 held by Robert Tsao. Mr. Tsao, one of our directors, is
an Investment Manager with Vertex Technology Fund. Mr. Tsao disclaims
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<PAGE> 64
beneficial ownership of the shares held by that entity except to the extent
of his proportionate pecuniary interest.
(5) Represents 9,259,259 shares held by Dauphin Capital Partners I, L.P. and
100,000 shares subject to stock options exercisable within 60 days of
September 30, 1999 held by Dauphin Management, L.L.C. James B. Hoover, one
of our directors, is a Managing Member of Dauphin Capital Partners I, L.P.
Mr. Hoover disclaims beneficial ownership of the shares held by that entity
except to the extent of his proportionate pecuniary interest.
(6) Includes 7,887,254 shares subject to stock options exercisable within 60
days of September 30, 1999.
(7) Includes 1,000,000 shares subject to stock options exercisable within 60
days of September 30, 1999.
(8) Includes 800,000 shares subject to stock options exercisable within 60 days
of September 30, 1999.
(9) Includes 2,772,000 shares subject to stock options exercisable within 60
days of September 30, 1999.
(10) Includes 100,000 shares subject to stock options exercisable within 60 days
of September 30, 1999.
(11) Includes 800,000 shares subject to stock options exercisable within 60 days
of September 30, 1999.
(12) Includes all shares described in the above footnotes.
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<PAGE> 65
DESCRIPTION OF CAPITAL STOCK
Upon the closing of the offering, our authorized capital stock will consist
of shares of common stock, $0.01 par value, and 5,000,000 shares
of preferred stock, $0.01 par value.
The following summary of provisions of the common stock and preferred stock
does not purport to be complete and is subject to, and qualified in its entirety
by, the provisions of our certificate of incorporation, which is included as an
exhibit to the registration statement of which this prospectus is a part, and by
the provisions of Delaware law.
COMMON STOCK
After giving effect to the conversion of all previously outstanding
preferred stock into shares of common stock and the assumed cashless exercise of
all outstanding common stock warrants and convertible preferred stock warrants
with exercise prices below an assumed initial public offering price and the
conversion of the convertible preferred stock issued upon the assumed exercise
of the latter warrants into common stock, as of September 30, 1999, there were
103,559,087 shares of common stock outstanding held of record by approximately
stockholders. There will be shares of common stock outstanding,
assuming no exercise of the underwriters' over-allotment option and no exercise
of outstanding options after September 30, 1999, after giving effect to the sale
of common stock in this offering.
The holders of common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders. Subject to
preferences that may be applicable to any outstanding shares of preferred stock,
the holders of common stock are entitled to receive ratably any dividends
declared by the board of directors out of funds legally available for the
payment of dividends. See "Dividend Policy." In the event of a liquidation,
dissolution or winding up of XCare.net, the holders of common stock are entitled
to share ratably in all assets, subject to prior distribution rights of the
preferred stock, if any, then outstanding. Holders of common stock have no
preemptive rights or rights to convert their common stock into any other
securities. There are no redemption or sinking fund provisions applicable to the
common stock. All outstanding shares of common stock are fully paid and
non-assessable, and the shares of common stock to be issued in the offering will
be fully paid and non-assessable.
PREFERRED STOCK
Upon the consummation of the offering, each share of convertible preferred
stock outstanding prior to this offering will automatically convert into common
stock. The Series A convertible preferred stock will each convert into 11.44
shares of common stock. The Series B convertible preferred stock will each
convert into one share of common stock. Pursuant to our certificate of
incorporation, after the offering our board of directors has the authority,
without further action by the stockholders, to issue up to 5,000,000 shares of
preferred stock in one or more series and to fix the designations, powers,
preferences, privileges, which may be greater than the rights of the common
stock. The board, without stockholder approval, can issue preferred stock with
voting, conversion or other rights that could adversely affect the voting power
and other rights of the holders of common stock. Preferred stock could thus be
issued quickly with terms calculated to delay or prevent a change in control of
XCare.net or to make removal of management more difficult. Additionally, the
issuance of preferred stock may have the effect of decreasing the market price
of the common stock. At present, we have no plans to issue any preferred stock.
REGISTRATION RIGHTS
Upon completion of this offering, the holders of an aggregate of
approximately 97,987,462 shares of common stock will be entitled to certain
rights with respect to the registration of such shares under the Securities Act
of 1933. Under the terms of the registration rights agreements, if we propose to
62
<PAGE> 66
register any of our securities under the Securities Act, either for our own
account or for the account of other security holders exercising registration
rights, the holders of registration rights are entitled to notice of such
registration and are entitled to include shares of common stock in the
registration. The rights are subject to conditions and limitations, among them
the right of the underwriters of the offering subject to the registration to
limit the number of shares included in such registration. Holders of these
rights may also require us to file a registration statement under the Securities
Act at our expense with respect to their shares of common stock, and we are
required to use our best efforts to effect that registration, subject to
conditions and limitations. Furthermore, stockholders with registration rights
may require us to file additional registration statements on Form S-3, subject
to conditions and limitations.
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS
Delaware Anti-Takeover Statute. We are subject to Section 203 of the
Delaware General Corporation Law. In general, these provisions prohibit a
Delaware corporation from engaging in any business combination with any
interested stockholder for a period of three years following the date that the
stockholder became an interested stockholder, unless the transaction in which
the person became an interested stockholder is approved in a manner presented in
Section 203 of the Delaware General Corporation Law. Generally, a "business
combination" is defined to include mergers, asset sales and other transactions
resulting in financial benefit to a stockholder. In general, an "interested
stockholder" is a person who, together with affiliates and associates, owns, or
within three years, did own, 15% or more of a corporation's voting stock.
Certificate of Incorporation. In October 1999, our stockholders approved
amendments to our certificate of incorporation, to provide:
- That the board of directors may issue, without further action by the
stockholders, up to 5,000,000 shares of undesignated preferred stock
- That any action to be taken by our stockholders must be effected at a
duly called annual or special meeting and not by a consent in writing
- For the division of the board of directors into three classes, with each
class serving for a term of three years
- That vacancies on the board, including newly created directorships, can
be filled only by a majority of the directors then in office
- That directors may be removed only for cause
Bylaws. In October 1999, our board approved amendments to our bylaws to
provide that special meetings of our stockholders may be called only by the
chairman of the board, the president or the board.
These provisions are intended to enhance the likelihood of continuity and
stability in the composition of the board and in the policies formulated by the
board and to discourage certain types of transactions that may involve an actual
or threatened change of control of XCare.net. These provisions also are designed
to reduce our vulnerability to an unsolicited proposal for a takeover of
XCare.net that does not contemplate the acquisition of all of its outstanding
shares or an unsolicited proposal for the restructuring or sale of all or part
of XCare.net. These provisions, however, could discourage potential acquisition
proposals and could delay or prevent a change in control of XCare.net. They may
also have the effect of preventing changes in our management.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is ChaseMellon
Shareholder Services L.L.C.
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<PAGE> 67
LISTING
Application has been made to have our common stock approved for quotation
on the Nasdaq National Market under the trading symbol "XCAR." We have not
applied to list our common stock on any other exchange or quotation system.
64
<PAGE> 68
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock.
Future sales of substantial amounts of common stock in the public market could
adversely affect the prevailing market price from time to time. Furthermore,
because only a limited number of shares will be available for sale shortly after
this offering as a result of contractual and legal restrictions on resale, sales
of substantial amounts of common stock in the public market after the
restrictions lapse could cause the prevailing market price of our common stock
to fall and impede our ability to raise equity capital in the future.
Upon completion of the offering, we will have outstanding an aggregate of
shares of common stock, assuming no exercise of the underwriters'
over-allotment option and no exercise of outstanding options after September 30,
1999. Of these outstanding shares, the shares sold in the offering
will be freely tradable without restriction or further registration under the
Securities Act of 1933 unless purchased by "affiliates" of XCare.net as that
term is defined in Rule 144 under the Securities Act. The remaining
shares of common stock outstanding upon completion of the offering will be
"restricted shares," as that term is defined in Rule 144 under the Securities
Act. Restricted shares may be sold in the public market only if registered or if
they qualify for an exemption from registration under Rules 144, 144(k) or 701
promulgated under the Securities Act, which rules are summarized below, or
another exemption. Sales of the restricted shares in the public market, or the
availability of such shares for sale, could adversely affect the market price of
our common stock.
We have has agreed not to sell or otherwise dispose of any shares of common
stock or any securities convertible into or exercisable or exchangeable for
common stock, or enter into any swap or similar agreement that transfers, in
whole or in part, the economic risk of ownership of the common stock, for a
period of 180 days after the date of this prospectus, without the prior written
consent of BancBoston Robertson Stephens. In addition, all officers, directors
and certain other holders of common stock have entered into contractual
"lock-up" agreements providing that they will not offer, sell, contract to sell
or grant any option to purchase or otherwise dispose of shares of common stock
owned by them or that could be purchased by them through the exercise of options
for a period of 180 days after the date of this prospectus without the prior
written consent of BancBoston Robertson Stephens. As a result of these
contractual restrictions, notwithstanding possible earlier eligibility for sale
under the provisions of Rules 144, 144(k) and 701, additional shares will be
available for sale in the public market as follows:
- No shares of common stock will be eligible for sale as of the effective
date of the offering
- No additional shares will be eligible for sale beginning 90 days after
the effective date of the offering
- additional shares will be eligible for sale beginning 180
days after the effective date of the offering, subject in some cases to
certain volume limitations
Of the remaining restricted shares:
- shares are subject to a repurchase option of XCare.net in
the event of termination of employment
- shares will not be eligible for sale pursuant to Rule 144
until the expiration of a one-year holding period in 2000
Rule 144
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned shares of our
common stock for at least one year
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<PAGE> 69
would be entitled to sell, within any three-month period, a number of shares
that does not exceed the greater of:
- 1% of the number of shares of common stock then outstanding, which will
equal approximately shares immediately after this offering;
or
- the average weekly trading volume of our common stock on the Nasdaq Stock
Market's National Market during the four calendar weeks preceding the
filing of a notice on Form 144 with respect to such sale.
Sales under Rule 144 are also subject to certain other requirements regarding
the manner of sale, notice filing and the availability of current public
information about us.
Rule 144(k)
Under Rule 144(k), a person who is not deemed to have been one of our
"affiliates" at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years,
generally including the holding period of any prior owner other than an
"affiliate," is entitled to sell such shares without complying with the manner
of sale, notice filing, volume limitation or notice provisions of Rule 144.
Therefore, unless otherwise restricted, "144(k) shares" may be sold immediately
upon the completion of this offering.
Rule 701
In general, under Rule 701, any of our employees, directors, officers,
consultants or advisors who purchase shares from us in connection with a
compensatory stock or option plan or other written agreement before the
effective date of this offering is entitled to resell such shares 90 days after
the date of this offering in reliance on Rule 144, without having to comply with
certain restrictions, including the holding period, contained in Rule 144.
The SEC has indicated that Rule 701 will apply to typical stock options
granted by an issuer before it becomes subject to the reporting requirements of
the Securities Exchange Act of 1934, along with the shares acquired upon
exercise of these options (including exercises after this offering). Securities
issued in reliance on Rule 701 are restricted securities and, subject to the
contractual restrictions described above, beginning 90 days after the date of
this offering, may be sold by persons other than "affiliates," as defined in
Rule 144, subject only to the manner of sale provisions of Rule 144. Securities
issued in reliance on Rule 701 may be sold by "affiliates" under Rule 144
without compliance with its one year minimum holding period requirement.
Registration on Form S-8
We intend to file a registration statement under the Securities Act
covering the shares of common stock subject to outstanding options or reserved
for issuance under the 1997 stock option plan, employee stock purchase plan and
the director option plan. This registration statement is expected to be filed as
early as the effectiveness of the registration statement covering the shares of
common stock offered in this offering and will automatically become effective
upon filing. Shares registered under this registration statement will, subject
to Rule 144 volume limitations applicable to affiliates and the expiration of
any 180-day contractual lockup period, be available for sale in the open market,
except to the extent that these shares are subject to vesting restrictions.
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<PAGE> 70
UNDERWRITING
The underwriters named below, acting through their representatives,
BancBoston Robertson Stephens Inc., SG Cowen Securities Corporation, E*OFFERING
Corp. and Advest, Inc., have severally agreed with us, subject to the terms and
conditions set forth in the underwriting agreement, to purchase from us the
number of shares of common stock set forth opposite their names below. The
underwriters are committed to purchase and pay for all such shares if any are
purchased.
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
----------- ----------------
<S> <C>
BancBoston Robertson Stephens Inc. .........................
SG Cowen Securities Corporation.............................
E*OFFERING Corp. ...........................................
Advest, Inc. ...............................................
--------
Total.............................................
========
</TABLE>
We have been advised by the representatives that the underwriters propose
to offer the shares of common stock to the public at the initial public offering
price set forth on the cover page of this prospectus and to certain dealers at
such price less a concession of not in excess of $ per share, of which
$ may be reallowed to other dealers. After the initial public offering,
the public offering price, concession and reallowance to dealers may be reduced
by the representatives. No such reduction shall change the amount of proceeds to
be received by us as set forth on the cover page of this prospectus. The common
stock is offered by the underwriters as stated herein, subject to receipt and
acceptance by them and subject to their right to reject any order in whole or in
part.
The underwriters have advised us that they do not expect sales to
discretionary accounts to exceed five percent of the total number of shares
offered.
Over-Allotment Option
We have granted to the underwriters an option, exercisable during the
30-day period after the date of this prospectus, to purchase up to additional
shares of common stock at the same price per share as we will receive for the
shares that the underwriters have agreed to purchase. To the extent that the
underwriters exercise this option, each of the underwriters will have a firm
commitment to purchase approximately the same percentage of such additional
shares that the number of shares of common stock to be purchased by it shown in
the above table represents as a percentage of the shares offered hereby. If
purchased, such additional shares will be sold by the underwriters on the same
terms as those on which the shares are being sold. We will be obligated,
pursuant to the option, to sell shares to the extent the option is exercised.
The underwriters may exercise such option only to cover over-allotments made in
connection with the sale of the shares of common stock offered hereby. If such
option is exercised in full, the total public offering price, underwriting
discounts and commissions and proceeds to us will be $ , $ and
$ , respectively.
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Indemnity
The underwriting agreement contains covenants of indemnity among the
underwriters and us against certain civil liabilities, including liabilities
under the Securities Act and liabilities arising from breaches of
representations and warranties contained in the underwriting agreement.
Lock-Up Agreements
Each of our executive officers, directors and shareholders and
substantially all of optionholders have agreed with the representatives, for a
period of 180 days after the date of this prospectus, subject to certain
exceptions, not to offer to sell, contract to sell, or otherwise sell, dispose
of, loan, pledge or grant any rights with respect to any shares of common stock,
any options or warrants to purchase any shares of common stock, or any
securities convertible into or exchangeable for shares of common stock owned as
of the date of this prospectus or, with certain exceptions, thereafter acquired
directly by such holders or with respect to which they have or hereafter acquire
the power of disposition, without the prior written consent of BancBoston
Robertson Stephens Inc. However, BancBoston Robertson Stephens Inc. may, in its
sole discretion and at any time without notice, release all or any portion of
the securities subject to the lock-up agreements. There are no agreements
between the representatives and any of our shareholders providing consent by the
representatives to the sale of shares prior to the expiration of the period of
180 days after this prospectus.
Future Sales
In addition, we have agreed that during the period of 180 days after this
prospectus, we will not, subject to certain exceptions, without the prior
written consent of BancBoston Robertson Stephens Inc.:
- Consent to the disposition of any shares held by shareholders prior to
the expiration of the period of 180 days after this prospectus; or
- Issue, sell, contract to sell or otherwise dispose of, any shares of
common stock, any options or warrants to purchase any shares of common
stock or any securities convertible into, exercisable for or exchangeable
for shares of common stock.
Directed Shares
We have requested that the underwriters reserve up to % of the shares of
common stock for sale at the initial public offering price to individuals
designated by us.
No Prior Public Market
Prior to this offering, there has been no public market for our common
stock. Consequently, the initial public offering price for the common stock
offered hereby will be determined through negotiations between us and the
representatives. Among the factors to be considered in such negotiations are
prevailing market conditions, certain of our financial information, market
valuations of other companies that we and the representatives believe to be
comparable to us, estimates of our business potential, the present state of our
development and other factors deemed relevant.
Stabilization
The representatives have advised us that, pursuant to Regulation M under
the Securities Act, certain persons participating in this offering may engage in
transactions, including stabilizing bids, syndicate covering transactions or the
imposition of penalty bids, that may have the effect of stabilizing or
maintaining the market price of the common stock at a level above that which
might otherwise prevail in the open market. A "stabilizing bid" is a bid for or
the purchase of the common stock on behalf of the underwriters for the purpose
of fixing or maintaining the price of the common stock. A "syndicate covering
transaction" is the bid for or the purchase of the common stock on behalf of the
underwriters
68
<PAGE> 72
to reduce a short position incurred by the underwriters in connection with this
offering. A "penalty bid" is an arrangement permitting the representatives to
reclaim the selling concession otherwise accruing to an underwriter or syndicate
member in connection with this offering if the common stock originally sold by
such underwriter or syndicate member is purchased by the representatives in a
syndicate covering transaction and has therefore not been effectively placed by
such underwriter or syndicate member. The representatives have advised us that
such transactions may be effected on the Nasdaq National Market or otherwise
and, if commenced, may be discontinued at any time.
Electronic Prospectuses
E*OFFERING Corp. is the exclusive Internet underwriter for this offering.
E*OFFERING has agreed to allocate a portion of the shares that it purchases to
E*TRADE Securities, Inc. E*OFFERING Corp. and E*TRADE Securities Inc. will
allocate shares to their respective customers in accordance with usual and
customary industry practices. A prospectus in electronic format, from which you
can link to a "Meet the Management" Presentation through an embedded hyperlink,
Iclick here for "Meet the Management" PresentationJ, is being made available on
the Web site maintained by E*OFFERING Corp., www.eoffering.com. Other than the
prospectus in electronic format, the information that is identified as being a
part of the prospectus and any other information that references XCare.net, the
information on E*OFFERING Corp.'s Web site and any information provided in any
other Web site maintained by E*OFFERING Corp. is not part of this prospectus and
has not been approved or endorsed by XCare.net and should not be relied upon by
prospective investors.
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for us by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo
Alto, California. Arthur F. Schneiderman and Rachel S. Lovejoy, a member and
associate, respectively, of Wilson Sonsini Goodrich & Rosati, beneficially own
an aggregate of 154,815 shares of our common stock. Legal matters in connection
with this offering will be passed upon for the underwriters by Brobeck Phleger &
Harrison LLP, San Francisco, California.
CHANGE IN INDEPENDENT ACCOUNTANTS
Effective September 1, 1999, PricewaterhouseCoopers LLP was engaged as our
independent accountants and replaced KPMG LLP, who were dismissed as our
independent accountants on August 25, 1999. The decision to change accountants
was approved by our Board of Directors. The audit reports of KPMG LLP for the
years ended December 31, 1997 and 1996 contained no adverse opinion or
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principle, except that the audit report issued by KPMG
LLP for the year ended December 31, 1997 included an explanatory paragraph
citing factors that raised substantial doubt surrounding our ability to continue
as a going concern. In connection with its audits through December 31, 1997 and
through August 25, 1999, there were no disagreements with KPMG LLP on any matter
of accounting principles or practices, financial statements disclosure or
auditing scope or procedures, which disagreements, if not resolved to their
satisfaction would have caused them to make reference in connection with their
opinion to the subject matter of the disagreement. KPMG LLP has not audited or
reported on any of the financial statements or information included in this
prospectus. For purposes of this filing, the financial statements for the years
ended December 31, 1997 and 1996 as well as the financial statements for the
year ended December 31, 1998 have been audited by PricewaterhouseCoopers LLP.
Prior to September 1, 1999, we had not consulted with PricewaterhouseCoopers LLP
on items that involved our accounting principles or the form of audit opinion to
be issued on our financial statements.
69
<PAGE> 73
EXPERTS
The financial statements as of December 31, 1997 and 1998, and for each of
the three years in the period ended December 31, 1998 included in this
prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
AVAILABLE INFORMATION
We have filed with the Securities and Exchange Commission, Washington, D.C.
20549, under the Securities Act of 1933, a registration statement on Form S-1
relating to the common stock offered hereby. This prospectus does not contain
all of the information set forth in the registration statement and the exhibits
and schedules thereto. For further information with respect to XCare.net and the
shares we are offering pursuant to this prospectus you should refer to the
registration statement, including the exhibits and schedules thereto. You may
inspect a copy of the registration statement without charge at the Public
Reference Section of the Securities and Exchange Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549 or at the Securities and Exchange
Commission's regional offices at 5670 Wilshire Boulevard, 11th Floor, Los
Angeles, California 90036. The Securities and Exchange Commission maintains an
Internet site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Securities
and Exchange Commission. The Securities and Exchange Commission's World Wide Web
address is www.sec.gov.
We intend to furnish holders of our common stock annual reports containing,
among other information, audited financial statements certified by an
independent public accounting firm and quarterly reports containing unaudited
condensed financial information for the first three quarters of each fiscal
year. We intend to furnish such other reports as we may determine or as may be
required by law.
70
<PAGE> 74
XCARE.NET, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................... F-2
Balance Sheet............................................... F-3
Statement of Operations..................................... F-4
Statement of Changes in Stockholders' Equity (Deficit)...... F-5
Statement of Cash Flows..................................... F-6
Notes to the Financial Statements........................... F-7
</TABLE>
F-1
<PAGE> 75
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of XCare.net, Inc.
In our opinion, the accompanying balance sheet and the related statements
of operations, of changes in stockholders' equity (deficit) and of cash flows
present fairly, in all material respects, the financial position of XCare.net,
Inc. at December 31, 1997 and 1998 and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1998, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Broomfield, Colorado
October 22, 1999
F-2
<PAGE> 76
XCARE.NET, INC.
BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
DECEMBER 31, EQUITY AT
------------------- JUNE 30, JUNE 30,
1997 1998 1999 1999
------- -------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents................................... $ 697 $ 198 $ 6,518
Accounts receivable, net of allowance of $0, $50 and $50
at December 31, 1997 and 1998 and June 30, 1999
(unaudited), respectively............................... 453 703 474
Prepaid expenses.......................................... 177 78 84
Income taxes receivable................................... 617 -- --
------- -------- --------
Total current assets.................................... 1,944 979 7,076
Property and equipment, net................................. 2,082 691 486
Purchased software, net..................................... -- 850 708
Deferred contract costs..................................... -- 285 --
------- -------- --------
$ 4,026 $ 2,805 $ 8,270
======= ======== ========
LIABILITIES, MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK
AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable.......................................... $ 239 $ 727 $ 487
Accrued liabilities....................................... 1,117 1,590 1,063
Unearned revenue.......................................... 188 500 220
Current portion of long-term debt and capital lease
obligations............................................. 1,352 3,497 626
------- -------- --------
Total current liabilities............................... 2,896 6,314 2,396
Long-term debt.............................................. 939 284 71
------- -------- --------
Total liabilities....................................... 3,835 6,598 2,467
------- -------- --------
Commitments and contingencies (Note 8)
Series A mandatorily redeemable convertible preferred stock,
$.01 par value; 5,000,000, 6,000,000 and 6,000,000 shares
authorized as of December 31, 1997, 1998 and June 30,
1999, respectively; 2,450,000 shares issued and
outstanding............................................... 6,677 6,743 6,776 $ --
Series B mandatorily redeemable convertible preferred stock,
$.01 par value; 0, 0 and 75,000,000 shares authorized as
of December 31, 1997, 1998 and June 30, 1999,
respectively; 38,979,070 issued and outstanding at June
30, 1999.................................................. -- -- 10,524 --
Value ascribed to mandatorily redeemable convertible
preferred stock warrants.................................. 51 84 84 --
------- -------- -------- --------
6,728 6,827 17,384 --
------- -------- -------- --------
Stockholders' equity (deficit):
Common stock, $.01 par value; 35,000,000, 50,000,000 and
125,000,000 shares authorized as of December 31, 1997,
1998 and June 30, 1999, respectively; 3,900,000 shares
issued and outstanding as of December 31, 1997 and 1998,
respectively; 4,148,875 shares issued and outstanding as
of June 30, 1999; 78,062,263 pro forma shares issued and
outstanding (unaudited)................................. 39 39 41 781
Additional paid-in capital................................ 495 494 465 17,109
Accumulated deficit....................................... (7,071) (11,153) (12,087) (12,087)
------- -------- -------- --------
Total stockholders' equity (deficit).................... (6,537) (10,620) (11,581) $ 5,803
------- -------- -------- --------
Total liabilities and stockholders' equity (deficit).... $ 4,026 $ 2,805 $ 8,270
======= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 77
XCARE.NET, INC.
STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------- ------------------
1996 1997 1998 1998 1999
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue............................... $ 9,726 $ 5,984 $ 2,270 $ 1,042 $ 1,841
------- ------- ------- ------- -------
Costs and expenses:
Cost of revenue..................... 3,744 4,575 2,086 992 1,637
Sales and marketing................. 1,369 2,531 965 566 293
General and administrative.......... 2,220 2,436 2,194 1,043 426
Research and development............ 3,190 4,212 670 546 161
Impairment of long-lived assets and
abandonment of operating lease... -- 887 -- -- --
------- ------- ------- ------- -------
10,523 14,641 5,915 3,147 2,517
------- ------- ------- ------- -------
Loss from operations.................. (797) (8,657) (3,645) (2,105) (676)
Settlements received from contract
terminations........................ 2,250 250 -- -- --
Interest income (expense), net........ -- 5 (437) (180) (258)
------- ------- ------- ------- -------
Income (loss) before income taxes..... 1,453 (8,402) (4,082) (2,285) (934)
Income tax (benefit) expense.......... 1,200 (1,078) -- -- --
------- ------- ------- ------- -------
Net income (loss)..................... $ 253 $(7,324) $(4,082) $(2,285) $ (934)
======= ======= ======= ======= =======
Net income (loss) per common share --
basic and diluted................... $ 0.05 $ (1.89) $ (1.06) $ (0.59) $ (0.24)
======= ======= ======= ======= =======
Weighted average common shares
outstanding -- basic and diluted.... 4,760 3,900 3,900 3,900 3,949
======= ======= ======= ======= =======
Pro forma net loss per common share
basic and diluted (unaudited)....... $ (0.10) $ (0.02)
======= =======
Pro forma weighted average common
shares basic and
diluted -- (unaudited).............. 40,584 52,601
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 78
XCARE.NET, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL ACCUMULATED
---------------- PAID-IN EARNINGS
SHARES AMOUNT CAPITAL (DEFICIT) TOTAL
------ ------ ---------- ----------- --------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995...... 10 $ -- $ 20 $ 1,750 $ 1,770
Repurchase and retirement of
common stock...................... (3) -- (7) (1,096) (1,103)
Dividends declared................ -- -- -- (78) (78)
Reclassification of accumulated
earnings upon conversion from
non-taxable to taxable status... -- -- 576 (576) --
Net income........................ -- -- -- 253 253
----- ---- ---- -------- --------
Balance at December 31, 1996...... 7 -- 589 253 842
Stock split....................... 3,893 39 (39) -- --
Accretion of mandatorily
redeemable convertible preferred
stock........................... -- -- (55) -- (55)
Net loss.......................... (7,324) (7,324)
----- ---- ---- -------- --------
Balance at December 31, 1997...... 3,900 39 495 (7,071) (6,537)
Accretion of mandatorily
redeemable convertible preferred
stock........................... -- -- (66) -- (66)
Other............................. -- -- 65 -- 65
Net loss.......................... -- -- -- (4,082) (4,082)
----- ---- ---- -------- --------
Balance at December 31, 1998...... 3,900 39 494 (11,153) (10,620)
Common stock issued upon exercise
of options (unaudited).......... 249 2 4 6
Accretion of mandatorily
redeemable convertible preferred
stock (unaudited)............... -- -- (33) -- (33)
Net loss (unaudited).............. -- -- -- (934) (934)
----- ---- ---- -------- --------
Balance at June 30, 1999
(unaudited)..................... 4,149 $ 41 $465 $(12,087) $(11,581)
===== ==== ==== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 79
XCARE.NET, INC.
STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------- ----------------
1996 1997 1998 1998 1999
------- ------- ------- ------- ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)........................................ $ 253 $(7,324) $(4,082) $(2,285) $ (934)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization.......................... 733 918 815 476 524
Loss on impairment and disposal of assets.............. 914 408 -- 106
Deferred income tax provision.......................... 451 (451) -- -- --
Other.................................................. -- -- 99 32 50
Change in assets and liabilities:
Accounts receivable, net............................. 986 756 (250) (296) 229
Prepaid expenses..................................... (91) (17) 99 85 (6)
Income taxes receivable.............................. -- (617) 617 617 --
Purchased software................................... -- -- (850) -- --
Deferred contract costs.............................. -- -- (285) (240) 285
Accounts payable..................................... (198) (367) 488 88 (240)
Accrued liabilities.................................. 691 (565) 473 (430) (527)
Unearned revenue..................................... -- 188 312 (118) (280)
------- ------- ------- ------- ------
Net cash provided by (used in) operating
activities.................................... 2,825 (6,565) (2,156) (2,071) (793)
------- ------- ------- ------- ------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment....................... (330) (348) (19) (10) (42)
Proceeds from sale of property and equipment............. -- 30 186 47 49
------- ------- ------- ------- ------
Net cash provided by (used in) investing
activities.................................... (330) (318) 167 37 7
------- ------- ------- ------- ------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of debt........................... 363 533 2,230 2,000 205
Principal payments on debt............................... (1,128) (618) (166) (159) (123)
Principal payments under capital leases.................. (49) (351) (574) (272) (302)
Proceeds from issuance of mandatorily redeemable
convertible preferred stock, net....................... -- 6,622 -- -- 7,320
Proceeds from issuance of common stock................... -- -- -- -- 6
Cash paid for repurchase of common stock................. (381) -- -- -- --
Dividends paid........................................... (78) -- -- -- --
------- ------- ------- ------- ------
Net cash provided by (used in) financing
activities.................................... (1,273) 6,186 1,490 1,569 7,106
------- ------- ------- ------- ------
Net increase (decrease) in cash and cash equivalents..... 1,222 (697) (499) (465) 6,320
Cash and cash equivalents at beginning of period......... 172 1,394 697 697 198
------- ------- ------- ------- ------
Cash and cash equivalents at end of period............... $ 1,394 $ 697 $ 198 $ 232 $6,518
======= ======= ======= ======= ======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid............................................ $ 83 $ 148 $ 127 $ 73 $ 54
Income taxes paid (refunded)............................. 213 -- (615) (615) --
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND
FINANCING TRANSACTIONS
Capital lease obligations for purchase of equipment...... $ 378 $ 1,217 $ -- $ -- $ --
Note issued for repurchase of common stock............... 722 -- -- -- --
Conversion of convertible promissory notes to Series B
mandatorily redeemable convertible preferred stock..... -- -- -- -- 3,204
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 80
XCARE.NET, INC.
NOTES TO THE FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
XCare.net, Inc. (the "Company") develops, deploys and supports
business-to-business software solutions for the health care industry. The
Company's proprietary XML-based platform and professional services allow it to
create customizable transaction-based application solutions that are designed to
address the complex administrative processing requirements of health care
companies. In addition, the Company provides outsourcing and transaction hosting
services that improve workflow processes and reduce administrative costs for
customers.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Revenue Recognition
For contracts entered into subsequent to January 1, 1998, the Company
recognizes revenue in accordance with the provisions of Statement of Position
97-2, "Software Revenue Recognition". The Company derives revenue from license
fees and related services under the terms of fixed price contracts. Maintenance
revenue is derived from agreements for supporting and providing periodic updates
to licensed software. Consulting revenue consists of revenue from consulting
services provided pursuant to time and materials contracts. Transaction
processing revenue is derived from outsourcing and transaction hosting services
and is recognized on a per-transaction basis as services are performed.
License fees and related services revenue is generally recognized from
fixed price contracts using the percentage-of-completion method of accounting
where collectibility of fees is reasonably assured. Where collectibility of fees
is not reasonably assured, the Company defers revenue and related costs as
deferred contract costs and recognizes revenue and cost of revenue as cash is
collected.
The Company may encounter budget and schedule overruns on fixed price
contracts caused by increased material, labor or overhead costs. Adjustments to
cost estimates are made in the periods in which the facts requiring such
revisions become known. Estimated losses, if any, are recorded in the period in
which current estimates of total contract revenue and contract costs indicate a
loss. The Company does not require collateral for its receivables and an
allowance is maintained for potential credit losses.
Maintenance revenue is recorded as unearned revenue and is recognized
ratably over the service period, which is generally 12 months. When maintenance
is bundled with the original license fee arrangement, its fair value is deferred
and recognized during the period such services are provided.
Revenue from consulting services provided pursuant to time-and-materials
contracts is recognized as the services are performed.
For contracts entered into prior to January 1, 1998, the Company recognized
revenue in accordance with Statement of Position 91-1, "Software Revenue
Recognition." The Company's revenue recognition for such pre-1998 contracts was
substantially the same as that discussed above.
F-7
<PAGE> 81
XCARE.NET, INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Cash and Cash Equivalents
All highly liquid investments with a maturity of three months or less when
purchased are considered to be cash equivalents. All cash equivalents are
carried at cost, which approximates fair value.
Fair Value of Financial Instruments
The Company's financial instruments include cash, accounts receivable,
prepaids, accounts payable and accrued liabilities. The carrying amounts of
financial instruments approximate fair value due to their short maturities.
Additionally, based upon the borrowing rates currently available to the Company
for debt agreements with similar terms and average maturities, management
believes the carrying amount of its debt approximates fair value.
Concentration of Credit Risk
The Company performs ongoing evaluations of its customers' financial
condition and, generally, requires no collateral from its customers. All such
customers operate in the health care industry.
The Company had the following customers which accounted for greater than
10% of each respective period's revenue:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
CUSTOMER 1996 1997 1998
- -------- ------ ------ ------
<S> <C> <C> <C> <C>
A 67% -- --
B 10% 74% --
C -- -- 29%
D -- -- 20%
E -- -- 12%
F -- -- 11%
</TABLE>
At December 31, 1998, customer's D, E and F accounted for 20%, 23% and 10%
of accounts receivable, respectively. Two other customers accounted for 27% and
13% of accounts receivable at December 31, 1998.
Property and Equipment
Property and equipment are recorded at cost and depreciated using
straight-line methods over the estimated useful lives of the related assets,
ranging from two to five years. Equipment under capital lease arrangements as
well as leasehold improvements are amortized over the shorter of their useful
lives or the terms of the related leases.
Long-Lived Assets and Impairments
The Company periodically evaluates the carrying value of long-lived assets,
including, but not limited to, purchased software, property and equipment, and
other assets, when events and circumstances warrant such a review. The carrying
value of a long-lived asset is considered impaired when the anticipated
undiscounted cash flow from such asset is separately indentifiable and is less
than its carrying value. In that event, a loss is recognized based on the amount
by which the carrying value exceeds the fair value of the long-lived asset. Fair
value is determined primarily using the anticipated cash flows discounted at a
rate commensurate with the risk involved. Loss on long-lived assets to be
F-8
<PAGE> 82
XCARE.NET, INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
disposed of is determined in a similar manner, except that fair values are
reduced for the cost to dispose.
Unaudited Pro Forma Stockholders' Equity
In accordance with the requirements of the Securities and Exchange
Commission ("SEC"), which provide that the total redemption value of Series A
and B mandatorily redeemable convertible preferred stock (the "Convertible
Preferred Stock") be excluded from stockholders' equity (deficit), the
redemption value of the Convertible Preferred Stock has been reflected in the
accompanying balance sheet as mandatorily redeemable convertible preferred
stock.
The board of directors has authorized management of the Company to file a
registration statement with the SEC permitting the Company to sell shares of its
common stock to the public. If the Company's initial public offering (the "IPO")
is consummated under the terms currently anticipated, all outstanding shares of
Convertible Preferred Stock will convert into 67,007,070 shares of common stock
of the Company. Unaudited Pro Forma Stockholders' Equity as of June 30, 1999, as
set forth in the accompanying balance sheet, is adjusted to reflect such
conversion, the assumed "cashless exercise" of all outstanding common stock
warrants and Series A mandatorily redeemable convertible preferred stock
warrants with exercise prices below the assumed initial public offering price,
and the conversion of the Series A mandatorily redeemable convertible preferred
stock issued upon the assumed exercise of the latter warrants into common stock,
resulting in the issuance of 73,913,388 additional shares of common stock.
Research and Development
Research and development expense includes costs incurred by the Company to
develop and enhance the Company's software. Research and development costs are
charged to expense as incurred.
Advertising
The Company expenses advertising costs as incurred. Advertising expenses
for the years ended December 31, 1996, 1997 and 1998 were approximately $98,000,
$433,000 and $66,000, respectively.
Software Development Costs
Software development costs are required to be expensed until the point that
technological feasibility of the product is established, after which time such
costs are capitalized until general availability of the product. The period
between achieving technological feasibility and the general availability of such
software has historically been short. Consequently, costs otherwise
capitalizable after technological feasibility have historically been immaterial
and therefore expensed as incurred.
Purchased software
Purchased software is held for resale under an exclusive license and is
capitalized and amortized ratably over a three-year estimated life. Accumulated
amortization was $0 and $142,000 (unaudited) as of December 31, 1998 and June
30, 1999, respectively. See Note 8.
Income Taxes
Deferred income taxes are recognized for the tax consequences in future
years of differences between the tax bases of assets and liabilities and their
financial reporting amounts at each year end based on enacted tax laws and
statutory tax rates applicable to the periods in which the differences are
F-9
<PAGE> 83
XCARE.NET, INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
expected to affect taxable earnings. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount more likely than not to be
realized. Income tax expense is the tax payable for the period and the change
during the period in deferred tax assets and liabilities.
Stock Option Compensation
Stock option compensation expense is recognized in accordance with
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees.
Net Income (Loss) Per Share
Net income (loss) per common share is calculated in accordance with SFAS
No. 128, "Earnings per Share" and SEC Staff Accounting Bulletin No. 98 ("SAB
98"). Under the provisions of SFAS No. 128 and SAB 98, basic net income (loss)
per common share is computed by dividing the net income (loss) for the period by
the weighted average number of common shares outstanding during the period.
Diluted net income (loss) per common share is computed by dividing the net
income (loss) for the period by the weighted average number of common and
potential shares outstanding during the period if their effect is dilutive.
Potential common shares consist of incremental common shares issuable upon the
exercise of stock options and warrants and upon conversion of the Convertible
Preferred Stock and convertible promissory notes.
Unaudited Pro Forma Net Income (Loss) Per Common Share
The Company has computed unaudited pro forma basic net loss per common
share in accordance with the methodology in SFAS No. 128. The Company's
historical capital structure is not indicative of its prospective structure due
to the automatic conversion of all shares of Convertible Preferred Stock into
common stock concurrent with the closing of the Company's anticipated IPO.
Accordingly, historical basic net income (loss) per common share should not be
used as an indicator of future earnings per common share.
Unaudited pro forma basic net loss per common share is computed using the
weighted average number of common shares outstanding during the period. The
Company has assumed the conversion of all outstanding Convertible Preferred
Stock issued into common stock for all periods presented on a weighted average
share basis and the assumed "cashless exercise" of all outstanding common stock
warrants and Series A mandatorily redeemable convertible preferred warrants with
exercise prices below the assumed initial public offering price, and the
conversion of the Series A mandatorily redeemable convertible preferred stock
issued upon the assumed exercise of the latter warrants into common shares as if
such transactions occurred at the beginning of the respective period or at the
date of original issuance, if later.
F-10
<PAGE> 84
XCARE.NET, INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
The following table sets forth the computation of the numerators and
denominators in the basic, diluted and pro forma net income (loss) per common
share calculations for the periods indicated:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------- ------------------
1996 1997 1998 1998 1999
------ ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Numerator:
Net income (loss).......................... $ 253 $(7,324) $(4,082) $(2,285) $ (934)
Accretion of mandatorily redeemable
convertible preferred stock........... -- (55) (66) (33) (33)
------ ------- ------- ------- -------
Net income (loss) available to common
stockholders.......................... $ 253 $(7,379) (4,148) $(2,318) (967)
====== ======= =======
Effect of pro forma conversion of
securities:
Accretion of mandatorily redeemable
convertible preferred stock......... 66 33
------- -------
Pro forma net loss available to common
stockholders (unaudited)............ $(4,082) $ (934)
======= =======
Denominator
Weighted average common shares
outstanding -- basic and diluted...... 4,760 3,900 3,900 3,900 3,949
====== ======= ------- ======= -------
Weighted average effect of pro forma
securities:
Series A mandatorily redeemable
convertible preferred stock......... 28,216 32,946
Series B mandatorily redeemable
convertible preferred stock......... 8,241 13,717
Common stock warrants................. 227 1,989
------- -------
Pro forma weighted average common shares
outstanding -- basic and diluted
(unaudited).............................. 40,584 52,601
======= =======
</TABLE>
Potentially dilutive securities totaling 17,828,549 and 57,370,914 for the
years ended December 31, 1997 and 1998, respectively, and 43,493,967 and
83,960,725 for the six month periods ended June 30, 1998 and 1999, respectively,
were excluded from historical basic and diluted loss per common share because of
their anti-dilutive effect.
Comprehensive Income
Effective January 1, 1998, the Company adopted the provisions of SFAS No.
130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards for
reporting comprehensive income and its components in financial statements.
Comprehensive income includes all changes in equity during a period from
non-owner sources. During each of the three years ended December 31, 1998, and
the six-month periods ended June 30, 1998 and 1999, the Company has not had any
significant transactions that are required to be reported as adjustments to
determine comprehensive income.
Unaudited Interim Financial Statements
The accompanying interim financial statements as of and for the six-month
periods ended June 30, 1998 and 1999 are unaudited. In the opinion of the
Company, the unaudited interim financial statements have been prepared on the
same basis as the audited financial statements and reflect all adjustments,
consisting only of normal recurring adjustments, necessary for the fair
presentation of the results of the
F-11
<PAGE> 85
XCARE.NET, INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
interim periods. The financial data and other information disclosed in these
notes to financial statements for the related periods are unaudited. The results
of operations for the interim periods are not necessarily indicative of the
results to be expected for any future periods.
Stock Split
On March 15, 1997, the Company effected a 600-for-one split of its common
stock. All references to shares, share prices and per share amounts have been
adjusted to reflect the stock split.
Recent Accounting Pronouncements
The Company recognizes revenue in accordance with Statement of Position
("SOP") 97-2, "Software Revenue Recognition," which provides guidance on
recognizing revenue from software transactions, as amended by SOP 98-4,
"Deferral of the Effective Date of a Provision of SOP 97-2, Software Revenue
Recognition." The Company applied the provisions of SOP 97-2 on a prospective
basis for new software transactions entered into as of January 1, 1998. The
adoption of this guidance did not have a material impact on the Company's
financial condition or results of operations.
Further guidance was published during 1998 in SOP 98-9 "Modification of SOP
97-2, Software Revenue Recognition, With Respect to Certain Transactions."
Additionally, the AICPA issued technical questions and answers on financial and
reporting issues related to SOP 97-2 in January 1999. The adoption of this
guidance will not have a material impact on the Company's financial condition or
results of operations.
2. BALANCE SHEET COMPONENTS
Certain balance sheet components are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------- JUNE 30,
1997 1998 1999
------ ------ --------
<S> <C> <C> <C>
ACCRUED LIABILITIES
Accrued payroll.......................................... $ 518 $ 171 $ 216
Operating lease obligation payable..................... 461 203 156
Accrued interest....................................... 18 269 10
Accrued license fee payable............................ -- 850 600
Other.................................................. 120 97 81
------ ------ ------
$1,117 $1,590 $1,063
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1998
------- -------
<S> <C> <C>
PROPERTY AND EQUIPMENT
Furniture, fixtures and equipment........................... $ 879 $ 301
Computer hardware......................................... 2,241 1,435
Computer software......................................... 755 257
------- -------
3,875 1,993
Less accumulated depreciation and amortization.............. (1,793) (1,302)
------- -------
$ 2,082 $ 691
======= =======
</TABLE>
F-12
<PAGE> 86
XCARE.NET, INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Assets underlying capital leases included above were approximately
$1,525,000 and $1,192,000 as of December 31, 1997 and 1998, respectively.
Accumulated amortization of assets under capital leases was approximately
$322,000 and $614,000 as of December 31, 1997 and 1998, respectively.
3. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
Debt consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1998
------- -------
<S> <C> <C>
Unsecured convertible promissory notes payable to preferred
stockholders, net of debt discount of $51 and $50 at
December 31, 1997 and 1998, respectively; interest rate at
12%; principal and interest due at maturity on September
30, 1999.................................................. $ 449 $ 2,680
Note payable to bank, as modified on April 22, 1997;
principal and interest payable in monthly installments of
$11,165 until December 22, 1998; interest on the note is at
the prime rate plus 1.0% (9.5% as of December 31, 1997);
secured by equipment and intellectual property rights....... 62 --
Unsecured notes payable to former employees; interest rates
ranging from 5.73% to 6.84%; principal and interest due in
equal annual installments with maturity dates through
2000...................................................... 290 246
Unsecured notes payable to software vendors for software
licenses; interest rate at 10.5%; principal and interest
were payable on January 1, 1998........................... 86 44
Unsecured notes payable to landlord for leasehold
improvements; interest rate at 9.5%; principal and
interest payable in monthly installments of $1,207 until
February 1, 2000.......................................... 33 16
Capitalized lease obligations............................... 1,371 795
------- -------
Total long-term debt................................... 2,291 3,781
Less current portion........................................ (1,352) (3,497)
------- -------
Long-term debt, excluding current portion.............. $ 939 $ 284
======= =======
</TABLE>
Maturities of long-term debt, including future minimum lease payments under
capitalized lease obligations, at December 31, 1998 are as follows (in
thousands):
<TABLE>
<CAPTION>
CAPITALIZED OTHER TOTAL LONG-TERM
LEASES DEBT DEBT COMMITMENTS
----------- ------ -----------------
<S> <C> <C> <C>
1999....................................... $614 $2,984 $3,598
2000....................................... 242 52 294
---- ------ ------
856 $3,036 $3,892
====== ======
Less: Amount representing interest......... (61)
----
Present value of capitalized lease
obligations (including $564 classified as
current)................................. $795
====
</TABLE>
Certain equipment financing agreements recorded as capital lease
obligations are subject to restrictive covenants contained in the credit
agreement that require XCare.net to maintain certain financial ratios. XCare.net
was not in compliance with the covenants as of December 31, 1998 and June 30,
1999 and obtained a waiver of compliance for all covenants through September 30,
1999. The capital lease obligations under the financing agreements that included
the restrictive covenants were paid off during September 1999.
F-13
<PAGE> 87
XCARE.NET, INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
On December 29, 1997 and April 10, 1998, the Company entered into bridge
loan agreements with its preferred stockholders. The loan agreements provided
for commitments for $2,500,000 of financing (the "1997 Convertible Promissory
Notes"), of which $500,000 was received in 1997. The remaining $2,000,000 was
received throughout 1998. In June 1999, the 1997 Convertible Promissory Notes
plus accrued interest aggregating approximately $2,924,000 converted at $0.27
per share into 10,831,800 shares of Series B mandatorily redeemable convertible
preferred stock in conjunction with the sale of Series B mandatorily redeemable
convertible preferred stock. In connection with the 1997 Convertible Promissory
Notes, the Company issued warrants to purchase 437,062 shares of the Company's
Series A mandatorily redeemable convertible preferred stock at $0.25 per share.
The warrants expire in 2002 through 2003 or upon an IPO, if earlier. The value
assigned to the warrants of $84,000, determined using a Black-Scholes option
pricing model, resulted in additional debt discount which is being amortized to
interest expense over the period that the Convertible Promissory Notes are
outstanding.
In November 1998, the Company entered into a second bridge loan agreement
with its preferred stockholders. The loan agreement provided for $265,000
financing of which $230,000 was received in 1998 and $35,000 was received in
1999 (the "1998 Convertible Promissory Notes"). In June 1999, the 1998
Convertible Promissory Notes plus accrued interest aggregating approximately
$280,000 converted at $0.27 per share into 1,036,159 shares of Series B
mandatorily redeemable convertible preferred stock in conjunction with the sale
of Series B mandatorily redeemable convertible preferred stock. In connection
with the 1998 Convertible Promissory Notes, the Company issued warrants to
purchase 2,000,000 shares of the Company's common stock at $0.01 per share. The
warrants expire in 2003 or upon an IPO, if earlier. The value assigned to the
warrants of $43,000 resulted in additional debt discount which is being
amortized to interest expense over the period that the Convertible Promissory
Notes are outstanding.
4. STOCKHOLDERS' EQUITY
Mandatorily Redeemable Convertible Preferred Stock
In March 1997, the Company issued 2,450,000 shares of $.01 par value Series
A mandatorily redeemable convertible preferred stock and received proceeds net
of issuance costs totaling approximately $6,622,000.
In June 1999, the Company issued 27,111,111 shares of $.01 par value Series
B mandatorily redeemable convertible preferred stock and received proceeds net
of issuance costs totaling $7,320,000. Concurrently, outstanding Convertible
Promissory Notes plus accrued interest of approximately $3,204,000 in the
aggregate were converted into an additional 11,867,959 shares of Series B
mandatorily redeemable convertible preferred stock.
In July 1999, the Company issued 24,074,074 shares of $.01 par value Series
B mandatorily redeemable convertible preferred stock and received proceeds net
of issuance costs totaling $6,500,000.
The holders of the Convertible Preferred Stock have the following rights
and preferences:
Voting Rights
The holders of the Convertible Preferred Stock and the common stock, voting
together as a single class, are entitled to vote upon any matter submitted to
the shareholders. The holders of the Convertible Preferred Stock are entitled to
one vote for each share of common stock that such holder would be entitled to
receive if the Convertible Preferred Stock were converted into common stock. The
holders of common stock have one vote per share of common stock.
F-14
<PAGE> 88
XCARE.NET, INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Dividends
The holders of the Series A mandatorily redeemable convertible preferred
stock are entitled to receive, out of funds legally available, dividends payable
at amounts equal to the equivalent per share dividend declared on the common
stock. Holders of Series B mandatorily redeemable convertible preferred stock
are entitled to receive noncumulative dividends at the per annum rate of
$0.00216 per share, when and if declared by the board of directors. No dividends
have been declared to date.
Liquidation
In the event of any liquidation, dissolution or winding up of the Company,
the holders of Series A mandatorily redeemable convertible preferred stock were
entitled to receive up to five times their original cost in the event of
liquidation. In June 1999, pursuant to the closing of the Series B mandatorily
redeemable convertible preferred stock, the Company's board of directors revised
the terms whereby holders of Series A mandatorily redeemable convertible
preferred stock are entitled to receive an amount of $2.86 per share plus any
declared but unpaid dividends prior to and in preference to any distribution to
the holders of common stock. The holders of the Series B mandatorily redeemable
convertible preferred stock are entitled to receive an amount of $0.27 per share
plus any declared but unpaid dividends prior to and in preference to any
distribution to the holders of common stock. The remaining assets, if any, shall
be distributed ratably among the holders of common stock. Should the Company's
legally available assets be insufficient to satisfy the liquidation preferences,
the funds will be distributed among the holders of Convertible Preferred Stock
in proportion to the number of common shares into which each share of
Convertible Preferred Stock is convertible.
Conversion
The 2,450,000 outstanding shares of Series A mandatorily redeemable
convertible preferred stock are convertible at the option of the holder into
28,028,000 shares of common stock. Each of the 38,979,070 shares of Series B
mandatorily redeemable convertible preferred stock are convertible at the option
of the holder into one share of common stock. Each share of Convertible
Preferred Stock automatically converts into common stock upon the closing of a
public offering at a per share price of at least $0.95 with gross proceeds of
greater then $15,000,000.
Redemption Rights
As of January 1, 2002, 2003 and 2004, each holder of the Convertible
Preferred Stock has the individual right to require the Company to redeem the
holder's shares by paying in cash $2.86 per share of Series A Convertible
Preferred Stock and $0.27 per share of Series B Convertible Preferred Stock, for
up to a maximum on each such date of one-third of the total shares of
Convertible Preferred Stock outstanding. The redemption value of the mandatorily
redeemable convertible preferred stock is being accreted ratably over the period
from issuance of the redemption dates which approximates the effective interest
method.
Stock Warrants
In conjunction with the Series A mandatorily redeemable convertible
preferred stock offering, the Company issued warrants to purchase a total of
122,500 shares of common stock for $3.15 per share. The value assigned to these
warrants using a Black-Scholes option pricing model was immaterial. The warrants
are exercisable immediately and expire in 2005 or upon an IPO, if earlier.
In connection with the issuance of the 1997 Convertible Promissory Notes,
warrants to purchase 437,062 shares of the Company's Series A mandatorily
redeemable convertible preferred stock at
F-15
<PAGE> 89
XCARE.NET, INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
$0.25 per share were issued to the promissory noteholders. The warrants expire
December 2002 through April 2003 or upon an IPO, if earlier, and are convertible
into 4,999,988 shares of common stock.
In connection with the issuance of the 1998 Convertible Promissory Notes,
warrants to purchase 2,000,000 shares of the Company's common stock at $0.01 per
share were issued to the promissory noteholders. The warrants expire November
and December of 2003 or upon IPO, if earlier.
As of June 30, 1999, all warrants remain outstanding.
5. CONTRACT TERMINATIONS AND RELATED CHARGES
During 1996, a major customer terminated its contract with the Company and
paid $2.3 million to settle all claims arising from the termination. During
1997, another major customer terminated its contract with the Company and paid
$250,000 to settle all claims associated with the termination.
As a result of these contract terminations, during 1997, the Company
abandoned an operating lease and incurred impairment charges for related fixed
assets aggregating $887,000.
6. EMPLOYEE BENEFIT PLANS
Stock Options
During 1997, the Company adopted a stock option plan (the "Plan") which
provides for the grant of stock options to directors, key employees, and
consultants. As of June 30, 1999, a total of 14,457,000 shares of common stock
are reserved for issuance under the Plan. The Plan provides for the granting of
incentive stock options to employees and nonqualified options to employees,
directors and consultants.
Stock options are granted with an exercise price not less than fair market
value of the common stock on the date of the grant, as determined by the board
of directors. The vesting period is determined by the board of directors and is
generally four years. The options generally expire ten years after the date of
grant. During February 1998, the board of directors reduced the exercise price
of 140,260 options from $0.28 to $0.05 and in July 1998, they reduced the
exercise price for 18,500 options from $0.05 to $0.03.
The Company records compensation expense related to stock options granted
to employees using the intrinsic value based method and includes a pro forma
disclosure in the footnotes for compensation value measured using the fair value
accounting treatment. Options granted to consultants are accounted for based on
the fair value of the consideration received or the fair value of the options
issued, whichever is more reliably measurable. For the fair value disclosure
below, compensation value is estimated for each option grant under the Plan on
the date of grant using a Black-Scholes-type option pricing model. The following
assumptions were used for grants in 1997 and the 1998: risk-free rates
corresponding to government securities with original maturities similar to the
expected option lives of 6.3% to 6.8% in 1997, 4.5% to 5.6% for 1998, and 4.9%
to 5.4% for the six months ended June 30, 1999; expected dividend yield of 0%
for all periods; volatility factor of zero; and expected lives of approximately
one year beyond vesting dates for all periods.
Based on calculations using a Black-Scholes-type minimum value option
pricing model, the weighted-average grant date fair value of options was $0.08,
$0.01 and $0.01 in 1997 1998, and for the six months ended June 30, 1999,
respectively. The pro forma impact on the Company's net loss and net
F-16
<PAGE> 90
XCARE.NET, INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
loss per share had compensation cost been recorded as determined in accordance
with SFAS No. 123, "Accounting for Stock-Based Compensation" is shown below (in
thousands, except per share data).
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------
1997 1998
------- -------
<S> <C> <C>
Net loss:
As reported................................................. $(7,324) $(4,082)
Pro forma................................................. (7,333) (4,089)
Net loss per common share:
As reported............................................... $ (1.89) $ (1.06)
Pro forma................................................. (1.89) (1.07)
</TABLE>
Total stock options outstanding and exercisable under the Plan as of
December 31, 1998 are as follows:
<TABLE>
<CAPTION>
STOCK OPTIONS OUTSTANDING STOCK OPTIONS EXERCISABLE
- ----------------------------------------------------------------- ---------------------------
WEIGHTED AVERAGE
REMAINING WEIGHTED WEIGHTED
RANGE OF NUMBER OF CONTRACTUAL AVERAGE NUMBER OF AVERAGE
EXERCISE PRICES SHARES LIFE (YEARS) EXERCISE PRICES SHARES EXERCISE PRICES
- --------------- ---------- ---------------- --------------- --------- ---------------
<S> <C> <C> <C> <C> <C>
$ 0.03 11,184,500 9.5 $0.03 4,132,180 $0.03
0.28 116,667 8.3 0.28 116,667 0.28
---------- ---------
0.03 - 0.28 11,301,167 9.5 0.03 4,248,847 0.03
========== =========
</TABLE>
Total stock options outstanding and exercisable under the Plan as of June
30, 1999 are as follows (unaudited):
<TABLE>
<CAPTION>
STOCK OPTIONS OUTSTANDING STOCK OPTIONS EXERCISABLE
- ---------------------------------------------------------------- ---------------------------
WEIGHTED AVERAGE
REMAINING WEIGHTED WEIGHTED
RANGE OF NUMBER OF CONTRACTUAL AVERAGE NUMBER OF AVERAGE
EXERCISE PRICES SHARES LIFE (YEARS) EXERCISE PRICE SHARES EXERCISE PRICE
- --------------- --------- ---------------- --------------- --------- ---------------
<S> <C> <C> <C> <C> <C>
$ 0.03 9,714,500 9.2 $0.03 2,577,991 $0.03
0.28 116,667 7.8 0.28 116,667 0.28
--------- ---------
0.03 - 0.28 9,831,167 9.2 0.03 2,694,658 0.04
========= =========
</TABLE>
F-17
<PAGE> 91
XCARE.NET, INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Activity of the Plan is summarized in the following table:
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
NUMBER OF AVERAGE OPTIONS AVERAGE
SHARES EXERCISE PRICE EXERCISABLE EXERCISE PRICE
---------- -------------- ----------- --------------
<S> <C> <C> <C> <C>
Options outstanding, December 31, 1996...... -- $ -- -- $ --
Options granted............................. 947,010 0.28
Less: options forfeited..................... (628,333) 0.28
----------
Options outstanding, December 31, 1997...... 318,677 0.28 129,667 0.28
Options granted............................. 11,206,000 0.03
Less: options forfeited..................... (223,510) 0.11
----------
Options outstanding, December 31, 1998...... 11,301,167 0.03 4,248,847 0.03
Options granted (unaudited)................. 3,704,000 0.03
Less: options exercised (unaudited)......... (248,875) 0.03
Less: options forfeited (unaudited)......... (4,925,125) 0.03
----------
Options outstanding, June 30, 1999
(unaudited)............................... 9,831,167 0.03 2,694,658 0.04
==========
</TABLE>
401(k) Plan
The Company has adopted an employee savings and retirement plan (the
"401(k) Plan") covering substantially all of the Company's employees. Pursuant
to the 401(k) Plan, eligible employees may elect to reduce their current
compensation by up to the statutory prescribed limit and have the amount of such
reduction contributed to the 401(k) Plan. The Company may make contributions to
the 401(k) Plan on behalf of eligible employees. The Company has not made any
contributions to the 401(k) Plan.
7. INCOME TAXES
Prior to January 1, 1996, the Company elected to be taxed under Subchapter
S of the Internal Revenue Code of 1986, as amended (the "Code"). Accordingly the
stockholders were responsible for payment of taxes on income earned by the
Company, and the Company distributed to stockholders annually an amount equal to
the estimated tax liability arising from operations. On January 1, 1996, the
Company revoked its election to be taxed under Subchapter S of the Code and
elected to be taxed under Subchapter C of the Code. In connection with the
change in status, the Company reclassified accumulated earnings of $576,000 to
additional paid-in capital to reduce accumulated earnings to zero as of the date
of the conversion. At December 31, 1998, the Company had net operating loss
("NOL") carryforwards of approximately $9.4 million which may be used to offset
future taxable income. These carryforwards expire beginning in 2011. The Tax
Reform Act of 1986 contains provisions that may limit the NOL available for use
in any given year upon the occurrence of certain events, including significant
changes in ownership interest. A change in ownership of a company of greater
than 50% within a three-year period results in an annual limitation on the
Company's ability to utilize its NOL carryforwards from tax periods prior to the
ownership change. The Company believes that its recent private placements of
mandatorily redeemable Convertible Preferred Stock and/or its initial public
offering of common stock may result in a change of ownership that could
substantially limit its ability to realize its net operating loss carryforwards
in future periods.
F-18
<PAGE> 92
XCARE.NET, INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
The provision for (benefit from) income taxes consists of the following (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1996 1997 1998
------ ------- -------
<S> <C> <C> <C>
Current:
Federal............................................. $ 623 $ (627) $ --
State............................................. 126 -- --
Deferred:
Federal........................................... 374 (383) --
State............................................. 77 (68) --
------ ------- -------
Total............................................... $1,200 $(1,078) $ --
====== ======= =======
</TABLE>
The components of the Company's deferred income tax assets and liabilities
under FAS 109 are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1998
------- -------
<S> <C> <C>
Deferred tax assets:
Deferred revenue............................................ $ -- $ 50
Impairment and exit cost accruals......................... 339 355
Employee benefits......................................... 77 57
Other..................................................... -- 35
Net operating loss carryforwards.......................... 2,122 3,681
Deferred tax liabilities:
Cash to accrual Section 481(a)............................ (375) (281)
Fixed asset sale and depreciation......................... (27) (187)
Amortization.............................................. -- (57)
Less: Valuation allowance................................... (2,136) (3,653)
------- -------
Net deferred tax asset.................................... $ -- $ --
======= =======
</TABLE>
The Company's NOLs represent unrecognized tax benefit. Recognition of these
benefits requires future taxable income, the attainment of which is uncertain.
Therefore, a valuation allowance has been established for the entire tax
benefit, and no benefit for income taxes has been recognized in the accompanying
statements of operations.
The benefit for income taxes differs from the amount computed by applying
the U.S. federal income tax rate of 34% to loss before income taxes as follows
(in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1996 1997 1998
------ ------- -------
<S> <C> <C> <C>
Federal income tax benefit at 34%................... $ 494 $(2,856) $(1,388)
State income tax, net of federal benefit............ 135 (381) (166)
Effect of conversion to taxable status.............. 600 -- --
Change in valuation allowance....................... -- 2,136 1,517
Other............................................... (29) 23 37
------ ------- -------
Income tax expense (benefit)........................ $1,200 $(1,078) $ --
====== ======= =======
</TABLE>
F-19
<PAGE> 93
XCARE.NET, INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
8. COMMITMENTS AND CONTINGENCIES
The Company leases equipment and office space under various long-term
non-cancelable operating leases that expire in 2002. The following is a schedule
by year of future minimum lease payments under operating leases, at December 31,
1998 (in thousands):
<TABLE>
<S> <C>
1999..................................... $ 542
2000..................................... 106
2001..................................... 100
2002..................................... 100
-----
848
Less: sublease income.................... (169)
-----
$ 679
=====
</TABLE>
Total rent expense for the years ended December 31, 1996, 1997 and 1998 was
approximately $288,000, $356,000 and $438,000, respectively.
In December 1998, the Company purchased an exclusive license for certain
software to be resold. This arrangement requires the Company to pay a royalty of
17.5% of all of its sales of the software. In the event the Company does not
satisfy specified minimum sales levels through June 30, 2000, the Company may
forfeit the exclusive rights to resell this software.
The Company has entered into another arrangement with a customer that
provides for a 10% royalty payment to the customer in the event the Company
resells the proprietary module developed for this customer.
9. SUBSEQUENT EVENTS
In July 1999, the board of directors amended all existing stock option
agreements under the Plan. The amendment provided that all options are
immediately exercisable. However, any shares acquired upon exercise are subject
to repurchase by XCare.net over a reverse vesting period that entitles the
optionee to exactly the same vesting schedule as the original grant. The
repurchase price is equal to the exercise price of the options.
Subsequent to June 30, 1999, the Company issued stock options to certain
employees under the Plan with exercise prices below the deemed fair value of the
Company's common stock at the date of grant. The Company will record deferred
stock compensation for the difference between the exercise price of the stock
options and the deemed fair value of the Company's common stock at the date of
grant. This deferred stock compensation will be amortized to expense over the
period during which the options or common stock subject to repurchase vest,
generally four years, using an accelerated method as described in Financial
Accounting Standards Board Interpretation No. 28.
In October 1999, the board of directors adopted an employee stock purchase
plan (the "Employee Stock Purchase Plan,") subject to shareholder approval which
will become effective immediately on the effective date of the IPO. A total of
3,500,000 shares of common stock have been reserved for issuance under the
Employee Stock Purchase Plan. The Employee Stock Purchase Plan permits eligible
employees to purchase common stock totaling up to 15% of an employee's
compensation through payroll deductions. The Employee Stock Purchase Plan for
U.S. employees is intended to qualify under Section 423 of the Internal Revenue
Code and contains consecutive overlapping twelve month offering periods. Each
offering period includes 2 six month purchase periods. The price of common stock
to be purchased will be 85% of the lower of the fair market value of the common
stock either at the beginning of the offering period or at the end of that
purchase period.
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XCARE.NET, INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
In September 1999, the board of directors increased the number of shares
reserved for issuance under the Plan to 22,000,000.
In October 1999, the board of directors adopted the Director Option Plan,
subject to shareholder approval, which will become effective immediately on the
effective date of the IPO. A total of 1,750,000 shares of common stock have been
reserved for issuance under the Director Option Plan. Members of the board of
directors who are not employees of XCare.net are eligible to participate in the
Director Option Plan. The Director Option Plan provides for an automatic initial
grant of an option to purchase 175,000 shares of common stock (the "Initial
Grant") upon the later of the effective date of the Director Option Plan or the
date a person first becomes a non-employee director. After the Initial Grant, a
non-employee director will automatically be granted options to purchase 70,000
shares of common stock ("Subsequent Grant") each year on the date of XCare.net's
annual stockholder's meeting, if such director has served as a member of the
board for at least six months. The term of such options is ten years, provided
that they will terminate three months following the date the director ceases to
be a director of XCare.net or twelve months if the termination is due to death
or disability. Each Initial Grant will vest as to 25% of the shares on each
anniversary date of the date of grant and each Subsequent Grant will vest as to
100% of the shares on the anniversary date of the date of grant.
In October 1999, the board of directors approved an amendment to the
Company's certificate of incorporation, subject to shareholder approval,
whereby, after the IPO, the board of directors will have the authority, without
further action by the stockholders, to issue up to 5,000,000 shares of preferred
stock in one or more series and to fix the designations, powers, preferences,
privileges, which may be greater than the rights of the common stock.
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IFOR E*OFFERING ONLINE PROSPECTUS ONLYJ
"MEET THE MANAGEMENT" PRESENTATION FOR
XCARE.NET
Prospective investors will be able to log on to a Web site maintained by
E*OFFERING Corp. at www.eoffering.com, where a prospectus is available for
review. Within designated sections of the prospectus, including the Underwriting
Section of the prospectus, an embedded hyperlink Iclick here for "Meet the
Management" PresentationJ will provide exclusive access to the "Meet the
Management" Presentation. This presentation highlights selected information
contained elsewhere in the prospectus. This presentation does not contain all of
the information that you should consider before investing in our common stock.
You should read the entire prospectus carefully, including the "Risk Factors"
and our financial statements and notes to those financial statements, before
making an investment decision.
Visual 1: Disclaimer
Imagery: Company logo.
Visual Text: The "Meet the Management" Presentation is part of our
prospectus. This presentation highlights selected information contained
elsewhere in this prospectus. This presentation does not contain all of the
information that you should consider before investing in our common stock. You
should read the entire prospectus carefully, including the "Risk Factors" and
our financial statements and notes to those financial statements, before making
an investment decision.
Script: (Lorine Sweeney) The "Meet the Management" Presentation is part of
our prospectus. This presentation highlights selected information contained
elsewhere in this prospectus. This presentation does not contain all of the
information that you should consider before investing in our common stock. You
should read the entire prospectus carefully, including the "Risk Factors" and
our financial statements and notes to those financial statements, before making
an investment decision.
Visual 2: Introduction
Imagery: See Description of Artwork on page 106 of the Registration
Statement for a description of the image located on the inside front cover of
the prospectus.
Script: (Lorine Sweeney) Welcome to the "Meet the Management" Presentation
for XCare.net. I'm Lorine Sweeney, President and CEO. I would like to introduce
you to Peter Cheesbrough, our Chief Financial Officer. We would like to talk to
you about XCare.net, a leading provider of Internet-based, business-to-business
connectivity, information exchange and electronic commerce solutions for health
care.
Visual 3: Health Care: Market Opportunities
Imagery: Border and Company logo. There is a horizontal bar chart depicting
growth in U.S. health care expenditures.
Visual Text: Title: Health Care: Market Opportunity. Subheading: "Total
U.S. Health Care Expenditures." Footnote at the bottom with the caption,
"Source: U.S. Health Care Finance Administration."
Script: (Lorine Sweeney) (see "Business--Overview--Health Care Market
Overview"): The U.S. Health Care Finance Administration estimates that health
care expenditures currently represent $1.2 trillion, or 14% of the U.S. economy,
and that these expenditures will increase to $2.0 trillion by 2007 due both to
rising health care costs and an aging population. Health care claims, which
totaled approximately 4.4 billion in 1998, generally are processed through
antiquated legacy systems via paper, fax or phone. These systems can be
inefficient and lead to unnecessary and duplicative costs.
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Visual 4: Health Care: Industry Participants
Imagery: Border and Company logo. See Description of Artwork on page 105
of the Registration Statement for a description of the image located on page 33
of the prospectus.
Visual Text: Title: Health Care: Industry Participants.
Script: (Lorine Sweeney) (see "Business -- Overview -- Health Care Market
Overview"): The health care industry is currently one of the most complex
markets due to the numerous interrelationships among health care participants.
The payment for and delivery of health care requires that consistent, accurate
information be shared confidentially among health care participants across a
large and fragmented industry. For instance, individuals compare medical plans,
choose physicians and submit claims for reimbursement. Physicians, hospitals and
other providers verify patient eligibility, collect patient histories, order
diagnostic tests and x-rays, render diagnoses and submit claims to payers. And
payers manage referrals, establish medical care protocols and reimbursement
policies and process claims. These health care transactions are all highly
dependent on the collection and communication of information, and each
participant is dependent on the others for portions of that information.
Visual 5: Market Characteristics and Issues
Imagery: Border and Company logo. On the top left there will be a box with
the caption "Market Fragmentation" with bulleted text underneath.
Visual Text: Title: Health Care: Market Characteristics and Issues. Within
the "Market Fragmentation" box, bullets will read:
- Geographic fragmentation
- Technological fragmentation
Script: (Lorine Sweeney) (see "Business -- Overview -- Market
Characteristics"): The health care market is highly fragmented. Because health
care is delivered locally, there are hundreds of thousands of market
participants in different locations. Current technology infrastructure in health
care is characterized by numerous incompatible and, in many cases, antiquated
legacy systems.
Visual 6: Market Characteristics and Issues (con't)
Imagery: Border and Company logo. The slide imagery will "lay over" the
previous slide. On the top left there will be a box with the caption "Market
Fragmentation" with bulleted text underneath. On the bottom left there will be a
box with the caption "Complex Processes" with bulleted text underneath.
Visual Text: Title: Health Care: Market Characteristics and Issues. Within
the "Market Fragmentation" box, bullets will read:
- Geographic fragmentation
- Technological fragmentation
Within the "Complex Processes" box, bullets will read:
- Transition to managed care
- Intensive data management
- No standard data format or business rules
- Complexity of procurement, purchasing and payment processes
- Increasing government regulation
Script: (Lorine Sweeney) (see "Business -- Overview -- Market
Characteristics"): Furthermore, health care is delivered in a marketplace which
has become increasingly complex given the transition to
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managed care, the data-intensive nature of health care transactions, the lack of
standard data formats, the complicated procurement process and the pervasiveness
of government regulation.
Visual 7: Market Characteristics and Issues (con't)
Imagery: Border and Company logo. The slide imagery will "lay over" the
previous slide. On the top left there will be a box with the caption "Market
Fragmentation" with bulleted text underneath. On the bottom left there will be a
box with the caption "Complex Processes" with bulleted text underneath. An arrow
connecting the two boxes on the left side of the slide will point to the right
side of the slide, which will have a box with the caption "Inefficiencies" with
bulleted text underneath.
Visual Text: Title: Health Care: Market Characteristics and Issues. Within
the "Market Fragmentation" box, bullets will read:
- Geographic fragmentation
- Technological fragmentation
Within the "Complex Processes" box, bullets will read:
- Transition to managed care
- Intensive data management
- No standard data format or business rules
- Complexity of procurement, purchasing and payment processes
- Increasing government regulation
Within the "Inefficiencies" box, bullets will read:
- Inability to manage and exchange data
- Lack of real time and secure communication
- Rising costs
Script: (Lorine Sweeney) (see "Business -- Overview -- Current Health Care
Market Issues" and "-- Health Care Market Overview"): As a result of the
fragmentation and complexity of the health care market, participants are unable
to cost-effectively manage, communicate and exchange information in real time.
This fragmentation and complexity has resulted in increasing dissatisfaction
among health care participants. We believe that providing new, Internet-based,
business-to-business connectivity, information exchange and electronic commerce
solutions that effectively address processing inefficiencies is one of the
largest market opportunities in health care today.
Visual 8: XCare.net Solution
Imagery: Border and Company logo. See Description of Artwork on page 106
of the Registration Statement for a description of the image located on the
inside front cover of the prospectus labeled "Solution Model."
Visual Text: Title: XCare.net Solution.
Script: (Lorine Sweeney) (see "Business -- Our Solution"): We have
developed an Internet-based, information and transaction technology platform,
which we call the XCare.net platform. Using the XCare.net platform, we connect
health care participants together into a community structure and deliver
applications, services and electronic commerce product offerings that are
designed to improve process efficiencies, reduce administrative costs and create
new revenue opportunities for our customers. We believe that the XCare.net
platform and our solutions can reduce administrative and transaction
inefficiencies and simplify the way business is conducted in health care. We
believe that our solutions have the following advantages:
Visual 9: XCare.net Solution (con't)
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Imagery: Border and Company logo. One arrow on the left of the page
pointing to the right.
Visual Text: Title: XCare.net Solution. To the right of the arrow will
appear the caption "Use of new standard for information exchange."
Script: (Lorine Sweeney) (see "Business -- Our Solution"): The XCare.net
platform and associated applications and services are based on the extensible
mark-up language, or XML. XML provides a rich document structure that allows
complex data from multiple sources to be dynamically processed and displayed to
users in personalized ways. We believe that these capabilities are particularly
applicable to the health care industry because XML can process data previously
trapped in legacy systems, allow for automation of health care processes and
integrate a wide array of health care data including audio, video and text.
Visual 10: XCare.net Solution (con't)
Imagery: Border and Company logo. The slide imagery will "lay over" the
previous slide. Two arrows on the left of the page pointing to the right.
Visual Text: Title: XCare.net Solution. To the right of the first arrow
will appear the caption "Use of new standard for information exchange." To the
right of the second arrow will appear the caption "Disciplined approach to
creating customer solutions."
Script: (Lorine Sweeney) (see "Business -- Our Solution"): We have
developed a step-by-step approach to assist our customers to envision, evaluate
and execute an Internet-based health care strategy. The resulting strategies are
tailored to the particular customer to improve efficiency, reduce costs and
create new opportunities for revenue generation.
Visual 11: XCare.net Solution (con't)
Imagery: Border and Company logo. The slide imagery will "lay over" the
previous slide. Three arrows on the left of the page pointing to the right.
Visual Text: Title: XCare.net Solution. To the right of the first arrow
will appear the caption "Use of new standard for information exchange." To the
right of the second arrow will appear the caption "Disciplined approach to
creating customer solutions." To the right of the third arrow will appear the
caption "Complete, turnkey solutions."
Script: (Lorine Sweeney) (see "Business -- Our Solution"): Our solutions
are designed to provide a comprehensive set of applications, services and
product offerings while preserving previous technology investments by
integrating diverse multimedia content, including content from legacy systems.
These solutions are delivered in a low cost, low maintenance environment
provided through our electronic commerce operations center.
Visual 12: XCare.net Solution (con't)
Imagery: Border and Company logo. The slide imagery will "lay over" the
previous slide. Four arrows on the left of the page pointing to the right.
Visual Text: Title: XCare.net Solution. To the right of the first arrow
will appear the caption "Use of new standard for information exchange." To the
right of the second arrow will appear the caption "Disciplined approach to
creating customer solutions." To the right of the third arrow will appear the
caption "Complete, turnkey solutions." To the right of the fourth arrow will
appear the caption "Value-added Solution Channels."
Script: (Lorine Sweeney) (see "Business -- Our Solution"): Our business
model is based on a multi-faceted network of collaborative relationships, which
we call Solution Channels. Our Solution Channels leverage our customers' and
vendors' core competencies to promote the exchange of health care related
services and products. XCare.net Solution Channels create a community which
enables our customers to also act as vendors of applications, services and
products to other XCare.net community participants. Solution Channels allow us
to create new revenue opportunities for others; identify new
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revenue opportunities for us; and establish growing communities connected
through the XCare.net platform.
Visual 13: XCare.net Strategy
Imagery: Border and Company logo. XCare.net logo in center of page. A
circle filled with a text heading will be connected to the logo as a spoke.
Visual Text: Title: XCare.net strategy. The surrounding circle will include
the following caption:
- Cross-sell applications, services and electronic commerce product
offerings in our Solution Channels
Script: (Lorine Sweeney) (see "Business -- Strategy"): Our strategy to grow
the Company focuses on the following initiatives. First, we believe that our
Solution Channels represent an opportunity for deploying new applications,
services and electronic commerce product offerings that are either internally
developed or obtained through our growing number of customer and vendor
relationships. We believe this cross-selling approach simplifies the sales
process and may shorten our sales cycle and reduce our cost of sales.
Visual 14: XCare.net Strategy (con't)
Imagery: Border and Company logo. The slide imagery will "lay over" the
previous slide. XCare.net logo in center of page. Two circles filled with text
headings will be connected to the logo as spokes.
Visual Text: Title: XCare.net Strategy. Each of the two surrounding circles
will include one of the following captions:
- Cross-sell applications, services and electronic commerce product
offerings in our Solution Channels
- Penetrate target market segments
Script: (Lorine Sweeney) (see "Business -- Strategy"): We estimate that
there are approximately 12,000 entities operating within the payer/third-party
administrator and at-risk provider market segments. We believe that these
organizations have both the funding to adopt new Internet-based process
improvements and the incentive to lower ongoing operating costs in order to
improve their margins.
Visual 15: XCare.net Strategy (con't)
Imagery: Border and Company logo. The slide imagery will "lay over" the
previous slide. XCare.net logo in center of page. Three circles filled with text
headings will be connected to the logo as spokes.
Visual Text: Title: XCare.net Strategy. Each of the three surrounding
circles will include one of the following captions:
- Cross-sell applications, services and electronic commerce product
offerings in our Solution Channels
- Penetrate target market segments
- Develop new applications, services and products
Script: (Lorine Sweeney) (see "Business -- Strategy"): We have developed a
variety of applications, services and product offerings to address operational
inefficiencies in the health care industry. As Internet strategies in the health
care industry evolve and new relationships between organizations are formed, we
intend to continue to identify new development opportunities.
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Visual 16: XCare.net Strategy (con't)
Imagery: Border and Company logo. The slide imagery will "lay over" the
previous slide. XCare.net logo in center of page. Four circles filled with text
headings will be connected to the logo as spokes.
Visual Text: Title: XCare.net Strategy. Each of the four surrounding
circles will include one of the following captions:
- Cross-sell applications, services and electronic commerce product
offerings in our Solution Channels
- Penetrate target market segments
- Develop new applications, services and products
- Leverage existing applications, services and product offerings
Script: (Lorine Sweeney) (see "Business -- Strategy"): We seek to identify
key functions that are critical to particular industry participants and develop
solutions supporting these functions. We intend to regularly review existing
applications, services and product offerings to extend their functionality,
transaction capabilities and features as customer needs dictate.
Visual 17: XCare.net Strategy (con't)
Imagery: Border and Company logo. The slide imagery will "lay over" the
previous slide. XCare.net logo in center of page. Five circles filled with text
headings will be connected to the logo as spokes.
Visual Text: Title: XCare.net Strategy. Each of the five surrounding
circles will include one of the following captions:
- Cross-sell applications, services and electronic commerce product
offerings in our Solution Channels
- Penetrate target market segments
- Develop new applications, services and products
- Leverage existing applications, services and product offerings
- Form strategic relationships with leading health care participants
Script: (Lorine Sweeney) (see "Business -- Strategy"): We are aggressively
pursuing strategic relationships with leaders in key health care industry
segments to increase our portfolio of applications, services and product
offerings, to increase the scope of the community of users and to provide
specialized industry expertise for new solutions. We believe this will result in
accelerated market awareness and demand for our applications, services and
product offerings.
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Visual 18: Applications, Services and Product Offerings
Imagery: Border and Company logo. Three vertical rectangles with the
titles "Applications," "Services" and "Product Offerings."
Visual Text: Title: Applications, Services and Product Offerings. Includes
three rectangles for Applications, Services and Product Offerings. Each
rectangle will include captions listing the following names of the Company's
applications, services and product offerings and their respective statuses.
- --------------------------------------------------------------------------------
APPLICATIONS
eXtensible CARE System Available
eXtensible CARE Transactions Available
MatchNet Staffing & Available
Scheduling
Physician Credentialing In development
Electronic Medical In development
Record
Case Management In development
Medication and Medical In development
Assessment
Inquiry Systems
Physician Practice In development
Management
SERVICES
eHealth Development Discipline Available
Third-Party Administration/ Available
Management Service
Organization
Outsourcing Services
eHealth Operations Available
Management
Custom Portal Integration & Available
Hosting
PRODUCT OFFERINGS
MDPay Accelerator Future offering
Online Drug Store Future offering
Medical Supply Product Future offering
Health and Medical Future offering
Bookstore
- --------------------------------------------------------------------------------
Script: (Lorine Sweeney) (see "Business -- Applications, Services and
Product Offerings"): We provide a range of applications, services and product
offerings that support the management of health care data and facilitate
business-to-business connectivity, information exchange and electronic commerce
among health care industry participants. Our applications, services and product
offerings, which may incorporate licensed components, are designed to enable our
customers to preserve investments in existing legacy systems while integrating
new Internet-based products and services. For example, the eXtensible CARE
Transactions application facilitates submission, adjudication, remittance and
verification transactions for a variety of managed care functions such as
claims, capitation, authorizations, referrals, eligibility, enrollment and
benefits. The eHealth Operations Management service provides a secure, 24 hours
a day, seven days a week environment for web hosting of transactions and
multi-media content. And, the Online Drug Store, which is currently in
development, offers an online drug store facilitating the purchase of brand-name
pharmaceutical and personal healthcare products, as well as access to decision
making resources.
Visual 19: Technology
Imagery: Border and Company logo. See Description of Artwork on page 105
of the Registration Statement for a description of the image located on page 38
of the prospectus.
Visual Text: Title: Technology
Script: (Lorine Sweeney) (see "Business -- Technology"): We believe that
the XCare.net platform is the first XML-based infrastructure using the Topic
Navigation Mapping standard that is specifically tailored to meet the demands of
health care industry participants. Unlike the current Internet standard,
hypertext mark-up language, or HTML, XML in combination with Topic Navigation
Mapping allows a higher degree of flexibility for customized data exchange
between health care participants. We expect XML to be a predominant protocol for
exchanging multimedia data for information exchange and electronic commerce in
the future. Topic Navigation Mapping provides a standard format for indexing and
structuring the XML formatted content. We call the resulting indices and
structures Topic Maps. We take advantage of the benefits of both XML and Topic
Navigation Mapping technologies to process data previously trapped in legacy
systems, allow for automation of health care processes and integrate a wide
variety of health care data including audio, video and text. We use a set form
of software applications,
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known as brokering components, to find, integrate and present relevant,
customized information to individual users. Let's walk through the diagram to
see how this technology actually works. In step one, a user initiates a request
for information. In step two, the Context Broker describes the user's request
and passes it to the Semantic Broker. In step three, the Semantic Broker queries
the Logic Fabric for the transaction that will satisfy the request. In step
four, the Semantic Broker dispatches the Service Broker to obtain information
from the Internet. In step five, information is returned to the Context Broker,
which presents the information in a customized view for users.
Visual 20: Customers
Imagery: Border and Company logo. Three vertical rectangles with the titles
"Health Care Providers", "Health Care Payers" and "Health Care Suppliers."
Visual Text: Title: Customers. Rectangles include captions listing the
following customers:
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS HEALTH CARE PAYERS HEALTH CARE SUPPLIERS
- --------------------------------------------------------------------------------------------------------
- - American Medical Pathways, - Advica Health Resources - ADIS International Ltd
Inc. - Employers Mutual, Inc., a - Digital Medical Registrar
- - Asthma Management Services, wholly owned subsidiary of
Inc. Florida Physicians Insurance
- - Methodist Care, Inc. Company and Brokerage Services
- - Provider Services Incorporated Incorporated, a division of
- - Quest Diagnostics Incorporated Employers Mutual, Inc.
- Kaiser Permanente
- Provider Services, Inc.
</TABLE>
- --------------------------------------------------------------------------------
Script: (Lorine Sweeney) (see "Business -- Customers" and "-- Our
Solution"): The following is a representative list of our customers that have
purchased applications or services. Customers and vendors can utilize our
Solution Channels as distribution channels for existing as well as new products
and services that allow them to generate new sources of incremental revenue. For
example, we package our eXtensible CARE applications system with medical
management and third party administration services provided by Employers Mutual,
Inc. These transactions are then distributed to other members of the XCare.net
community such as American Medical Pathways, a subsidiary of American Medical
Response.
Visual 21: Competition
Imagery: Border and Company logo. Page with three arrows on the left of the
page pointing to the right.
Visual Text: Title: Competition. Subheading: "Potential competitors fall
into three primary categories." To the right of the first arrow will appear the
caption, "Health care Internet companies." To the right of the second arrow will
appear the caption, "Traditional health care information system vendors." To the
right of the third arrow will appear the caption, "Traditional managed care
information system and outsourcing vendors."
Script: (Lorine Sweeney) (see "Business -- Competition"): Potential
competitors fall into three primary categories. First, health care Internet
companies focused on providing connectivity and transactions within
business-to-business and business-to-consumer frameworks. Second, traditional
health care information system vendors who seek to extend the services of their
core products using Internet-based technology. And third, traditional managed
care information system and outsourcing vendors who generally sell legacy
systems and are focusing on extending the services of their core products to the
Internet.
And with that, I will turn it over to Peter for an overview of our
financial results. Peter . . .
Visual 22: Financial Summary
Imagery: Border and Company logo. Selected Quarterly results of Operations
(March 21, 1998 -- June 30, 1999).
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Visual Text: Title: Financial Summary. "Quarterly Results of Operations"
table.
Script: (Peter Cheesbrough) (See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Overview" and "-- Quarterly
Results of Operations"):
We commenced operations in March 1989, but we did not begin to focus on
Internet-based health care solutions until mid-1998. We have historically
derived a significant portion of revenue from sales of mainframe and
client-server software for managed health care systems and from providing
services to health care organizations seeking to outsource administrative
functions. We intend to derive an increasing portion of our future revenue from
our Internet-based applications, services and product offerings. Accordingly, we
believe that our historical financial results are not necessarily indicative of
our future financial performance.
We have experienced quarterly fluctuations in our operating and financial
results due to the timing and relative size of new custom software development
projects, cancellations of contracts, and fluctuations in costs, including
personnel, equipment and facilities costs. We expect quarterly results to
fluctuate in the future due to the timing and introduction of new applications
and services and other market factors.
The following table sets forth unaudited statement of operations data for
each of the six quarters ended June 30, 1999. This information has been derived
from our unaudited financial statements. These unaudited quarterly results
should be read in conjunction with the financial statements and notes thereto
appearing elsewhere in the prospectus.
Revenue increased significantly during the quarter ended March 31, 1999 due
to the progress made in completing several custom software development projects.
Revenue for the quarter ended June 30, 1999 decreased relative to the prior
quarter as limited working capital available during the six months ended June
30, 1999 resulted in a reduction in our sales force personnel and other
promotional marketing activities, which impeded our ability to generate new
sales leads.
Cost of revenue as a percentage of revenue has varied from quarter to
quarter due to fluctuations in quarterly revenue and changes in associated
personnel costs. During the quarter ended March 31, 1999, cost of revenue
decreased as a percentage of revenue due to increased revenue from the
completion of several custom software development projects during the quarter.
During the quarter ended June 30, 1999, the increase in cost of revenue as a
percentage of revenue reflects the decreased revenue recognized during the
quarter, the amortization of purchased software and the transfer of certain
personnel from research and development to custom software development projects.
During the quarter ended December 31, 1998, general and administrative
expense increased in absolute dollars and as a percentage of revenue due to an
approximate $360,000 loss on disposal of fixed assets. During the quarter ended
March 31, 1999, sales and marketing and general administrative expense declined
in both dollars and as a percentage of revenue due to substantial reductions of
personnel costs.
Research and development expenses sharply declined following the quarter
ended March 31, 1998 due to reduction of research and development personnel
caused by limited working capital.
Lorine . . .
Visual 23: End of Presentation
Imagery: See Description of Artwork on page 106 of the Registration
Statement for a description of the image located on the inside front cover of
the prospectus.
Script: (Lorine Sweeney): We hope that this presentation was helpful in
understanding the business model of XCare.net and the strategy that our
management team intends to execute. We encourage you to refer back to the
prospectus for additional support and disclosure as well as to take a look at
the "Risk Factors" in detail. Again, thank you for your interest in XCare.net.
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IALTERNATIVE PAGE i FOR E*OFFERING ONLINE PROSPECTUSJ
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary..................................................... 1
Risk Factors................................................ 6
Use of Proceeds............................................. 18
Dividend Policy............................................. 18
Capitalization.............................................. 19
Dilution.................................................... 20
Selected Financial Data..................................... 21
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 23
Business.................................................... 32
Management.................................................. 50
Certain Transactions........................................ 58
Principal Stockholders...................................... 61
Description of Capital Stock................................ 64
Shares Eligible for Future Sale............................. 67
Underwriting................................................ 69
Legal Matters............................................... 71
Change in Independent Accountants........................... 71
Experts..................................................... 71
Available Information....................................... 72
Index to Financial Statements............................... F-1
Appendix: "Meet the Management" Presentation................ A-1
Iclick here for "Meet the Management" PresentationJ
</TABLE>
------------------------------
XCare.net is a trademark of XCare.net, Inc. Trade names, trademarks and
service marks of other companies appearing in this prospectus are the property
of the respective holders.
A-10
<PAGE> 105
DESCRIPTION OF ARTWORK
[Artwork on page 33]
In the middle of the artwork are pictures of an envelope, with the caption
"U.S. Mail" on it, a telephone, a fax machine, with the caption "Fax" on it,
and a computer with the caption "Legacy System" on it.
Surrounding these pictures are pictures depicting health care participants
as follows:
On the top left is a picture of a person, with the caption "Employer" to
the left of it. Under the caption are the phrases "Enroll employees," "Select
plans," "Choose benefit levels" and "maintain eligibility data."
On the bottom left is a picture of a person with the caption "Consumer" to
the left of it. Under the caption are the phrases "Compare plans," "Choose
physicians" and "Submit claims."
On the bottom center is a picture of a person with a stethoscope holding a
piece of paper with "Rx" written on it and with the caption "Providers
(Physicians' Offices, Hospitals, Clinics)" below and to the left of the
picture. Above the caption are the phrases "Verify patient eligibility,"
"Collect patient lists," "Order tests and x-rays," "Receive and interpret
tests," "Render diagnoses," "Issue referrals" and "Submit claims to payers."
On the bottom right is a picture of a laboratory flask and test tube with
the caption "Suppliers (Pharmacies, Clinical Labs, Pharmaceutical Companies,
Device Mfgs. and Distributors)" above and the right of the picture. Underneath
the caption are the phrases "Analyze and process patient samples and tests,"
"Provide test results," "Fill prescriptions" and "Submit claims to payers."
On the top right is a picture of an office building with the caption
"Payers (HMOs, PPOs, TPAs, Insurers)" above and to the rights of it. Underneath
the caption are the phrases "Establish protocols and reimbursement policy,"
"Manage referrals" and "Process claims."
Lines run from each of the captions to the pictures of the envelope,
telephone, fax machine and the computer and between each of these pictures.
[Artwork on p.38]
On the top left of the artwork is a picture of a person with a stethoscope
holding a piece of paper with "Rx" written on it. To the right of the picture
is the caption "1. User initiates request for information."
<PAGE> 106
To the right of this picture is a picture of a wall with two openings with
a conveyer belt running away from and into the openings in the wall.
The conveyer belt running away from the wall has two pictures of pieces of
paper on it. The first piece of paper is on the edge of the conveyer belt next
to the wall and has "Rx" written on it. The second piece of paper is in the
middle of the conveyer belt and has a graphic representing data. Standing next
to the conveyer belt is a picture of a person holding a piece of paper with "Rx"
written on it and shown to be saying "XML." Connected by a line to this person
is a caption placed underneath the conveyer belt which states "2. The Context
Broker describes the user's request and passes it to the Semantic Broker."
The conveyer belt runs into a six level structure with the caption "Topic
Navigation Mapping" on it. The levels have captions on them which alternate
between "Logic" and "Data." Connected by a line from the structure is a caption
to the right of the structure stating "3. The Semantic Broker queries the Logic
Fabric for the transaction that will satisfy the request."
On top of the structure is a picture of a robot with the caption "Semantic
Broker" on it show to be taking a piece of paper with "Rx" on it from the
picture of the person next to the conveyer belt.
The conveyer belt running into the opening in the wall begins at the
six-level structure. On the conveyer belt at the end next to the wall is a
picture of an open box with the word "XML" written on the inside of the box.
Standing next to the box to the side of the conveyer belt is a picture of a
person with the caption "5. Information is returned to the Context Broker, which
presents the information in a customized view for users."
Above this conveyer belt and to the right is a picture of a cloud with
"WWW" written on it. Conveyer belts run into and out of the cloud. The robot on
top of the structure is show to be placing pieces of paper on the conveyer belt
running into the cloud. The pieces of paper have graphics depicting data on
them. The conveyer belt running out of the cloud as a picture of a stack of
paper on it. In between these to conveyer belts is a picture of a person.
Connected to this person by a line a caption stating "4. The Semantic Broker
dispatches the Service Broker to obtain information from the Internet."
[Artwork on inside front cover]
There are three pictures, one on the far left is entitled "Solution
Model", one in the middle entitled "Technology Model", and one on the far right
entitled "Business Model".
"Solution Model"
<PAGE> 107
On the top left of the artwork is a picture of a person standing with the
word "Employer" written above the person. On the top right is a picture of a
person holding a large pill with the word "Consumer" written above the person.
On the bottom left is a picture of a building, with the words "Health Plan"
written above it. On the bottom right is a picture of a person wearing a
stethoscope and holding a piece of paper with "Rx" written on it. Above this
person is the word "Provider."
Connecting the pictures of the three person and the building is an
x-shape, with the words, "Community," "Connectivity," and "Commerce" in the
middle, the words "An eCommerce paradigm for services delivery..." above the
x-shape and the words "...Integrating best of breed practices" below the
x-shape. On the top left part of the x-shape is a rectangle, inside of which is
a smaller picture of the building and a smaller picture of the person holding
the pill. Below that and closer to the center of the x-shape are two smaller
rectangles on top of an arrow pointing toward the center of the x-shape. Inside
the two smaller rectangles are a picture of a person holding a pill, and a
question mark.
On the top right of the x-shape is a rectangle, inside of which is a
smaller picture of the building, and a smaller picture of the person holding
the pill. Below that and closer to the center of the x-shape is a smaller
rectangle on top of an arrow pointing toward the center of the x-shape. Inside
the rectangle is a question mark.
On the bottom left of the x-shape is a rectangle, inside of which is a
smaller picture of the person standing, the person holding the pill and the
person wearing the stethoscope. Above that and closer to the center of the
x-shape are two smaller rectangles on top of an arrow pointing toward the
center of the x-shape. Inside the two rectangles are a picture of a pill and a
picture of a person holding a pill.
On the bottom right of the x-shape is a rectangle, inside of which is a
smaller picture of the building and a smaller picture of the person wearing a
stethoscope. Above that and closer to the center of the x-shape are two smaller
rectangles on top of an arrow pointing toward the center of the circle. Inside
the two rectangles are an "Rx" and a cross-shape.
"Technology Model"
On the top left of the artwork is a picture of a person with a
stethoscope. To the right of the picture is the caption "1. User."
To the right of this picture is a picture of a wall with two openings with
a conveyer belt running away from and into the openings in the wall.
The conveyer belt running away from the wall has two pictures of pieces of
paper on it. The first piece of paper is on the edge of the conveyer belt next
to the wall and has "Rx" written on it. The second piece of paper is in the
middle of the conveyer belt and has a graphic representing data. Standing next
to the conveyer belt is a picture of a
<PAGE> 108
person holding a piece of paper with "Rx" written on it and shown to be saying
"XML." Connected by a line to this person is a caption placed underneath the
conveyor belt which states "2. The Context Broker."
This conveyor belt runs into a six level structure with the caption "Topic
Navigation Mapping" on it. The levels have captions on them which alternate
between "Logic" and "Data." Connected by a line from the structure is a caption
to the right of the structure stating "3. The Semantic Broker."
On top of the structure is a picture of a robot with the caption "Semantic
Broker" on it shown to be taking a piece of paper with "Rx" on it from the
picture of the person next to the conveyor belt.
The conveyor belt running into the opening in the wall begins at the
structure. On the conveyor belt at the end next to the wall is a picture of an
open box with the word "XML" written on the inside of the box. Standing next to
the box to the side of the conveyor belt is a picture of a person with the
caption "5. Context Broker/Personalization."
Above this conveyor belt and to the right is a picture of a cloud with
"WWW" written on it. Conveyor belts run into and out of the cloud. The robot on
top of the structure is shown to be placing pieces of paper on the conveyor belt
running into the cloud. The pieces of paper have graphics depicting data on
them. The conveyor belt running out of the cloud has a picture of a stack of
paper on it. In between these two conveyor belts is a picture of a person.
Connected to this person by a line is a caption stating "4. The Semantic
Broker/Service."
"Business Model"
This picture is an x-shape, with a round, ball-shape in the middle, above
which is the caption "Applications, Products and Services." Connected to the
large ball-shape in the middle are five smaller ball-shapes. On the upper left
of the x-shape is a ball-shape, sitting above an arrow pointing toward the
center of the x-shape, with the caption "Xcare.net Component" to the left of
it. Connected to this ball-shape is one smaller ball-shape. Below that and
closer to the center of the x-shape is another ball-shape with the caption
"Customer Partner Component" to the left of it. Attached to this ball-shape are
two smaller ball-shapes. Below that and closer to the center of the x-shape are
two smaller ball-shapes with no captions.
Coming out of the large ball-shape in the center is an arrow heading
toward the upper right of the x-shape. On top of the arrow is another ball-shape
with five smaller ball-shapes connected to it. Further up the upper right axis
of the x-shape is another ball-shape with five smaller balls connected to it,
inside a cylinder shape, and a smaller cylinder shape through which an arrow
points to a picture of a person.
<PAGE> 109
Coming out of the large ball-shape in the center is an arrow pointing
toward the lower right of the x-shape. On the top of the arrow is a ball-shape
with five smaller ball-shapes connected to it.
Coming toward the large ball-shape in the center from the lower left of
the x-shape is a ball-shape with two smaller ball-shapes connected to it, with
the caption "Vendor Partner Component" to the left. To the right of that and
closer to the center of the x-shape is one small ball-shape.
To the left of the x-shape is the caption "Component Partners." To the
right of the x-shape is the caption "Solution Channels."
<PAGE> 110
LOGO
<PAGE> 111
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the registrant in connection
with the sale of common stock being registered. All amounts are estimates except
the registration fee and the NASD filing fee.
<TABLE>
<CAPTION>
AMOUNT
TO BE PAID
----------
<S> <C>
Registration Fee............................................ 16,680
NASD Fee.................................................... 6,500
Nasdaq Listing Fee.......................................... *
Legal Fees and Expenses..................................... *
Accounting Fees and Expenses................................ *
Blue Sky Fees and Expenses.................................. 3,000
Transfer Agent Fees......................................... *
Miscellaneous............................................... *
----------
Total.................................................. $
==========
</TABLE>
- -------------------------
* To be filed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by Section 145 of the Delaware General Corporation Law, the
registrant's certificate of incorporation includes a provision that eliminates
the personal liability of its directors for monetary damages for breach or
alleged breach of their duty of care. In addition, as permitted by Section 145
of the Delaware General Corporation Law, the bylaws of the registrant provide
that: (1) the registrant is required to indemnify its directors and executive
officers and persons serving in such capacities in other business enterprises
(including, for example, subsidiaries of the registrant) at the registrant's
request, to the fullest extent permitted by Delaware law, including in those
circumstances in which indemnification would otherwise be discretionary; (2) the
registrant may, in its discretion, indemnify employees and agents in those
circumstances where indemnification is not required by law; (3) the registrant
is required to advance expenses, as incurred, to its directors and executive
officers in connection with defending a proceeding (except that it is not
required to advance expenses to a person against whom the registrant brings a
claim for breach of the duty of loyalty, failure to act in good faith,
intentional misconduct, knowing violation of law or deriving an improper
personal benefit; (4) the rights conferred in the bylaws are not exclusive, and
the registrant is authorized to enter into indemnification agreements with its
directors, executive officers and employees; and (5) the registrant may not
retroactively amend the bylaw provisions in a way that it adverse to such
directors, executive officers and employees.
The registrant's policy is to enter into indemnification agreements with
each of its directors and executive officers that provide the maximum indemnity
allowed to directors and executive officers by Section 145 of the Delaware
General Corporation Law and the bylaws, as well as certain additional procedural
protections. In addition, such indemnity agreements provide that directors and
executive officers will be indemnified to the fullest possible extent not
prohibited by law against all expenses (including attorney's fees) and
settlement amounts paid or incurred by them in any action or proceeding,
including any derivative action by or in the right of the registrant, on account
of their services as directors or executive officers of the registrant or as
directors or officers of any other company or enterprise when they are serving
in such capacities at the request of the registrant. The registrant will not be
obligated pursuant to the indemnity agreements to indemnify or advance expenses
to an indemnified party with respect to proceedings or claims initiated by the
indemnified party and not by
II-1
<PAGE> 112
way of defense, except with respect to proceedings specifically authorized by
the registrant's board of directors or brought to enforce a right to
indemnification under the indemnity agreement, the registrant's bylaws or any
statute or law. Under the agreements, the registrant is not obligated to
indemnify the indemnified party (1) for any expenses incurred by the indemnified
party with respect to any proceeding instituted by the indemnified party to
enforce or interpret the agreement, if a court of competent jurisdiction
determines that each of the material assertions made by the indemnified party in
such proceeding was not made in good faith or was frivolous; (2) for any amounts
paid in settlement of a proceeding unless the registrant consents to such
settlement; (3) with respect to any proceeding brought by the registrant against
the indemnified party for willful misconduct, unless a court determines that
each of such claims was not made in good faith or was frivolous; (4) on account
of any suit in which judgment is rendered against the indemnified party for an
accounting of profits made from the purchase or sale by the indemnified party of
securities of the registrant pursuant to the provisions of sec. 16(b) of the
Securities Exchange Act of 1934 and related laws; (5) on account of the
indemnified party's conduct which is finally adjudged to have been knowingly
fraudulent or deliberately dishonest, or to constitute willful misconduct or a
knowing violation of the law; (6) an account of any conduct from which the
indemnified party derived an improper personal benefit; (7) on account of
conduct the indemnified party believed to be contrary to the best interests of
the registrant or its stockholders; (8) on account of conduct that constituted a
breach of the indemnified party's duty of loyalty to the registrant or its
stockholders; or (9) if a final decision by a court having jurisdiction in the
matter shall determine that such indemnification is not lawful.
The indemnification provision in the bylaws and the indemnification
agreements entered into between the registrant and its directors and executive
officers, may be sufficiently broad to permit indemnification of the
registrant's officers and directors for liabilities arising under the 1933 Act.
Reference is made to the following documents filed as exhibits to this
registration statement regarding relevant indemnification provisions described
above and elsewhere herein:
<TABLE>
<CAPTION>
EXHIBIT
DOCUMENT NUMBER
-------- -------
<S> <C>
Form of Underwriting Agreement.............................. 1.1
Certificate of Incorporation of Registrant, as amended...... 3.1
Form of Amended and Restated Certificate of Incorporation of
Registrant, to be filed upon closing of the offering...... 3.2
Bylaws of Registrant........................................ 3.3
Form of Indemnification Agreement entered into by the
Registrant with each of its directors and executive
officers.................................................. 4.1
</TABLE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since October 1, 1996, the Registrant has issued and sold the following
securities:
(a) From May 17, 1999 to September 16, 1999, XCare.net sold in the
aggregate of 1,676,625 shares of unregistered common stock to sixteen
directors, officers and employees at a price of $0.025 per share, for
aggregate consideration of $41,915.63. Such shares were sold pursuant to
the exercise of options granted by the board. As to each director, officer
and employee of XCare.net who was issued such securities, XCare.net relied
upon Rule 701 of the Securities Act of 1933. Each such person purchased
securities of XCare.net pursuant to a written contract between such person
and XCare.net. In addition, XCare.net met the conditions imposed under Rule
701(b).
(b) On March 12, 1997, XCare.net sold in the aggregate 2,450,000
shares of unregistered Series A Preferred Stock at a price per share of
$2.86 to certain investors for aggregate cash consideration of $7,007,000.
XCare.net relied upon Section 4(2) of the Securities Act in connection with
the sale of these shares. Each investor who was not an accredited investor
represented to
II-2
<PAGE> 113
XCare.net that he or she had such knowledge and experience in financial and
business matters that he or she was capable of evaluating the merits and
risks of the investment.
(c) In June and July 1999, XCare.net sold in the aggregate 63,053,144
shares of unregistered Series B Preferred Stock at a price per share of
$0.27 to certain investors for aggregate consideration of $17,024,348.88,
including an aggregate of $3,204,348.93 representing the principal and
interest of convertible promissory notes converted into shares of Series B
Preferred Stock. XCare.net relied upon Regulation D, Rule 506, of the
Securities Act in connection with the sale of these shares. The sale of the
Series B Preferred was made in compliance with all of the terms of Rules
501 and 502 of Regulation D, there were no more than 35 investors (as
calculated pursuant to Rule 501(e) of Regulation D) and each investor who
was not an accredited investor represented to the Registrant that he or she
had such knowledge and experience in financial and business matters that he
or she was capable of evaluating the merits and risks of the investment.
(d) From December 29, 1997 to November 20 , 1998, XCare.net issued an
aggregate of 15 convertible promissory notes to existing investors for
aggregate cash consideration of $2,765,000. On June 4, 1999, the principal
and accrued interest due on these convertible promissory notes were
converted into an aggregate of 11,867,959 shares of Series B Preferred
Stock. XCare.net relied on Section 4(2) of the Securities Act in connection
with the sales of these securities. Each investor who was not an accredited
investor represented to XCare.net that he or she had such knowledge and
experience in financial and business matters that he or she was capable of
evaluating the merits and risks of the investment.
(e) From December 29, 1997 to June 9, 1998, XCare.net issued an
aggregate of 13 warrants to existing investors for the purchase of an
aggregate of 437,062 shares of Series A Preferred Stock at an exercise
price per share of $0.25. Each warrant expires 5 years from the date of
issuance or upon the closing of our initial public offering, if earlier.
XCare.net relied on Section 4(2) of the Securities Act in connection with
the sales of these securities. Each investor who was not an accredited
investor represented to XCare.net that he or she had such knowledge and
experience in financial and business matters that he or she was capable of
evaluating the merits and risks of the investment.
(f) On March 12, 1997 and November 20, 1998, XCare.net issued an
aggregate of 3 warrants to existing investors and a consultant for the
purchase of an aggregate of 2,122,500 shares of common stock at exercise
prices per share ranging from $0.01 to $3.15. The warrant issued on March
12, 1997 expires on March 12, 2005 or upon the closing of our initial
public offering, if earlier, and the 2 warrants issued on November 20, 1998
expire on November 20, 2003 or upon the closing of our initial public
offering, if earlier. XCare.net relied on Section 4(2) of the Securities
Act in connection with the sales of these securities. Each investor who was
not an accredited investor represented to XCare.net that he or she had such
knowledge and experience in financial and business matters that he or she
was capable of evaluating the merits and risks of the investment.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<S> <C>
1.1* Form of Underwriting Agreement.
3.1* Amended and Restated Certificate of Incorporation of
Registrant.
3.2* Form of Amended and Restated Certificate of Incorporation of
Registrant to be filed upon the closing of the offering made
under the Registration Statement.
3.3 Bylaws of Registrant.
4.1* Form of Registrant's Common Stock Certificate.
4.2 Second Amended and Restated Registration Rights Agreement,
dated as of July 27, 1999, between the Registrant and the
parties named therein.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
</TABLE>
II-3
<PAGE> 114
<TABLE>
<S> <C>
10.1 Form of Indemnification Agreement entered into by Registrant
with each of its directors and executive officers.
10.2 Amended and Restated 1997 Stock Option Plan.
10.3 1999 Employee Stock Purchase Plan and related agreements.
10.4 1999 Director Option Plan and related agreements.
10.5** Licensing Agreement, dated as of December 30, 1998, between
the Registrant and Match Health Care Services, Ltd.
10.6** Master Licensing Agreement, dated February 4, 1999, between
the Registrant and Methodist Care, Inc.
10.7 Services Agreement Subcontract, dated December 17, 1998,
between the Registrant and PRC, Inc.
10.8** Master Licensing, Processing and Services Agreement, dated
February 16, 1997, between the Registrant and
Healthscope/United, Inc.
10.9** System Management Contract, dated April 1, 1999, between the
Registrant and Advica Health Resources.
10.10** Administration Services Agreement, dated March 29, 1999,
between the Registrant and American Medical Pathways, Inc.
10.11** Processing and Services Agreement, dated January 1, 1997,
between the Registrant and Brokerage Services Incorporated.
10.12** Addendum to Processing and Services Agreement, dated July
25, 1997, between the Registrant and Brokerage Services
Incorporated.
10.13** Supplemental Agreement, dated December 24, 1997, between the
Registrant and Brokerage Services Incorporated.
10.14** Employers Mutual, Inc. Assignment Letter, dated August 5,
1999, between the Registrant and Employers Mutual, Inc.
10.15** Master License and Services Agreement, dated June 24, 1998,
between Registrant and Employers Mutual, Inc.
10.16** Contractor Agreement, dated February 19, 1999, between the
Registrant and Employers Mutual, Inc.
10.17** Master Licensing and Services Agreement, dated February 20,
1998, between the Registrant and Provider Services,
Incorporated.
10.18** Contractor Agreement, dated April 27, 1999, between the
Registrant and Provider Services, Incorporated.
10.19** Master Licensing and Services Agreement, dated August 24,
1998, between the Registrant and Quest Diagnostics
Incorporated.
10.20 Offer letter, dated September 22, 1997, with Lorine Sweeney.
10.21 Offer letter, dated December 12, 1997, with Mark Rangell.
10.22 Offer letter, dated June 12, 1998, with Tammy McLaren.
10.23 Sublease, dated as of May 11, 1998, by and between the
Registrant and Echo Bay Management Corp.
10.24 Sub-sublease Agreement, dated as of December 18, 1998, by
and between Registrant and Project Discovery, Inc.
10.25 Office lease, dated May 2, 1997, between Registrant and MBL
Life Assurance Corporation.
10.26 Office lease, dated September 29, 1995 between Registrant
and MBL Life Assurance Corporation.
10.27** Consulting Agreement, dated June 10, 1998, by and between
Registrant and ADIS International Ltd.
10.28** Consulting Agreement, dated September 16, 1998, by and
between Registrant and ADIS International Ltd.
16.1 Letter regarding change in certifying accountant.
23.1* Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation (included in Exhibit 5.1).
23.2 Consent of PricewaterhouseCoopers, LLP.
24.1 Power of Attorney (See page II-7).
27.1 Financial Data Schedule
</TABLE>
II-4
<PAGE> 115
- -------------------------
* To be supplied by amendment.
+ Confidential treatment has been requested with respect to certain portions of
this exhibit. Omitted portions have been filed separately with the Securities
and Exchange Commission.
(b) FINANCIAL STATEMENT SCHEDULES
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
ITEM 17. UNDERTAKINGS
The undersigned 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.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the provisions referenced in Item 14 of this registration Statement
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 hereunder, 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 that:
(1) For purposes of determining any liability under the Act, 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 Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Act, 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.
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<PAGE> 116
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement on Form S-1 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Englewood,
State of Colorado, on this 2nd day of November 1999.
XCARE.NET, INC.
By: /s/ LORINE R. SWEENEY
---------------------------------------
Lorine R. Sweeney
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints, jointly and severally, Lorine R. Sweeney and
Peter Cheesbrough and each one of them, his true and lawful attorney-in-fact and
agents, each with full power of substitution, for his and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this registration statement, and any registration
statement related to the offering contemplated by this registration statement
that is to be effective upon filing pursuant to Rule 462(b) under the Securities
Act of 1933 and to file the same, with all exhibits thereto and all other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as she might or could do in person, hereby ratifying and confirming all
that each of said attorneys-in-fact and agents or any of them, or his or their
substitute or substitutes, may lawfully do or cause to be done or by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ LORINE R. SWEENEY President and Chief November 2, 1999
- ----------------------------------------------------- Executive Officer
Lorine R. Sweeney (Principal Executive
Officer)
/s/ PETER H. CHEESBROUGH Senior Vice President, November 2, 1999
- ----------------------------------------------------- Finance and Chief Financial
Peter H. Cheesbrough Officer (Principal
Financial and Accounting
Officer)
/s/ JEFFREY M. KRAUSS Chairman of the Board November 2, 1999
- -----------------------------------------------------
Jeffrey M. Krauss
/s/ J. ANDREW COWHERD Director November 2, 1999
- -----------------------------------------------------
J. Andrew Cowherd
/s/ JAMES B. HOOVER Director November 2, 1999
- -----------------------------------------------------
James B. Hoover
/s/ DANIEL J. MITCHELL Director November 2, 1999
- -----------------------------------------------------
Daniel J. Mitchell
</TABLE>
II-6
<PAGE> 117
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ WILLIAM F. REILLY Director November 2, 1999
- -----------------------------------------------------
William F. Reilly
/s/ ROBERT TSAO Director November 2, 1999
- -----------------------------------------------------
Robert Tsao
</TABLE>
II-7
<PAGE> 118
EXHIBIT INDEX
<TABLE>
<S> <C>
1.1* Form of Underwriting Agreement.
3.1* Amended and Restated Certificate of Incorporation of
Registrant.
3.2* Form of Amended and Restated Certificate of Incorporation of
Registrant to be filed upon the closing of the offering made
under the Registration Statement.
3.3 Bylaws of Registrant.
4.1* Form of Registrant's Common Stock Certificate.
4.2 Second Amended and Restated Registration Rights Agreement,
dated as of July 27, 1999, between the Registrant and the
parties named therein.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
10.1 Form of Indemnification Agreement entered into by Registrant
with each of its directors and executive officers.
10.2 Amended and Restated 1997 Stock Option Plan.
10.3 1999 Employee Stock Purchase Plan and related agreements.
10.4 1999 Director Option Plan and related agreements.
10.5** Licensing Agreement, dated as of December 30, 1998, between
the Registrant and Match Health Care Services, Ltd.
10.6** Master Licensing Agreement, dated February 4, 1999, between
the Registrant and Methodist Care, Inc.
10.7 Services Agreement Subcontract, dated December 17, 1998,
between the Registrant and PRC, Inc.
10.8** Master Licensing, Processing and Services Agreement, dated
February 16, 1997, between the Registrant and
Healthscope/United, Inc.
10.9** System Management Contract, dated April 1, 1999, between the
Registrant and Advica Health Resources.
10.10** Administration Services Agreement, dated March 29, 1999,
between the Registrant and American Medical Pathways, Inc.
10.11** Processing and Services Agreement, dated January 1, 1997,
between the Registrant and Brokerage Services Incorporated.
10.12** Addendum to Processing and Services Agreement, dated July
25, 1997, between the Registrant and Brokerage Services
Incorporated.
10.13** Supplemental Agreement, dated December 24, 1997, between the
Registrant and Brokerage Services Incorporated.
10.14** Employers Mutual, Inc. Assignment Letter, dated August 5,
1999, between the Registrant and Employers Mutual, Inc.
10.15** Master License and Services Agreement, dated June 24, 1998,
between Registrant and Employers Mutual, Inc.
10.16** Contractor Agreement, dated February 19, 1999, between the
Registrant and Employers Mutual, Inc.
10.17** Master Licensing and Services Agreement, dated February 20,
1998, between the Registrant and Provider Services,
Incorporated.
10.18** Contractor Agreement, dated April 27, 1999, between the
Registrant and Provider Services, Incorporated.
10.19** Master Licensing and Services Agreement, dated August 24,
1998, between the Registrant and Quest Diagnostics
Incorporated.
10.20 Offer letter, dated September 22, 1997, with Lorine Sweeney.
10.21 Offer letter, dated December 12, 1997, with Mark Rangell.
10.22 Offer letter, dated June 12, 1998, with Tammy McLaren.
10.23 Sublease, dated as of May 11, 1998, by and between the
Registrant and Echo Bay Management Corp.
</TABLE>
<PAGE> 119
<TABLE>
<S> <C>
10.24 Sub-sublease Agreement, dated as of December 18, 1998, by
and between Registrant and Project Discovery, Inc.
10.25 Office lease, dated May 2, 1997, between Registrant and MBL
Life Assurance Corporation.
10.26 Office lease, dated September 29, 1995 between Registrant
and MBL Life Assurance Corporation.
10.27** Consulting Agreement, dated June 10, 1998, by and between
Registrant and ADIS International Ltd.
10.28** Consulting Agreement, dated September 16, 1998, by and
between Registrant and ADIS International Ltd.
16.1 Letter regarding change in certifying accountant.
23.1* Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation (included in Exhibit 5.1).
23.2 Consent of PricewaterhouseCoopers, LLP.
24.1 Power of Attorney (See page II-7).
27.1 Financial Data Schedule.
</TABLE>
- -------------------------
* To be supplied by amendment.
** Confidential treatment has been requested with respect to certain portions of
this exhibit. Omitted portions have been filed separately with the Securities
and Exchange Commission. To be supplied by amendment.
<PAGE> 1
EXHIBIT 3.3
BYLAWS OF
XCARE.NET, INC.
(a Delaware Corporation)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I -- CORPORATE OFFICES.........................................................................1
1.1 REGISTERED OFFICE....................................................................1
1.2 OTHER OFFICES........................................................................1
ARTICLE II -- MEETINGS OF STOCKHOLDERS.................................................................1
2.1 PLACE OF MEETINGS....................................................................1
2.2 ANNUAL MEETING.......................................................................1
2.3 SPECIAL MEETING......................................................................2
2.4 NOTICE OF STOCKHOLDERS' MEETINGS.....................................................2
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS......................2
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE.........................................3
2.7 QUORUM...............................................................................3
2.8 ADJOURNED MEETING; NOTICE............................................................4
2.9 VOTING...............................................................................4
2.10 WAIVER OF NOTICE.....................................................................4
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING...........................................5
2.12 PROXIES..............................................................................5
2.13 ORGANIZATION.........................................................................5
2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE................................................6
ARTICLE III -- DIRECTORS...............................................................................6
3.1 POWERS...............................................................................6
3.2 NUMBER OF DIRECTORS..................................................................6
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS.............................................6
3.4 RESIGNATION AND VACANCIES............................................................7
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE.............................................7
3.6 REGULAR MEETINGS.....................................................................7
3.7 SPECIAL MEETINGS; NOTICE.............................................................7
3.8 QUORUM...............................................................................8
3.9 WAIVER OF NOTICE.....................................................................8
3.10 ADJOURNMENT..........................................................................8
3.11 NOTICE OF ADJOURNMENT................................................................8
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING....................................8
3.13 FEES AND COMPENSATION OF DIRECTORS...................................................9
</TABLE>
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<PAGE> 2
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
3.14 APPROVAL OF LOANS TO OFFICERS........................................................9
ARTICLE IV -- COMMITTEES...............................................................................9
4.1 COMMITTEES OF DIRECTORS..............................................................9
4.2 MEETINGS AND ACTION OF COMMITTEES...................................................10
4.3 COMMITTEE MINUTES...................................................................10
ARTICLE V -- OFFICERS.................................................................................11
5.1 OFFICERS............................................................................11
5.2 ELECTION OF OFFICERS................................................................11
5.3 SUBORDINATE OFFICERS................................................................11
5.4 REMOVAL AND RESIGNATION OF OFFICERS.................................................11
5.5 VACANCIES IN OFFICES................................................................11
5.6 CHAIRMAN OF THE BOARD...............................................................12
5.7 PRESIDENT...........................................................................12
5.8 VICE PRESIDENTS.....................................................................12
5.9 SECRETARY...........................................................................12
5.10 CHIEF FINANCIAL OFFICER.............................................................13
ARTICLE VI -- INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS.....................13
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS...........................................13
6.2 INDEMNIFICATION OF OTHERS...........................................................14
6.3 INSURANCE...........................................................................14
ARTICLE VII -- RECORDS AND REPORTS....................................................................15
7.1 MAINTENANCE AND INSPECTION OF RECORDS...............................................15
7.2 INSPECTION BY DIRECTORS.............................................................15
7.3 ANNUAL STATEMENT TO STOCKHOLDERS....................................................15
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS......................................15
7.5 CERTIFICATION AND INSPECTION OF BYLAWS..............................................16
ARTICLE VIII -- GENERAL MATTERS.......................................................................16
8.1 RECORD DATE FOR PURPOSES OTHER THAN
NOTICE AND VOTING...................................................................16
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS...........................................16
8.3 CORPORATE CONTRACTS AND INSTRUMENTS:
HOW EXECUTED........................................................................16
8.4 STOCK CERTIFICATES; TRANSFER; PARTLY PAID SHARES....................................17
8.5 SPECIAL DESIGNATION ON CERTIFICATES.................................................17
8.6 LOST CERTIFICATES...................................................................18
</TABLE>
-ii-
<PAGE> 3
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
8.7 TRANSFER AGENTS AND REGISTRARS......................................................18
8.8 CONSTRUCTION; DEFINITIONS...........................................................18
ARTICLE IX -- AMENDMENTS..............................................................................18
9.1 AMENDMENTS BY STOCKHOLDERS AND DIRECTORS............................................18
9.2 SUPERMAJORITY VOTE..................................................................19
</TABLE>
-iii-
<PAGE> 4
BYLAWS
OF
XCARE.NET, INC.
(a Delaware Corporation)
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE
The registered office of the corporation shall be fixed in the
certificate of incorporation of the corporation.
1.2 OTHER OFFICES
The board of directors may at any time establish branch or subordinate
offices at any place or places where the corporation is qualified to do
business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at any place within or outside
the State of Delaware designated by the board of directors. In the absence of
any such designation, stockholders' meetings shall be held at the principal
executive office of the corporation.
2.2 ANNUAL MEETING
The annual meeting of stockholders shall be held each year on a date and
at a time designated by the board of directors. In the absence of such
designation, the annual meeting of stockholders shall be held on the third
Tuesday of May in each year at 10:00 a.m. However, if such day falls on a legal
holiday, then the meeting shall be held at the same time and place on the next
succeeding full business day. At the meeting, directors shall be elected, and
any other proper business may be transacted.
<PAGE> 5
2.3 SPECIAL MEETING
Except as otherwise required by law, a special meeting of the
stockholders may be called only by the Board of Directors, the Chairman of the
Board, or the President; provided however, that if at any time no directors
remain in office, then a special meeting for the purpose of electing directors
may be called in accordance with the procedure set forth in the Bylaws. No
business may be transacted at such special meeting otherwise than as specified
in the notice of such meeting.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
All notices of meetings of stockholders shall be sent or otherwise given
in accordance with Section 2.6 of these bylaws not less than ten (10) nor more
than sixty (60) days before the date of the meeting. The notice shall specify
the place, date and hour of the meeting and (i) in the case of a special
meeting, the purpose or purposes for which the meeting is called (no business
other than that specified in the notice may be transacted) or (ii) in the case
of the annual meeting, those matters which the board of directors, at the time
of giving the notice, intends to present for action by the stockholders (but any
proper matter may be presented at the meeting for such action). The notice of
any meeting at which directors are to be elected shall include the name of any
nominee or nominees who, at the time of the notice, the board intends to present
for election.
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS
Subject to the rights of holders of any class or series of stock having
a preference over the Common Stock as to dividends or upon liquidation,
(a) nominations for the election of directors, and
(b) business proposed to be brought before any stockholder
meeting
may be made by the board of directors or proxy committee appointed by the board
of directors or by any stockholder entitled to vote in the election of directors
generally if such nomination or business proposed is otherwise proper business
before such meeting. However, any such stockholder may nominate one or more
persons for election as directors at a meeting or propose business to be brought
before a meeting, or both, only if such stockholder has given timely notice to
the secretary of the corporation in proper written form of their intent to make
such nomination or nominations or to propose such business. To be timely, such
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the corporation not less than one hundred twenty
(120) calendar days in advance of the date of the corporation's proxy statement
released to stockholders in connection with the previous year's annual meeting
of stockholders; provided, however, that in the event that no annual meeting was
held in the previous year or the date of the annual meeting has been changed by
more than thirty (30) days from the date contemplated at the time of the
previous year's proxy statement, notice by the stockholder to be timely must be
so received a reasonable time before the solicitation is made. To be in proper
form, a stockholder's notice to the secretary shall set forth:
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<PAGE> 6
(i) the name and address of the stockholder who
intends to make the nominations or propose the business and, as the case may be,
of the person or persons to be nominated or of the business to be proposed;
(ii) a representation that the stockholder is a
holder of record of stock of the corporation entitled to vote at such meeting
and, if applicable, intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice;
(iii) if applicable, a description of all arrangements
or understandings between the stockholder and each nominee and any other person
or persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder;
(iv) such other information regarding each nominee or
each matter of business to be proposed by such stockholder as would be required
to be included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission had the nominee been nominated, or intended
to be nominated, or the matter been proposed, or intended to be proposed by the
board of directors; and
(v) if applicable, the consent of each nominee to
serve as director of the corporation if so elected.
The chairman of the meeting shall refuse to acknowledge the nomination
of any person or the proposal of any business not made in compliance with the
foregoing procedure.
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of stockholders shall be given either
personally or by first-class mail or by telegraphic or other written
communication. Notices not personally delivered shall be sent charges prepaid
and shall be addressed to the stockholder at the address of that stockholder
appearing on the books of the corporation or given by the stockholder to the
corporation for the purpose of notice. Notice shall be deemed to have been given
at the time when delivered personally or deposited in the mail or sent by
telegram or other means of written communication.
An affidavit of the mailing or other means of giving any notice of any
stockholders' meeting, executed by the secretary, assistant secretary or any
transfer agent of the corporation giving the notice, shall be prima facie
evidence of the giving of such notice.
2.7 QUORUM
The holders of a majority in voting power of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum is not present or
represented at any meeting of the stockholders, then either (i) the chairman of
the meeting or (ii) the stockholders entitled to
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<PAGE> 7
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting in accordance with Section 2.7 of these bylaws.
When a quorum is present at any meeting, the vote of the holders of a
majority of the stock having voting power present in person or represented by
proxy shall decide any question brought before such meeting, unless the question
is one upon which, by express provision of the laws of the State of Delaware or
of the certificate of incorporation or these bylaws, a different vote is
required, in which case such express provision shall govern and control the
decision of the question.
If a quorum be initially present, the stockholders may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum, if any action taken is approved by a
majority of the stockholders initially constituting the quorum.
2.8 ADJOURNED MEETING; NOTICE
When a meeting is adjourned to another time and place, unless these
bylaws otherwise require, 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 corporation may transact any business
that might have been transacted at the original meeting. If the adjournment is
for more than thirty (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 of record entitled to vote at the meeting.
2.9 VOTING
The stockholders entitled to vote at any meeting of stockholders shall
be determined in accordance with the provisions of Section 2.11 of these bylaws,
subject to the provisions of Sections 217 and 218 of the General Corporation Law
of Delaware (relating to voting rights of fiduciaries, pledgors and joint
owners, and to voting trusts and other voting agreements).
Except as may be otherwise provided in the certificate of incorporation
or these bylaws, each stockholder shall be entitled to one vote for each share
of capital stock held by such stockholder with respect to any matter submitted
to a vote of the stockholders and stockholders shall not be entitled to cumulate
their votes in the election of directors.
2.10 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the certificate of incorporation or
these bylaws, a written waiver thereof, signed by the person entitled to notice,
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 a 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. Neither the
business to be transacted at, nor the purpose of, any regular or
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<PAGE> 8
special meeting of the stockholders need be specified in any written waiver of
notice unless so required by the certificate of incorporation or these bylaws.
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING
For purposes of determining the stockholders entitled to notice of any
meeting or to vote thereat, the board of directors may fix, in advance, a record
date, which shall not precede the date upon which the resolution fixing the
record date is adopted by the board of directors and which shall not be more
than sixty (60) days nor less than ten (10) days before the date of any such
meeting, and in such event only stockholders of record on the date so fixed are
entitled to notice and to vote, notwithstanding any transfer of any shares on
the books of the corporation after the record date.
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.
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
unless the board of directors fixes a new record date for the adjourned meeting,
but the board of directors shall fix a new record date if the meeting is
adjourned for more than thirty (30) days from the date set for the original
meeting.
The record date for any other purpose shall be as provided in Section
8.1 of these bylaws.
2.12 PROXIES
Every person entitled to vote for directors, or on any other matter,
shall have the right to do so either in person or by one or more agents
authorized by a written proxy signed by the person and filed with the secretary
of the corporation, but no such proxy shall be voted or acted upon after three
(3) years from its date unless the proxy provides for a longer period. A proxy
shall be deemed signed if the stockholder's name is placed on the proxy (whether
by manual signature, typewriting, telegraphic transmission, telefacsimile or
otherwise) by the stockholder or the stockholder's attorney-in-fact. The
revocability of a proxy that states on its face that it is irrevocable shall be
governed by the provisions of Section 212(e) of the General Corporation Law of
Delaware.
2.13 ORGANIZATION
The president, or in the absence of the president, the chairman of the
board, or, in the absence of the president and the chairman of the board, one of
the corporation's vice presidents, shall call the meeting of the stockholders to
order, and shall act as chairman of the meeting. In the absence of the
president, the chairman of the board, and all of the vice presidents, the
stockholders shall appoint a chairman for such meeting. The chairman of any
meeting of stockholders shall determine the order of business and the procedures
at the meeting, including such matters as the regulation of the manner of voting
and the conduct of business. The secretary of the corporation shall act as
secretary of all
-5-
<PAGE> 9
meetings of the stockholders, but in the absence of the secretary at any meeting
of the stockholders, the chairman of the meeting may appoint any person to act
as secretary of the meeting.
2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE
The officer who has charge of the stock ledger of the corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the General Corporation Law of Delaware and
any limitations in the certificate of incorporation and these bylaws relating to
action required to be approved by the stockholders or by the outstanding shares,
the business and affairs of the corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the board of directors.
3.2 NUMBER OF DIRECTORS
The board of directors shall consist of nine members. The board of
directors may increase or decrease the number of directors constituting the
board of directors upon the approval of a majority of the directors then in
office. The number of directors so determined shall be the authorized number of
directors of the corporation. No reduction of the authorized number of directors
shall have the effect of removing any director before that director's term of
office expires.
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS
Except as provided in Section 3.4 of these bylaws, directors shall be
elected at each annual meeting of stockholders to hold office until the next
annual meeting. Each director, including a director elected or appointed to fill
a vacancy, shall hold office until the expiration of the term for which elected
and until a successor has been elected and qualified.
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<PAGE> 10
3.4 RESIGNATION AND VACANCIES
Any director may resign effective on giving written notice to the
chairman of the board, the president, the secretary or the board of directors,
unless the notice specifies a later time for that resignation to become
effective. If the resignation of a director is effective at a future time, the
board of directors may elect a successor to take office when the resignation
becomes effective.
All vacancies in the board of directors may be filled by a majority of
the remaining directors, even if less than a quorum, or by a sole remaining
director; provided, that whenever the holders of any class or classes of stock
or series thereof are entitled to elect one or more directors by the provisions
of the certificate of incorporation, vacancies and newly created directorships
of such class or classes or series may be filled by a majority of the directors
elected by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
Regular meetings of the board of directors may be held at any place
within or outside the State of Delaware that has been designated from time to
time by resolution of the board. In the absence of such a designation, regular
meetings shall be held at the principal executive office of the corporation.
Special meetings of the board may be held at any place within or outside the
State of Delaware that has been designated in the notice of the meeting or, if
not stated in the notice or if there is no notice, at the principal executive
office of the corporation.
Any meeting, regular or special, may be held by conference telephone or
similar communication equipment, so long as all directors participating in the
meeting can hear one another; and all such directors shall be deemed to be
present in person at the meeting.
3.6 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice if
the times of such meetings are fixed by the board of directors. If any regular
meeting day shall fall on a legal holiday, then the meeting shall be held next
succeeding full business day.
3.7 SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors for any purpose or purposes
may be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two directors.
Notice of the 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 that director's address
as it is shown on the records of the corporation. If the notice is mailed, it
shall be deposited in the United States mail at least four (4) days before the
time of the holding of the meeting. If 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 forty-eight (48) hours before the time
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<PAGE> 11
of the holding of the meeting. Any oral notice given personally or by telephone
may be communicated either to the director or to a person at the office of the
director who the person giving the notice has reason to believe will promptly
communicate it to the director. The notice need not specify the purpose or the
place of the meeting, if the meeting is to be held at the principal executive
office of the corporation.
3.8 QUORUM
A majority of the authorized number of directors shall constitute a
quorum for the transaction of business, except to adjourn as provided in Section
3.10 of these bylaws. Every act or decision done or made by a majority of the
directors present at a duly held meeting at which a quorum is present shall be
regarded as the act of the board of directors, subject to the provisions of the
certificate of incorporation and other applicable law.
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 for that
meeting.
3.9 WAIVER OF NOTICE
Notice of a meeting need not be given to any director (i) who signs a
waiver of notice or a consent to holding the meeting or an approval of the
minutes thereof, whether before or after the meeting, or (ii) who attends the
meeting without protesting, prior thereto or at its commencement, the lack of
notice to such directors. All such waivers, consents, and approvals shall be
filed with the corporate records or made part of the minutes of the meeting. A
waiver of notice need not specify the purpose of any regular or special meeting
of the board of directors.
3.10 ADJOURNMENT
A majority of the directors present, whether or not constituting a
quorum, may adjourn any meeting to another time and place.
3.11 NOTICE OF ADJOURNMENT
Notice of the time and place of holding an adjourned meeting need not be
given unless the meeting is adjourned for more than twenty-four (24) hours. If
the meeting is adjourned for more than twenty-four (24) hours, then notice of
the time and place of the adjourned meeting shall be given before the adjourned
meeting takes place, in the manner specified in Section 3.7 of these bylaws, to
the directors who were not present at the time of the adjournment.
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action required or permitted to be taken by the board of directors
may be taken without a meeting, provided that all members of the board
individually or collectively consent in writing to that action. Such action by
written consent shall have the same force and effect as a unanimous vote
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of the board of directors. Such written consent and any counterparts thereof
shall be filed with the minutes of the proceedings of the board.
3.13 FEES AND COMPENSATION OF DIRECTORS
Directors and members of committees may receive such compensation, if
any, for their services and such reimbursement of expenses as may be fixed or
determined by resolution of the board of directors. This Section 3.13 shall not
be construed to preclude any director from serving the corporation in any other
capacity as an officer, agent, employee or otherwise and receiving compensation
for those services.
3.14 APPROVAL OF LOANS TO OFFICERS
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or any of its
subsidiaries, including any officer or employee who is a director of the
corporation or any of its subsidiaries, whenever, in the judgment of the
directors, such loan, guaranty or assistance may reasonably be expected to
benefit the corporation. The loan, guaranty or other assistance may be with or
without interest and may be unsecured, or secured in such manner as the board of
directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing contained in this Section shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution adopted by a majority of the
authorized number of directors, designate one (1) or more committees, each
consisting of two or more directors, to serve at the pleasure of the board. The
board may designate one (1) or more directors as alternate members of any
committee, who may replace any absent member at any meeting of the committee.
The appointment of members or alternate members of a committee requires the vote
of a majority of the authorized number of directors. Any committee, to the
extent provided in the resolution of the board, shall have and may exercise all
the powers and authority of the board, but no such committee shall have the
power of authority to:
(a) amend the certificate of incorporation (except that a
committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares of stock adopted by the board of directors
as provided in Section 151(a) of the General Corporation Law of Delaware, fix
the designations and any of the preferences or rights of such shares relating to
dividends, redemption, dissolution, any distribution of assets of the
corporation or the conversion
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into, or the exchange of such shares for, shares of any other class or classes
or any other series of the same or any other class or classes of stock of the
corporation);
(b) adopt an agreement of merger or consolidation under
Sections 251 or 252 of the General Corporation Law of Delaware;
(c) recommend to the stockholders the sale, lease or
exchange of all or substantially all of the corporation's property and assets;
(d) recommend to the stockholders a dissolution of the
corporation or a revocation of a dissolution; or
(e) amend the bylaws of the corporation; and, unless the
board resolution establishing the committee, the bylaws or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock, or to adopt
a certificate of ownership and merger pursuant to Section 253 of the General
Corporation Law of Delaware.
4.2 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Article III of these bylaws, Section
3.5 (place of meetings), Section 3.6 (regular meetings), Section 3.7 (special
meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of notice),
Section 3.10 (adjournment), Section 3.11 (notice of adjournment), and Section
3.12 (action without meeting), with such changes in the context of those bylaws
as are necessary to substitute the committee and its members for the board of
directors and its members; provided, however, that the time of regular meetings
of committees may be determined either by resolution of the board of directors
or by resolution of the committee, that special meetings of committees may also
be called by resolution of the board of directors, and that notice of special
meetings of committees shall also be given to all alternate members, who shall
have the right to attend all meetings of the committee. The board of directors
may adopt rules for the government of any committee not inconsistent with the
provisions of these bylaws.
4.3 COMMITTEE MINUTES
Each committee shall keep regular minutes of its meetings and report the
same to the board of directors when required.
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ARTICLE V
OFFICERS
5.1 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, one or more vice presidents, one or
more assistant secretaries, one or more assistant treasurers, and such other
officers as may be appointed in accordance with the provisions of Section 5.3 of
these bylaws. Any number of offices may be held by the same person.
5.2 ELECTION OF OFFICERS
The officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Section 5.3 or Section 5.5 of
these bylaws, shall be chosen by the board, subject to the rights, if any, of an
officer under any contract of employment.
5.3 SUBORDINATE OFFICERS
The board of directors may appoint, or may empower the 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 these bylaws or as the board of directors may
from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by the
board of directors at any regular or special meeting of the board 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 is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5.5 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.
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5.6 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may from time to time be assigned to him by the
board of directors or as may be prescribed by these bylaws. If there is no
president, then the chairman of the board shall also be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 5.7 of these bylaws.
5.7 PRESIDENT
Subject to such supervisory powers, if any, as may be given by the board
of directors to the chairman of the board, if there be such an officer, the
president shall be the chief executive officer of the corporation and 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 preside at all meetings of the stockholders and, in the absence or
non-existence of a chairman of the board, at all meetings of the board of
directors. He shall have the 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 these
bylaws.
5.8 VICE PRESIDENTS
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
be 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, these bylaws,
the president or the chairman of the board.
5.9 SECRETARY
The secretary shall keep or cause to be kept, at the principal executive
office of the corporation 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. The minutes shall show the time and place of each
meeting, whether regular or special (and, if special, how authorized and 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 the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation 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 evidencing such shares, and the number
and date of cancellation of every certificate surrendered for cancellation.
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The secretary shall give, or cause to be given, notice of all meetings
of the stockholders and of the board of directors required to be given by law or
by these bylaws. He shall keep the seal of the corporation, if one be adopted,
in safe custody and shall have such other powers and perform such other duties
as may be prescribed by the board of directors or by these bylaws.
5.10 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, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The chief financial officer shall deposit all money and other valuables
in the name and to the credit of the corporation with such depositaries as may
be designated by the board of directors. He shall disburse the funds of the
corporation as may be ordered by the board of directors, shall render to the
president and directors, whenever they request it, an account of all of his
transactions as chief financial officer and of the financial condition of the
corporation, and shall have such other powers and perform such other duties as
may be prescribed by the board of directors or these bylaws.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES,
AND OTHER AGENTS
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall, to the maximum extent and in the manner permitted
by the General Corporation Law of Delaware as the same now exists or may
hereafter be amended, indemnify any person against expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement actually and
reasonably incurred in connection with any threatened, pending or completed
action, suit, or proceeding in which such person was or is a party or is
threatened to be made a party by reason of the fact that such person is or was a
director or officer of the corporation. For purposes of this Section 6.1, a
"director" or "officer" of the corporation shall mean any person (i) who is or
was a director or officer of the corporation, (ii) who is or was serving at the
request of the corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) who was a
director or officer of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
The corporation shall be required to indemnify a director or officer in
connection with an action, suit, or proceeding (or part thereof) initiated by
such director or officer only if the initiation of such action, suit, or
proceeding (or part thereof) by the director or officer was authorized by the
Board of Directors of the corporation.
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The corporation shall pay the expenses (including attorney's fees)
incurred by a director or officer of the corporation entitled to indemnification
hereunder in defending any action, suit or proceeding referred to in this
Section 6.1 in advance of its final disposition; provided, however, that payment
of expenses incurred by a director or officer of the corporation in advance of
the final disposition of such action, suit or proceeding shall be made only upon
receipt of an undertaking by the director or officer to repay all amounts
advanced if it should ultimately be determined that the director of officer is
not entitled to be indemnified under this Section 6.1 or otherwise.
The rights conferred on any person by this Article shall not be
exclusive of any other rights which such person may have or hereafter acquire
under any statute, provision of the corporation's Certificate of Incorporation,
these bylaws, agreement, vote of the stockholders or disinterested directors or
otherwise.
Any repeal or modification of the foregoing provisions of this Article
shall not adversely affect any right or protection hereunder of any person in
respect of any act or omission occurring prior to the time of such repeal or
modification.
6.2 INDEMNIFICATION OF OTHERS
The corporation shall have the power, to the maximum extent and in the
manner permitted by the General Corporation Law of Delaware as the same now
exists or may hereafter be amended, to indemnify any person (other than
directors and officers) against expenses (including attorneys' fees), judgments,
fines, and amounts paid in settlement actually and reasonably incurred in
connection with any threatened, pending or completed action, suit, or
proceeding, in which such person was or is a party or is threatened to be made a
party by reason of the fact that such person is or was an employee or agent of
the corporation. For purposes of this Section 6.2, an "employee" or "agent" of
the corporation (other than a director or officer) shall mean any person (i) who
is or was an employee or agent of the corporation, (ii) who is or was serving at
the request of the corporation as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) who was an
employee or agent of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
6.3 INSURANCE
The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him or her and incurred
by him or her in any such capacity, or arising out of his or her status as such,
whether or not the corporation would have the power to indemnify him or her
against such liability under the provisions of the General Corporation Law of
Delaware.
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ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS
The corporation shall, either at its principal executive office or at
such place or places as designated by the board of directors, keep a record of
its stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these bylaws as amended to date,
accounting books and other records of its business and properties.
Any stockholder of record, in person or by attorney or other agent,
shall, upon written demand under oath stating the purpose thereof, have the
right during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
7.2 INSPECTION BY DIRECTORS
Any director shall have the right to examine (and to make copies of) the
corporation's stock ledger, a list of its stockholders and its other books and
records for a purpose reasonably related to his or her position as a director.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS
The board of directors shall present at each annual meeting, and at any
special meeting of the stockholders when called for by vote of the stockholders,
a full and clear statement of the business and condition of the corporation.
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, if any, the president, any vice president,
the chief financial officer, the secretary or any assistant secretary of this
corporation, or any other person authorized by the board of directors or the
president or a vice president, is authorized to vote, represent and exercise on
behalf of this corporation all rights incident to any and all shares of the
stock of any other corporation or corporations standing in the name of this
corporation. The authority herein granted may be exercised either by such person
directly or by any other person authorized to do so by proxy or power of
attorney duly executed by such person having the authority.
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7.5 CERTIFICATION AND INSPECTION OF BYLAWS
The original or a copy of these bylaws, as amended or otherwise altered
to date, certified by the secretary, shall be kept at the corporation's
principal executive office and shall be open to inspection by the stockholders
of the corporation, at all reasonable times during office hours.
ARTICLE VIII
GENERAL MATTERS
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING
For purposes of determining the stockholders entitled to receive payment
of any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect of any other lawful
action, the board of directors may fix, in advance, a record date, which shall
not be more than sixty (60) days before any such action. In that case, only
stockholders of record at the close of business on the date so fixed are
entitled to receive the dividend, distribution or allotment of rights, or to
exercise such rights, as the case may be, notwithstanding any transfer of any
shares on the books of the corporation after the record date so fixed, except as
otherwise provided in the General Corporation Law of Delaware.
If the board of directors does not so fix a record date, then the record
date for determining stockholders for any such purpose shall be at the close of
business on the day on which the board adopts the applicable resolution.
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED
The board of directors, except as otherwise provided in these bylaws,
may authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
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8.4 STOCK CERTIFICATES; TRANSFER; PARTLY PAID SHARES
The shares of the corporation shall be represented by certificates,
provided that the board of directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not apply to
shares represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption of such a resolution by the board of
directors, every holder of stock represented by certificates and, upon request,
every holder of uncertificated shares, shall be entitled to have a certificate
signed by, or in the name of the corporation by, the chairman or vice-chairman
of the board of directors, or the president or vice-president, and by the
treasurer or an assistant treasurer, or the secretary or an assistant secretary
of such corporation representing the number of shares registered in certificate
form. 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 placed upon a certificate has 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 or she were such officer,
transfer agent or registrar at the date of issue.
Certificates for shares shall be of such form and device as the board of
directors may designate and shall state the name of the record holder of the
shares represented thereby; its number; date of issuance; the number of shares
for which it is issued; a summary statement or reference to the powers,
designations, preferences or other special rights of such stock and the
qualifications, limitations or restrictions of such preferences and/or rights,
if any; a statement or summary of liens, if any; a conspicuous notice of
restrictions upon transfer or registration of transfer, if any; a statement as
to any applicable voting trust agreement; if the shares be assessable, or, if
assessments are collectible by personal action, a plain statement of such facts.
Upon surrender to the secretary or transfer agent of the corporation of
a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, or upon the books and records of the corporation in
the case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid shares, the corporation shall
declare a dividend upon partly paid shares of the same class, but only upon the
basis of the percentage of the consideration actually paid thereon.
8.5 SPECIAL DESIGNATION ON CERTIFICATES
If the corporation is authorized to issue more than one class of stock
or more than one series of any class, then the powers, the designations, the
preferences and the relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on
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the face or back of the certificate that the corporation shall issue to
represent such class or series of stock; provided, however, that, except as
otherwise provided in Section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements there may be set forth on the face or back of
the certificate that the corporation shall issue to represent such class or
series of stock a statement that the corporation will furnish without charge to
each stockholder who so requests the powers, the designations, the preferences
and the relative, participating, optional or other special rights of each class
of stock or series thereof and the qualifications, limitations or restrictions
of such preferences and/or rights.
8.6 LOST CERTIFICATES
Except as provided in this Section 8.6, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and canceled at the same time. The board of
directors may, in case any share certificate or certificate for any other
security is lost, stolen or destroyed, authorize the issuance of replacement
certificates on such terms and conditions as the board may require; the board
may require indemnification of the corporation secured by a bond or other
adequate security sufficient to protect the corporation against any claim that
may be made against it, including any expense or liability, on account of the
alleged loss, theft or destruction of the certificate or the issuance of the
replacement certificate.
8.7 TRANSFER AGENTS AND REGISTRARS
The board of directors may appoint one or more transfer agents or
transfer clerks, and one or more registrars, each of which shall be an
incorporated bank or trust company -- either domestic or foreign, who shall be
appointed at such times and places as the requirements of the corporation may
necessitate and the board of directors may designate.
8.8 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the General Corporation Law of Delaware shall
govern the construction of these bylaws. Without limiting the generality of this
provision, the singular number includes the plural, the plural number includes
the singular, and the term "person" includes both a corporation and a natural
person.
ARTICLE IX
AMENDMENTS
9.1 AMENDMENTS BY STOCKHOLDERS AND DIRECTORS
The original or other bylaws of the corporation may be adopted, amended
or repealed by the stockholders entitled to vote or by the board of directors of
the corporation. The fact that such power has been so conferred upon the
directors shall not divest the stockholders of the power, nor limit their power
to adopt, amend or repeal bylaws.
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Whenever an amendment or new bylaw is adopted, it shall be copied in the
book of bylaws with the original bylaws, in the appropriate place. If any bylaw
is repealed, the fact of repeal with the date of the meeting at which the repeal
was enacted or the filing of the operative written consent(s) shall be stated in
said book.
9.2 SUPERMAJORITY VOTE
Notwithstanding anything to the contrary in the bylaws, neither Section
2.3 (special meeting), Section 2.5 (advance notice of stockholder nominees and
stockholder business), nor this Section 9.2 (supermajority vote) of the bylaws
shall be repealed or amended, nor shall any provision inconsistent with the
aforementioned provisions be adopted and added to the bylaws except upon the
affirmative vote of not less than two-thirds of the shares of the corporation
issued and outstanding.
Amended and Restated Bylaws adopted by the Board of Directors of the
Corporation at New York, New York, this 5th day of October, 1999.
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EXHIBIT 4.2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 1 DEFINITIONS......................................................2
1.1 Certain Definitions............................................2
SECTION 2 REGISTRATION RIGHTS..............................................4
2.1 Requested Registration.........................................4
2.2 Company Registration...........................................7
2.3 Registration on Form S-3.......................................9
2.4 Limitations on Subsequent Registration Rights..................9
2.5 Expenses of Registration......................................10
2.6 Registration Procedures.......................................10
2.7 Indemnification...............................................12
2.8 Termination of Registration Rights............................14
2.9 Information by Holder.........................................14
2.10 Rule 144 Reporting............................................15
2.11 Transfer of Registration Rights...............................15
2.12 Standoff Agreement............................................15
2.13 Merger Etc....................................................16
SECTION 3 PREEMPTIVE RIGHT ON COMPANY ISSUES..............................16
3.1 Company Offer.................................................16
3.2 Acceptance of Company Offer...................................17
3.3 Sale to Third Parties.........................................17
3.4 Closing.......................................................17
3.5 Termination of Preemptive Rights..............................17
SECTION 4 INFORMATION RIGHTS..............................................17
4.1 Financial Statements and Other Information....................17
SECTION 5 MISCELLANEOUS...................................................19
5.1 Governing Law.................................................19
5.2 Additional Purchasers.........................................19
5.3 Entire Agreement; Amendment...................................19
5.4 Notices, etc..................................................19
5.5 Severability..................................................20
5.6 Titles and Subtitles..........................................20
5.7 Adjustments for Stock Splits, Etc.............................20
5.8 Aggregation of Stock..........................................20
5.9 Counterparts..................................................20
5.10 Reservation of Common Stock...................................20
5.11 Successors and Assigns........................................20
</TABLE>
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<PAGE> 2
XCARE.NET, INC.
SECOND AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
THIS AGREEMENT is made as of July 27, 1999, among XCare.Net, Inc., a
Delaware corporation (the "COMPANY"), the purchasers of the Company's Series B
Preferred Stock, listed on Exhibit A hereto (each a "PURCHASER" and,
collectively, the "PURCHASERS"), the Series B Investors as defined herein, and
the Series A Investors as defined herein.
RECITALS
A. In connection with the sale and issuance of its Series B Preferred
Stock, the Company entered into that certain Amended and Restated Investor
Rights Agreement dated June 4, 1999 (the "PREVIOUS AGREEMENT") with the
purchasers of Series A Preferred Stock (the "SERIES A INVESTORS") and certain
purchasers of Series B Preferred Stock in the first closing of the Series B
Preferred Stock Financing of the Company (the "SERIES B INVESTORS").
B. The Company and the Purchasers are parties to that certain Series B
Preferred Stock Purchase Agreement dated as of the date hereof (the "PURCHASE
AGREEMENT") whereby the Company will sell, and the Purchasers will buy, Series B
Preferred Stock of the Company.
C. The obligations of the Company and the Purchasers under the Purchase
Agreement are conditional, among other things, upon the execution and delivery
of this Agreement by the Company and the Purchasers.
D. Section 5.3 of the Previous Agreement provides that the written
consent of the Company and the holders of a majority of the Registrable
Securities (as defined in the Previous Agreement) are required to amend the
Previous Agreement.
E. The Company and certain stockholders who together hold not less than
a majority of the Registrable Securities (as defined in the Previous Agreement)
now desire to amend and restate the Previous Agreement in its entirety in order
to add the Purchasers as parties thereto and to make certain other changes.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the promises and
covenants contained herein, the parties agree to amend and restate the Previous
Agreement in its entirety as follows:
<PAGE> 3
SECTION 1
DEFINITIONS
1.1 CERTAIN DEFINITIONS. Hereafter, in this Agreement the following
terms shall have the following respective meanings:
"COMMISSION" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the Securities Act.
"CONVERSION STOCK" means the Common Stock issued or issuable
pursuant to conversion of the Preferred.
"EXEMPT ISSUANCES" shall mean (i) the sale or issuance of equity
securities in a firm commitment underwritten public offering pursuant to an
effective registration statement under the Securities Act, (ii) the sale or
issuance of up to 14,457,000 shares of Common Stock reserved for officers,
directors and employees of, and consultants and vendors to the Company pursuant
to stock grants, option plans, purchase plans or other employee stock incentive
programs or arrangements approved by the Board, including upon exercise of
options or warrants granted pursuant to any such plan or arrangement, (iii) the
sale or issuance of the Preferred or the issuance of Conversion Stock upon
conversion of the Preferred, (iv) equity securities issued upon conversion,
exchange or exercise of any outstanding equity securities, in accordance with
the terms thereof, if the Company complied with the provisions of Section 3 in
connection with the original issuance of such outstanding equity securities; (v)
equity securities issued pursuant to any merger or acquisition by the Company
that is approved by the Board and (vi) equity securities issued in connection
with the lease of equipment to be used in the Company's business, secured credit
agreements, or technology agreements, pursuant to such arrangements approved by
at least a majority of the Board, at least one Series A Preferred Stock board
representative, and at least one Series B Preferred Stock board representative.
"HOLDER" or "HOLDERS" shall mean any Investor holding
Registrable Securities and any person holding Registrable Securities to whom the
rights under this Agreement have been transferred in accordance with Section
2.11 hereof.
"INITIATING HOLDERS" shall mean any Holders of Series A or
Series B Preferred or transferees of such Holders under Section 2.1 hereof who
in the aggregate are Holders of greater than 50% of the Series A or Series B
Preferred Registrable Securities, respectively.
"PERSON" shall mean any individual, firm, company, corporation,
unincorporated associated, partnership, trust, joint venture or other entity,
and shall include any successor (by merger or otherwise) of such entity.
"PREFERRED" means the Series A Preferred Stock and the Series B
Preferred Stock of the Company.
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"PRO RATA PORTION" shall mean the amount of Company Offered
Securities multiplied by a fraction, the numerator of which shall equal the
number of Shares then held by such Person, and the denominator of which shall
equal the sum of the aggregate number of Shares held by all Persons.
"REGISTRABLE SECURITIES" means the Series A Registrable
Securities and the Series B Registrable Securities.
"REGISTRATION EXPENSES" shall mean all expenses, except as
otherwise stated below, incurred by the Company in complying with Section 2.1,
2.2 and 2.3 hereof, including, without limitation, all registration,
qualification and filing fees, printing expenses, escrow fees, fees and
disbursements of counsel for the Company, blue sky fees and expenses, the
expense of any special audits incident to or required by any such registration
(but excluding the compensation of regular employees of the Company which shall
be paid in any event by the Company) any and all fees and expenses incurred in
connection with road show presentations and the reasonable fees and
disbursements of one counsel for all Holders in any registration pursuant to
Sections 2.1, 2.2 and 2.3 hereof.
"RESTRICTED SECURITIES" shall mean the securities of the Company
not available for sale under Rule 144(k) of the Securities Act of 1933.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, or any similar federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"SELLING EXPENSES" shall mean all underwriting discounts,
selling commissions and stock transfer taxes applicable to the securities
registered by the Holders.
"SERIES A PREFERRED" means the Series A Preferred Stock of the
Company.
"SERIES B PREFERRED" means the Series B Preferred Stock of the
Company.
"SERIES A REGISTRABLE SECURITIES" means (i) the Conversion
Stock, and (ii) any Common Stock of the Company issued or issuable in respect of
the Conversion Stock or other securities issued or issuable pursuant to the
conversion of the Series A Preferred upon any stock split, stock dividend,
recapitalization, or similar event, or any Common Stock otherwise issued or
issuable with respect to the Series A Preferred; provided, however, that shares
of Common Stock or other securities shall only be treated as Series A
Registrable Securities if and so long as they have not been (A) sold to or
through a broker or dealer or underwriter in a public distribution or a public
securities transaction, whether in a registered offering, Rule 144 transaction
or otherwise, or (B) sold or are available for sale in the reasonable opinion of
counsel to the Company in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act so that all transfer
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restrictions and restrictive legends with respect thereto are removed upon the
consummation of such sale.
The terms "REGISTER," "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"SERIES B REGISTRABLE SECURITIES" means (i) the Conversion
Stock, and (ii) any Common Stock of the Company issued or issuable in respect of
the Conversion Stock or other securities issued or issuable pursuant to the
conversion of the Series B Preferred upon any stock split, stock dividend,
recapitalization, or similar event, or any Common Stock otherwise issued or
issuable with respect to the Preferred; provided, however, that shares of Common
Stock or other securities shall only be treated as Series B Registrable
Securities if and so long as they have not been (A) sold to or through a broker
or dealer or underwriter in a public distribution or a public securities
transaction, whether in a registered offering, Rule 144 transaction or
otherwise, or (B) sold or are available for sale in the reasonable opinion of
counsel to the Company in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act so that all transfer
restrictions and restrictive legends with respect thereto are removed upon the
consummation of such sale.
"SHARES" held by any Person shall mean the shares of the
Company's Preferred Stock (calculated on an as-converted basis) and the shares
of Common Stock held by such Person.
SECTION 2
REGISTRATION RIGHTS
2.1 REQUESTED REGISTRATION.
(a) Request for Registration. If the Company shall receive from
Initiating Holders a written request that the Company effect any registration,
qualification or compliance with respect to not less than twenty percent (20%)
of the shares of Series A or Series B Registrable Securities, or any lesser
number of shares if the anticipated aggregate offering price would exceed
$5,000,000, the Company will:
(i) promptly give written notice of the proposed
registration, qualification or compliance to all other Holders; and
(ii) as soon as practicable, use its best efforts to
effect such registration, qualification or compliance (including, without
limitation, appropriate qualification under applicable blue sky or other state
securities laws and appropriate compliance with applicable regulations issued
under the Securities Act and any other governmental requirements or regulations)
as may be so requested and as would permit or facilitate the sale and
distribution of all or such portion of such Series A or Series B Registrable
Securities as are specified in such request, together with all or such portion
of the Series A or Series B Registrable Securities of any Holder or Holders
joining in such
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request as are specified in a written request received by the Company within
twenty (20) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to take any action to
effect any such registration, qualification or compliance pursuant to this
Section 2.1:
(A) In any particular jurisdiction in which the
Company would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act;
(B) Prior to the earlier of (i) six (6) months
after the effective date of the registration statement in respect of the initial
public offering of the Company's securities, or (ii) three years after the date
of this Agreement;
(C) During the period starting with the date
sixty (60) days prior to the Company's estimated date of filing of, and ending
on the date six (6) months immediately following the effective date of, any
registration statement pertaining to securities of the Company (other than a
registration of securities in a Rule 145 transaction or with respect to an
employee benefit plan), provided that the Company is actively employing in good
faith all reasonable efforts to cause such registration statement to become
effective.
In addition, the Company shall not be obligated to take any action
requested by Initiating Holders of Series A Preferred to effect such
registration, qualification, or compliance pursuant to this Section 2.1:
(D) After the Company has effected two such
registrations pursuant to this Section 2.1(a) at the request of Initiating
Holders of Series A Preferred, and each such registration has been declared or
ordered effective;
(E) After the Company has effected one such
registration pursuant to this Section 2.1(a) at the request of Initiating
Holders of Series A Preferred, and such registration has been declared or
ordered effective during the preceding 12 months; or
(F) If the Company shall furnish to such Holders
a certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors it would be seriously detrimental to
the Company or its shareholders for a registration statement to be filed in the
near future, then the Company's obligation to use its best efforts to register,
qualify or comply under this Section 2.1 shall be deferred for a period not to
exceed one hundred twenty (120) days from the date of receipt of written request
from the Initiating Holders, provided that such right to delay a request may not
be exercised by the Company more than once in any twelve-month period.
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In addition, the Company shall not be obligated to take any action
requested by Initiating Holders of Series B Preferred to effect such
registration, qualification, or compliance pursuant to this Section 2.1:
(G) After the Company has effected two such
registrations pursuant to this Section 2.1(a) at the request of Initiating
Holders of Series B Preferred, and each such registration has been declared or
ordered effective;
(H) After the Company has effected one such
registration pursuant to this Section 2.1(a) at the request of Initiating
Holders of Series B Preferred, and such registration has been declared or
ordered effective during the preceding 12 months; or
(I) If the Company shall furnish to such Holders
a certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors it would be seriously detrimental to
the Company or its shareholders for a registration statement to be filed in the
near future, then the Company's obligation to use its best efforts to register,
qualify or comply under this Section 2.1 shall be deferred for a period not to
exceed one hundred twenty (120) days from the date of receipt of written request
from the Initiating Holders, provided that such right to delay a request may not
be exercised by the Company more than once in any twelve-month period.
Subject to the foregoing clauses (A) through (I), the Company shall file
a registration statement covering the Registrable Securities so requested to be
registered, after receipt of the request or requests of the Initiating Holders.
Any registration pursuant to this Section 2.1 shall not be treated as a request
for registration by the Initial Holders if greater than twenty percent of the
shares of Common Stock requested to be registered are not registered.
(b) Underwriting. In the event that a registration pursuant to
Section 2.1 is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as part of the notice given pursuant to
Section 2.1(a)(i). In such event, the right of any Holder to registration
pursuant to Section 2.1 shall be conditioned upon such Holder's participation in
the underwriting arrangements required by this Section 2.1(b), and the inclusion
of such Holder's Registrable Securities in the underwriting to the extent
requested shall be limited to the extent provided herein.
The Company shall (together with all Holders proposing to distribute
their securities through such underwriting) enter into an underwriting agreement
in customary form with the managing underwriter selected for such underwriting
by a majority in interest of the Initiating Holders, but subject to the
Company's reasonable approval. Notwithstanding any other provision of this
Section 2.1, if the managing underwriter advises the Initiating Holders in
writing that marketing factors require a limitation of the number of shares to
be underwritten, then the Company shall so advise all Holders of Registrable
Securities and the number of shares of Registrable Securities to be included in
the registration shall be allocated in the following manner:
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(i)first, among all Holders of Registrable Securities of
the same class of Series A or Series B Preferred requested by the Initiating
Holders, on a pro rata basis, as nearly as practicable up to the lesser of the
respective amounts of Registrable Securities held by such Holders at the time of
filing the Registration Statement, or 70% of the total number of shares to be
included in the registration if that total number is less than the total number
of outstanding shares of Preferred;
(ii) second, among all Holders of Registrable Securities
of the class of Series A or Series B Preferred not requested by the Initiating
Holders, on a pro rata basis, as nearly as practicable up to the respective
amounts of Registrable Securities held by such Holders at the time of the filing
of the Registration Statement;
(iii) third, among all Holders of Registrable Securities
of the same class of Series A or Series B Preferred requested by the Initiating
Holders, on a pro rata basis, as nearly as practicable up to the respective
amounts of shares of Registrable Securities, held by such Holders and not
included in the allocation under section (i) above;
(iv) fourth, to the Company, as nearly as practicable up
to the amount of Registrable Securities held by the Company; and
(v) fifth, all Holders of Registrable Securities of the
Company who are either an officer or director of the Company, on a pro-rata
basis, as nearly as practicable up to the respective amounts of Registrable
Securities held by such Holders at the time of filing the Registration
Statement.
No Registrable Securities excluded from the underwriting by reason of
the underwriter's marketing limitation shall be included in such registration.
To facilitate the allocation of shares in accordance with the above provisions,
the Company or the underwriters may round the number of shares allocated to any
Holder to the nearest one hundred (100) shares.
If any Holder of Registrable Securities disapproves of the terms of the
underwriting, such person may elect to withdraw therefrom by written notice to
the Company, the managing underwriter and the Initiating Holders. The
Registrable Securities and/or other securities so withdrawn shall also be
withdrawn from registration.
2.2 COMPANY REGISTRATION.
(a) Notice of Registration. If at any time or from time to time
the Company shall determine to register any of its equity securities, either for
its own account or the account of a security holder or holders, other than (i) a
registration relating solely to employee benefit plans, or (ii) a registration
relating solely to a Rule 145 transaction, the Company will:
(i) promptly give to each Holder written notice thereof
and a reasonably detailed explanation of such Holder's rights and obligations
under this Section 2.2;
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(ii) 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 specified in a written request
or requests, made within thirty (30) days after mailing of such written notice
by the Company, by any Holder; and
(iii) use its best efforts to effect such registration
under the Securities Act of all Registrable Securities that the Holders have
requested that the Company register.
Underwriting. If the registration of which the Company gives notice is
for a registered public offering involving an underwriting, the Company shall so
advise the Holders as a part of the written notice given pursuant to Section
2.2(a)(i). In such event the right of any Holder to registration pursuant to
Section 2.2 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of Registrable Securities in the underwriting to
the extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall (together with the Company and the other holders
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the managing underwriter selected
for such underwriting by the Company. Notwithstanding any other provision of
this Section 2.2, if the managing underwriter determines that marketing factors
require a limitation of the number of shares to be underwritten, the managing
underwriter may limit the Registrable Securities to be included in such
registration. The Company shall so advise all Holders and other holders
distributing their securities through such underwriting and the number of shares
of Registrable Securities that may be included in the registration and
underwriting shall be allocated in the following manner: first, to the Company;
second, among all Holders of Series A and Series B Registrable Securities, on a
pro rata, as converted basis, as nearly as practicable to the respective amounts
of Registrable Securities held by such Holders at the time of filing the
Registration Statement; and third, among all Holders of Registrable Securities
who are either an officer or a director of the Company, in proportion, as nearly
as practicable to the respective amounts of Registrable Securities held by such
Holders at the time of filing the Registration Statement. No Registrable
Securities excluded from the underwriting by reason of the underwriter's
marketing limitation shall be included in such registration. To facilitate the
allocation of shares in accordance with the above provisions, the Company or the
underwriters may round the number of shares allocated to any Holder to the
nearest one hundred (100) shares.
(b) To facilitate the allocation of shares in accordance with
the above provisions, the Company may round the number of shares allocated to
any Holder or holder to the nearest one hundred (100) shares. If any Holder
disapproves of the terms of any such underwriting, he may elect to withdraw
therefrom by written notice to the Company and the managing underwriter. Any
securities excluded or withdrawn from such underwriting shall be withdrawn from
such registration.
(c) Right to Terminate Registration. The Company shall have the
right to terminate or withdraw any registration initiated by it under this
Section 2.2 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration; provided, that
the Company shall have the obligation to pay all Registration Expenses in
connection with any such registration incurred pursuant to this Section 2.2.
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2.3 REGISTRATION ON FORM S-3.
(a) If any Initiating Holder or Initiating Holders of the
then-outstanding Series A or Series B Registrable Securities request that the
Company file a registration statement on Form S-3 (or any successor form to Form
S-3) for a public offering of shares of the Registrable Securities the
reasonably anticipated aggregate offering price to the public of which, net of
underwriting discounts and commissions, would exceed $1,000,000, and the Company
is a registrant entitled to use Form S-3 to register the Series A or Series B
Registrable Securities for such an offering, the Company shall give prompt
notice of such proposed registration to all Holders and shall use its best
efforts to cause the Registrable Securities, and any other Registrable
Securities held by others who so notify the Company in writing within a
reasonable time that they wish to participate, to be registered for the offering
on such form and to cause the Registrable Securities to be qualified in such
jurisdictions as the Initiating Holder or Initiating Holders may reasonably
request; provided, however, that the Company shall not be required to effect
more than one registration requested by Initiating Holders of Series A
Preferred, and more than one registration requested by Initiating Holders of
Series B Preferred, pursuant to this Section 2.3 in any twelve (12) month
period. The substantive provisions of Section 2.1(b) shall be applicable to each
registration initiated under this Section 2.3.
(b) Notwithstanding the foregoing, the Company shall not be
obligated to take any action pursuant to this Section 2.3: (i) in any particular
jurisdiction in which the Company would be required to execute a general consent
to service of process in effecting such registration, qualification or
compliance unless the Company is already subject to service in such jurisdiction
and except as may be required by the Securities Act; (ii) if the Company, within
ten (10) days of the receipt of the request of the Initiating Holders, gives
notice of its bona fide intention to effect the filing of a registration
statement with the Commission within sixty (60) days of receipt of such request
(other than with respect to a registration statement relating to a Rule 145
transaction, an offering solely to employees or any other registration which is
not appropriate for the registration of Registrable Securities); (iii) during
the period starting with the date sixty (60) days prior to the Company's
estimated date of filing of, and ending on the date three (3) months immediately
following, the effective date of any registration statement pertaining to
securities of the Company (other than a registration of securities in a Rule 145
transaction or with respect to an employee benefit plan), provided that the
Company is actively employing in good faith all reasonable efforts to cause such
registration statement to become effective; or (iv) if the Company shall furnish
to such Initiating Holder a certificate signed by the President of the Company
stating that in the good faith judgment of the Board of Directors it would be
seriously detrimental to the Company or its shareholders for registration
statements to be filed in the near future, then the Company's obligation to use
its best efforts to file a registration statement shall be deferred for a period
not to exceed one hundred twenty (120) days from the receipt of the request to
file such registration by such Initiating Holder, provided that such right to
delay a request may not be exercised by the Company more than once in any
twelve-month period.
2.4 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after the
date of this Agreement, the Company shall not enter into any agreement granting
any Holder or prospective
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holder of any securities of the Company registration rights with respect to such
securities unless (i) the rights of such holders to participate in Company
offerings are subordinate to the rights of the Holders under Sections 2.2 and
2.3 and such holder shall have no right to make a demand registration which
could result in such registration statement being declared effective prior to
October 1, 2002, or (ii) the Holders of fifty percent (50%) or more of the
Registrable Securities consent to the grant of such registration rights.
2.5 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with registrations pursuant to Sections 2.1, 2.2 and 2.3, shall be
borne by the Company. Unless otherwise stated, all Selling Expenses relating to
securities registered on behalf of the Holders shall be borne by the Holders of
such securities pro rata on the basis of the number of shares so registered.
2.6 REGISTRATION PROCEDURES. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Section 2,
the Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. At its expense the Company will as expeditiously as possible:
(a) prepare and file with the Commission a registration
statement with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for at least ninety (90)
days or until the distribution described in the registration statement has been
completed;
(b) furnish to the Holders participating in such registration
and to the underwriters of the securities being registered such reasonable
number of copies of the registration statement and of each amendment and
supplement thereto, preliminary prospectus, final prospectus and such other
documents in conformity with the Securities Act as such Holders and underwriters
may reasonably request in order to facilitate the public offering of such
securities;
(c) prepare and file with the Commission any amendments and
supplements to the registration statement and the prospectus included in the
registration statement as may be necessary to keep the registration statement
effective, in the case of a firm commitment underwritten public offering, until
each underwriter has completed the distribution of all securities purchased by
it and, in the case of any other offering, until the earlier of the sale of all
Registrable Securities covered thereby or 180 days after the effective date
thereof, provided that before filing a registration statement, or any amendments
or supplements thereto, the Company will furnish to the Holders and their
counsel, copies of all documents to be filed, which documents will be subject to
the review of such counsel;
(d) use its best efforts to register or qualify the Registrable
Securities covered by the registration statement under the securities or Blue
Sky laws of such states as the selling Holders shall reasonably request, and do
any and all other acts and things that may be necessary or desirable to enable
the selling Holders to consummate the public sale or other disposition in such
states of the Registrable Securities owned by the selling Holder; provided,
however, that the Company shall not
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be required in connection with this paragraph (d) to qualify as a foreign
corporation or execute a general consent to service of process in any
jurisdiction;
(e) if the Company has delivered preliminary or final prospectuses to
the selling Holders and after having done so the prospectus is amended to comply
with the requirements of the Securities Act, the Company shall promptly notify
the selling Holders and, if requested, the selling Holders shall immediately
cease making offers of Registrable Securities and return all prospectuses to the
Company. The Company shall promptly provide the selling Holders with revised
prospectuses and, following receipt of the revised prospectuses, the selling
Holders shall be free to resume making offers of the Registrable Shares;
(f) make available for inspection by Holders of the Registrable
Securities covered by the registration statement, by any underwriter
participating in any disposition to be effected pursuant to such registration
statement and by any attorney, accountant or other agent retained by such
Holders or any such underwriter, all pertinent financial and other records,
pertinent corporate documents and properties of the Company, officers, directors
and employees of the Company, and cause all of such officers, directors and
employees to supply all information reasonably requested by any such Holder,
underwriter, attorney, accountant or agent in connection with the registration
statement;
(g) notify each Holder of any such Registrable Securities covered by
such registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act within the appropriate period
mentioned in Section 2.6(c), of the Company's becoming aware that the prospectus
included in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing, and at the request of any such Holder,
prepare and furnish to such Holder a reasonable number of copies of any
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus shall not include an
untrue statement of a material fact or omit 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;
(h) use its best efforts to comply with all applicable rules and
regulations of the Securities and Exchange Commission, and make available to its
security holders, as soon as reasonably practicable (but not more than eighteen
(18) months) after the effective date of the registration statement, an earnings
statement which shall satisfy the provisions of Section 11(a) of the Securities
Act and the rules and regulations promulgated thereunder;
(i) enter into such customary agreements (including an underwriting
agreement in customary form) and take such other actions as sellers of a
majority of shares of such Registrable Securities or the underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities; and
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(j) obtain a "cold comfort" letter or letters from the Company's
independent public accountants in customary form and covering matters of the
type customarily covered by "cold comfort" letters as the Holder or Holders of a
majority of the shares of such Registrable Securities shall reasonably request.
2.7 INDEMNIFICATION.
(a) The Company will indemnify and hold harmless each Holder and
each affiliate thereof, and their respective officers, directors, partners,
accountants, legal counsel and agents, and each person controlling such Holder
or affiliate thereof within the meaning of Section 15 of the Securities Act,
with respect to which registration, qualification or compliance has been
effected pursuant to this Section 2, and each person or entity that participates
as underwriter, if any, and each person who controls any underwriter within the
meaning of Section 15 of the Securities Act (each, a "Company Indemnified
Party"), against all expenses, claims, losses, damages or liabilities (joint or
several) (or actions in respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or threatened, arising out
of or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any registration statement, prospectus, offering circular or
other document, or any amendment or supplement thereto, 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, in light of the circumstances in which
they were made, not misleading, or any violation or alleged violation by the
Company of the Securities Act or any rule or regulation promulgated under the
Securities Act, the Exchange Act, state securities or Blue Sky Laws or otherwise
applicable to the Company in connection with any such registration,
qualification or compliance, and the Company will reimburse each such Company
Indemnified Party, for any legal and any other expenses reasonably incurred in
connection with investigating, preparing or defending any such claim, loss,
damage, liability, action or proceeding, 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 or alleged untrue statement or omission, made in reliance upon and in
conformity with written information furnished to the Company by an instrument
duly executed by such Holder, controlling person or underwriter and stated to be
specifically for use therein.
(b) Each Holder will, if Registrable Securities held by such
Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers, each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who controls
the Company or such underwriter within the meaning of Section 15 of the
Securities Act, and each other such Holder, each of its officers, directors and
partners, and each person controlling such Holder within the meaning of Section
15 of the Securities Act (collectively the "Holder Indemnified Parties"),
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
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not misleading, and will reimburse the Company, such Holders, such directors,
officers, persons, underwriters or control persons for any legal or any other
expenses reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability or action; provided that in each of the
foregoing pursuant to this Section 2.7(b) such Holder shall only indemnify the
Holder Indemnified Parties to the extent, but only to the extent, that such
untrue statement (or alleged untrue statement) or omission (or alleged omission)
is 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 and stated to be
specifically for use therein. Notwithstanding the foregoing, the liability of
each Holder under this subsection (b) shall be limited in an amount equal to the
initial public offering price of the shares sold by such Holder.
(c) Each party entitled to indemnification under this Section
2.7 (the "Indemnified Party") shall give written notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has received written notice of the commencement of any action,
claim or proceeding as to which indemnity may be sought, 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 approved by the
Indemnified Party (whose approval shall not unreasonably be withheld), and the
Indemnified Party may participate in such defense at such party's expense (other
than the reasonable costs of investigation which shall be paid by the
Indemnifying Party), 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 2 unless but only to the extent that the
failure to give such notice is materially prejudicial to an Indemnifying Party's
ability to defend such action and provided further, that the Indemnifying Party
shall not assume the defense for matters as to which there is, in the reasonable
judgment of the Indemnified Party an actual or potential conflict of interest or
separate and different defenses. If there is such an actual or potential
conflict, then such Indemnified Party may employ separate counsel to represent
such Indemnified Party and the Indemnifying Party shall be liable for the
reasonable fees and expenses of separate counsel. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the written consent
of each Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect to such claim or litigation.
(d) In order to provide for just and equitable contribution to
joint liability under the Securities Act in any case in which either (i) any
Holder exercising rights under this Agreement, or any controlling person of such
Holder, makes a claim for indemnification pursuant to this Section 2.7 but it is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 2.7 provides for indemnification in
such case, or (ii) contribution under the Securities Act may be required on the
part of any such selling Holder or any such controlling person in
-13-
<PAGE> 15
circumstances for which indemnification is provided under this Section 2.7;
then, and in each such case, the Company and such Holder will contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(after contribution from others) in such proportion (i) so that such Holder
shall under no circumstances be responsible for more than the portion
represented by the percentage that the public offering price of its Registrable
Securities offered by and sold under the registration statement bears to the
public offering price of all securities offered by and sold under such
registration statement and (ii) so that the relative benefits received by each
party from the offering of the Registrable Securities (taking into account the
portion of the proceeds realized by each), the parties' relative knowledge and
access to information concerning the matter with respect to which the claim was
asserted, the opportunity to correct and prevent any misstatement or omission
and any other equitable considerations appropriate under the circumstances shall
be considered, and the Company and the other selling Holders are responsible for
the remaining portion; provided, however, that in any such case, (A) no such
Holder will be required to contribute any amount in excess of the public
offering price of all such Registrable Securities offered and sold by such
Holder pursuant to such registration statement; and (B) no person to the extent
that contribution is not permitted under Section 11(f) of the Securities Act
will be entitled to contribution.
(e) The obligations of the Company and Holders under this
Section 2.7 shall survive the completion of any offering of Registrable
Securities in a registration statement, and otherwise.
(f) The obligations of the parties under this Section 2 shall be
in addition to any liability which any party may otherwise have to any other
party.
2.8 TERMINATION OF REGISTRATION RIGHTS. The rights granted pursuant to
this Agreement, to the extent not earlier terminated by the terms hereof, shall
terminate as to any Holder (i) five (5) years after the closing of an
underwritten public offering pursuant to an effective registration statement
under the Securities Act covering the offer and sale of common stock for the
account of the Company to the public, or (ii) at such time after the Company's
initial registered public offering as all Registrable Securities held by such
Holder can be sold without compliance with the registration requirements of the
Securities Act pursuant to Rule 144 (including without limitation Rule 144(k))
promulgated thereunder and such Holder owns less than 1% of the then outstanding
Registrable Securities.
2.9 INFORMATION BY HOLDER. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders, the Registrable Securities held by
them and the distribution proposed by such Holder or Holders as the Company may
reasonably request in writing, pertinent to such Holder and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in this Section 2.
-14-
<PAGE> 16
2.10 RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Restricted Securities to the public without registration, after such
time as a public market exists for the Common Stock of the Company, the Company
agrees to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times after
the effective date that the Company becomes subject to the reporting
requirements of the Securities Act or the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT").
(b) File with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act
(at any time after it has become subject to such reporting requirements);
(c) So long as a Holder owns any Shares that are Restricted Securities
to furnish promptly to the Holder forthwith upon request a written statement by
the Company as to its compliance with the reporting requirements of said Rule
144 (at any time after ninety (90) days after the effective date of the first
registration statement filed by the Company for an offering of its securities to
the general public), and of the Securities Act and the Exchange Act (at any time
after it has become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents of the Company and other information in the possession of or
reasonably obtainable by the Company as a Holder may reasonably request in
availing itself of any rule or regulation of the Commission allowing a Holder to
sell any such securities without registration.
2.11 TRANSFER OF REGISTRATION RIGHTS. The rights to cause the Company to
register securities granted Holders under Sections 2.1, 2.2 and 2.3 may be
assigned to a transferee or assignee in connection with any transfer or
assignment of Registrable Securities by a Holder provided that the Company is
given notice of the transfer or assignment and: (i) such transfer may otherwise
be effected in accordance with applicable securities laws, and (ii) either (A)
such assignee or transferee acquires at least 1,850,000 shares of Registrable
Securities or, if lesser, all of such shares held by the Holder or (B) such
transferee is an affiliate of the Holder (defined as a person that directly, or
indirectly through one or more intermediaries, controls or is controlled by, or
is under common control with the Holder). Notwithstanding the foregoing, the
rights to cause the Company to register securities may be assigned to any
constituent partner or retired partner of a Holder which is a partnership, or
any family member or trust for the benefit of any such individual holder,
without compliance with item (ii) above.
2.12 STANDOFF AGREEMENT. Each Holder agrees in connection with the
public offering of the Company's securities, upon written request of the Company
or the managing underwriter, if any, any underwritten offering of the Company's
securities, not to sell, make any short sale of, loan, grant any option for the
purchase of, or otherwise dispose of any Registrable Securities (other than
those included in the registration) without the prior written consent of the
Company or such underwriter, as
-15-
<PAGE> 17
the case may be, for such period of time (not to exceed one hundred eighty (180)
days)(the "Lockup Period") during the effectiveness of such registration
statement relating to such offering, provided that similar lockup agreements are
entered into by each of the Company's officers and directors and all Holders
holding not less than one percent (1%) of the outstanding capital stock of the
Company (including shares of Common Stock issuable upon the conversion of shares
of Preferred, or other convertible securities, or upon the exercise of options,
warrants or rights) and that such agreement shall not apply to Registrable
Securities included in the registration statement. In order to enforce the
provisions of this Section 2.1, the Company may impose stop-transfer
instructions with respect to the securities of the Company held by each Holder
not included in the registration statement until the end of the Lockup Period.
2.13 MERGER ETC. The Company shall not, directly or indirectly, enter
into any merger, consolidation or reorganization in which the Company shall not
be the surviving corporation unless the proposed surviving corporation shall,
prior to such merger, consolidation or reorganization, agree in writing to
assume any and all of the obligations of the Company under this Agreement, and
for that purpose references hereunder to "Registrable Securities" shall be
deemed to be references to the securities which the Holders would be entitled to
receive in exchange for Registrable Securities under any such merger,
consolidation or reorganization; provided, however, that the provisions of this
Section 2.13 shall not apply in the event of any merger, consolidation or
reorganization in which the Company is not the surviving corporation if all
Holders are entitled to receive in exchange for their Registrable Securities
consideration consisting solely of (a) cash, (b) securities of the acquiring
corporation which may be immediately sold to the public without registration
under the Securities Act, or (c) securities of the acquiring corporation which
the acquiring corporation has agreed to register within 90 days of completion of
the transaction for resale to the public pursuant to the Securities Act.
SECTION 3
PREEMPTIVE RIGHT ON COMPANY ISSUES
3.1 COMPANY OFFER. The Company shall give the Holders forty (40) days'
prior written notice (the "Company Offer"), delivered or mailed as provided in
Section 5.4, of the Company's intention to sell or issue any equity securities
(the "Company Offered Securities"), other than an Exempt Issuance, stating the
material proposed terms of such sale or issuance and the identity of the Person,
if known, who has offered to purchase the Company Offered Securities. Such
notice shall include a representation to the Holders that, to the Company's
knowledge, a Person has made a bona fide offer to consummate such Company Offer,
and the Company has a good faith intention to sell such equity securities to
such Person on the terms specified. A Company Offer shall constitute an offer by
the Company, irrevocable for forty (40) days, to sell or issue to each Holders
such Holder's Pro Rata Portion of the Company Offered Securities on the same
terms as specified in the Company Offer or, if such terms provide for
consideration other than cash, for cash in an amount equal to the fair market
value of such noncash consideration (as determined by the Board) if the parties
cannot mutually agree upon such value.
-16-
<PAGE> 18
3.2 ACCEPTANCE OF COMPANY OFFER. Within forty (40) days after receipt of
a Company Offer, each Holder shall give an irrevocable written notice to the
Company (a "Section 3 Acceptance Notice") that (i) such Holder has elected to
purchase any of the Company Offered Securities. If such Holder fails to give a
Section 3 Acceptance Notice by the end of such forty (40) day period, such
Holder shall be deemed to have elected not to purchase any of the Company
Offered Securities.
3.3 SALE TO THIRD PARTIES. If a Holder does not elect to purchase all of
its Pro Rata Portion of the Company Offered Securities, the Company shall have
the right, exercisable not later than ninety (90) days after the giving of the
Company Offer, to issue the Company Offered Securities not purchased by the
Holder on terms and conditions no more favorable than those set forth in the
Company Offer.
3.4 CLOSING. The closing of any sale or issue of Company Offered
Securities to a Holder pursuant to this Section 3 shall take place on such date,
within thirty (30) days of the date of the Section 3 Acceptance Notice (subject
to extension to comply with any applicable law), as shall be agreed by the
Company and such Holder. At any such closing, the Company shall deliver to such
Holder certificate(s) representing the Company Offered Securities being issued,
registered in the name of such Holder or its nominee, against payment of the
applicable purchase price by check or wire transfer of same day funds.
3.5 TERMINATION OF PREEMPTIVE RIGHTS. The rights of the Holders under
this Section 3 shall terminate upon such time as such Holder beneficially owns
less than 4,000,000 Shares.
SECTION 4
INFORMATION RIGHTS
4.1 FINANCIAL STATEMENTS AND OTHER INFORMATION.
The Company hereby covenants and agrees that, so long as it is not
subject to the reporting requirements pursuant to Section 13 or 15(d) of the
Exchange Act, it will mail the following reports, provide access to the Company,
and provide prompt notification, as applicable, to each Holder for so long as
such Holder is a holder of at least 4,000,000 Shares (as adjusted for any stock
split, stock dividend, stock combination or other recapitalization, a
"RECAPITALIZATION"):
(a) As soon as practicable after the end of each fiscal year,
and in any event within ninety (90) days thereafter, audited consolidated
balance sheets of the Company and its consolidated subsidiaries, if any, as of
the end of such fiscal year, and consolidated statements of income and retained
earnings and consolidated statements of cash flows of the Company and its
consolidated subsidiaries, if any, for such year, prepared in accordance with
generally accepted accounting principles and setting forth in each case in
comparative form the figures for the previous fiscal year, reported on without a
"going concern" or like qualification or exception, all in reasonable
-17-
<PAGE> 19
detail and audited by nationally recognized independent public accountants
selected by the Company.
(b) As soon as practicable after the end of each fiscal month of
the Company and in any event within thirty (30) business days thereafter, an
unaudited consolidated balance sheet of the Company and its subsidiaries, if
any, as of the end of each such monthly period, and unaudited consolidated
statements of income and retained earnings and unaudited consolidated statements
of changes in cash flows of the Company and its subsidiaries, if any, for such
period and for the current fiscal year to date, prepared in accordance with
generally accepted accounting principles (other than for accompanying notes),
subject to changes resulting from year-end audit adjustments, all in reasonable
detail comparing such financial information to the Company's budgeted figures
for such monthly period, and the comparable figures for the previous year
including a narrative explaining all significant variations with management's
analysis of the results of operations and with such financial statements
certified by the principal financial or accounting officer of the Company as
being fairly stated in all material respects when considered in relation to the
consolidated financial statements of the Company and its consolidated
subsidiaries, if any.
(c) At least 60 days prior to the beginning of each fiscal year,
a budget (containing an operating plan with monthly breakdowns of income and
retained earnings and cash flow and narrative explanation) for the subsequent
fiscal year.
(d) The Company shall provide Holders and their representatives
with free and full access to the financial and other records, corporate
documents, business records and properties of the Company and reasonable access
to all officers, directors and employees of the Company, provided however, that
the Holders (and their representatives) agree to maintain the confidentiality of
such information.
(e) The Company shall promptly notify the Holders of any (i)
material adverse change in the business, operations, prospects, assets or
condition, financial or otherwise, of the Company and (ii) litigation, claim or
proceeding or investigation brought or, to the best of the Company's knowledge,
threatened against the Company, or otherwise in respect of the Preferred or
against any founder, officer, director, key employee or principal stockholder of
the Company materially adversely affecting or which, if adversely determined,
would materially adversely affect its business, operations, prospects, assets or
condition, financial or otherwise or the validity of the Preferred.
The information rights described in this Section 4.1 shall also apply
to: (i) any partner or retired partner of any such Holder which is a partnership
(subject to any limitations on the information rights of such a partnership's
limited partners which may be disclosed in writing to the Company by a general
partner of such partnership); (ii) any family member or trust for the benefits
of any such individual holder; or (iii) any transferee; provided, that the party
requesting information rights is a Holder of at least 4,000,000 Shares (as
adjusted for Recapitalizations) and the Company is given written notice thereof.
-18-
<PAGE> 20
SECTION 5
MISCELLANEOUS
5.1 GOVERNING LAW. This Agreement shall be governed and construed in all
respects in accordance with the laws of the State of Delaware as applied to
agreements made and performed in Delaware by residents of the State of Delaware.
5.2 ADDITIONAL PURCHASERS. The Company expects to issue and sell Series
B Preferred in one or more closings. Upon executing and delivering a counterpart
signature page to this Agreement at the time of purchase, each purchaser of the
Preferred shall become party to this Agreement, shall be included within the
definition of "Holder," and shall be added to the list of Purchasers at Exhibit
A.
5.3 ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes the entire
understanding and agreement between the parties with regard to the subjects
hereof, and no party shall be liable or bound to any other party in any manner
by any warranties, representations or covenants except as specifically set forth
herein. Except as expressly provided herein, neither this Agreement nor any term
hereof may be amended, supplemented, modified, waived, discharged or terminated
other than by a written instrument signed by the party against whom enforcement
of any such amendment, waiver, discharge or termination is sought; provided,
however, that Holders of a majority of the Registrable Securities may, with the
Company's prior written consent, waive, modify or amend on behalf of all
Holders, any provisions hereof.
5.4 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid or otherwise delivered by hand or by messenger,
addressed (a) if to a Holder at such Holder's address set forth on the signature
pages hereof, or at such other address as such Holders shall have furnished to
the Company in writing or (b) if to any other holder of any shares of Company
Stock, at such address as such holder shall have furnished the Company in
writing, or until any such holder so furnishes an address to the Company, then
to and at the address of the last holder of such shares who has so furnished an
address to the Company, or (c) if to the Company, one copy should be sent to the
Company's executive offices addressed to the attention of the Chief Executive
Officer, at such address as the Company shall have furnished to the Holders, and
one copy should be sent to Wilson Sonsini Goodrich & Rosati, 650 Page Mill Road,
Palo Alto, California 94304, Attn.: Arthur F. Schneiderman.
Each such notice or other communication shall, unless otherwise
expressly provided herein, be treated as effective or having been given when
delivered if delivered personally, or, if sent by mail, at the earlier of its
receipt or seventy-two (72) hours after the same has been deposited in a
regularly maintained receptacle for the deposit of the United States mail,
addressed and mailed as aforesaid.
-19-
<PAGE> 21
5.5 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; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
5.6 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.
5.7 ADJUSTMENTS FOR STOCK SPLITS, ETC. Wherever in this Agreement there
is a reference to a specific number of shares of Common Stock or Preferred Stock
of the Company of any class or series, then, upon the occurrence of any
subdivision, combination or stock dividend of such class or series of stock, the
specified number of shares so referenced in this Agreement shall automatically
be proportionally adjusted to reflect the effect on the outstanding shares of
such class or series of stock by such subdivision, combination or stock
dividend.
5.8 AGGREGATION OF STOCK. All shares held or acquired by affiliated
entities or persons shall be aggregated together for the purpose of determining
the availability of any rights under this Agreement.
5.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which may be executed by less than all of the parties
hereto, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
5.10 RESERVATION OF COMMON STOCK. The Company shall reserve and maintain
a sufficient number of shares of Common Stock for issuance upon conversion of
all the Preferred at any time outstanding.
5.11 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
-20-
<PAGE> 22
IN WITNESS WHEREOF, the parties have executed this Investor Rights
Agreement as of the date first above written.
COMPANY:
XCARE.NET, INC.
a Delaware corporation
By:
--------------------------------------
Lorine R. Sweeney, President
INVESTORS
VERTEX TECHNOLOGY FUND (II) LTD.
By: Vertex Technology Fund (II) Ltd.
its general partner
By:
--------------------------------------
a general partner
DAUPHIN CAPITAL PARTNERS I, L.P.
By: DCP I, LLC
its general partner
By:
--------------------------------------
a managing member
ATLANTIC MEDICAL CAPITAL, L.P.
By: Atlantic Medical Associates, L.P.
its general partner
By: Atlantic Medical Partners, LLC
its general partner
By:
--------------------------------------
a managing member
[AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT SIGNATURE PAGE]
<PAGE> 23
NAZEM & COMPANY IV, L.P.
By: Nazem & Associates IV, L.P.
its general partner
By:
--------------------------------------
a general partner
THE TRANSATLANTIC VENTURE FUND C.V.
By:
--------------------------------------
an investment manager
SINGAPORE COMPUTER SYSTEMS LIMITED
By:
--------------------------------------
DENNIS YONG
By:
--------------------------------------
SECOND CLOSING INVESTORS:
SEQUEL LIMITED PARTNERSHIP II
By: Sequel Venture Partners II, LLC
By:
--------------------------------------
Dan J. Mitchell
Manager
[AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT SIGNATURE PAGE]
<PAGE> 24
SEQUEL ENTREPRENEURS FUND II, L.P.
By: Sequel Venture Partners II, LLC
By:
--------------------------------------
Dan J. Mitchell
Manager
CB HEALTHCARE FUND, L.P.
By: CB Health Ventures, LLC
By:
--------------------------------------
Title: Manager
CANPARTNERS INVESTMENTS, IV LLC
a California limited liability corporation
By: Canpartners Incorporated, a California corporation
By:
--------------------------------------
Title:
-----------------------------------
ATLANTIC MEDICAL CAPITAL, L.P.
By: Atlantic Medical Associates, L.P.
its general partner
By: Atlantic Medical Partners, L.P.
its general partner
By:
--------------------------------------
a managing member
ARTHUR F. SCHNEIDERMAN
By:
--------------------------------------
RACHEL S. LOVEJOY
By:
--------------------------------------
[AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT SIGNATURE PAGE]
<PAGE> 25
EXHIBIT A
INVESTORS
SERIES B - SECOND CLOSING
<TABLE>
<CAPTION>
INVESTOR SHARES
-------- ------
<S> <C>
Sequel Limited Partnership II
4430 Arapahoe Avenue
Suite 220
Boulder, CO 80303 10,740,741
Sequel Entrepreneurs Fund II, L.P.
4430 Arapahoe Avenue
Suite 220
Boulder, CO 80303 370,370
CB Healthcare Fund, L.P.
One Boston Place
Suite 4010
Boston, MA 02108 11,111,111
Canpartners Investments, IV L.L.C.
9665 Wilshire Blvd.
Suite 200
Beverly Hills, CA 90212 1,296,296
Atlantic Medical Capital, L.P.
156 W. 56th Street
Suite 1605
New York, New York 10019-3800
Attn: Andy Cowherd 400,741
Arthur F. Schneiderman
650 Page Mill Road
Palo Alto, CA 94304-1050 151,111
Rachel S. Lovejoy
650 Page Mill Road
Palo Alto, CA 94304-1050 3,704
Total 24,074,074
- ----- ----------
</TABLE>
<PAGE> 1
EXHIBIT 10.1
XCARE.NET, INC.
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is effective as of 19 by
and between XCare.net, Inc., a Delaware corporation (the "Company"), and
Indemnitee ("Indemnitee").
WHEREAS, the Company desires to attract and retain the services of
highly qualified individuals, such as Indemnitee, to serve the Company and its
related entities;
WHEREAS, in view of the considerations set forth above, the Company
desires that Indemnitee shall be indemnified by the Company as set forth herein;
NOW, THEREFORE, the Company and Indemnitee hereby agree as set forth
below.
1. Certain Definitions.
(a) "Change in Control" shall mean, and shall be deemed to have
occurred if, on or after the date of this Agreement, (i) any "person" (as such
term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934,
as amended), other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company acting in such capacity or a corporation
owned directly or indirectly by the stockholders of the Company in substantially
the same proportions as their ownership of stock of the Company, becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing more than 50% of the total
voting power represented by the Company's then outstanding Voting Securities,
(ii) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board of Directors of the Company and
any new director whose election by the Board of Directors or nomination for
election by the Company's stockholders was approved by a vote of at least two
thirds (2/3) of the directors then still in office who either were directors at
the beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a majority thereof,
or (iii) the stockholders of the Company approve a merger or consolidation of
the Company with any other corporation other than a merger or consolidation
which would result in the Voting Securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into Voting Securities of the surviving
entity) at least 80% of the total voting power represented by the Voting
Securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation, or the stockholders of the Company approve a plan
of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of (in one transaction or a series of related
transactions) all or substantially all of the Company's assets.
(b) "Claim" shall mean any threatened, pending or completed action,
suit, proceeding or alternative dispute resolution mechanism, or any hearing,
inquiry or investigation that Indemnitee in good faith believes might lead to
the institution of any such action, suit, proceeding or alternative dispute
resolution mechanism, whether civil, criminal, administrative, investigative or
other.
<PAGE> 2
(c) References to the "Company" shall include, in addition to
XCare.net, Inc., any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger to which XCare.net, Inc. (or
any of its wholly owned subsidiaries) is a party which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, employees, agents or fiduciaries, so that if Indemnitee is
or was a director, officer, employee, agent or fiduciary of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee, agent or fiduciary of another corporation,
partnership, joint venture, employee benefit plan, trust or other enterprise,
Indemnitee shall stand in the same position under the provisions of this
Agreement with respect to the resulting or surviving corporation as Indemnitee
would have with respect to such constituent corporation if its separate
existence had continued.
(d) "Expenses" shall mean any and all expenses (including attorneys'
fees and all other costs, expenses and obligations incurred in connection with
investigating, defending, being a witness in or participating in (including on
appeal), or preparing to defend, to be a witness in or to participate in, any
action, suit, proceeding, alternative dispute resolution mechanism, hearing,
inquiry or investigation), judgments, fines, penalties and amounts paid in
settlement (if such settlement is approved in advance by the Company, which
approval shall not be unreasonably withheld) of any Claim regarding any
Indemnifiable Event and any federal, state, local or foreign taxes imposed on
the Indemnitee as a result of the actual or deemed receipt of any payments under
this Agreement.
(e) "Expense Advance" shall mean an advance payment of Expenses to
Indemnitee pursuant to Section 3 (a).
(f) "Indemnifiable Event" shall mean any event or occurrence related
to the fact that Indemnitee is or was a director, officer, employee, agent or
fiduciary of the Company, or any subsidiary of the Company, or is or was serving
at the request of the Company as a director, officer, employee, agent or
fiduciary of another corporation, partnership, joint venture, trust or other
enterprise, or by reason of any action or inaction on the part of Indemnitee
while serving in such capacity.
(g) "Independent Legal Counsel" shall mean an attorney or firm of
attorneys, selected in accordance with the provisions of Section 2(c) hereof,
who shall not have otherwise performed services for the Company or Indemnitee
within the last three years (other than with respect to matters concerning the
rights of Indemnitee under this Agreement, or of other indemnitee under similar
indemnity agreements).
(h) References to "other enterprises" shall include employee benefit
plans; references to "fines" shall include any excise taxes assessed on
Indemnitee with respect to an employee benefit plan; and references to "serving
at the request of the Company" shall include any service as a director, officer,
employee, agent or fiduciary of the Company which imposes duties on, or involves
services by, such director, officer, employee, agent or fiduciary with respect
to an employee benefit plan, its participants or its beneficiaries; and if
Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to
be in the interest of the participants and beneficiaries
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<PAGE> 3
of an employee benefit plan, Indemnitee shall be deemed to have acted in a
manner "not opposed to the best interests of the Company" as referred to in this
Agreement.
(i) "Reviewing Party" shall mean any appropriate person or body
consisting of a member or members of the Company's Board of Directors or any
other person or body appointed by the Board of Directors who is not a party to
the particular Claim for which Indemnitee is seeking indemnification, or
Independent Legal Counsel.
(j) "Voting Securities" shall mean any securities of the Company
that vote generally in the election of directors.
2. Indemnification.
(a) Indemnification of Expenses. The Company shall indemnify
Indemnitee to the fullest extent permitted by law if Indemnitee was or is or
becomes a party to or witness or other participant in, or is threatened to be
made a party to or witness or other participant in, any Claim by reason of (or
arising in part out of) any Indemnifiable Event against Expenses, including all
interest, assessments and other charges paid or payable in connection with or in
respect of such Expenses. Such payment of Expenses shall be made by the Company
as soon as practicable but in any event no later than five (5) business days
after written demand by Indemnitee therefor is presented to the Company.
(b) Reviewing Party. Notwithstanding the foregoing, (i) the
obligations of the Company under Section 2(a) shall be subject to the condition
that the Reviewing Party shall not have determined (in a written opinion, in any
case in which the Independent Legal Counsel referred to in Section 2(c) hereof
is involved) that Indemnitee would not be permitted to be indemnified under
applicable law, and (ii) the obligation of the Company to make an Expense
Advance shall be subject to the condition that, if, when and to the extent that
the Reviewing Party determines that Indemnitee would not be permitted to be so
indemnified under applicable law, the Company shall be entitled to be reimbursed
by Indemnitee (who hereby agrees to reimburse the Company) for all such amounts
theretofore paid; provided, however, that if Indemnitee has commenced or
thereafter commences legal proceedings in a court of competent jurisdiction to
secure a determination that Indemnitee should be indemnified under applicable
law, any determination made by the Reviewing Party that Indemnitee would not be
permitted to be indemnified under applicable law shall not be binding and
Indemnitee shall not be required to reimburse the Company for any Expense
Advance until a final judicial determination is made with respect thereto (as to
which all rights of appeal therefrom have been exhausted or lapsed).
Indemnitee's obligation to reimburse the Company for any Expense Advance shall
be unsecured and no interest shall be charged thereon. If there has not been a
Change in Control, the Reviewing Party shall be selected by the Board of
Directors, and if there has been such a Change in Control (other than a Change
in Control which has been approved by a majority of the Company's Board of
Directors who were directors immediately prior to such Change in Control), the
Reviewing Party shall be the Independent Legal Counsel. If there has been no
determination by the Reviewing Party or if the Reviewing Party determines that
Indemnitee substantively would not be permitted to be indemnified in whole or in
part under applicable law, Indemnitee shall have the right to commence
litigation seeking an initial determination by the court or challenging any such
determination by the Reviewing Party or any aspect thereof, including the legal
or factual bases
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<PAGE> 4
therefor, and the Company hereby consents to service of process and to appear in
any such proceeding. Absent such litigation, any determination by the Reviewing
Party shall be conclusive and binding on the Company and Indemnitee.
(c) Change in Control. The Company agrees that if there is a Change
in Control of the Company (other than a Change in Control which has been
approved by a majority of the Company's Board of Directors who were directors
immediately prior to such Change in Control), then with respect to all matters
thereafter arising concerning the rights of Indemnitee to payments of Expenses
and Expense Advances under this Agreement or any other agreement or under the
Company's Certificate of Incorporation or Bylaws as now or hereafter in effect,
Independent Legal Counsel, if desired by Indemnitee, shall be selected by
Indemnitee and approved by the Company (which approval shall not be unreasonably
withheld). Such counsel, among other things, shall render its written opinion to
the Company and Indemnitee as to whether and to what extent Indemnitee would be
permitted to be indemnified under applicable law and the Company agrees to abide
by such opinion. The Company agrees to pay the reasonable fees of the
Independent Legal Counsel referred to above and to indemnify fully such counsel
against any and all expenses (including attorneys' fees), claims, liabilities
and damages arising out of or relating to this Agreement or its engagement
pursuant hereto. Notwithstanding any other provision of this Agreement, the
Company shall not be required to pay Expenses of more than one Independent Legal
Counsel in connection with all matters concerning a single Indemnitee, and such
Independent Legal Counsel shall be the Independent Legal Counsel for any or all
other Indemnitees unless (i) the Company otherwise determines or (ii) any
Indemnitee shall provide a written statement setting forth in detail a
reasonable objection to such Independent Legal Counsel representing other
Indemnitees.
(d) Mandatory Payment of Expenses. Notwithstanding any other
provision of this Agreement other than Section 10 hereof, to the extent that
Indemnitee has been successful on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice, in defense of any
Claim regarding any Indemnifiable Event, Indemnitee shall be indemnified against
all Expenses incurred by Indemnitee in connection therewith.
3. Expenses; Indemnification Procedure.
(a) Advancement of Expenses. The Company shall advance all Expenses
incurred by Indemnitee. The advances to be made hereunder shall be paid by the
Company to Indemnitee as soon as practicable but in any event no later than five
(5) business days after written demand by Indemnitee therefor to the Company.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a
condition precedent to Indemnitee's right to be indemnified under this
Agreement, give the Company notice in writing as soon as practicable of any
Claim made against Indemnitee for which indemnification will or could be sought
under this Agreement. Notice to the Company shall be directed to the Chief
Executive Officer of the Company at the address shown on the signature page of
this Agreement (or such other address as the Company shall designate in writing
to Indemnitee). In addition, Indemnitee shall give the Company such information
and cooperation as it may reasonably require and as shall be within Indemnitee's
power.
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<PAGE> 5
(c) No Presumptions; Burden of Proof. For purposes of this
Agreement, the termination of any Claim by judgment, order, settlement (whether
with or without court approval) or conviction, or upon a plea of nolo
contendere, or its equivalent, shall not create a presumption that Indemnitee
did not meet any particular standard of conduct or have any particular belief or
that a court has determined that indemnification is not permitted by applicable
law. In addition, neither the failure of the Reviewing Party to have made a
determination as to whether Indemnitee has met any particular standard of
conduct or had any particular belief, nor an actual determination by the
Reviewing Party that Indemnitee has not met such standard of conduct or did not
have such belief, prior to the commencement of legal proceedings by Indemnitee
to secure a judicial determination that Indemnitee should be indemnified under
applicable law, shall be a defense to Indemnitee's claim or create a presumption
that Indemnitee has not met any particular standard of conduct or did not have
any particular belief. In connection with any determination by the Reviewing
Party or otherwise as to whether the Indemnitee is entitled to be indemnified
hereunder, the burden of proof shall be on the Company to establish that
Indemnitee is not so entitled.
(d) Notice to Insurers. If, at the time of the receipt by the
Company of a notice of a Claim pursuant to Section 3(b) hereof, the Company has
liability insurance in effect which may cover such Claim, the Company shall give
prompt notice of the commencement of such Claim to the insurers in accordance
with the procedures set forth in the respective policies. The Company shall
thereafter take all necessary or desirable action to cause such insurers to pay,
on behalf of the Indemnitee, all amounts payable as a result of such Claim in
accordance with the terms of such policies.
(e) Selection of Counsel. In the event the Company shall be
obligated hereunder to pay the Expenses of any Claim, the Company, if
appropriate, shall be entitled to assume the defense of such Claim with counsel
approved by Indemnitee (not to be unreasonably withheld) upon the delivery to
Indemnitee of written notice of the Company's election so to do. After delivery
of such notice, approval of such counsel by Indemnitee and the retention of such
counsel by the Company, the Company will not be liable to Indemnitee under this
Agreement for any fees of counsel subsequently incurred by Indemnitee with
respect to the same Claim; provided that, (i) Indemnitee shall have the right to
employ Indemnitee's separate counsel in any such Claim at Indemnitee's expense
and (ii) if (A) the employment of separate counsel by Indemnitee has been
previously authorized by the Company, (B) Indemnitee shall have reasonably
concluded that there may be a conflict of interest between the Company and
Indemnitee in the conduct of any such defense, or (C) the Company shall not
continue to retain such counsel to defend such Claim, then the fees and expenses
of Indemnitee's separate counsel shall be at the expense of the Company.
4. Additional Indemnification Rights, Nonexclusivity.
(a) Scope. The Company hereby agrees to indemnify the Indemnitee to
the fullest extent permitted by law, notwithstanding that such indemnification
is not specifically authorized by the other provisions of this Agreement, the
Company's Certificate of Incorporation, the Company's Bylaws or by statute. In
the event of any change after the date of this Agreement in any applicable law,
statute or rule which expands the right of a Delaware corporation to indemnify a
member of its board of directors or an officer, employee, agent or fiduciary, it
is the intent of the parties hereto that Indemnitee shall enjoy by this
Agreement the greater benefits afforded by such
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<PAGE> 6
change. In the event of any change in any applicable law, statute or rule which
narrows the right of a Delaware corporation to indemnify a member of its board
of directors or an officer, employee, agent or fiduciary, such change, to the
extent not otherwise required by such law, statute or rule to be applied to this
Agreement, shall have no effect on this Agreement or the parties' rights and
obligations hereunder except as set forth in Section 9(a) hereof.
(b) Nonexclusivity. The indemnification provided by this Agreement
shall be in addition to any rights to which Indemnitee may be entitled under the
Company's Certificate of Incorporation, its Bylaws, any other agreement, any
vote of stockholders or disinterested directors, the General Corporation Law of
the State of Delaware, or otherwise. The indemnification provided under this
Agreement shall continue as to Indemnitee for any action taken or not taken
while serving in an indemnified capacity even though Indemnitee may have ceased
to serve in such capacity.
5. No Duplication of Payments. The Company shall not be liable under
this Agreement to make any payment in connection with any Claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any insurance policy, provision of the Company's Certificate of
Incorporation, bylaw or otherwise) of the amounts otherwise indemnifiable
hereunder.
6. Partial Indemnification. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of Expenses incurred in connection with any Claim, but not, however, for
all of the total amount thereof, the Company shall nevertheless indemnify
Indemnitee for the portion of such Expenses to which Indemnitee is entitled.
7. Mutual Acknowledgment. Both the Company and Indemnitee acknowledge
that in certain instances, federal law or applicable public policy may prohibit
the Company from indemnifying its directors, officers, employees, agents or
fiduciaries under this Agreement or otherwise. Indemnitee understands and
acknowledges that the Company has undertaken or may be required in the future to
undertake with the Securities and Exchange Commission to submit the question of
indemnification to a court in certain circumstances for a determination of the
Company's right under public policy to indemnify Indemnitee.
8. Liability Insurance. To the extent the Company maintains liability
insurance applicable to directors, officers, employees, agents or fiduciaries,
Indemnitee shall be covered by such policies in such a manner as to provide
Indemnitee the same rights and benefits as are provided to the most favorably
insured of the Company's directors, if Indemnitee is a director; or of the
Company's officers, if Indemnitee is not a director of the Company but is an
officer; or of the Company's key employees, agents or fiduciaries, if Indemnitee
is not an officer or director but is a key employee, agent or fiduciary.
9. Exceptions. Notwithstanding any other provision of this Agreement,
the Company shall not be obligated pursuant to the terms of this Agreement:
(a) Excluded Action or Omissions. To indemnify Indemnitee for acts,
omissions or transactions from which Indemnitee may not be relieved of liability
under applicable law.
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<PAGE> 7
(b) Claims Initiated by Indemnitee. To indemnify or advance expenses
to Indemnitee with respect to Claims initiated or brought voluntarily by
Indemnitee and not by way of defense, except (i) with respect to actions or
proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other agreement or insurance policy or under the Company's
Certificate of Incorporation or Bylaws now or hereafter in effect relating to
Claims for Indemnifiable Events, (ii) in specific cases if the Board of
Directors has approved the initiation or bringing of such Claim, or (iii) as
otherwise required under Section 145 of the Delaware General Corporation Law,
regardless of whether Indemnitee ultimately is determined to be entitled to such
indemnification, advance expense payment or insurance recovery, as the case may
be.
(c) Lack of Good Faith, To indemnify Indemnitee for any expenses
incurred by the Indemnitee with respect to any proceeding instituted by
Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by the
Indemnitee in such proceeding was not made in good faith or was frivolous.
(d) Claims Under Section 16(b). To indemnify Indemnitee for expenses
and the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 16(b) of the Securities Exchange Act of 1934,
as amended, or any similar successor statute.
10. Period of Limitations. No legal action shall be brought and no cause
of action shall be asserted by or in the right of the Company against
Indemnitee, Indemnitee's estate, spouse, heirs, executors or personal or legal
representatives after the expiration of two years from the date of accrual of
such cause of action, and any claim or cause of action of the Company shall be
extinguished and deemed released unless asserted by the timely filing of a legal
action within such two-year period; provided, however that if any shorter period
of limitations is otherwise applicable to any such cause of action, such shorter
period shall govern.
11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
12. Binding Effect, Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors, assigns (including any direct or
indirect successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business or assets of the Company), spouses, heirs and
personal and legal representatives. The Company shall require and cause any
successor (whether direct or indirect, and whether by purchase, merger,
consolidation or otherwise) to all, substantially all, or a substantial part, of
the business or assets of the Company, by written agreement in form and
substance satisfactory to Indemnitee, expressly to assume and 'agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform if no such succession had taken place. This Agreement
shall continue in effect regardless of whether Indemnitee continues to serve as
a director, officer, employee, agent or fiduciary (as applicable) of the Company
or of any other enterprise at the Company's request.
13. Attorneys' Fees. In the event that any action is instituted by
Indemnitee under this Agreement or under any liability insurance policies
maintained by the Company to enforce or interpret any of the terms hereof or
thereof, Indemnitee shall be entitled to be paid all Expenses
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<PAGE> 8
incurred by Indemnitee with respect to such action, regardless of whether
Indemnitee is ultimately successful in such action, and shall be entitled to the
advancement of Expenses with respect to such action, unless as a part of such
action a court of competent jurisdiction over such action determines that each
of the material assertions made by Indemnitee as a basis for such action were
not made in good faith or were frivolous. In the event of an action instituted
by or in the name of the Company under this Agreement to enforce or interpret
any of the terms of this Agreement, Indemnitee shall be entitled to be paid all
Expenses incurred by Indemnitee in defense of such action (including costs and
expenses incurred with respect to Indemnitee's counterclaims and cross-claims
made in such action), and shall be entitled to the advancement of Expenses with
respect to such action, unless as a part of such action a court having
jurisdiction over such action determines that each of Indemnitee's material
defenses to such action were made in bad faith or were frivolous.
14. Notice. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and signed for by the party addressed, on the date of such
delivery, or (ii) if mailed by domestic certified or registered mail with
postage prepaid, on the third business day after the date postmarked. Addresses
for notice to either party are as shown on the signature page of this Agreement,
or as subsequently modified by written notice.
15. Consent to Jurisdiction. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be commenced, prosecuted and continued only in the Court of
Chancery of the State of Delaware in and for New Castle County, which shall be
the exclusive and only proper forum for adjudicating such a claim.
16. Severability. The provisions of this Agreement shall be severable in
the event that any of the provisions hereof (including any provision within a
single section, paragraph or sentence) are held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable, and the remaining
provisions shall remain enforceable to the fullest extent permitted by law.
Furthermore, to the fullest extent possible, the provisions of this Agreement
(including, without limitations, each portion of this Agreement containing any
provision held to be invalid, void or otherwise unenforceable, that is not
itself invalid, void or unenforceable) shall be construed so as to give effect
to the intent manifested by the provision held invalid, illegal or
unenforceable.
17. Choice of Law. This Agreement shall be governed by and its
provisions construed and enforced in accordance with the laws of the State of
Delaware as applied to contracts between Delaware residents entered into and to
be performed entirely within the State of Delaware.
18. Subrogation. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.
19. Amendment and Termination. No amendment, modification, termination
or cancellation of this Agreement shall be effective unless it is in writing
signed by both the parties
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<PAGE> 9
hereto. No waiver of any of the provisions of this Agreement shall be deemed to
be or shall constitute a waiver of any other provisions hereof (whether or not
similar), nor shall such waiver constitute a continuing waiver.
20. Integration and Entire Agreement. This Agreement sets forth the
entire understanding between the parties hereto and supersedes and merges all
previous written and oral negotiations, commitments, understandings and
agreements relating to the subject matter hereof between the parties hereto.
21. No Construction as Employment Agreement. Nothing contained in this
Agreement shall be construed as giving Indemnitee any right to be retained in
the employ of the Company or any of its subsidiaries or affiliated entities.
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IN WITNESS WHEREOF, the parties hereto have executed this
Indemnification Agreement as of the date first above written.
XCARE.NET, INC.
By:
-------------------------------
Title:
-----------------------------
Address:
AGREED TO AND ACCEPTED
INDEMNITEE:
--------------------------------------------
(signature)
--------------------------------------------
Indemnitee,
--------------------------------------------
--------------------------------------------
(address)
<PAGE> 1
EXHIBIT 10.2
XCARE.NET, INC.
1997 STOCK PLAN
(AS AMENDED AND RESTATED EFFECTIVE __)
1. Purposes of the Plan. The purposes of this Stock Plan are to attract
and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees, Directors and
Consultants and to promote the success of the Company's business. Options
granted under the Plan may be Incentive Stock Options or Nonstatutory Stock
Options, as determined by the Administrator at the time of grant. Stock Purchase
Rights may also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees as
shall be administering the Plan in accordance with Section 4 hereof.
(b) "Applicable Laws" means the requirements relating to the
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options or Stock Purchase Rights are
granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means a committee of Directors appointed by the
Board in accordance with Section 4 hereof.
(f) "Common Stock" means the common stock of the Company.
(g) "Company" means XCare.net, Inc., a Delaware corporation.
(h) "Consultant" means any person who is engaged by the Company
or any Parent or Subsidiary to render consulting or advisory services to such
entity.
(i) "Director" means a member of the Board.
(j) "Employee" means any person, including officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company. A
Service Provider shall not cease to be an Employee in the case of (i) any leave
of absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed ninety days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment
<PAGE> 2
upon expiration of a leave of absence approved by the Company is not so
guaranteed, on the 181st day of such leave any Incentive Stock Option held by
the Optionee shall cease to be treated as an Incentive Stock Option and shall be
treated for tax purposes as a Nonstatutory Stock Option. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(l) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:
(i)If the Common Stock is listed on any established
stock exchange or a national market system, including without limitation the
Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market,
its Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of grant, as reported in The Wall
Street Journal or such other source as the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean between the high bid and low asked prices for the
Common Stock on the last market trading day prior to the day of grant; or
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good faith by
the Administrator.
(m) "Incentive Stock Option" means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code.
(n) "IPO Effective Date" means the date upon which the
Securities and Exchange Commission declares the initial public offering of the
Company's common stock as effective.
(o) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(p) "Option" means a stock option granted pursuant to the Plan.
(q) "Option Agreement" means a written or electronic agreement
between the Company and an Optionee evidencing the terms and conditions of an
individual Option grant. The Option Agreement is subject to the terms and
conditions of the Plan.
(r) "Option Exchange Program" means a program whereby
outstanding Options are exchanged for Options with a lower exercise price.
(s) "Optioned Stock" means the Common Stock subject to an Option
or a Stock Purchase Right.
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<PAGE> 3
(t) "Optionee" means the holder of an outstanding Option or
Stock Purchase Right granted under the Plan.
(u) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(v) "Plan" means this 1997 Stock Plan, as amended.
(w) "Restricted Stock" means shares of Common Stock acquired
pursuant to a grant of a Stock Purchase Right under Section 11 below.
(x) "Service Provider" means an Employee, Director or
Consultant.
(y) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 12 below.
(z) "Stock Purchase Right" means a right to purchase Common
Stock pursuant to Section 10 below.
(aa) "Subsidiary" means a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 13 of
the Plan, the maximum aggregate number of Shares which may be subject to option
and sold under the Plan is 22,000,000 Shares, plus an annual increase to be
added on January 1 of each year, beginning in 2001, equal to the lesser of (i)
1,224,000 shares, (ii) 5% of the outstanding shares on such date or (iii) a
lesser amount determined by the Board. The Shares may be authorized but
unissued, or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes
unexercisable without having been exercised in full, or is surrendered pursuant
to an Option Exchange Program, the unpurchased Shares which were subject thereto
shall become available for future grant or sale under the Plan (unless the Plan
has terminated). However, Shares that have actually been issued under the Plan,
upon exercise of either an Option or Stock Purchase Right, shall not be returned
to the Plan and shall not become available for future distribution under the
Plan, except that if Shares of Restricted Stock are repurchased by the Company
at their original purchase price, such Shares shall become available for future
grant under the Plan.
4. Administration of the Plan.
(a) The Plan shall be administered by the Board or a Committee
appointed by the Board, which Committee shall be constituted to comply with
Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of
the Plan and, in the case of a Committee, the specific duties delegated by the
Board to such Committee, and subject to the approval of any relevant
authorities, the Administrator shall have the authority in its discretion:
(i) to determine the Fair Market Value;
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<PAGE> 4
(ii) to select the Service Providers to whom Options and
Stock Purchase Rights may from time to time be granted hereunder;
(iii) to determine the number of Shares to be covered by
each such award granted hereunder;
(iv) to approve forms of agreement for use under the
Plan;
(v) to determine the terms and conditions, of any Option
or Stock Purchase Right granted hereunder. Such terms and conditions include,
but are not limited to, the exercise price, the time or times when Options or
Stock Purchase Rights may be exercised (which may be based on performance
criteria), any vesting acceleration or waiver of forfeiture restrictions, and
any restriction or limitation regarding any Option or Stock Purchase Right of
the Common Stock relating thereto, based in each case on such factors as the
Administrator, in its sole discretion, shall determine;
(vi) to determine whether and under what circumstances
an Option may be settled in cash under subsection 9(e) instead of Common Stock;
(vii) to reduce the exercise price of any Option to the
then current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option has declined since the date the Option was granted;
(viii) to initiate an Option Exchange Program;
(ix) to prescribe, amend and rescind rules and
regulations relating to the Plan, including rules and regulations relating to
sub-plans established for the purpose of qualifying for preferred tax treatment
under foreign tax laws;
(x) to allow Optionees to satisfy withholding tax
obligations by electing to have the Company withhold from the Shares to be
issued upon exercise of an Option or Stock Purchase Right that number of Shares
having a Fair Market Value equal to the amount required to be withheld. The Fair
Market Value of the Shares to be withheld shall be determined on the date that
the amount of tax to be withheld is to be determined. All elections by Optionees
to have Shares withheld for this purpose shall be made in such form and under
such conditions as the Administrator may deem necessary or advisable; and
(xi) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan.
(c) Effect of Administrator's Decision. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees.
5. Eligibility. Nonstatutory Stock Options and Stock Purchase Rights may
be granted to Service Providers. Incentive Stock Options may be granted only to
Employees.
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<PAGE> 5
6. Limitations.
(a) Each Option shall be designated in the Option Agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Option or Stock Purchase Right
shall confer upon any Optionee any right with respect to continuing the
Optionee's relationship as a Service Provider with the Company, nor shall it
interfere in any way with his or her right or the Company's right to terminate
such relationship at any time, with or without cause.
(c) The following limitations shall apply to grants of Options:
(i)No Service Provider shall be granted, in any fiscal
year of the Company, Options to purchase more than 10,500,000 Shares.
(ii) In connection with his or her initial service, a
Service Provider may be granted Options to purchase up to an additional
10,500,000 Shares which shall not count against the limit set forth in
subsection (i) above.
(iii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 13.
(iv) If an Option is cancelled in the same fiscal year
of the Company in which it was granted (other than in connection with a
transaction described in Section 13), the cancelled Option will be counted
against the limits set forth in subsections (i) and (ii) above. For this
purpose, if the exercise price of an Option is reduced, the transaction will be
treated as a cancellation of the Option and the grant of a new Option.
7. Term of Plan. Subject to Section 19 of the Plan, the amendment and
restatement of the Plan shall become effective upon the date of stockholder
approval of the Plan in October, 1999; provided, however, that amendments that
would cause the Plan or Options granted hereunder to fail to comply with
applicable Delaware "blue sky" securities law shall not become effective until
the IPO Effective Date. It shall continue in effect for a term of ten (10) years
unless sooner terminated under Section 15 of the Plan.
8. Term of Option. The term of each Option shall be stated in the Option
Agreement; provided, however, that the term shall be no more than ten (10) years
from the date of grant thereof. In the case of an Incentive Stock Option granted
to an Optionee who, at the time the Option is granted, owns stock representing
more than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the term of the Option shall be five (5)
years from the date of grant or such shorter term as may be provided in the
Option Agreement.
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<PAGE> 6
9. Option Exercise Price and Consideration.
(a) The per share exercise price for the Shares to be issued
upon exercise of an Option shall be such price as is determined by the
Administrator, but shall be subject to the following:
(i)In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of
grant of such Option, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the exercise price shall be no less than 110% of the Fair Market Value per Share
on the date of grant.
(B) granted to any other Employee, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the per
Share exercise price shall be determined by the Administrator.
(iii) Notwithstanding the foregoing, Options may be
granted with a per Share exercise price other than as required above pursuant to
a merger or other corporate transaction.
(b) The consideration to be paid for the Shares to be issued
upon exercise of an Option, including the method of payment, shall be determined
by the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant). Such consideration may consist of (1) cash,
(2) check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six months on the date of surrender, and (y) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which such Option shall be exercised, (5) consideration received by the Company
under a cashless exercise program implemented by the Company in connection with
the Plan, or (6) any combination of the foregoing methods of payment. In making
its determination as to the type of consideration to accept, the Administrator
shall consider if acceptance of such consideration may be reasonably expected to
benefit the Company.
10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable according to the terms hereof at such
times and under such conditions as determined by the Administrator and set forth
in the Option Agreement. Unless the Administrator provides otherwise, vesting of
Options granted hereunder shall be tolled during any unpaid leave of absence. An
Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company
receives: (i) written or electronic notice of exercise (in accordance with the
Option Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of
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<PAGE> 7
an Option shall be issued in the name of the Optionee or, if requested by the
Optionee, in the name of the Optionee and his or her spouse. Until the Shares
are issued (as evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company), no right to vote or receive
dividends or any other rights as a shareholder shall exist with respect to the
Shares, notwithstanding the exercise of the Option. The Company shall issue (or
cause to be issued) such Shares promptly after the Option is exercised. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the Shares are issued, except as provided in Section 12 of
the Plan.
Exercise of an Option in any manner shall result in a
decrease in the number of Shares thereafter available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Relationship as a Service Provider. If an
Optionee ceases to be a Service Provider, such Optionee may exercise his or her
Option within such period of time as is specified in the Option Agreement (of at
least thirty (30) days) to the extent that the Option is vested on the date of
termination (but in no event later than the expiration of the term of the Option
as set forth in the Option Agreement). In the absence of a specified time in the
Option Agreement, the Option shall remain exercisable for three (3) months
following the Optionee's termination. If, on the date of termination, the
Optionee is not vested as to his or her entire Option, the Shares covered by the
unvested portion of the Option shall revert to the Plan. If, after termination,
the Optionee does not exercise his or her Option within the time specified by
the Administrator, the Option shall terminate, and the Shares covered by such
Option shall revert to the Plan.
(c) Disability of Optionee. If an Optionee ceases to be a
Service Provider as a result of the Optionee's total and permanent disability,
as defined in Section 22(e)(3) of the Code, the Optionee may exercise his or her
Option within such period of time as is specified in the Option Agreement to the
extent the Option is vested on the date of termination (but in no event later
than the expiration of the term of such Option as set forth in the Option
Agreement). In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for twelve (12) months following the Optionee's
termination. If, on the date of termination, the Optionee is not vested as to
his or her entire Option, the Shares covered by the unvested portion of the
Option shall revert to the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(d) Death of Optionee. If an Optionee dies while a Service
Provider, the Option may be exercised within such period of time as is specified
in the Option Agreement (but in no event later than the expiration of the term
of such Option as set forth in the Notice of Grant), by the Optionee's estate or
by a person who acquires the right to exercise the Option by bequest or
inheritance, but only to the extent that the Option is vested on the date of
death. In the absence of a specified time in the Option Agreement, the Option
shall remain exercisable for twelve (12) months following the Optionee's
termination. If, at the time of death, the Optionee is not vested as to his or
her entire Option, the Shares covered by the unvested portion of the Option
shall immediately revert to the Plan. The Option may be exercised by the
executor or administrator of the Optionee's estate or, if none, by the person(s)
entitled to exercise the Option under the Optionee's will or the laws of
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<PAGE> 8
descent or distribution. If the Option is not so exercised within the time
specified herein, the Option shall terminate, and the Shares covered by such
Option shall revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time offer
to buy out for a payment in cash or Shares, an Option previously granted, based
on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.
11. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued
either alone, in addition to, or in tandem with other awards granted under the
Plan and/or cash awards made outside of the Plan. After the Administrator
determines that it will offer Stock Purchase Rights under the Plan, it shall
advise the offeree in writing or electronically of the terms, conditions and
restrictions related to the offer, including the number of Shares that such
person shall be entitled to purchase, the price to be paid, and the time within
which such person must accept such offer. The offer shall be accepted by
execution of a Restricted Stock purchase agreement in the form determined by the
Administrator.
(b) Repurchase Option. Unless the Administrator determines
otherwise, the Restricted Stock purchase agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's service with the Company for any reason (including death or
disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at such rate as the
Administrator may determine.
(c) Other Provisions. The Restricted Stock purchase agreement
shall contain such other terms, provisions and conditions not inconsistent with
the Plan as may be determined by the Administrator in its sole discretion.
(d) Rights as a Shareholder. Once the Stock Purchase Right is
exercised, the purchaser shall have rights equivalent to those of a shareholder
and shall be a shareholder when his or her purchase is entered upon the records
of the duly authorized transfer agent of the Company. No adjustment shall be
made for a dividend or other right for which the record date is prior to the
date the Stock Purchase Right is exercised, except as provided in Section 13 of
the Plan.
12. Non-Transferability of Options and Stock Purchase Rights. Unless
determined otherwise by the Administrator, Options and Stock Purchase Rights may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee. If the
Administrator makes an Option or Stock Purchase Right transferable, such Option
or Stock Purchase Right shall contain such additional terms and conditions as
the Administrator deems appropriate.
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<PAGE> 9
13. Adjustments Upon Changes in Capitalization, Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required action by
the shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option or Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company. The conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issuance 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 Common Stock subject to an Option or Stock Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until fifteen (15) days prior to
such transaction as to all of the Optioned Stock covered thereby, including
Shares as to which the Option would not otherwise be exercisable. In addition,
the Administrator may provide that any Company repurchase option applicable to
any Shares purchased upon exercise of an Option or Stock Purchase Right shall
lapse as to all such Shares, provided the proposed dissolution or liquidation
takes place at the time and in the manner contemplated. To the extent it has not
been previously exercised, an Option or Stock Purchase Right will terminate
immediately prior to the consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the
Company with or into another corporation, or the sale of substantially all of
the assets of the Company, each outstanding Option and Stock Purchase Right
shall be assumed or an equivalent option or right substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. In the event
that the successor corporation refuses to assume or substitute for the Option or
Stock Purchase Right, the Optionee shall fully vest in and have the right to
exercise the Option or Stock Purchase Right as to all of the Optioned Stock,
including Shares as to which it would not otherwise be vested or exercisable. If
an Option or Stock Purchase Right becomes fully vested and exercisable in lieu
of assumption or substitution in the event of a merger or sale of assets, the
Administrator shall notify the Optionee in writing or electronically that the
Option or Stock Purchase Right shall be fully exercisable for a period of
fifteen (15) days from the date of such notice, and the Option or Stock Purchase
Right shall terminate upon the expiration of such period. For the purposes of
this paragraph, the Option or Stock Purchase Right shall be considered assumed
if, following the merger or sale of assets, the option or right confers the
right to purchase or receive, for each Share of
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<PAGE> 10
Optioned Stock subject to the Option or Stock Purchase Right immediately prior
to the merger or sale of assets, the consideration (whether stock, cash, or
other securities or property) received in the merger or sale of assets by
holders of Common Stock for each Share held on the effective date of the
transaction (and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the merger or sale of
assets is not solely common stock of the successor corporation or its Parent,
the Administrator may, with the consent of the successor corporation, provide
for the consideration to be received upon the exercise of the Option or Stock
Purchase Right, for each Share of Optioned Stock subject to the Option or Stock
Purchase Right, to be solely common stock of the successor corporation or its
Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.
14. Time of Granting Options and Stock Purchase Rights. The date of
grant of an Option or Stock Purchase Right shall, for all purposes, be the date
on which the Administrator makes the determination granting such Option or Stock
Purchase Right, or such other date as is determined by the Administrator. Notice
of the determination shall be given to each Service Provider to whom an Option
or Stock Purchase Right is so granted within a reasonable time after the date of
such grant.
15. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or terminate the Plan.
(b) Shareholder Approval. The Board shall obtain shareholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.
(c) Effect of Amendment or Termination. No amendment,
alteration, suspension or termination of the Plan shall impair the rights of any
Optionee, unless mutually agreed otherwise between the Optionee and the
Administrator, which agreement must be in writing and signed by the Optionee and
the Company. Termination of the Plan shall not affect the Administrator's
ability to exercise the powers granted to it hereunder with respect to Options
granted under the Plan prior to the date of such termination.
16. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the
exercise of an Option unless the exercise of such Option and the issuance and
delivery of such Shares shall comply with Applicable Laws and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
(b) Investment Representations. As a condition to the exercise
of an Option, the Administrator may require the person exercising such Option to
represent and warrant at the time of any such exercise that the Shares are being
purchased only for investment and without any present intention to sell or
distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required.
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<PAGE> 11
17. Inability to Obtain Authority. The inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
18. Reservation of Shares. The Company, during the term of this Plan,
shall at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
19. Shareholder Approval. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the degree and manner
required under Applicable Laws.
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<PAGE> 12
XCARE.NET, INC.
1997 STOCK PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
<<Name>>
The undersigned Optionee has been granted an Option to purchase Common
Stock of the Company, subject to the terms and conditions of the Plan and this
Option Agreement, as follows:
<TABLE>
<S> <C>
Grant Number <<Grant_No>>
Date of Grant <<Grant_Date>>
Vesting Commencement Date <<Vesting_Date>>
Exercise Price per Share $<<Price_per_share>>
Total Number of Shares Granted <<Total_Shares>>
Total Exercise Price $<<Total_Price>>
Type of Option: <<ISO>> Incentive Stock Option
<<NSO>> Nonstatutory Stock Option
Term/Expiration Date: <<Exp_Date>>
Vesting Schedule:
</TABLE>
This Option shall be exercisable, in whole or in part, according to the
following vesting schedule:
25% of the Shares subject to the Option shall vest twelve months after
the Vesting Commencement Date, and 1/48 of the Shares subject to the Option
shall vest each month thereafter, subject to Optionee's continuing to be a
Service Provider on such dates. That the options shall become fully exerciseable
upon a change of control of the Company.
<PAGE> 13
Termination Period:
This Option shall be exercisable for three months after Optionee ceases
to be a Service Provider. Upon Optionee's death or disability, this Option may
be exercised for one year after Optionee ceases to be a Service Provider. In no
event may Optionee exercise this Option after the Term/Expiration Date as
provided above.
II. AGREEMENT
1. Grant of Option. The Plan Administrator of the Company hereby grants
to the Optionee named in the Notice of Grant (the "Optionee"), an option (the
"Option") to purchase the number of Shares set forth in the Notice of Grant, at
the exercise price per Share set forth in the Notice of Grant (the "Exercise
Price"), and subject to the terms and conditions of the Plan, which is
incorporated herein by reference. Subject to Section 14(c) of the Plan, in the
event of a conflict between the terms and conditions of the Plan and this Option
Agreement, the terms and conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option as
defined in Section 422 of the Code. Nevertheless, to the extent that it exceeds
the $100,000 rule of Code Section 422(d), this Option shall be treated as a
Nonstatutory Stock Option ("NSO").
2. Exercise of Option.
(a) Right to Exercise.
i) Subject to subsections 2(a)(ii) and 2(a) iii below,
this Option shall be exercisable cumulatively according to the vesting schedule
set forth in the Notice of Grant.
ii) This Option may not be exercised for a fraction of a
Share.
(b) Method of Exercise. This Option shall be exercisable by
delivery of an exercise notice in the form attached as Exhibit A (the "Exercise
Notice") which shall state the election to exercise the Option, the number of
Shares with respect to which the Option is being exercised, and such other
representations and agreements as may be required by the Company. The Exercise
Notice shall be accompanied by payment of the aggregate Exercise Price as to all
Exercised Shares. This Option shall be deemed to be exercised upon receipt by
the Company of such fully executed Exercise Notice accompanied by the aggregate
Exercise Price.
No Shares shall be issued pursuant to the exercise of an Option
unless such issuance and such exercise complies with Applicable laws. Assuming
such compliance, for income tax purposes the Shares shall be considered
transferred to the Optionee on the date on which the Option is exercised with
respect to such Shares.
3. Optionee's Representations. In the event the Shares have not been
registered under the Securities Act of 1933, as amended, at the time this Option
is exercised, the Optionee shall, if
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<PAGE> 14
required by the Company, concurrently with the exercise of all or any portion of
this Option, deliver to the Company his or her Investment Representation
Statement in the form attached hereto as Exhibit B.
4. Lock-Up Period. Optionee hereby agrees that, if so requested by the
Company or any representative of the underwriters (the "Managing Underwriter")
in connection with any registration of the offering of any securities of the
Company under the Securities Act, Optionee shall not sell or otherwise transfer
any Shares or other securities of the Company during the 180-day period (or such
other period as may be requested in writing by the Managing Underwriter and
agreed to in writing by the Company) (the "Market Standoff Period") following
the effective date of a registration statement of the Company filed under the
Securities Act. Such restriction shall apply only to the first registration
statement of the Company to become effective under the Securities Act that
includes securities to be sold on behalf of the Company to the public in an
underwritten public offering under the Securities Act. The Company may impose
stop-transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such Market Standoff Period.
5. Method of Payment. Payment of the aggregate Exercise Price shall be
by any of the following, or a combination thereof, at the election of the
Optionee:
(a) cash or check;
(b) consideration received by the Company under a formal
cashless exercise program adopted by the Company in connection with the Plan; or
(c) surrender of other Shares which, (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (ii) have a Fair Market Value
on the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares.
6. Restrictions on Exercise. This Option may not be exercised until such
time as the Plan has been approved by the shareholders of the Company, or if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any Applicable
Law.
7. Non-Transferability of Option. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by Optionee. The terms of
the Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
8. Term of Option. This Option may be exercised only within the term set
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option.
9. Tax Consequences. Set forth below is a brief summary as of the date
of this Option of some of the federal tax consequences of exercise of this
Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE,
AND THE TAX LAWS AND
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<PAGE> 15
REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISER
BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(a) Exercise of ISO. If this Option qualifies as an ISO, there
will be no regular federal income tax liability upon the exercise of the Option,
although the excess, if any, of the Fair Market Value of the Shares on the date
of exercise over the Exercise Price will be treated as an adjustment to the
alternative minimum tax for federal tax purposes and may subject the Optionee to
the alternative minimum tax in the year of exercise.
(b) Exercise of Nonstatutory Stock Option. There may be a
regular federal income tax liability upon the exercise of a Nonstatutory Stock
Option. The Optionee will be treated as having received compensation income
(taxable at ordinary income tax rates) equal to the excess, if any, of the Fair
Market Value of the Shares on the date of exercise over the Exercise Price. If
Optionee is an Employee or a former Employee, the Company will be required to
withhold from Optionee's compensation or collect from Optionee and pay to the
applicable taxing authorities an amount in cash equal to a percentage of this
compensation income at the time of exercise, and may refuse to honor the
exercise and refuse to deliver Shares if such withholding amounts are not
delivered at the time of exercise.
(c) Disposition of Shares. In the case of an NSO, if Shares are
held for at least one year, any gain realized on disposition of the Shares will
be treated as long-term capital gain for federal income tax purposes. In the
case of an ISO, if Shares transferred pursuant to the Option are held for at
least one year after exercise and of at least two years after the Date of Grant,
any gain realized on disposition of the Shares will also be treated as long-term
capital gain for federal income tax purposes. If Shares purchased under an ISO
are disposed of within one year after exercise or two years after the Date of
Grant, any gain realized on such disposition will be treated as compensation
income (taxable at ordinary income rates) to the extent of the difference
between the Exercise Price and the lesser of (1) the Fair Market Value of the
Shares on the date of exercise, or (2) the sale price of the Shares. Any
additional gain will be taxed as capital gain, short-term or long-term depending
on the period that the ISO Shares were held.
(d) Notice of Disqualifying Disposition of ISO Shares. If the
Option granted to Optionee herein is an ISO, and if Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to the ISO on or before the
later of (1) the date two years after the Date of Grant, or (2) the date one
year after the date of exercise, the Optionee shall immediately notify the
Company in writing of such disposition. Optionee agrees that Optionee may be
subject to income tax withholding by the Company on the compensation income
recognized by the Optionee.
10. Entire Agreement; Governing Law. The Plan is incorporated herein by
reference. The Plan and this Option Agreement constitute the entire agreement of
the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee. This agreement is governed by the internal substantive laws but not
the choice of law rules of Colorado.
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<PAGE> 16
11. No Guarantee of Continued Service. OPTIONEE ACKNOWLEDGES AND AGREES
THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED
ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (NOT THROUGH
THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES
HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO
NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A
SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL
NOT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR
WITHOUT CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents that
he or she is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option. Optionee
further agrees to notify the Company upon any change in the residence address
indicated below.
OPTIONEE: XCARE.NET, INC.
- ---------------------------------- -----------------------------------
Signature By
- ---------------------------------- -----------------------------------
Print Name Title
Residence Address
- ----------------------------------
- ----------------------------------
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<PAGE> 17
EXHIBIT A
1997 STOCK PLAN
EXERCISE NOTICE
XCARE.NET, INC.
6400 S. Fiddler's Green Circle
Suite 540
Englewood, CO 80111
Attention: Secretary
1. Exercise of Option. Effective as of today, ___________, 19__, the
undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase
_________ shares of the Common Stock (the "Shares") of XCARE.NET, INC. (the
"Company") under and pursuant to the 1997 Stock Plan (the "Plan") and the Stock
Option Agreement dated <<Grant_Date>> (the "Option Agreement").
2. Delivery of Payment. Purchaser herewith delivers to the Company the
full purchase price of the Shares, as set forth in the Option Agreement.
3. Representations of Optionee. Optionee acknowledges that Optionee has
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.
4. Rights as Shareholder. Until the issuance of the Shares (as evidenced
by the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company), no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Shares shall be issued to the
Optionee as soon as practicable after the Option is exercised. No adjustment
shall be made for a dividend or other right for which the record date is prior
to the date of issuance except as provided in Section 12 of the Plan.
5. Company's Right of First Refusal. Before any Shares held by Optionee
or any transferee (either being sometimes referred to herein as the "Holder")
may be sold or otherwise transferred (including transfer by gift or operation of
law), the Company or its assignee(s) shall have a right of first refusal to
purchase the Shares on the terms and conditions set forth in this Section (the
"Right of First Refusal").
(a) Notice of Proposed Transfer. The Holder of the Shares shall
deliver to the Company a written notice (the "Notice") stating: (i) the Holder's
bona fide intention to sell or otherwise transfer such Shares; (ii) the name of
each proposed purchaser or other transferee ("Proposed Transferee"); (iii) the
number of Shares to be transferred to each Proposed Transferee; and (iv) the
bona fide cash price or other consideration for which the Holder proposes to
transfer the
<PAGE> 18
Shares (the "Offered Price"), and the Holder shall offer the Shares at the
Offered Price to the Company or its assignee(s).
(b) Exercise of Right of First Refusal. At any time within
thirty (30) days after receipt of the Notice, the Company and/or its assignee(s)
may, by giving written notice to the Holder, elect to purchase all, but not less
than all, of the Shares proposed to be transferred to any one or more of the
Proposed Transferees, at the purchase price determined in accordance with
subsection (c) below.
(c) Purchase Price. The purchase price ("Purchase Price") for
the Shares purchased by the Company or its assignee(s) under this Section shall
be the Offered Price. If the Offered Price includes consideration other than
cash, the cash equivalent value of the non-cash consideration shall be
determined by the Board of Directors of the Company in good faith.
(d) Payment. Payment of the Purchase Price shall be made, at the
option of the Company or its assignee(s), in cash (by check), by cancellation of
all or a portion of any outstanding indebtedness of the Holder to the Company
(or, in the case of repurchase by an assignee, to the assignee), or by any
combination thereof within 30 days after receipt of the Notice or in the manner
and at the times set forth in the Notice.
(e) Holder's Right to Transfer. If all of the Shares proposed in
the Notice to be transferred to a given Proposed Transferee are not purchased by
the Company and/or its assignee(s) as provided in this Section, then the Holder
may sell or otherwise transfer such Shares to that Proposed Transferee at the
Offered Price or at a higher price, provided that such sale or other transfer is
consummated within 120 days after the date of the Notice, that any such sale or
other transfer is effected in accordance with any applicable securities laws and
that the Proposed Transferee agrees in writing that the provisions of this
Section shall continue to apply to the Shares in the hands of such Proposed
Transferee. If the Shares described in the Notice are not transferred to the
Proposed Transferee within such period, a new Notice shall be given to the
Company, and the Company and/or its assignees shall again be offered the Right
of First Refusal before any Shares held by the Holder may be sold or otherwise
transferred.
(f) Exception for Certain Family Transfers. Anything to the
contrary contained in this Section notwithstanding, the transfer of any or all
of the Shares during the Optionee's lifetime or on the Optionee's death by will
or intestacy to the Optionee's immediate family or a trust for the benefit of
the Optionee's immediate family shall be exempt from the provisions of this
Section. "Immediate Family" as used herein shall mean spouse, lineal descendant
or antecedent, father, mother, brother or sister. In such case, the transferee
or other recipient shall receive and hold the Shares so transferred subject to
the provisions of this Section, and there shall be no further transfer of such
Shares except in accordance with the terms of this Section.
(g) Termination of Right of First Refusal. The Right of First
Refusal shall terminate as to any Shares upon the first sale of Common Stock of
the Company to the general public pursuant to a registration statement filed
with and declared effective by the Securities and Exchange Commission under the
Securities Act of 1933, as amended.
-2-
<PAGE> 19
6. Tax Consultation. Optionee understands that Optionee may suffer
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
7. Restrictive Legends and Stop-Transfer Orders.
(a) Legends. Optionee understands and agrees that the Company
shall cause the legends set forth below or legends substantially equivalent
thereto, to be placed upon any certificate(s) evidencing ownership of the Shares
together with any other legends that may be required by the Company or by state
or federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS
AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COMPANY
COUNSEL SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH
OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN
COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFER AND A RIGHT OF FIRST REFUSAL
HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE
EXERCISE NOTICE BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF
THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL
OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS AND RIGHT OF
FIRST REFUSAL ARE BINDING ON TRANSFEREES OF THESE SHARES.
(b) Stop-Transfer Notices. Optionee agrees that, in order to
ensure compliance with the restrictions referred to herein, the Company may
issue appropriate "stop transfer" instructions to its transfer agent, if any,
and that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i)
to transfer on its books any Shares that have been sold or otherwise transferred
in violation of any of the provisions of this Agreement or (ii) to treat as
owner of such Shares or to accord the right to vote or pay dividends to any
purchaser or other transferee to whom such Shares shall have been so
transferred.
8. Successors and Assigns. The Company may assign any of its rights
under this Agreement to single or multiple assignees, and this Agreement shall
inure to the benefit of the successors and assigns of the Company. Subject to
the restrictions on transfer herein set forth, this
-3-
<PAGE> 20
Agreement shall be binding upon Optionee and his or her heirs, executors,
administrators, successors and assigns.
9. Interpretation. Any dispute regarding the interpretation of this
Agreement shall be submitted by Optionee or by the Company forthwith to the
Administrator which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Administrator shall be final and binding on
all parties.
10. Governing Law; Severability. This Agreement is governed by the
internal substantive laws but not the choice of law rules, of New Mexico.
11. Entire Agreement. The Plan and Option Agreement are incorporated
herein by reference. This Agreement, the Plan, the Option Agreement and the
Investment Representation Statement constitute the entire agreement of the
parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee.
Submitted by: Accepted by:
OPTIONEE: XCARE.NET, INC.
- ---------------------------------- -----------------------------------
Signature By
- ---------------------------------- -----------------------------------
Print Name Its
Address: Address:
- ---------------------------------- -----------------------------------
- ---------------------------------- -----------------------------------
Date Received:
--------------------
-4-
<PAGE> 21
EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
<TABLE>
<S> <C>
OPTIONEE: <<Name>>
COMPANY: XCARE.NET, INC.
SECURITY: COMMON STOCK
AMOUNT:
DATE:
</TABLE>
In connection with the purchase of the above-listed Securities, the
undersigned Optionee represents to the Company the following:
(a) Optionee is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Securities. Optionee is
acquiring these Securities for investment for Optionee's own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act").
(b) Optionee acknowledges and understands that the Securities constitute
"restricted securities" under the Securities Act and have not been registered
under the Securities Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of Optionee's
investment intent as expressed herein. In this connection, Optionee understands
that, in the view of the Securities and Exchange Commission, the statutory basis
for such exemption may be unavailable if Optionee's representation was
predicated solely upon a present intention to hold these Securities for the
minimum capital gains period specified under tax statutes, for a deferred sale,
for or until an increase or decrease in the market price of the Securities, or
for a period of one year or any other fixed period in the future. Optionee
further understands that the Securities must be held indefinitely unless they
are subsequently registered under the Securities Act or an exemption from such
registration is available. Optionee further acknowledges and understands that
the Company is under no obligation to register the Securities. Optionee
understands that the certificate evidencing the Securities will be imprinted
with a legend which prohibits the transfer of the Securities unless they are
registered or such registration is not required in the opinion of counsel
satisfactory to the Company and any other legend required under applicable state
securities laws.
(c) Optionee is familiar with the provisions of Rule 701 and Rule 144,
each promulgated under the Securities Act, which, in substance, permit limited
public resale of "restricted securities" acquired, directly or indirectly from
the issuer thereof, in a non-public offering subject to the
<PAGE> 22
satisfaction of certain conditions. Rule 701 provides that if the issuer
qualifies under Rule 701 at the time of the grant of the Option to the Optionee,
the exercise will be exempt from registration under the Securities Act. In the
event the Company becomes subject to the reporting requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter (or
such longer period as any market stand-off agreement may require) the Securities
exempt under Rule 701 may be resold, subject to the satisfaction of certain of
the conditions specified by Rule 144, including: (1) the resale being made
through a broker in an unsolicited "broker's transaction" or in transactions
directly with a market maker (as said term is defined under the Securities
Exchange Act of 1934); and, in the case of an affiliate, (2) the availability of
certain public information about the Company, (3) the amount of Securities being
sold during any three month period not exceeding the limitations specified in
Rule 144(e), and (4) the timely filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the
time of grant of the Option, then the Securities may be resold in certain
limited circumstances subject to the provisions of Rule 144, which requires the
resale to occur not less than two years after the later of the date the
Securities were sold by the Company or the date the Securities were sold by an
affiliate of the Company, within the meaning of Rule 144; and, in the case of
acquisition of the Securities by an affiliate, or by a non-affiliate who
subsequently holds the Securities less than three years, the satisfaction of the
conditions set forth in sections (1), (2), (3) and (4) of the paragraph
immediately above.
(d) Optionee further understands that in the event all of the applicable
requirements of Rule 701 or 144 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rules 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk. Optionee understands that no assurances can be given that any
such other registration exemption will be available in such event.
SIGNATURE OF OPTIONEE:
DATE: _______________________, 19___
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<PAGE> 1
EXHIBIT 10.3
XCARE.NET, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
1. Purpose. The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the intention
of the Company to have the Plan qualify as an "Employee Stock Purchase Plan"
under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" shall mean the common stock of the Company.
(d) "Company" shall mean XCare.net, Inc., a Delaware corporation, and
any Designated Subsidiary of the Company.
(e) "Compensation" shall mean all base straight time gross earnings
and commissions, exclusive of payments for overtime, shift premium, incentive
compensation, incentive payments, bonuses and other compensation.
(f) "Designated Subsidiary" shall mean any Subsidiary which has been
designated by the Board from time to time in its sole discretion as eligible to
participate in the Plan.
(g) "Employee" shall mean any individual who is an Employee of the
Company for tax purposes whose customary employment with the Company is at least
twenty (20) hours per week and more than five (5) months in any calendar year.
For purposes of the Plan, the employment relationship shall be treated as
continuing intact while the individual is on sick leave or other leave of
absence approved by the Company. Where the period of leave exceeds 90 days and
the individual's right to reemployment is not guaranteed either by statute or by
contract, the employment relationship shall be deemed to have terminated on the
91st day of such leave.
(h) "Enrollment Date" shall mean the first Trading Day of each
Offering Period.
(i) "Exercise Date" shall mean the last Trading Day of each Purchase
Period.
(j) "Fair Market Value" shall mean, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq
<PAGE> 2
SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the
closing sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such exchange or system for the last market trading day
on the date prior to the purchase, as reported in The Wall Street Journal or
such other source as the Board deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean of the closing bid and asked prices for the Common Stock on
the date prior to the purchase, as reported in The Wall Street Journal or such
other source as the Board deems reliable;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board; or
(iv) For purposes of the Enrollment Date of the first Offering
Period under the Plan, the Fair Market Value shall be the initial price to the
public as set forth in the final prospectus included within the registration
statement in Form S-1 filed with the Securities and Exchange Commission for the
initial public offering of the Company's Common Stock (the "Registration
Statement").
(k) "Offering Periods" shall mean the periods of approximately twelve
(12) months during which an option granted pursuant to the Plan may be
exercised, commencing on the first Trading Day on or after May 1 and November 1
of each year and terminating on the last Trading Day in the periods ending
twelve months later; provided, however, that the first Offering Period under the
Plan shall commence with the first Trading Day on or after the date on which the
Securities and Exchange Commission declares the Company's Registration Statement
effective and ending on the last Trading Day on or before April 30, 2001. The
duration and timing of Offering Periods may be changed pursuant to Section 4 of
this Plan.
(l) "Plan" shall mean this 1999 Employee Stock Purchase Plan.
(m) "Purchase Period" shall mean the approximately six month period
commencing after one Exercise Date and ending with the next Exercise Date,
except that the first Purchase Period of any Offering Period shall commence on
the Enrollment Date and end with the next Exercise Date.
(n) "Purchase Price" shall mean 85% of the Fair Market Value of a
share of Common Stock on the Enrollment Date or on the Exercise Date, whichever
is lower; provided however, that the Purchase Price may be adjusted by the Board
pursuant to Section 20.
(o) "Reserves" shall mean the number of shares of Common Stock
covered by each option under the Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but not yet placed under option.
(p) "Subsidiary" shall mean a corporation, domestic or foreign, of
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.
2
<PAGE> 3
(q) "Trading Day" shall mean a day on which national stock exchanges
and the Nasdaq System are open for trading.
3. Eligibility.
(a) Any Employee who shall be employed by the Company on a given
Enrollment Date shall be eligible to participate in the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) to the extent that,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own capital stock of the Company and/or hold outstanding options to
purchase such stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of the capital stock of the Company or of
any Subsidiary, or (ii) to the extent that his or her rights to purchase stock
under all employee stock purchase plans of the Company and its subsidiaries
accrues at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth of
stock (determined at the fair market value of the shares at the time such option
is granted) for each calendar year in which such option is outstanding at any
time.
4. Offering Periods. The Plan shall be implemented by consecutive,
overlapping Offering Periods with a new Offering Period commencing on the first
Trading Day on or after May 1 and November 1 each year, or on such other date as
the Board shall determine, and continuing thereafter until terminated in
accordance with Section 20 hereof; provided, however, that the first Offering
Period under the Plan shall commence with the first Trading Day on or after the
date on which the Securities and Exchange Commission declares the Company's
Registration Statement effective and ending on the last Trading Day on or before
April 30, 2001. The Board shall have the power to change the duration of
Offering Periods (including the commencement dates thereof) with respect to
future offerings without shareholder approval if such change is announced at
least five (5) days prior to the scheduled beginning of the first Offering
Period to be affected thereafter.
5. Participation.
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions in the form
of Exhibit A to this Plan and filing it with the Company's payroll office
fifteen days prior to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on the first
payroll following the Enrollment Date and shall end on the last payroll in the
Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.
6. Payroll Deductions.
(a) At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each pay day
during the Offering Period in an amount
3
<PAGE> 4
not exceeding twenty percent (20%) of the Compensation which he or she receives
on each pay day during the Offering Period.
(b) All payroll deductions made for a participant shall be credited
to his or her account under the Plan and shall be withheld in whole percentages
only. A participant may not make any additional payments into such account.
(c) A participant may discontinue his or her participation in the
Plan as provided in Section 10 hereof, or may increase or decrease the rate of
his or her payroll deductions during the Offering Period by completing or filing
with the Company a new subscription agreement authorizing a change in payroll
deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period. The change in rate shall
be effective with the first full payroll period following five (5) business days
after the Company's receipt of the new subscription agreement unless the Company
elects to process a given change in participation more quickly. A participant's
subscription agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's
payroll deductions may be decreased to zero percent (0%) at any time during a
Purchase Period. Payroll deductions shall recommence at the rate provided in
such participant's subscription agreement at the beginning of the first Purchase
Period which is scheduled to end in the following calendar year, unless
terminated by the participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in part, or at
the time some or all of the Company's Common Stock issued under the Plan is
disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock. At any time,
the Company may, but shall not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering Period, each
eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Exercise Date during such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Purchase Period more than
20,000 shares of the Company's Common Stock (subject to any adjustment pursuant
to Section 19), and provided further that such purchase shall be subject to the
limitations set forth in Sections 3(b) and 12 hereof. The Board may, for future
Offering Periods, increase or decrease, in its absolute discretion, the maximum
number of shares of the Company's Common Stock an Employee may purchase during
each Purchase Period of such Offering Period. Exercise of the option shall occur
as provided in Section 8 hereof, unless the
4
<PAGE> 5
participant has withdrawn pursuant to Section 10 hereof. The option shall expire
on the last day of the Offering Period.
8. Exercise of Option.
(a) Unless a participant withdraws from the Plan as provided in
Section 10 hereof, his or her option for the purchase of shares shall be
exercised automatically on the Exercise Date, and the maximum number of full
shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares shall be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Purchase Period or Offering Period, subject to earlier withdrawal by the
participant as provided in Section 10 hereof. Any other monies left over in a
participant's account after the Exercise Date shall be returned to the
participant. During a participant's lifetime, a participant's option to purchase
shares hereunder is exercisable only by him or her.
(b) If the Board determines that, on a given Exercise Date, the
number of shares with respect to which options are to be exercised may exceed
(i) the number of shares of Common Stock that were available for sale under the
Plan on the Enrollment Date of the applicable Offering Period, or (ii) the
number of shares available for sale under the Plan on such Exercise Date, the
Board may in its sole discretion (x) provide that the Company shall make a pro
rata allocation of the shares of Common Stock available for purchase on such
Enrollment Date or Exercise Date, as applicable, in as uniform a manner as shall
be practicable and as it shall determine in its sole discretion to be equitable
among all participants exercising options to purchase Common Stock on such
Exercise Date, and continue all Offering Periods then in effect, or (y) provide
that the Company shall make a pro rata allocation of the shares available for
purchase on such Enrollment Date or Exercise Date, as applicable, in as uniform
a manner as shall be practicable and as it shall determine in its sole
discretion to be equitable among all participants exercising options to purchase
Common Stock on such Exercise Date, and terminate any or all Offering Periods
then in effect pursuant to Section 20 hereof. The Company may make pro rata
allocation of the shares available on the Enrollment Date of any applicable
Offering Period pursuant to the preceding sentence, notwithstanding any
authorization of additional shares for issuance under the Plan by the Company's
shareholders subsequent to such Enrollment Date.
9. Delivery. As promptly as practicable after each Exercise Date on which
a purchase of shares occurs, the Company shall arrange the delivery to each
participant, as appropriate, of a certificate representing the shares purchased
upon exercise of his or her option.
10. Withdrawal.
(a) A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his or
her option under the Plan at any time by giving written notice to the Company in
the form of Exhibit B to this Plan. All of the participant's payroll deductions
credited to his or her account shall be paid to such participant promptly after
receipt of notice of withdrawal and such participant's option for the Offering
Period
5
<PAGE> 6
shall be automatically terminated, and no further payroll deductions for the
purchase of shares shall be made for such Offering Period. If a participant
withdraws from an Offering Period, payroll deductions shall not resume at the
beginning of the succeeding Offering Period unless the participant delivers to
the Company a new subscription agreement.
(b) A participant's withdrawal from an Offering Period shall not have
any effect upon his or her eligibility to participate in any similar plan which
may hereafter be adopted by the Company or in succeeding Offering Periods which
commence after the termination of the Offering Period from which the participant
withdraws.
11. Termination of Employment.
Upon a participant's ceasing to be an Employee, for any reason, he or
she shall be deemed to have elected to withdraw from the Plan and the payroll
deductions credited to such participant's account during the Offering Period but
not yet used to exercise the option shall be returned to such participant or, in
the case of his or her death, to the person or persons entitled thereto under
Section 15 hereof, and such participant's option shall be automatically
terminated. The preceding sentence notwithstanding, a participant who receives
payment in lieu of notice of termination of employment shall be treated as
continuing to be an Employee for the participant's customary number of hours per
week of employment during the period in which the participant is subject to such
payment in lieu of notice.
12. Interest. No interest shall accrue on the payroll deductions of a
participant in the Plan.
13. Stock.
(a) Subject to adjustment upon changes in capitalization of the
Company as provided in Section 19 hereof, the maximum number of shares of the
Company's Common Stock which shall be made available for sale under the Plan
shall be 3,500,000 shares, plus an annual increase to be added on January 1, of
each year, beginning in 2001, equal to the lesser of (i) 3,500,000 shares, (ii)
2% of the outstanding shares on such date, or (iii) a lesser amount determined
by the Board.
(b) The participant shall have no interest or voting right in shares
covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan shall be
registered in the name of the participant or in the name of the participant and
his or her spouse.
14. Administration. The Plan shall be administered by the Board or a
committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision and
determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.
15. Designation of Beneficiary.
6
<PAGE> 7
(a) A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the participant's account under
the Plan in the event of such participant's death subsequent to an Exercise Date
on which the option is exercised but prior to delivery to such participant 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 such participant's death prior to exercise of the
option. If a participant is married and the designated beneficiary is not the
spouse, spousal consent shall be required for such designation to be effective.
(b) Such designation of beneficiary may be changed by the participant
at any time by written notice. In the event of the death of a participant and in
the absence of a beneficiary validly designated under the Plan who is living at
the time of such participant's death, the Company shall deliver such shares
and/or cash 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 Company), the Company, in its discretion, may deliver such shares and/or
cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
16. 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 15 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 an Offering Period in accordance with Section 10 hereof.
17. Use of Funds. All payroll deductions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
18. Reports. Individual accounts shall be maintained for each participant
in the Plan. Statements of account shall be given to participating Employees at
least annually, which statements shall set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if any.
19. Adjustments Upon Changes in Capitalization, Dissolution, Liquidation,
Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the Reserves, the maximum number of shares each
participant may purchase each Purchase Period (pursuant to Section 7), as well
as the price per share and the number of shares of Common Stock covered by each
option 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 Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without
7
<PAGE> 8
receipt of consideration." Such adjustment shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive. Except as
expressly provided herein, no issuance 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 Common Stock subject to an option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Offering Period then in progress
shall be shortened by setting a new Exercise Date (the "New Exercise Date"), and
shall terminate immediately prior to the consummation of such proposed
dissolution or liquidation, unless provided otherwise by the Board. The New
Exercise Date shall be before the date of the Company's proposed dissolution or
liquidation. The Board shall notify each participant in writing, at least ten
(10) business days prior to the New Exercise Date, that the Exercise Date for
the participant's option has been changed to the New Exercise Date and that the
participant's option shall be exercised automatically on the New Exercise Date,
unless prior to such date the participant has withdrawn from the Offering Period
as provided in Section 10 hereof.
(c) Merger or Asset Sale. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each outstanding option shall be assumed or an
equivalent option substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the option, any Purchase Periods
then in progress shall be shortened by setting a new Exercise Date (the "New
Exercise Date") and any Offering Periods then in progress shall end on the New
Exercise Date. The New Exercise Date shall be before the date of the Company's
proposed sale or merger. The Board shall notify each participant in writing, at
least ten (10) business days prior to the New Exercise Date, that the Exercise
Date for the participant's option has been changed to the New Exercise Date and
that the participant's option shall be exercised automatically on the New
Exercise Date, unless prior to such date the participant has withdrawn from the
Offering Period as provided in Section 10 hereof.
20. Amendment or Termination.
(a) The Board of Directors of the Company may at any time and for any
reason terminate or amend the Plan. Except as provided in Section 19 hereof, no
such termination can affect options previously granted, provided that an
Offering Period may be terminated by the Board of Directors on any Exercise Date
if the Board determines that the termination of the Offering Period or the Plan
is in the best interests of the Company and its shareholders. Except as provided
in Section 19 and this Section 20 hereof, no amendment may make any change in
any option theretofore granted which adversely affects the rights of any
participant. To the extent necessary to comply with Section 423 of the Code (or
any successor rule or provision or any other applicable law, regulation or stock
exchange rule), the Company shall obtain shareholder approval in such a manner
and to such a degree as required.
(b) Without shareholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be
8
<PAGE> 9
entitled to change the Offering Periods, limit the frequency and/or number of
changes in the amount withheld during an Offering Period, establish the exchange
ratio applicable to amounts withheld in a currency other than U.S. dollars,
permit payroll withholding in excess of the amount designated by a participant
in order to adjust for delays or mistakes in the Company's processing of
properly completed withholding elections, establish reasonable waiting and
adjustment periods and/or accounting and crediting procedures to ensure that
amounts applied toward the purchase of Common Stock for each participant
properly correspond with amounts withheld from the participant's Compensation,
and establish such other limitations or procedures as the Board (or its
committee) determines in its sole discretion advisable which are consistent with
the Plan.
(c) In the event the Board determines that the ongoing operation of
the Plan may result in unfavorable financial accounting consequences, the Board
may, in its discretion and, to the extent necessary or desirable, modify or
amend the Plan to reduce or eliminate such accounting consequence including, but
not limited to:
(i) altering the Purchase Price for any Offering Period
including an Offering Period underway at the time of the change in Purchase
Price;
(ii) shortening any Offering Period so that Offering Period ends
on a new Exercise Date, including an Offering Period underway at the time of the
Board action; and
(iii) allocating shares.
Such modifications or amendments shall not require stockholder approval or
the consent of any Plan participants.
21. Notices. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
22. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may require the
person exercising such option to represent and warrant at the time of any such
exercise that the shares are being purchased only for investment and without any
present intention to sell or distribute such shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned applicable provisions of law.
9
<PAGE> 10
23. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 20 hereof.
24. Automatic Transfer to Low Price Offering Period. To the extent
permitted by any applicable laws, regulations, or stock exchange rules if the
Fair Market Value of the Common Stock on any Exercise Date in an Offering Period
is lower than the Fair Market Value of the Common Stock on the Enrollment Date
of such Offering Period, then all participants in such Offering Period shall be
automatically withdrawn from such Offering Period immediately after the exercise
of their option on such Exercise Date and automatically re-enrolled in the
immediately following Offering Period as of the first day thereof.
10
<PAGE> 11
EXHIBIT A
XCARE.NET, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date: ___________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)
1. ____________________ hereby elects to participate in the XCare.net, Inc.
1999 Employee Stock Purchase Plan (the "Employee Stock Purchase Plan") and
subscribes to purchase shares of the Company's Common Stock in accordance
with this Subscription Agreement and the Employee Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount of
____% of my Compensation on each payday (from 1% to 20%) during the
Offering Period in accordance with the Employee Stock Purchase Plan.
(Please note that no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise my
option.
4. I have received a copy of the complete Employee Stock Purchase Plan. I
understand that my participation in the Employee Stock Purchase Plan is in
all respects subject to the terms of the Plan. I understand that my ability
to exercise the option under this Subscription Agreement is subject to
shareholder approval of the Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should be
issued in the name(s) of (Employee or Employee and Spouse only).
6. I understand that if I dispose of any shares received by me pursuant to the
Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased such shares) or one year after the
Exercise Date, I will be treated for federal income tax purposes as having
received ordinary income at the time of such disposition in an amount equal
to the excess of the fair market value of the shares at the time such
shares were purchased by me over the price which I paid for the shares. I
hereby agree to notify the Company in writing
<PAGE> 12
within 30 days after the date of any disposition of my shares and I will
make adequate provision for Federal, state or other tax withholding
obligations, if any, which arise upon the disposition of the Common Stock.
The Company may, but will not be obligated to, withhold from my
compensation the amount necessary to meet any applicable withholding
obligation including any withholding necessary to make available to the
Company any tax deductions or benefits attributable to sale or early
disposition of Common Stock by me. If I dispose of such shares at any time
after the expiration of the 2-year and 1-year holding periods, I understand
that I will be treated for federal income tax purposes as having received
income only at the time of such disposition, and that such income will be
taxed as ordinary income only to the extent of an amount equal to the
lesser of (1) the excess of the fair market value of the shares at the time
of such disposition over the purchase price which I paid for the shares, or
(2) 15% of the fair market value of the shares on the first day of the
Offering Period. The remainder of the gain, if any, recognized on such
disposition will be taxed as capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent upon my
eligibility to participate in the Employee Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:
NAME: (Please print)______________________________________________
(First) (Middle) (Last)
_____________________________________ ________________________________________
Relationship
________________________________________
(Address)
2
<PAGE> 13
Employee's Social
Security Number: ____________________________________
Employee's Address: ____________________________________
____________________________________
____________________________________
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated:_________________________ ________________________________________
Signature of Employee
________________________________________
Spouse's Signature
(If beneficiary other than spouse)
3
<PAGE> 14
EXHIBIT B
XCARE.NET, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the XCare.net, Inc.
1999 Employee Stock Purchase Plan which began on ____________, ______ (the
"Enrollment Date") hereby notifies the Company that he or she hereby withdraws
from the Offering Period. He or she hereby directs the Company to pay to the
undersigned as promptly as practicable all the payroll deductions credited to
his or her account with respect to such Offering Period. The undersigned
understands and agrees that his or her option for such Offering Period will be
automatically terminated. The undersigned understands further that no further
payroll deductions will be made for the purchase of shares in the current
Offering Period and the undersigned shall be eligible to participate in
succeeding Offering Periods only by delivering to the Company a new Subscription
Agreement.
Name and Address of Participant:
--------------------------------
--------------------------------
--------------------------------
Signature:
--------------------------------
Date:
---------------------------
<PAGE> 1
EXHIBIT 10.4
XCARE.NET, INC.
1999 DIRECTOR OPTION PLAN
1. Purposes of the Plan. The purposes of this 1999 Director Option Plan
are to attract and retain the best available personnel for service as Outside
Directors (as defined herein) of the Company, to provide additional incentive to
the Outside Directors of the Company to serve as Directors, and to encourage
their continued service on the Board.
All options granted hereunder shall be nonstatutory stock options.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" means the common stock of the Company.
(d) "Company" means XCare.net, Inc., a Delaware corporation.
(e) "Director" means a member of the Board.
(f) "Disability" means total and permanent disability as defined in
section 22(e)(3) of the Code.
(g) "Employee" means any person, including officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a Director's fee by the Company shall not be sufficient in and of itself to
constitute "employment" by the Company.
(h) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(i) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of grant as reported in The Wall
Street Journal or such other source as the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock for the last market
<PAGE> 2
trading day prior to the time of grant, as reported in The Wall Street Journal
or such other source as the Board deems reliable; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board.
(j) "Inside Director" means a Director who is an Employee.
(k) "IPO Effective Date" means the date upon with the Securities and
Exchange Commission declares the initial public offering of the Company's common
stock as effective.
(l) "Option" means a stock option granted pursuant to the Plan.
(m) "Optioned Stock" means the Common Stock subject to an Option.
(n) "Optionee" means a Director who holds an Option.
(o) "Outside Director" means a Director who is not an Employee.
(p) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(q) "Plan" means this 1999 Director Option Plan.
(r) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 10 of the Plan.
(s) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Internal Revenue Code of
1986.
3. Stock Subject to the Plan. Subject to the provisions of Section 10 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 1,750,000 Shares (the "Pool"), plus an annual increase to be
added on January 1 of each year beginning in 2001, equal to the lesser of (i)
1,400,000 shares, (ii) 1% of the outstanding shares on such date, or (iii) a
lesser amount determined by the Board. The Shares may be authorized, but
unissued, or reacquired Common Stock.
If an Option expires or becomes unexercisable without having been
exercised in full, the unpurchased Shares which were subject thereto shall
become available for future grant or sale under the Plan (unless the Plan has
terminated). Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan.
4. Administration and Grants of Options under the Plan.
(a) Procedure for Grants. All grants of Options to Outside Directors
under this Plan shall be automatic and nondiscretionary and shall be made
strictly in accordance with the following provisions:
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<PAGE> 3
(i) No person shall have any discretion to select which Outside
Directors shall be granted Options or to determine the number of Shares to be
covered by Options.
(ii) Each Outside Director shall be automatically granted an
Option to purchase 175,000 Shares (the "First Option") on the date on which the
later of the following events occurs: (A) the IPO Effective Date, or (B) the
date on which such person first becomes an Outside Director, whether through
election by the shareholders of the Company or appointment by the Board to fill
a vacancy; provided, however, that an Inside Director who ceases to be an Inside
Director but who remains a Director shall not receive a First Option.
(iii) Each Outside Director shall be automatically granted an
Option to purchase 70,000 Shares (a "Subsequent Option") on the date of the
annual stockholders meeting of each year provided he or she is then an Outside
Director and if as of such date, he or she shall have served on the Board for at
least the preceding six (6) months.
(iv) Notwithstanding the provisions of subsections (ii) and (iii)
hereof, any exercise of an Option granted before the Company has obtained
shareholder approval of the Plan in accordance with Section 16 hereof shall be
conditioned upon obtaining such shareholder approval of the Plan in accordance
with Section 16 hereof.
(v) The terms of a First Option granted hereunder shall be as
follows:
(A) the term of the First Option shall be ten (10) years.
(B) the First Option shall be exercisable only while the
Outside Director remains a Director of the Company, except as set forth in
Sections 8 and 10 hereof.
(C) the exercise price per Share shall be 100% of the Fair
Market Value per Share on the date of grant of the First Option.
(D) subject to Section 10 hereof, the First Option shall
become exercisable as to 25% percent of the Shares subject to the First Option
on each anniversary of its date of grant, provided that the Optionee continues
to serve as a Director on such dates.
(vi) The terms of a Subsequent Option granted hereunder shall be
as follows:
(A) the term of the Subsequent Option shall be ten (10)
years.
(B) the Subsequent Option shall be exercisable only while
the Outside Director remains a Director of the Company, except as set forth in
Sections 8 and 10 hereof
(C) the exercise price per Share shall be 100% of the Fair
Market Value per Share on the date of grant of the Subsequent Option.
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<PAGE> 4
(D) subject to Section 10 hereof, the Subsequent Option
shall become exercisable as to 100% percent of the Shares subject to the
Subsequent Option on the anniversary of its date of grant, provided that the
Optionee continues to serve as a Director on such date.
(vii) In the event that any Option granted under the Plan would
cause the number of Shares subject to outstanding Options plus the number of
Shares previously purchased under Options to exceed the Pool, then the remaining
Shares available for Option grant shall be granted under Options to the Outside
Directors on a pro rata basis. No further grants shall be made until such time,
if any, as additional Shares become available for grant under the Plan through
action of the Board or the shareholders to increase the number of Shares which
may be issued under the Plan or through cancellation or expiration of Options
previously granted hereunder.
5. Eligibility. Options may be granted only to Outside Directors. All
Options shall be automatically granted in accordance with the terms set forth in
Section 4 hereof.
The Plan shall not confer upon any Optionee any right with respect to
continuation of service as a Director or nomination to serve as a Director, nor
shall it interfere in any way with any rights which the Director or the Company
may have to terminate the Director's relationship with the Company at any time.
6. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board or its approval by the shareholders of the
Company as described in Section 16 of the Plan. It shall continue in effect for
a term of ten (10) years unless sooner terminated under Section 11 of the Plan.
7. Form of Consideration. The consideration to be paid for the Shares to
be issued upon exercise of an Option, including the method of payment, shall
consist of (i) cash, (ii) check, (iii) other shares which (x) in the case of
Shares acquired upon exercise of an option, have been owned by the Optionee for
more than six (6) months on the date of surrender, and (y) have a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the
Shares as to which said Option shall be exercised, (iv) consideration received
by the Company under a cashless exercise program implemented by the Company in
connection with the Plan, or (v) any combination of the foregoing methods of
payment.
8. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable at such times as are set forth in Section
4 hereof; provided, however, that no Options shall be exercisable until
shareholder approval of the Plan in accordance with Section 16 hereof has been
obtained.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person
-4-
<PAGE> 5
entitled to exercise the Option and full payment for the Shares with respect to
which the Option is exercised has been received by the Company. Full payment may
consist of any consideration and method of payment allowable under Section 7 of
the Plan. Until the issuance (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company) of the
stock certificate evidencing such Shares, no right to vote or receive dividends
or any other rights as a shareholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. A share certificate for the
number of Shares so acquired shall be issued to the Optionee as soon as
practicable after exercise of the Option. No adjustment shall be made for a
dividend or other right for which the record date is prior to the date the stock
certificate is issued, except as provided in Section 10 of the Plan.
Exercise of an Option in any manner shall result in a decrease in
the number of Shares which thereafter may be available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Continuous Status as a Director. Subject to
Section 10 hereof, in the event an Optionee's status as a Director terminates
(other than upon the Optionee's death or Disability), the Optionee may exercise
his or her Option, but only within three (3) months following the date of such
termination, and only to the extent that the Optionee was entitled to exercise
it on the date of such termination (but in no event later than the expiration of
its ten (10) year term). To the extent that the Optionee was not entitled to
exercise an Option on the date of such termination, and to the extent that the
Optionee does not exercise such Option (to the extent otherwise so entitled)
within the time specified herein, the Option shall terminate.
(c) Disability of Optionee. In the event Optionee's status as a
Director terminates as a result of Disability, the Optionee may exercise his or
her Option, but only within twelve (12) months following the date of such
termination, and only to the extent that the Optionee was entitled to exercise
it on the date of such termination (but in no event later than the expiration of
its ten (10) year term). To the extent that the Optionee was not entitled to
exercise an Option on the date of termination, or if he or she does not exercise
such Option (to the extent otherwise so entitled) within the time specified
herein, the Option shall terminate.
(d) Death of Optionee. In the event of an Optionee's death, the
Optionee's estate or a person who acquired the right to exercise the Option by
bequest or inheritance may exercise the Option, but only within twelve (12)
months following the date of death, and only to the extent that the Optionee was
entitled to exercise it on the date of death (but in no event later than the
expiration of its ten (10) year term). To the extent that the Optionee was not
entitled to exercise an Option on the date of death, and to the extent that the
Optionee's estate or a person who acquired the right to exercise such Option
does not exercise such Option (to the extent otherwise so entitled) within the
time specified herein, the Option shall terminate.
9. Non-Transferability of Options. The Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
-5-
<PAGE> 6
10. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
Asset Sale.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of Shares covered by each outstanding
Option, the number of Shares which have been authorized for issuance under the
Plan but as to which no Options have yet been granted or which have been
returned to the Plan upon cancellation or expiration of an Option, as well as
the price per Share covered by each such outstanding Option, and the number of
Shares issuable pursuant to the automatic grant provisions of Section 4 hereof
shall be proportionately adjusted for any increase or decrease in the number of
issued Shares resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued Shares effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Except as expressly provided herein, no
issuance 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
subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option has not
been previously exercised, it shall terminate immediately prior to the
consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company
with or into another corporation or the sale of substantially all of the assets
of the Company, outstanding Options may be assumed or equivalent options may be
substituted by the successor corporation or a Parent or Subsidiary thereof (the
"Successor Corporation"). If an Option is assumed or substituted for, the Option
or equivalent option shall continue to be exercisable as provided in Section 4
hereof for so long as the Optionee serves as a Director or a director of the
Successor Corporation. Following such assumption or substitution, if the
Optionee's status as a Director or director of the Successor Corporation, as
applicable, is terminated other than upon a voluntary resignation by the
Optionee, the Option or option shall become fully exercisable, including as to
Shares for which it would not otherwise be exercisable. Thereafter, the Option
or option shall remain exercisable in accordance with Sections 8(b) through (d)
above.
If the Successor Corporation does not assume an outstanding Option or
substitute for it an equivalent option, the Option shall become fully vested and
exercisable, including as to Shares for which it would not otherwise be
exercisable. In such event the Board shall notify the Optionee that the Option
shall be fully exercisable for a period of thirty (30) days from the date of
such notice, and upon the expiration of such period the Option shall terminate.
For the purposes of this Section 10(c), an Option shall be considered
assumed if, following the merger or sale of assets, the Option confers the right
to purchase or receive, for each Share of Optioned Stock subject to the Option
immediately prior to the merger or sale of assets, the consideration (whether
stock, cash, or other securities or property) received in the merger or sale of
assets by holders of Common Stock for each Share held on the effective date of
the transaction (and
-6-
<PAGE> 7
if holders were offered a choice of consideration, the type of consideration
chosen by the holders of a majority of the outstanding Shares). If such
consideration received in the merger or sale of assets is not solely common
stock of the successor corporation or its Parent, the Administrator may, with
the consent of the successor corporation, provide for the consideration to be
received upon the exercise of the Option, for each Share of Optioned Stock
subject to the Option, to be solely common stock of the successor corporation or
its Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.
11. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend, or discontinue the Plan, but no amendment, alteration,
suspension, or discontinuation shall be made which would impair the rights of
any Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with any applicable
law, regulation or stock exchange rule, the Company shall obtain shareholder
approval of any Plan amendment in such a manner and to such a degree as
required.
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated.
12. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date determined in accordance with Section 4 hereof.
13. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares, if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
-7-
<PAGE> 8
14. Reservation of Shares. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
15. Option Agreement. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
16. Shareholder Approval. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the degree and manner
required under applicable state and federal law and any stock exchange rules.
-8-
<PAGE> 1
EXHIBIT 10.5
DATED 30th December 1998
SOFTWARE LICENCE
MATCH HEALTH CARE (1)
SERVICES LIMITED
MPOWER SOLUTIONS INC (2)
LAWRENCE GRAHAM
190 Strand
London WC2R 11N
Tel: 0171-379 0000
Fax: 0171 379 6854
Ref: 0847658.01
<PAGE> 2
THIS AGREEMENT is made the 30th day of December 1998
BETWEEN:-
(1) MATCH HEALTHCARE SERVICES LIMITED whose registered office is at Jessica
House, Red Lion Square, 191 Wandsworth High Street, London, SW18 4LS
(the "Licensor"); and
(2) MPOWER SOLUTIONS INC, with its principal offices at 6400 South Fiddlers
Green Circle, Suite 540, Englewood, Colorado 80111 (the "Licensee")
WHEREAS:-
(A) The Licensor is the owner of a computer software product known as
Matchnet further details of which are set out in Schedule 1 (the
"Software").
(B) The Licensee wishes to acquire from the Licensor a licence to use modify
and sublicense the use of the Software in the Territory (as defined in
Schedule 3) and the Licensor is willing to grant such an agreement on
the terms of this agreement.
NOW IT IS HEREBY AGREED AS FOLLOWS:
1. GRANT OF LICENCE
1.1 In consideration of the payments to be made by the Licensor pursuant to
Clause 3 the Licensor hereby grants to the Licensee and the Licensee
hereby accepts the following exclusive licences in respect of the
healthcare market in the Territory (save as provided below) and
non-exclusive licences in respect of the non healthcare market in the
Territory each of which licences shall be non-transferable (the
"Licenses"):
1.1.1 a licence to use alter amend upgrade translate modify and enhance
the Software to integrate the Software with the Licensee's
software products;
1.1.2 a licence to market distribute and grant a sub-licence of the use
(but not to modify or further sub-licence the Software) of the
Software.
Provided that such exclusivity will forthwith cease and such licences shall
become non-exclusive on the expiry of 18 months from the Commencement Date if
the sales targets set out at Clause 5.1.1 are not achieved and where such sales
targets are achieved but the sales targets set out in Clause 5.1.2 are not
achieved then the
<PAGE> 3
exclusivity shall terminate at the end of 30 months from the Commencement Date.
Notwithstanding the above the exclusivity shall in any event forthwith terminate
on the expiry of 10 years from the Commencement Date.
1.2 The Licensor shall promptly following the signature of this Agreement
furnish the Licensee with one reproducible copy of the Software together
with its current (as at the date hereof) user manual written operating
instructions therefor.
2. TERM
The Agreements shall take effect on the date of the signature by the
parties of this Agreement ("the Commencement Date") and shall continue
thereafter until or unless terminated by either party pursuant to
Clause 11.
3. LICENCE FEE AND ROYALTIES
3.1 In consideration of the grant of the Licences the Licensee shall pay to
the Licensor:
3.1.1 the sum of US $[*] (the "Initial Fee") in accordance with
Schedule 2; and
3.1.2 a sum equal to [*]% of all sums received or paid to the Licensee
in respect of sales or licences granted by the Licensee of the
Software or any products sold or licences granted by the Licensee
in each year during the term of this Agreement (including in
respect of sales made prior to the termination of this Agreement,
and received after the termination of the Agreement) which
contain the Software (in whole or in part) ("Relevant Products)
such payments shall be made within 90 days of the date of the
Licensor's invoice therefor.
3.2 If any deduction or withholding is required by law in respect of any
payment due to the Licensor, the Licensee shall pay such additional
amounts as may be necessary to ensure that the Licensor receives a net
amount equal to the full amount which it would have received had the
payment not been subject to the withholding.
4. TECHNICAL ASSISTANCE
4.1 From the Commencement Date until the Licensee's first installation of
the Software with an end user the Licensor shall provide the Licensee
with all reasonable and necessary technical support (excluding
developmental programming) in connection with the operation of the
Software to facilitate the handover of an operational product ("the
Assistance") and shall during the 6
* Confidential Treatment Requested
<PAGE> 4
months following the signature of the Licensor's first licence of the
Software provide to the Licensee Assistance in connection with the
operation of the Software up to a maximum of 10 man days per month the
Assistance to be provided pursuant to this Clause 4.1 shall be free of
charge.
4.2 The Assistance to be provided pursuant to Clause 4.1 shall wherever
possible be provided remotely by or on behalf of the Licensor provided
that if in the reasonable opinion of the Licensor it is desirable or at
the request of the Licensee the Licensor may provide such assistance at
the premises of the Licensee in which case the Licensee shall pay all
costs reasonably incurred by the Licensor in respect of travel
subsistence and accommodation within 60 days of the date of the
Licensor's invoice in respect thereof.
4.3 If the Licensee requests any Assistance in excess of that to be provided
pursuant to Clause 4.1 then any such Assistance provided by the Licensor
will be at its then prevailing time and materials rates and otherwise on
terms to be agreed between the parties.
5. SALES TARGETS
5.1 The Licensee shall during the term of this Agreement attain the
following sales of the Relevant Products:-
5.1.1 during the first 18 months, from the Commencement Date the
Licensee shall achieve no less than $[*] worth of sales of
the Relevant Products; thereafter
5.1.2 the Licensee shall achieve no less than $[*] worth of sales
per year of the Relevant Products.
6. LICENCEES END-USERS
The Licensee shall ensure that the terms of its sub-licence to its
end-users contains a prohibition on granting any further licences or sub
licences in respect of the Software and to the maximum extent permitted
by applicable law not to modify or reverse engineer the Software and the
Licensee undertakes to the Licensor that it will not distribute any
copies of the Software (in whole or in part) to any end user prior to
receiving its written acceptance of such prohibition.
7. UNDERTAKINGS BY THE LICENCEE
The Licensee undertakes and agrees with the Licensor that it will at all
times
* Confidential Treatment Requested
<PAGE> 5
during the continuance in force of this Agreement and where applicable,
following termination hereof observe and perform the terms and
conditions set out in this Agreement and in particular;
7.1 will use at all times its best endeavours to promote and extend the
market for the Software to all potential licensees in the Territory and
work diligently to obtain the Sales Targets;
7.2 will at its own expense provide advertising and publicity for the
Software;
7.3 will not without the previous consent in writing of the Licensor be
concerned or interested either directly or indirectly in the production,
importation, sale, licensing or advertisement of any software which is
so like or similar to the Software as to be capable of restricting,
competing or otherwise interfering with or which might otherwise
restrict or interfere with the market for the Software;
7.4 will not incur any liability on behalf of the Licensor or in any way
pledge or purport to pledge the Licensor's credit or purport to make any
contract binding upon the Licensor;
7.5 will not alter, obscure, remove, conceal or otherwise interfere with any
eye-readable or machine-readable marking on the Software which refers to
the Licensor as author or developer of the Software or otherwise refers
to the Licensor's copyright or other intellectual property rights in the
software;
7.6 will permit any duly authorised representative of the Licensor upon
reasonable prior notice to enter into any of the Licensees' premises for
the purpose of ascertaining that the provisions of this Agreement are
being complied with by the Licensee;
7.7 will immediately bring to the attention of the Licensor any improper or
wrongful use of the Licensor's trade marks, intellectual or commercial
property rights which come to the notice of the Licensee and will in the
performance of its duties under this Agreement use every effort to
safeguard the property rights and interests of the Licensor and will at
the request and cost of the Licensor take all steps required by the
Licensor to defend such rights;
7.8 will during the continuance of the Agreement keep full accurate and
up-to-date details of the number of sales and the amount of revenue
payable and received and outstanding from sales of the Relevant Products
and shall on reasonable prior written notice permit an auditor or other
independent representative appointed by
<PAGE> 6
the Licensor to inspect such records at all reasonable times;
7.9 will on the Licensor's written request, provide to the Licensor a report
from the Licensee's external auditors certifying the accuracy of the
information submitted by the Licensee pursuant to Clause 7.8 provided
that the Licensor shall not request such a report more than once in any
period of 6 months during the Term.
7.10 will from time to time on request by the Licensor, supply to the
Licensor reports, returns and other information relating to the
Agreements; and
7.11 will at all times in good faith and not take any action which will
prejudice the prospects of the Licensor in relation to its entitlement
in respect of sale or licences of Relevant Products.
8. LIABILITY
Except to the extent that statute prevents liability from being lawfully
excluded in an Agreement of this nature and between the respective
parties hereto, any statement, representation, condition, warranty or
other term express or implied, statutory or otherwise, as to the
quality, merchantability, suitability or fitness for any particular
purpose of the Software is hereby excluded and the Licensor shall not be
liable to the Licensee or to any other persons by reason thereof or any
duty, statutory or otherwise, for any loss or damage (whether direct
indirect or consequential) arising directly or indirectly in connection
with the Software or any documentation manual provided by the licensor
to the licensee relating thereto.
9. COPYRIGHT, PATENTS, TRADE MARKS AND OTHER INTELLECTUAL PROPERTY RIGHTS
9.1 The Licensee acknowledges that any and all of the copyright trade marks
and other intellectual property rights subsisting in or used in
connection with the Software including all documentation and manuals
relating thereto are and shall remain the property of the Licensor and
the Licensee shall not during or at any time after the expiry or
termination of this Agreement in any way question or dispute the
ownership thereof by the Licensor.
9.2 The Licensee also acknowledges that such copyright trade marks and other
rights belonging to the Licensor may only be used by the Licensee with
the consent of the Licensor and during this Agreement.
9.3 The Licensee shall not during or after the expiry or termination of this
Agreement,
<PAGE> 7
without the prior written consent of the Licensor, use or adopt any
name, trade name, trading style or commercial designation that includes
or is similar to or may be mistaken for the whole or any part of any
trade mark trade name, trading style or commercial designation used by
the Licensor.
10. CONFIDENTIALITY
10.1 Except as provided by Clause 10.2 each party shall at all times during
the continuance of this Agreement and thereafter:
10.1.1 use its best endeavours to keep all Restricted Information
(which for the purpose of this Agreement means any confidential
information which is disclosed by either part to the other
pursuant to or in connection with this Agreement (whether orally
or in writing and whether or not such information is expressly
stated to be confidential or marked as such) of the other party
confidential and accordingly not to disclose any of the other
party's Restricted Information to any other person; and
10.1.2 not use any of the other party's Restricted Information for any
purpose other than the performance of its obligations under this
Agreement.
10.2 Any Restricted Information of each party may be disclosed by the other
party (the "Disclosing Party") to:
10.2.1 any governmental or other authority or regulatory body; and
10.2.2 any employees of the Disclosing Party or of any of the
aforementioned persons;
to such extent only as is necessary for the purposes contemplated by
this Agreement or as is required by law and subject in each case to the
Disclosing Party using all reasonable endeavours to ensure that the
person in question keeps the same confidential and does not use the same
except for the purposes for which the disclosure was made.
11. TERMINATION
11.1 Notwithstanding any provisions herein contained this Agreement may be
terminated forthwith by either party by notice in writing from the party
not at fault if any of the following events shall occur:-
11.1.1 if the other party shall at any time be in default under this
Agreement
<PAGE> 8
and shall fail to remedy such default (if capable of remedy) within
thirty (30) days from receipt of notice in writing from the first party
specifying such default;
11.1.2 if the other party shall commit any act of bankruptcy, shall
have a receiving order made against it, shall make or negotiate
for any composition or arrangement with or assignment for the
benefit of its creditors or if the other party being a body
corporate, shall present a petition or have a petition presented
by a creditor for its winding up or shall enter into any
liquidation (other than for the purpose of reconstruction or
amalgamation), shall call any meeting of its creditors, shall
have a receiver of all or any of its undertakings or assets
appointed, shall be deemed by virtue of the relevant statutory
provisions under the applicable law to be unable to pay its
debts, or shall cease to carry on business;
may be so terminated by the Licensor if any of the following events
shall occur:-
11.1.3 non-payment of any sum payable under this Agreement to the
Licensor by its due date for payment; and
11.1.4 the Licensee fails to meet the sales targets pursuant to Clause
5.
11.2 The expiry or termination of this Agreement shall be without prejudice
to the rights of the parties accrued up to the date of such expiry or
termination.
11.3 Upon the termination of this Agreement the Licensee shall at the request
of the Licensor and within 30 days thereof transfer or assign to the
Licensor all Licences with its end users relating to the Software.
12. INTEREST
The Licensee shall pay to the Licensor interest on any amount payable to
the other hereunder which is not paid within 30 days of the day on which
it falls due at a rate equal to 2% per annum over LIBOR (which for the
purposes of this Agreement shall mean (i) the rate for US dollar
deposits for that period which appears on the Telerate page 3750 (or
such other page as may replace that page for the purpose of displaying
offered rates of lending banks for London inter-bank deposits as
aforesaid) at or about 11 am on the first day of that period or (ii)
such other rate as may be agreed between the Licensor and the Licensee
both before and after judgement until the date of payment.
<PAGE> 9
13. WAIVER
Failure or neglect by the Licensor to enforce at any time any of the
provisions hereof shall not be construed nor shall be deemed to be a
waiver of the Licensor's rights hereunder nor in any way affect the
validity of the whole or any part of this Agreement nor prejudice the
Licensor's rights to take subsequent action.
14. ASSIGNMENT OR TRANSFER
This Agreement shall not be assigned by the Licensee in whole or in
part, to any party without the prior written consent of the Licensor not
to be unreasonably withheld.
15. AGREEMENT
This Agreement supersedes any arrangements, understandings, promises or
licences made or existing between the parties and constitutes the entire
understanding between the parties. Except as otherwise provided herein,
no addition, amendment to or modification of this Agreement shall be
effective unless it is in writing and signed by and on behalf of both
parties.
16. NOTICES
16.1 Any notice by either party to be given hereunder shall be delivered or
sent by first class post or by facsimile transmission (such facsimile
transmission notice to be confirmed by letter posted within 12 hours) to
the address or to the facsimile number of the party set out below (or
such other address or numbers as may have been notified) and any such
notice or other document shall be deemed to have been served (if
delivered) at the time of delivery (if sent by post) upon the expiration
of 48 hours after posting and (if sent by facsimile transmission) upon
the expiration of 12 hours after dispatch.
Notices to Licensor:
Address: Jessica House, Red Lion Square,
191 Wandsworth High Street,
London, SW18 4LS
Facsimile Number: 0181 875 9720
Attention of: Company Secretary
<PAGE> 10
Notices to Licensee:
Address: 6400 South Fiddlers Green Circle,
Suite 540, Englewood,
Colorado 80111
Facsimile Number: 001 303 488 9705
Attention of: Lorine Sweeney
The Licensee appoints Lorine Sweeney to accept service on its behalf of
any suit action or proceedings arising out of or in connection with the
Agreement which may be commenced pursuant to this Agreement.
17. ANNOUNCEMENTS/PRESS RELEASES
Save as required by law or any relevant regulatory authority, no
announcement or press release concerning this Agreement shall be made by
the Licensee without the prior written approval of the Licensor.
18. COSTS
Each of the Licensee and the Licensor shall bear its own costs incurred
in the negotiation or preparations of this Agreement.
19. HEADINGS
The headings of the paragraphs of this Agreement are inserted for
convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
20. SEVERABILITY
In the event that any or any part of the terms, conditions or provisions
contained in this Agreement shall be determined by any competent
authority to be invalid, unlawful or unenforceable to any extent such
term, condition or provision shall to that extent be severed from the
remaining terms, conditions and provisions which shall continue to be
valid and enforceable to the fullest extent permitted by law.
21. LAW
The parties hereby agree that this Agreement and the provisions hereof
shall be governed and construed in accordance with English Law and the
parties hereby submit to the non-exclusive jurisdiction of the English
courts in relation to any dispute arising in connection with the
Agreement.
<PAGE> 11
AS WITNESS the hands of the duly authorised representatives of the
parties hereto the day and year first before written
SIGNED by )
)
duly authorised )
for and on behalf of )
MATCH HEALTHCARE )
SERVICES LIMITED )
in the presence of: )
SIGNED by )
duly authorised ) /s/ Lorine Sweeney
for and on behalf of ) President and CEO
MPOWER SOLUTIONS INC. )
in the presence of: ) /s/ Jennifer A. Scott
<PAGE> 12
SCHEDULE 1
The Software
The Software consists of the Matchnet software.
<PAGE> 13
SCHEDULE 2
Initial Fee
1. Initial Payment
US $[*] on or before February 1999;
2. Payment Terms for Balance
US $[*] which shall be paid by applying the royalties payable
pursuant to Clause 3.1.2 until such sum (together with accrued interest)
has been paid in full. Thereafter the royalties shall be payable in
accordance with Clause 3.1.2. If at the expiry of 18 months from the
Commencement Date there is any part the US $[*] (or interest
thereon) unpaid the Licensee shall forthwith pay all such sums to the
Licensor by single payment.
3. Interest
Subject to Clause 12, interest shall accrue on all the sums referred to
above at the rate of 1 per cent above LIBOR from the Commencement Date
to the date of payment.
* Confidential Treatment Requested
<PAGE> 14
SCHEDULE 3
The Territory
The Territory is the healthcare and non-healthcare markets in the United
States of America
<PAGE> 1
EXHIBIT 10.6
MASTER AGREEMENT
BETWEEN
MPOWER SOLUTIONS, INC.
AND
METHODIST CARE, INC.
MPOWER MASTER AGREEMENT PAGE 1
<PAGE> 2
MASTER AGREEMENT
THIS MASTER AGREEMENT (the "Agreement"), effective February 4, 1999 (the
"Effective Date"), between MPOWER SOLUTIONS INC., a Delaware corporation with
its principal place of business located at 6400 S. Fiddler's Green Circle, Suite
540, Englewood, CO 80111 ("MPOWER") and Methodist Care, Inc., a Texas licensed
Health Maintenance Organization ("HMO") with its principal place of business
located at Two Greenway Plaza, Suite 500, Houston, TX 77046 ("Customer") sets
forth the promises of the parties with respect to the products and services of
MPOWER which are described in this Agreement.
WHEREAS, MPOWER is in the business of providing automated managed health care
information software and services to businesses providing managed health care
and insurance services, and desires to provide such services and software to
Customer, subject to the terms hereof; and
WHEREAS, Customer is a Texas licensed HMO and desires to use the software and
services provided by MPOWER, subject to the terms hereof.
NOW THEREFORE, in consideration of the mutual promises made, the terms and
conditions hereunder described and other valuable consideration, the parties
agree as follows:
I. DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
A. CPI
"CPI" shall mean the Consumer Price Index for All Urban Consumers, U.S.
City Average, for All Items (1982-1984=100), as published by the Bureau
of Labor Statistics of the U.S. Department of Labor. If the Bureau of
Labor Statistics ceases to publish or substantially changes the
content, calculation or format of the CPI, the parties will substitute
another comparable index published by a mutually agreeable source;
provided, however, that if the change is merely to redefine the base
period to some other period, the parties will continue to use the
affected index but will convert either the current or prior level of
such index to the same basis as the other by using an appropriate
conversion factor.
B. DOCUMENTATION
"Documentation" shall mean the standard operational instructions,
manuals and related material regarding MPOWER Products (as defined
below) which MPOWER will deliver to Customer as set out in the
Attachments to this Agreement.
MPOWER MASTER AGREEMENT PAGE 2
<PAGE> 3
C. MPOWER(R) Product(s)
"MPOWER(R) Product(s)" shall mean those products which MPOWER will
deliver to Customer as set out in the Attachments to this Agreement.
D. Release
"Release" shall mean a set of computer programs and/or associated
Documentation regarding an MPOWER Product which MPOWER makes available
for use by its customers who are covered under warranty or a
maintenance agreement regarding such MPOWER Product. MPOWER reserves
the right to charge an additional license fee for any optional modules
which MPOWER reasonably determines contains significant additional
functionality. Such significant additional functionality shall mean (a)
new modules or subsystems that are not a mere enhancement nor extension
of existing functionality, which enhancements and extensions are
covered under maintenance agreements, or Go) different hardware,
operating system platforms or databases. The major modules and/or
functionality initially covered under this Agreement are listed in
Exhibit F to the applicable Attachment to this Agreement.
E. Site(s)
"Site(s)" shall mean the physical location(s) at which Customer
conducts its business.
F. Live Production Environment
A live production environment ("Live Production Environment") is
defined whereby MPOWER(R) is managing on-line the enrollment and
processing of subscribers or members, and, at a minimum, one line of
business,
G. Plan(s)
A "Plan" shall mean a health benefit plan which Customer or a Plan
Sponsor is offering.
H. Enrollee.
"Enrollee" shall mean an individual who is currently enrolled in a Plan
entitled to receive Covered Services or who has been enrolled in a Plan
at some time during the then-previous twelve (12) months, whether or
not such covered Enrollee has presented a valid claim to such Plan.
I. Covered Services
"Covered Services" shall mean those healthcare or related benefits that
an Enrollee is entitled to receive from a Participating Provider or
other Provider pursuant to the applicable Enrollee Group Benefits
Agreement.
MPOWER MASTER AGREEMENT PAGE 3
<PAGE> 4
J. Participating Provider
"Participating Provider" means Provider that has entered into an
agreement with Customer or Customer's customer to provide Covered
Services to Enrollees.
K. Group Benefits Agreement
"Group Benefits Agreement" means the document distributed by Customer
to its Enrollees describing all Covered Services in a Plan.
L. Work Order
"Work Order" shall mean a document that is separately executed by both
parties, that (a) describes a scope of services that Customer wishes
MPOWER to perform for Customer, (b) authorizes and obligates MPOWER to
perform such services for Customer, and (c) obligates Customer to pay
for such services, all under the terms of that separate document, and
which document, when executed, is incorporated and made part of this
Agreement.
M. Derivative Work
"Derivative Work" shall mean any computer program, application,
interface or related documentation that is based on an MPOWER. Product,
or any component part thereof, that is used or intended to be used as a
commercial software product or as a competitive product to MPOWER.
N. Source Code
"Source Code" shall mean the commonly accepted source code of a
computer program describing in a formal language certain logic
functions, from which source code a computer program is compiled or
interpreted to perform certain functions in a computer.
O. Object Code
"Object Code" shall mean the commonly accepted object code of a
computer program, which is that version of the computer program logic
that has been translated from the Source Code into instructions that
can be run directly within a computer in a predefined operating system
environment.
P. Plan Sponsor
"Plan Sponsor" shall mean the health plan, organization or legal person
that offers a Plan either directly or through another organization or
legal entity to Enrollees.
MPOWER MASTER AGREEMENT PAGE 4
<PAGE> 5
Q. Provider
"Provider" shall mean a medical services provider, clinic, laboratory
or other institution or facility that customarily provides Covered
Services or other medical, surgical, laboratory, radiology, therapies,
alternative medical services or any other commonly accepted services of
a medical or medically related nature, whether licensed or unlicensed,
to Enrollees of Customer or Customer's customers.
R. Claim Transaction
"Claim Transaction" shall mean a medical, surgical, laboratory,
radiology, therapy or other service claim or encounter, whether for a
Covered Service or any other service or product, submitted to Customer
by a Provider detailing services or products provided by such Provider
to an Enrollee.
S. Encounter File
"Encounter File" shall mean the codified output of one or more of the
aforementioned services performed by such Provider to an Enrollee,
resulting in claim transaction(s) to be processed.
T. "Life"("Lives")
"Life" ("Lives") shall mean an Enrollee or Member.
U. End User or Authorized User
"End User" or "Authorized User" shall mean all such authorized
individuals deemed by Customer to require access to the then current
release of MPOWER Product in Object Code form, based upon conformance
to the terms and conditions set forth in Paragraph II (Confidential and
Proprietary Information) of this Agreement.
V. Effective Date
"Effective Date" shall mean the date this Agreement is executed as
evidenced by the signature page included herein.
II. CONFIDENTIAL AND PROPRIETARY INFORMATION
MPOWER, on behalf of itself, its employees, agents, vendors,
successors, and assigns, agrees to keep in confidence all data relating
to Customer's business to which MPOWER
MPOWER MASTER AGREEMENT PAGE 5
<PAGE> 6
may have access as a result of performing its obligations under this
Agreement and the terms of this Agreement.
MPOWER asserts and Customer acknowledges that all MPOWER Products,
structural definitions, the Documentation and the Releases, and a11
information, data, designs, system setups, benefit plans, provider
contracts, fee groups, ad hoc reports, letter formats, sample letter
content, business process workflow diagrams, and any other structural
templates and other similar information provided by MPOWER, developed
by or in conjunction with MPOWER, and used by MPOWER in assisting
Customer in the installation, implementation or on-going use of the
MPOWER Product, and methodologies related thereto ("Proprietary
Information") are the exclusive property of MPOWER or MPOWER's
suppliers and that the Proprietary Information is confidential, has
tangible value and includes trade secret information of MPOWER and/or
MPOWER's suppliers. MPOWER and/or MPOWER's suppliers shall retain all
fights to the Proprietary Information, including all copyright rights
therein, except to the extent to which MPOWER grants rights to Customer
to use the Proprietary Information pursuant to this Agreement. Customer
may not create Derivative Works based upon the Proprietary Information
in whole or in part. All improvements, enhancements and modifications
to the Proprietary Information shall be owned exclusively by MPOWER or
MPOWER's suppliers. Without MPOWER's prior written consent, Customer
shall not decompile, disassemble or reverse engineer any Proprietary
Information.
Customer agrees not to sell, lease, assign or otherwise transfer,
disclose or make available, in whole or in part, any portion of the
Proprietary Information or the terms of this Agreement and Customer
shall prevent disclosure of any part of the Proprietary Information or
the terms of this Agreement to any third party for any reason (except
for disclosure or access to Customer's employees, contracted entities,
external auditors, Federal or State agencies, or Customer's customers
which is necessary for Customer to be able to use the Proprietary
Information in accordance with this Agreement). Customer agrees to
notify those employees, contracted entities, external auditors, Federal
or State agencies or customers to whom Customer gives access to the
Proprietary Information of the restrictions contained in this Section
II and to ensure their compliance with such restrictions.
The duties and obligations which are included in this Section II shall
survive any termination of this Agreement and/or Customer's right and
license to use any MPOWER Product.
If Customer desires to disclose any Proprietary Information to any
third party or to permit any third party to have access to any
Proprietary Information, such third party must have a legitimate need
to have access to such Proprietary Information (consistent with the
purpose[s] for which such disclosure was made to Customer) and, prior
to any such disclosure or access, Customer and such third party must
enter into a nondisclosure agreement as attached herein. In no event
shall Customer disclose any Proprietary Information to any competitor
of MPOWER.
MPOWER MASTER AGREEMENT PAGE 6
<PAGE> 7
Notwithstanding the above, Customer and MPOWER. acknowledge that the
MPOWER Product structural definitions of any system setups, benefit
plans, provider contracts, fee groups, ad hoc reports, letter formats,
sample letter content, workflow diagrams of Customer business
processes, and any other structural templates, that have been provided,
developed, reviewed or verified in whole or in part by or with the
support of MPOWER, its employees or agents, do not constitute
Proprietary Information of Customer within the meaning of this Section
II; provided, however, that specific provider and benefit contract
rates, benefit plans, workflow diagrams of Customer business processes,
the names, demographic information, contractual relationships, and
medical information of any group, member, provider or other entity with
a contractual relationship with Customer shall be considered
Proprietary Information of Customer or of such other entity contracted
with Customer, unless such information is available through public
sources or through publicly available filings with any insurance or
health care regulatory agency or with any industry accreditation or
reporting body.
Further notwithstanding the above, Customer and MPOWER acknowledge that
Customer may create and distribute reports and data from its licensed
use of the MPOWER Products in the normal course of its business to its
customers, to health care providers, Enrollees, employers or Plan
Sponsors, government agencies and others with a legitimate purpose in
the conduct of the Customer's business and the data processed by the
licensed MPOWER Products, and that such reports and distributed data do
not constitute Derivative Works, unless they are used to create
commercial software products for reuse and / or license to other
parties.
Customer "Confidential Information" shall mean this Agreement and any
information of the Customer that is disclosed in any form or manner,
whatsoever by Customer to MPOWER. MPOWER's licensed products, pricing
and written documentation. Except for member/enrollee information,
Confidential Information does not include any particular information
which the recipient of such information can demonstrate: (a) was, at
the time of disclosure to it, in the public domain; (b) after
disclosure to it, is published or otherwise becomes part of the public
domain through no fault of the recipient; (c) was received after
disclosure to it from a third party who had lawful right to disclose
such information to it. ALL CUSTOMER EMPLOYEE AND MEMBER/ENROLLEE
INFORMATION, INCLUDING MEDICAL AND BILLING INFORMATION, IS CONFIDENTIAL
INFORMATION, AND THE FOREGOING EXCLUSIONS SHALL NOT APPLY TO SUCH
INFORMATION.
Notwithstanding anything herein to the contrary, in the event Customer
requests MPOWER to develop a module that is separate from MPOWER's
application and provided that such development is agreed to in advance
in writing with MPOWER as a designated "Proprietary Methodist Care
Module" and Customer funds substantially all of the development costs
for the module, MPOWER will develop such a mutually agreed to module
for Customer. If MPOWER desires to market to or utilize this
"Proprietary MethodistCare Module" for any other Customer(s), MPOWER
will pay Customer on an annual basis 10% of all revenues
MPOWER MASTER AGREEMENT PAGE 7
<PAGE> 8
associated with the Proprietary MethodistCare Module. These payments
will be made until Customer has recouped 100% of its associated
development costs.
III. COPYING
Customer, for each licensed instance of the MPOWER Product being used
in a Live Production Environment, may make one (I) copy of each MPOWER
Product in machine-readable form in a test region for the purpose of
testing new releases or fixes and also one (1) copy of each MPOWER
Product in machine-readable form for backup purposes only. Customer
agrees that upon copying any MPOWER Product, Customer shall place a
label on the outside of each copy medium showing the program name,
version number and any/all copyright and proprietary notices in the
same form as contained on the original copy.
In addition, Customer may make automated backup copies of its
production and testing regions for operational backup purposes without
applying the above labels, provided that such operational backup copies
are maintained with the acceptable industry standard security measures
and not made available to outside parties except for the case of
disaster recovery purposes, in which case the disaster recovery agent
will be bound to all the confidentiality and Proprietary Information
restrictions to which Customer is bound hereunder, and further that no
such disaster recovery agent may be a competitor of MPOWER.
IV. SOURCE CODE ESCROW
At the request of Customer, MPOWER and Customer will enter into an
agreement with MPOWER's escrow agent ("Custodian") for the depositing
of the MPOWER Products' Source Code ("Source Code Copy"). [The current
Custodian is NORWEST Bank.] MPOWER shall notify Customer at least ten
(10) business days prior to a change in the entity identified as the
Custodian. Subject to Customer's payment of all fees due under this
Agreement in accordance with the applicable payment terms and
Customer's payment of all fees related to Custodian's administration of
said escrow (the current rate as of the date of this Agreement being
One Thousand Five Hundred ($1,500.00) Dollars per annum), the Source
Code Copy so deposited will be maintained during the period Customer
shall use and purchase, and MPOWER shall provide, software, are
maintenance services for the particular MPOWER Product. The Source Code
Copy will be updated by MPOWER within thirty (30) days after each new
Release of the particular MPOWER Product.
The parties agree that the Source Code Copy shall be held by the
Custodian for delivery to Customer under the conditions that this
Agreement is terminated as a result of a material breach of the terms
of this Agreement by MPOWER, MPOWER files for bankruptcy under Chapter
7, or its business is not continued by virtue of a merger,
consolidation, the sale of
MPOWER MASTER AGREEMENT PAGE 8
<PAGE> 9
all or substantially all of its assets, or through some other
transaction by another corporation or entity, and the Custodian of the
Source Code has received from Customer or from MPOWER, or from a court
of competent jurisdiction: (i) written notification of any such event
or condition; (ii) demand that a copy of the Source Code Copy be mailed
to Customer; (iii) written undertaking from Customer, which shall be
legally binding, that the copy of the Source Code Copy to be supplied
to Customer will be licensed to Customer as a Perpetual Source Code
License for internal Customer use only; and (iv) specific instructions
from Customer for the delivery of a copy of the Source Code Copy, with
a copy of such instructions to MPOWER. Customer has the right to use
the MPOWER Perpetual Source Code License indefinitely and to modify
Source Code to meet future business needs. Customer will pay the costs
and expenses of the Custodian in carrying out the requirements of this
Section IV.
Source Code Escrow Agreement. Upon receipt of all applicable fees from
Customer associated with said escrow, MPOWER acknowledges that it shall
deliver to Norwest Bank, an escrow agent (the "Escrow Agent") the
Source Code for MPOWER Release. During the term of the license for the
MPOWER Release granted in this Agreement, MPOWER shall deliver to the
Escrow Agent all modifications of the said Source Code so as to ensure
that the Source Code in possession of the Escrow Agent represents at
all times the most current version of MPOWER Release being operated by
Customer.
In addition, if Customer uses the MPOWER Product Source Code, it will
only be for the purposes for which the Object Code is licensed under
this Agreement and not for re-license, reverse engineering or to create
a derivative product. The Confidential and Proprietary Information
provisions of Section II apply also to the Source Code.
V. TERM AND TERMINATION
This Agreement is valid for an initial period of five (5) years from
the Effective Date. After the initial period this Agreement will renew
annually for one (1) year terms unless Customer provides ninety (90)
days prior notice of its intent not to renew.
Should Customer fail to pay may sum due and payable under this
Agreement, MPOWER shall notify Customer in writing of such failure to
pay. Customer shall then have thirty (30) days from the delivery of
MPOWER's written notice to pay such amount(s). The foregoing sentence
in no way relieves Customer from its obligation to pay any and all late
charges which may become due as set forth in Section VI below. If
payment is not made within such thirty (30) days, MPOWER shall have the
immediate right to discontinue any and all services under this
Agreement. Furthermore, if payment is not made within sixty (60) days
from the delivery of MPOWER's written notice, MPOWER shall have the
immediate right to terminate this Agreement.
Should either party commit a material breach of its obligations under
this Agreement, other than failing to pay money, the non-breaching
party may notify the breaching party in
MPOWER MASTER AGREEMENT PAGE 9
<PAGE> 10
writing, setting out the breach, and the breaching party shall have
thirty (30) days to remedy such breach. If the breaching party fails to
remedy the breach during this thirty (30) day period, or, with respect
to those breaches which cannot reasonably be remedied within thirty
(30) days, if the breaching party fails to proceed promptly after being
given such notice to commence remedying the breach and thereafter to
proceed to remedy the same, the other party shall have the right to
terminate this Agreement, provided such party gives the breaching party
thirty (30) days' prior written notice to that effect. Notwithstanding
the foregoing, either party shall have the fight to immediately
terminate this Agreement upon any breach by the other of its
obligations under Section II above.
Termination of this Agreement shall be without prejudice to all accrued
rights and remedies either party may have and shall not affect any
continuing rights and obligations of the parties under this Agreement.
Upon the termination of this Agreement and/or any Attachment to this
Agreement, Customer shall return to MPOWER all Proprietary Information
regarding the MPOWER Product whose license is being terminated, within
sixty (60) days after such termination and MPOWER shall return to
Customer any proprietary information obtained in the performance of
this Agreement within sixty (60) days after such termination.
VI. INVOICES AND CHARGES
Unless a specific payment date is set out in an Attachment to this
Agreement, Customer agrees to remit all payments under this Agreement
so that MPOWER shall receive such payments no later than thirty (30)
days from the date of receipt of MPOWER's invoice. Customer also agrees
that MPOWER shall have the right to charge interest of one and one-half
percent (1.5%) of the outstanding balance per month, or the highest
amount allowed by law, whichever is less, on any and all late payments,
and Customer agrees to pay such charges. All prices mentioned in this
Agreement are in U.S. Dollars. The parties agree that the prices set
out in this Agreement do not include any sales, use or gross receipts
taxes, any duties, any similar assessments, or any other tax imposed on
any party by virtue of this Agreement, all of which, excluding only
taxes based on MPOWER's income, shall be the sole liability of, and
shall be paid solely by, Customer.
VII. FORCE MAJEURE
Neither party shall be liable to the other for failing to fulfill any
obligation under this Agreement if such failure is caused by an event
which is beyond such party's reasonable control and which is not caused
by such party's fault or negligence, including without limitation, acts
of God, acts of war, rites, strikes, lightning, floods, epidemics,
civil unrest, power shortages, equipment failure, delays in
transportation, or either party's inability to
MPOWER MASTER AGREEMENT PAGE 10
<PAGE> 11
obtain necessary labor, material or components due to causes beyond
such party's reasonable control.
VIII. CUSTOMER RESPONSIBILITIES
A. Customer Responsibilities
Customer acknowledges that MPOWER(R) reflects certain interdependent
relationships, such as exist among the data variables, logic rules and
system functions of MPOWER(R). Customer further acknowledges that it is
required and has a .responsibility to understand such data variables,
logic rules and system functions, and their interdependent
relationships, and to define for its own purposes such data variables,
logic rules and system functions to MPOWER(R) in such a way that
MPOW'ER(R) will provide the functionality desired by Customer. Customer
acknowledges that it has or will hire and will maintain on its staff
personnel who are able to understand and define such data variables,
logic rules, system functions and interdependent relationships.
Customer further acknowledges that, even though MPOWER may assist
Customer personnel in performing these tasks, the responsibility for
the effective definition and maintenance of these data variables, logic
rules and system functions resides with Customer and not with MPOWER,
unless Customer specifically requests MPOWER to perform these tasks at
agreed upon rates specified in a Work Order.
B. Customer Data
Customer shall be responsible for inputting and ensuring the accuracy,
validity and completeness of all data variables, logic rules, system
functions and Customer data, including but not limited to group,
subscriber, member, provider, utilization, encounter, claims,
capitation, fund accounting, billing, collection, broker, benefits,
product contract, provider contract, provider fees, standard business
measures, and other similar or related data. Customer shall also be
responsible for inputting and ensuring, the accuracy, validity and
completeness of all user-defined report definitions, all report and
batch production job specifications and priority scheduling criteria.
Customer shall also be responsible for initiating, monitoring,
operating, printing and ensuring the accuracy, validity, and
completeness of all print outputs and file downloads, such as but not
limited to all reports, premium bills, checks, and the like,
determining how many and on what print stock such outputs are to be
printed or into which files or programs on Customer-controlled
computers such files are to be downloaded and manipulated, at
Customer's own initiative, responsibility and risk. Customer hereby
acknowledges 'responsibility for generally
MPOWER MASTER AGREEMENT PAGE 11
<PAGE> 12
controlling all aspects related to the production, distribution and
control of such outputs. Customer further acknowledges that,
notwithstanding the responsibility of MPOWER to have used due care and
diligence in the design, programming, documentation and operation of
the System, the accuracy of Customer's data base within MPOWER(R) and
the accuracy of the several outputs of the MPOWER(R), including but not
limited to, outputs that control the billing, receipt or expenditure of
monies, will be dependent on the accuracy and use of the data
variables, logic rules, system functions and Customer data input into
MPOWER(R) by Customer and verified by Customer.
C. Other Customer Obligations
In addition to its other obligations hereunder, Customer will on a
timely basis:
1. Communicate on a timely basis any significant changes in
general business operations or priorities, within 90 days from
such a change, which relate to MPOWER support of Customer.
Customer recognizes that changes in such priorities may result
in additional fees hereunder for additional staff, as
incremental support, or reordering of other priorities to
provide MPOWER services within the current fee structure.
2. Cooperate with MPOWER by, among other things, making
available, as reasonably requested by MPOWER, management
decisions, information, approvals, and acceptances in order
that MPOWER may properly accomplish its obligations and
responsibilities hereunder.
3. Carefully inspect and review all MPOWER generated reports and
other output and notify MPOWER of any incorrect reports or
output.
4. Personalize, maintain, reproduce and' distribute (solely for
Customer's internal use) procedure manuals and documentation
used by Customer personnel in connection with the M. POWER
services hereunder.
5. Train applicable Customer personnel to properly prepare input
for and to effectively utilize output from the systems
operated by MPOWER hereunder.
6. Pay all costs of acquisition, installation, use and
maintenance of equipment at Customer's site, as required for
the performance of MPOWER services.
7. Such other responsibilities as set forth herein.
Customer agrees that to the extent its failure to meet its obligations
set forth in this Section VIII affects the ability of M_POWER to
perform MPOWER's obligations under this Agreement, M_POWER shall be
relieved of such obligations and Customer shall not exert against
MPOWER any claims or liabilities arising out of such failure by
Customer.
MPOWER MASTER AGREEMENT PAGE 12
<PAGE> 13
D. Reprocessing or Reconstructing of Data
During any period of use of MPOWER(R), to the extent that any Customer
data must be corrected, recreated, restored or reprocessed due to the
fault or negligence of Customer, its employees or agents, or by a
breach by Customer of any of its obligations hereunder, MPOWER will do
so, and in such event Customer shall pay MPOWER at the service fee
rates outlined in an applicable Work Order and reimburse MPOWER for any
reasonable direct costs incurred by M_POWER in correcting, recreating,
restoring or reprocessing such data or in providing assistance
therewith.
IX. LIMITATION OF LIABILITY
PARTIES AGREE THAT THEY SHALL HAVE NO LIABILITY TO THE OTHER FOR
INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES, EVEN IF ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES, OR FOR LOSS OF USE OR OTHER COMMERCIAL
LOSS (INCLUDING, BUT NOT LIMITED TO, LOSS OF REVENUES AND/OR PROFITS),
HOWEVER OCCASIONED AND WHATEVER THE FORM OF ACTION, FOR ACTUAL OR
IMPUTED NEGLIGENCE, BREACH OF CONTRACT, BREACH OF WARRANTY OR
OTHERWISE.
FURTHERMORE, PARTIES AGREE THAT IN NO EVENT SHALL TIKE OTHER BE LIABLE
FOR DIRECT DAMAGES IN EXCESS OF:
A. ALL LICENSE AND MAINTENANCE FEES CUSTOMER SHALL HAVE
PAID MPOWER FOR THE PARTICULAR MPOWER PRODUCT WHICH IS
THE SUBJECT OF CLAIM.
The parties agree that no action, regardless of form, which may arise
out of the transactions under this Agreement may be brought by either
party more than one (1) year after the cause of action is known, or
ought reasonably to have been known, to the party bringing the action.
X. INFRINGEMENT
MPOWER agrees to defend, indemnify and hold Customer harmless against
any and all claims that any MPOWER Product infringes a U.S. Letter
Patent, copyright, trade secret or the proprietary rights of others,
provided that MPOWER shall have received timely written notice of any
such claim and that MPOWER shall have sole control of the defense of
such claim and all negotiations for the settlement or compromise of
such claim.
MPOWER MASTER AGREEMENT PAGE 13
<PAGE> 14
As of the date first written above, MPOWER warrants that it is not
aware of any infringement, and has not been notified by any third party
that it may be infringing, any U. S. Letter Patent, copyright, trade
secret or the proprietary rights of others.
If use of an MPOWER Product by Customer is enjoined, or becomes, or, in
MPOWER's sole opinion, is likely to become, the subject of a claim of
infringement, MPOWER will, at its option and expense, either:
1. procure for Customer the right to continue using the MPOWER
Product in question; or
2. replace or modify the same so that it is functionally equivalent
[i.e. the MPOWER Product will achieve the same or similar
business logic result] (or contains more functionality) and is
non-infringing.
Notwithstanding the foregoing, if MPOWER determines that neither of the
alternatives set forth above is reasonably available, MPOWER will
refund to Customer any un-amortized portion of the infringing MPOWER
Product's license fee which has then been paid by Customer.
Amortization shall be based upon a seven (7)-year life of the
infringing MPOWER Product, beginning on the date the infringing MPOWER
Product was licensed by Customer from MPOWER. Should such refund occur,
Customer agrees to return the infringing MPOWER Product to MPOWER.
Should any refund described above occur, the license for the infringing
MPOWER Product shall be terminated and MPOWER, its affiliates,
subsidiaries, assigns and successor corporations shall be released from
any and all liability arising from any and all claims, losses,
liabilities, damages, costs or deficiencies which are then-existing or
which may arise in the future with regard to such infringing MPOWER
Product(s) for which MPOWER has refunded fees pursuant to this Section
X.
Notwithstanding anything contained herein to the contrary, MPOWER shall
have no liability for any loss, cost, claim or expense caused by:
1. alteration of any MPOWER Product provided hereunder by any party
other than MPOWER;
2. any loss, expense or liability resulting from any infringement
which is a consequence of MPOWER's compliance with designs or
code submitted to MPOWER by Customer;
3. the use of any MPOWER Product in combination with products not
licensed to customer by MPOWER;
MPOWER MASTER AGREEMENT PAGE 14
<PAGE> 15
4. continuation of the allegedly infringing activity by Customer
after Customer is notified in writing thereof and after the
conclusion of a reasonable grace period afforded Customer in the
notice to migrate from the infringing activity to an alternate
solution; or
5. Customer's use of an MPOWER Product other than in compliance with
the terms and conditions of this Agreement.
Notwithstanding the foregoing, MPOWER shall not be obligated to defend,
indemnify or hold Customer harmless from and against any claim, suit
proceeding or allegation asserted by a parent, subsidiary or affiliate
of Customer.
The foregoing remedy set forth in this Section X represents the
exclusive remedy of Customer and MPOWER's sole liability with regard to
any claim that an MPOWER Product infringes the rights of others.
XI. RESOLUTION OF DISPUTES
If any dispute shall arise between the parties under this Agreement,
the parties shall make every effort to amicably resolve the dispute
pursuant to this Section XI. The following procedures shall be adhered
to in order to expeditiously resolve any disputes arising during the
term of this Agreement.
The party invoking the procedures of this Section XI shall provide
written notice to the other party and within five (5) business days
following the other party's receipt of such notice, the parties'
implementation team leaders shall attempt to resolve such dispute. If
the parties' team leaders do not resolve such dispute within seven (7)
business days following the date of the non-invoking party's receipt of
notice hereunder, either party hereto shall have the fight to refer
such dispute for "Executive Review" as provided below.
"Executive Review" shall refer to the dispute resolution process which
shall be conducted as follows: within fifteen (15) days of any party's
request for Executive Review, each such party shall have designated an
executive-level employee of such party and such designated executive
shall have met, either in person or via telephone, with the other
party's executive-level designee to attempt to resolve such dispute. If
said executive- level designees are unable to resolve the dispute
within ten (10) business days of their first telephone or in-person
meeting pursuant to this paragraph, either party may request that the
dispute be referred to a second level of Executive Review. Within ten
(10) days of any party's request for such second level of Executive
Review, the Chief Executive Officers of both parties hereto shall meet,
in person or via telephone, to attempt to settle such dispute.
Notwithstanding anything in this Agreement to the contrary, should
either party feel the dispute cannot be amicably resolved after having
negotiated in good faith to
MPOWER MASTER AGREEMENT PAGE 15
<PAGE> 16
resolve such dispute pursuant to the foregoing provisions of this
Section XI, such party shall have the right to terminate such
negotiations. Nothing in this Section XI shall require either party to
engage in negotiations to resolve a dispute for a period of more than
forty-five (45) days.
XII. SUCCESSORS AND ASSIGNS
Assignment. Except as may be herein specifically provided to the
contrary, this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective legal representatives,
successors, and assigns; provided, however, that no assignment of this
Agreement or the rights and obligations hereunder shall be valid
without the specific written consent of both parties hereto.
Notwithstanding anything herein to the contrary, both Customer and
MPOWER shall have the right to (i) assign this Agreement and the rights
and obligations hereunder to an entity that is controlled by, under
common control with, or that controls Customer or MPOWER, where Control
is defined as an entity which Customer has majority ownership of or is
majority shareholder in or that is formed as the result of an internal
restructuring of Customer and/or its affiliates. Any such assignment by
Customer or MPOWER shall be effective without the need for any action
on the part of any party ether than such assignment by Customer to be
effective.
XIII. OMNIBUS RECONCILIATION ACT COMPLIANCE
As applicable under the Omnibus Reconciliation Act of 1980, until the
expiration of four (4) years after the furnishing of services under
this Agreement, MPOWER shall, upon receipt of written request, and if
then required to make such information available under the
then-existing law, make available to the Secretary of the United States
Department of Health and Human Services ("Secretary"), the Comptroller
General, or any of their duly authorized representatives; this
Agreement, books, documents, and/or records of MPOWER that are
necessary to certify the nature and extent of products and services
delivered under tiffs Agreement and costs associated therewith.
Furthermore, if MPOWER carries out any of the duties of tiffs Agreement
through a subcontract with a value or cost of Ten Thousand Dollars
($10,000.00) or more over a twelve (12)-month period, such subcontract
will contain a clause to the effect that, until the expiration of four
(4) years after the furnishing of such services under such subcontract,
the subcontractor shall, upon receipt of written request and if then
required to make such information available under the then-existing
law, make available to the Secretary, Comptroller General, or any of
their duly authorized representatives, the subcontract, books,
documents, and/or records of such subcontractor that are necessary to
verify the nature and extent of such costs.
MPOWER MASTER AGREEMENT PAGE 16
<PAGE> 17
XIV. RELATIONSHIP MANAGEMENT
MPOWER and Customer agree to discuss business and relationship
strategies affecting both parties, as is required to effectively manage
the relationship between the parties. MPOWER and Customer further agree
to have regularly scheduled communications to summarize current
activities, performance results, error corrections and work efforts, as
well as the future planned activities. During the term of this
Agreement, each party will provide a liaison who (i) will have overall
management responsibility for the performance by the party hereunder,
(ii) will have primary operational responsibility, and (iii) will serve
as the party's primary liaison with the other party with respect to
performance under this Agreement.
XV. MISCELLANEOUS
A. Invalidity. If any of the provisions, or portions thereof, of
this Agreement are deemed to be invalid under any applicable
statute or role of law, they are to that extent to be deemed
omitted, and the parties agree to negotiate in good faith to
bring such provisions, or portions thereof, into compliance.
B. Headings. The headings of Sections in this Agreement and in the
Attachments are included for convenience only and shall not be
considered by either party in construing the meaning of this
Agreement or any Attachment.
C. Notices. Any notice given under this Agreement shall be in
writing, sent by Certified .Mail, Return Receipt Requested or
overnight courier such as FedEx or equivalent, and shall be
deemed to be delivered upon receipt by the receiving party.
All notices remitted to MPOWER shall be remitted to the attention
of: Chief Executive Officer. All notices remitted to Customer
shall be remitted to the attention of'. Michael Stock, CFO.
D. Waiver. Neither party shall be deemed to have waived any term or
provision of this Agreement, nor consented to any breach of this
Agreement, unless such party shall waive such term or provision,
or shall consent to such breach, in writing. Any such written
waiver and/or consent must be signed by the party which is
waiving such term or provision or is consenting to a breach.
Either party's consenting to a waiver, or a breach, by the other,
whether express or implied, shall not constitute consent or
waiver of any other different or subsequent breach by the other.
E. Governing Law. This Agreement and all Attachments hereto shall be
governed by and construed according to the laws of the State of
Texas and venue shall lie exclusively in Harris County, Texas.
MPOWER MASTER AGREEMENT PAGE 17
<PAGE> 18
F. Joint Venture. Nothing in this Agreement constitutes or shall be
construed to be an agreement for Customer and MPOWER to share
losses or, for any reason, to be a partner or joint-venturer with
one another.
G. Entire Agreement. This Master Agreement, Attachment 1 and the
Exhibits contain the entire agreement of the parties with respect
to the subject matter covered by this Agreement. All provisions
contained in the Master Agreement apply to Attachment I and the
Exhibits. No other Agreement, attachment, statement, or promise
made by either party, or an employee, officer, or agent of the
party, which is not contained in this Agreement shall be binding
or valid unless executed pursuant to Section XV(H) below.
H. Amendment. Any changes to this Agreement shall be in writing in
the form of an amendment mutually agreed upon and duly executed
by both parties.
I. Right To Purchase Source Code. MPOWER grants to Customer the
right to purchase the Source Code for MPOWER. Products at any
time in the future for set price of [*] dollars ($[*] U.S.).
(REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.)
* Confidential Treatment Requested
MPOWER MASTER AGREEMENT PAGE 18
<PAGE> 19
XVI. SIGNATURE PAGE
The parties have each read this Agreement and agree to be bound by all of its
provisions, and further agree that it constitutes the complete and exclusive
statement of the agreement between them with regard to the subject matter
referenced herein, and supersedes any and all prior agreements and
understandings between them pertaining to the subject matter of this Agreement
and takes precedence over the provisions of any purchase orders submitted to
MPOWER by Customer. This Agreement may be amended only in writing signed by
authorized representatives of both of the parties.
METHODIST CARE INC. MPOWER SOLUTIONS INC.
("METHODIST CARE") ("POWER")
/s/ M. JAMES HENDERSON /s/ MARK S. RANGELL
- ---------------------------- --------------------------------
SIGNATURE SIGNATURE
M. JAMES HENDERSON MARK S. RANGELL
- ---------------------------- --------------------------------
NAME PRINTED NAME PRINTED
President/CEO Senior Vice President
- ---------------------------- --------------------------------
TITLE TITLE
2/9/99 2/4/99
- ---------------------------- --------------------------------
DATE DATE
MPOWER MASTER AGREEMENT PAGE 19
<PAGE> 20
METHODISTCARE
THE METHODIST HEALTH CARE SYSTEM
THIRD-PARTY ACCESS, CONFIDENTIALITY AND NON-DISCLOSURE AGREEMENT
In consideration of access to MethodistCare and MPOWER information or computer
systems, I agree to the following:
Access: I agree that MethodistCare and MPOWER will determine the
appropriate level of access to MethodistCare and MPOWER computer
systems, applications and information. Access will be based on my
duties and responsibilities. If appropriate, I will be assigned a user
identification label and will be asked to select a confidential
password. It is my responsibility to safeguard this password and not
share it with anyone. I agree to change my password periodically or as
required by a specific computer system. As an authorized computer
system user, I accept full responsibility for all actions performed
using my password. If I suspect or detect someone using my password, it
is my responsibility to both immediately change the password and notify
the Director, MethodistCare Information Services.
Purposes: I agree MethodistCare and MPOWER computer workstations,
premises and property are to be used only for MethodistCare and MPOWER
authorized purposes. Performing any unauthorized or inappropriate
functions constitutes a serious security violation. I understand that
periodic random audits may be conducted to detect violations. The
Director of MethodistCare Information Services or Chief Financial
Officer will be responsible for dealing with all security violations.
Data Protection: I will take all necessary steps to protect
MethodistCare and MPOWER data and information from destruction,
inappropriate alteration or unauthorized access. This includes any
confidential MethodistCare and MPOWER or Methodist Health Care System
data and information. I agree that I am required to log off a
MethodistCare and MPOWER computer workstation any time I leave the work
area.
Third Party Software: I agree not to copy or use MethodistCare and
MPOWER licensed software in violation of any vendor license agreements
or state/federal laws. Further, I agree not to remove any licensed
software from or lead any unapproved software on MethodistCare and
MPOWER computers or systems.
Confidentiality: I agree that all medical, financial and personal
information pertaining to membeRS, patients, physicians, providers,
employer groups and employees is Confidential. I further agree that all
financial, operational, proprietary or developmental information
pertaining to MethodistCare and MPOWER, the Methodist Health Care
System or third-party contractors is also Confidential. I agree not to
release, use. recreate, distribute, discuss, destroy, alter, or derive
benefit from any Confidential information without proper legal
authorization. The MethodistCare Chief Financial Officer or designee
will be responsible for chroming this provision.
Indemnification: I agree that I will indemnify and hold harmless
MethodistCare and MPOWER Methodist Health Care System and any related
entities from and against all liability, demands, claims, damages,
suits or judgments, including attorney's fees, costs and expenses
incident thereto, for injury or damage to any person
* Confidential Treatment Requested
MPOWER MASTER AGREEMENT PAGE 20
<PAGE> 21
or property, or loss caused by my negligent or intentional acts or
omissions, including but not limited to, release of confidential
information.
Non-Disclosure: I agree not to sell, lease, assign, use or otherwise
transfer, disclose or make available In any manner or form any
MethodistCare and MPOWER Confidential information without proper legal
authorization. I further agree to immediately return any MethodistCare
and MPOWER information including confidential or proprietary
information upon (1) request or (2) completion or termination of my
services.
I have read, understand and as evidenced by my signature below agree to be bound
by the terms of this agreement. I further understand that the terms of this
agreement survive the termination of any relationship I have with MethodistCare
and MPOWER.
- ---------------------------- --------------------------------
Signature/Date Witness/Date
MPOWER. MASTER AGREEMENT PAGE 21
<PAGE> 22
ATTACHMENT 1
I. DEFINITIONS
Except as set forth in this Section I of this Attachment, all
capitalized terms used in this Attachment shall have the same meaning
as set forth in the Master Agreement.
A. Master Agreement
"Master Agreement" shall mean the agreement to which this Attachment 1
is attached.
B. Agreement
"Agreement" shall mean the Master Agreement and all Addenda, Exhibits
and Attachments thereto.
C. MPOWER(R)
"MOWER(R)" shall mean the software product marketed by MPOWER which is
being licensed by Customer under this Attachment and the Master
Agreement. The modules that are included in MPOWER(R) as of the date of
this Attachment are listed in Exhibit F hereto.
II. GRANT OF LICENSE
In consideration of Customer's paying the Initial License Fee (as
hereinafter defined) and, when due, the Maintenance Fee, in accordance
with Section VIII of this Attachment, MPOWER grants Customer a
fully-paid, non-exclusive, perpetual, royalty free and annually
self-renewing license to operate a single, Object Code instance version
of MPOWER(R) on a RS/6000 HA50 platform for a Live Production
Environment for [*] lives ("Initial License).
This license allows authorized users to engage in the following
activities with respect to any MPOWER Release and Documentation:
(a) to use the MPOWER Release concurrently on authorized
computers;
(b) interface MPOWER Release with other programs used or
maintained by Customer;
(c) to make a reasonable number of back-up copies of MPOWER
Release on magnetic or optical media;
* Confidential Treatment Requested
MPOWER MASTER AGREEMENT PAGE 22
<PAGE> 23
(d) to copy and use MPOWER Release on a substitute computer or
computers if the authorized computers become inoperable;
(e) to use MPOWER Release at Customer's third party disaster site
on a computer other than the authorized computers (including
semi-annual testing at such site);
(f) to use MPOWER Release as otherwise provided in this Agreement;
(g) to relocate the authorized computers to any Controlled
Customer facility; and
(h) to make a reasonable number of copies of the documentation
related to the MPOWER Release.
All of such rights are collectively referred to as the "License
Rights."
Customer may extend the license for such single, Object Code instance
of MPOWER(R) ("License Extension(s)") for [*] lives by paying MPOWER
the fees for additional lives defined in Section VIII below, and
abiding by the terms therein stipulated, and by providing the number of
such additional lives to MPOWER prior to Customer's first use of
MPOWER(R) on behalf of such additional lives.
Customer may copy MPOWER(R) and/or the Documentation as allowed under
Section III of the Master Agreement. Furthermore, Customer may copy the
Documentation in order to supply a copy of the Documentation to each
end user of MPOWER(R) at each Site. Customer agrees that any and all
copies of MPOWER(R) and/or the Documentation made by Customer shall
include any/all copyright and proprietary notices in the same form as
contained on the original copy. Except as allowed in Section III of the
Master Agreement and this paragraph, Customer may not otherwise make
copies of MPOWER(R) or the Documentation or any part thereof without
the prior written consent of MPOWER. Customer agrees there shall be no
other use of MPOWER(R) or the Documentation without the prior written
consent of MPOWER except as allowed in Section II of the Master
Agreement.
In order to ensure that MPOWER(R) is being used in conformity with the
license being granted under this Attachment, MPOWER shall have the
right to conduct audits (either on-site or remotely, at MPOWER's
option) of Customer's use of MPOWER(R) at periodic intervals. MPOWER
agrees that any such on-site audit shall be scheduled in advance and at
a time so as not to unduly interfere with Customer's business
operations. Customer agrees that any audit revealing unauthorized use
of MPOWER(R) will result in Customer's being liable for the payment of
additional fees to MPOWER equal to MPOWER's fees as stated in Section
VIII A of this Attachment.
* Confidential Treatment Requested
MPOWER MASTER AGREEMENT PAGE 23
<PAGE> 24
Network and other Use. MPOWER acknowledges that the MPOWER Release will
be operated in conjunction with, and as a component of the Customers
network. As such, the MPOWER Release will be electronically linked to
the software and equipment, with which it may interact, including
interchanging data. The License Rights are deemed to include a license
to use the MPOWER Release in conjunction with the Customer's network.
Authorized Users may access the MPOWER Release through Customer's
network, and that such access and use via Customer's network does not
violate the License Rights.
III DELIVERY AND MEDIA
Promptly after the full execution of this Attachment, MPOWER will
deliver to Customer:
A. one (l) copy of the then-current Release of MPOWER(R) in Object Code
form; and
B. one (1) set of the the-current version of the Documentation in
electronic form.
IV. WARRANTY
A. System Warranties
Non-Infringement Warranty. MPOWER represents and warrants that as of
the Effective Date the MPOWER Release's performance under this
Agreement does not, and will continue not to, infringe, or constitute
an infringement or misappropriation of, the intellectual property
rights of any third party.
Performance Warranty. MPOWER represents and warrants that MPOWER
Release does, and shall continue to, meet or exceed the Functional
Specifications, Technical Specifications and Performance Standards set
forth in MPOWER's RFP responses, sales brochures and marketing
materials which are incorporated herein and made a part of this
Agreement. (the "Performance Warranty"). If MPOWER Release fails to
meet any aspect of the Performance Warranty (irrespective of the
severity of such failure) for any three consecutive months during the
warranty period, then Customer shall have the right to terminate this
Agreement pursuant. If MPOWER Release does not meet any aspect of the
Performance Warranty after the expiration of the warranty period but
while the Support and Maintenance Agreement is in effect, then MPOWER
shall take whatever corrective actions as may be necessary (or as
Customer may request) to have MPOWER Release meet the Performance
Warranty, at Customer's sole cost and expense.
PASS-THROUGH OF THIRD PARTY WARRANTIES. To the extent MPOWER may do so
under
MPOWER MASTER AGREEMENT PAGE 24
<PAGE> 25
agreement with Third Party software manufacturers or suppliers, M_POWER
passes through to Customer all warranties for Third Party software. To
the extent MPOWER may not pass such warranties through, MPOWER hereby
makes to Customer the same Third Party software warranties as
manufacturers or suppliers make to MPOWER.
AS DOCUMENTED WARRANT,. During the warranty period, MPOWER warrants
that MPOWER Release will operate in accordance with the Documentation,
including Third Party software documentation (the "As Documented
Warranty"). Upon receipt of notice from Customer of a breach of the
As-Documented Warranty, MPOWER will correct the breach, in accordance
with the corrective-maintenance provisions of the Support and
Maintenance Agreement.
PHYSICAL MEDIA WARRANTY. MPOWER warrants that MPOWER Release is and
will be free from physical defects in each media that contains MPOWER
Release (the "Physical media Warranty"); provided, however, (i) the
Physical Media Warranty does not apply to defects discovered more than
90 days after the date of installation of MPOWER Release by MPOWER; and
(ii) Customer's sole remedy for breach of the Physical Media Warranty,
to the exclusion of all other remedies, shall be replacement by MPOWER
of any copy of MPOWER Release that does not comply with this warranty.
B. YEAR 2000 WARRANTY.
The MPOWER Release software shall be Millennium Compliant. As used in
this Agreement, "Millennium Compliant" shall mean the ability of MPOWER
Release software to perform the following functions: a) consistently
handle date information before, during, and after January 1, 2000,
including but not limited to accepting date input, providing data
output, and accurately performing calculations in dates or portions of
dates, and b) function accurately in accordance with Customer's
requirements, without interruption before and after January 1, 2000,
without any change in operations associated with the advent of the new
century. In the event that Customer becomes aware that MPOWER(R) will
not or does not process data containing any dates before, during, or
after January 1, 2000, correctly, Customer shall immediately notify
MPOWER of that fact and MPOWER agrees to correct or replace MPOWER(R)
to eliminate such processing problem in accordance with MPOWER's
standard policies, which are available upon request.
Further, MPOWER agrees to provide on-site Year 2000 compliance testing
during the implementation phase and pursuant to Customer's
specifications and requirements.
The foregoing is Customer's sole and exclusive remedy for breach of
warranty. The warranty set forth above is made to and for Customer's
benefit only. The warranty will apply only if no modification,
alteration or addition has been made to MPOWER(R) by persons other than
MPOWER or MPOWER's authorized representative.
MPOWER MASTER AGREEMENT PAGE 25
<PAGE> 26
In no event will MPOWER be liable for any loss of profits, loss of use,
business interruption, loss of data, cover of cover, or indirect,
special, incidental, or consequential damages of any kind in connection
with or arising out of the furnishing, performance or use of MPOWER(R),
whether alleged as a breach of contract or tortious conduct, including
negligence, even if MPOWER has been advised of the possibility of such
damages. MPOWER's liability under this limited warranty for damages
will not, in any event, exceed the fees paid by Customer to MPOWER for
MPOWER(R).
C. SERVICE WARRANTIES.
MPOWER represents and warrants that it will perform the services
required under this Agreement in a professional manner with the utmost
due diligence and good faith. In addition, MPOWER represents and
warrants that it will initiate work on urgent issues within 1 hour of
Customer's call for assistance, at any time. Generally, "urgent issues"
involve substantial program failure or issues whose resolution is
critical to Customer's data processing, clinical or business
operations.
Disclaimer of all Other Warranties and Representations. THE EXPRESS
WARRANTIES AND REPRESENTATIONS SET FORTH IN THIS AGREEMENT ARE IN LIEU
OF, AND CUSTOMER ACKNOWLEDGES THAT MPOWER DISCLAIMS, ANY AND ALL OTHER
WARRANTIES, CONDITIONS, OR REPRESENTATIONS (EXPRESS OF IMPLIED, ORAL
OR WRITTEN), WITH RESPECT TO THE SYSTEM OR ANY COMPONENT THEREOF,
INCLUDING ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE.
D. NON-INFRINGEMENT INDEMNITY.
Covenant to Defend and Indemnify. As a covenant separate from the
representation and warranty of non-infringement contained in Section
entitled Non-Infringement Warranty, MPOWER will defend, hold harmless
and indemnify Customer from any and all Claims brought against Customer
by any third party arising from or related to Customer's use of MPOWER
Release or MPOWER's Services subject to Section VIII, Customer
Responsibilities provision as established herein and to Limitations of
Liability as established in Section IX of the Master Agreement.
MPOWER MASTER AGREEMENT PAGE 26
<PAGE> 27
CONDITIONS FOR MPOWER'S DEFENSE. If a third party asserts an
infringement claim: (i) Customer shall promptly advise MPOWER of the
existence of the claim within 30 days of receipt of a written statement
of the claim against Customer (whether or not litigation or any such
action has occurred); (ii) MPOWER shall have the sole right to control
the defense and/or settlement of all such claims, in litigation or
otherwise; provided, however, that (A) any settlement does not
adversely affect Customer's ability to exercise the License Rights or
obligates Customer in any way to the third party without Customer's
prior written consent; and (B) MPOWER can demonstrate, upon Customer's
request, MPOWER's financial ability to defend and indemnify Customer.
Customer shall have the right, at Customers expense, to engage separate
legal counsel to monitor and advise Customer regarding such defense.
Any delay in notifying MPOWER of a claim as set forth in this Section
shall not relieve MPOWER of its indemnity obligations hereunder, unless
such delay materially prejudices MPOWER.
MPOWER'S RIGHT TO CURE. If MPOWER Release is found to infringe any
third party intellectual property right, at MPOWER's sole discretion
and expense, MPOWER may:
(1) obtain a license from such third party for Customer's benefit; or
(2) replace or modify the MPOWER so that it is no longer infringing.
INFRINGEMENT INJUNCTIONS OBTAINED BY THIRD PARTIES. If a third party
infringement claim is sustained in a final judgment from which no
further appeal is taken or possible, and which enjoins Customer from
continued use of MPOWER Release or portions thereof, then MPOWER shall,
at its sole expense: (i) procure for Customer (at MPOWER's expense) the
right to continue to use MPOWER Release pursuant to this Agreement,
including all License Rights; or (ii) replace or modify M_POWER Release
to make it non-infringing.
CUSTOMER'S OPTION TO TERMINATE. If Customer is ordered by a court to
cease use of MPOWER Release or of specific functions(s) of MPOWER
Release, or if MPOWER's replacement or modification of MPOWER Release
is not acceptable to Customer, then Customer will have the option to
terminate this Agreement pursuant without opportunity to cure.
V. SOFTWARE MAINTENANCE SERVICES
In consideration of payment of the annual Maintenance Fee(s) set forth
in Section VIII B of this Attachment, Customer agrees to purchase, and
MPOWER agrees to provide Customer on an annually renewable basis with
software maintenance services for MPOWER(R) as follows (provided
Customer allows MPOWER, at MPOWER's request, dial-up access to
MPOWER(R)):
MPOWER MASTER AGREEMENT PAGE 27
<PAGE> 28
A. any and all Releases regarding MPOWER(R) issued by MPOWER;
B. any and all updates to the Documentation issued by MPOWER; and
C. remote diagnostic support (including dial-up capabilities)
regarding MPOWER(R)to include error analysis and, where
possible, correction services, twenty-four (24) hours per day,
seven (7) days per week. Any on-site assistance which Customer
may request and which is provided by MPOWER, which, in
MPOWER's reasonable opinion, is not necessary to determine the
nature and resolution of any problems Customer may have with
MPOWER(R)shall be provided by MPOWER at its then-current
rates. If Customer notifies MPOWER that it suspects a material
error in the program logic of MPOWER(R)or in the
Documentation, MPOWER shall make all reasonable efforts to
confirm the existence of the error and correct it. If the
parties mutually determine that no such error exists, Customer
agrees to pay MPOWER for its services at MPOWER's hourly rates
then in effect and to reimburse MPOWER for any and all
reasonable travel and living expenses incurred by MPOWER in
rendering such services. MPOWER will use its Severity
Designations in effect from time to time to provide remote
diagnostic support. The current Severity Designations and
attendant response times are given in Exhibit G to this
Attachment.
Notwithstanding the foregoing, should Customer be utilizing any Release
of MPOWER(R) other than the then-most-recent Release, or the Release
prior to the then-most-current Release, provided such Release has been
available for Customer's use for a period of twelve (12) months or
longer, MPOWER reserves the right, at its sole option, to terminate its
obligations to provide maintenance services under this Section V at any
time upon giving thirty (30) days' prior written notice to Customer. If
such a condition exists, MPOWER and Customer agree to negotiate in good
faith to define reasonable terms, conditions and fees for MPOWER to
provide Customer with maintenance services for such then non-current
Release.
MPOWER's providing Customer with maintenance services as described in
this Section V shall automatically continue, on an annual basis, unless
either party shall give written notice to the other that it desires not
to renew such maintenance services. The parties agree that such written
notice shall be remitted for receipt by the other no less than ninety
(90) days prior to the end of the then-current annual maintenance
period.
VI. IMPLEMENTATION AND CONVERSION SERVICES
MPOWER MASTER AGREEMENT PAGE 28
<PAGE> 29
MPOWER agrees to provide implementation services ("Implementation
Services") to assist Customer in implementing MPOWER(R) at the Site(s).
These implementation services shall comprise: 1) analysis of the
Site's(s') business requirements; 2) assistance in the user set up
definitions and build; 3) testing of MPOWER(R) including Year 2000
compliance testing requested by Customer; 4) pre/post activation
support for end users; 5) up to eighty (80) hours of initial training
services and 6) project management. MPOWER shall charge Customer as set
out in Section VIII.C below for all such Implementation Services
requested by Customer.
MPOWER agrees to provide conversion services ("Conversion Services") to
Customer to convert its current data files from its existing software
system to the MPOWER(R) database. MPOWER shall charge Customer as set
out in Section VIII.C below for all such Conversion Services requested
by Customer.
MPOWER reserves the fight to subcontract any Implementation Services
responsibilities it may accept under this Agreement. Customer shall
have the fight to approve MPOWER's subcontractors, which approval shall
not be unreasonably withheld. If Customer objects to certain
subcontractors for a stated good cause, MPOWER and Customer agree to
seek a mutually agreeable resolution to Customer's objection.
VII. TRAINING SERVICES
MPOWER will provide up to eighty (80) hours of initial trainer services
training within the scope of payment of initial Implementation Fees, as
indicated in Section VIII.C of this Attachment. Initial training will
focus on Customer's education of functionality contained within key
subsystems of MPOWER(R) and will be inclusive of the following:
o Mapping of business rules to benefit plan templates;
o Establishment of workflow procedures and user-defined
variables;
o Use of standard and ad-hoc reporting systems; and
o Methods for maintenance of key information being stored in the
system.
MPOWER will provide Customer under an appropriate Work Order, at
MPOWER's then-current fees, with additional training sessions regarding
MPOWER(R) to a reasonable number of Customer's personnel. All such
training, including initial End User training, shall be conducted at
location(s) elected by Customer at time(s) which are mutually
acceptable to both parties. Current fees for additional training
sessions are provided in Section VIII.F.
MPOWER MASTER AGREEMENT PAGE 29
<PAGE> 30
VIII. FEES
A. MPOWER(R) License Fees.
1. Fee for the Initial License.
Customer agrees to pay MPOWER a license fee ("Initial License
Fee") equal to [*] Dollars $[*] for the master license granted
in Section II of this Attachment for [*] lives ("Initial
License"). Customer agrees this entire Initial License Fee is
due to MPOWER on the full execution of this Attachment and
payable according to the schedule shown in Exhibit C hereto.
2. Fees for License Extensions.
Customer may, during the term of this Agreement, provided
Customer is current with all Maintenance Fees, exercise an
incremental license or incremental licenses for additional
life volume growth by paying to MPOWER an additional license
fee ("License Extension Fee") as shown on Exhibit C hereto for
each such License Extension.
The Initial License Fee and the License Extension Fee(s) may
be referred to as the License Fee(s).
The License Extension Fees will be billed and paid in
accordance with the terms and conditions outlined in this
Agreement.
B. Annual Maintenance Fees.
Customer agrees to pay to MPOWER for the software maintenance
services described above a software maintenance fee
("Maintenance Fee") equal to [*] percent ([*]%) of the
aggregate of the Initial License Fee and all License Fee
Extensions paid or payable by Customer to MPOWER.
The annual Maintenance Fee is due and payable as follows: the
first annual Maintenance Fee shall be due and payable upon the
earlier to occur of Final Acceptance or when Customer first
begins to use MPOWER(R) in a Live Production Environment.
* Confidential Treatment Requested
MPOWER MASTER AGREEMENT PAGE 30
<PAGE> 31
Each subsequent annual Maintenance Fee shall be billed and due
annually, based on the anniversary date of the first annual
Maintenance Fee due date. MPOWER will invoice Customer on an
annual basis for the maintenance fee. Customer agrees to pay
such invoices within thirty (30) days after Customer's receipt
of the invoice.
Maintenance Fees Payment Schedule is outlined in Exhibit D to
this Attachment.
C. Implementation Fees.
As outlined in Sections VI and VII above, MPOWER will provide
set-up, implementation, interface development and installation
services based upon the implementation requirement task list
and related hours outlined in Exhibit I hereto.
The Implementation Fee of $[*] ([*] dollars) will provide to
Customer [*] hours ([*]) of MPOWER professional staff
services for the services noted above and will be payable as
outlined in the schedule provided in Exhibit E. Such hours
will be accounted for and tracked via weekly time reporting to
Customer.
D. Travel and out of pocket expenses.
The fees set out above do not include travel and other
out-of-pocket expenses which may be incurred by MPOWER in the
course of delivering the products and services described in
this Attachment. MPOWER shall use all its reasonable efforts
to keep these travel and other out-of-pocket expenses to a
minimum. MPOWER will invoice Customer for MPOWER's travel and
out of pocket expenses on a monthly basis, as they are
incurred, and Customer agrees to pay such invoices within
thirty (30) days after receipt of the invoice.
E. Other Services
Customer may request and MPOWER may perform other services
("Other Services") for Customer, which services shall be
described in a Work Order, which shall be considered an
addendum to this Agreement and covered under the terms of this
Agreement, unless stated otherwise in the applicable Work
Order. The List Service Fee rate in effect through calendar
year 1999 is [*] ($[*]) Dollars per hour.
F. Additional Training Sessions
* Confidential Treatment Requested
MPOWER MASTER AGREEMENT PAGE 31
<PAGE> 32
Customer may request and MPOWER may perform additional
training sessions beyond the scope of the aforementioned
initial End User training, as described in Section VII of this
Attachment. Additional training services shall be described in
a Work Order, which shall be considered an addendum to this
Agreement and covered under the terms of this Agreement,
unless stated otherwise in the applicable Work Order. The rate
in effect for additional training services through calendar
year 1999 is $[1000.00] per day Customer may include as many
of its personnel in such sessions as may reasonably be
accommodated within a classroom environment
IX. THIRD PARTY PRODUCTS
Customer has the option to utilize Third Party Products with MPOWER(R)
as outlined in Exhibit B.
X. ACCEPTANCE
As soon as practicable after completion of preliminary testing,
Customer shall begin using MPOWER(R) in a simulated processing
environment using Customer's data. MPOWER(R) shall be deemed fully
accepted ("Final Acceptance") upon the conclusion of any consecutive
five (5) day period in which the MPOWER(R) functions in simulated
processing mode based on a test plan which has been jointly agreed to
by MPOWER and Customer. Customer shall execute a Certificate of
Acceptance (Exhibit A), which shall be attached hereto and made a part
of this Agreement. The date shown on the Certificate of Acceptance will
be the beginning date of any warranty or maintenance periods provided
for in this Agreement or any Exhibit hereto. Notwithstanding the above,
MPOWER(R) shall be deemed fully accepted upon the earlier to occur of
the date of the Certificate of Acceptance or the placement of MPOWER(R)
in a Live Production Environment.
XI. ADDITIONAL TERMS AND CONDITIONS
In addition to the terms and conditions of this Attachment, the parties
agree that all the terms and conditions of the Master Agreement shall
also apply to Customer's use of MPOWER(R). Should any terms or
conditions of this Attachment and the Master Agreement conflict, the
terms and conditions of this Attachment shall take precedence. Should
any terms or conditions of an applicable Work Order and this Attachment
or the Master Agreement conflict, the terms and conditions of the
applicable Work Order shall take precedence.
MPOWER MASTER AGREEMENT PAGE 32
<PAGE> 33
Signature Page
The parties have each read this Attachment and agree to be bound by all of its
provisions. The parties further agree that this Attachment (including its
Exhibits) and the Master Agreement constitute the complete and exclusive
statement of the agreement between the parties regarding MPOWER(R) and
supersedes any and all prior agreements and understandings between them
pertaining to MPOWER(R) and takes precedence over the provisions of any purchase
orders submitted to MPOWER by Customer. This Attachment may be amended only in
writing signed by both parties.
CUSTOMER MPOWER SOLUTIONS INC.
By: /s/ M. JAMES HENDERSON /s/ MARK S. RANGELL
- ---------------------------------- -----------------------------------
Signature of Authorized Signatory Signature of Authorized Signatory
M. JAMES HENDERSON MARK S. RANGELL
- ---------------------------------- -----------------------------------
Name Printed Name Printed
President/CEO Senior Vice President
- ---------------------------------- -----------------------------------
Title TItle
2/9/99 2/4/99
- ---------------------------------- -----------------------------------
Date Date
MPOWER MASTER AGREEMENT PAGE 33
<PAGE> 34
EXHIBIT A
FINAL ACCEPTANCE CERTIFICATE
Customer hereby acknowledges and MPOWER Solutions, Inc. hereby accepts that
MPOWEP(R) has been accepted by Customer per the date noted below. This will be
the basis for the beginning of any warranty or maintenance periods provided for
in this Agreement or any Exhibit hereto.
Date of Final Acceptance______________
Accepted by Customer: Accepted by MPOWER:
CUSTOMER MPOWER SOLUTIONS INC.
By:___________________________ By:________________________
Name (Printed):_______________ Name (Printed):____________
Title:________________________ Title:_____________________
Date:_________________________ Date:______________________
MPOWER MASTER AGREEMENT PAGE 34
<PAGE> 35
EXHIBIT B
NOT CURRENTLY APPLICABLE.
MPOWER MASTER AGREEMENT PAGE 35
<PAGE> 36
EXHIBIT C
MPOWER(R) License Fee Payment Schedule for the License Fees. Refer to
Section VIII A of the Attachment for MPOWER license terms and conditions.
<TABLE>
<CAPTION>
PAYMENT TRIGGERING EVENT EXPECTED PERCENTAGE AMOUNT
TIMEFRAME DUE DUE
<S> <C> <C> <C>
Contract Execution [ * ] [ * ] [ * ]
Customer Installation [ * ] [ * ] [ * ]
Completion of Acceptance Test / Go [ * ] [ * ] [ * ]
Live Date
Optional License Extension Based on a [ * ] Per
Quarterly Review Schedule
and Audit of
Customer's current
Life Count as of
the date Audit is
performed by
MPOWER
</TABLE>
LICENSE EXTENSION FEE(S):
o Increments of life volume above [ * ] initial lives:
[ * ] lives-[ * ] lives (increments of [ * ]) $[ * ] (each [ * ] lives)
[ * ] lives-[ * ] lives (increments of [ * ]) $[ * ] (each [ * ] lives)
* Confidential Treatment Requested
MPOWER MASTER AGREEMENT PAGE 36
<PAGE> 37
EXHIBIT D
MPOWER Annual Maintenance Fee Payment Schedule.
MPOWER billing and Customer paying of Annual Maintenance Fees is outlined in
Section VIII B of the Attachment. Refer to Section VIII B for on-going and
MPOWER Annual Maintenance Fee terms and conditions. The Annual Maintenance Fee
is calculated by multiplying [*] by the current License Fee or if adjusting the
amount based on Quarterly Audits, will be calculated by prorating any current
year amount of Maintenance Fee Customer has paid to MPOWER as of the date of the
Audit by MPOWER and subtracting that amount from [*] of the newly adjusted
License Fee for the current quarter post-audit life count totals. The
Maintenance Fee is due the first year on the date Final Acceptance and "Go Live"
occurs. The Annual Maintenance Fee may be adjusted by MPOWER based on the
Quarterly Audits of Life Count as described in Exhibit C.
<TABLE>
<CAPTION>
PAYMENT ESTIMATED PERCENTAGE DUE ESTIMATED
TRIGGERING EVENT TIMEFRAME -------------- AMOUNT DUE
- ----------------- --------- ----------
<S> <C> <C> <C>
Final Acceptance [*] [*] of First Year Annual [*]
or commencement Maintenance Fee
of Live Production
Environment and
"Go Live Date"
("Acceptance")
First and Annually [*] of Annual Maintenance [*] of Total
Subsequent Thereafter Fee License Fee
Anniversaries of
Acceptance
</TABLE>
* Confidential Treatment Requested
MPOWER MASTER AGREEMENT PAGE 37
<PAGE> 38
EXHIBIT E
MPOWER Initial Implementation Fee Payment Schedule
MPOWER billing and Customer payment of Implementation Fees are outlined in
Section VIII C of the Attachment. Refer to Section VIII C. for Terms and
Conditions.
<TABLE>
<CAPTION>
PAYMENT ESTIMATED PERCENTAGE DUE ESTIMATED
TRIGGERING EVENT TIMEFRAME -------------- AMOUNT DUE
- ----------------- --------- ----------
<S> <C> <C> <C>
Commencement of [*] [*] [*]
Setup Activities for
Initial
Implementation
Services
Customer [*] [*] [*]
Installation
Completion of [*] [*] [*]
Acceptance Test and
Go Live Date
</TABLE>
* Confidential Treatment Requested
MPOWER MASTER AGREEMENT PAGE 38
<PAGE> 39
EXHIBIT F
MODULES INCLUDED IN MPOWER(R)
All modules are included by MPOWER and comprise MPOWER(R) as of the
date of this Attachment:
o Set-ups
o Group Enrollment & Contracting
o Premium Billing & Accounts Receivable
o Member / Subscriber Enrollment
o Provider Contracting
o Capitation
o Claims Adjudication for UB92 / HCFA 1500 Claims'
o Certifications / Authorizations
o Customer Service
o Letter Generation
o Medicare Risk
o Medicaid Processing
o Ad Hoc Reporting
MPOWER MASTER AGREEMENT PAGE 39
<PAGE> 40
EXHIBIT G
Severity Definitions and Resolution Process
o SEVERITY 1.
The problem causes complete loss of service in the production and
staging environment and work cannot reasonably continue. The problem or
defect has one or more of the following characteristics:
[ ] Data corruption. Physical or logical data is unavailable or
incorrect. Examples: Block format corruption, invalid indices,
corruption of meta-data, incorrect results.
[ ] Critical functionality is not available.
[ ] System hangs. The process hangs indefinitely or there is severe
performance degradation, causing unreasonable waits for resources
or response, as if the system is hanging.
[ ] The entire MPOWER application crashes repeatedly.
[ ] Database process or background processes fall and continue to
fail after restart attempts.
[ ] Potential for above occurrences is defined imminent.
RESOLUTION OF SEVERITY 1: Until the issue is resolved MPOWER Solutions
will work on Severity 1 around the clock (7x24). As a result of the
severity, the customer must provide MPOWER with a point of contact
during the 7x24 period. The customer's point of contact will assist the
MPOWER customer support and development staff in gathering data,
testing fixes in the customer's testing region, and applying fixes to
the customer production environment.
o SEVERITY 2:
Problem or product defect causes a severe impact on the customer's
business regardless of customer environment. No workaround is
available, however operations can continue in a restricted fashion. The
problem or defect has one or more of the following characteristics:
[ ] Business Impact Examples: The customer can handle current volume,
but will not be able to handle quarter close; At close, customer
finds totals wrong, but close is not for a few weeks.
[ ] Internal software error, causing the application to fall to run
to completion, or return wrong results, or software error
severely degrades performance.
[ ] Some important functionality is unavailable, yet the system can
continue to operate in a restricted fashion.
[ ] Potential for above occurrences is defined imminent.
MPOWER MASTER AGREEMENT PAGE 40
<PAGE> 41
RESOLUTION OF SEVERITY 2: MPOWER Solutions will work on Severity 2 bug
based on customer assigned priority. Severity 2 fixes will be added in
the next scheduled maintenance or patch release.
o SEVERITY 3.
Problem or product defect causes minimal impact on the Customer's
business. The impact of the problem or defect is minor or an
inconvenience, such as a manual bypass to restore product
functionality. The problem or defect has one or more of the following
characteristics:
[ ] A software error for which there is an acceptable workaround.
[ ] Software error minimally degrades performance.
[ ] Software error or incorrect behavior has minor impact the
operation of the system.
RESOLUTION OF SEVERITY 3: Fixes for severity 3 bugs will be added to
the priority list for the next major scheduled release of the product.
The order of priority for resolving severity 3 issues will be assigned
jointly by the Customer and MPOWER.
o SEVERITY 4.
The problem or product defect causes NO impact on the Customer's
business. The problem or defect is a minor error, incorrect behavior,
or a documentation error that in no way impedes the operation of a
system.
RESOLUTION OF SEVERITY 4: Fixes for severity 4 bugs will be added to
the priority list for the next major scheduled release of the product.
The order of priority for resolving severity 4 issues will be assigned
jointly by the Customer and MPOWER.
MPOWER MASTER AGREEMENT PAGE 41
<PAGE> 42
EXHIBIT H
NOT CURRENTLY APPLICABLE.
MPOWER MASTER AGREEMENT PAGE 42
<PAGE> 43
EXHIBIT I
Customer Functional Requirements
SEE METHODIST CARE IMPLEMENTATION ATTACHMENT.
MethodistCare Implementation Attachment will identify hours and
associated costs related to development of "Proprietary MethodistCare
Modules" for recovery as set forth in Section II of the Master
Agreement.
[INIT]
MPOWER PLASTER AGREEMENT PAGE 43
<PAGE> 44
AMENDMENT NO. 1 TO
MASTER AGREEMENT
This Amendment No. 1 (the "Amendment") to the parties' February 4, 1999
Master Agreement is 'entered into as of the date of the later signature below by
and between Xcare.net, a Delaware corporation with its principal office at 6400
S. Fiddler's Green Circle, Suite 540, Englewood, Colorado 80111 ("Xcare.net")
and Methodist Care, Inc., a Texas licensed health maintenance organization, with
its principal office at Two Greenway Plaza, Suite 500, Houston, Texas 77046
("Customer").
WHEREAS, on February 4, 1999 Xcare.net (formerly "Mpower Solutions
Inc.") and Customer entered into a Master Agreement (the "Master Agreement");
and
WHEREAS, the parties desire to amend the Master Agreement as set forth
herein.
NOW, THEREFORE, for good and valuable consideration the receipt of
which is hereby acknowledged, the parties agree that the Master Agreement is
amended to include the following:
1. For the duration of the Master Agreement and for a period of one
year after the service are completed, Client agrees not to employ or solicit the
employment of any Xcare.net personnel who performed services under the Master
Agreement. Customer agrees to pay Xcare.net an amount equal to the annual
compensation of such personnel for the one-year period immediately preceding any
hiring or solicitation of any such Xcare.net personnel. This payment by Customer
constitutes the parties' estimates of that portion of Xcare.net's damages for
which Customer should be responsible for such activity, and is not a penalty.
The parties agree that this estimate is reasonable under the circumstances
existing as of the date of this Agreement, including, without limitation, the
difficulty of computing such damages exactly.
2. Except as expressly provided in this Amendment, the Master Agreement
shall remain unmodified and in full force and effect. In the event of any
inconsistency or conflict, the provisions of this Amendment shall control and
govern over the provisions of the Master Agreement.
METHODIST CARE, INC. XCARE.NET
By: By: /s/ LORINE SWEENEY
--------------------------------- ---------------------------------
Print Name: Print Name: LORINE SWEENEY
------------------------- -------------------------
Title: Title: PRESIDENT & CEO
------------------------------ ------------------------------
Date: Date: 8/27/99
------------------------------- -------------------------------
<PAGE> 1
EXHIBIT 10.7
SUBCONTRACT
BY
AND
BETWEEN
PRC INC.
AND
MPOWER SOLUTIONS INC.
SUBCONTRACT NO. D/SID2-SC-98-251
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
PREAMBLE 1
THE SCHEDULE 2
ARTICLE 1. SUPERSEDING EFFECT 2
ARTICLE 2. PRIORITY RATING 2
ARTICLE 3. SUBCONTRACT TYPE 2
ARTICLE 4. PERIOD OF PERFORMANCE 2
ARTICLE 5. OPTION TO EXTEND 3
ARTICLE 6. SCOPE OF WORK 3
ARTICLE 7. SUBCONTRACT CEILINGS AND PAYMENT 3
ARTICLE 8. TRAVEL AND OTHER DIRECT COST 3
ARTICLE 9. SUBCONTRACTING 4
ARTICLE 10. OVERTIME 4
ARTICLE 11. KEY PERSONNEL 4
ARTICLE 12. STAFFING AND CONDUCT OF SUBCONTRACTOR PERSONNEL 4
ARTICLE 13. INSPECTION AND ACCEPTANCE 5
ARTICLE 14. GOVERNMENT PROPERTY 5
ARTICLE 15. SUBCONTRACTOR VISITS 6
ARTICLE 16. PROGRAM MANAGEMENT 6
ARTICLE 17. STATUS REPORTING AND REVIEWS 7
ARTICLE 18. INVOICING AND PAYMENT 7
ARTICLE 19. INSURANCE SCHEDULE 8
ARTICLE 20. DISPUTES 8
ARTICLE 21. TERMINATIONS 9
ARTICLE 22. RECORDS 9
ARTICLE 23. SECURITY CLASSIFICATIONS AND CLEARANCES 9
ARTICLE 24. SUBCONTRACTOR/GOVERNMENT INTERFACE 10
ARTICLE 25. HIRING OF EMPLOYEES 10
ARTICLE 26. RETENTION OF INFORMATION 10
ARTICLE 27. SUBCONTRACT ADMINISTRATION 10
ARTICLE 28. MISCELLANEOUS 11
ARTICLE 39. ORDER OF PRECEDENCE 12
ARTICLE 30. EXECUTION OF AGREEMENT OF SUBCONTRACT 12
ATTACHMENTS
ATTACHMENT A SPECIAL PROVISIONS
ATTACHMENT B GENERAL PROVISIONS
ATTACHMENT C PERSONNEL QUALIFICATIONS
ATTACHMENT D PRIME CONTRACT STATEMENT OF WORK
ATTACHMENT E SECURITY REQUIREMENTS
ATTACHMENT F WAGE DETERMINATION
ATTACHMENT G MONTHLY PROGRESS REPORT FORMAT
ATTACHMENT H GOVERNMENT PROPERTY FORMS
</TABLE>
<PAGE> 3
SUBCONTRACT NO. D/SID2-SC-98-251
This Subcontract is made this ____ day of _______, 1998, by and between PRC
Inc., having offices at 1500 PRC Drive, McLean, Virginia 22102 (hereinafter
referred to as "PRC" or "Prime Contractor"), a corporation duly organized and
existing under the laws of the State of Delaware, and, MPOWER Solutions Inc.,
having offices at 6400 South Fiddler's Green Circle, Suite 540, Englewood, CO
80111, (hereinafter referred to as "MPOWER" or "Subcontractor"), a corporation
duly organized and existing under the laws of the State of
______________________________.
PREAMBLE
W I T N E S S E T H
WHEREAS, the Prime Contractor has been awarded Contract No. DASW01-98-D-0031
(hereinafter referred to as "Prime Contract") to provide technical assistance as
required for the systems design, development, operations and maintenance of
ongoing and future automation initiatives for the Office of the Assistant
Secretary of Defense for Health Affairs (OASD/HA); and
WHEREAS, the Statement of Work of the Prime Contract sets forth a description of
the scope of and manner in which the Prime Contractor shall provide the OASD/HA
with technical services; and
WHEREAS, the Prime Contractor has need of certain work to be provided by the
Subcontractor as set forth herein; and
WHEREAS, the Subcontractor wishes to provide the Prime Contractor the said work
as set forth herein;
All in the manner and subject to the terms and conditions as hereinafter set
forth,
NOW, THEREFORE, BE IT KNOWN AND IT IS HEREBY AGREED in consideration of the
foregoing premises and mutual covenants herein contained, the parties hereby
mutually agree as follows:
<PAGE> 4
Subcontract No. D/SID2-SC-98-251
THE SCHEDULE
ARTICLE 1. SUPERSEDING EFFECT
A. This Subcontract supersedes all written or oral agreements, if any, and
constitutes the entire agreement between the parties hereto with respect
to this Subcontract.
B. All work performed by the Subcontractor, actions taken, and payments
made, if any, under any other prior written or oral agreements, with
respect to this Subcontract, shall be deemed to have been work
performed, actions taken, or payments made under this Subcontract.
ARTICLE 2. PRIORITY RATING
To the extent that materials are procured hereunder they are certified for
national defense under DPS Reg. 1 and/or DMS Reg. 1 and of all other regulations
and orders of the Department of Commerce, where applicable, in obtaining
controlled materials and other products and materials needed to fill this
Subcontract. DPS/DMS Rating:. S10.
ARTICLE 3. SUBCONTRACT TYPE
A. This Subcontract is an Indefinite Delivery Indefinite Quantity (IDIQ)
Cost Plus Fixed Fee, (CPFF) type Agreement that establishes the terms
and conditions whereunder the Prime Contractor will procure services and
provides for the Subcontractor to furnish the work specified on either a
CPFF/LOE basis as indicated in Task Orders. This Subcontract and any
task orders issued hereunder are subject to the terms, conditions and
provisions included herein or incorporated as Attachments hereto and
made a part hereof. Such orders may be issued from the Date of
Subcontract Award through April 14, 2003.
B. In the event of conflict between a task order and this Subcontract, the
Subcontract shall control. The Prime Contractor cannot predict
accurately the types and quantities of services needed for any period of
time. At a minimum, the Prime Contractor shall order services with a
value of $1,000.00 (One Thousand Dollars). Subcontractor shall notify
Prime Contractor in writing 30 days prior to the end of the term of this
Subcontract if the guaranteed minimum has not been ordered.
ARTICLE 4. PERIOD OF PERFORMANCE
The base period of performance for this Subcontract shall be from December 1,
1998 through April 14, 1999.
2
<PAGE> 5
Subcontract No. D/SID2-SC-98-251
ARTICLE 5. OPTION TO EXTEND
A. PRC will, based upon the Government's exercising of options under the
Prime Contract, extend the performance period of this Subcontract beyond
the base period by exercising the following options:
Prime Contract Option Year I April 15, 1999 through April 14, 2000
Prime Contract Option Year II April 15, 2000 through April 14, 2001
Prime Contract Option Year III April 15, 2001 through April 14, 2002
Prime Contract Option Year IV April 15, 2002 through April 14, 2003
B. If the Prime Contractor receives such notices from the Government, the
Prime Contractor will in turn extend the term of this Subcontract by
written notice to the Subcontractor by formal modification to the
subcontract. The preliminary notice does not commit the Prime Contractor
to the exercise of an option.
C. If the Prime Contractor exercises this option, the extended Subcontract
shall be considered to include this option provision. The Prime
Contractor shall exercise such options by formal modification to this
Subcontract. The total duration of this Subcontract, including the
exercise of any options under this article, shall not exceed 60 months.
ARTICLE 6. SCOPE OF WORK
The Subcontractor shall provide to the Prime Contractor the work specified in
Task Orders within the scope of the Statement of Work (SOW) from the prime
contract which is incorporated herein as Attachment E and made a part hereof.
ARTICLE 7. SUBCONTRACT CEILINGS AND PAYMENT
A. The estimated cost and fixed fee ceilings for this Subcontract are the
sum total of all Task Orders issued to the Subcontractor. Task Order
ceilings will be indicated on individual Task Orders.
B. For CPFF/LOE Task Order, the estimated cost and fixed fee shall be paid
in accordance with FAR 52.216-7, entitled "Allowable Cost and Payment,"
and FAR 52.216-8 entitled "Fixed Fee" which are included by reference in
the General Provisions attached hereto.
ARTICLE 8. TRAVEL AND OTHER DIRECT COST
Travel and other direct cost, except as identified in Subcontractor's Task Order
proposals, shall not be allowable as a direct charge to this Subcontract without
the prior written approval of the Prime Contractor's Program Manager (PM). For
CPFF/LOE Task Orders, when authorized, the Subcontractor shall be reimbursed for
travel and other direct cost at actual cost, plus applicable burdens and fee.
For FPLH Task Orders, when authorized, the Subcontractor shall be reimbursed for
travel and other direct cost at actual cost, plus applicable burdens but without
profit. Air Travel shall be coach fare. Automobile rental shall be for a compact
vehicle, unless specific requirements in a task order require another vehicle
type. The cost for per diem, accommodations, personal
3
<PAGE> 6
Subcontract No. D/SID2-SC-98-251
automobile shall not exceed those rates authorized by FAR 31.205-46 entitled
"Travel Costs" in effect during the time of such travel.
ARTICLE 9. SUBCONTRACTING
Except as identified in Subcontractor's Task Order proposals, no other
subcontracts to accomplish work required hereunder shall be issued by the
Subcontractor unless approved by the Prime Contractor's designated
representative in writing in accordance with FAR 52.244-1, Subcontracts-Fixed
Price Contracts and FAR 52.244-2, Subcontracts-Cost Reimbursement Contracts
incorporated by reference in Attachment C.
ARTICLE 10. OVERTIME
No overtime premiums are allowable as a direct charge for exempt personnel.
ARTICLE 11. KEY PERSONNEL
A. The Subcontractor shall notify the Prime Contractor prior to making any
changes in key personnel. Key personnel are defined as follows:
1. Personnel identified in the proposal for the individual Task
Order as key individuals to be assigned for participation in the
performance of the Subcontract;
2. Individuals which are designated as key personnel by agreement
of the Prime Contractor and the Subcontractor during
negotiations.
B. The Subcontractor must demonstrate that the qualifications of
prospective personnel are equal to or better than the qualifications of
the personnel being replaced. Notwithstanding any of the foregoing
provisions, key personnel shall be furnished unless the Subcontractor
has demonstrated to the satisfaction of PRC's PM and the Government that
the qualifications of the proposed substitute personnel are equal to or
better than the qualifications of the personnel being replaced.
Replacement personnel should be in place within ten (10) days or a
longer time period of time if mutually acceptable to the Government and
PRC.
ARTICLE 12. STAFFING AND CONDUCT OF SUBCONTRACTOR PERSONNEL
A. The Subcontractor's staffing actions and personnel assigned to task
orders issued under this Subcontract shall be mutually agreed to by
PRC's Program Manager and Subcontractor to assure compliance with a task
order's Statement of Work. Should the Subcontractor be unable to meet
the staffing plan as identified in the individual Task Order, such
understaffing may not be compensated for by overstaffing during later
periods without the approval of the Prime Contractor's PM or duly
authorized representative.
B. The Prime Contractor's Program Manager, after due consultation with the
Subcontractor, may request the Subcontractor to remove any employee of
the Subcontractor whose
4
<PAGE> 7
Subcontract No. D/SID2-SC-98-251
performance is deemed unacceptable by the Government and it shall be the
responsibility of the Subcontractor to so remove and replace that
individual at no cost to the Prime Contractor.
C. If the Subcontractor is requested to remove any of the Subcontractor's
personnel from further performance under this Subcontract for reasons of
unethical conduct, security reasons or for violation of installation
regulations, the Subcontractor shall use its best efforts to replace the
personnel promptly in order to minimize the impact upon performance. The
maximum time period allowed for replacement of Subcontractor personnel
shall not exceed 10 calendar days, unless otherwise mutually agreed,
and, the Subcontractor shall bear all costs associated with such removal
including the costs for the replacement of any personnel so removed.
ARTICLE 13. INSPECTION AND ACCEPTANCE
A DD250 Form shall be submitted with deliverables. Acceptance criteria for
deliverable products shall be specified in the Statement of Work. The Prime
Contractor will conduct. a review of the Subcontract deliverables for
completeness, correctness and compliance with the Task Order requirements. If
the Prime Contractor determines that there are omissions, errors or
deficiencies, the Subcontractor shall make the necessary modifications that will
allow the Prime Contractor to accept the final products. The corrections shall
be made within a period of time agreed upon by the Prime Contractor and
Subcontractor and in accordance with the provisions set forth in FAR Clauses
listed below:
FAR 52.246-2 Inspection of Supplies--Fixed Price (AUG 1996)
FAR 52.246-3 Inspection of Supplies--Cost Reimbursement (APR 1984)
FAR 52.246-4 Inspection of Services--Fixed Price (AUG 1996)
FAR 52.246-5 Inspection of Services--Cost Reimbursement (APR 19840
DFAR 252.246-7000 Material Inspection and Receiving Report (DEC 1991)
ARTICLE 14. GOVERNMENT PROPERTY
A. This subcontract contains the clause entitled "Government Property".
However, receipt of Government Furnished Property or Subcontractor
Acquired Property is not authorized under this subcontract. Such
property may be acquired only upon receipt of a fully executed task
order or task order modification that specifically authorizes
acquisition of the property by the Subcontractor. Requests for
Subcontractor Acquired Property must be made to the Procurement
Specialist designated in Article 27, with a copy of the request to the
PRC Government Property Office.
B. To meet the requirements set forth in FAR 45.510, prior to approving
requests for Government Furnished Property or Subcontractor Acquired
Property, the Subcontractor will be required to show proof of a Property
Management System, which has been approved by the Government within
three audit years of the date of the subcontract or task order. Upon
acceptance and approval of the status of the system by the PRC
Government Property Office, the Subcontractor will be authorized to
follow the terms and conditions of their Government approved Property
Management System. Failure to
5
<PAGE> 8
Subcontract No. D/SID2-SC-98-251
have an approved Property Management System will result in acceptance of
the terms and conditions of PRC's Government Property Management System.
C. Whether the Subcontractor's Property Management System or PRC's Property
Management System is being followed, the Subcontractor is required to:
(1) on an annual basis, conduct a wall-to-wall inventory of the
Government Property in their possession which is being used to
perform the work under this subcontract, and submit the results
to the PRC Government Property Office,
(2) submit an up-to-date copy of their Official Property Record to
the PRC Government Property Office by October 5, of each year,
and
(3) comply with other requirements as determined necessary.
D. Upon changes in status and/or quantity of Government Property notice
shall be submitted to the PRC Government Property Office immediately.
E. In accordance with FAR 52.245-2, Government Property (Fixed Price
Contracts) (DEC 1989) and FAR 52.245-5, Government Property (Cost
Reimbursement, Time and Material, or Labor Hour Contracts) (JAN 1986),
the Subcontractor will assume full risk of loss for any Subcontractor
Acquired Property/Government Furnished Property under this agreement.
Limited risk of loss for any Subcontractor Acquired/Government Furnished
will only be applicable if the Government Contracting Officer's
authorization is obtained by PRC in advance of authorization for the
Subcontractor to receive such property.
F. Any loss or destruction of, or damage to, Government Property in the
possession of the Subcontractor must be reported to the PRC Government
Property Office within five (5) days of discover.
ARTICLE 15. SUBCONTRACTOR VISITS
PRC's PM and/or the Government's Contracting Officer's Representative (COR) will
approve and coordinate all Subcontractor visits to a sponsor's agency and other
DoD agencies necessary for performance under this Subcontract. All Subcontractor
security visit requests shall be submitted through PRC's PM to the COR for
approval
ARTICLE 16. PROGRAM MANAGEMENT
A. PRC's Program Manager or duly authorized representative shall provide
direction to the Subcontractor relative to the specific work to be
performed hereunder, to include any and all marketing efforts. In the
event direction is given that will affect the price and/or period of
performance or otherwise is in conflict with the terms and conditions of
this Subcontract, the Subcontractor is responsible for notifying the
Prime Contractor's designated representative set forth in Article 27
herein in accordance with the provisions set forth in the following
clauses incorporated in Attachment B:
FAR 52.243-1 Changes--Fixed Price (AUG 1987)
FAR 52.243-2 Changes--Cost Reimbursement (AUG 1987)
FAR 52.243-2 II Changes--Cost Reimbursement, Alternate II (APR 1984)
6
<PAGE> 9
Subcontract No. D/SID2-SC-98-251
B. PRC's Program Manager will forward any contractual or performance
problems or issues to the Subcontractor for correction or resolution, as
required. PRC's Program Manager also has been delegated responsibility
for coordinating task order pre-proposal conferences; review of
Subcontractor technical and cost proposals; coordination of Prime
Contract reporting requirements with the Government and Subcontractor;
deliverable and other Subcontractor submissions; maintenance of the PRC
D/SIDDOMS II task order award database; maintenance of DD250
documentation and other contract documents; management and coordination
of Government Subcontract Reporting requirements with Subcontractor team
members; and quality assurance.
ARTICLE 17. STATUS REPORTING AND REVIEWS
A. The Subcontractor shall provide monthly status reports and support the
Prime Contractor in program reviews as set forth below within seven (7)
business days of end of the calendar month. As a minimum the
Subcontractor shall provide a Monthly Progress Report, in hard copy and
soft copy, that addresses total Subcontract work activity for the
reporting period and will individually address each active task order.
Each report shall include information as specified in Attachment H,
Monthly Progress Report Format.
B. The Subcontractor shall support the Prime Contractor in satisfying all
Government special reporting requirements, as specified in separate Task
orders.
C. Reports delivered by the Subcontractor in performance of this
Subcontract shall be considered "Technical Data" as defined in the
applicable "Rights in Data" clause of the General Provisions.
ARTICLE 18. INVOICING AND PAYMENT
A. The Subcontractor shall invoice PRC not more than monthly on a task
order basis. The Subcontractor shall provide one original and two Copies
of a proper invoice to the address specified in paragraph C. Properly
submitted invoices shall be payable net thirty (30) days following
receipt by PRC.
B. In order for a Subcontractor invoice to be considered proper, each
invoice shall contain, at a minimum, the following information:
1. This Subcontract number and Task Order Number with A/P Reference
Number.
2. Period of performance or deliverable for which the invoice is
submitted.
3. Hours expended by labor category, and individual both current
and cumulative.
4. The amount invoiced, by category, and individual both current
and cumulative.
5. Other Direct Costs (ODCs), which must have the advance approval
of the Prime Contractor's PM, shall specify a description of the
cost (i.e., travel, computer time, etc.) and for which paid
invoices, storeroom requisitions or other certifications of
payment are available for Government audit verification.
6. Total amount invoiced for the period, both current and
cumulative.
7
<PAGE> 10
Subcontract No. D/SID2-SC-98-251
C. Invoices shall be directed to the following:
PRC Inc. 1500
PRC Drive
McLean, VA 22102
Attention: Ms. Sue Noah, MS 2E1
ARTICLE 19. INSURANCE SCHEDULE
The Subcontractor shall maintain the types of insurance and coverage listed
below.
<TABLE>
<CAPTION>
TYPE OF INSURANCE MINIMUM AMOUNT
<S> <C> <C>
(i) Workmen's compensation and all occupational disease As required by State Law
(ii) Employer's Liability including all occupational disease $100,000 per acct.
when not so covered in Workmen's Compensation above.
(iii) General Liability (Comprehensive) Bodily Injury
per occurrence $500,000
(iv) Automobile Liability (Comprehensive)
Bodily Injury per person $200,000
Bodily Injury per occurrence $500,000
Property Damage per accident $ 20,000
</TABLE>
ARTICLE 20. DISPUTES
A. Good-Faith Negotiations. If any dispute arises under this agreement that
is not settled promptly in the ordinary course of business, the parties
shall seek to resolve any such dispute between them, first, by
negotiating promptly with each other in good faith in face-to-face
negotiations. If the parties are unable to resolve the dispute within 20
business days (or such period as the parties shall otherwise agree)
through these face-to-face negotiations, then any such dispute shall be
resolved in the following manner.
B. Excluded Causes. If the only dispute relates to unpaid fees, costs or
other charges, the party owed the money may commence legal action in
court for outstanding monies due under this Agreement.
C. Binding Alternative Dispute Resolution. Any remaining dispute arising
under this Agreement shall be resolved by using alternative dispute
resolution (ADR) procedures, which can hopefully avoid or reduce the
acrimony resulting from adversarial litigation. If the efforts through
face-to-face negotiations in paragraph A., above, are not successful,
the parties will initiate a mini-trial (ADR) process with selection of a
neutral advisor, who will schedule a mini-trial to occur approximately
30 business days after the selection of the neutral advisor. The neutral
advisor will introduce an impartial opinion approximately 15 business
days after completion of the mini-trial. Throughout the ADR process, the
neutral advisor will provide an element of mediation with the goal of
having the parties resolve the dispute without issuance of the impartial
opinion. However, if agreement is not reached by the parties, the
impartial opinion rendered by the neutral advisor will be binding and
judgment upon that opinion may be entered in any court having
jurisdiction thereof. The parties may elect to use an
arbitration/mediation service which specializes in timely ADR,
8
<PAGE> 11
Subcontract No. D/SID2-SC-98-251
such as ENDISPUTE or the Judicial Arbitration and Mediation Services,
Inc. All expenses such as the cost of the neutral advisor or the hearing
facility will be shared equally.
ARTICLE 21. TERMINATIONS
A. In addition to the termination provisions of FAR 52.249-2 and 52.249-6
incorporated herein by reference, a Task Order may be terminated in
writing by PRC upon occurrence of any of the following:
1. Termination by the Government of the Prime Contract or Prime
Contract Delivery Order upon which Subcontractor's Task Order is
issued upon 30 days notice prior to delivery date.
2. Failure of Subcontractor to perform a Task Order in accordance
with the terms and conditions of this Subcontract or failure by
Subcontractor to perform or comply with any other provision of
this Subcontract and such failure is not cured within ten (10)
days after receiving a written notice from PRC specifying such
failure to perform.
B. PRC reserves the right to terminate this Subcontract and/or unfulfilled
Task Orders issued hereunder in the event Subcontractor is subject to
sanctions arising from investigative procedures instituted by agencies
of the U.S. Government.
B. In addition to any rights pursuant to paragraphs A and B, above, Prime
Contractor may cancel this Subcontract in whole or in part without any
liability in the event Subcontractor: (1) ceases to do business; (2)
Subcontractor becomes insolvent; (3) Subcontractor institutes bankruptcy
proceedings or liquidation proceedings are instituted against the
Subcontractor; (4) a trustee or receiver is appointed for Subcontractor
business or property; or (5) in the event of any assignment,
reorganization or arrangement by Subcontractor for its creditors.
ARTICLE 22. RECORDS
A. The Subcontractor shall maintain sufficient records concerning
Subcontract performance of separate task orders to permit verification
through normal audit procedures of the hours expended by labor
categories in performance of the effort set forth herein.
B. The Subcontractor agrees that its books and records and its plants, or
such part thereof as may be engaged in the performance of this
Subcontract shall at all reasonable times be subject to inspection and
audit by any authorized representative of the U.S. Government. This
right shall survive acceptance and final closeout on this Subcontract
for a period of three (3) years.
ARTICLE 23. SECURITY CLASSIFICATIONS AND CLEARANCES
The work to be performed hereunder may involve classified information
necessitating performance by personnel with appropriate security clearances. If
the Prime Contract Task order Security
9
<PAGE> 12
Subcontract No. D/SID2-SC-98-251
Classification Specification (DD Form 254) is applicable, the Task order DD254
form will be furnished to the Subcontractor under separate letter upon approval
by the issuing agency. In addition, the Subcontractor shall comply with Security
Requirements as specified in Attachment F.
ARTICLE 24. SUBCONTRACTOR/GOVERNMENT INTERFACE
A. All meetings and other contacts involving Subcontractor personnel and/or
their representatives with representatives of the United States
Government, relative to performance of this Subcontract, shall be
coordinated through the Prime Contractor's PM, or his designee. The
Subcontractor is further reminded that only the Prime Contractor can
direct the Subcontractor and/or modify the terms and conditions of this
Subcontract or Task Orders executed under this Subcontract.
B. PRC's PM or his designee has the responsibility to manage, direct and
coordinate the marketing efforts including trade shows of all
subcontractors. PRC's PM shall be the sole arbitrator of disputes
between subcontractors with respect to marketing opportunities and is
responsible for assignment of task orders awarded by the Government to
the appropriate subcontractor(s).
ARTICLE 25. HIRING OF EMPLOYEES
Except as otherwise agreed in writing during the period that this Subcontract is
in effect, including any extensions thereto, the Subcontractor and the Prime
Contractor shall not actively recruit or otherwise induce the other party's
employees assigned in connection with the effort hereunder to accept a position
with the other party. This clause is not intended to restrict the rights of
employees of either party to respond to public advertisements and notices of
employment opportunities.
ARTICLE 26. RETENTION OF INFORMATION
After completion of this Subcontract, the Subcontractor shall not retain in its
possession (unless otherwise specified) any drawings, sketches, prints, reports
or other data developed under this Subcontract or provided by the Prime
Contractor hereunder without written approval of the Prime Contractor.
ARTICLE 27. SUBCONTRACT ADMINISTRATION
In regard to administrative and contractual matters relating to this
Subcontract, the parties hereby appoint the below-listed persons, or their duly
authorized designees, as the only persons empowered to make commitments on
behalf of their respective organizations to effect changes to any portion of
this Subcontract.
<TABLE>
<S> <C>
For the Prime Contractor: Catherine J. Fontaine, Manager, Procurement, or her designee,
Lesley M. Tyson, Principal Procurement Specialist
Lorine Sweeney, CEO & President
For the Subcontractor: Patrice N. Light, V.P. Healthcare Technology
Tammy McLaren, V.P. Prof. Services and CIO
</TABLE>
10
<PAGE> 13
Subcontract No. D/SID2-SC-98-251
ARTICLE 28. MISCELLANEOUS
A. NOTICES. Whenever under this Subcontract one party is required or
requires to give notice to the other, such notice shall be deemed to
have been given if appropriately addressed as follows:
1. In the case of the Prime Contractor:
For Contractual Matters: For Technical Matters:
PRC Inc. PRC Inc.
1500 PRC Drive 1500 PRC Drive
McLean, Virginia 22102 McLean, VA 22102
Attention: Ms. Lesley M. Tyson Attention: Mr. Cary Havert
Phone Number: (703)556-1890 Phone Number: (703) 556-2311
Fax Number: (703)556-1534 Fax Number: (703)883-8704
2. In the case of the Subcontractor:
For Contractual Matters: For Technical Matters:
MPOWER Solutions Inc. MPOWER Solutions Inc.
6400 So. Fiddler's Green Circle 6400 So. Fiddler's Green Circle
Englewood, CO 80111 Englewood, CO 80111
Attention: Ms. Patrice N. Light Attention: Mrs. Tammy McLaren
Phone Number: (303) 488-9928 Phone Number: (303) 488-9928
Fax Number: (303) 488-9705 Fax Number: (303) 488-9705
B. ENTIRE AGREEMENT AND GOVERNING LAW. This Subcontract, including all
attachments whether incorporated by reference or otherwise, constitutes
the entire Subcontract and supersedes all other agreements whether oral
or written. Furthermore, this agreement shall be construed to be
governed in accordance with the laws of the Commonwealth of Virginia.
C. COUNTERPARTS. This Subcontract may be executed in several counterparts
all of which taken together shall constitute one single Subcontracts
between the parties hereto.
D. HEADINGS AND INTERPRETATIONS. The article and section headings and table
of contents used herein are for reference and convenience only and shall
not enter into the interpretation thereof.
E. SEVERABILITY. If any of the provisions of this Subcontract or part of
such provisions are or become invalid or unenforceable, the remaining
provisions shall continue to be effective.
F. WAIVERS. No waiver by a party of any of its rights or remedies hereunder
shall be construed as a waiver by such party of any other rights or
remedies that such party may have under this Subcontract.
11
<PAGE> 14
Subcontract No. D/SID2-SC-98-251
G. NEGATION OF THE FORMATION OF A BUSINESS ORGANIZATION. This Subcontract
shall not constitute, create, or in any way be interpreted to create a
partnership, joint venture, or formal business organization of any kind
between the Prime Contractor and the Subcontractor.
ARTICLE 39. ORDER OF PRECEDENCE
In the event of inconsistency between the provisions of this Subcontract, the
inconsistency shall be resolved by giving precedence as follows:
(a) the Subcontract;
(b) Attachment A - Special Provisions;
(c) Attachment B - General Provisions;
(d) Attachment C - Personnel Qualifications;
(e) Attachment D - Prime Contract Statement of Work;
(f) Attachment E - Security Requirements;
(g) Attachment F - Wage Determination;
(h) Attachment G - Monthly Progress Report Format;
(i) Attachment H - Government Property Forms.
ARTICLE 30. EXECUTION OF AGREEMENT OF SUBCONTRACT
IN WITNESS WHEREOF, the parties hereto have caused these presents to be executed
as of the day and year first above written.
BY: /s/ LORINE SWEENEY BY: /s/ CATHERINE J. FONTAINE
-------------------------------- -------------------------------------
NAME: Lorine Sweeney NAME: Catherine J. Fontaine
------------------------------ -----------------------------------
TITLE: President & CEO TITLE: Manager, Procurement
----------------------------- ----------------------------------
DATE: 12-17-98 DATE: 1/12/99
------------------------------ -----------------------------------
12
<PAGE> 15
Subcontract No. D/SID2-SC-98-251
ATTACHMENT A
SPECIAL PROVISIONS
The special provisions of the Prime Contract are hereby incorporated by
reference in the following pages. As used herein the term "Contractor" shall
mean the Subcontractor and the terms "Government" and the "Contracting Officer"
or equivalent terms shall mean PRC and PRC Contractual Representative hereunder,
respectively, except under those clauses relating to rights to audit or examine
the Subcontractor's books or financial records, in which case the terms the
"Government" and the "Contracting Officer" shall mean the U.S. Government and
the Contracting Officer under the prime contract respectively.
ARTICLE 20. COMMERCIAL OFF THE SHELF (COTS) PRODUCTS AND DATA STANDARDIZATION
A. Background
1. The Government intends to use international, industry,
government, DoD, and Military Health Systems (MHS) standards to
promote the efficient and unambiguous exchange of information
with required government and commercial systems. In addition,
the government must understand the meaning and context of the
data being captured and processed to ensure a common
understanding of the data being exchanged.
2. Congress defined performance measures to assess progress toward
information technology goals in the National Defense
Authorization Action for Fiscal Year 1995 to ensure that the DoD
receives the maximum benefit possible from development,
modernization, operation, and maintenance of automated
information systems (AISs). Section 381 paragraph 1.3.2 of this
Act specifically establishes measures for data standardization
to include the number and percentage of DoD standard data
elements that are used in migration programs. The paragraph
further states that this can be done through actual use of DoD
standard data elements of the mapping of non-standard data to
DoD standard data.
3. Therefore, it is the purchasing organizations responsibility to
ensure the COTS software vendor provides the following minimum
information in the form of data dictionary to DoD Health
Affairs: the logical data element name, its definition that
describes the meaning and the context of the data element in the
system, the domain of the data element (the allowable values),
the data type, length and unit of measure if applicable. Any
data element acronym or abbreviation must be spelled out clearly
in the definition. The vendor is required to submit this data
dictionary using the MHS Health Import Tool (HITool) which can
be obtained from MHS Health Data Program Web Site. This tool
ensures that Health Affairs has the necessary data element
information in a useable format. In addition, the vendor will be
required to assist Health Affairs in reporting the metric
described above. These requirements are described in paragraph
below entitled "COTS Software Data Requirements.
<PAGE> 16
Subcontract No. D/SID2-SC-98-251
B. Scope. These contract requirements apply to COTS software purchased to
satisfy Military Health System (MHS) functional requirements. They do
not apply to development tools such as PowerBuilder, Visual Basic,
utilities, etc., office automation software such as word processors of
infrastructure-related software such as operating systems. The
Government will include these requirements in each task statement or
acquisition document which includes or anticipates the need for COTS
software. to satisfy functional requirements.
C. COTS Software Data Requirements. Prior to final agreement and purchase,
the COTS software vendor shall provide a data dictionary which includes
the following information for each functional data element in the
software: the logical data element name; its definition that describes
the meaning and the context of the data element in the system; the
domain of the data element (the allowable values); the data type, length
and a unit of measure if applicable. The vendor is required to submit
this data dictionary using MHS Health Import Tool (HITool) which can be
obtained from http://hirs.brooks.aff.mill/mhss/. In addition, the vendor
will be required to provide additional information for clarification of
the individual data element meaning and context to assist Health Affairs
in reporting the National Defense Authorizations Action data
standardization metric as required in Section 381 of the National
Defense Authorization Action for Fiscal Year 1995.
D. COTS Software Data Import and Export Capability. The COTS software
vendor shall describe in its proposal to the Government and be able to
demonstrate the applications capability and flexibility to import and
export applicable standard MHS data defined in the task order to or from
external sources directly or through standardized interfaces, front-end
or back-end translators or utilities.
<PAGE> 17
SECTION H
SPECIAL CONTRACT REQUIREMENTS
H.1 52.245-7001 REPORTS OF GOVERNMENT PROPERTY (MAY 1994)
(a) The Contractor shall provide an annual report-
(l) For all DoD property for which the Contractor is accountable
under the contract;
(2) Prepared in accordance with the requirements of DD Form 1662,
DoD Property in the Custody of Contractors, or approved
substitute, including instructions on the reverse side of the
form;
(3) In duplicate, to the cognizant Government property
administrator, no later than October 31.
(b) The Contractor is responsible for reporting all Government property
accountable to this contract, including that at subcontractor and alternate
locations.
H.2 CONFLICT OF INTEREST
It is understood that the Contractor, to include all subcontractors and
consultants, shall comply with the provisions of FAR Subpart 9.5 -
Organizational Conflicts of Interest. If the Contractor is issued a delivery
order to provide services, any of the services set forth in FAR 9.505-1, 9.505-2
and 9.505-3, the Contractor or any subcontractors or consultants working on that
delivery order shall not supply any hardware, software or other services
resulting from that order for a period of three (3) years from the completion of
that delivery order. Each delivery order subject to the Organizational Conflict
of Interest provisions above will specify the limitations required by FAR
Subpart 9.5.
1. Constraints on Awards. An Offeror may propose as prime or
subcontractor on multiple D/SIDDOMS Lots. However, awards are subject to
the following contract exclusions:
a. Lot I awardee(s) is eligible for award(s) for Lot II and LOT
IV or the awardee(s) of Lot I is eligible for award of Lot III
but not the combination of Lot II, Lot III, and Lot IV. The
awardee(s) of Lot II is eligible for award(s) of Lot I and Lot
IV. The awardee(s) of Lot III is eligible for award of Lot I.
but not Lot II and Lot IV. The awardee(s) of Lot IV is also
eligible for Lot I and Lot II but not Lot III.
b. The (OASD/HA) DMIM Program Office must maintain independence
between the integration tasking of Lot II and Lot IV and the
design, development, deployment. operations and maintenance
tasking of Lot III. The purpose of the restriction is to prevent
a bias in the contractor's judgment in suggesting
recommendations or solutions to be implemented under Lot III.
Furthermore, it would provide Lot III awards an unfair
consideration in the issuance of delivery orders.
c. The Contractor shall obtain a written response and approval
from the Contracting Officer when there is any doubt,
whatsoever, as to whether or not the furnishing of services,
equipment or software to the Government as a result of any
tasking performed under this contract represents a conflict of
interest.
NOTE: For the purposes of this clause, the "Contractor", or "Subcontractor", or
"Consultant" means the Contractor, its subsidiaries and affiliates, joint
ventures involving the Contractor, any entity with which the Contractor may
hereafter merge or affiliate with, and other successor in interest or assignee
of the Contractor. Additionally, the reference to (OASD/HA), DMIM shall be
understood to mean any name for this Government organization which shall be
changed during the period specified by this clause as a result of a
re-organization, etc., for which a new name cannot be anticipated at this time.
H - 1
<PAGE> 18
H.3 ROYALTY FREE LICENSE
In consideration of the sum to be paid to the Contractor under this contract,
the contractor hereby agrees and does grant, convey, and reserves to the United
States of America a nonexclusive, irrevocable, world wide, royalty-free license
in all written material, published, printed, presented or used in connection
with the contract, in which the Contractor presently holds a copyright or in the
future shall obtain a copyright therein or in which he has the right to issue
royalty-free licenses thereto.
H.4 CONFORMITY TO LAWS AND REGULATIONS
The Contractor shall be responsible for assuring that employees assigned to this
contract comply, while oversees with the applicable laws and regulations of that
country. In addition, the Contractor shall be responsible for assuring that the
Contractor's employees comply with military rules and regulations when employed
in areas under the jurisdiction of the Commander in Chief of the applicable
theater.
In the event that a contractor's employee is barred from continuing to perform
under this contract for failure to comply with the laws, rules, and regulations
described in the foregoing paragraph, any cost incurred by the contractor as a
result of the removal of the employee or the substitution of a replacement
employee shall not be allowed. The disallowed costs include relocation costs
incurred by the Contractor to furnish a substitute employee for the oversees
assignment unless the Contractor is obliged in accordance with FAR 31-205-35(d)
or under the terms of this contract to refund or credit to the Government the
relocation costs originally incurred to furnish the removed employee for the
oversees assignment.
H.5 COMPUTER PROGRAMMER AND SYSTEMS ANALYSTS
(a) The Department of Labor has determined that Computer Programmers and System
Analysts are not in the learned professions for purposes of an exemption from
the Service Contract Labor Standards Act, 41 U.S.C. Sections as amended. This
determination is published at 29 C.F.R. Section 541-302(h).
(b) Therefore, the Service Contract Act must be included in this contract unless
the Contractor can provide signed certifications and supporting evidence
acceptable to the Contracting Officer that all Computer Programmers and Systems
Analysts (including trainees) whose services will be acquired under this
contract are either:
(i) Engaged in managerial and administrative duties which qualify them
for exemption under 29 C.F.R. 541.1 or 541.2; or
(ii) High salary professional employees as defined in 29 C.F.R. 541-315.
(A) Compensated on a salary or fee basis at a rate of at least
$250 per week exclusive of board, lodging, or other facilities,
and
(B) Whose primary duty consists of the performance of work
requiring knowledge of an advanced type in a field of science or
learning which include work requiring the constant exercise of
discretion and judgment.
H.6 WAGE DETERMINATION STATUS
A Wage Determination has been requested from the Department of Labor(DoL) and
not received as of date of issue of the subject Request For Proposal (RFP).
However, any Wage Determination received will be subsequently incorporated in
the contract award. (See revised Section J, Attachment J-17.)
H - 2
<PAGE> 19
H.7 KEY PERSONNEL
The contractor shall notify the contracting officer prior to making any changes
in key personnel, Key personnel are defined as:
(a) personnel identified in the proposal as key individuals to be
assigned for participation in the performance of the contract;
(b) individuals who are designated as key personnel by agreement of the
Government and the contractor during negotiations.
The contractor must demonstrate that the qualifications of prospective personnel
are equal to, or better than, the qualifications of the personnel being
replaced. Notwithstanding any of the foregoing provisions, key personnel shall
be furnished unless the contractor has demonstrated to the satisfaction of the
contracting officer and the COR that the qualifications of the proposed
substitute personnel are equal to, or belief than, the qualifications of the
personnel being replaced.
H.8 SPECIAL ACCESS AND COMPETITIVE PROCUREMENT
(a) Proprietary Data of Third Parties, In the event the Contractor requests
access to proprietary data of other companies, in order to conduct studies and
research under the contract, it will enter into agreements with the supplying
companies to protect such dam from unauthorized use or disclosure so long as
such data remains proprietary. These agreements shall be made available to the
Government upon request of the Contracting Officer.
(b) Proprietary Data Furnished by the Government. In the event the Contractor is
given access by the Government to proprietary dam of the Government or
proprietary data of third parties possessed by the Government, the Contractor
hereby agrees to protect such data from unauthorized use or disclosure as long
as such data remains proprietary.
H.9 YEAR 2000 COMPLIANT
All Information Technology products provided under this contract shall be "Year
2000 Compliant" as outlined below:
Year 2000 complaint means information technology that accurately processes
date/time data (including, but not limited to, calculating, comparing, and
sequencing) from, into, and between the twentieth and twenty-first centuries,
and the years 1999 and 2000 and leap year calculations. Furthermore, Year 2000
compliant information technology, when used in combination with other
information technology, shall accurately process date/time data if the other
information technology properly exchanges date/time data with it.
H.10 MULTIPLE AWARDS AND ISSUANCE OF DELIVERY ORDERS PROCEDURES
In the event of multiple awards, and as a matter of contract administration, all
contractors awarded a contract under this solicitation will be fairly considered
for the issuance of delivery orders in excess of the minimum stated contract
amount. The decision to place a delivery order among any one of the Contractors
awarded in the contract is within the discretion of the Contracting Officer. The
decision to issue or propose to issue any delivery order under this contract is
not subject to protest. The Contracting Officer may consider any one or all of
the following matters.
(a) The order's requirement and relationship to the unique products or
services of a particular contractor.
(b) The Contractor's favorable customer relation and satisfaction.
H - 3
<PAGE> 20
(c) Past performance on prior delivery orders or on other related
contacts, to include timely performance and quality of products or
services provided.
(d) The interests of economy and efficiency to include logical follow on
(e) Unusual and urgency need's of the Government to include avoidance of
delays.
(f) The capabilities and financial status of the Contractor.
The Contracting Officer may obtain and use information from any source. In
deciding to issue a delivery order, the Contracting Officer may issue the order
without consultation or the opportunity for comments from contractors regarding
the independently obtained information.
H - 4
<PAGE> 21
END OF SECTION H
H - 5
<PAGE> 22
Subcontract No. D/SID2-SC-98-251
ATTACHMENT B
GENERAL PROVISIONS
The general provisions of the Prime Contract are hereby incorporated by
reference in the following pages. As used herein the term "Contractor" shall
mean the Subcontractor and the terms "Government" and the "Contracting Officer"
or equivalent terms shall mean PRC and PRC Contractual Representative hereunder,
respectively, except under those clauses relating to rights to audit or examine
the Subcontractor's books or financial records, in which case the terms the
"Government" and the "Contracting Officer" shall mean the U.S. Government and
the Contracting Officer under the prime contract respectively.
<PAGE> 23
SECTION I
CONTRACT CLAUSES
I.1 52.252-1 SOLICITATION PROVISIONS INCORPORATED BY REFERENCE (JUN
1988)
This solicitation incorporates one or more solicitation provisions by reference,
with the same force and effect as if they were given in full text. Upon request,
the Contracting Officer will make their full text available.
I.2 52.252-2 CLAUSES INCORPORATED BY REFERENCE (JUN 1988)
This contract incorporates one or more clauses by reference, with the same force
and effect as if they were given in full text. Upon request, the Connecting
Officer will make their full text available.
I.3 52.202-1 DEFINITIONS (OCT 1995)
(Reference 2.201)
I.4 52.203-3 GRATUITIES (APR 1984)
(Reference 3.202)
I.5 52.203-5 COVENANT AGAINST CONTINGENT FEES (APR 1984)
(Reference 3.404)
I.6 52.203-7 ANTI-KICKBACK PROCEDURES (JUL 1995)
(Reference 3.502-3)
I.7 52.203-10 PRICE OR FEE ADJUSTMENT FOR ILLEGAL OR IMPROPER
ACTIVITY (JAN 1997)
(Reference 3.104-9(b))
I.8 52.203-12 LIMITATION ON PAYMENTS TO INFLUENCE CERTAIN FEDERAL
TRANSACTIONS (JAN 1990)
(Reference 3.808(b))
I.9 52.204-2 SECURITY REQUIREMENTS (AUG 1996)
(Reference 4.404(a))
I.10 52.204-4 PRINTING/COPYING DOUBLE-SIDED ON RECYCLED PAPER
(JUN 1996)
(Reference 4.304)
I.11 52.215-2 AUDIT AND RECORDS-NEGOTIATION (AUG 1996)
(Reference 15.106-1(b))
I.12 52.215-2 1 REQUIREMENTS FOR COST OR PRICING DATA OR INFORMATION
OTHER THAN COST OR PRICING DATA - MODIFICATIONS (OCT
1997)
(Reference 15.408(m))
I.13 52.215-26 INTEGRITY OF UNIT PRICES (JAN 1997)
(Reference 15.812-2(a))
I.14 52.215-27 TERMINATION OF DEFINED BENEFIT PENSION PLANS(MAR 1996)
(Reference 15.804-8(e))
I.15 52.215-30 FACILITIES CAPITAL COST OF MONEY (SEP 1987)
(Reference 15.904(a))
<PAGE> 24
I.16 52.215-31 WAIVER OF FACILITIES CAPITAL COST OF MONEY (SEP 1987)
(Reference 15.904(b))
I.17 52.215-35 ORDER OF PRECEDENCE (JAN 1986)
(Reference 15.106-3(b))
I.18 52.215-39 REVERSION OR ADJUSTMENT OF PLANS FOR POST RETIREMENT
BENEFITS OTHER THAN PENSIONS (PRB) (MAR 1996)
(Reference 15.804-8(f))
I.19 52.215-40 NOTIFICATION OF OWNERSHIP CHANGES (FEB 1995)
(Reference 15.804-8(g))
I.20 52.216-7 ALLOWABLE COST AND PAYMENT (FEB 1997)
(Reference 16.307(a))
I.21 52.216-8 FIXED FEE (FEB 1997)
(Reference 16.307(b))
I.22 52.217-8 OPTION TO EXTEND SERVICES (AUG 1989)
(Reference 17.208(f))
I.23 52.219-8 UTILIZATION OF SMALL, SMALL DISADVANTAGED AND
WOMEN-OWNED SMALL BUSINESS CONCERNS (OCT 1995)
(Reference 19.708(a))
I.24 52.219-9 SMALL, SMALL DISADVANTAGED AND WOMEN-OWNED SMALL
BUSINESS SUBCONTRACTING PLAN
I.25 52.219-14 LIMITATIONS ON SUBCONTRACTING (DEC 1996)
(Reference 19.508(e))
I.26 52.219-16 LIQUIDATED DAMAGES - SUBCONTRACTING PLANS
(Reference 19.708(b)(2))
I.27 52.222-1 NOTICE TO THE GOVERNMENT OF LABOR DISPUTES (FEB 1997)
(Reference 22.103-5(a))
I.28 52.222-2 PAYMENT FOR OVERTIME PREMIUMS (JUL 1990)
(Reference 22.103-5(b))
I.29 52.222-3 CONVICT LABOR (AUG 1996)
(Reference 22.202)
I.30 52.222-4 CONTRACT WORK HOURS AND SAFETY STANDARDS ACT - OVERTIME
COMPENSATION (JUL 1995)
(Reference 22.305)
I.31 52.222-26 EQUAL OPPORTUNITY (APR 1984)
(Reference 22.810(c))
I.32 52.222-28 EQUAL OPPORTUNITY PREAWARD CLEARANCE OF SUBCONTRACTS
(APR 1984)
(Reference 22.810(g))
<PAGE> 25
I.33 52.222-29 NOTIFICATION OF VISA DENIAL (APR 1984)
(Reference 22.810(h))
I.34 52.222-35 AFFIRMATIVE ACTION FOR SPECIAL DISABLED AND VIETNAM ERA
VETERANS (APR 1984)
(Reference 22.1308)
I.35 52.222-36 AFFIRMATIVE ACTION FOR HANDICAPPED WORKERS (APR 1984)
(Reference 22.1408)
I.36 52.222-37 EMPLOYMENT REPORTS ON SPECIAL DISABLED VETERANS AND
VETERANS OF THE VIETNAM ERA (JAN 1988)
(Reference 22.1308(b))
I.37 52.222-41 SERVICE CONTRACT ACT OF 1965, AS AMENDED (MAY 1989)
(Reference 22.1006(a))
I.38 52.222-47 SERVICE CONTRACT ACT (SCA) MINIMUM WAGES AND FRINGE
BENEFITS (MAY 1989)
(Reference 22.1006(d))
I.39 52.223-2 CLEAN AIR AND WATER (APR 1984)
(Reference 23.105(b))
I.40 52.223-6 DRUG-FREE WORKPLACE (JAN 1997)
(Reference 23.505(b))
I.41 52.224-1 PRIVACY ACT NOTIFICATION (APR 1984)
(Reference 24.104(a))
I.42 52.224-2 PRIVACY ACT (APR 1984)
(Reference 24.104(b))
I.43 52.225- 11 RESTRICTIONS ON CERTAIN FOREIGN PURCHASES (OCT 1996)
(Reference 25.702)
I.44 52.226-1 UTILIZATION OF INDIAN ORGANIZATION AND INDIAN-OWNED
ECONOMIC ENTERPRISES (SEP 1996)
(Reference 26.104)
I.45 52.227-1 AUTHORIZATION AND CONSENT (JUL 1995)
(Reference 27.201-2(a))
I.46 52.227-2 NOTICE AND ASSISTANCE REGARDING PATENT AND COPYRIGHT
INFRINGEMENT (AUG 1996)
(Reference 27.202-2)
I.47 52.227-3 PATENT INDEMNITY (APR 1984)
(Reference 27.203-1 (b))
I.48 52.228-7 INSURANCE-LIABILITY TO THIRD PERSONS (MAR 1996)
(Reference 28.311-1)
I.49 52.230-3 DISCLOSURE AND CONSISTENCY OF COST ACCOUNTING PRACTICES
(APR 1996)
<PAGE> 26
(Reference 30.201-4(b))
I.50 52.220-4 CONSISTENCY IN COST ACCOUNTING PRACTICES (AUG 1992)
(Reference 30.201-4(c))
I.51 52.232-1 PAYMENTS (APR 1984)
(Reference 32.111(a)(1))
I.52 52.232-9 LIMITATION ON WITHHOLDING OF PAYMENTS (APR 1984)
(Reference 32.111(c)(2))
I.53 52.232-17 INTEREST (JUN 1996)
(Reference 32.617(a)&( ))
I.54 52.232-22 LIMITATION OF FUNDS (APR 1984)
(Reference 32.705-2(c))
I.55 52.232-23 ASSIGNMENT OF CLAIMS (JAN 1986)
(Reference 32.806(a)(1))
I.56 52.232-25 PROMPT PAYMENT (MAR 1994)
(Reference 32.908(c))
I.61 52.237-2 PROTECTION OF GOVERNMENT BUILDINGS, EQUIPMENT AND
VEGETATION (APR 1984)
(Reference 32.110(b))
I.62 52.237-3 CONTINUITY OF SERVICE (JAN 1991)
(Reference 32.110(c))
I.63 52.237-7 INDEMNIFICATION AND MEDICAL LIABILITY INSURANCE (JAN
1997)
(Reference 37.403)
I.64 52.242-1 NOTICE OF INTENT TO DISALLOW COSTS (APR 1984)
(Reference 42.802)
I.65 52.243-1 CHANGES-FIXED-PRICE (AUG 1987)
(Reference 43.205(a)(1))
I.66 52.243-2 CHANGES-COST-REIMBURSEMENT (AUG 1987)
(Reference 43.205(b)(1)) Change references to 30 days to
15 days
I.67 52.243-2 II CHANGES-COST-REIMBURSEMENT (AUG 1987) - ALTERNATE II
(APR 1984) Change references to 30 days to 15 days
<PAGE> 27
(Reference 43.205(b)(2))
I.68 52.243-7 NOTIFICATION OF CHANGES (APR 1984)
(Reference 43.107)
I.69 52.244-1 SUBCONTRACTS (FIXED-PRICE CONTRACTS) (FEB 1995)
(Reference 44.204(a))
I.70 52.244-2 SUBCONTRACTS (COST-REIMBURSEMENT AND LETTER CONTRACTS)
(FEB 1997)
(Reference 44.204(b))
I.71 52.244-5 COMPETITION IN SUBCONTRACTING (DEC 1996)
(Reference 44.204(e))
I.72 52.245-1 PROPERTY RECORDS (APR 1984)
(Reference 45.106(a))
I.73 52.245-2 GOVERNMENT PROPERTY (FIXED-PRICE CONTRACTS) (DEC 1989)
(Reference 45.106(b)(1))
I.74 52.245-5 GOVERNMENT PROPERTY (COST-REIMBURSEMENT, TIME AND
MATERIAL OR LABOR-HOUR CONTRACTS) (JAN 1986)
(Reference 45.106(f)(1))
I.75 52.245-19 GOVERNMENT PROPERTY FURNISHED "AS IS" (APR 1984)
(Reference 45.308-2)
I.76 52.246-25 LIMITATION OF LIABILITY--SERVICE (FEB 1997)
(Reference 46.805)
I.77 52.247-1 COMMERCIAL BILL OF LADING NOTATIONS (APR 1984)
(Reference 47.104-4)
I.78 52.247-63 PREFERENCE FOR U.S.-FLAG AIR CARRIERS (JAN 1997)
(Reference 47.405)
I.79 52.249-2 TERMINATION FOR CONVENIENCE OF THE GOVERNMENT
FIXED-PRICE) (SEP 1996)
(Reference 49.502(b)(1)) Para (c) change 120 days to
90 days Para (e) change 1 year to 90 days
I.80 52.249-6 TERMINATION (COST-REIMBURSEMENT) (SEP 1996)
(Reference 49.503(a)(1)) Para (f) change 1 year
to 90 days
I.81 52.249-8 DEFAULT (FIXED-PRICE SUPPLY AND SERVICE) (APR 1984)
(Reference 49.504(a)(1))
I.82 52.249-14 EXCUSABLE DELAYS (APR 1984)
(Reference 49.505(d))
I.83 52.250-1 INDEMNIFICATION UNDER PUBLIC LAW 85-804 (APR 1984)
(Reference 50.403-3)
I.84 52.251-1 GOVERNMENT SUPPLY SOURCES (APR 1984)
(Reference 51.107)
I.85 52.253-1 COMPUTER GENERATED FORMS (JAN 1991)
<PAGE> 28
(Reference 53.111)
I.86 252.203-7001 SPECIAL PROHIBITION ON EMPLOYMENT (NOV 1995)
(Reference 203.570-5)
I.87 252.205-7000 PROVISION OF INFORMATION TO COOPERATIVE AGREEMENT
HOLDERS (DEC 1991)
(Reference 205.470-2)
I.88 252.209-7000 ACQUISITION FROM SUBCONTRACTORS SUBJECT TO ON-SITE
INSPECTION UNDER THE IMMEDIATE-RANGE NUCLEAR FORCES
(INF) TREATY (NOV 1995)
(Reference 209.103-70)
I.89 252.215-7000 PRICING ADJUSTMENTS (DEC 1991)
(Reference 215.804-8(1))
I.90 252.215-7002 COST ESTIMATING SYSTEM REQUIREMENTS (DEC 1991)
(Reference 215.811-70(h))
I.91 252.219-7003 SMALL, SMALL DISADVANTAGED AND WOMEN-OWNED SMALL
BUSINESS SUBCONTRACTING PLAN (DoD CONTRACTS) (APR 1996)
(Reference 219.708)
I.92 252.223-7004 DRUG-FREE WORK FORCE (SEP 1988)
(Reference 223.570-4)
I.93 252.227-7013 RIGHTS IN TECHNICAL DATA--NONCOMMERCIAL ITEMS (NOV 1995)
(Reference 227.7103-6(a))
I.94 252.227-7015 TECHNICAL DATA--COMMERCIAL ITEMS (NOV 1995)
(Reference 227.7102-3)
I.95 252.2.227-7026 DEFERRED DELIVERY OF TECHNICAL DATA OR COMPUTER SOFTWARE
(APR 1988)
(Reference 227.7103-8(a))
I.96 252.227-7027 DEFERRED ORDERING OF TECHNICAL DATA OR COMPUTER SOFTWARE
(APR 1988)
(Reference 227.7103-8(b))
I.97 252.227-7030 TECHNICAL DATA-WITHHOLDING OF PAYMENT (OCT 1988)
(Reference 227.7103-6(f))
I.98 252.227-7037 VALIDATION OF RESTRICTIVE MARKINGS ON TECHNICAL DATA
(NOV 1995)
(Reference 227.7102-3(c))
I.99 252.231-7000 SUPPLEMENTAL COST PRINCIPLES (DEC 1991)
(Reference 231.100-70)
I.100 252.237-7019 IDENTIFICATION OF UNCOMPENSATED OVERTIME (APR 1992)
(Reference 237.170-3)
I.101 252.242-7004 MATERIAL MANAGEMENT AND ACCOUNTING SYSTEM (SEP 1996)
(Reference 242.7206)
<PAGE> 29
I.102 252.245-7001 REPORTS OF GOVERNMENT PROPERTY (MAY 1994)
(Reference 245.505-14(a))
I.103 52.203-6 RESTRICTIONS ON SUBCONTRACTOR SALES TO THE GOVERNMENT
(JUL 1995)
(a) Except as provided in (b) below, the Contractor shall not enter into
any agreement with an actual or prospective subcontractor, nor otherwise
act in any manner, which has or may have the effect of restricting sales
by such subcontractors directly to the Government of any item or process
(including computer software) made or furnished by the subcontractor
under this contract or under any follow-on production contract.
(b) The prohibition in (a) above does not preclude the Contractor from
asserting rights that are otherwise authorized by law or regulation.
(c) The Contractor agrees to incorporate the substance of this clause,
including this paragraph (c), in all subcontracts under this contract
which exceeds $100,000.
I.104 52.209-6 PROTECTING THE GOVERNMENTS INTEREST WHEN SUBCONTRACTING
WITH CONTRACTORS DEBARRED, SUSPENDED, OR PROPOSED FOR
DEBARMENT (JUL 1995)
(a) The Government suspends or debars Contractors to protect the
Government's interest. The Contractor shall not enter into any
subcontract in excess of $25,000 with a Contractor that is debarred,
suspended, or proposed for debarment unless there is a compelling reason
to do so.
(b) The Contractor shall require each proposed first-tier subcontractor
whose subcontract will exceed $25,000, to disclose to the Contractor, in
writing, whether as of the time of award of the subcontract the
subcontractor, or its principals, is or is not debarred, suspended, or
proposed for debarment by the Federal Government.
(c) A corporate officer or a designee of the Contractor shall notify the
Contracting Officer, in writing, before entering into a subcontract with
a party that is debarred, suspended, or proposed for debarment (see FAR
9.404 for information on the List of Parties Excluded from Federal
Procurement and Nonprocurement Programs). The notice must include the
following:.
(1) The name of the subcontractor.
(2) The Contractor's knowledge of the reasons for the
subcontractor being on the List of Parties Excluded from Federal
Procurement and Nonprocurement Programs.
(3) The compelling reason(s) for doing business with the
subcontractor notwithstanding its inclusion on the List of
Parties Excluded from Federal Procurement and Nonprocurement
Programs.
(4) The systems and procedures the Contractor has established to
ensure that it is fully protecting the Government's interests
when dealing with such subcontractor in view of the specific
basis for the party's debarment, suspension or proposed
debarment.
<PAGE> 30
I.108 52.222-42 STATEMENT OF EQUIVALENT RATES FOR FEDERAL HIRES (MAY
1989)
In compliance with the Service Contract Act of 1965, as amended, and the
regulations of the Secretary of Labor (29 CFR Part 4), this clause identifies
the classes of service employees expected to be employed under the contract and
states the wages and fringe benefits payable to each if they were employed by
the contracting agency subject to the provisions of 5 U.S.C. 5341 or 5332.
THIS STATEMENT IS FOR INFORMATION ONLY: IT IS NOT A WAGE DETERMINATION
I.109 52.232.18 AVAILABILITY OF FUNDS (APR 1984)
Funds are not presently available for this contract. The Government's obligation
under this contract is contingent upon the availability of appropriated funds
from which payment for contract purposes can be made. No legal liability on the
part of the Government for any payment may arise until funds are made available
to the Contracting Officer for this contract and until the Contractor receives
notice of such availability, to be confirmed in writing by the Contracting
Officer.
I.110 52.232-19 AVAILABILITY OF FUNDS FOR THE NEXT FISCAL YEAR (APR
1984)
Funds are not presently available for performance under this contract beyond 30
September 1998. The Government's obligation for performance of this contract
beyond that date is contingent upon the availability of appropriated funds from
which payment for contract purposes can be made. No legal liability on the part
of the Government for any payment may arise for performance under this contract
beyond September 1998, until funds are made available to the Contracting Officer
for performance and until the Contractor receives notice of availability to be
confirmed in writing by the Contracting Officer.
I.111 52.242-13 BANKRUPTCY (JUL 1995)
In the event the Contractor enters into proceedings rotating to bankruptcy,
whether voluntary or involuntary, the Contractor agrees to furnish, by certified
mail or electronic commerce method authorized by the contract, written
notification of the bankruptcy to the Contracting Officer responsible for
administering the contract. This notification shall be furnished within five
days of the initiation of the proceedings relating to bankruptcy filing. This
notification shall include the date on which the bankruptcy petition was filed,
the identity of the court in which the bankruptcy petition was filed, and a
listing of Government contract numbers and contracting offices for all
Government contracts against which final payment has act been made. This
obligation remains in effect until final payment under this
I.112 52.203-7002 DISPLAY OF DoD HOTLINE POSTER (DEC 1991)
(a) The Contractor shall display prominently in common work areas within
business segments performing work under Department of Defense (DoD) contracts.
DoD HOTLINE Posters prepared by the DoD Office of the Inspector General
(b) DoD HOTLINE Posters may be obtained from the DoD Inspector General. ATTN:
Defense HOTLINE 400 Army Navy Drive, Washington, DC 22202-2884.
<PAGE> 31
(c) The Contractor need not comply with paragraph (a) of this clause if it has
established a mechanism, such as a HOTLINE, by which employees may report
suspected instances of improper conduct, and instructions that encourage
employees to make such reports.
(End of Clause)
I.114 52.232.20 LIMITATION OF COSTS
I.115 52.232.33 MANDATARY INFORMATION FOR ELECTRONIC FUNDS TRANSFER
PAYMENT
I.116 52.232.34 OPTIONAL INFORMATION FOR ELECTRONIC FUNDS TRANSFER
PAYMENT
I.117 252.277-7014 RIGHTS IN NON COMMERCIAL COMPUTER SOFTWARE AND NON
COMMERCIAL COMPUTER SOFTWARE DOCUMENTATION
I.118 52.215-1 INSTRUCTIONS TO OFFERORS--COMPETITIVE ACQUISITION (OCT
1997)(REFERENCE 15.209(a))
END OF SECTION I
<PAGE> 32
Subcontract No. D/SID2-SC-98-251
ATTACHMENT C
PERSONNEL QUALIFICATIONS
<PAGE> 33
c. Contractor personnel performing work on unclassified automated
information systems must be assigned to one of three position sensitivity
designations in accordance with the requirements in Section J, Security
Requirements, before commencing work on D/SIDDOMS II. This requirement applies
to all labor categories.
d. Each Labor Category is assigned an identifying Number (column one)
and a Title (column two). These are the numbers and titles used in the
Government's estimate for the anticipated level of effort (Section J, Level of
Effort Estimate).
<TABLE>
<CAPTION>
Number Title
- ------ -----
<S> <C>
2. Task Manager
3. Systems Engineer - Senior
4. Systems Engineer - Middle
5. Systems Engineer - Junior
6. Open Systems Engineer - Principal
7. Open Systems Engineer - Senior
8. Open Systems Engineer - Middle
9. Open Systems Engineer - Junior
10. Telecommunications Electronics Engineer - Senior
11. Telecommunications Electronics Engineer - Middle
12. Telecommunications Electronics Engineer - Junior
13. Information Engineer - Principal
14. Information Engineer - Senior
15. Information Engineer - Middle
16. Information Engineer - Junior
17. Functional Area Analyst - Senior
18. Functional Area Analyst - Middle
19. Functional Area Analyst - Junior
20. Computer Scientists/Systems Analyst - Senior
21. Computer Scientists/Systems Analyst - Middle
22. Computer Scientists/Systems Analyst - Junior
23. Computer Security Systems Engineer - Senior
24. Computer Security Systems Engineer - Middle
25. Computer Security Systems Engineer - Junior
26. Computer Security Systems Engineer - Technician
27. Software Engineer - Senior
28. Software Engineer - Middle
29. Software Engineer - Junior
30. System Programmer - Senior
31. System Programmer - Middle
32. System Programmer - Junior
33. General Scientific Professional - Senior
34. General Scientific Professional - Middle
35. General Scientific Professional - Junior
36. General Management Professional - Senior
37. General Management Professional - Middle
38. General Management Professional - Junior
39. Technician
40. Administrative Assistant - High Skill
41. Administrative Assistant - Medium Skill
42. Administrative Assistant - Low Skill
43. Database Administrator
44. Database System Operator - Senior
45. Database System Operator - Junior
</TABLE>
J.1 - 19
<PAGE> 34
<TABLE>
<CAPTION>
Number Title
- ------ -----
<S> <C>
46. Security Professional/Facility Security Officer
47. Operations Support Assistant
48. Operations Support Coordinator
49. Business Process Engineer - Principal
50. Business Process Engineer - Senior
51. Business Process Engineer - Middle
52. Cost Analyst
53. Electronic Meeting Technographer
54. Training Specialist - Senior
55. Training Specialist - Junior
56. Help Desk Manager
57. Help Desk Specialist
58. Installation Technician - Senior
59. Installation Technician - Junior
60. System Administrator
61. System Operator
62. Network Manager
63. Network Technician
64. Repair Technician - Senior
65. Repair Technician - Junior
66. Quality Assurance Manager
67. Quality Assurance Analyst
</TABLE>
7.2 Labor Category Descriptions
The Labor Category descriptions describe the general skills, knowledge
and/or tasks that a person may be required to have or perform. When alternate
qualifications are allowed for a labor category, the degree fields and
experience referred to are the degree fields or subjects and experience in the
general description or primary qualification for that labor category. For
example, all widget operators may be required to be able to install, operate and
maintain blue, black and green widgets with at least one year of specialized
experience operating widgets connected to a local area network. A senior widget
operator is required to have at least an associate degree in widget operation,
mathematics. computer science or a related field with at Inert four years of
experience in the field and one year of specialized experience. If the alternate
qualification is a bachelor's degree with two years experience and one year of
specialized experience, then the bachelors degree must also be in widget
operation, mathematics, computer science, or a related field and the two years
experience must be in the area of installing, operating and maintaining blue,
black and green widgets with the specialized experience being in the operation
of widgets connected to a local network.
J.1 - 20
<PAGE> 35
7.2.2 Task Manager
Category 2, Task Manager
Description: Serves as the contractor's Task Manager, and shall be the
contractor's authorized point of contact with the government Task Manager. Under
the guidance of the Program Manager, responsible for the overall management of a
specific Delivery Order, or, in the case of particularly complex Delivery
Orders, responsible for management of a Delivery Order Task under the guidance
of the Delivery Order Task Manager. Interfaces with government management
personnel, contract managers, and customer agency representatives. Responsible
for formulating and enforcing work standards, assigning contractor schedules,
reviewing work quality, communicating policies, purposes, and goals of the
organization to subordinates. The Task Manager shall also have demonstrated
capability in the overall management of complex tasks, and strong team building
skills.
Qualifications: Must possess a bachelor's degree in a field applicable to this
position, i.e., Computer Science, Information Systems, Engineering, Business, or
other related scientific or technical discipline. Ten years of progressively
more responsible experience is required in both information systems design and
management. Alternative qualifications include (a) a master's degree may be
substituted for two years of this experience, or (b) no degree is required with
fifteen years of progressively responsible experience.
7.2.3 Systems Engineers
Description: Performs professional engineering assignments in support of C41
systems engineering efforts in one or more of the following disciplines:
communications engineering, electronic engineering, communications security,
network analysis, ECM/ECCM, interoperability analysis, system standards,
military operations (ground, sea, and air), program analysis, program planning,
cost analysis. Qualifications:
Category 3, Systems Engineer- Senior: Must possess an advanced degree in
electrical or electronic engineering, computer science, computer engineering or
system engineering related area with at least eight years experience in that
field. Five years of this work experience must be directly related to the above
description. Alternate qualifications include (a) a Ph.D. may be substituted for
two years related experience or (b) a bachelor's degree with at least 10 years
experience.
Category 4, Systems Engineer - Middle: Must possess a bachelor's degree in
electrical or electronic engineering, computer science, computer engineering or
system engineering related area with at least 5 years experience in that field.
Two years of this work experience must be directly related to the above
description. Alternate qualifications include (a) a master's degree may be
substituted for one year of related experience, or(b) an associate degree with
at least ten years experience directly related to the above description.
Category 5, Systems Engineer - Junior: Must possess a bachelor's degree in
electrical or electronic engineering, computer science, computer engineering or
system engineering related area with at least I year of experience in that
field. Alternate qualification: an associate degree in electrical or electronic
engineering with at least eight years experience of which at least four years
are related.
J.1 - 21
<PAGE> 36
7.2.4 Open Systems Engineers
Description: Applies software, hardware, and standards information technology
skills in the analysis, specification, development, integration and acquisition
of open systems for DoD information processing (IP) applications. Familiar with
standards-based open systems architectures, reference models, and profiles of
standards (such as the IEEE POSIX Open Systems Environment (OSE) reference
model) as they apply to the implementation and specification of IP solutions on
the application platform, across the application program interface (API), and to
the external environment/software application. Performs professional engineering
assignments in support of C4I systems engineering efforts in one or more of the
following disciplines: communications engineering, communications security,
network analysis, command and control mission analysis, interoperability
analysis, system standards, military operations (ground, sea, and air), program
analysis, program planning, cost analysis. Knowledgeable of COTS products and
methods that can be acquired to provide interoperable, portable, and scaleable
information technology solutions. Performs analysis and validation of reusable
software/hardware components to ensure the integration of these components into
interoperable IP designs. Designs and maintains message format and symbology
databases which provide real time updates to fielded systems. Experienced with
and familiar with current research and/or standards in at least two of the
following technology/standards areas: POSIX, GOSIP, GUI, Ada/4GL, CASE, object
oriented technologies, DBMS, SQL, IRDS (repository), ODA/ODIF, CALS/EDI, DCE,
simulation and modeling, automated systems security, software metrics/system
effectiveness measures/tools, multimedia, on-line transaction processing (OLTP),
and distributed computing.
Qualifications:
Category 6, Principal Open Systems Engineer: Must possess a Ph.D. in a
scientific or information systems field and at least 10 years experience in the
information systems/software engineering/system engineering field. Must be
experienced with and familiar with current research and/or standards in at least
three of the following technology, standards areas: POSIX, GOSIP, GUI, Ada/4GL,
CASE, object oriented technologies, OPENbus, DBMS, SQL, IRDS (repository),
ODA/ODIF, CALS/EDI, DCE, simulation and modeling, automated systems security,
software metrics/system effectiveness measures/tools, multimedia, OLTP,
distributed computing, and process/data/BCA modeling methods and tools.
Alternate qualification: advanced degree in above fields and at least 12 years
experience in the information systems field.
Category 7, Open Systems Engineer - Senior: Must possess an advanced degree in a
scientific field or information systems/system engineering related area and at
least eight years experience in the information systems/software engineering
field. Must be familiar with current research and/or standards in at least two
of the following technology/standards areas: POSIX, GOSIP, GUI, Ada,/4GL, CASE,
object oriented technologies, OPENbus, DBMS, SQL, IRDS (repository), ODA/ODIF,
CALS/EDI, simulation and modeling, automated systems security, software
metrics/system effectiveness measures/tools, multimedia, OLTP, distributed
computing, and process/data/BCA modeling methods and tools. Alternate
qualifications include (a) a bachelor's degree in a related field and at least
l0 years experience in the information systems/software engineering field, or
(b) a Ph.D. may be substituted for two years experience.
Category 8, Open Systems Engineer - Middle: Must possess a bachelor's degree in
a scientific field or information systems/system engineering related area and at
least 5 years experience in the information systems/software engineering field,
with participation in an information technology standards working group desired.
Must be familiar with current research and/or standards in at least two of the
following technology/standards areas: POSIX, GOSIP, GUI, Ada/4GL, CASE. object
oriented technologies, OPENbus, DBMS, SQL, IRDS (repository), ODA/ODIF,
CALS/EDI, DCD, simulation and modeling, automated systems security, software
metrics/system effectiveness measure/tools, multimedia, OLTP, distributed
computing, and process/data/BCA modeling methods and tools. Alternate
qualifications include (a) a master's degree maybe substituted for one year of
related experience, or (b) an associate degree with at least eight years
experience directly related to the above description.
Category 9, Open Systems Engineer - Junior: Must possess a bachelor's degree in
a scientific field or information systems/system engineering related area and at
least one year of experience in the development or maintenance of
standards-based open systems applications, and/or integrated hardware/software
information systems. Alternate qualification: an associate degree with at least
eight years experience of which at least four years are related.
J.1 - 22
<PAGE> 37
7.2.5 Telecommunications Electronics Engineers
Description: Performs professional engineering assignments in support of
telecommunications engineering efforts in one or more of the following
disciplines: satellite communications, transmission systems, fiber optic
communications, switched networks, network management, or control systems.
Qualifications:
Category 10, Telecommunications Electronics Engineer- Senior:. Must possess an
advanced degree in electrical, electronics, or systems engineering with at least
eight years experience in that field. Five years of this work experience must be
directly related to the above description. Alternate qualifications include (a)
a bachelor's degree in a related field and at least 10 years experience in the
information systems/software engineering field, or (b) a Ph.D. may be
substituted for two years experience.
Category 11, Telecommunications Electronics Engineer - Middle: Must possess a
bachelor's degree in electrical, electronics, or systems engineering with at
least five years experience in that field. Two years of this work experience
must be directly related to the above description. Alternate qualifications
include (a) a master's degree may be substituted for one year of related
experience, or (b) a Ph.D. may be substituted for two years experience.
Category 12, Telecommunications Electronics Engineer - Junior: Must possess a
bachelor's degree in electrical, electronics, or systems engineering with at
least one year of experience in that field. Alternate qualification: an
associate degree in electrical, electronics or systems engineering with at least
eight years experience of which at least four years are related.
7.2.6 Information Engineers
Description: Applies an organization-wide set of disciplines for the planning,
analysis, design, and construction of information systems on an enterprise-wide
basis or across a major sector of the enterprise. Performs enterprise strategic
systems planning, enterprise information planning and business area analysis.
Performs process and data modeling in support of the planning and analysis
efforts using both manual and automated (Integrated Computer-Aided Software
Engineering (ICASE)) tools. Develops and applies organization-wide information
models for use in designing and building integrated, shared software and
database management systems. Assist in establishing standards for information
systems procedures. Applies reverse engineering and reengineering disciplines to
develop migration strategies and planning documents. Experience is also required
in information systems development, functional and data requirements analysis,
systems analysis and design, programming. program design and documentation
preparation.
Qualifications:
Category 13, Principal Information Engineer: Must possess a Ph.D. in Information
Systems. Information Technology, Computer Science or similar technical
discipline and at least 10 years experience in the information systems field.
Alternate qualification: advanced degree in above fields and at least 12 years
experience in the information systems field.
Category 14, Information Engineer - Senior: Must possess an advanced degree in
either a scientific field or an MBA and at least eight years experience in the
information systems field. Alternate qualifications include (a) a Ph.D. may be
substituted for two years experience, or (b) or a bachelors degree, in a related
field, and at least 10 years experience in the information systems field.
Category 15, Information Engineer - Middle: Must possess a bachelor's degree in
a scientific field or Business Administration and at least five years experience
in the information systems field. Alternate qualifications include (a) a
master's degree may be substituted for one years experience, or (b) an
associates degree in a related field with minimum of eight years of experience
in the information systems field.
Category 16, Information Engineer- Junior: Must possess a bachelor's degree in a
scientific field or Business Administration and at least 0-5 years experience in
the information systems field. Alternate qualifications include (a)
J.1 - 23
<PAGE> 38
an associates degree in a related field with minimum of 3 years of experience in
the information systems field, or (b) no degree is required with a minimum of
six years of experience in the information systems field.
7.2.7 Functional Area Analysts
Description: Applies analytical skills to support process improvement, studies
and analysis projects. Typical duties include analysis, planning, establishment
of requirements, functional modeling, development of procedures, development of
functional architectures, and other related management and technical duties.
Requires expertise in specialty areas. Experience in or related to military
medicine or general health care is highly desirable.
Qualifications:
Category 17, Functional Area Analyst - Senior: Must possess an advanced degree
and at least eight years experience in the functional areas of Human Resources.
Medical, Reserve Components. Finance, Procurement, Material Management, or C3I.
Advanced professional military education in one of the primary functional areas
above is highly desirable. Alternate qualifications include (a) a Ph.D. degree
may be substituted for two years experience, or (b) a bachelors degree and at
least 10 years functional experience
Category 18, Functional Area Analyst - Middle: Must possess a bachelor's degree
and at least five years experience in the functional areas of Human Resources,
Medical, Reserve Components, Finance, Procurement, Material Management, or C3I.
Advanced professional military education in one of the primary functional areas
above is highly desirable. Alternate qualifications include (a) an advanced
degree may be substituted for one year of experience, or (b) an associate degree
(or having equivalent military or other professional educational credits) with a
minimum of 10 years of functional experience.
Category 19, Functional Area Analyst - Junior: Must possess a bachelor's degree
and at least 0-5 years experience in the functional areas of Human Resources,
Medical, Reserve Components. Finance, Procurement, Material Management, or C3I.
Alternate qualification: an associate degree (or having equivalent military or
other professional educational credits) with a minimum of three years of
functional experience.
7.2.8 Computer Scientists/Systems Analysts
Description: Performs professional assignments in the general areas of computer
hardware and software such as: analysis of computer systems, protocols, computer
operations, interfaces. programming and database structuring and management,
evaluation of computer test plans and procedures. Translates user automation
requirements into hardware. software, and communications requirements and
solutions. Work may require expertise in the following
1. 4GL, object oriented, client server technology (e.g., Visual Basic, C++,
etc.)
2. Database technology (e.g., SQL, ODBMS, RDBMS (e.g., INFORMIX. MS ACCESS,
ODBC))
3. Network Operating Systems (WFW 3.11, Windows 95, Windows NT, UNIX,
NOVELL, Solaris, etc.)
4. Electronic publishing tools, techniques. and environments (Folio Views,
MS WOSA, etc.)
5. Internet Web technology
6. Mainframe Operating Systems (AMDAHL/IBM MVS)
7. Mainframe 3GL, 4GL Technology (COBOL/COBOL II, ADS/0)
8. Mainframe Database Technology (CA IDMS)
Qualifications:
J.1 - 24
<PAGE> 39
Category 20, Computer Scientist/Systems Analyst - Senior: Must possess an
advanced degree in Computer Science, Information Systems, or other directly
related discipline, with at least eight years experience in the areas of
expertise identified above. Alternate qualifications include (a) a Ph.D. may be
substituted for two years experience, or (b) a bachelors degree, in a related
field, and at least 10 years experience in the information systems field.
Category 21, Computer Scientist/Systems Analyst - Middle: Must possess a
bachelors' degree in Computer Science, Information Systems or other directly
related discipline, with at least five years experience in the areas of
expertise identified above. Alternate qualifications include (a) a master's
degree maybe substituted for one year of related experience, or (b)an associate
degree with at least eight years of related experience.
Category 22, Computer Scientist/Systems Analyst - Junior: Must possess a
bachelor's degree in Computer Science, Information Systems, or other directly
related discipline, with at least one year of experience in the areas of
expertise identified above. Alternate qualifications include: (a) an associate
degree with at least eight years experience of which at least four years are
related or, (b) no degree with at least ten years experience directly related to
the above description..
7.2.9 Computer Security Systems Engineers
Description: Analyzes and defines security requirements for Multilevel Security
(MLS) issues. Designs, develops, engineers, and implements solutions to MLS
requirements. Gathers, organizes technical information about an organization's
mission goals and needs, existing security products, and ongoing programs in the
MLS arena. This professional level contains engineers, system designers,
installation planners and technicians. Supervisory experience over Information
System Security Engineers or equivalent staff category. Experience in Secure LAN
and Secure Client/Server distributor processing environments, Experience in
mainframe computer systems to include CA Top Secret and IDMS/IDD. Experience in
two or more of the following disciplines: Security Requirements Analysis,
Testing, Certification and Accreditation. Experience in DoD 5200.28-STD, DoD
Trusted Computer System Evaluation Criteria (Orange Book), and the supplemental
NSA Guidelines (The Rainbow Series), Progressively more responsible experience
in Information Systems Security Engineering or related Engineering/Computer
Science activities.
Qualifications:
Category 23, Computer Security Systems Engineer - Senior: Must have a Ph.D. in
Electrical Engineering, Information Science, Information Systems, Computer
Science, Physics, Math, or other Technical/Scientific discipline and at least
eight years of directly related experience in defining computer security
requirements for high level applications, evaluation of approved security
product capabilities, and developing solutions to MLS problems. Alternate
qualifications include (a) an advanced degree with at least 10 years experience,
or (b) a bachelors degree, in a related field, and at least 12 years experience
in the information systems field.
Category 24, Computer Security Systems - Middle: Must have an Advanced degree in
Electrical Engineering, Information Science, Information Systems, Computer
Science. Physics, Math, or other Technical/Scientific discipline and at least
six years of directly related experience in designing, engineering, and
implementing solutions to computer security requirements. Alternate
qualifications include (a) a Ph.D. may be substituted for two years experience,
or (b) a bachelors degree. in a related field, and at least 10 years experience
in the computer security field.
Category 25, Computer Security Systems Engineer - Junior: Must have a bachelor's
degree in Electrical Engineering, Information Science, Information Systems,
Computer Science, Physics, Math, or other Technical/Scientific discipline and at
least two years of directly related experience in designing, engineering, and
implementing solutions to computer security requirements. Alternate
qualifications include: (a) an advanced degree may be substituted for two years
experience or (b) an associate degree with at least six years of related
experience.
Category 26, Computer Security Systems Engineer - Technician; Must have an
Associates degree in Engineering, Computer Science, or Information Science with
at least five years in systems analysis, design, and implementation and at least
3 years of directly related experience in installing, maintaining, or operating
MLS systems. Must be familiar with the "Orange Book" and the "Rainbow" series of
standards. Must be knowledgeable of MLS products
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such as Verdix B-2 LAN, SunOS MLS, AT&T System V/MLS, HFSI XTS-200, CMW, Gemini,
and Trusted Xenix. Alternate qualifications include (a) a bachelor's degree may
be substituted for two years experience or (b) no degree with at least eight
years experience directly related to the above description.
7.2.10 Software Engineers
Description: Manages and/or performs the validation and certification of
reusable software components and other software development artifacts for entry
into the DoD Software Reuse Repository. Manages the implementation of and
designs software tools and subsystems to support software reuse and domain
analysis. Manages software development and support using formal specifications,
data flow diagrams or other commonly accepted design techniques, and computer
aided software engineering (CASE) tools. Estimates software development cost and
schedule, overseeing software configuration management, interpreting software
requirements and design specifications, managing/performing independent
verification and validation, managing/performing data integrity assurance,
managing integration and software test activities.
Must have experience managing or performing software engineering activities.
Work may require expertise in the following areas:
1. 3GL and 4GL programming languages (e.g., Ads, C+, C++, COBOL,
SAS, ADS-On-Line, etc.)
2. 4GL, object-oriented, client-server development tools (Visual
Basic, etc.)
3. Database technology (e.g., SQL, ODBMS, RDBMS (e.g., INFORMIX, MS
ACCESS, FOCUS, ODBC))
4. Network Operating System environments (Windows NT, UNIX, etc.)
5. Electronic publishing tools, techniques, and environments (Folio
Views, MS WOSA, etc.)
6. Internet Web Technology, such as design and implementation of
Web pages and servers.
Qualifications:
Category 27, Software Engineer - Senior: Must possess an advanced degree in
Computer Science or a software related discipline, and at least eight years
experience in the software engineering field. Alternate qualifications include
(a) a Ph.D. may be substituted for two years experience, or (b) a bachelors
degree, in a related field, and at least 10 years experience.
Category 28, Software Engineer - Middle: Must possess a bachelor's degree in
Computer Science or a software related discipline, and at least five years
experience in the software engineering field. Alternate qualifications include
(a) a master's degree may be substituted for one year of related experience, or
(b)an associate degree with at least eight years of related experience.
Category 29, Software Engineer - Junior: Must possess a bachelor's degree in
Computer Science or a software related discipline, and at least 0-5 years
experience in the software engineering field. Alternate qualifications include
(a) an associate degree and at least 3 years experience, or (b) no degree is
required with at least 5 years experience.
7.2.11 System Programmers
Description: Develops and/or maintains operating systems, communications
software, database packages, compilers, assemblers, and utility programs.
Modifies existing and creates special purpose software and ensures systems
efficiency and integrity. Analyzes systems requirements and design
specifications. Develops block diagrams and logic flow charts. Translates
detailed design into computer software. Tests, debugs, and refines the computer
software to produce the required product. Prepares required documentation,
including project plans, software program and user documentation. Enhances
software to reduce operating time or improve efficiency. Provides technical
direction to less experienced programmers. Experience in ADP system analysis and
programming and
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utilizing major concepts of application programming on large-scale database
management systems. Knowledge of state-of-the-art computer equipment and high
level computer languages, Experience in applications development under
MIL-STD-498 and a software engineering environment (SEE) that integrates at
least two of the following: Ads, CASE tools, relational/object-oriented DBMS,
repository/data dictionary, optical-imaging/large-scale mass storage technology,
and client/server networks is desired.
Qualifications:
Category 30, System Programmer - Senior: An advanced graduate degree in Computer
Science or related study and at least eight years experience in system analysis
and programming. Requires project planning, technical writing, and
verbal/presentation skills. Alternate qualifications include (a) a Ph.D. may be
substituted for two years experience, or (b) or a bachelors degree, in a related
field, and at least 10 years experience.
Category 31, System Programmer - Middle: A bachelor's degree in a field
applicable to this position, i.e., Computer Science, Information Systems,
Engineering, and at least 5 years experience in system analysis and programming.
Alternate qualifications include (a) a master's degree may be substituted for
one year of related experience, or (b) an associate degree with at least eight
years of related experience.
Category 32, System Programmer - Junior: A bachelor's degree in a field
applicable to this position, i.e., Computer Science, Information Systems,
Engineering, and at least 0-5 years experience in system analysis and
programming. Alternate qualifications include (a) an associate degree and at
least 3 years experience, or (b) no degree is required with at least 5 years
experience.
7.2.12 General Scientific Professionals
Description: This category includes professional scientific occupations not
otherwise covered. These persons perform analytical work in support of systems
engineering or planning activities. Such occupations include: Operations
Research Analyst, Mathematician, Physicist. Statistician. Typical duties will
involve assignments similar to those of the System Engineer but where a
scientific expert is needed.
Qualifications:
Category 33, General Scientific Professional - Senior: Must possess an advanced
degree in such disciplines as Electrical or Electronic Engineering, Computer
Science, Information Systems, Physics, Statistics. Mathematics or a field
otherwise related to the area of expertise to be supported. The candidate must
also have at least eight years experience in the specific discipline in which
the advanced degree has been obtained. Alternate qualifications include (a) a
Ph.D. may be substituted for two years experience, or (b) a bachelors degree, in
a related field, and at least 10 years experience.
Category 34, General Scientific Professional - Middle: Must possess a bachelor's
degree in such disciplines as Electrical or Electronic Engineering, Computer
Science, Information Systems, Physics, Statistics, Mathematics or fields
otherwise related to the area of expertise to be supported. The candidate must
also have at least 5 years experience in the specific discipline in which the
degree has been obtained. Alternate qualifications include (a) a master's degree
may be substituted for one year of related experience, or (b)an associate degree
with at least eight years of related experience.
Category 35, General Scientific Professional - Junior: Must possess a bachelor's
degree in such disciplines as Electrical or Electronic Engineering, Computer
Science, Information Systems, Physics, Statistics, Mathematics or fields
otherwise related to the area of expertise to be supported, The candidate must
also have 1-5 years of experience in the specific discipline in which the degree
has been obtained. Alternate qualifications include (a) a master's degree may be
substituted for one year of related experience or (b) an associate degree in the
above fields with at least eight years experience.
7.2.13 General Management Professionals
Description: This category includes professional occupations which perform
management work such as: Data Management. Business Management/Program Control,
Cost Variance Analysis, General Management, Procurement
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Strategy and Analysis. Typical duties include analysis, planning, establishment
of requirements, development of procedures and other related management and
technical duties. Requires expertise in specialty areas. Experience in or
related to military medicine or general health care is desirable.
Qualifications:
Category 36, General Management Professional - Senior: Must possess an advanced
degree plus at least eight years experience in the area being supported. That
the advanced degree is directly related to the support areas identified above is
desirable. Alternate qualifications include (a) a Ph.D. may be substituted for
two years experience, or (b) a bachelors degree, in a related field, and at
least 10 years experience.
Category 37, General Management Professional - Middle: Must possess a bachelor's
degree plus at least 5 years experience in the area being supported. That the
degree is directly related to the support areas identified above is desirable.
Alternate qualifications include (a) a master's degree may be substituted for
one year of related experience, or (b) an associate degree with at least eight
years of related experience.
Category 38, General Management Professional - Junior: Must possess a bachelor's
degree plus 1-5 years experience in the area being supported. That the degree is
directly related to the support areas identified above is desirable. Alternate
qualifications include (a) a master's degree may be substituted for one year of
related experience, or (b) an associate degree with at least 5 years experience.
7.2.14 Technician
Description: Performs entry to mid-level professional technical engineering
tasks under the supervision of a Senior Engineer.
Qualifications:
Category 39, Technician: Must have an Associate Degree (2 year) with a major or
academic emphasis in electrical engineering, mathematics, computer science, or
physical sciences with a minimum of two (2) years experience in their
professional field. Alternate qualification: High School Diploma or GED with
three (3) years of specific experience.
7.2.15 Administrative Assistants
Description: This professional level includes clerical personnel, administrative
services personnel, illustrator/graphics personnel, technical editors,
accountants, bookkeepers, librarians, technical writers and technical
publications personnel who have a minimum of two (2) years experience in their
field.
Qualifications:
Category 40, Administrative Support - High Skill: Must have an associate degree
(or its equivalent as evidenced by two years of applicable college courses) or
higher. Must have at least two years experience in administrative typing,
technical typing, and using word processing equipment. Experience with computer
graphics or computer terminals can be used as substitute for experience with
word processing equipment. Alternate qualification: a High School Diploma (or
GED) and four years of applicable experience.
Category 41, Administrative Support - Medium Skill: Must have a high school
diploma (or GED). Must have at least two years experience in filing techniques,
administrative typing, and using word processing equipment. Experience with
computer graphics or computer terminals can be used as substitute for experience
with word processing equipment. Alternate qualification: an associate degree (or
its equivalent as evidenced by two years of applicable college courses) and at
least one year of experience.
Category 42, Administrative Support - Low Skill: Must have a high school diploma
(or GED). Must have a thorough knowledge of English grammar, syntax. spelling,
punctuation, and abbreviation. Must have at least one year experience in filing
techniques and administrative typing. Alternate qualification: an associate
degree (or its equivalent as evidenced by two years of applicable college
courses).
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7.2.16 Database System Personnel
Description: Ensures efficient operation of a multicomputer site that supports
database administration, database analysis, database report production, dam
dictionary administration, and system development, by local and remote users.
Computer sites may include mainframes (running software such as IDMS, SQL) as
well as microcomputers. Coordinates system resource availability with database
analysts, system and application programmers, and other users. Provides advice
and assistance to users on equipment operation, to include data communications.
Ensures site compliance with electronic and physical security procedures and
standards.
Qualifications:
Category 43, Database Administrator: Must have a bachelor's degree in or related
to information technology or computer science and a combination of additional
technical experience/education directly related to the above description
totaling seven years. Alternate qualification: an advanced degree may be
substituted for two years experience.
Category 44, Database System Operator - Senior:. Must have a high school diploma
(or the equivalent), and a combination of additional technical
experience/education directly related to the above description totaling at least
six years. Alternate qualifications (a) an associate degree (or its equivalent
as evidenced by two years of applicable college courses) and at least three
years of experience or (b) a bachelor's degree and at least two years
experience.
Category 45, Database System Operator - Junior: Must have a high school diploma
(or the equivalent), and a combination of additional technical
experience/education directly related to the above description totaling at least
two (2) years.
7.2.17 Security Professional/Facility Security Officer
Description: Analyzes, defines and establishes security policy and procedures to
meet National Industrial Security Program (NISP) requirements for facilities
occupied by multiple prime contractors and their team members. Gathers and
organizes technical information about facility missions and functions; designs
standard practice procedures to satisfy the requirements of the NISP, the
Cognizant Security Agency (CSA) and the Government Contracting Activity (GCA).
Oversees all aspects of security within the facility. Experience in the
following disciplines is necessary: Facility Security Officer functions, SCIF
Management, Information Systems Security, SAP Security, Information Security,
Physical Security, Personnel Security, Security Training, and Security Surveys.
Qualifications:
Category 46, Security Professional/Facility Security Officer: Must possess an
Associates Degree in a relevant major such as Computer Sciences, Law
Enforcement, or Business Administration, be certified as a Facility Security
Officer (FSO) by the Defense Investigative Service (DIS), have completed
technical training in at least two or of the security disciplines listed in the
description above from either the DoD Security Institute or other recognized and
accredited institutions and have at least six years of directly related security
experience in a large work force environment. Alternate qualifications: either
(a) a bachelor's degree may be substituted for two years of experience or (b)
two years experience may be substituted for the associate's degree.
7.2.18 Operations Support
Category 47, Operations Support Assistant: Performs a variety of support
services such as operation of reproduction equipment to produce large volumes of
documents, courier service and mail service, etc. Must have a high school
diploma (or GED equivalent). Must have at least one year of directly related
experience.
Category 48, Operations Support Coordinator: Coordinates and directs a variety
of support services such as use of reproduction equipment, scheduling
maintenance for equipment, scheduling courier runs, ensuring approved security
practices are applied relative to document control and scheduling and ensuring
efficient operation of conference facilities. Must have a high school diploma
(or GED equivalent). Must have at least three years of directly related
experience.
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7.2.19 Business Process Engineers
Description: Applies process improvement and reengineering methodologies and
principles to conduct process modernization projects. Responsible for effective
transitioning of existing project teams, and the facilitation of project teams
in the accomplishment of project activities and objectives. Provides group
facilitation, interviewing, training and provides additional forms of knowledge
transfer. Coordinates between multiple project teams to ensure enterprise-wide
integration of reengineering efforts. Includes activity and data modeling,
developing modern business methods, identifying best practices, and creating and
assessing performance measurements. Experience in or related to military
medicine or general health care is desirable.
Specialized experience may include: facilitation, training, methodology
development and evaluation, process reengineering across all phases, identifying
best practices, change management, business process improvement, business
management techniques, organizational development, activity and data modeling,
or information system development methods.
Qualifications:
Category 49, Business Process Engineer - Principal: Master's degree in computer
science, information systems, engineering, business, education, management
sciences, human resources or other related discipline and at least eight years
experience of which at least six must be specialized. Alternate qualifications
include (a) with a Ph.D. six years of general experience of which at least four
must be specialized, or (b) with a bachelor's degree 10 years of general
experience of which at least eight must be specialized.
Category 50, Business Process Engineer - Senior: Bachelor's degree in computer
science, information systems, engineering, business, education, management
sciences, human resources or other related discipline and at least six years
experience of which at least four must be specialized. Alternate qualifications
include (a) with an advanced degree four years of general experience of which at
least three must be specialized. or (b) with no degree must have at least 10
years of general experience of which at least six must be specialized.
Category 51, Business Process Engineer - Middle: Bachelor's degree in computer
science, information systems, engineering, business, education, management
sciences, human resources or other related discipline and at least five years
experience of which at least three must be specialized. Alternate qualifications
include (a) with an advanced degree three years of general experience of which
at least two must be specialized, (b) with an associate degree at least six
years experience of which at least four years must be specialized, or (c) with
no degree must have at least eight years of general experience of which at least
6 must be specialized.
7.2.20 Business Process Support
Category 52, Cost analyst: Performs Functional Economic Analysis (FEA) to
evaluate the costs of alternative ways to accomplish functional objectives. The
FEA states investment costs, benefits and risks as a net change to the
functional baseline cost, the cost of doing business now and in the future.
Ensures that cross-functionality, security and other integration issues are
addressed. Qualifications: bachelor's degree in computer science, information
systems, engineering, business, accounting or other related discipline with at
least five years general experience of which at least three years must be
specialized. Specialized experience includes demonstrated experience in
providing technical and financial justifications and cost/benefit analyses.
Alternate qualifications include (a) an advanced degree with at least four years
experience of which at least two years are specialized, or (b) an associate
degree with at least eight years general experience of which at least six years
are specialized.
Category 53, Electronic Meeting Technographer: Supports meeting facilitator or
data modular in preparing and conducting meetings and in meeting follow-up
activities. Manipulates on-line electronic meeting software for business
reengineering or process improvement sessions. Catalogs, maintains and
distributes customer session data files. Specialized experience includes: cross
functional computer skills, knowledge of LAN servers, data modeling,
facilitating, or previous technographer positions. Qualifications: Bachelor's
degree in computer science, information systems, engineering, business,
education, management sciences, English, communications, human resources or
other related discipline and at least three years experience of which at least
one must be specialized. Alternate
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qualifications include (a) an associate degree with five years experience of
which at least two must be specialized, or (b) with no degree must have at least
seven years of general experience of which at least four must be specialized.
7.2.21 Training Specialists
Description: Conducts research necessary to develop and revise training courses
and prepares appropriate training catalogs. Develops instructor materials such
as course outline, background material, and training aids. Develops student
material such as course manuals, workbooks, handouts, completion certificates
and course critique forms. Trains personnel by conducting formal classroom
courses, workshops, seminars and/or computer-based or aided training.
Coordinates for additional subject matter experts to participate in training as
needed.
Qualifications:
Category 54, Training Specialist - Senior: Bachelor's degree in any field with
at least seven years general experience of which at least five must be
training-related. Alternate qualifications include (a) with an advanced degree
six years of experience of which at least four must be training-related, or (b)
no degree is required with 10 years general experience of which at least eight
is training-related.
Category 55, Training Specialist - Junior: Bachelor's degree in any field with
at least four years general experience of which at least two must be
training-related. Alternate qualifications include (a) with an advanced degree
two years of experience of which at least one must be training-related, or (b)
no degree is required with eight years general experience of which at least six
is training-related.
7.2.22 Help Desk Support
Description: Provide phone and in-person support to users in the areas of
electronic mail, directories, standard Windows desktop applications, and
applications developed or deployed under this contract. (Help desk personnel may
be trained after award on new applications developed or deployed under this
contract.) Experience in Amdahl mainframe applications is desirable.
Qualifications:
Category 56, Help Desk Manager: Bachelor's degree in computer science,
information systems, engineering, business or other related discipline with at
least seven years general experience of which at least five must be specialized.
Specialized experience includes: management of help desks in a multi-server
environment. management of help desks in a mainframe environment, comprehensive
knowledge of PC operating systems, knowledge of networking and electronic mail.
Alternate qualifications include (a) with an advanced degree six years of
experience of which at least four must be specialized, or (b) no degree is
required with ten years general experience of which at least eight is
specialized.
Category 57, Help Desk Specialist: Associates degree in computer science,
information systems, engineering, business or other related discipline with at
least five years general experience of which at least three must be specialized.
Specialized experience includes: work on a help desk, knowledge of PC operating
systems, knowledge of mainframe operating systems, knowledge of networking and
electronic mail. Alternate qualifications include (a) with a bachelor's degree
three years of general experience of which at least two must be specialized, or
(b) with no degree must have at least seven years of general experience of which
at least five must be specialized.
7.2.23 Installation Support
Category 58, Installation Technician - Senior: Organizes and directs hardware
and network installations. Assesses and documents current site network
configuration and user requirements. Designs and optimizes network topologies.
Analyzes and develops new hardware requirements and prepares specifications for
hardware acquisitions. Directs and leads preparation of engineering plans and
site installation technical design packages. Develops hardware installation
schedules. Mobilizes installation team. Directs and leads preparation of
drawings documenting configuration changes at each site. Prepares site
installation and test reports. Coordinates post installation operations and
maintenance support. Qualifications: High school diploma with eight years
experience of which at least six must be specialized. Specialized experience
includes: supervision of installation technicians, analysis, design and
installation of computer based systems, analysis, design and installation of
local and wide area nets, and
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analysis and installation of communications systems. Alternate qualifications
include (a) an associate's degree with seven years experience of which at least
five years is specialized, or (b) a bachelor's degree with five years experience
of which at least three years is specialized.
Category 59, Installation Technician - .runlet: Conducts site surveys. Assesses
and documents current site network configuration and user requirements. Designs
and optimizes network topologies. Analyzes and develops new hardware
requirements and prepares specifications for hardware acquisitions. Prepares
engineering plans and site installation technical design packages. Develops
hardware installation schedules. Prepares drawings documenting configuration
changes at each site. Prepares site installation and test reports. Installs and
configures computers, communications devices and peripheral equipment. Installs
network hardware. Qualifications: High school diploma with five years experience
of which at least three must specialized. Specialized experience includes:
analysis, design and installation of computer based systems, analysis, design
and installation of local area nets (LANs), specialized interconnect cable
design and fabrication, and analysis and installation of communications systems.
Alternate qualifications include (a) an associate's degree with four years
experience of which at least two years is specialized, or (b) a bachelor's
degree with three years experience of which at least one year is specialized
7.2.24 System Operations
Category 60, System Administrator: Supervises and manages the daily activities
of configuration and operation of business systems which may be mini or
client/server based. Optimizes system operation and resource utilization, and
performs system capacity analysis and planning. Provides assistance to users in
accessing and using business systems. Qualifications: Bachelor's degree in
computer science, information systems, engineering, business or other related
discipline with at least four years experience of which at least three must be
specialized experience in administrating UNIX or open-systems compliant systems
or AMDAHL/IBM mainframe systems. Alternate qualifications include (a) advanced
degree with three years of experience of which at least two must he specialized,
or (b) no degree is required with at least eight years of experience of which at
least six years is specialized.
Category 61, System Operator: Monitors and supports computer processing.
Coordinates, input, output and file media. Distributes output and controls
computer operation. Qualifications: Associate's degree in computer science,
information systems, engineering, business or other related discipline with at
least three years experience of which at least two must be specialized
experience in operating UNIX or open-systems compliant computer systems or a
multi-server local area network or two years experience in operating AMDAHL/IBM
mainframe hardware to include scheduling, job processing, and production
operations. Alternate qualifications include (a) bachelor's degree with two
years of experience of which at least one must be specialized, or (b) no degree
is required with at least seven years of experience of which at least five years
is specialized.
7.2.25 Network Manager
Description: Evaluates network and communications hardware and software.
troubleshoots LAN/MAN/WAN and other network related problems, provides technical
expertise for performance and configuration of networks, performs general
LAN/MAN/WAN administration, provides technical leadership in the integration and
test of complex large scale computer integrated networks. Schedules conversions
and cutovers. Oversees network control center. Supervises maintenance of
systems. Coordinates with all responsible users and sites. Supervises staff.
Qualifications:
Category 62, Network Manager: A Bachelor's Degree in Computer Science,
Information Systems, Engineering, Business or other related discipline. This
position requires a minimum of seven years experience of which five years must
be specialized. Specialized experience includes protocol analysis, knowledge of
OSI protocols. Experience with ATM, frame relay, other knowledge with bridges,
routers, gateways, F'DDI, UNIX, NOVELL, mainframe (IBM compatible) or Windows
operating systems. Specialized experience also includes: supervising the
operation and maintenance of communications network systems which may be
mainframe, mini or client/server based. General experience includes all aspects
of communications networks planning, installation and support. Alternate
qualifications include (a) with a Master's degree in one of the above fields
five years general experience of which at least three years is specialized, or
(b) no degree is required with at least eleven years general experience of which
at least nine years is specialized.
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7.2.26 Network Technician
Description: Analyzes network characteristics (e.g., traffic, connect time,
transmission speeds, packet sizes and throughput) and recommends procurement,
removals and modifications to network components. Designs and optimizes network
topologies and site configurations. Plans installations, transitions, and
cutovers of network components and capabilities. Evaluates network and
communications hardware and software, troubleshoots LAN/MAN/WAN and other
network related problems, and performs general LAN/MAN/WAN administration.
Qualifications:
Category 63, Network Technician: A Bachelor's Degree in Computer Science,
Information Systems, Engineering, Business or other related discipline. This
position requires a minimum of four years experience, of which at least three
must be specialized experience in one or more of the following areas:
communications software, communications hardware, or network design,
installation and support. Alternate qualifications include (a) with a Master's
degree in one of the above fields three years general experience of which at
least two years is specialized, or (b) no degree is required with at least eight
years general experience of which at least five years is specialized.
7.2.27 Repair Support
Description: Responds to user help calls referred by the Help Desk. Diagnoses
end-user equipment problems. Installs and relocates end-user devices. Repairs
and services end-user equipment. Performs board-level maintenance and swap out
of component part for ADPE, including PCs, printers, plotters, etc. Performs
tests to locate problems using diagnostic software and electronic test
equipment. Repairs/replaces broken or non-functional parts that prevent proper
operation of mechanical devices. Tests ADPE to validate functionality.
Installs/relocates hardware and software at a designated location and assists
users with initial operating instructions. Adds or exchanges externally
connected PC accessories and data communications equipment. Troubleshoots
LAN's/WAN's and provides problem resolution for PC and data communications
hardware. Adds or replaces boards, batteries, disk drives, and other PC
components. Installs cabling for LANs, WAN's, etc. Attaches, detaches, or
exchanges LAN cabling to workstations, servers, network devices,
telecommunications and data communications equipment. Works independently.
Qualifications:
Category 64, Repair Technician - Senior: Associate's degree or equivalent
military/industry technical training in electronic equipment repair or a related
field. At least five years experience in the area of troubleshooting and
maintenance of ADP equipment (e.g., servers, personal computers, laptops,
minicomputers, printers, monitors, modems, etc.). Alternate qualification: High
school diploma or GED and at least eight years experience in troubleshooting and
maintenance of ADP equipment.
Category 65, Repair Technician - Junior: High school diploma and at least three
years experience in the area of troubleshooting and maintenance of ADP equipment
(e.g., servers, personal computers, laptops, minicomputers, printers, monitors,
modems, etc.). Alternate qualification: associate's degree or equivalent
military/industry technical training in electronic equipment repair or a related
field and at least one year of experience.
7.2.28 Quality Assurance
Category 66, Quality Assurance Manager
Description: Establishes and maintains a process for evaluating software and
associated documentation. Determines the resources required for quality control.
Maintains the level of quality throughout the software life cycle. Conducts
formal and informal reviews at pre-determined points throughout the development
life cycle. Provides daily supervision and direction to staff.
Qualifications:
Bachelor's degree in computer science, information systems, engineering,
business or other related discipline. Minimum of eight years experience, of
which at least five years must be specialized. Specialized experience includes:
configuration management, verification and validation, software testing and
integration, software metrics
J.1 - 33
<PAGE> 48
and their application to software quality assessment. Alternate qualifications
include (a) with an advanced degree at least six years of experience of which at
least four years must be specialized, or (b) with an associate degree at least
10 years of experience of which at least eight years are specialized.
Category 67, Quality Assurance Analyst
Description: Provides technical and administrative direction for personnel
performing software development tasks, including review of work products for
correctness, adherence to the design concept, user standards and business rules,
review of program documentation to assure government standards and requirements
are adhered to, and for progress in accordance with schedules. Coordinates with
Project Manager and/or quality assurance manager to insure problems are resolved
to user's satisfaction. Makes recommendations, if needed, for approval of major
systems installations. Prepares milestone status reports and
deliveries/presentations on system concepts.
Qualifications:
Bachelor's degree in computer science, information systems, engineering,
business or other related discipline. Minimum of six years experience, of which
at least three years must be specialized. Specialized experience includes:
analysis and design of business applications on complex systems for large-scale
computers, data base management, use of programming languages such as Aria or a
4GL or use of DBMS. Alternate qualifications include (a) with an advanced degree
at least four years of general experience of which at least two are specialized,
or (b) with an associate degree at least eight years of general experience of
which at least six years are specialized.
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<PAGE> 49
Subcontract No. D/SID2-SC-98-251
ATTACHMENT D
PRIME CONTRACT STATEMENT OF WORK
<PAGE> 50
Section J - Attachment One
STATEMENT OF WORK
FOR
DEFENSE MEDICAL INFORMATION MANAGEMENT/
SYSTEMS INTEGRATION, DESIGN, DEVELOPMENT,
OPERATIONS AND MAINTENANCE SERVICES
(D/SIDDOMS) II
Lot III, DASW01-97-R-0050
Design, Development, Deployment, Operations and Maintenance
<PAGE> 51
<TABLE>
<S> <C>
1 Overview ...........................................................................1
1.1 Introduction .............................................................1
1.2 Contract Type ............................................................1
1.3 Award ....................................................................1
1.4 Contract Exclusions ......................................................1
1.5 Scope ....................................................................2
1.6 Background ...............................................................2
1.6.1 The TRICARE Program ............................................2
1.6.2 The MHSS .......................................................3
1.6.3 The Functional Architecture ....................................4
1.6.2 MHSS Information Management Strategic Principles ...............5
1.6.3 Emerald City ...................................................5
1.6.4 MHSS Acquisition Philosophy ....................................8
2 Synopsis of Requirements ...........................................................8
3 Lot III Design, Development, Deployment, Operations and Maintenance (DDDOM) .......10
3.1 Software Development/Maintenance Process ................................10
3.1.1 Software Development Process ..................................10
3.1.2 Presentation for DII COE Certification ........................10
3.1.3 Critical Security Requirements ................................11
3.1.4 Other Critical Requirements ...................................11
3.1.5 Calendar Year 2000 Requirements ...............................11
3.2 System Engineering ......................................................11
3.3 System Assessment .......................................................12
3.4 Engineering, Reengineering, Segmentation and/or Testing .................12
3.5 Technical Support .......................................................12
3.6 Documentation ...........................................................13
3.7 Systems Analysis ........................................................13
3.8 Systems Design and Development ..........................................13
3.9 Installation, Conversion and Technical Training .........................14
3.9.1 Installation, Conversion and Training
for Systems Developed under this Contract .....................14
3.10 Systems Operations Support .............................................14
3.10.1 System and Network Services ..................................14
3.10.2 Documentation Maintenance ....................................14
3.10.3 Problem Identification .......................................14
3.10.4 Perform LAN Administration ...................................14
3.10.5 Customer Support .............................................14
3.10.6 Management and User Training .................................15
3.10.7 Systems Maintenance Support ..................................15
3.11 Miscellaneous Tasks ....................................................15
3.11.1 General Software Support Services ............................15
3.11.2 Issues and Questions .........................................15
3.11.3 Maintenance-Related Activities ...............................15
3.11.4 Data Acquisition .............................................15
4 Management ........................................................................15
4.1 Management ..............................................................16
</TABLE>
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<PAGE> 52
<TABLE>
<S> <C>
4.1.1 Program Management Plan .......................................16
4.1.2 Post-Award Plans ..............................................16
4.1.3 Communications with the Government ............................16
4.2 Quality Assurance .......................................................16
4.3 Reporting Requirements ..................................................17
4.3.1 Monthly Progress Reports ......................................17
4.3.2 Delivery ......................................................17
5 Standards and Applicable Documents ................................................18
6 Facilities and Support Requirements ...............................................18
6.1 Support Tools and Methods ...............................................18
7 Personnel Skill Mix, Experience and Education .....................................18
7.1 Labor Categories ........................................................18
7.2 Labor Category Descriptions .............................................20
7.2.1 Program Manager ...............................................20
7.2.2 Task Manager ..................................................21
7.2.3 Systems Engineers .............................................21
7.2.4 Open Systems Engineers ........................................22
7.2.5 Telecommunications Electronics Engineers ......................23
7.2.6 Information Engineers .........................................23
7.2.7 Functional Application Analysts ...............................24
7.2.8 Computer Scientists/Systems Analysts ..........................24
7.2.9 Computer Security Systems Engineers ...........................25
7.2.10 Software Engineers ...........................................26
7.2.11 System Programmers ...........................................26
7.2.12 General Scientific Professionals .............................27
7.2.13 General Management Professionals .............................27
7.2.14 Technician ...................................................28
7.2.15 Administrative Assistants ....................................28
7.2.16 Database System Personnel ....................................29
7.2.17 Security Professional/Facility Security Officer ..............29
7.2.18 Operations Support ...........................................29
7.2.19 Business Process Engineers ...................................30
7.2.20 Business Process Support .....................................30
7.2.21 Training Specialists .........................................31
7.2.22 Help Desk Support ............................................31
7.2.23 Installation Support .........................................31
7.2.24 System Operations ............................................32
7.2.25 Network Manager ..............................................32
7.2.26 Network Technician ...........................................33
7.2.27 Computer Repair Support ......................................33
7.2.28 Quality Assurance ............................................33
</TABLE>
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<PAGE> 53
J.1 STATEMENT OF WORK FOR D/SIDDOMS II LOT III, DESIGN, DEVELOPMENT,
DEPLOYMENT, OPERATIONS AND MAINTENANCE
1 Overview
1.1 Introduction
The Office of the Assistant Secretary of Defense (Health Affairs) (OASD(HA)) has
a requirement to provide support for ongoing and future health care programs.
This requirement is known as the Defense Medical Information Management/Systems
Integration, Design, Development, Operations and Maintenance Services
(D/SIDDOMS) II. D/SIDDOMS II is an expanded requirement to the current D/SIDDOMS
contract. The resultant contracts will be Indefinite Delivery/Indefinite
Quantity (IDIQ) type contracts for use by all components of the Military Health
Services System (MHSS) to support their medical information management systems
needs. It may also be made available to other agencies to use appropriate
support capabilities required by the Department of Defense to accomplish its
Health Affairs mission.
1.2 Contract Type
The resultant contracts will be IDIQ style contracts. The Government anticipates
the use of multiple contract types on a Delivery Order (DO) basis.
1.3 Award
The D/SIDDOMS II program consists of four (4) Lots. Each Lot is being
implemented as a separate procurement. The intent is to award multiple contracts
for all Lots, based on the quality of the proposals and availability of funds.
It is also the intent that Lot IV be set aside for small businesses. Each Lot is
designed to meet specific needs in the overall system life cycle. Procurement
IV, TSS, is a 100% small business set aside. The four Lots and their
corresponding RFP identifiers are:
<TABLE>
<S> <C>
Lot I - Functional Area Support (FAS) DASW01-97-R-0051
Lot II - Enterprise Technical Analysis & Support (ETAS) DASW01-97-R-0052
Lot III- Design, Development, Deployment, Operations & Maintenance (DDDOM) DASW01-97-R-0050
Lot IV - Technology Solutions Support (TSS) DASW01-97-R-0049
</TABLE>
This Statement of Work is for Lot III, Design, Development, Deployment.
Operations and Maintenance, DASW01- 97-R-0050.
1.4 Contract Exclusions
See Section H, Article H.2, Conflict of Interest
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<PAGE> 54
1.5 Scope
D/SIDDOMS II will cover a wide spectrum of specific functional and information
technology functions for all Information Management/Information Technology
(IM/IT) and related requirements within the MHSS. D/SIDDOMS II will utilize
highly skilled personnel and processes in performance of all IM/IT and related
functions. At a minimum, services will consist of the following: studies,
functional requirements definition, systems engineering, database design, data
administration, software customization, communications, networking, user
support/problem resolution, product support, training, IT reengineering support,
technology evaluation, technology insertion/refreshment, operations,
installation/reinstallation, maintenance/repair, configuration and inventory
management. The Government anticipates tonal system solutions, as directed by
individual DO, to include all necessary hardware, software, local communications
and related expenses to meet the functional and technical requirements.
1.6 Background
1.6.1 The TRICARE Program
DoD operates one of the nation's largest health cam systems. With more than 8
million people eligible to receive case through the MHSS, it has a vital mission
in both wartime and peacetime. The wartime mission is to provide medical support
to active-duty military members in preparation for and during wartime or other
contingencies. The peacetime mission is to maintain the health of the 1.7
million people on active duty and m provide medical care to more than 6 million
non-active-duty beneficiaries at Military Treatment Facilities (MTFs) or at
civilian facilities under the TRICARE program.
TRICARE is the DoD regional, managed care program for active-duty and retired
members of the uniformed services, their families, and their survivors.
Congress, in the National Defense Authorization Act of 1994, directed DoD to
proscribe and implement a health benefit option for beneficiaries eligible for
health case under Chapter 55 of Title 10, United States Code. The program was
modeled on health maintenance organization (HMO) plans offered in the private
sector and other similar Government health insurance programs. In addition
beneficiaries who enroll in the health benefit option would have reduced
out-of-pocket costs and a uniform benefit structure. Congress further directed
that the costs to DoD would be no greater than those normally incurred to
provide health care to the covered beneficiaries who enroll in the option.
To conform with the directives in the 1994 Authorization Act, DoD developed a
regional managed health care strategy, in cooperation with the Services, that
restructures the MHSS into 12 CONUS health services regions. Two additional
overseas regions that encompass Europe and the Pacific region have been
established. Each region is administered by a Lead Agent. Responsibilities of
the Lead Agent include collaborating with the other MTF commanders within the
region to develop an integrated plan for delivering health case for their
beneficiaries. Regional TRICARE plans are being put in place, and procurement
schedules have been developed to support these initiatives. The TRICARE program
is expected to be implemented fully throughout the United States in calendar
year 1997 (CY97).
In the TRICARE environment, the MHSS must maximize health care dollars by
continuing to examine all options for meeting the legal requirements to provide
quality and timely preventive health care to DoD beneficiaries. TRICARE, through
employment of a flexible delivery structure, must complement the readiness
mission to ensure that the medical sustaining base can fully support deployed
forces and absorb additional patient workload without sacrificing access and
high-quality care delivery to all nondeployed beneficiaries.
While TRICARE is a medical force multiplier, it will also demand greater
attention from IM/IT for data standardization and interoperability to ensure
that the distributed computer-based patient records (CPRs) are easily accessed
and totally compatible around the world. Special contractual and security
arrangements will be necessary to ensure that TRICARE support contractor systems
can support the distributed CPR capability with standardized data, allow
authorized users to have ready access to MHSS hosted portions of individual
CPRs, and support fast response to MHSS originated CPR and case assessment
queries.
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<PAGE> 55
1.6.2 The MHSS
The MHSS uses information management/information technology capabilities to
assist the MTFs in the delivery of quality patient care to the population served
within the MHSS. Over 100 automated information systems (AISs) in the MHSS are
in the process of being migrated to a small number of business area (functional
area) based target migration systems. The MTFs have a wide range of physical
configuration ranging from small offices with a few workstations and dial-in
communications to clinics with local area networks (LANs) with moderate external
connectivity to large hospitals with extensive internal LANs and external
connectivity. Data handling needs also vary tremendously from moderate text and
office automation needs through video conferencing to large medical imagery
files.
The environment of the MHSS is significantly different than civilian health care
delivery systems. Several points are presented to illustrate the differences.
a. The MHSS mission is to maintain the health status of the members of
the armed force, their families and others entitled to DoD health care
by providing total inpatient and outpatient care and to maintain medical
readiness to support mobilization.
b. A significant feature of the MHSS is the volume of outpatient care
provided at MTFs. Unlike the civilian health care delivery systems,
where private physicians provide the bulk: of outpatient care in their
office, DoD provides this ambulatory care to the entitled population in
hospital clinics and remote support clinics using primarily hospital
staff.
e. The MHSS includes over 100 hospitals and major clinics and more than
500 separately located other medical facilities throughout the world in
addition to the TRICARE providers/facilities.
The Assistant Secretary of Defense (Health Affairs) (ASD(HA)) oversees all
aspects of the MHSS Program. In addition, the ASD(HA) works with the individual
Military Departments and obtains support from non-DoD Government agencies and
civilian Contractor(s).
In view of both the number and diversity of organizations processing military
hospital information. as well as the fact that major information processing
requirements among these organizations are similar, the general automation
approach is to centralize and coordinate the application development using
appropriate open systems technology and standards and the MHSS Infrastructure.
The MHSS Infrastructure was developed to provide a common set of standardized
interfaces across platforms and configurations to facilitate communications,
data and resource sharing among defense medical systems. Standardized systems
are being developed by defining common requirements and implementing
standardized system capabilities while supporting Service-unique needs.
In October 1989, the Deputy Secretary of Defense established the Corporate
Information Management (CIM) initiative. This initiative is primary objectives
and goals were to promote data standardization, quality and consistency, to
eliminate duplication of effort in the development and maintenance of software,
and to improve effectiveness in the Information Resource Management (IRM) life
cycle. The process led to the identification and selection of Fifty-two
medical/health migration systems and a goal of the eventual elimination of all
associated legacy systems. The final vision of the MHSS is based on information
management/information technology strategic planning centered around the
evolution to a business area focus, emphasizing critical functional areas using
functional, technical and data standardization.
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1.6.3 The Functional Architecture
The functional architecture, as shown in Figure 1, Health Functional
Architecture, groups the Health functions into four major business areas:
Clinical, Logistics, Resources. and Executive Information/Decision Support. Each
of these four business areas will be supported by an information system
capability that will be a compendium of standards-based and integrated
commercial off-the-shelf (COTS), Government-off-the-shelf (GOTS), or, if no
alternative exists. MHSS-developed functional applications. These system
capabilities include the Composite Health Care System II (CHCS II), Defense
Medical Logistics Standard Support II (DMLSS II), Health Standard Resources
System (HSRS), and Corporate Executive Information System (CEIS).
The MHSS also interfaces with other DoD mission support areas, such as
Personnel. Finance. Logistics, and Transportation. These nonmedical functions
are important to effectively and efficiently meet the full mission of the MHSS
and are represented by the nonmedical area notation in Figure 1.
Business and mission needs drive the IM/IT requirements from Business Process
Reengineering (BPR) to MHSS Program Objective Memorandum (POM) development,
budget execution, and IM/IT strategic planning. IT investment provides a force
multiplier to ensure that the information needs of the MHSS are met by providing
the right information to the right location at the right time.
Figure 1 - Health Functional Architecture
[OPERATIONAL CONTINUUM GRAPHIC]
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<PAGE> 57
Functional requirements are derived from business needs, thereby building the
basis for MHSS IM/IT support requirements. BPR and functional process
improvement outputs are used to build the requirements that drive IM/IT. Mapping
of functional requirements is an important Step to ensuring that the
requirements are addressed only once and that like requirements from different
functional processes are aggregated and addressed in one technical area.
1.6.4 MHSS Information Management Strategic Principles
The MHSS Information Management/Information Technology Program is based on the
following principles:
Information management entails planning, programming, benefits
estimation, funding, deployment, implementation, and benefits
realization and is the responsibility of all managers throughout the
MHSS consistent with centrally developed policy.
Information management will support comparable performance measurements
across the Military Services and the private sector.
Information will be managed so it improves the understanding of how to
effectively and efficiently provide health services so that informed
choices can be made by providers and beneficiaries based on the
recognition of best value.
Information architecture will be maintained so that computing and
communications infrastructure components are interchangeable,
interoperable, and transparent to the user.
Information will be available when and where needed and protected from
unintentional or unauthorized alteration, destruction. or disclosure.
Operational efficiency will be accomplished. whenever possible, using
process reengineering to simplify and integrate common functions before
investing in new or additional information technology.
Common functions will be supported by single, integrated information
management approaches, consisting of uniform data sets. processes, and
technical standards.
New business and information management processes will be validated
through maximum use of prototyping before system-wide deployment.
Whenever practical. competitive bidding will be used to obtain
off-the-shelf products for information management from the most
cost-effective sources, rather than new development.
Processes will be engineered so that data is entered only once, at the
point of origin.
Information management capabilities will offer consistent presentation,
will be easy to use, and will be acceptable to users.
Information management capabilities will be deployed incrementally to
accelerate uniform benefit realization for all MHSS beneficiaries.
1.6.5 Emerald City
Health Affairs has developed a vision called Emerald City, with a complete set
of strategic and Automated Information System (AIS) plans in support of the
goals of military medicine and the Military Health Services System (MHSS) in the
year 2000 and beyond.
The Emerald City vision encompasses several key points:
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<PAGE> 58
1) FOCUS IS ON MEDICAL READINESS
Medical readiness encompasses the ability to mobilize, deploy, and sustain field
medical services and support all operations requiring military services; to
maintain and project the continuum of health care resources required to provide
for the health of the force; and to operate in conjunction with beneficiary
health care.
The goal of the MHSS is to support military medical readiness by
positioning the MHSS to adapt rapidly to change, to be responsive, and
to be flexible in its capability to support all users in all operational
settings-worldwide. The core IM/IT areas that are critical in providing
the flexible, responsive services necessary to meet MHSS needs include-
Business process reengineering (BPR)
Cross business area functional requirements integration
MHSS infrastructure standardization
Data standardization and implementation
Automated information system (AIS) migration
DoD-wide systems integration and open systems standards conformance that
incorporates accessibility for individuals with disabilities
A common operating environment (COE)
Performance measurements tailored to the Health business area
Information security
2) COMPATIBLE WITH GCCS AND GCSS
The MHSS technical architecture is based on the Technical Architecture Framework
for Information Management (TAFIM) client/server model and open systems
specifications that support cost-effective interoperability and scalability, the
identification of the components and services that implement the IM/IT goals,
and the development of a framework within which the systems interoperate. The
technical architecture consists of three tiers: presentation, application, and
data. The enabling framework for the technical architecture is the Health
Information Infrastructure (HII). The HII is based on the open systems
specifications contained in the Technical Architecture Framework for Information
Management (TAFIM), the Joint Technical Architecture (JTA), the Defense
Information Infrastructure (DII) Strategic Enterprise Architecture, and the
DII/COE Integration and Runtime Specification. Implementation of the HII will
ensure that the MHSS is totally integrated and fully compatible with the DII,
DII/COE, Global Command and Control System (GCCS), Global Combat Support System
(GCSS), and Defense Information Systems Network (DISN).
3) COMPATIBLE WITH DII/COE
The MHSS COE is being developed from baseline standards and requirements such as
the TAFIM, JTA, and DII COE. The DII COE primarily supports the Global Command
and Control System (GCCS) requirements with an emphasis on X-Windows client and
UNIX Server architecture. The MHSS COE will standardize on the Windows NT
client/server model (95% solution) with Unix as an acceptable alternative. It
will provide the MHSS "medical-variant" architectural principles, guidelines,
and methodologies for the development of MHSS applications software by
capitalizing on a thorough and cohesive set of infrastructure support services.
4) SUPPORTS FULL OPERATIONAL CONTINUUM
The MHSS must support the full operational continuum from the sustaining base to
the deployed unit. Scalability, flexibility, and reliability are critical
requirements for the deployed MHSS AISs to ensure that the MHSS is fully
functional and provides support for the full range of user needs in
theater/contingency and operations other than war.
Capabilities must be built into the systems and stress tested regularly during
training exercises using the deployable asset configurations to ensure that the
systems function properly and that they can be used effectively. User interface
with the systems must be standardized to ensure that system use in the theater
configuration is consistent with the peacetime operation so that no special
training is required under deployment conditions.
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<PAGE> 59
Functional requirements may vary between theater/contingency and operations
other than war. Therefore, support packages with defined capabilities must be
established for specified scenarios. Unneeded functionality must be easy to
remove to ensure that the deployed systems (hardware and software) are "lean and
mean" in weight and cube yet are capable of supporting all required
functionality for the deployed mission.
5) REQUIRES DATA, TECHNICAL AND FUNCTIONAL STANDARDIZATION
Standardization efforts are ongoing through the development of the Health
Functional Architecture, the MHSS enterprise technical architecture, and the DoD
data standardization effort. The approach to MHSS AIS migration is based on the
following basic concepts:
Support for the readiness mission is an essential and integral part of
each MHSS AIS. Common sharable: resources that form the HII COE include
the following:
Communications
Hardware
Common operating system software
Utility functions
An integrated database environment
Standardized data
Systems are composed of applications, external systems interfaces, and
subject area databases.
6) SUPPORTS RAPID ELIMINATION OF LEGACY SYSTEMS
Health Affairs has initiated action to significantly reduce the total number of
existing MHSS migration systems. The MHSS IM/IT strategic direction is
considered to be feasible, cost effective, functionally efficient, and
consistent with the anticipated DoD direction and future MHSS needs. In this
revised structure, MHSS functionality has been grouped into four major
functional categories (business areas) capable of supporting the deployed and
peacetime/sustaining base environments. The Health Functional Architecture
groups the Health functions into four major business areas: Clinical, Logistics,
Resources, and Executive Information/Decision Support. Each of these four
business areas will be supported by an information system capability that will
be a compendium of standards-based and integrated commercial off-the-shelf
(COTS), Government-off-the-shelf (GOTS), or, if no alternative exists,
MHSS-developed functional applications. These system capabilities include the
Composite Health Care System II (CHCS II), Defense Medical Logistics Standard
Support II (DMLSS II), Health Standard Resources System (HERS). and Corporate
Executive Information System (CEIS). (A fifth category, Theater, contains all
functionality of the four base categories that is relevant and necessary to the
support of any contingency mission, and excludes all functionality not needed in
the theater environment.).
7) USES DISN FOR LONG-HAUL COMMUNICATIONS SUPPORT
The MHSS will continue to rely on geographically distributed resources as its
computing environment. These distributed resources include a heterogeneous set
of computers, operating systems, system support software, applications. data,
and communications. DISN and the MHSS Data Communications Network will provide
the information transport services to local and supporting activities and will
offer a seamless and interoperable information transport in support of deployed
forces, including reach-back support. DISN and the MHSS Data Communications
Network will provide communications services that are flexible, interoperable,
survivable, highly available, high capacity, secure, responsive, and capable of
handling surge requirements.
FIGURE 2 - THE EMERALD CITY VISION
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[OPERATIONAL CONTINUUM GRAPHIC]
1.6.6 MHSS Acquisition Philosophy
Acquisition is one of the enabling tools used to help support the
current MHSS and transition the MHSS to the Emerald City vision. The D/SIDDOMS
II program is one part of the dual element MHSS acquisition philosophy. The two
elements are (1) acquisition of services and support and (2) acquisition of
information technology products. The original D/SIDDOMS contracts are currently
the prime vehicle for MHSS program managers to acquire information management
and information technology related services such as application development,
studies, integration, system deployments, technical management and support, and
operations and maintenance. D/SIDDOMS II will provide enhanced and improved
support of the same nature to support the wide range of users and programs in
the MHSS. The other side of the coin is obtaining information technology
products. MHSS uses both internal and external contracting vehicles for this
purpose, The major internal contracting vehicles are the Support Hardware and
Automation Related Products (SHARP) procurements, one of which was awarded in
January 1997 and the second of which will be awarded approximately mid-1997.
SHARP provides an extensive range of hardware, software and training products
which were specified to meet the needs of a wide cross-section of MHSS users and
programs. An important aspect of the MHSS acquisition philosophy, however, is
that it is more important to adequately meet the needs of the users than it is
to force reliance upon a few contracts. Therefore, although SHARP was developed
specifically to meet MHSS needs, if those needs can be fulfilled better through
the use of other vehicles such as GSA schedules or other government agency
contracts the MHSS acquisition managers will help the users to identify the best
source and execute the purchase. One of the services that will arise from the
D/SIDDOMS II contract is expected to be assistance for users and managers in
identifying the best products and solutions, identifying appropriate sources,
and also helping to improve the acquisition vehicles for MHSS.
2. Synopsis of Requirements
As noted earlier, the D/SIDDOMS II program consists of four Lots. A brief
synopsis of some of the major requirements for each Lot is listed below.
Information on all four Lots is being provided to indicate the extent of
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<PAGE> 61
the D/SIDDOMS II program; in their proposals offerors shall address those
elements identified in section 3 for the Lot being bid (i.e., a proposal
submitted for ETAS shall address the ETAS requirements, a proposal submitted for
DDDOM shall address the DDDOM requirements, etc.).
The following services are included in Design, Development, Deployment,
Operations and Maintenance:
Software development/maintenance process at Level III of the Capability Maturity
Model of the SEI
COE compliance
Year 2000 compliance
System Engineering
Systems Analysis
System Design and Development
System Installation, Conversion and Training
System Deployment and Implementation
Systems Operations and Maintenance Support
System Monitoring
Technical support
Database Design and Development
Technical Configuration Management
Customer Support
Documentation
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3. Lot III Design, Development, Deployment, Operations and Maintenance
(DDDOM)
3.1 Software Development/Maintenance Process
The developer shall have an established software development/maintenance process
consistent with the requirements of a Level III contractor as defined in the
Capability Maturity Model for Software of the Software Engineering Institute at
Carnegie-Mallon University. The developer shall use systematic, documented
methods for all software design and development activities. These methods shall
be described in, or referenced from the MIL-STD-498 (or its replacement) and
documented in a specific software development plan as required by delivery order
activity. The software development/maintenance process shall include the
following major activities, which may overlap, may be applied iteratively, may
be applied differently to different elements of software, and need not be
performed in the order listed below.
1. Project planning and oversight
2. Establishing a software development environment
3. System requirements analysis
4. System design
5. Software requirements analysis
6. Software design
7. Software implementation and segmentation
8. Unit/segmentation testing
9. Unit integration and testing
10. Software item qualification testing
11. Software and hardware item integration and testing
12. System qualification testing
13. Preparing for software use
14. Preparing for software transition
15. Internal development processes for:
a. Software configuration management
b. Software product evaluation
c. Software quality assurance
d. Corrective action tracking and resolution
16. Documentation of software
3.1.1 Software Development Process
The developer's software development process shall be described in a software
development plan. The developer shall identify and evaluate reusable software
products for use in fulfilling the requirements of the contract. The scope of
the search and the criteria to be used for evaluation shall be as described in
the software development plan. Reusable software products, in particular,
software segments registered as COE compliant should be used, or those that meet
the criteria shall be used where practical.
3.1.2 Presentation for DII COE Certification
Upon completion of an application, system, subsystem or other major component,
the Contractor shall perform technical and preliminary DII COE testing using the
DII developers' tool kit and shall present the tested segments to
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the current DII COE registration and certification facility. Upon successful
completion of testing, the application segment shall be registered as a DII COE
compliant segment.
3.1.3 Critical Security Requirements
The developer shall identify as security-critical those core service
applications or portions thereof whose failure could lead to a breach of system
security. If there is such software, the developer shall develop a security
assurance strategy to assure that the requirements, design, implementation, and
operating procedures for the identified software minimize or eliminate the
potential for breaches of system security. The developer shall record the
strategy in the software development plan, implement the strategy, and produce
evidence, as part of required software products, that the security assurance
strategy has been carried out.
3.1.4 Other Critical Requirements
If a system relies on software to satisfy other requirements deemed critical by
the contract or by system specifications, the Contractor shall identify those
core applications or portions thereof whose failure could lead to violation of
those critical requirements; develop strategy to assure that the requirements,
design, implementation, and operating procedures for the identified software
minimize or eliminate the potential for such violations; record the strategy in
the software development plan; implement the strategy; and produce evidence, as
part of required software products, that the assurance strategy has been carried
out.
3.1.5 Calendar Year 2000 Requirements
a. The Contractor shall ensure that new software and systems provided
under this contract are Year 2000 compliant.
b. The Contractor shall provide the capability to upgrade existing
software and systems to be Year 2000 compliant.
c. Year 2000 compliant means information technology that accurately
processes date/time data (including, but not limited to, calculating, comparing,
and sequencing) from, into, and between the twentieth and twenty-first
centuries, and the years 1999 and 2000 and leap year calculations. Furthermore,
Year 2000 compliant information technology, when used in combination with other
information technology, shall accurately process date/time data if the other
information technology properly exchanges date/time data with it.
3.2 System Engineering
Systems Engineering is the engineering of complex systems which addresses
detailed engineering and integration of all system components to include
information collection, information processing, information storage and
retrieval, information transport, information correlation and fusion,
information display, and information management systems and subsystems
components. Systems Engineering addresses the relationships between components
in a system. Engineering activities include:
1. Overall system architecture
2. Baseline assessments
3. Technical and operational requirements analysis
4. Specifications, relationships, and performance parameters
5. Technical/Economic analysis
6. System and subsystem design
7. Designs analysis and tradeoffs
8. Interface definitions
9. Integrated hardware and software design, development and
implementation
10. Networks design and implementation
11. Integration within subsystems and across overall system
12. Modeling and simulation
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13. Prototyping
14. Configuration Management
15. Engineering change Management
16. Quality Assurance
17. Test development and review
18. Test analysis and recommendation
19. Technical risk analysis
20. Leading edge technology insertion
21. Logistics support analysis
22. Communications security engineering to include Multilevel
Security (MLS) Program and Engineering Support, site surveys, MLS engineering
plans, rapid prototyping, demonstrations, assessments, and implementation of MLS
technologies
3.3 System Assessment
a. The Contractor shall have the capability to assess designated MHSS
applications for conformance with the DII COE and develop sufficient information
to plan and perform a migration, to identify and describe the application
segments, and to register certified application segments. Assessing consists of
base lining the applications. End products from the initial system assessment
shall be a report identifying potential data and application code segments (DII
COE or customer application), a proposed prioritization of the application
implementation, and/or a proposed schedule.
b. The Contractor shall have the capability to assess existing MHSS
applications for Year 2000 compliance.
c. Assessment data shall be submitted to DMIM for inclusion into a MHSS
assessment database.
3.4 Engineering, Reengineering, Segmentation and/or Testing
The Contractor shall provide engineering/reengineering support of selected
applications into application segments in accordance with the most current DII
COE Integration and Runtime Specification (I&RTS). Application
engineering/Reengineering shall include, but not be limited to, decomposing
selected systems, application, subsystems, and/or functions into applications
DII COE compliant segments; performing functional testing, reassembling the
segments into the engineered/reengineered application; performing systems and
performance testing, and performing DII COE compliance testing. The engineered
applications shall be at a minimum DII COE conformance level five as defined in
the current I&RTS.
3.5 Technical Support
The Contractor shall provide technical support in areas that supplement the
design stage activities. This may include, but not be limited to, information
and design reports on specialized software (i.e., languages, database management
software (DBMS), client server applications, etc.); analysis and evaluation of
existing government and commercial off-the-shelf application support software
packages to include baseline assessments and application segmentation; review
and evaluation of management, planning, security, audit and other products;
attendance at planning sessions and evaluation and modification of previously
prepared design stage documents. The Contractor may also be called upon to
develop schedules and implementation plans with definable deliverables including
parallel operations where required. They also may include the following:
l. Deriving requirements from a variety of sources such as engineering
studies, commercial and Defense research and development technical
reports, Federal standards evolution, operational requirements, policies
and doctrines, technical guidelines, and performance analyses and
benchmarking, and industry best practices;
2. Performing reviews to identify technical and operational issues and
problems such as requirements definition, architecture and policy
compliance. and engineering guideline development or compliance
assessments for the MHSS;
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3. Recommending opportunities for resolving issues in requirements,
data, applications, and infrastructure elements;
4. Analyzing and reporting impacts on issues such as costs, engineering
trade-offs, return on investment, schedule dependencies, and technically
feasible alternatives and solutions.
3.6 Documentation
The Contractor shall develop documentation for items such as studies, analyses,
assessments, system implementations and architectures, engineering designs, and
information brochures. This documentation may involve items originated by the
contractor as well as government provided topics. The data items will be
identified by task order. Provide services to ensure that all systems are
properly documented in accordance with approved DoD standards and the provisions
of MIL-STD-498, "Software Development and Documentation", or its replacement.
Provide a documentation database for application software development. Ensure
that the inventory of system documentation and use is correct and up-to-date,
including identification of missing, outdated, or invalid documentation.
Conduct/attend walk-throughs and/or meetings where developed documentation is
discussed. Respond to government issues and questions, prepare modifications to
all or part of the documentation, respond to management concerns with any
additional or supporting information when required.
3.7 Systems Analysis
Provide support services for the development of systems technical requirements,
interface requirements, data and systems technical performance requirements. The
technical support services shall include, but not be limited to, the development
of systems concepts and implementation approaches, technical feasibility and
alternative analyses, and trade-off studies.
3.8 Systems Design and Development
Provide support services for the design, development and testing of systems.
Provide support for new system development and system enhancements and the
preparation of detailed systems designs. Detailed systems designs shall include,
but not be limited to, detailed data and process models, program specifications,
interface specifications, screen and report designs, prototypes, program control
specifications, structure charts, module definitions, compile or build units,
data usage definitions and networking or teleprocessing considerations. For any
given delivery order, any or all of the following activities may be required.
a. Define and use an integrated CASE technology environment including
tools, techniques and end-user participation in the total rapid application
development process to capture requirements, provide requirements traceability,
construct and generate source code and produce executable code modules.
b. Establish the detailed system architecture to include a system
schematic, subsystem descriptions, hardware and software specifications to
include sizing and performance requirements, systems interface requirements and
systems control requirements.
c. Design database and hie structures to include definitions of file
characteristics, file layouts, data dictionary entries, file indices for each
subsystem and database schema and subschema.
d. Finalize input and output designs to include data flows, data
dictionary entries, dialogue specifications and lists of all inputs and outputs
by subsystem.
e. Define special design considerations to include network design
approaches, teleprocessing design specifications, data control, security and
audit procedures: archived, historical, current data purging and data entry
criteria, scheduling; disaster recovery, special quality assurance factors and
configuration control requirements.
f. Define program design specifications to include detailed processing
logic for each module, data dictionary entries for parameter data and a list of
compile and load units for each design unit and their component modules.
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g. Finalize test, conversion and implementation plans to include system
test plans, beginning at the unit and module level, progressing through full
systems integration testing, user acceptance testing, prototype testing and
culminating in Alpha/Beta testing; test case specifications and the required
output to ensure test acceptance.
3.9 Installation, Conversion and Technical Training
Provide support for all aspects of planning, controlling and overseeing the
successful installation, initial training, conversion and acceptance of
system(s), whether contractor developed or resulting from the integration of
current or modified operational systems, or any combination thereof. Such
support shall be provided in accordance with test and acceptance plans and
procedures.
3.9.1 Installation, Conversion and Training for Systems Developed under this
Contract
Provide support set vices and all material required for all aspects of deploying
approved standard/common/migration applications/systems. All services provided
in this task shall use and be integrated with approved DoD standard
communications, security, data, and other defined technical solutions (e.g.,
GCCS, GCSS, Defense Information Systems Network (DISN), DII Control Concept,
Defense Message System (DMS), ShaDE, Multilevel Information Systems Security
Initiative (MISSI)). Applications shall be integrated with existing
infrastructure or built with new infrastructure in compliance with DoD approved
standards and architectures (i.e., DII COE, TAFIM, DII COE I&RTS and Joint
Technical Architecture). Tasks in this area include, but are not limited to,
controlling, overseeing, and conducting the successful installation,
segmentation/unit installation, and developing and/or conducting initial
training and ongoing training. This task area includes site surveys, site
planning, site installation, initial system file and table builds, data
acquisition/conversion, and installation tests. Tasks may include the support
services necessary to convert from one or more legacy systems to the migration
application(s) to include steps such as parallel operations.
3.10 Systems Operations Support
Provide systems operations support to include, but not be limited to, technical
and administrative operation and support for MHSS information systems.
3.10.1 System and Network Services
Perform system and network operation and administration services to include
reporting on system status, operation and performance and determinations of
system change requirements based on operational characteristics and forecasted
workloads.
3.10.2 Documentation Maintenance
Perform maintenance of documentation related to systems operations and oversight
to include system operating procedures, activity and status logs, and downtime
and Mean-Time-Between-Failure (MTBF) statistics on all major system components.
3.10.3 Problem Identification
Perform routine system problem identification to include diagnosis and
resolution as defined in the system control and configuration management
procedures.
3.10.4 Perform LAN Administration
Perform LAN administration and oversight to include configuration and access
control, basic troubleshooting and maintenance of the standard LAN software and
hardware configurations.
3.10.5 Customer Support
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Provide the necessary support and resources to operate a customer support
function to include, but not be limited to, a help-desk facility; dial-up access
to provide information, tools, techniques and procedures to assist information
systems users at all levels; automated support for management of the customer
service function; problem reporting and resolution of customer problems; and
support to new and existing customer information and support centers.
3.10.6 Management and User Training
Provide training support for all levels of information systems managers and
users to include development of alternative training scenarios, development of
recommendations for appropriate training approaches to include, but not be
limited to, centralized, regional, on-site, train-the-trainer,
train-the-end-user; the preparation of training plans; development of training
curricula and materials for management, technical specialists and end users;
preparation of materials and schedules; and administration and conduct of
training sessions on Government and Contractor sites.
3.10.7 Systems Maintenance Support
Provide support for the maintenance of software and/or hardware for the current
systems and systems delivered during the period of performance of this contract
to include, but not be limited to, analysis of problem or change request(s),
preparation of resource estimates and schedules to effect necessary changes,
design and code changes, conduct testing of all changes, complete and/or update
all documentation affected by the required change(s), and coordination of change
implementation through appropriate approvals as required by the contractor's
configuration management procedures.
3.11 Miscellaneous Tasks
3.11.1 General Software Support Services
Conduct/attend walkthroughs and/or meetings where contractor maintained software
is discussed. Participate in Integrated Product Teams as directed by the
Government.
3.11.2 Issues and Questions
Provide responses to issues and questions, modifications to all or part of the
software, responses to management concerns and any additional or supporting
information where required.
3.11.3 Maintenance-Related Activities
Provide general support in areas that supplement the maintenance activities to
include, but not be limited to, information and reviews on specialized tools,
techniques and methods for increasing the efficiency and cost effectiveness of
the systems maintenance process.
3.11.4 Data Acquisition
Provide the necessary support to collect, enter, verify and validate all input
data to MHSS systems, ensure that all data sources meet the specifications of
the Standard Data Dictionary and report anomalies, errors or other potential
problems to the appropriate System Administrator.
4. Management
The Contractor shall ensure a management approach for planning, organizing,
managing and reporting staff and task activities is in place for all Delivery
Orders throughout the period of performance of this contract. The contractor
shall conduct project planning and control in accordance with the approved
Program Management Plan provided in the contractor's proposal. Management
activities shall not be directly billed but should be included in G&A.
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4.1 Management
The Contractor shall provide all services to effectively plan for, perform, and
manage the activities supporting this contract. Tile following are descriptions
of the various categories of program management services that are
representative, but not necessarily inclusive of, activities that the Contractor
shall be required to perform under this task.
4.1.1 Program Management Plan
The Contractor shall prepare, maintain, and execute a Program Management Plan to
ensure timely and cost-effective accomplishment of task activities under this
contract and early identification and correction of problems and issues.
a. This plan shall describe organization, resources, and management
policies and procedures, including subcontractor and Government-provided
property management, that the Contractor shall employ to meet the cost,
performance, and schedule requirements throughout the period of performance.
b. The Program Management Plan shall include a delivery order annex that
describes the technical approach, types of organizational resources and
management controls that the Contractor will employ to meet the contract,
performance, cost and schedule requirements of a typical Delivery Order.
c. The Program Management Plan shall include a transition annex that
describes the technical approach, types of organizational resources and
management controls that the Contractor will empty to conduct a typical
transition for both a phase-in and phase-out of services and support.
4.1.2 Post-Award Plans
After award, in addition to maintaining a current Program Management Plan, the
following plans shall be provided:
a. A Delivery Order Plan shall be provided with each Delivery Order
throughout the period of performance which shall include the technical approach,
organizational resources, Gantt chart and management controls specific to that
Delivery Order. The Gantt chart shall be updated monthly with actual work
accomplishes and shall be included in the monthly report (see paragraph 4.3.2
and Attachment J.20)
b. The Contractor shall prepare and execute Transition Plans to ensure
an orderly phase-in and phase-out of services and support currently provided
under the incumbent and subsequent contract and other contracts. This plan shall
identify the Contractor's Program Manager and shall address how the Contractor
will assume responsibility for services and support. The plan shall include
facilities implementation, staff training and deployment, and other activities
the Contractor deems necessary for successful transition. Throughout transition,
the Contractor shall prepare a chronology or other appropriate record of lessons
learned from transition activities.
4.1.3 Communications with the Government
The Contractor shall provide at least the following means of communications with
the Government:
1. Telephone
2. Facsimile
3. Electronic mail
4. Downloadable User's Guide describing at least services,
procedures and points of contact
5. Internet Home Page
4.2 Quality Assurance
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The Contractor shall ensure that a Total Quality Management (TQM) approach is
implemented and followed throughout the performance period of this contract in
accordance with the Contractor's proposal.
4.3 Reporting Requirements
The Contractor shill submit the following reports and other deliverables in
accordance with the delivery schedule in Section F.
4.3.1 Monthly Progress Reports
These reports shall address total contract work activity for the reporting
period and will individually address each active delivery order. The COR shall
receive one hard copy and one electronic copy of the complete report (summary
reports plus individual DO report) and the Government Task Manager shall receive
at least one hard copy and one electronic copy of all individual DO reports. The
following outline applies and sample formats are included in Section J, Monthly
Progress Report Formats:
Cover Page/Memo
Contract Summary Report Sample A
Contract Other Direct Expense Report Sample B
Delivery Order Reports
Cover Page Sample C
Narrative Summary Sample D
Labor Hours (Name) Report Sample E(or sample F as applicable)
Updated Gantt chart
4.3.2 Delivery
Reports delivered by the Contractor in performance of this contract shall be
considered "Technical Data" as defined in the applicable "Rights in Data" clause
of the General Provisions.
1. Bulky reports shall be mailed by other than first-class mail
unless the urgency of submission requites use of first-class
mail. In this situation, one (1) copy shall be mailed
first-class and the remaining copies forwarded by less than
first-class postage.
2. Except for reports designated specifically for the COR, reports
and other deliverables shall be delivered to the Government Task
Manager unless otherwise stated in the DO.
2. The heading of all reports shall contain the following
information:
Contract Number Name of Contractor
Contractor's Program Manager
Name and Phone Number
Short Title of the Contract Name of the Contract Officer's
Representative (COR)
In addition, for each delivery order:
Delivery Order Number Contractor's Task Manager Name and Phone
Number
Delivery Order Name Government Task Manager
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5. Standards and Applicable Documents
All work performed and documentation supplied under this contract shall be in
compliance with the provisions of the standards and documents in Section J,
Reference Documents. Additional or different standards may be specified in
individual task orders.
6. Facilities and Support Requirements
The Contractor shall provide both on-site and off-site rates to provide a fully
supported project office per Delivery Order. It will be the Government's option
whether the Contractor shall provide office spaces, telephone, or automated data
processing (ADP) support. If the Government directs the Contractor to provide
these things, the Contractor shall provide a fully supported office to include
all space, furniture, materials, supplies, telephone or ADP support (or any
combination directed by the Government) within close proximity to Skyline 3,
5201 Leesburg Pike, Falls Church, VA 22041-3201. The size and complexity of this
effort requires that the contractor's personnel be readily available to the
Government sponsor. If the Government directs the Contractor to sustain its own
network, the Contractor will provide a gateway (to be specified by contract
award) for connection to the Health Affairs Local Area Network (LAN) or for
remote access as required. The Government reserves the right to provide
gateways, remote access or other ADP support on a case-by-case basis. The
project office shall provide for all day-to-day contractor's staff interaction
with their Government sponsors per Delivery Order.
6.1 Support Tools and Methods
The Contractor shall ensure that automated resources and procedures shall be
used, wherever possible, to maintain the most cost-efficient and cost-effective
use of Government funds. The Contractor shall have the capability to format
electronic deliverables in MicroSoft Office applications (release to be
determined by the Government) or in additional formats if needed for specific
Delivery Orders. The Contractor shall have the capability to provide all
electronic deliverables via electronic mail, the Contractor's Internet home
page, or on a 3 1/2 inch IBM compatible diskette or in hard copy if so
requested. The Contractor's software shall be capable of producing high quality
"camera-ready" copies of deliverables. The Contractor's software shall also be
capable of producing high quality graphics for use in contract deliverables as
necessary. The deliverable shall normally be a MS Word file via email or
diskette: additional or different formats and methods of delivery will be stated
in each DO. Gantt charts shall be provided in one of the following software
products unless a different product is approved by the Task Manager: Primarvera
P3 Project Planner 2.0 or Microsoft Project 4.0.
7. Personnel Skill Mix, Experience and Education
This contract identifies educational and experience qualifications for the
Contractor support staff. The qualifications of any personnel proposed by the
Contractor for these services shall be guided by the guidelines outlined below.
After award, Contractor may apply for waiver of education or experience
guidelines on a case-by-case basis when proposing personnel with unique
capabilities or high-demand/low availability skills in new technologies,
techniques or programming tools needed for individual delivery orders.
7.1 Labor Categories
a. The Labor Categories of Program Manager, Task Manager and Principal
Open Systems Engineer are designated as Key Personnel.
b. The Contractor shall provide, but not be limited to, personnel with
the skills described below. While the core staff onboard is expected to perform
the work, the Contracting Officer reserves the right to specify and/or approve
consultants/area specialists whenever necessary to perform highly specialized
functions not identified in the below categories due to evolving requirements
and technology not identified at the time of contract award.
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Subcontract No. D/SID2-SC-98-251
ATTACHMENT E
SECURITY REQUIREMENTS
<PAGE> 72
J.6 SECURITY REQUIREMENTS
This attachment describes types of general security requirements which apply to
work done for the MHSS. These requirements are extracted from various pertinent
security directives, instructions, etc. The Personnel Security requirements
apply to all labor categories as noted in Section J, Statement of Work. Other
requirements will apply decoding on the nature of the work being performed.
J.6.1 PERSONNEL SECURITY PROGRAM REQUIREMENTS - DoD 5200.2-R
Identify personnel (military, civilian, consultants, and contractors) who occupy
automated data processing (ADP) positions where their duties meet the criteria
for ADP-I, ADP-II, or ADP-III sensitivity designations, as described in Appendix
K. DoD 5200.2-R.
Contractor personnel performing on unclassified automated information systems
must be assigned to one of three position sensitivity designations before
commencing work on D/SIDDOMS
1. Critical-Sensitive Positions (ADP-I positions): Those positions in
which the incumbent is responsible for the planning, direction, and
implementation of a computer security program; major responsibility for
the direction, planning and design of a computer system, including the
hardware and software; or, can access a system during the operation or
maintenance in such a way, and with a relatively high risk for causing
grave damage, or realize a significant personal gain. ADP-I positions
require a Background Investigation (BI).
2. Noncritical-Sensitive Positions (ADP-II positions): Those positions
in which the incumbent is responsible for the direction, planning,
design, operation, or maintenance of a computer system, and whose work
is technically reviewed by a higher authority of the ADP-I category to
insure integrity of the system. ADP-II positions require a National
Agency Check plus Written Inquiries (NACI) or a DoD NACI (DNACI).
3. Nonsensitive Positions (ADP-III positions): All other positions
involved in computer activities, ADP-III positions require a National
Agency Check (NAC).
J.6.2 MINIMUM GENERAL SECURITY REQUIREMENTS - DoD DIRECTIVE 5200.28
Accountability. Implement safeguards to ensure individuals with access to an
automated information system (AIS) are held accountable for their actions. A
manual or automated audit trail must be implemented that documents the
following: identity of each person and device having access; time of access;
user activities; activities that might modify, bypass, or negate safeguards
controlled by the AIS security relevant actions associated with period
processing, or the changing of security levels or categories of information.
Access. Implement an access control policy that will positively identify each
user who is authorized to access the AIS before allowing access.
SECURITY TRAINING AND AWARENESS. Establish a security training and awareness
program that will ensure all persons responsible for the AIS or information
processed and/or maintained by the AIS, or all persons who access the AIS, are
aware of proper operational and security-related procedures and risks.
PHYSICAL CONTROLS. Protect hardware, software, documentation, and data from
unauthorized disclosure, destruction or modification. Protective means can
include personnel, physical, administrative, and configuration controls. The
level of control must be commensurate with the maximum sensitivity of the
information.
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MARKING. Mark AIS output media, and media containers to accurately reflect the
sensitivity of information. Mark unclassified sensitive information in
accordance with Enclosure 3, paragraph S, DoDD 5200.28, and Chapter IV, DoD
5400.7-R.
LEAST PRIVILEGE. Ensure the AIS functions in a manner that each user has access
only to information to which the user is entitled, and no more.
DATA CONTINUITY. Control accessibility, maintenance, movement, and disposition
of each file or data collection so that each has an identifiable source
throughout its life cycle and is governed by security clearance, formal access
approval, and need-to-know.
DATA INTEGRITY. Implement safeguards to detect and minimize inadvertent
modification or destruction of data, and detect and prevent malicious
destruction or modification of data.
CONTINGENCY PLANNING. Develop and test a contingency plan to ensure AIS security
controls function reliably, and are maintained continuously during periods of
interrupted service. Ensure the plan includes procedures to recover data that
has been modified or destroyed.
ACCREDITATION. Accredit each AIS and network to operate in accordance with a set
of Designated Approving Authority (DAA) approved security safeguards.
RISK MANAGEMENT. Implement a risk management program to determine how much
protection is required by the AIS, the level provided, how much exists, and the
most economical way of providing the needed protection.
J.6.3 C2 SECURITY REQUIREMENTS - DoD 5200.28-STD
DISCRETIONARY ACCESS CONTROL. Restrict access to objects (e.g., Hies) based on
the identity of individuals or defined groups of individuals, to protect objects
from unauthorized access and to limit propagation of access rights.
OBJECT REUSE. Eliminate all residual data from a medium (page frame, disk
sector, magnetic tape) before reassignment of that medium from one subject to
another subject.
IDENTIFICATION AND AUTHENTICATION. Identify each individual user of the system
prior to allowing user activity on that system. Establish protective mechanisms
(e.g., passwords) to authenticate the user's identity and to associate this
identity with all auditable actions taken by that user. Authentication data is
to be protected so that it cannot be accessed by any unauthorized user.
Individual accountability is to be enforced by providing the capability to
uniquely identify each individual system user.
AUDIT. Create and maintain an audit trail so that all actions affecting the
security of a system can be traced to the responsible party based on individual
identity. The system must also protect the audit information from modification
or unauthorized access or destruction. The following events must be recorded:
- use of identification and authentication mechanisms;
- introduction of objects into a user's address space, e.g., file
open, program initiation deletion of objects
- actions taken by computer operators and system administrators
and/or system security officers, and other security relevant
events.
For each recorded event, the audit record shall identify:
- date and time of the event
- user ID and password
- type of event
- success or failure of the event
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For identification and authentication events, the origin of request,
e.g., terminal ID), shall be included in the audit record. For events
that introduce an object into a user's address space, and for object
deletion events, the audit record shall include the name of the object.
The ADP system administrator shall be able to audit selectively the
actions of any one or more users based on individual identity.
SYSTEM ARCHITECTURE. Create and maintain a domain for execution to protect the
Trusted Computing Base (TCB) from external interference or tampering, so that
the TCB may protect its resources via access controls and audit trails.
SYSTEM INTEGRITY. Provide hardware/software features that will validate the
correct operation of the hardware/software/firmware elements of the TCB.
SECURITY TESTING. Test security protection mechanisms to confirm that they work
as claimed in the system documentation. Search for obvious flaws that would
enable bypass of the security mechanisms, violation of resource isolation, and
unauthorized access to the audit or authentication data.
SECURITY FEATURES USERS GUIDE. Prepare a section in the user documentation
describing the protection mechanisms provided by the TCB, guidelines on their
use, and how they interact with one another.
TRUSTED FACILITY MANUAL. Prepare documentation presenting the cautions about
functions and privileges needing to be controlled when running a secure
facility, as well as procedures for examining and maintaining audit files.
Provide a detailed audit record structure for each type of audit event.
TEST DOCUMENTATION. Prepare documentation that describes the test activities and
results of the security mechanisms functional testing.
DESIGN DOCUMENTATION. Make available the manufacturer's documentation that
describes their philosophy of protection and how it is translated into the TCB,
and if distinct TCB modules exist, the description of the interfaces between
these modules.
J.6.4 FREEDOM OF INFORMATION ACT (FOIA) REQUIREMENTS - DoD 5400.7-R
FOR OFFICIAL USE ONLY. Where sensitive unclassified information meets the
criteria of FOIA Exemptions (exemptions 2 through 9), mark and safeguard the
information as "FOR OFFICIAL USE ONLY," as prescribed in Chapter IV, DoD
5400.7-R.
J.6.5 PRIVACY ACT PROGRAM REQUIREMENTS - DoD 5400.11
PRIVACY PROGRAM GENERAL REQUIREMENTS. Establish safeguards to ensure that
records in every system of records that contains personal information covered by
DoD 5400.7-R, are marked and protected as "FOR OFFICIAL USE ONLY."
PRIVACY PROGRAM ADMINISTRATIVE REQUIREMENTS. Establish administrative safeguards
to ensure records in every system of records are protected from unauthorized
disclosure or alteration and that their confidentiality is protected. Safeguards
include measures to mark and protect information, media and computer resources
subject to the DoD Privacy Program; recovery procedures to ensure data
integrity; and computer security training.
PRIVACY PROGRAM PHYSICAL REQUIREMENTS. Establish physical safeguards to ensure
records in every system of records are protected from identified threats that
could result in unauthorized access or alteration and that their confidentiality
is protected. Safeguards include access controls to areas that contain personal
information; protection of on-line devices that directly link to ADP systems
that contain personal information; and appropriate disposal techniques for paper
records. (Paragraph D, Appendix A, DoD 5400.11-R)
J.6 - 3
<PAGE> 75
PRIVACY PROGRAM TECHNICAL REQUIREMENTS. Establish technical safeguards to ensure
records in every system of records are protected from unauthorized disclosure or
alteration and that their confidentiality is protected. Safeguards include
encryption of sensitive unclassified information (only if a comprehensive risk
assessment indicates that it is a cost-effective measure); complete removal of
residual data from magnetic media; control access by dial-up devices via
computer-verified passwords; and controls to assure that passwords grant access
only to data elements required, and no more. (Paragraph E, Appendix A, DoD
5400.11-R)
PRIVACY PROGRAM RISK ASSESSMENT REQUIREMENTS. Conduct a formal risk assessment
for ADP installations that process unclassified personal information to
safeguard against the likelihood of compromise or threats to the information
contained within the installation. This requirement includes installations with
terminals and devices having access to ADP facilities. A formal risk assessment
shall be conducted at the beginning of the design phase of each new unclassified
ADP installation, or for each existing unclassified ADP installation that will
begin processing personal data on a regular basis. The assessments shall be
reconducted every 5 years or whenever a change takes place within tile
installation that warrants this activity. (Paragraph H, Appendix A, DoD
5400.11-R)
J.6.6 LIFE CYCLE MANAGEMENT REQUIREMENTS - DoD 8120.1
LIFE CYCLE MANAGEMENT REQUIREMENTS. Incorporate operational requirements for
security in all AIS programs (paragraph D.2, DoDD 8120.1). Include adequate
internal controls in AIS planning and design to provide reasonable assurance
that the recording, processing, and reporting of data are properly performed
during the operation of the AIS, and that there is conformance with applicable
security regulations, policy, and requirements (paragraph F.6, DoDD 8120.1).
Minimum accomplishments required during the life cycle management phases
include: the development of security specifications based on identified security
requirements and consideration of potential threats and vulnerabilities;
identification of risk areas and definition of risk reduction measures,
management approaches, and plans; security testing and evaluation to certify
that technical security features and other safeguards satisfy specified security
requirements before the initiation of operational testing; the establishment of
procedures for ensuring the continuous use of approved security safeguards
during the Production and Deployment Phase; and ensuring security safeguards arc
in use during the Operations and Support Phase (paragraphs D.4, G.4.i.K.4.a.2,
K.4.b.3, K.4.c.3, M.4.b, N.4.a of DoD Instruction 8120.2, Enclosure 3).
J.6 - 4
<PAGE> 76
Subcontract No. D/SID2-SC-98.251
ATTACHMENT F
WAGE DETERMINATION
<PAGE> 77
J.9 WAGE DETERMINATION
This attachment has two parts.
Part one contains the wage determination information submitted to the Department
of Labor on SF98 and SF98A.
Part two contains the wage determination information that was received from the
Department of Labor.
Part one starts on next page.
J.9 - 1
<PAGE> 78
Rev. Feb. 1973 NOTICE OF INTENTION TO MAKE A 1234359
U.S. DEPARTMENT OF LABOR A SERVICE CONTRACT AND RESPONSE TO NOTICE
EMPLOYMENT STANDARDS
ADMINISTRATION (See Instructions on Reverse)
MAIL TO: 2. Estimated solicitation date (use
Administrator numerals)
Wage and Hour Division Month 04 Day 01 Year 97
U.S. Department of Labor
Washington, D.C. 20210 3. Estimated date bids or proposes to
be opened or negotiations begun (use
numerals)
Month 06 Day 02 Year 97
4. Date contract performance to begin
(use numerals)
Month 10 Day 01 Year 97
5. PLACE(S} OF PERFORMANCE 6. SERVICES TO BE PERFORMED (describe)
Washington Metropolitan Area Functional Area Support. Enterprise Tech
Analysis & Support. Design, Development,
Operations & Maintenance. Emerging
Technology Solutions Support.
7. INFORMATION ABOUT PERFORMANCE
A. [ ] Services now B. [ ] Services now C. [ ] Services not
performed by a performed by Federal presently being
contractor employees performed
8. IF BOX A IN ITEM 7 IS MARKED, COMPLETE ITEM 8 AS APPLICABLE
a. Name and address of incumbent b. Number(s) of any wage
contractor determination(s) in incumbent's
contract
SEE ATTACHED 94-2103 Revised No. 3
c. Name(s) of union(s) if services am
being performed under collective RESPONSE TO NOTICE
bargaining agreement(s). Important: (by Department of Labor)
Attach copies of current applicable
collective bargaining agreements.
A. [ ] The attached wage
determination(s) listed below
apply to procurement.
------------------------------------
------------------------------------
9. OFFICIAL SUBMITTING NOTICE
SIGNED: DATE B. [ ] As of this date, no wage
(original signed) 12 Feb 97 determination applicable to the
specified locality and classes of
employees is in effect.
TYPE OR PRINT TELEPHONE NO. C. [ ] From information supplied, the
Delene Snell (703) 681-9535 Service Contract Act does not apply
(see attached explanation).
10. TYPE OR PRINT NAME AND TITLE OF
PERSON TO WHOM RESPONSE IS TO BE D. [ ] Notice returned for additional
SENT AND NAME AND ADDRESS OF information (see attached
DEPARTMENT OF AGENCY, BUREAU, explanation).
DIVISION, ETC.
Delene Snell, Contracting Specialist Signed:
Defense Supply Service - Washington ---------------------------------
5200 Army Pentagon (U.S. Department of Labor)
Washington, D.C. 20310-5200
---------------------------------
(Date)
J.9 - 2
<PAGE> 79
<TABLE>
<CAPTION>
Rev. Feb. 1973 NOTICE OF INTENTION TO MAKE Notice No.
U.S. DEPARTMENT OF LABOR A SERVICE CONTRACT AND RESPONSE TO NOTICE A 1234359
EMPLOYMENT STANDARDS
ADMINISTRATION (Attachment A) Page 3 of 4
12. CLASSES OF SERVICE 13. NUMBER OF 14. HOURLY WAGE RATE
EMPLOYEES TO BE EMPL EMPLOYEES THAT WOULD BE
ON CONTRACT IN EACH CLASS PAID IF FEDERALLY
EMPLOYED
<S> <C> <C>
Program Manager 40.19 $41.37
Task Manager 198.38 $29.77
Systems Engineer - Senior 106.79 $28.89
Systems Engineer - Middle 106.79 $25.03
Systems Engineer - Junior 106.79 $24.30
Open Systems Engineer - Principal 21.52 $29.77
Open Systems Engineer - Senior 21.52 $28.89
Open Systems Engineer - Middle 21.52 $25.03
Open Systems Engineer - Junior 21.52 $24.30
Telecommunications Electronics Engineer - Senior 24.61 $28.89
Telecommunications Electronics Engineer - Middle 24.61 $25.03
Telecommunications Electronics Engineer - Junior 24.61 $24.30
Information Engineer - Principal 32.05 $29.77
Information Engineer - Senior 32.05 $28.89
Information Engineer - Middle 32.05 $25.03
Information Engineer - Junior 32.05 $24.30
Functional Application Analyst - Senior 29.14 $28.89
Functional Application Analyst - Middle 29.14 $25.03
Functional Application Analyst - Junior 29.14 $24.30
Computer Scientists / Systems Analyst - Senior 75.47 $28.89
Computer Scientist / Systems Analyst - Middle 75.47 $25.03
Computer Scientist / Systems Analyst - Junior 75.47 $24.30
Computer Security Systems Engineer - Senior 41.35 $28.89
Computer Security Systems Engineer - Middle 41.35 $25.03
Computer Security Systems Engineer - Junior 41.35 $24.30
Computer Security Systems Engineer - Technician 41.35 $28.89
Software Engineer - Senior 97.53 $28.89
Software Engineer - Middle 97.53 $25.03
Software Engineer - Junior 97.53 $24.30
System Programmer - Senior 118.14 $28.89
System Programmer - Middle 118.14 $25.03
System Programmer- Junior 118.14 $24.30
General Scientific Professional - Senior 47.24 $28.89
General Scientific Professional - Middle 47.24 $25.30
General Scientific Professional - Junior 47.24 $24.30
General Management Professional - Senior 35.15 $28.89
General Management Professional - Middle 35.15 $25.03
General Management Professional - Junior 35.15 $24.30
Technician 149.26 $25.03
Administrative Assistant - High Skill 39.9 $28.89
Administrative Assistant - Medium Skill 39.9 $25.03
Administrative Assistant - Low Skill 39.9 $24.30
Database System Operator - Senior 38.26 $28.89
Database System Operator - Middle 38.25 $25.03
Database System Operator - Junior 38.25 $24.30
Security Professional/Facility Security Officer 28.69 $29.77
Operations Support Assistant 91.04 $25.03
Operations Support Coordinator 46.57 $29.77
Business Process Engineer - Principal 31.45 $29.77
Business Process Engineer- Senior 31.45 $28.89
</TABLE>
J.9 - 4
<PAGE> 80
<TABLE>
<CAPTION>
Rev. Feb. 1973 NOTICE OF INTENTION TO MAKE Notice No.
U.S. DEPARTMENT OF LABOR A SERVICE CONTRACT AND RESPONSE TO NOTICE A 1234359
EMPLOYMENT STANDARDS
ADMINISTRATION (Attachment A) Page 4 of 4
12. CLASSES OF SERVICE 13. NUMBER OF 14. HOURLY WAGE RATE
EMPLOYEES TO BE EMPL EMPLOYEES THAT WOULD BE
ON CONTRACT IN EACH CLASS PAID IF FEDERALLY
EMPLOYED
<S> <C> <C>
Business Process Engineer - Middle 31.45 $25.03
Cost Analyst 11.17 $25.03
Electronic Meeting Technographer 11.52 $17.26
Training Specialist - Senior 43.04 $28.89
Training Specialist 43.04 $25.03
Help Desk Manager 86.04 $25.03
Help Desk Specialist 114.78 $24.30
Installation Technician - Senior 71.98 $25.03
Installation Technician 71.98 $24.30
System Administrator 172.17 $29.77
System Operator 172.17 $25.03
Network Manager 157.18 $25.03
Network Technician 99.78 $24.30
Repair Technician - Senior 14.34 $28.89
Repair Technician 14.34 $25.03
Quality Assurance Manager 39.65 $28.89
Quality Assurance Analyst 39.65 $25.03
</TABLE>
J.9- 5
<PAGE> 81
Part two starts on next page.
J.9 - 6
<PAGE> 82
Rev. Feb. 1973 NOTICE OF INTENTION TO MAKE A 1234359
U.S. DEPARTMENT OF LABOR A SERVICE CONTRACT AND RESPONSE TO NOTICE
EMPLOYMENT STANDARDS
ADMINISTRATION (See Instructions on Reverse)
MAIL TO: 2. Estimated solicitation date (use
Administrator numerals)
Wage and Hour Division Month 04 Day 01 Year 97
U.S. Department of Labor
Washington, D.C. 20210 3. Estimated date bids or proposes to
be opened or negotiations begun (use
numerals)
Month 06 Day 02 Year 97
4. Date contract performance to begin
(use numerals)
Month 10 Day 01 Year 97
5. PLACE(S} OF PERFORMANCE 6. SERVICES TO BE PERFORMED (describe)
Washington Metropolitan Area Functional Area Support. Enterprise Tech
Analysis & Support. Design, Development,
(District of Columbia, DC) Operations & Maintenance. Emerging
Technology Solutions Support.
7. INFORMATION ABOUT PERFORMANCE
A. [ ] Services now B. [ ] Services now C. [ ] Services not
performed by a performed by Federal presently being
contractor employees performed
8. IF BOX A IN ITEM 7 IS MARKED, COMPLETE ITEM 8 AS APPLICABLE
a. Name and address of incumbent b. Number(s) of any wage
contractor determination(s) in incumbent's
contract
SEE ATTACHED 94-2103 Revised No. 3
c. Name(s) of union(s) if services are
being performed under collective RESPONSE TO NOTICE
bargaining agreement(s). Important: (by Department of Labor)
Attach copies of current applicable
collective bargaining agreements.
A. [ ] The attached wage
determination(s) listed below
apply to procurement.
94-2103 (Rev 10)
------------------------------------
------------------------------------
9. OFFICIAL SUBMITTING NOTICE
SIGNED: DATE B. [ ] As of this date, no wage
(original signed) 12 Feb 97 determination applicable to the
specified locality and classes of
employees is in effect.
TYPE OR PRINT TELEPHONE NO. C. [ ] From information supplied, the
Delene Snell (703) 681-9535 Service Contract Act does not apply
(see attached explanation).
10. TYPE OR PRINT NAME AND TITLE OF
PERSON TO WHOM RESPONSE IS TO BE D. [ ] Notice returned for additional
SENT AND NAME AND ADDRESS OF information (see attached
DEPARTMENT OF AGENCY, BUREAU, explanation).
DIVISION, ETC.
Delene Snell, Contracting Specialist Signed: (Clarence J. Strain --
Defense Supply Service - Washington original signed)
5200 Army Pentagon ---------------------------------
Washington, D.C. 20310-5200 (U.S. Department of Labor)
---------------------------------
(Date)
J.9 - 7
<PAGE> 83
REGISTER OF WAGE DETERMINATIONS U.S. DEPARTMENT OF LABOR
UNDER THE SERVICE CONTRACT ACT EMPLOYMENT STANDARDS
By direction of the Secretary of Labor ADMINISTRATION WAGE AND HOUR
DIVISION
WASHINGTON, D.C. 20210
Wage Determination No.: 94-2103
Alan L. Moss Division of Revision No.: 10
Director Wage Determination Date of Last Revision: 02/03/1997
State(s): Dist. of Col.. Maryland, Virginia
AREA: MARYLAND COUNTIES OF CALVERT, CHARLES, FREDERICK, MONTGOMERY,
PRICE GEORGE'S, ST. MARY'S.
VIRGINIA COUNTIES OF ALEXANDRIA, ARLINGTON, FAIRFAX, FALLS CHURCH,
FAUQUIER, KING GEORGE, LOUDOUN, PRINCE WILLIAM, STAFFORD.
** Fringe Benefits Required For All Occupations Included In
This Wage Determination Follow The Occupational Listing **
<TABLE>
<CAPTION>
OCCUPATION CODE AND TITLE MINIMUM HOURLY WAGE
<S> <C> <C>
ADMINISTRATIVE SUPPORT AND CLERICAL:
01011 Accounting Clerk I $ 8.79
01012 Accounting Clerk II $ 10.28
01013 Accounting Clerk III $ 12.15
01014 Accounting Clerk IV $ 14.16
01030 Court Reporter $ 13.22
01050 Dispatcher, Motor Vehicle $ 13.85
01060 Document Preparation Clerk $ 10.25
01090 Duplicating Machine Operator $ 10.25
01110 Film/Tape Librarian $ 12.88
01115 General Clerk I $ 7.82
01116 General Clerk II $ 9.17
01117 General Clerk III $ 10.25
01118 General Clerk IV $ 14.31
01120 Housing Referral Assistant $ 14.82
01131 Key Entry Operator I $ 10.05
01132 Key Entry Operator II $ 11.23
01191 Order Clerk I $ 11.26
01192 Order Clerk II $ 12.44
01220 Order Filler $ 12.76
01261 Personnel Assistant $ 10.33
(Employment) I
01262 Personnel Assistant $ 11.28
(Employment) II
01263 Personnel Assistant $ 13.00
(Employment) III
01264 Personnel Assistant $ 15.50
(Employment) IV
01270 Production Control Clerk $ 14.82
01290 Rental Clerk $ 12.08
01300 Scheduler, Maintenance $ 12.08
01311 Secretary I $ 12.08
</TABLE>
J.9 - 8
<PAGE> 84
<TABLE>
<CAPTION>
OCCUPATION CODE AND TITLE MINIMUM HOURLY WAGE
<S> <C> <C>
01312 Secretary II $ 13.22
01313 Secretary III $ 14.82
01314 Secretary IV $ 16.86
01315 Secretary V $ 18.96
01320 Service Order Dispatcher $ 12.08
01341 Stenographer I $ 13.26
01342 Stenographer II $ 14.87
01400 Supply Technician $ 16.86
01420 Survey Worker (Interviewer) $ 13.22
01460 Switchboard Operator- $ 10.28
Receptionist
01510 Test Examiner $ 13.22
01520 Test Proctor $ 13.22
01531 Travel Clerk I $ 7.98
01532 Travel Clerk II $ 8.60
01533 Travel Clerk III $ 9.26
01611 Word Processor I $ 10.48
01612 Word Processor II $ 12.05
01613 Word Processor III $ 14.95
AUTOMATIC DATA PROCESSING:
03010 Computer Data Librarian $ 9.97
03041 Computer Operator I $ 10.23
03042 Computer Operator II $ 12.06
03043 Computer Operator III $ 14.62
03044 Computer Operator IV $ 16.53
03045 Computer Operator V $ 17.79
03071 Computer Programmer I 1/ $ 14.46
03072 Computer Programmer II 1/ $ 16.97
03073 Computer Programmer III 1/ $ 19.87
03074 Computer Programmer IV 1/ $ 23.04
03101 Computer Systems Analyst I 1/ $ 17.93
03102 Computer Systems Analyst II 1/ $ 23.32
03103 Computer Systems Analyst III 1/ $ 27.12
03160 Peripheral Equipment Operator $ 9.97
AUTOMOTIVE SERVICES:
05005 Automobile Body Repairer- $ 18.39
Fiberglass
05010 Automotive Glass Installer $ 16.45
05040 Automotive Worker $ 16.45
05070 Electrician, Automotive $ 17.44
05100 Mobile Equipment Servicer $ 14.43
05130 Motor Equipment Metal Mechanic $ 18.39
05160 Motor Equipment Metal Worker $ 16.45
05190 Motor Vehicle Mechanic $ 18.46
05220 Motor Vehicle Mechanic Helper $ 13.38
05250 Motor Vehicle Upholstery $ 15.47
Worker
05280 Motor Vehicle Wrecker $ 16.45
05310 Painter, Automotive $ 17.44
05340 Radiator Repair Specialist $ 16.45
05370 Tire Repairer $ 14.43
</TABLE>
J.9 - 9
<PAGE> 85
<TABLE>
<CAPTION>
OCCUPATION CODE AND TITLE MINIMUM HOURLY WAGE
<S> <C> <C>
05400 Transmission Repair Specialist $ 18.39
FOOD PREPARATION AND SERVICE:
07010 Baker $ 11.47
07041 Cook I $ 10.06
07042 Cook II $ 11.47
07070 Dishwasher $ 7.23
07100 Food Service Worker $ 7.23
(Cafeteria Worker)
07130 Meat Cutter $ 11.47
07250 Waitress/Waiter $ 7.89
FURNITURE MAINTENANCE AND REPAIR:
09010 Electrostatic Spray Painter $ 17.44
09040 Furniture Handler $ 12.13
09070 Furniture Refinisher $ 17.44
09100 Furniture Refinisher Helper $ 13.38
09110 Furniture Repairer, Minor $ 15.47
09130 Upholsterer $ 17.44
GENERAL SERVICES AND SUPPORT:
11030 Cleaner, Vehicles $ 7.23
11060 Elevator Operator $ 7.23
11090 Gardener $ 10.06
11121 Housekeeping Aide I $ 6.44
11122 Housekeeping Aide II $ 7.26
11150 Janitor $ 7.23
11180 Laborer $ 9.71
11210 Laborer, Grounds Maintenance $ 7.89
11240 Maid or Houseman $ 6.39
11270 Pest Controller $ 10.79
11300 Refuse Collector $ 7.23
11330 Tractor Operator $ 9.33
11360 Window Cleaner $ 7.89
HEALTH:
12010 Ambulance Driver $ 10.42
12040 Emergency Medical Technician $ 10.42
12071 Licensed Practical Nurse I $ 12.69
12072 Licensed Practical Nurse II $ 14.25
12073 Licensed Practical Nurse III $ 15.95
12100 Medical Assistant $ 8.69
12130 Medical Laboratory Technician $ 8.69
12160 Medical Record Clerk $ 8.69
12190 Medical Record Technician $ 12.05
12221 Nursing Assistant I $ 7.28
12222 Nursing Assistant II $ 8.18
12223 Nursing Assistant III $ 10.48
12224 Nursing Assistant IV $ 11.77
12250 Pharmacy Technician $ 10.84
12280 Phlebotomist $ 8.69
</TABLE>
J.9 - 10
<PAGE> 86
<TABLE>
<CAPTION>
OCCUPATION CODE AND TITLE MINIMUM HOURLY WAGE
<S> <C> <C>
12311 Registered Nurse I $ 15.88
12312 Registered Nurse II $ 17.80
12313 Registered Nurse II, $ 19.65
Specialist
12314 Registered Nurse III $ 21.55
12315 Registered Nurse III, $ 21.55
Anesthetist
12316 Registered Nurse IV $ 25.83
INFORMATION AND ARTS:
13002 Audiovisual Librarian $ 16.86
13011 Exhibits Specialist I $ 15.11
13012 Exhibits Specialist II $ 18.90
13013 Exhibits Specialist III $ 23.27
13041 Illustrator I $ 15.11
13042 Illustrator II $ 18.90
13043 Illustrator III $ 23.27
13047 Librarian $ 18.96
13050 Library Technician $ 13.22
13071 Photographer I $ 13.46
13072 Photographer II $ 15.11
13073 Photographer III $ 18.90
13074 Photographer IV $ 23.27
13075 Photographer V $ 25.60
LAUNDRY, DRY CLEANERS, PRESSING:
15010 Assembler $ 6.01
15030 Counter Attendant $ 6.01
15040 Dry Cleaner $ 7.77
15070 Finisher, Flatwork, Machine $ 6.01
15090 Presser, Hand $ 6.01
15100 Presser, Machine, Dry Cleaning $ 6.01
15130 Presser, Machine, Shirts $ 6.01
15160 Presser, Machine, Wearing $ 6.01
Apparel, Laundry
15190 Sewing Machine Operator $ 8.39
15220 Tailor $ 8.99
15250 Washer, Machine $ 6.60
MACHINE TOOL OPERATION AND REPAIR:
19010 Machine-tool Operator $ 17.44
(Toolroom)
19040 Tool and Die Maker $ 21.24
MATERIALS HANDLING AND PACKING:
21010 Fuel Distribution System $ 14.80
Operator
21020 Material Coordinator $ 14.64
21030 Material Expediter $ 14.64
21040 Material Handling Laborer $ 10.01
21071 Forklift Operator $ 10.93
</TABLE>
J.9 - 11
<PAGE> 87
<TABLE>
<CAPTION>
OCCUPATION CODE AND TITLE MINIMUM HOURLY WAGE
<S> <C> <C>
21080 Production Line Worker $ 11.25
(Food Processing)
21100 Shipping/Receiving Clerk $ 11.78
21130 Shipping Packer $ 10.99
21140 StoreWorker I $ 8.61
21150 Store Clerk (Shelf Stocker; $ 10.50
Store Worker II)
21150 Stock Clerk
21210 Tools and Parts Attendant $ 12.73
21400 Warehouse Specialist $ 11.25
MECHANICS AND MAINTENANCE AND REPAIR:
23010 Aircraft Mechanic $ 18.39
23040 Aircraft Mechanic Helper $ 13.38
23050 Aircraft Quality Control $ 19.37
Inspector
23060 Aircraft Servicer $ 15.47
23070 Aircraft Worker $ 16.45
23100 Appliance Mechanic $ 17.44
23120 Bicycle Repairer $ 14.43
23125 Cable Splicer $ 18.39
23130 Carpenter, Maintenance $ 17.44
23140 Carpet Layer $ 16.85
23160 Electrician, Maintenance $ 17.93
23181 Electronics Technician $ 15.51
Maintenance I
23182 Electronics Technician $ 19.80
Maintenance II
23183 Electronics Technician $ 21.56
Maintenance III
23260 Fabric Worker $ 15.23
23290 Fire Alarm System Mechanic $ 18.39
23310 Fire Extinguisher Repairer $ 14.43
23340 Fuel Distribution System $ 18.39
Mechanic
23370 General Maintenance Worker $ 15.90
23400 Heating, Refrigeration and Air $ 18.39
Conditioning Mechanic
23430 Heavy Equipment Mechanic $ 18.39
23460 Instrument Mechanic $ 18.39
23500 Locksmith $ 17.44
23530 Machinery Maintenance Mechanic $ 19.82
23550 Machinist, Maintenance $ 20.79
23580 Maintenance Trades Helper $ 13.38
23640 Millwright $ 18.39
23700 Office Appliance Repairer $ 17.44
23740 Painter, Aircraft $ 17.44
23760 Painter, Maintenance $ 17.44
23790 Pipefitter, Maintenance $ 17.77
23800 Plumber, Maintenance $ 17.44
23820 Pneudraulic Systems Mechanic $ 18.39
23850 Rigger $ 18.39
23870 Scale Mechanic $ 16.45
23890 Sheet-metal Worker $ 18.39
</TABLE>
J.9 - 12
<PAGE> 88
<TABLE>
<CAPTION>
OCCUPATION CODE AND TITLE MINIMUM HOURLY WAGE
<S> <C> <C>
Maintenance
23910 Small Engine Mechanic $ 19.37
23930 Telecommunications Mechanic I $ 18.39
23931 Telecommunications Mechanic II $ 19.37
23950 Telephone Lineman $ 18.39
23960 Welder, Combination, $ 18.39
Maintenance
23965 Well Driller $ 18.39
23970 Woodcrafter Worker $ 18.39
23980 Woodworker $ 14.80
PERSONAL NEEDS:
24570 Child Care Attendant $ 8.69
24600 Chore Aide $ 6.39
24630 Homemaker $ 12.05
PLANT AND SYSTEM OPERATION:
25010 Boiler Tender $ 18.39
25040 Sewage Plant Operator $ 17.44
25070 Stationary Engineer $ 18.39
25190 Ventilation Equipment Tender $ 13.38
25210 Water Treatment Plant Operator $ 17.44
PROTECTIVE SERVICE:
27004 Alarm Monitor $ 11.20
27006 Corrections Officer $ 14.90
27010 Court Security Officer $ 15.76
27040 Detention Officer $ 15.76
27070 Firefighter $ 14.65
27101 Guard I $ 8.50
27102 Guard II $ 11.20
27130 Police Officer $ 17.54
TECHNICAL:
29010 Air Traffic Control
Specialist, Center
29011 Air Traffic Control
Specialist, Station
29012 Air Traffic Control
Specialist, Terminal
29020 Archeological Technician $ 18.90
29030 Cartographic Technician $ 18.90
29035 Computer Based Training $ 17.93
Specialist/Instructor
29040 Civil Engineering Technician $ 18.90
29061 Drafter I $ 10.75
29062 Drafter II $ 13.46
29063 Drafter III $ 15.11
29064 Drafter IV $ 18.90
29070 Embalmer $ 18.40
29081 Engineering Technician I $ 11.55
</TABLE>
J.9 - 13
<PAGE> 89
<TABLE>
<CAPTION>
OCCUPATION CODE AND TITLE MINIMUM HOURLY WAGE
<S> <C> <C>
29082 Engineering Technician II $ 13.40
29083 Engineering Technician III $ 16.10
29084 Engineering Technician IV $ 18.48
29085 Engineering Technician V $ 22.60
29086 Engineering Technician VI $ 27.35
29090 Environmental Technician $ 18.27
29100 Flight Simulator/Instructor $ 23.32
(Pilot)
29150 Graphic Artist $ 17.93
29210 Laboratory Technician $ 14.62
29240 Mathematical Technician $ 15.48
29330 Mortician $ 18.40
29361 Paralegal/Legal Assistant I $ 13.22
29362 Paralegal/Legal Assistant II $ 16.86
29363 Paralegal/Legal Assistant III $ 20.62
29364 Paralegal/Legal Assistant IV $ 24.95
29390 Photooptics Technician $ 18.48
29480 Technical Writer $ 16.72
29620 Weather Observer, Senior 2/ $ 17.02
29621 Weather Observer, Combined 2/ $ 14.62
Upper Air and Surface Programs
29622 Weather Observer, Upper Air 2/ $ 14.62
TRANSPORTATION/MOBILE EQUIPMENT
OPERATION:
31030 Bus Driver $ 13.24
31100 Driver Messenger $ 9.67
31200 Heavy Equipment Operator $ 18.66
31260 Parking and Lot Attendant $ 7.50
31290 Shuttle Bus Driver $ 10.42
31300 Taxi Driver $ 9.67
31361 Truck driver, Light Truck $ 10.42
31362 Truck driver, Medium Truck $ 13.24
31363 Truck driver, Heavy Truck $ 15.54
36364 Truck driver, Tractor-Trailer $ 16.93
MISCELLANEOUS
99020 Animal Caretaker $ 8.61
99030 Cashier $ 6.51
99040 Child Care Center $ 10.54
99050 Desk Clerk $ 9.45
99260 Instructor $ 18.40
99300 Lifeguard $ 6.89
99350 Park Attendant (Aide) $ 8.48
99400 Photofinishing Worker (Photo Lab/Dark
Room Technician) $ 7.58
99500 Recreation Specialist $ 15.40
99510 Recycling Worker $ 9.33
99610 Sales Clerk $ 6.75
99630 Sports Official $ 6.75
99658 Survey Party Chief $ 10.93
</TABLE>
J.9 - 14
<PAGE> 90
<TABLE>
<CAPTION>
OCCUPATION CODE AND TITLE MINIMUM HOURLY WAGE
<S> <C> <C>
99659 Surveying Technician $ 9.42
99660 Surveying Aide $ 6.16
99690 Swimming Pool Operator $ 11.47
99720 Vending Machine Attendant $ 9.33
99730 Vending Machine Repairer $ 11.47
99740 Vending Machine Repairer Helper $ 9.33
</TABLE>
FRINGE BENEFITS REQUIRED FOR ALL OCCUPATIONS INCLUDED IN THIS WAGE DETERMINATION
HEALTH & WELFARE: $0.90 per hour or $36.00 per week or $156.00 per month.
VACATION: Two weeks paid vacation after 1 year if service with a contractor or
successor; 3 weeks after 5 years; 4 weeks after 15 years. Length of service
includes the whole span of continuous service with the present contractor or
successor, wherever employed, and with the predecessor contractor in the
performance of similar work at the same Federal facility. (Reg. 4.173)
HOLIDAYS: Minimum of ten paid holidays per year: New Year's Day. Martin Luther
King Jr.'s Birthday, Washington's Birthday, Memorial Day, Independence Day,
Labor Day, Columbus Day, Veteran's Day, Thanksgiving Day, and Christmas Day. (A
contractor may substitute for any of the named holidays another day off with pay
in accordance with a plan communicated to the employees involved) (See 29 CFR
4.174)
1/ Does not apply to employees in a bona fide executive, administrative, or
professional capacity as defined and delineated in 29 CFR 541. (See 29 CFR
4.156)
2/ APPLICABLE TO WEATHER OBSERVERS ONLY - NIGHT PAY & SUNDAY PAY: If you
work at night as a part of a regular tour of duty, you will earn a NIGHT
DIFFERENTIAL and receive an additional 10% of basic pay for any hours worked
between 6 p.m. and 6 a.m. If you are a full-time employee (40 hours per week)
and Sunday is part of your regularly scheduled workweek, you are paid at your
rate of basic pay plus a Sunday premium of 25% of your basic rate for each hour
of Sunday work which is not overtime (i.e. occasional work on Sunday outside the
normal tour of duty is considered overtime work).
UNIFORM ALLOWANCE
If employees are required to wear uniforms in the performance of this contract
(either by terms of the Government contract, by the employer, by the state of
local law etc.), the cost of furnishing such uniforms and maintaining (by
laundering or dry cleaning) such uniforms is an expense that may not be borne by
an employee where such cost reduces the hourly rate below that required by the
wage determination. The Department of Labor will accept payment on accordance
with the following standards as compliance:
The contractor or subcontractor is required to furnish all employees with an
adequate number of uniforms without cost or to reimburse employees for the
actual cost of the uniforms. In addition, where uniform cleaning and maintenance
is made the responsibility of the employee, all contractors and subcontractors
subject to this wage determination shall (in the absence of a bona fide
collective bargaining agreement providing for a different amount, or the
furnishing of contrary affirmative proof as to the actual cost), reimburse all
employees for such cleaning and maintenance at a rate of $4.25 per week (or $.85
cents per day). However, in those instances where the uniforms furnished are
made of "wash and wear" material, may be routinely washed and dried with other
personal garments, and do not require special treatment such as dry cleaning,
daily washing, or commercial laundering in order to meet the cleanliness or
appearance standards set by the terms of the Government contract, by the
contractor, by law, or by the nature of the work. there is no requirement that
employees be reimbursed for uniform maintenance costs.
NOTES APPLYING TO WAGE DETERMINATION
J.9 - 15
<PAGE> 91
Source of Occupational Titles and Descriptions:
The duties of employees under job tides listed are those described in the
"Service Contract Act Directory of Occupations," Fourth Edition, January 1993,
as amended by the Second Supplement, dated August 1995, unless otherwise
indicated. This publication may be obtained from the Superintendent of
Documents, at 202-783-323g, or by writing to the superintendent of Documents,
U.S. Government Printing Office, Washington, D.C. 20402. Copies of specific job
descriptions may also be obtained from the appropriate contracting officer.
REQUESTS FOR AUTHORIZATION OF ADDITIONAL CLASSIFICATION AND WAGE RATE (Standard
Form 1444 (SF 1444)
Conformance Process:
The contracting officer shall require that any class of service employee which
is not listed herein and which is employed under contract (i.e., the work to be
performed is not performed by any classification listed in the wage
determination), be classified by the contractor so as to provide a reasonable
relationship (i.e., appropriate level of skill comparison) between such unlisted
classifications and the classifications listed in the wage determination. Such
conformed classes of employees shall be paid the monetary wages and furnished
the fringe benefits as are determined. Such conforming process shall be
initiated by the contractor prior to the performance of contract work by such
unlisted class(es) of employees. The conformed classification, wage rate, and/or
fringe benefits shall be retroactive to the commencement date of the contract.
(See section 4.6 (C) (vi). When multiple wage determinations are included in a
contract, a separate SF 1444 should be prepared for each wage determination to
which a class(es) is to be conformed.
The process for preparing a conformance request is as follows:
1) When preparing the bid, the contractor identifies the need for a
conformed occupation(s) and computes a proposed rate(s).
2) After contract award, the contractor prepares a written report listing
in order proposed classification title(s), a Federal grade equivalency
(FGE) for each proposed classification(s), job description(s), and
rational for proposed wage rate(s), including information regarding the
agreement or disagreement, if the authorized representative of the
employees involved, or where there is no authorized representative, the
employees themselves. This report should be submitted to the contracting
officer no later than 30 days after such unlisted class(es) of employees
performs any contract work.
3) The contracting officer reviews the proposed action and promptly submits
a report of the action, together with the agency's recommendations and
pertinent information including the position of the contractor and the
employees, to the Wage and Hour Division, Employment Standards
Administration, U,S. Department of Labor, for review. (See section 4.6
(b) (2) of Regulations 29 CFR Part 4).
4) Within 30 days of receipt, the Wage and Hour Division approves, modifies
of disapproves the action via transmittal to the agency contracting
officer, or notifies the contracting officer that additional time will
be required to process the request.
5) The contracting officer transmits the Wage and Hour decision to the
contractor.
6) The contractor informs the affected employees.
Information required by the Regulations must be submitted of SF 1444 or bond
paper.
When preparing a conformance request, the "Service Contract Act Directory of
Occupations" (the Directory) should be used to compare job definitions to insure
that duties requested are not performed by a classification already listed in
the wage determination. Remember, it is not the job title, but the required
tasks that determine whether a class is included in an established wage
determination. Conformances may not be used to artificially split, combine, or
subdivide classifications listed in the wage determination
J.9 - 16
<PAGE> 92
Subcontract No. D/SID2-SC-98-251
ATTACHMENT G
MONTHLY PROGRESS REPORT FORMAT
<PAGE> 93
J.10 MONTHLY PROGRESS REPORT FORMAT
This attachment contains the Monthly Progress Report format and instructions.
J.10.1 Monthly Progress Reports
These reports shall address total contract work activity for the reporting
period and will individually address each active delivery order. The following
outline applies and sample formats are included in this attachment:
<TABLE>
<CAPTION>
FPLH CPFF
<S> <C> <C>
Cover Page/Memo
Contract Summary Report Sample A (same)
Contract Other Direct Expense Report Sample B (same)
Delivery Order Reports (active DO's)
Cover Page Sample C (same)
Narrative Summary Sample D (same)
Labor Hours (Name) Report Sample E Sample F
D.O. Other Direct Expense Report Sample B* (same)
Updated Gantt chart
</TABLE>
Sample B for each Delivery Order does not require the "Del Ord"
number column
J. 10.2 Gantt Chart
Provide the updated Gantt chart (see section C.2.2 and
Attachment J.1, paragraph 4.1.2) with actual work accomplished.
Indicate number of completed units (and hours if unit of measure
is something other than hours) at each subtask level for the
month. (For hardcopy submission, only the Gantt chart (by task
order) is required; for the electronic copy, provide entire
electronic file for each task order).
One of the following software tools shall be used to generate
this Gantt chart unless a different product is approved by the
Task Manager:
Primavera P3 Project Planner 2.0
Microsoft Project 4.0
J.10 - 1
<PAGE> 94
SAMPLE (A)
COMPANY
D/SIDDOMS II LOT x CONTRACT xxxxxx-9x-x-xxxx
CONTRACT SUMMARY REPORT
CURRENT MONTH / YEAR
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Cum
DO Task PA&E Award Expenditures Current Mo Total expended Funds % Funds
No No. Code Amount Thru Prior Mo Expenditures to Date Remaining Expended
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Total (a) (b) (c)
- --------------------------------------------------------------------------------------------------------------
</TABLE>
TOTAL CONTRACT CEILING:
LESS: TOTAL AWARDED to DATE: (a)
FUNDS REMAINING:
LESS: AMT EXPENDED TO DATE: (b)
FUNDS REMAINING: (c)
PERCENT of CEILING EXPENDED:
J.10 - 2
<PAGE> 95
SAMPLE (B)
COMPANY
D/SIDDOMS II LOT x CONTRACT xxxxxx-9x-x-xxxx
OTHER DIRECT COST REPORT
CURRENT MONTH / YEAR
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
DO Task BA
No No. Code Travel SUBCONT SUPT SVCS S'WARE H'WARE SUPPLIES OTHER Totals
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Total (a) (b) (c)
- --------------------------------------------------------------------------------------------------------------
</TABLE>
Use shading to denote complete delivery orders
J.10 - 3
<PAGE> 96
SAMPLE (C)
MONTHLY PROGRESS REPORT
DELIVERY ORDER NO. __
For the Month of ______ 19xx
CONTRACT INFORMATION
CONTRACTOR:
CONTRACT NUMBER:
CONTRACT EXPIRATION DATE:
SHORT TITLE of CONTRACT:
CONTRACTOR'S PROGRAM MANAGER:
TELEPHONE NUMBER:
CONTRACT OFFICER'S REPRESENTATIVE (COR):
DELIVERY ORDER INFORMATION
DELIVERY ORDER NAME:
MOST RECENT MODIFICATION NUMBER:
PERIOD OF PERFORMANCE:
DELIVERY ORDER TOTAL DOLLAR VALUE:
CONTRACTOR'S PROJECT MANAGER:
TELEPHONE NUMBER:
J.10 - 4
<PAGE> 97
SAMPLE (D)
D.O. No. _______
NARRATIVE SUMMARY
REPORT MO. _________
Short Title:
<TABLE>
<S> <C> <C> <C>
I. Status of work in progress:
II. Problems or constraints encountered during the reporting
III. Suggested solutions:
IV. Resources expended: (Dollars)
Total Funding (Thru Mod #________) $
Less: Prior Actual (Per voucher dated _________) $
Less: Est. Expenses not billed $______
Funds Remaining $
Less: Next reporting period ( Mo. ) Estimate $______
Funds Remaining after Next Period $
Percent of Total Funding _______%
V. Other Direct Costs
</TABLE>
For each Delivery Order. provide the current month expenditure for each task and
the total for the DO.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Task BA
No. Code TRAVEL SUBCONT SUPT SVCS S'WARE H'WARE SUPPLIES OTHER Totals
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
</TABLE>
For each Delivery Order, provide the total expended to date (including current
month) for each task and the total for the DO.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Task BA
No. Code TRAVEL SUBCONT SUPT SVCS S'WARE H'WARE SUPPLIES OTHER Totals
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
</TABLE>
Comments:
J.10 - 5
<PAGE> 98
SAMPLE (E)
COMPANY
D/SIDDOMS II Lot x Contract xxxxxx-9x-x-xxxx
ACTUAL FIXED PRICE LABOR HOUR REPORT
As of:
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
- --------------------------------------------------------------------------------------------------------
Govt. Cur Per Cur Per Cum Cum Labr
DO Task(s) BA CLIN Name-L Name-F Site Hrs Labr $$ Hrs $$
- --------------------------------------------------------------------------------------------------------
Examples:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
001 000 24 0040AB Smith(C) John 160.0 $6,240.00 284.0 $11,076.00
001 000 26 0041AA Jones Richard Y 96.0 $4,224.00 192.0 $ 8,448.00
</TABLE>
Column Descriptions:
(1) Delivery Order Number
(2) Task/subtask number; will be defined on delivery order task
statement(s), if required
(3) BA codes are Business Area codes and will be included in the delivery
order task statement, if required. It is linked to the task and
subtasks. Examples of BA codes are DMLSS, CEIS, CHCS, FMI, Res, and Them
The Specific code will be provided by the Government in the Task
Statement.
(4) Contract Line Item; in this instance, will define labor category
(5) Individual's Last Name; indicate consultants with a (C); this may be an
additional column, if desired
(6) Individual's First Name
(7) Yes/No field; only affirmative responses are required
(8) Current Period Hours; hours charged to this delivery order during the
contractor's financial month to (1) decimal place
(9) Fully burdened (thru fee) direct labor dollars charged to this delivery
order by this individual in this PA&E code to (2) decimal places.
(Note: An individual's raw hourly rate is based upon the contractor's
actual labor conversion factor.)
(10) Cumulative hours charged to this delivery order, (sea column 8 format).
(11) Cumulative fully burdened direct labor dollars charged (see column 9
format).
This exhibit shall be submitted electronically using Excel (less than or
equal to Version specified by the COR). Subcontractors may submit this data
separately if desired; and provide the prime with copies; cost information must
be in the same format. However, if prime submits subcontractor data, an
additional column will be required for "Company" name. In the version submitted
electronically, no subtotals or totals are required; this data is intended to be
a simple. download from each contractor's (and subcontractor's) monthly job cost
data (the Work Breakdown Structure [WBS] should be set up to collect costs with
these data requirements in mind).
J.10 - 6
<PAGE> 99
SAMPLE (F)
COMPANY
D/SIDDOMS II Lot x Contract xxxxxx-9x-x-xxxx
ACTUAL FIXED PRICE LABOR HOUR REPORT
As of:______
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
- --------------------------------------------------------------------------------------------------------
DO Task(s) BA Labor Name-L Name-F Govt. Cur Per Cur Per Cum Cum Labr
Category Site Hrs Labr $$ Hrs $$
- --------------------------------------------------------------------------------------------------------
Examples:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
011 n/a 18 Tech Analyst Taylor George Y 80.0 $ 1,440.00 480.0 $8,640.00
022 001 33 Analyst, Jr. Wilson Naomi Y 96.0 $ 1,641.60 192.0 $3,283.20
- --------------------------------------------------------------------------------------------------------
</TABLE>
Column Descriptions:
(1) Delivery Order Number
(2) Task/subtask number; will be defined on delivery order task
statement(s), if required
(3) BA codes are Business Area codes and will be included in the delivery
order task statement, if required. It is linked to the task and
subtasks. Examples of BA codes are DMLSS, CEIS, CHCS, FMI, Res, and
Thea. The specific code will be provided by the Government in the Task
Statement.
(4) Labor category (as required in D.O.)
(5) Individual's Last Name; indicate consultants with a (C); this may be an
additional column, if desired
(6) Individual's First Name
(7) Yes/No field; only affirmative responses are required
(8) Current Period Hours; hours charged to this delivery order during the
contractor's financial month to (1) decimal place
(9) Fully burdened (thru fee) direct labor dollars charged to this delivery
order by this individual in this PA&E code to (2) decimal places.
(Note: An individual's raw hourly rate is based upon the contractor's
actual labor conversion factor.)
(10) Cumulative hours charged to this delivery order, (see column 8 format).
(11) Cumulative fully burdened direct labor dollars charged (see column 9
format).
This exhibit shall be submitted electronically using Excel (less than or
equal to Version specified by the CUR). Subcontractors may submit this data
separately if desired; and provide the prime with copies; cost information must
be in the same format. However, if prime submits subcontractor data, an
additional column will be required for "Company" name. In the version submitted
electronically, no subtotals or totals are required; this data is intended to be
a simple download from each contractor's (and subcontractor's) monthly job cost
data (the Work Breakdown Structure [WBS] should be set up to collect costs with
these data requirements in mind).
Peculiar to Cost Plus Fixed Fee Labor (CPFF) delivery orders.
J.10 - 7
<PAGE> 100
Subcontract No. D/SID2-SC-98-251
ATTACHMENT H
GOVERNMENT PROPERTY FORMS
<PAGE> 101
J.11 GOVERNMENT PROPERTY
This attachment contains DD Forms 1342 and 1662. The forms shall be filled out
appropriately as needed for control and accountability of Government property.
J.11 - 1
<PAGE> 1
EXHIBIT 10.8
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1. Definitions ...........................................................1
2. MPOWER Software; License; Core Services ...............................5
3. Supplemental Services ................................................11
4. Problem Resolution ...................................................11
5. Customer Responsibilities ............................................11
6. Acceptance ...........................................................14
7. Warranties ...........................................................17
8. Limitation of Liability ..............................................18
9. Fees and Charges .....................................................19
10. Other Provisions .....................................................21
11. Dispute Resolution and Termination ...................................21
12. Law Governing Agreement ..............................................23
13. Confidentiality ......................................................23
14. Backup and Disaster Recovery Services ................................25
15. Source Code Custody Agreement ........................................26
16. Relationship and project Management and Liaison ......................27
17. General ..............................................................27
</TABLE>
<TABLE>
<S> <C>
Schedule A: Definition of Core Services
Schedule B: Definition of Supplemental Services
Schedule C: License, Processing and Supplemental Service Fees
Schedule D: Documentation Outline
Schedule E: Travel Guidelines
Schedule F: Non-disclosure Agreement
Schedule G: MPOWER Identified Parties for Non-disclosure
Schedule H: Work Orders
Schedule I: Marketing Partner Terms
Schedule J: HUBLink Interfaces
</TABLE>
page i
<PAGE> 2
MPOWER(TM) 6000
MASTER LICENSE, PROCESSING AND SERVICES AGREEMENT
This Agreement is entered into as of this 16th day of February, 1997, by
and between HealthScope/United, Inc., a New York State corporation with its
principal place of business located at 345 Hudson Street, 16th Floor, New York,
NY, 10014(hereinafter referred to as "Customer"),and MPOWER Solutions Inc., a
Delaware corporation with its principal place of business located at 2305 Renard
Place, S. E., Albuquerque, New Mexico 87106 (hereinafter referred to as
"MPOWER") .
WHEREAS, MPOWER is in the business of providing automated managed health
care information services and licensing software to businesses providing managed
health care and insurance services, and desires to provide such services, and
license such software, to Customer, subject to the terms hereof; and
WHEREAS, Customer is in the business of providing managed health care and
insurance services to its customers and desires to use the services of, and/or
software licensed by MPOWER, subject to the terms hereof; and
WHEREAS, Customer and MPOWER wish to establish a relationship in which
Customer will serve as the initial test site for MPOWER's DB2 version of
MPOWER(TM) operating on the IBM RS6000 platform and MPOWER's first release of
the MPOWER(TM) GUI Software and Customer will assist MPOWER in the marketing of
its software as set forth in this Agreement, subject to the terms hereof.
NOW, THEREFORE, in consideration of the mutual promises made, the terms and
conditions hereunder described and other valuable consideration, the parties
agree as follows
1. DEFINITIONS
1.1 As used in this Agreement, the following terms shall have the meanings
indicated unless the context clearly requires otherwise;
-1-
<PAGE> 3
(a) "Core Services" shall mean those services provided by MPOWER (as
described and set forth in Schedule A) in consideration of Customer's payment
of the License Fees.
(b) "Critical Failure" shall mean a verifiable Nonconformity in the
Shelf Version of the MPOWER Software which has a material impact on Customer's
mission critical system related functions. By way of example, a Critical Failure
may include the inability of Customer to generate checks, complete failure of
availability of the on-line system, inability to perform on-line adjudication of
any types of claims, incorrect adjudication of any types of claims or inability
to produce mission critical reports.
(c) "Customer Processing" shall mean the use of the MPOWER Software
on Customer equipment at a Customer site, as set forth herein.
(d) "Documentation" shall mean the User Documentation as outlined in
Schedule D.
(e) "Effective Date" shall mean the date first set forth above.
(f) "Expenses" shall mean any reasonable out of pocket expenses,
including, travel and travel-related expenses, incurred by MPOWER or by Customer
(relating to MPOWER marketing) in connection with the performance of this
Agreement.
(g) "Fees" shall mean the fees for MPOWER Services as described and
set forth in Schedule C attached hereto.
(h) "General System Enhancements" shall mean enhancements, revisions
or updates to the MPOWER Software that are made available generally to licensees
of the MPOWER Software as part of the Maintenance Support Services, as and when
such enhancements, revisions or updates are made available generally, and shall
not include any separate products where MPOWER charges a separate license fee to
its licensees.
(i) "Implementation" shall mean the conversion and installation of
Customer's managed health care and/or insurance processing to the MPOWER(TM)
system as set forth in this agreement.
-2-
<PAGE> 4
(j) "Implementation Date" shall mean the actual date that the first
Member transaction is processed, either by MPOWER or Customer.
(k) "License" shall mean the license granted by MPOWER to Customer
for the MPOWER Software, to the extent set forth herein.
(l) "License Fees" shall include the Initial License Fee(s)
("ILF")and the Maintenance Support Fee ("MF"),as described in Schedule C herein.
(m) "Maintenance Support Services" shall mean the post-production
services provided by MPOWER as part of the Core Services that do not provide for
upgrades or general enhancements to the MPOWER Software, which are provided
through the MF.
(n) "Member" shall mean an individual who is as of a certain
effective date eligible for certain benefits provided by or through Customer or
a Related Party, which individual becomes eligible either (a) directly as the
subscriber to a Customer or Related Party sponsored and administered insurance
or benefit program, (b) as an eligible employee to an employer sponsored benefit
plan administered by Customer or a Related Party, or (c) as a beneficiary of a
government sponsored benefit plan, or (d) indirectly as a dependent of that
subscriber, employee or beneficiary. For example, in a family of four (4)
individuals, where the employee is the primary participant individual, the
employee, the spouse and the two (2) dependent children are each a Member for a
total of four (4) Members. "Member" shall also mean an individual eligible for
certain benefits provided by or through Customer or a related party under
statutory or other legal obligation.
(o) "Member Month" shall mean, respectively, as of the first of each
applicable month, the number of active eligible Members as enrolled and entered
by Customer, as of a given effective date, onto the MPOWER System (for Remote
Processing) or processed using the MPOWER Software (for Customer Processing),
adjusted for actual retroactive Customer Member enrollment or disenrollment
occurring in the prior twelve (12) months.
(p) "Nonconformity" shall mean a failure of a specific Release of the
MPOWER Software to materially conform to the User Documentation of such Release.
-3-
<PAGE> 5
(q) "MPOWER Services" shall mean services furnished by MPOWER
according to the terms of this Agreement and attached Schedules and other
services described in any Work Order accepted by MPOWER.
(r) "MPOWER Site" shall mean the site of the MPOWER System, currently
located at 2305 Renard Place, S. E., Albuquerque, New Mexico, 87106.
(s) "MPOWER Client-Server Software" or "MPOWER 6000" shall mean the
MPOWER(TM) Software owned by MPOWER and licensed by Customer under this
Agreement, operating on the IBM RS6000 computer, and any updates, revisions,
enhancements, or additions thereto supplied by MPOWER, (including but not
limited to those updates, revisions, enhancements, or additions supplied to
Customer pursuant to Work Orders under this Agreement).
(t) "MPOWER Standard Interface Specifications" shall mean the MPOWER
written specifications for the file size, format, blocking-factors, field
content and frequency of batch transmission for interfacing software programs
for data exported from or imported into the MPOWER(TM) software-maintained
databases. MPOWER agrees that with respect to those specifications for
interfacing programs not yet developed, MPOWER agrees to consult with Customer
on such specifications and the resulting specifications shall comply with normal
industry standards.
(u) "MPOWER System" shall mean the computer hardware, MPOWER Software
and other hardware and software at the MPOWER Site linking the MPOWER Site to
the Customer-provided network and to Customer's facility(ies).
(v) "Related Party" shall mean an entity as to which Customer
directly owns a greater than fifty percent (50%) equity interest in the assets
of such entity, but excludes any entity as to which another co-owner, partner or
joint venture participant or affiliate is a competitor of MPOWER as set forth in
Schedule G.
(w) A "Release" shall mean a new version or new release of the MPOWER
Software containing General System Enhancements that is made available to
MPOWER's customers generally.
-4-
<PAGE> 6
(x) A "Release Date" is the date that a Release is made
available to MPOWER's customers generally.
(y) "Shelf version" shall mean the Releases of the MPOWER
Software which are accepted by Customer pursuant to Section 6.
(z) "Supplemental Services" shall mean any support or services
required by Customer and agreed to be provided by MPOWER in addition to that
provided as part of the License, as fully specified in each Work Order, which
Supplemental Services may include, but not be limited to, conversion support,
modification and enhancements, and System Set-ups.
(aa) "User Documentation" shall mean the MPOWER user
documentation provided to Customer pursuant to the terms of this Agreement. An
outline of the current User Documentation is set forth in Schedule D attached
hereto.
(bb) "Work Order" shall mean a document that is separately
executed by both parties, substantially in the format of the template of
Schedule H hereto, that authorizes MPOWER to perform Supplemental Services or
other services for Customer and obligates Customer to pay for such Supplemental
Services or other services under the terms of that separate document, and which
document is incorporated and made part of this Agreement.
(cc) "Workaround" shall mean a change in the procedures followed
or data supplied to avoid a Nonconformity without materially impairing
performance of the MPOWER Software.
(dd) "Graphical User Interface" or "GUI" shall mean a Visual
Basic(TM) application that presents MPOWER(TM) in a Windows 95(R) environment.
2. MPOWER SOFTWARE; LICENSE; CORE SERVICES
2.1 MPOWER Software License.
(a) MPOWER grants to Customer, a nonexclusive, non-transferable
(except as specified herein) object code only license (the "License") to use the
MPOWER Software at a single site on a single CPU , which MPOWER Software
includes the
-5-
<PAGE> 7
Documentation during the term of this Agreement, subject to the terms and
conditions set forth herein. However, in the event that the architecture of the
MPOWER 6000 system, operating on the IBM Rs/6000 platform, results in
significant degradation of system performance, due solely to the segregation of
Customer's clients' files, Customer is required to acquire and operate a second
Rs/6000 in order to meet the processing requirements of the clients set forth in
Schedule A, then Customer may operate the MPOWER 6000 Software on the second CPU
without payment of an additional license fee.
(b) MPOWER shall prepare and provide Customer one (1) copy of the
current Documentation for the MPOWER Software using electronic media and update
same as required due to enhancements, upgrades, error correction or other
changes made by MPOWER to the MPOWER Software. When MPOWER has produced
Documentation in HTML format, which is expected to be available by the end of
1997, MPOWER will provide a copy of the Documentation to Customer in such
format.
2.2 Payment. In consideration of the License, Customer shall timely pay
the ILF, the MF and the Supplemental Services Fees in accordance with Schedule
C.
2.3 Scope of Use.
(a) Customer, shall use the MPOWER Software and Documentation solely
for its own use as a provider or administrator of managed health care and/or
other insurance services to Customer clients and the Members of its Related
Parties, including a health maintenance organization which may be established by
Customer, solely as expressly set forth herein, pursuant to the terms herein and
not for the benefit of any other entity, and further subject to the Related
Party restrictions in the License granted. The initial Customer clients which
will be processed by Customer are Community Premier Plan, Bridgeport Health
Plan, Fidelis Care Health Plan, Suffolk County Health Plan and Universal Health
Plan, except that Universal Health Plan will not be subjected to the
implementation terms and incentives set forth in this Agreement. If Customer
establishes a health maintenance organization or insurance company, MPOWER's
implementation for such entities shall be subject to fees as Supplemental
services.
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(b) Customer shall have the right to provide the use of certain
limited functions and features of the MPOWER Software, to its clients for which
Customer provides administration services, and to providers of health care
services, subject to the confidentiality restrictions set forth in Section 13.
(c) Customer shall not copy the MPOWER Software or permit same to be
copied, except for production copies for use within the restrictions of the
License granted herein, and for a reasonable number of backup and test copies:
(i.) for the specific data center where the MPOWER Software will be installed
where Customer is performing Customer Processing, (ii.) for testing and
modification of the MPOWER Software (pursuant to Section 2.7), and (iii.)for
training of Customer personnel. Customer shall promptly notify MPOWER in writing
as to the number of production and test copies and location of said copies of
the MPOWER Software which it intends to make in each instance.
(d) In addition, Customer shall be permitted to make a reasonable
number of copies of the User Documentation solely for Customer's internal use
and for distribution to Related Parties and Non-Related Parties pursuant to
Section 13.2, not to exceed one (1) copy per workstation, and only if the
original copyright and other proprietary rights notices are preserved.
(e) MPOWER Software used for Customer Processing may be temporarily
transferred to backup equipment owned by Customer or by a third party provider
of disaster recovery services and used thereon only for so long as the Customer
site is inoperative. The use of such third party provider of disaster recovery
services shall not require the consent of MPOWER provided such provider agrees
to be bound by the confidentiality restrictions set forth herein, and is not a
competitor of MPOWER. Simultaneous use of more than the authorized number of
copies of the MPOWER Software is expressly prohibited.
(f) Customer shall not modify the MPOWER Software or the
Documentation (except as set forth below), nor translate, or adapt the MPOWER
Software or the Documentation (except as set forth below), in any way or use it
to create a derivative work or permit the foregoing. Customer's modification of
the MPOWER Software in any way, may be considered by MPOWER to be a material
breach of this Agreement by Customer. Notwithstanding the above,
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Customer, in certain circumstances, may be permitted to modify the GUI
presentation of the MPOWER Software as follows: Customer will initially present
a requested change to MPOWER and if MPOWER wishes to make the change, MPOWER
will submit a quote to Customer for the work and if the Customer accepts the
proposal, a Work Order will be developed for the project. If Customer declines
MPOWER's proposal, Customer may propose to MPOWER that Customer develop the
modification. Customer will submit a plan for such modification to MPOWER and if
MPOWER accepts such plan, and if the Customer developed modification
successfully passes acceptance testing, then MPOWER will warrant the performance
of the modification. If MPOWER elects not to accept the proposed modification or
if an accepted proposal fails to pass acceptance, or if Customer modifies GUI
presentation without the consent of MPOWER, MPOWER shall have no obligation to
warrant or support such Customer developed modifications.
Customer may modify copies of the Documentation limited to the purpose of
integrating Customer's internal operating procedures and work flows into the
content relating to the operation of MPOWER. All Customer duties to maintain the
confidentiality of MPOWER Software and Documentation shall remain in full effect
for all MPOWER Documentation incorporated into such Customer documents. Customer
shall maintain an unaltered copy of the MPOWER Documentation which shall be the
baseline Documentation of the MPOWER System.
Except as set forth in Section 7.2 with respect to the Shelf Version and as set
forth in this Section 2.3 (f), MPOWER shall not be responsible for the
functioning of updates, revisions, enhancements, additions or conversions or
otherwise maintaining the MPOWER Software if the MPOWER Software is modified by
Customer (or without MPOWER's consent relating to the GUI) or if Customer
installs or attempts to install software, other than MPOWER Software, which
interfaces with the MPOWER Software in a manner which is inconsistent with
MPOWER Standard Interface Specifications, or writes to any data files maintained
by the MPOWER Software. Customer shall be solely responsible for the results of
such modifications or interfaces, including the integrity of data used or
generated by the MPOWER Software. In the event that Customer makes a
modification or enhancement to the MPOWER Software, and it is subsequently
determined that such modification or enhancement was the cause of a
Nonconformity in the MPOWER Software, then MPOWER shall be reimbursed at the
Supplemental Service Fees rates set forth in Schedule C for the
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time spent in determining that such modification or enhancement was the cause of
the Nonconformity, and, if MPOWER agrees to provide Supplemental Services
support as specified on a Work Order to correct such Nonconformity, then MPOWER
shall be reimbursed at the Supplemental Service Fee rates set forth in
Schedule C.
2.4 General System Enhancements. In consideration of the ILF and MF,
MPOWER shall provide to Customer General System Enhancements, if and when such
General System Enhancements are made available to licensees of the MPOWER
Software generally, except as otherwise provided in Schedule C. Any General
System Enhancements supplied to Customer by MPOWER shall become part of, and
subject to, this Agreement and License. MPOWER shall only provide General System
Enhancements for the then most current Release of the MPOWER Software. In
addition, MPOWER agrees also to provide support for the one prior Release
immediately preceding the most current Release of the MPOWER Software and to
provide support for any other Releases for up to one (1) year from the Release
Date of such other Releases. During any applicable support period, support for
any such prior Release of the MPOWER Software that has been replaced or modified
by General System Enhancements or by a subsequent Release shall be limited to
correction of identified and reproducible defects in the Shelf Version of such
prior Release from the published specifications therefor. MPOWER shall not be
obligated to provide General System Enhancements for any Release other than the
most current Release. Any additional MPOWER Services provided in connection with
an older Release of the MPOWER Software shall be provided as Supplemental
Services.
2.5 Upgrades in Operating System. In the event the operating system for
the platform on which Customer operates MPOWER is upgraded by the developer of
such operating system, MPOWER will within one year of the release of said
upgrade test the performance of the MPOWER Software on such operating system.
2.6 Correction of Nonconformities. In consideration of the ILF and MF, and
subject to the terms of this Agreement, upon written notification by Customer of
a Nonconformity in the most current Release of the MPOWER Software or in the one
prior Release immediately preceding the most current Release of the MPOWER
Software, MPOWER will analyze the Nonconformity and notify Customer of its
estimate of when and how such Nonconformity will be corrected or any Workaround
provided and MPOWER shall use
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commercially reasonable efforts to correct such Nonconformity in accordance with
the procedures and priorities established in Schedule B. Notwithstanding the
prior sentence, MPOWER's sole obligation hereunder shall be limited to
correcting identified and reproducible Nonconformities in the Shelf Version of
the MPOWER Software in accordance with Section 4 and the relevant portions of
Schedule B which deal with Definitions, Support and Time Frame for Resolution of
issues logged through the MPOWER Help Desk.
2.7 Proprietary Rights and Confidentiality. MPOWER represents and Customer
acknowledges that the MPOWER Software, including the Documentation, is the sole
and exclusive property of MPOWER, including, but not limited to, all applicable
rights to patents, copyrights, trademarks and trade secrets inherent therein and
appurtenant thereto, and MPOWER retains title to the MPOWER Software and any
copies thereof. Customer shall not sell, license, transfer, or otherwise make
available (except as expressly provided herein) any portion of the MPOWER
Software to others, including but not limited to Related Parties and Non-Related
Parties for which Customer is providing processing services pursuant to the
terms hereof, nor permit the foregoing, except for disclosure of the MPOWER
Software to Customer consultants and auditors pursuant to the provisions of
Section 13.2 herein, and the disclosure of the User Documentation to Related
Parties and Non-Related Parties, pursuant to the provisions of Sections 2.3 and
13.2 herein. Customer agrees to use at least commercially reasonable methods to
secure and protect the MPOWER Software and the Documentation as MPOWER
Confidential Information as defined herein, in a manner consistent with the
manner in which it protects its own most sensitive confidential information.
2.8 Core Services. In consideration of the payment of the License Fees by
Customer, MPOWER shall, during the term of this Agreement, provide the Core
Services set forth in Schedule A, except as otherwise provided in Schedule C.
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3. SUPPLEMENTAL SERVICES
In consideration of the payment by Customer of the Maintenance Fees and
Supplemental Service Fees, MPOWER shall, during the term of this Agreement,
provide the Supplemental Services set forth in Schedule B, except as otherwise
provided in Schedule C.
4. PROBLEM RESOLUTION
Subject to the limitations in support for prior Releases provided by MPOWER as
set forth in Section 2 hereof, in the event MPOWER receives notice from Customer
of a Critical Failure in the most current Release of the MPOWER Software or in
the one prior Release immediately preceding the most current Release of the
MPOWER Software, MPOWER agrees to respond to such notice by assigning a
qualified individual to attempt to remedy the Critical Failure, and agrees to
use commercially reasonable efforts to remedy the Critical Failure in accordance
with the provisions of Section 7.2 herein commensurate with the severity of the
problem and the timeliness and quality of information regarding the problem
received from Customer in accordance with the Definition, Support and Time Frame
for Resolution paragraphs of the Help Desk section of Schedule B.
5. CUSTOMER RESPONSIBILITIES
5.1 Customer Responsibilities. Customer acknowledges that the MPOWER
Software reflects certain interdependent relationships, such as exist among the
data variables, logic rules and system functions of the MPOWER Software.
Customer further acknowledges that it is required and has a responsibility to
understand such data variables, logic rules and system functions, and their
interdependent relationships, and to define for its own purposes such data
variables, logic rules and system functions to the MPOWER Software in such a way
that the MPOWER Software will provide the functionality desired by Customer.
Customer acknowledges that it has or will hire and will maintain on its staff
personnel who are able to understand and define such data variables, logic
rules, system functions and interdependent relationships. Customer further
acknowledges that, even though MPOWER may assist Customer personnel in
performing these tasks, the responsibility for the effective definition and
maintenance of these data variables,
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logic rules and system functions resides with Customer and not with MPOWER,
unless Customer specifically requests MPOWER to perform these tasks at the
Supplemental Services Fees. Notwithstanding the foregoing, nothing herein shall
relieve MPOWER of responsibility for the assistance that it may provide to
Customer hereunder.
5.2 Testing Customer acknowledges that it will undertake testing of the
MPOWER Software and of the basic functionality and interdependency of its
customer-defined data variables, logic rules and system functions as set forth
in Section 6 prior to commencing use of the MPOWER Software for its business.
5.3 Customer Data. Except as may be provided under an applicable Work
Order, Customer shall be responsible for inputting and ensuring the accuracy,
validity and completeness of all data variables, logic rules, system functions
and Customer data, including but not limited to group, subscriber, Member,
provider, utilization, encounter, claims, capitation, fund accounting, billing,
collection, broker, benefits, product contract, provider contract, provider
fees, standard business measures, and other similar or related data. Customer
shall also be responsible for inputting and ensuring the accuracy, validity and
completeness of all user-defined report definitions, all report and batch
production job specifications and priority scheduling criteria. Customer shall
also be responsible for initiating, monitoring, operating, printing and ensuring
the accuracy, validity, and completeness of all print outputs and file
downloads, including but not limited to all reports, premium bills, checks,
etc., determining how many and on what print stock such outputs are to be
printed or into which files or programs on Customer controlled computers such
files are to be downloaded and manipulated, at Customer's own initiative,
responsibility and risk. Customer hereby acknowledges responsibility for
generally controlling all aspects related to the production, distribution and
control of such outputs. Customer further acknowledges that the accuracy of
Customer's database within the MPOWER Software and the accuracy of the several
outputs of the MPOWER Software, including but not limited to, outputs that
control the billing, receipt or expenditure of moneys, will be dependent on the
accuracy and use of the data variables, logic rules, system functions and
Customer data input into the MPOWER Software by Customer and verified by
Customer. Notwithstanding the
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foregoing, nothing herein shall relieve MPOWER of responsibility for
the assistance that it may provide to Customer hereunder.
5.4 Other Customer Obligations. In addition to its other obligations
hereunder, Customer will on a timely basis:
(a) Establish appropriate priorities for Customer that relate to
MPOWER Services and communicate the same to MPOWER. Customer recognizes that
changes in such priorities may result in additional fees hereunder for
additional staff, as Supplemental Services, or reordering of other priorities to
provide MPOWER Services within the current fee structure;
(b) Cooperate with MPOWER by, among other things, making available,
as reasonably requested by MPOWER, management decisions, information, approvals,
and acceptances in order that MPOWER may properly accomplish its obligations and
responsibilities hereunder;
(c) If applicable (e.g. for certain conversion services), deliver
input and output data to and from the MPOWER Software accompanied by control
totals, and providing supplies of the necessary input and output forms;
(d) If applicable (e.g. for certain conversion services), carefully
inspect and review for accuracy and completeness all reports and other output of
any incorrect reports or output within sixty (60) calendar days after receipt
thereof. If Customer fails to so notify MPOWER of the inaccuracies or
incompleteness of such reports or outputs, or fails to make available to MPOWER
access to the production data including but not limited to data files, data
bases, run time setups and source and load libraries as they existed at the time
of the creation of the inaccurate or incomplete report or output, Customer shall
be deemed to have waived its rights and assumed all risks with respect thereto;
(e) Maintain, reproduce and distribute (solely for Customer's use in
connection with the authorized use of the MPOWER Software hereunder) procedure
manuals and documentation used by Customer personnel in connection with the
MPOWER Services hereunder;
(f) Train applicable Customer. personnel to properly prepare input
for and to effectively utilize output from
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the MPOWER Software operated either by MPOWER or by Customer hereunder;
(g) Pay all costs of acquisition, installation and use of equipment
and services at all Customer sites and all current and future pass-through
costs;
(h) Properly maintain the Customer equipment at all Customer sites;
(i) Properly maintain the operating environment, operating system,
network and database software as agreed to between the parties;
(j) Such other responsibilities as set forth herein.
Customer agrees that to the extent its failure to meet its obligations set
forth in this Section 5.4 affects the ability of MPOWER to perform MPOWER's
obligations under this Agreement, MPOWER shall be relieved of such obligations,
and Customer shall indemnify MPOWER against any claims or liabilities arising
out of such failure by Customer including those set forth in Schedule C.
5.5 Reprocessing or Reconstructing of Data. To the extent that any
Customer data must be corrected, recreated, restored or reprocessed due to the
sole fault or negligence of Customer, its employees or agents, or by a breach by
Customer of any of its obligations hereunder, MPOWER will do so as Supplemental
Services, and in such event Customer shall reimburse MPOWER for any costs
incurred by MPOWER in correcting, recreating, restoring or reprocessing such
data or in providing assistance therewith.
6. ACCEPTANCE
6.1 Initial Delivery of MPOWER Software: For all deliverables, including
the MPOWER Software and General System Enhancements, Customer shall, not later
than June 1, 1997, review and, if applicable, test the deliverable and approve
it or notify MPOWER in writing of non-approval, documenting in reasonable detail
any and all material defects in the deliverable which prevent it from conforming
to the Documentation. MPOWER shall, upon receipt of such notice, use its best
efforts to
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correct any such material failures and shall notify Customer of its completion
thereof. Customer shall, after receipt of said notice, review the deliverable
and report the results to MPOWER. Customer shall do so promptly using diligent
efforts, but in no event shall such process exceed fifteen (15) days. The above
cycle shall be repeated as is necessary. A deliverable shall be deemed accepted
by Customer if either:
(a) Customer notifies MPOWER in writing of its acceptance and the
acceptance date shall then be the date of such notice;
(b) Customer fails to notify MPOWER in writing within the applicable
time period of any material defect in the deliverable and the acceptance date
shall then be the last day of said period; or
(c) Customer places in productive use any portion of the deliverable
and the acceptance date shall be June 1, 1997, unless accepted earlier under
paragraphs (a) or (b) above.
Customer agrees that it will test any modifications or enhancements made by
MPOWER for Customer as a part of the initial Implementation. The version and
release of the MPOWER Software so accepted by Customer shall be deemed the
current Shelf Version. Customer and MPOWER shall maintain copies of each Shelf
Version. The obligation of MPOWER to maintain any enhancements or modifications
made specifically for Customer that are not part of either General System
Enhancements or a Release shall be specified in the Work Order that authorizes
such enhancements or modifications or in a subsequent Work Order.
6.2 Delivery of Releases, Modifications and Enhancements Subsequent to
Initial Implementation: For all deliverables, including the MPOWER Software and
General System Enhancements and Customer-specific enhancements and modifications
provided pursuant to an applicable Work Order, Customer shall, within thirty
(30) days of receipt of the deliverable, review and, if applicable, test the
deliverable and approve it or notify MPOWER in writing of non-approval,
documenting in reasonable detail any and all material defects in the deliverable
which prevent it from conforming to the Documentation or specifications
therefor, as applicable. Work Orders for Customer enhancement requests will
include specification of an acceptance test period
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that is mutually agreed to by Customer and MPOWER and which shall be reflective
of the estimated size and complexity of the deliverable specified by the Work
Order. MPOWER shall, upon receipt of such notice, use its best efforts to
correct any such material failures and shall notify Customer of its completion
thereof. Customer shall, after receipt of said notice, review the deliverable
and report. Customer shall do so promptly using diligent efforts, but in no
event shall such process exceed fifteen (15) days. The above cycle shall be
repeated as is necessary. A deliverable shall be deemed accepted by Customer if
either:
(a) Customer notifies MPOWER in writing of its acceptance and the
acceptance date shall then be the date of such notice;
(b) Customer fails to notify MPOWER in writing within the applicable
time period of any material defect in the deliverable and the acceptance date
shall then be the last day of said period; or
(c) Customer places in productive use any portion of the deliverable
and the acceptance date shall then be the first day of such productive use.
Productive use for purposes of the foregoing shall not include the use by
Customer of the MPOWER Software in a parallel processing environment where
Customer is utilizing the MPOWER Software to process a limited number of Members
during a reasonable period of time for the purpose of testing the MPOWER
Software.
Customer agrees that it will so test any modifications or enhancements made
by MPOWER for Customer under an applicable Work Order and made part of a Release
and all General System Enhancements. The version and release of the MPOWER
Software so accepted by Customer shall be deemed the current Shelf Version.
Customer and MPOWER shall maintain copies of each Shelf Version. The obligation
of MPOWER to maintain any enhancements or modifications made specifically for
Customer that are not part of either General System Enhancements or a Release
shall be specified in the Work Order that authorizes such enhancements or
modifications or in a subsequent Work Order.
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7. WARRANTIES
7.1 MPOWER warrants that it either owns the rights to the MPOWER Software
or has the right to grant the license to Customer herein, and that it either
owns or has licensed in the manner contemplated by this Agreement any other
software used in the provision of the MPOWER Services to Customer, including but
not limited to the enhancements or modifications provided by MPOWER pursuant to
an applicable Work Order. MPOWER warrants that the MPOWER Software, including
without limitation each component or part thereof, does not and will not
infringe upon or violate any patent, copyright, trademark, trade secret or other
proprietary or contractual rights of any third party.
MPOWER shall, at its own expense indemnify, defend, settle and hold
harmless Customer and its officers and employees, from and against any and all
claims, damages, losses, liabilities, costs and expenses (including reasonable
legal fees) directly arising out of any such claim that the Shelf Version of the
MPOWER Software infringes upon or violates any United States patents,
copyrights, trademarks, trade secrets or other proprietary, contractual or
intellectual property rights of any third party; provided, however, Customer
must send MPOWER written notice of any claim relating to such infringement
promptly after Customer receives notice of the same and Customer fully
cooperates, at MPOWER's expense, in the defense of any such claim. Following
such notice of a claim or of a threatened or actual suit, MPOWER shall, upon
written notice to Customer and at MPOWER's expense, either: (a) procure for
Customer the right to continue using such MPOWER Software; (b) replace or modify
same so that it becomes non-infringing; or, (c) grant to Customer a refund of
the ILF for said MPOWER Software based upon a five (5) year straight line
depreciation upon its return to MPOWER if neither (a) nor (b) are reasonably
possible, in MPOWER's sole discretion. The foregoing states the entire liability
of MPOWER and the sole remedy of Customer with respect to any infringement or
claimed infringement by the MPOWER Software.
Notwithstanding the foregoing, MPOWER shall not be obligated to defend,
indemnify or hold Customer harmless from and against any claim, suit proceeding
or allegation (i.) asserted by a parent, subsidiary or affiliate of Customer or
any Related Party, (ii.) resulting from Customer's additions to, changes in, or
enhancements or modifications of the MPOWER Software, (iii.) resulting from
Customer's use of the MPOWER Software in
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combination with non-MPOWER Software, or (iv.) resulting from Customer's misuse
of the MPOWER Software.
7.2 MPOWER warrants that the Shelf Version of the MPOWER Software will
function as set forth in MPOWER's User Documentation, including all MPOWER
developed updates and enhancements thereto. Upon receipt of Customer's notice
given pursuant to Section 16.1, MPOWER and Customer shall cooperate to attempt
to duplicate the problem on the Shelf Version of the MPOWER Software. If the
problem can be duplicated, MPOWER's sole obligation under this warranty and
Customer's sole remedy shall be for MPOWER to comply with the service
obligations set forth in Section 4. If the problem cannot be duplicated,
MPOWER's warranty shall not apply and MPOWER shall have no obligation to remedy
the cited defect. MPOWER covenants and warrants that all improvements and
enhancements of the MPOWER Software provided by MPOWER will be compatible with,
and will not materially diminish the features or functions of, or the
specifications of the Shelf Version of the MPOWER Software, and that the Shelf
Version of the MPOWER Software will be compatible with the equipment described
in the Documentation. MPOWER warrants that User Documentation shall reflect the
operation of the MPOWER Software, and MPOWER shall, at no additional cost to
Customer, correct any User Documentation that does not conform to this warranty.
7.3 MPOWER DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, EXCEPT
THOSE WARRANTIES EXPRESSLY SET FORTH IN THIS SECTION 7. MPOWER SPECIFICALLY
DISCLAIMS ANY WARRANTY, EXPRESS OR IMPLIED, AS TO THE MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE OF THE MPOWER SERVICES OR THE MPOWER SYSTEM, OR THE
COMPLIANCE OF THE FOREGOING WITH ANY LAW, REGULATION OR ORDER.
8. LIMITATION OF LIABILITY
MPOWER SHALL HAVE NO LIABILITY WITH RESPECT TO ITS OBLIGATIONS UNDER THIS
AGREEMENT OR OTHERWISE FOR CONSEQUENTIAL, EXEMPLARY, INCIDENTAL OR PUNITIVE
DAMAGES EVEN IF IT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. MPOWER
SHALL NOT BE LIABLE FOR ANY CLAIM ARISING FROM THE USE OF SOFTWARE OR DATA WHICH
HAS BEEN MODIFIED BY ANYONE OTHER THAN MPOWER, NOR FOR ANY CLAIM ARISING FROM
THE USE OF ANY SOFTWARE OR EQUIPMENT DEVELOPED OR MODIFIED BY CUSTOMER OR WHICH
HAS BEEN PROVIDED TO OR ACQUIRED BY CUSTOMER UNDER ANY LICENSE OR OTHERWISE FROM
ANY THIRD PARTY.
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EXCEPT AS PROVIDED IN SECTION 7.1 WITH RESPECT TO MPOWER's EXPRESS
OBLIGATIONS TO INDEMNIFY CUSTOMER FOR LIABILITIES TO THIRD PARTIES, MPOWER'S
SOLE AND TOTAL LIABILITY TO CUSTOMER RELATED TO THIS AGREEMENT WHETHER IN
CONTRACT OR IN TORT OR OTHERWISE SHALL BE LIMITED TO CUSTOMER'S ACTUAL DIRECT
DAMAGES IN AN AMOUNT EQUAL TO THE MAXIMUM COVERAGE OF MPOWER'S ERRORS AND
OMISSIONS POLICY OR MPOWER'S INSURANCE LIABILITY POLICY, WHICHEVER IS
APPROPRIATE, (THE MAXIMUM E&O COVERAGE IS $5,000,000; THE MAXIMUM GENERAL
LIABILITY COVERAGE IS $2,000,000 -- THESE COVERAGES CANNOT BE REDUCED OR
CANCELLED BY MPOWER) OR FEES PAID TO MPOWER BY CUSTOMER (INCLUDING THE $500,000
LICENSE FEE WAIVED BY MPOWER IN SCHEDULE A, B.1.), WHICHEVER IS GREATER, AND
FURTHER PROVIDED THAT IN ANY EVENT, MPOWER IS THE SOLE CAUSE FOR THE BREACH OR
CAUSE OF ACTION FOR WHICH DAMAGES ARE CLAIMED.
THIS LIMITATION APPLIES TO ALL CAUSES OF ACTIONS OR CLAIMS IN THE AGGREGATE
INCLUDING WITHOUT LIMITATION, BREACH OF CONTRACT, BREACH OF WARRANTY,
NEGLIGENCE, STRICT LIABILITY, MISREPRESENTATION AND OTHER TORTS. FURTHER, NO
CAUSE OF ACTION WHICH ACCRUED MORE THAN TWO(2) YEARS PRIOR TO THE FILING OF A
SUIT ALLEGING SUCH CAUSE OF ACTION MAY BE ASSERTED AGAINST MPOWER, EXCEPT TEAT
IN NO EVENT SHALL THE FOREGOING LIMITATION EXTEND ANY APPLICABLE STATUTORY
LIMITATION PERIOD. CUSTOMER AND MPOWER EXPRESSLY ACKNOWLEDGE AND AGREE THAT THE
LIMITATIONS AND EXCLUSIONS CONTAINED HEREIN REPRESENT THE PARTIES' AGREEMENT AS
TO THE ALLOCATION OF RISK BETWEEN THE PARTIES IN CONNECTION WITH MPOWER's
OBLIGATIONS UNDER THIS AGREEMENT. THE PAYMENTS PAYABLE TO MPOWER IN CONNECTION
HEREWITH REFLECT THIS ALLOCATION OF RISK AND THE EXCLUSION OF CONSEQUENTIAL
DAMAGES IN THIS AGREEMENT.
MPOWER hereby is not assuming or otherwise responsible for, expressly or
implicitly, any obligation or liability of any kind whatsoever of Customer.
Customer shall and hereby does agree to indemnify and hold MPOWER harmless from
any and all claims, lawsuits, liabilities, expenses, costs, damages and fees
arising from or in connection with Customer's use or misuse of the MPOWER
Services or MPOWER Software in breach of its obligations hereunder or relative
to Customer's provision of services or products to any third party.
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9. FEES AND CHARGES
9.1 Fees and Charges. The Fees for the MPOWER License and Services are
described in Schedule C attached hereto.
9.2 Timeliness of Payment. Customer will pay the ILF in accordance with
the schedule set forth in Schedule C. Any other sum due MPOWER hereunder for
which a time for payment is not otherwise specified will be due and payable
within thirty (30) days after the due date of an invoice therefor from MPOWER.
All payments shall be in U.S. dollars. Each MPOWER invoice shall reference this
Agreement and the applicable Work Order. If Customer fails to pay any amount due
and not reasonably disputed by Customer within forty-five (45) days from its due
date, late charges of one and one half percent (1.5%) (or the maximum allowable
under applicable law, whichever is lower) per month shall also become payable by
Customer to MPOWER. if Customer fails to pay, when due, any amount payable
hereunder and not reasonably disputed by Customer or fails to fully perform its
obligations hereunder, Customer agrees to pay, in addition to any amount past
due, plus interest accrued thereon, all reasonable expenses incurred by MPOWER
in enforcing this Agreement including but not limited to all expenses of any
legal proceeding related thereto and all reasonable attorneys' fees incurred in
connection therewith. No failure by MPOWER to request any such payment or to
demand any such performance shall be deemed a waiver by MPOWER of Customer's
obligations hereunder or a waiver of MPOWER's right to terminate this Agreement.
9.3 Taxes. There will be added to any charges under this Agreement, and
Customer will pay to MPOWER, amounts equal to any taxes, however designated or
levied, based upon such charges, or upon this Agreement or the services or
materials provided hereunder, or Customer's use thereof, including federal,
state and local sales, use, privilege or excise taxes based on gross revenue,
and any taxes or amounts in lieu thereof paid or payable by MPOWER in respect of
the foregoing, but excluding any franchise taxes, taxes based on the gross
income or adjusted gross income of MPOWER, and employee withholding, FICA and
other taxes relating to MPOWER personnel performing services hereunder. Such
taxes will be itemized separately from service fees or charges for materials and
products on the invoice. In the event that MPOWER collects any such taxes, as
described in the first sentence of this Section 9.3, MPOWER acknowledges its
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responsibility to pay such collected taxes to the appropriate taxing authority
10. OTHER PROVISIONS
10.1 Independent Contractor. MPOWER, its agents and employees, in
performing their respective obligations under this Agreement, are acting only as
independent contractors of Customer, and not as officers, employees or agents of
Customer, and the rights and responsibilities of the parties shall be determined
accordingly.
10.2 Force Majeure. Each party hereto shall be excused from performance
hereunder (except for payment obligations) for any period and to the extent
that it is prevented from performing any services pursuant hereto, in whole or
in part, as a result of delays caused by the other party or an act of God, war,
civil disturbance, court order, labor dispute of the other party or any third
party, or other cause beyond its reasonable control and which it child not have
prevented by reasonable precautions, and such nonperformance shall not be a
default hereunder or a ground for termination hereof. In the event that either
party is excused from performance hereunder pursuant to this Section, then that
party shall take all reasonable actions to resume, or provide alternative
performance of its obligations hereunder as soon as feasible.
11. DISPUTE RESOLUTION AND TERMINATION
11.1 Dispute Resolution. In the event of a dispute between the parties
arising out of or relating to this Agreement, the parties shall meet and attempt
in good faith resolve the dispute. Initially, disputes will be handled by the
MPOWER Account Executive and the Information Services Director, or his/her
equivalent, of Customer, and if they are unable to reach a resolution, the
dispute will be presented to the Chief Operating Officer of MPOWER and the
President of Customer for resolution. If the matter has not been resolved
pursuant to the aforesaid mediation procedure within sixty (60) days of the
commencement of such procedure (which period may be extended by mutual
agreement), the controversy shall be settled by arbitration pursuant to the
rules of the American Arbitration Association for commercial arbitration, by a
panel of three (3) arbitrators knowledgeable in the computer area. The
arbitration
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shall be governed by the United States Arbitration Act, 9 U.S.C. Sec. 1-16, and
judgment upon the award by the arbitrator may be entered by any court having
jurisdiction thereof. The place of arbitration shall be New York City, New York.
Each party shall pay its own cost and expenses.
The formation and performance of this Agreement shall be governed and
interpreted by the laws of the State of New York. Either party shall be entitled
to seek injunctive relief against the other in a court having competent
jurisdiction upon a disclosure or threatened disclosure of any Confidential
Information without a requirement that the moving party prove irreparable harm
or the posting of a bond.
11.2 Termination for Cause. In the event either party materially breaches
any term or provision of this Agreement and such breach remains uncured for
thirty (30) days following receipt of written notice from the other party of
such breach; or if any proceedings under the bankruptcy law or any state or
local insolvency statutes are filed against Customer or MPOWER which remain
undismissed or undischarged for a period of ninety (90) days; or if either party
files a petition in voluntary bankruptcy or seeks relief under any bankruptcy
law or any state or local insolvency statutes; or if either party consents to
the appointment of or taking possession by a receiver, trustee or liquidator of
itself or its property; or if either party makes an assignment for the benefit
of creditors; then the nondefaulting party may terminate, at its option, this
Agreement and License hereunder, and/or have recourse to any other right or
remedy available at law or in equity.
11.3 Outstanding Amounts. Termination of this Agreement shall entitle
MPOWER to payment and Customer shall be obligated to pay for the provisions of
any and all undisputed and verified MPOWER Services rendered by MPOWER under
this Agreement prior to the date of such termination, and all outstanding fees
and Expenses incurred prior to the date of termination.
11.4 Customer Data. In the event that either party terminates this
Agreement, Customer retains ownership of all Customer membership data and all
other Customer data defined in the MPOWER System. MPOWER shall return same to
Customer at the time of termination in MPOWER's standard tape record format. Any
programming, analysis or consulting services requested by
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<PAGE> 24
Customer to provide data in formats other than MPOWER's standard tape record
format shall be provided as Supplemental Services.
11.5 MPOWER Software. Unless otherwise provided in this Agreement, Customer
agrees that upon termination of this Agreement, the License granted hereunder
shall also terminate and Customer shall cease using the MPOWER Software and
shall return to MPOWER or destroy, within thirty (30) days after such
termination, the original and all copies of such MPOWER Software and
Documentation. Except for termination resulting from the material breach on the
part of Customer, including without limitation, breach of its Confidentiality
obligations or failure to timely make any payment hereunder, Customer shall be
permitted to continue to use the MPOWER Software pursuant to all the terms and
conditions set forth in this Agreement for up to a maximum of six (6) months
following such termination for the sole purpose of transitioning Members to an
alternate processing software, provided (i.) Customer remains obligated to pay
MF during such period; (ii.) MPOWER has no further obligations to provide Core
Services, new Releases, fixes to Nonconformities or Critical Failures, and
(iii.) the MPOWER Software is no longer warranted. If Customer destroys the
MPOWER Software, all copies thereof and Documentation, within thirty (30) days
of such destruction an officer of Customer shall certify to MPOWER in writing
that the MPOWER Software and all copies and Documentation thereof have been
destroyed. Due to the nature of the MPOWER Software and the need for its
protection as a trade secret and confidential proprietary information, time is
of the essence in its return or destruction, and in the event of Customer's
failure to do so within the time provided herein, Customer agrees that MPOWER
shall be entitled to obtain injunctive relief to require such return or
destruction and reasonable attorneys' fees and costs incurred in obtaining such
injunctive relief.
12. LAW GOVERNING AGREEMENT
This Agreement shall be construed and enforced according to the laws of the
State of New York without reference to principles of conflicts of laws.
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<PAGE> 25
13. CONFIDENTIALITY
13.1 Confidential Information. "Confidential Information" shall mean
information such as customer lists, business plans, operation plans, client
information, application software programs and documentation licensed by third
parties to Customer or MPOWER, the MPOWER Software, the User Documentation,
which are disclosed by Customer or MPOWER to the other party, its employees,
agents, contractors, assignees or successors in the conduct of business under
this Agreement. In addition, Confidential Information shall also include any
other materials relating to MPOWER's business or the business of Customer which
are designated in writing as confidential at the time of disclosure by Customer
or MPOWER, or is identified orally at the time of the disclosure as confidential
and confirmed in writing within one week of such disclosure, and which are
disclosed by Customer or MPOWER to the other party, its employees, agents,
contractors, assignees or successors in the conduct of business under this
Agreement. The following information shall not be deemed Confidential
Information, and a party and that party's employees shall have no obligation.
with respect to any such information which:
(a) is or falls into the public domain through no wrongful act of a
party or that party's agents or employees; or
(b) is rightfully received from a third party without restriction and
without breach of this Agreement; or
(c) is approved for release by written authorization of an officer of
a party; or
(d) is disclosed pursuant to the requirements of a governmental
agency or operation of law; or
(e) is already in possession of a party or that party's employees as
evidenced by their records and is not the subject of a separate non-disclosure
or confidentiality agreement with either of them.
13.2 Standard of Care. Each party hereby agrees that it and its respective
officers, employees, agents, contractors,
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<PAGE> 26
assignees, and successors shall (i.) keep all Confidential Information received
from the other party strictly confidential, (ii.) instruct their officers,
employees, agents, contractors, and permitted assignees and successors, who have
access to such Confidential Information, to use the same degree of care and
discretion with respect to the Confidential Information of the other party, or
of any third party utilized hereunder, that MPOWER and Customer each require
with respect to their own most confidential information, (iii.) use and disclose
such information solely for the purposes and in the manner set forth in this
Agreement, (iv.) not disclose any such information to any other person,
corporation, governmental agency or other entity without the express written
permission of the other party, except that Customer may disclose the MPOWER
Software and Documentation to outside consultants or other third parties having
a need to know such Confidential Information for purposes of this Agreement, and
provided said consultants or third parties agree to hold the MPOWER Software and
Documentation in confidence, and have executed a Non-Disclosure Agreement in the
form annexed hereto as Schedule F, and (v.) disclose the User Documentation to
Related Parties and Non-Related Parties in order for Customer to be able to
provide and for such parties to be able to effectively receive and utilize
Customer Processing, provided said Related and Non-Related Parties agree to hold
the User Documentation in confidence subject to the provisions herein, and have
executed a Non-Disclosure Agreement in the form annexed hereto as Schedule F.
NOTWITHSTANDING THE FOREGOING, WITH RESPECT TO MPOWER SOFTWARE AND
DOCUMENTATION, IN ADDITION TO ITS OBLIGATIONS SET FORTH HEREIN, CUSTOMER SHALL
USE NO LESS THAN THE SAME DEGREE OF CARE AND DISCRETION THAT CUSTOMER REQUIRES
WITH RESPECT TO ITS MOST VALUABLE TRADE SECRET INFORMATION. Notwithstanding the
foregoing, Customer may not disclose MPOWER's Confidential Information to any of
the parties identified by MPOWER in Schedule G, as such Schedule may be updated
from time to time by MPOWER, or to their employees, agents or consultants.
Customer shall institute the necessary security policies and procedures to meet
its obligations hereunder.
Customer shall indemnify and hold harmless MPOWER and its officers and
employees from and against any and all damages, losses, liabilities, costs and
expenses (including reasonable legal fees) arising in any way out of use not in
compliance with this Agreement or of any breach of the Confidentiality
obligations hereunder by Customer, or its subsidiaries and
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<PAGE> 27
affiliates, or any entity controlling, controlled by or under common control
with Customer or any Related Party.
14. BACKUP AND DISASTER RECOVERY SERVICES
14.1 Disaster Recovery. At Customer's request and if agreed to by MPOWER,
MPOWER and Customer will jointly assess and consequently approve a mutually
satisfactory Disaster Recovery Third Party vendor. Customer will be responsible
for all costs associated with Disaster Recovery services.
15. SOURCE CODE CUSTODY AGREEMENT
15.1 MPOWER agrees to place a copy of the then current version of its
source code for the computer program known as "MPOWER", into a source code
custody arrangement (described below).
15.2 The parties agree that the Source Code Copy shall be held by a
mutually agreed upon-third party acting as custodian of MPOWER's source code,
hereinafter referred to as "Custodian" for delivery to Customer under the
following conditions:
(a.) If MPOWER ceases doing business, and its business is not continued by
virtue of a merger, consolidation, the sales of all or substantially all of its
assets, or. through some other transaction by another corporation or entity, or
(b.) MPOWER ceases offering maintenance support services to the public, and
(c.) the Custodian of the source code has received from Customer:
(i) written notification of such event or condition;
(ii) evidence that Customer has previously notified MPOWER of any such
event or condition in writing and;
(iii) a demand letter that a copy of the source code be mailed to
Customer;
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<PAGE> 28
(iv) written undertaking from Customer that the copy of the source
code to be supplied to Customer will be used only for Customer's
maintenance of the MPOWER Software at a specified location and will be
promptly returned to the Custodian at the expiration of the period during
which Customer, under its agreement with MPOWER, has the right to use the
MPOWER Software, and that the copy of the source code and the information
and material contained therein shall be held in confidentially by Customer
and its employees who are involved in the use of the MPOWER Software,
including the provision of Section 13 hereof, and shall not, under any
circumstances, be disclosed or made available to any other person or
entity;
(v) specific instructions from Customer for the delivery of a copy of
the source code, which delivery shall be by mail to the address provided
under Section 17.
16. RELATIONSHIP AND PROJECT MANAGEMENT AND LIAISON
16.1 Relationship Management. MPOWER and Customer agree to establish a
committee to meet regularly to discuss business and relationship strategies
affecting both parties. Until such time as Customer is in routine, full time
production, or as otherwise agreed to by the parties, MPOWER and Customer
further agree to hold regularly scheduled meetings on a mutually agreed upon
schedule to summarize current activities, performance results, error corrections
and work efforts, as well as additional planned activities. These meetings shall
follow a predefined agenda and may be conducted by telephone. MPOWER shall
provide Customer with written status reports as reasonably requested.
16.2 Liaison. During the term of this Agreement, each party will provide a
liaison who (i.) will have overall management responsibility for the performance
by the party hereunder, (ii.) will have primary operational responsibility, and
(iii.) will serve as the party's primary liaison with the other party with
respect to performance under this Agreement.
17. GENERAL
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17.1 Notices. All notices and other communications under this Agreement
shall be in writing and may be given by any of the following methods: (a)
personal delivery against a signed receipt; (b) facsimile transmission; (c)
registered or certified mail, postage prepaid, return receipt requested; or (d)
overnight delivery service. Notices shall be sent to the appropriate party at
its address or facsimile number given below (or at such other address or
facsimile number for such party as shall be specified by notice given
hereunder):
17.1.1 If to MPOWER, to:
MPOWER Solutions Corporation
2305 Renard Place, S. E.
Albuquerque, New Mexico 87106
Attn.: Mr. William F.X. O'Neil
Chief Operating Officer
Fax No.: 505-248-3960
with a copy to:
Julian S. Millstein, Esq.
Brown Raysman & Millstein LLP
120 West 45th Street
New York, New York 10036
Fax No.: 212-840-2429
17.1.2 If to Customer, to:
Attn: Steven A. Rogers
President
Fax No.: 614.647.9517
with a copy to:
Michael Singer, Esq.
C/o HealthScope/United, Inc.
345 Hudson Street, 16th Floor
New York, NY 10014
All such notices and communications shall be deemed 'delivered upon (a)
actual receipt thereof by the addressee, (b) actual delivery thereof to the
appropriate address, or (c) in the
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<PAGE> 30
case of a facsimile transmission, upon transmission thereof by the sender and
issuance by the transmitting machine of a confirmation slip confirming that the
number of pages constituting the notice have been transmitted without error. In
the case of notices sent by facsimile transmission, the sender shall
contemporaneously dispatch a copy of the notice to the addressee at the
address(es) provided for above by an overnight courier service. However, such
mailing shall in no way alter the time at which the facsimile notice is deemed
received.
17.2 Insurance. During the term of this Agreement, each party will
maintain, either through external insurance coverage or internal self-insurance,
such capability to bear the risks associated with the performance of this
Agreement as is reasonable, prudent and advisable under the circumstances and
will provide evidence of or otherwise demonstrate such capability to the other
party upon the other party's reasonable request from time to time.
17.3 Assignment. Except as otherwise provided in this Agreement, neither
Customer nor MPOWER may assign its rights or delegate its obligations under this
Agreement without the prior written consent of the other party, which consent
shall not be unreasonably withheld.
17.4 Hiring of Employees. Except as otherwise provided in this Agreement,
Customer and MPOWER each agree that, during the term of this Agreement and for
one (1) year thereafter, neither Customer nor MPOWER shall, except with the
prior written consent of the other party, offer employment to or employ any
person employed then or within the preceding twelve (12) months by the other
party. Notwithstanding the previous sentence hereof, Customer is relieved of its
obligations under this Section 16.4 immediately upon (i.) the filing by MPOWER
of a Chapter 7 application for liquidation under the United States Bankruptcy
Code or (ii.) the acquisition of the assets or voting control of MPOWER by one
or more Customer Direct Competitor(s) whose sum total interest in MPOWER's
assets or voting control is greater than fifty percent (50%). Customer Direct
Competitor shall mean an entity that competes directly with Customer in the
manufacturing, distribution or administration of employee benefits, products and
services.
17.5 Agreement. This Agreement, including any Schedules or Work Orders
referred to herein and attached hereto,
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constitute the entire agreement between the parties hereto with respect to the
subject matter hereof and there are no representations, understandings or
agreements relative hereto which are not fully expressed herein. No amendment,
change, waiver, or discharge hereof shall be valid unless in writing and signed
by an authorized representative of the party against which such amendment,
change, waiver, or discharge is sought to be enforced.
17.6 Survival of Terms, Waiver, Severability, Section Headings. All
provisions of this Agreement relating to confidentiality, nondisclosure,
publicity, proprietary rights and indemnity shall survive cancellation,
termination or expiration of this Agreement. The waiver or failure of either
party to exercise any right in any instance shall not be deemed a waiver of any
other or further right hereunder. If for any reason a court of competent
jurisdiction finds any provision of this Agreement, or portion thereof to be
unenforceable, that provision shall be enforced to the maximum extent
permissible so as to effect the intent of the parties, and the remainder of this
Agreement shall continue in full force and effect. The section headings used
herein are for reference and convenience only and shall not enter into the
interpretation thereof.
17.7 Publicity. Neither party shall use the name, trade name, service
marks, trademarks, trade dress or logo of the other in publicity releases,
advertising or. similar activities without the prior written consent of the
other. Notwithstanding the foregoing, MPOWER shall have the right to list
Customer's name on customer lists, provided that such listing(s) does not state
or imply a recommendation, approval or testimonial by Customer.
17.8 Export Assurance. Notwithstanding anything contained herein to the
contrary and regardless of any disclosure made by Customer to MPOWER of any
ultimate destination of the MPOWER Software, Customer shall not export or
re-export directly or indirectly the MPOWER Software acquired from MPOWER, or
any technical data derived therefrom, without first obtaining the written
approval or required export license to do so from the United States Department
of Commerce or any other agency of the United States Government or of any
foreign government having jurisdiction over such transaction, when required by
an applicable statute, regulation or order.
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17.9 Governmental Restrictions. Customer shall be responsible for complying
with all applicable governmental regulations of the United States or any foreign
countries with respect to Customer's transport or use of the MPOWER Software
outside of the United States, including, but not limited to import and export
restrictions, obtaining any necessary consents, registering or filing any
documents and paying any duties, fees or taxes. Customer shall be solely
responsible for all costs associated with such compliance. Customer shall
defend, indemnify and hold MPOWER harmless from and against any and all claims,
judgments, costs, awards, expenses (including reasonable attorneys' fees) and
liability of any kind arising out of the non-compliance with applicable
governmental regulations, statute, decree or other obligation with respect to
the MPOWER Software, outside the United States.
17.10 Waiver of Default. Any failure by either party at any time, or from
time to time, to enforce or require the strict keeping and performance of the
other party of any of the terms or conditions of the Agreement shall not
constitute a waiver by the first party of a breach of any such terms or
conditions and shall not affect or impair such terms or conditions in any way,
or the right of the first party at any time to avail itself of such remedies as
it may have for any such breach or breaches of such terms or conditions.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives.
MPOWER Solutions Inc. HealthScope/United, Inc.
(Customer)
By: /s/ WILLIAM F. REILLY By: /s/ STEPHEN A. ROGERS
--------------------------------- -----------------------------------
Name: William F. Reilly Name: Stephen A. Rogers
------------------------------- ---------------------------------
Title: President & CEO Title: President & COO
------------------------------ --------------------------------
Date: 16 February 1997 Date: 16 February 97
------------------------------- ---------------------------------
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INDEX OF SCHEDULES
SCHEDULE A -- DEFINITION OF CORE SERVICES
SCHEDULE B -- DEFINITION OF SUPPLEMENTAL SERVICES
SCHEDULE C -- LICENSE, PROCESSING AND SUPPLEMENTAL SERVICE FEES
SCHEDULE D -- DOCUMENTATION OUTLINE
SCHEDULE E -- TRAVEL GUIDELINES
SCHEDULE F -- NON-DISCLOSURE AGREEMENT
SCHEDULE G -- MPOWER IDENTIFIED PARTIES FOR NON-DISCLOSURE
SCHEDULE H -- WORK ORDER
SCHEDULE I -- MARKETING PARTNER TERMS
SCHEDULE J -- HUBLink Interface
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<PAGE> 34
SCHEDULE A
DEFINITION OF CORE SERVICES
"Core Services" are those services, in addition to the License, that are
provided to Customer by MPOWER in consideration for the payment of the License
Fees, except as otherwise provided in Schedule C. Core Services shall include
the following:
Implementation Plan: MPOWER will provide a template implementation plan for
migrating, converting, and implementing Customer Members to the MPOWER Software
or the MPOWER System. The template implementation plan will include a
description of tasks to be performed, milestones, and deliverables. Customer and
MPOWER will mutually agree on initial modifications to the template
implementation plan to fit the Customer's specific situation and circumstances.
This modified template implementation plan shall be referred to as the
"Implementation Plan", which may be subsequently modified by agreement of the
parties from time to time.
The Implementation Plan will conform to the following committed Live Dates:
Definition of Current Customer Clients:
<TABLE>
<CAPTION>
Plan Name Committed Live Date
- --------- -------------------
<S> <C> <C>
Community Premier Plan ("CPP") -- New York [*]
Bridgeport Health Plan ("BHP") -- Connecticut [*]
Fidelis Care Health Plan("FCP") -- New York [*]
Suffolk County Health Plan ("SHP") -- New York [*]
*Universal Health Plan ("UHP") (If Necessary) [*]
</TABLE>
- ----------
*UHP will not be subjected to the terms and incentives outlined in this
agreement.
Customer acknowledges that MPOWER has met the deliverable date for CPP.
MPOWER commits to meet the following Implementation Dates as set forth:
* Confidential Treatment Requested
A-1
<PAGE> 35
o MPOWER will commit to provide a "production ready, functionally
operational" managed care information system for CPP, that will provide the
following:
o Provider Files loaded and updated -- [*]
o New York Medicaid Enrollment Tape Submittal [*]
o New York Medicaid Tape Receipt and Reconciliation Process- [*]
o Print-out of Primary Care Physician Rosters and member lists -- [*]
o Generate Capitation Payments, Generate Premium Billing Invoices,
Provide Customer Service Team Functionality including Graphical User
Interface ("GUI") and Record Authorizations & Referrals [*]
o Receive and process HCFA 1500 and UB92 paper and electronic-claims,
Interface to CUSTOMER Financial System -- [*]
o MPOWER will commit to provide a "production ready, functionally
operational" managed care information system for the FCP, SHP and BEP plans
by [*].
o MPOWER will commit to converting the mutually agreed upon historical data
for Fidelis Care, Suffolk Health Plan and Bridgeport Health Plan by [*].
o Customer and MPOWER acknowledge that the Implementation includes time
frames that are extremely aggressive. MPOWER understands the operational
and time frame demands of the Customer. Customer will rely on MPOWER
expertise and recommendations to ensure Implementation in accordance with
these dates. Customer also agrees to accept reasonable interim workarounds
to achieve expected time frames.
o Customer agrees to provide MPOWER all necessary information for benefits,
members, providers and other such information as reasonably required and
appropriately requested by MPOWER, in a timely manner and in mutually
agreeable formats. Both parties acknowledge that failure of Customer to do
so may
* Confidential Treatment Requested
A-2
<PAGE> 36
impact committed time frames set forth above. Time delays caused by
Customer or associated third parties (i.e. CPP, FHP, SHP, BHP, State of New
York, State of Connecticut, etc.) will be applied to the committed live
dates and they will be extended appropriately.
Customer acknowledges that as an initial and development test site for
MPOWER, that functionality delivered may not be error free and that
Customer and MPOWER will establish a protocol for identifying and
correcting Non-conformities and suggesting improvements.
Software Installation (if applicable): Customer shall install MPOWER Software on
a single Customer CPU(s) designated as follows:
CPU Model Number(s):
--------------------
CPU Serial Number(s):
--------------------
Prior to installation of MPOWER Software, Customer shall have installed the
vendor software detailed on Exhibit
Delivery: Unless otherwise requested in writing at the time of final delivery to
Customer of any deliverable of the MPOWER Software or of the enhancement or
modification provided under any Work Order under the License or applicable Work
Order to Customer or any Related Party, all deliverables to Customer or any
Related Party shall be by electronic delivery. MPOWER shall arrange or provide
appropriate communications linkages to deliver the MPOWER System and to monitor
remotely the system performance and Customer shall pay MPOWER the fees stated
therefor in Schedule C as pass-through costs.
Documentation: MPOWER will provide User Documentation in the form outlined in
Schedule D, Documentation.
Training: The initial Implementation will include 80 hours for training at
Customer's site for 10 students. Training will be in the "train the trainer"
format.
A-3
<PAGE> 37
Ongoing Support: MPOWER provides ongoing support in the areas of General System
Enhancements, correction of Nonconformities, and in certain specific situations,
support for modifications, Whether made by Customer or MPOWER:
General System Enhancements: See Section 2.4.
Correction of Nonconformities: See Section 2.5.
Ongoing Support will commence [*], with the "CPP" site going live.
* Confidential Treatment Requested
A-4
<PAGE> 38
Schedule B
Definition of Supplemental Services
B.1. Supplemental Services: Supplemental Services may include as applicable (i.)
conversion services to convert Customer data; (ii.) System Setup such as the
establishment of benefit plans, pricing information, tracking information,
capitation rules, procedure and diagnosis code files and fund accounting and
billing rules; (iii.) services for modifying the MPOWER Software for
enhancements and modifications; (iv.) training beyond that set forth in Schedule
A; (v.) consulting services; (vi.) the efforts required to be put forth by
MPOWER to respond to the excessive or inappropriate use of the MPOWER Help Desk
by Customer for issues resulting from the lack of adequately trained Customer
personnel or from the lack of use or inadequate utilization of the Documentation
by Customer ; and (vii.) project coordination and management for the above
Supplemental Services. All suck Supplemental Services shall be described in an
applicable Work Order and shall be undertaken by MPOWER only pursuant to a Work
Order, a specimen of which is set forth in Schedule H.
For services requested by Customer which are beyond the scope of the services
generally contemplated hereunder, for special circumstances, or if the
geographic location in which any MPOWER services are to be provided for Customer
demands higher labor or resource costs, MPOWER will provide Customer with
written notice, and MPOWER reserves the right to propose a new fee structure or
different rates, which fee structure or rates will be detailed in the
appropriate Work Order.
B.2. Enhancements and Modifications Under Work Orders: Pursuant to this Schedule
and the applicable Work Order, Customer may identify enhancements or
modifications which it desires to have MPOWER make to the MPOWER Software, such
as integration to other software systems, modifications for legal requirements,
and other functional enhancements. Customer shall be responsible for providing
to MPOWER a description of the changes which Customer requests to be made in the
MPOWER Software. MPOWER shall have the right to design any Customer requested
enhancements or modifications in a way which, in MPOWER's reasonable opinion,
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<PAGE> 39
will not adversely affect the MPOWER Services or the structure or performance of
the MPOWER Software or will have general applicability. In the event MPOWER
agrees to provide such enhancements or modifications to the MPOWER Software,
such enhancements or modifications shall be owned by MPOWER and licensed to
Customer as part of the MPOWER Software subject Section 2 of the Agreement.
Resources utilized by MPOWER in providing services pursuant to any such requests
will be detailed in applicable Work Orders. If MPOWER declines to modify
presentation of the MPOWER Software, Customer may have the option to modify such
GUI presentation only, subject to the terms and conditions set forth in Section
2.3 (f) of the Agreement.
B.3. Data Integrity: Customer acknowledges that, although MPOWER may, as part of
Supplemental Services, perform certain conversion tasks (for which MPOWER shall
be responsible), including development of files and programs for the conversion
of Customer data into formats for the MPOWER Software, the quality and integrity
of all Customer data provided to MPOWER, and the results obtained or resulting
from poor or inaccurate data are solely Customer's responsibility.
B.4. Access: In order for the Supplemental Services to be completed in a timely
and successful manner, Customer shall provide MPOWER with such access to
applicable information and key Customer personnel as MPOWER may reasonably
request from time to time during the period the Supplemental Services are being
performed. In connection with the Supplemental Services, MPOWER will be entitled
to submit various materials, including time schedules, business requirements,
specifications, and test results, for Customer's review, comment, sign-off, or
approval. Customer will respond to each such request as soon as reasonably
practicable, and, in any event, in a time frame consistent with the applicable
project plan, and shall not unreasonably withhold any sign-off or approval
requested by MPOWER.
B.5. Help Desk: MPOWER shall provide a "Level Two" Help Desk to answer Customer
questions and solve Customer problems for acceptance testing and production
activities as further described herein. (Questions that are training related, or
answers to which can be found in the User Documentation, or that are related
B-2
<PAGE> 40
to initial setups and definitions should be referred to the MPOWER
implementation support team.) The Help Desk is staffed 8:00 a.m. to 5:00 p.m.,
Mountain Time, Monday through Friday. Calls to the Help Desk outside of these
hours are rolled over either to MPOWER Operations or pager response. An Inward
WATS number (currently 1-800-993-3677) is available for Help Desk calls at no
charge to the Customer. Calls to the Help Desk that represent problems related
to the MPOWER Software or MPOWER System are assigned a Problem Number and
entered into the MPOWER Problem Reporting and Tracking System, where current
status is available for reporting back to the Customer.
A "Level Two" Help Desk call is a call from the Customer's internal Help
Desk seeking support for questions and problems for production activities
that the Customer's Help Desk was not able to resolve on its own (each a
"Service Call").
MPOWER represents that Service calls will be logged and responded to
as-follows:.
A. Severity Level/Priority: 1
Definition: A Critical Failure.
Support: MPOWER will provide telephone support twenty-fours (24) hours per
day, seven (7) days per week for Severity Level 1 problems.
Time Frame for Resolution: Service Calls will be responded to by
knowledgeable MPOWER staff via telephone within thirty (30) minutes of
receipt of a Service Call between the hours of 8:00 a.m. to 5:00 p.m.,
Mountain Time, Monday through Friday, and one (1) hour during other
periods. MPOWER will use its best efforts to provide a resolution of the
problem (permanent or temporary) within twenty-four (24) hours of receipt
of the Service Call, or verification by MPOWER of the problem, either
through replication or receipt by MPOWER of complete documentation from
Customer needed to resolve the problem -- whichever occurs last. Customer
shall maintain immediate resource availability during all hours that MPOWER
is working on a Service Call.
B. Severity Level/Priority: 2
B-3
<PAGE> 41
Definition: Production degraded -- defined as a verifiable Nonconformity in
the Shelf Version of the MPOWER Software (or verifiable failure of the
MPOWER System hardware, if the problem arises with respect to Remote
Processing) that does not disrupt critical business processing, but causes
disruption to normal work flow.
Support: MPOWER will provide telephone support twenty-fours (24) hours per
day, Mountain Time, Monday through Friday for Severity Level 2 problems.
Time Frame for Resolution: Service Calls will be responded to by
knowledgeable MPOWER staff via telephone within the same working day,
Monday through Friday, if the Service Call is received prior to 3:00 p.m.
Mountain Time. Otherwise, if the Service Call is received after 3:00 p.m.
Mountain Time, the call will be responded to by 10:00 a.m., Mountain Time,
the next morning, except Saturdays and Sundays. MPOWER will use its best
efforts to provide a resolution of the problem (permanent or temporary)
within three (3) business days of receipt of the Service Call; or
verification by MPOWER of the problem, either through replication or
receipt by MPOWER of complete documentation from Customer needed to resolve
the problem -- whichever occurs last.
C. Severity Level/ Priority: 3
Definition: Normal response to either non-critical questions or
non-critical problems. A non-critical problem is defined as a verifiable
Nonconformity in the Shelf Version of the MPOWER Software (or verifiable
failure of the MPOWER System hardware, if the problem arises with respect
to Remote Processing), that does not cause disruption to normal work flow
or degrade production.
SUPPORT: MPOWER will provide telephone support from 8:00 a.m. to 5:00 p.m.
Mountain Time, Monday through Friday, for Severity Level 3 situations.
Time Frame for Resolution: Service Calls for Severity Level 3 situations
are handled differently whether the Service Call is a non-critical question
or a non-critical MPOWER Software or
B-4
<PAGE> 42
MPOWER System problem. If a non-critical MPOWER Software or MPOWER System
problem, it will be entered into the MPOWER Problem Reporting and Tracking
System. MPOWER and the Customer shall jointly prioritize these non-critical
problems at least weekly up to one year after first production use, and at
least monthly thereafter. After prioritization, MPOWER shall produce a
schedule for their resolution.
Within ten (10) working days after month-end, MPOWER will provide reports and
graphs to the customer liaison (see Section 15.2 and 16.1) comparing Service
Call performance against standards for Severity 1, 2, and 3 Service Calls --
both for the month and the year-to-date.
For two successive calendar quarters, beginning with the first calendar quarter
after the initial Implementation Date, the Customer shall be entitled to
unlimited Service Calls from the Customer's help desk to the Help Desk (or its
"after hours" rollover to Operations). Thereafter, Service Calls to the Help
Desk in excess of sixty (60) calls per calendar quarter shall be billed as
Supplemental Services.
Other Customer Requested Services: Customer may request additional Supplemental
Services pursuant to this section subject to Customer's submission of a Work
Order, MPOWER's acceptance of the assignment and subject to the payment of
Supplemental Service Fees set forth in Schedule C.
B-5
<PAGE> 43
SCHEDULE C
LICENSE, PROCESSING AND SUPPLEMENTAL SERVICE FEES
I. LICENSE FEES
A. License Fees. MPOWER License Fees for the use of the MPOWER Software
are broken into two(2) components: (i.) Initial License Fee (ILF) and
(ii) Maintenance Fee (MF). These components are intended to provide
Customer with initial and ongoing rights to use the Software pursuant
to the terms of the License, Processing and Services Agreement.
1. Initial License Fee: The ILF is the initial fee payable by
Customer for the License to use the MPOWER Software. The ILF for
Customer and Related Parties is set forth in Section B(1) below.
2. Maintenance Fee: The MF is the fee payable by Customer for the
ongoing License and support for the MPOWER Software, as described
in Sections 2.3 and 2.4 of the Agreement.
B. License Fees (ILF) and MF) and Advanced Payments for Customer and
Related Parties
1. Initial License Fee. The initial License Fee payable by Customer
for the License of the MPOWER Software for Customer and Related
Parties is $[*].
MPOWER is waiving the License Fee in exchange for Customer becoming an
operational development site and marketing partner for the MPOWER 6000
product.
2. Support and Maintenance Fee for Customer and Related Parties. The
Maintenance Fee for Customer and Related Parties will be paid by
Customer in accordance with the following schedule:
* Confidential Treatment Requested
C-1
<PAGE> 44
$[*] per month each year.
Support and Maintenance Fee payments shall commence following the
first month of productive use, meaning after historical data
conversion, for CPP, FCP, SHP and BHP. Should the productive use
of the MPOWER System extend beyond June 1, 1997, through no fault
of MPOWER, then Customer will begin payment of monthly support
and maintenance fees on June 1, 1997.
All Support and Maintenance Fees will be subject to annual cost
of living increases, based upon National CPI, to be capped at
[*]% Annual Increase, for a period of five (5) years, at such
time the Support and Maintenance Fee will be re-evaluated.
Additionally, Customer will be subject to annual increases to the
monthly Support and Maintenance Fees on a prorated basis for
increments of [*] members once the total membership exceeds
[*].
II. FEES FOR SUPPLEMENTAL SERVICES
Supplemental Services Fees, as incorporated in Work Orders, may be either
fixed-price or time and materials. Time and materials Will be charged at
the then-current rates for such services. Current (as of December 1996
through December 1997) rates for time and materials shall be held constant
by MPOWER for Customer through December 31, 1997, and are as follows:
$[*]/hr -- for all MPOWER services, not to exceed a total of $[*]
for the Current Customer Clients set forth in Schedule A.
The $[*] shall include $[*] for initial training.
Thereafter, the rate for Supplemental Services will be
* Confidential Treatment Requested
C-2
<PAGE> 45
adjusted to reflect the lesser of the prices charged by MPOWER at the
anniversary date of this Agreement the National CPI or [*] percent
([*]%).
The rates for outside independent contractors provided by MPOWER for
Supplemental Services shall be the greater of (i.) the rates set forth
above (for applicable skill sets) or (ii.) a rate to be mutually
agreed upon in advance by Customer and MPOWER.
III. TRAVEL EXPENSES
All MPOWER travel expenses shall be in accordance with the Travel
Guidelines hereto as Schedule E.
IV. OTHER FEES
Other fees may pertain to the use by Customer of the MPOWER System for
set-up, testing, training, acceptance testing or other uses not related to
the production use of the MPOWER System for processing active Members of
Customer or of a Related Party. Such other fees may be indicated in a Work
Order.
In addition, Customer shall be responsible for the all pass-through costs,
including, but not limited to:
o License Fee for the initial Interface Engine -- Capped at $[*].
o Annual Maintenance Fee for one Interface Engine Capped at $[*] par
year for the first year.
o Travel and Living Expenses incurred by MPOWER, as part of the
Implementation and Work Plan. Travel associated outside the work plan
will be pre-approved by Customer.
o Hardware and Software as required, including obtaining and paying for
licenses for software tools necessary to operate the GUI version of
MPOWER(TM).
o Communications links between MPOWER and Customer.
MPOWER waives fees associated with programming necessary to link the
Interface Engine and to provide interfaces to
* Confidential Treatment Requested
C-3
<PAGE> 46
Customer's accounting system and electronic data interfaces.
V. INCENTIVES
On April 1, 1997, Customer and MPOWER will reconcile and make payments
based on the following:
An incentive payment will be made by Customer to MPOWER for each plan that
is put in production two (2) weeks earlier than the committed production
date. Furthermore, for each two (2) weeks, in addition to those first two
(2) weeks, a similar incentive will be made.
Each incentive payment will be equal to [*] percent ([*]%) of one
quarter of the total implementation and conversion service fees paid by
Customer to MPOWER. The sum total of all incentive payments will not exceed
[*] percent ([*]%) of the total payments made by Customer to MPOWER
for such implementation and conversion services.
MPOWER agrees to pay Customer for delays, caused by mostly by MPOWER, in
the same manner for the same time frames, with the same dollar limit. Such
reconciliation will be netted with payments made appropriately.
VI. SOURCE CODE BUYOUT
Customer shall have the option to acquire the rights to the source code of
the MPOWER Software by exercising the Source Code Buyout Option upon
providing MPOWER with three (3) months advance written notice of the
election of such Source Code Buyout Option and paying the sum of $[*]
to MPOWER Solutions, Inc.
Upon the exercise of the Source Code Buyout Option, the terms of the
Agreement shall remain unchanged except, (a) Customer shall have the right
to modify the MPOWER Software without first obtaining the consent of MPOWER
and without notifying MPOWER; (b) Customer will no longer be obligated to
pay Maintenance Fees; (c) Customer shall no longer be entitled to future
releases or General System Enhancements; and (d) Customer shall not be
entitled to the future provision of
* Confidential Treatment Requested
C-4
<PAGE> 47
Core Services and Maintenance Support Services. Any services provided by
MPOWER to Customer subsequent to completion of the Source Coda Buyout
Option shall be provided as Supplemental Services.
C-5
<PAGE> 48
SCHEDULE D
MPOWER -- USER REFERENCE MANUAL
OUTLINE
<TABLE>
<CAPTION>
BATCH SYSTEM VOLUME 1
GROUP & SUBSCRIBER/MEMBER ENROLLMENT SUBSYSTEM
<S> <C>
Chapter 1 Users Reference Manual System Overview
Chapter 2 Batch Group & Subscriber / Member Enrollment Overview
Chaplet 3 Group Termination -- GRPTRM
Chapter 4 Change Member Identification -- CHGSID
Chaplet 5 Dual / Duplicate Member Report -- DUPMEM
Chapter 6 Special Identification Card Program -- IDCARD
Chapter 7 Member Month Report -- MBRMTH
Chapter 8 Ad Hoc Membership Reporting System -- MBRRPT
Chapter 9 MEMCHG This chapter is currently being developed 11/15/96 KLM.
Chapter 10 MEMELG This chapter is currently under development 11/15/96 KLM.
Chapter 11 Member Outputs -- MEMOUT
Chapter 12 Member Listing -- NEWLST
Chapter 13 Overage Dependent Label & Listing Program -- OVDPLB
Chapter 14 Health Care Financing Administration Reply Data Report
Chapter 15 Subscriber Mailing Labels -- SSLBGR
Chapter 16 Subscriber Mailing Labels By Primary Care Physician (PCP) -- SBLBPV
Chapter 17 Send HCFA Transmission -- SDHCFA
Chapter 18 Senior Choice Enrollment -- SRCHOI
Chapter 19 Subscriber Labels -- SUBLBL
</TABLE>
<TABLE>
<CAPTION>
BATCH SYSTEM VOLUME 2
PREMIUM BILLING & ACCOUNTS RECEIVABLE SUBSYSTEM
<S> <C>
Chapter 1 Users Reference Manual System Overview
Chapter 2 Batch Premium Billing & Accounts Receivable Subsystem Overview
Chapter 3 Aged Accounts Receivable Report -- AGARMO
Chapter 4 Detailed Accounts Receivable Report -- ARDET
Chapter 5 Accounts Receivable Reconciliation -- ARRECN
Chapter 6 Cash Receipts List -- CSHRCP
</TABLE>
D-1
<PAGE> 49
<TABLE>
<S> <C>
Chapter 7 Current Accounts Receivable Report -- CURAR
Chapter 8 Produce Premium Bills -- PRMBIL
Chapter 9 Detail Of Premium Revenue -- PRMREV
Chapter 10 Reset Billing Run -- RESBIL
</TABLE>
<TABLE>
<CAPTION>
BATCH SYSTEM VOLUME 3
AGENT I BROKER SUBSYSTEM
<S> <C>
Chapter 1 Users Reference Manual System Overview
Chapter 2 Agent / Broker Batch Subsystem Overview This chapter is currently under development 11/15/96 KLM.
Chapter 3 Agent Commission Payment -- AGTCOM
Chapter 4 Broker Checks -- BRKCHK
Chapter 5 Produce Letters & Reports For Overdue Groups -- OVRDUE
Chapter 6 Change / Pay / Void Agent Check -- AGTCHK
Chapter 7 Premium Transmittal Report -- PRMRPT
</TABLE>
<TABLE>
<CAPTION>
BATCH SYSTEM VOLUME 4
PROVIDER SUBSYSTEM
<S> <C>
Chapter 1 Users Reference Manual System Overview
Chapter 2 Batch Provider Subsystem Overview
Chapter 3 Provider List By Hospital -- HOSPVS This chapter is currently under development 11/15/96 KLM.
Chapter 4 Independent Practice Association Eligibility -- IPAELG
Chapter 5 Primary Care Physician Availability Report -- PCPAVL
Chapter 6 Provider Information Report -- PVINFO This chapter is currently under development 1 1/1 5/96 KLM.
Chapter 7 Provider Mailing Labels -- PVLBLS
Chapter 8 Terminated Provider's List Of Members -- TRMPCP
</TABLE>
<TABLE>
<CAPTION>
BATCH SYSTEM VOLUME 5
CERTIFICATION SUBSYSTEM
<S> <C>
Chapter 1 Users Reference Manual System Overview
Chapter 2 Batch Certification Subsystem Overview
Chapter 3 Acute & Sub-Acute Beddays Report -- ASABED
Chapter 4 Catastrophic Utilization Management Report -- CATUMA
Chapter 5 Medical Management Detail Report -- CRTMMI
</TABLE>
D-2
<PAGE> 50
<TABLE>
<S> <C>
Chapter 6 Quality Management Detail -- CRTQMI
Chapter 7 Pended Certification Reports -- CRTPND
Chapter 8 Hospital Log Listing Report -- GENLOG
Chapter 9 Hospital Census Reports -- HOSCEN
Chapter 10 Inpatient Summary by Hospital Admissions Report -- INPHOS
Chapter 11 Inpatient Summary By Physicians Admissions -- INPPHY
Chapter 12 Mortality Report -- MRTLTY
Chapter 13 Certification By Procedure Grouping -- PXAPXG
Chapter 14 Hospital Service Category Report -- SVCCAT
Chapter 15 Certification Monthly Statistical Summary -- UMSTAT
</TABLE>
<TABLE>
<CAPTION>
BATCH SYSTEM VOLUME 6
CLAIMS SUBSYSTEM
<S> <C>
Chapter 1 Users Reference Manual System Overview
Chapter 2 Batch Claims Subsystem Overview
Chapter 3 Aging Report -- Claims Set To .Pay -- AGECLM
Chapter 4 Member Claim Audit -- AUDCLM This chapter is currently under development? 11/15/96 KLM.
Chapter 5 Carrier List With Comments o CARCOM
Chapter 6 Carrier Listing -- CARLST
Chapter 7 Check Run Program -- CHKRUN
Chapter 8 Catastrophic Claims Report -- CLMCAT
Chapter 9 Claims Control Listing -- CLMCTL
Chapter 10 Claims Processing Performance Report -- CLMPPL
Chapter 11 Claim Transaction Report -- CLMTRN
Chapter 12 COB Suspended Claims Processing -- COBSUS
Chapter 13 Explanation Of Benefits -- EOB
Chapter 14 Denial Letter Generation -- Denltr This chapter is currently under development 11/15/96 KLM.
Chapter 15 Hold Claims -- HLDCLM This chapter is currently under development 11/15/96 KLM.
Chapter 16 Member Claim Detail Report -- MBRCDR
Chapter 17 Provider Claim Detail Report -- PRVCDR
Chapter 18 Reset Checking Account Codes -- RESACT This chapter is currently under development 11/15/96 KLM.
Chapter 19 Reset Check Run -- RESCKS
</TABLE>
D-3
<PAGE> 51
<TABLE>
<S> <C>
Chapter 20 Reverse / Unset Claims -- REVUNS
Chapter 21 Set Checking Account Code -- SETACT This chapter is currently under development 11/15/96 KLM.
Chapter 22 Disconnect Paid Claims -- SETCHK
Chapter 23 Claims Summary By Employee -- SUBCLM This chapter is currently under development 11/15/96 KLM.
Chapter 24 Suspended Claims List -- SUSCLA
Chapter 25 Suspended Claims Summary -- SUSSUM
Chapter 26 Unpaid Claims Report -- UNPDCL This chapter is currently under development 11/15,/96 KLM.
Chapter 27 Batch Claims Processing -- BATCLM
</TABLE>
<TABLE>
<CAPTION>
BATCH SYSTEM VOLUME 7
CAPITATION & FUND ACCOUNTING
<S> <C>
Chapter 1 Users Reference Manual System Overview
Chapter 2 Batch Capitation & Fund Accounting Overview
Chapter 3 Capitation And Fund Budgeting.- CAP JOB
Chapter 4 Fund Status -- CFSRPT
Chapter 5 Capitation Deduction Run -- CAPDED
Chapter 6 Batch Capitation & Fund Accounting Subsystem Output Error Messages
</TABLE>
<TABLE>
<CAPTION>
BATCH VOLUME 8
ACCOUNTING & FINANCIAL REPORTS
<S> <C>
Chapter 1 Users Reference Manual System Overview
Chapter 2 Batch Accounting & Financial Reports
Chapter 3 Claims Lag Report -- AETLAG
Chapter 4 Define Report Grouping Codes -- DEFINC
Chapter 5 Display Report Grouping Codes -- DISINC
</TABLE>
<TABLE>
<CAPTION>
BATCH SYSTEM VOLUME 9
LETTER WRITING SUBSYSTEM
<S> <C>
Chapter 1 Users Reference Manual System Overview
Chapter 2 Letter Writing Subsystem Overview
Chapter 3 Submit Batch Letters -- BATLTR This chapter is currently under development 11/15/96 KLM.
Chapter 4 Print Letters -- PRTLTR
</TABLE>
D-4
<PAGE> 52
<TABLE>
<S> <C>
Chapter 6 Diagnosis Listing -- DXLST
Chapter 7 Fee File Listing -- FEELST
Chapter 8 Fee Schedule Report -- FEESCH
Chapter 9 ICD9-CM Procedure File Listing -- ICD9PX
Chapter 10 Provider Participation Area Report -- PPDRPT
</TABLE>
[The balance of this page left intentionally blank.]
D-6
<PAGE> 53
ON-LINE SYSTEM
<TABLE>
<CAPTION>
SET-UPS, REFERENCE & UVAM SUBSYSTEM VOLUME 1
<S> <C>
Chapter 1 Users Reference Manual System Overview
Chapter 2 On-Line Group Enrollment Subsystem Overview
Chapter 3 Add New Group -ADDGRP
Chapter 4 Adding Group Contract -- ADOGRP
Chapter 5 Adding Benefits -- ADDGRP
Chapter 6 Adding Premium Billing Rates -- ADDGRP
Chapter 7 Adding Average Contract Size Definitions -- ADDGRP
Chapter 8 Adding Benefit Riders Information -- ADDGRP
Chapter 9 Display Group -- DISGRP
Chapter 10 Displaying Contract For Group -- DISGRP
Chapter 11 Displaying Benefits For Group -- DISGRP
Chapter 12 Displaying Rates For Group -- DISGRP
Chapter 13 Displaying The Average Contract Size -- DISGRP
Chapter 14 Modify Group -- MODGRP
Chapter 15 Modifying Group Contract -- MODGRP
Chapter 16 Modifying Benefits For Group -- MODGRP
Chapter 17 Modifying Benefit Riders Information -- MODGRP
Chapter 18 Modifying Premium Billing Rates -- MODGRP
Chapter 19 Modifying Average Contract Size Definitions -- MODGRP
Chapter 20 Add Market Projections -- ADDPRJ
Chapter 21 Display Market Projections -- DISPRJ
Chapter 22 Add Group Comments -- ADDGCO
Chapter 23 Display Group Comments -- DISGCO
Chapter 24 Group Name List -- NAMGRP
Chapter 25 Define Group Contract Riders -- DEFRDR
Chapter 26 Display Rider Details -- DISRDR
</TABLE>
<TABLE>
<CAPTION>
ON-LINE SYSTEM VOLUME 2
SUBSCRIBER & MEMBER ENROLLMENT SUBSYSTEM
<S> <C>
Chapter 1 Users Reference Manual System Overview
Chapter 2 On-Line Subscriber & Member Enrollment Subsystem Overview
Chapter 3 Add Family -- ADDFAM
</TABLE>
D-7
<PAGE> 54
<TABLE>
<S> <C>
Chapter 4 Display Family -- DISFAM
Chapter 5 Modify Family -- MODFAM
Chapter 6 Display Commercial Member Status History -- DISMST
Chapter 7 Display Other Billing Information -- DISOTH
Chapter 8 Display Subscriber Status -- DISSST
Chapter 9 Subscriber Identification Number Assignment -- NEXTID
Chapter 10 Add Duplicate Insurance Coverage Information -- ADDDCI
Chapter 11 Duplicate Coverage Comments -- DCICOM
Chapter 12 Display Duplicate Coverage -- DISDCI
Chapter 13 Update Pre-Existing Condition -ADDPEC
Chapter 14 Display Pre-Existing Medical Conditions -- DISPEC
Chapter 15 Add Family Comments -- ADDFCC
Chapter 16 Display Family Comments -- DISFCC
Chapter 17 Find Member List -- FNDMBR
Chapter 18 Cross Reference Identification Number -- IDXREF
Chapter 19 Member Name List -- NAMMBR
Chapter 20 Title 19 Member -- T19MBR This chapter is currently under development 11/15/96 KLM.
Chapter 21 Adding Member Dual Coverage -- ADDMDC
Chapter 22 Display Member Dual Coverage -- DISMDC
Chapter 23 Add Medicare Member -- ADBMED
Chapter 24 Display Medicare Member -- DISMED
Chapter 25 Modify Medicare Member -- MODMED
</TABLE>
<TABLE>
<CAPTION>
ON-LINE SYSTEM VOLUME 3
PREMIUM BILLING & ACCOUNTS RECEIVABLE
<S> <C>
Chapter 1 Users Reference Manuel System Overview
Chapter 2 On-Line Premium Billing & Accounts Receivable
Chapter 3 Define Premium Rate Table -- DEFRTB
Chapter 4 Display Premium Rate Table -- DISRTB
Chapter 5 Define Premium Billing Formal -- BILFMT
Chapter 6 Add Customer Account -- ADDCUS
Chapter 7 Display Customer Account -- DISCUS
Chapter 8 Add Payment -- ADDPAY
Chapter 9 Adjust Customer Account -- ADJACT
Chapter 10 Add Customer Account Comments -- ADDCAC
</TABLE>
D-8
<PAGE> 55
<TABLE>
<S> <C>
Chapter 11 Display Customer Account Comments -- DISCAC
Chapter 12 Add Premium Billing History Records -ADDHST
Chapter 13 Display Subscriber Premium Billing History -- DISHST
Chapter 14 Modify Premium Billing History Records -- MODHST
Chapter 15 Change Billed Through Date -- CHGBIL
</TABLE>
<TABLE>
<CAPTION>
ON-LINE SYSTEM VOLUME 4
AGENT / BROKER SUBSYSTEM
<S> <C>
Chapter 1 Users Reference Manual System Overview
Chapter 2 On-Line Agent / Broker Subsystem Overview This chapter is currently under development 11/5/96 KLM.
Chapter 3 Add New Agent -- ADDAGT
Chapter 4 Display Agent -- DISAGT
Chapter 5 Modify Agent -- MODAGT
Chapter 6 Commissions For a Given Agent -- AGTCPM
Chapter 7 Commissions For Payee -- PYECPM
Chapter 8 Groups For Agent -- AGTGRP
Chapter 9 Define Commission Schedules -- DEFCSH
Chapter 10 Display Commission Schedules -- DISCSH
Chapter 11 Add, Modify and Display Group Commission Data -
Chapter 12 Add Agent Comments -- ADDACO
Chapter 13 Display Agent Comments -- DISACO
Chapter 14 Agents For General Agent- GENAGT
Chapter 15 Agents For Payee Agent -- PYEAGT
Chapter 16 Agent's Name List -- NAMAGT
Chapter 17 Define Agent Commission -- DEFAGC
</TABLE>
<TABLE>
<CAPTION>
ON-LINE SYSTEM VOLUME 5
PROVIDER SUBSYSTEM
<S> <C>
Chapter 1 Users Reference Manual System Overview
Chapter 2 On-Line Provider Subsystem Overview
Chapter 3 Define Provider Category -- DEFCAT
Chapter 4 Display Provider Category -- DISCAT
Chapter 5 Add New Provider -- ADDPRV
Chapter 6 Adding A Provider In Multiple Networks -- The IPA Equals 99999
</TABLE>
D-9
<PAGE> 56
<TABLE>
<S> <C>
Chapter 7 Adding Discount And Interest Data
Chapter 8 Display Provider -- DISPRV
Chapter 9 Displaying Network / HIO / POE Data
Chapter 10 Modify Provider Information -- MODPRV
Chapter 11 Modifying A Provider In Multiple Networks -- MODPRV -- The IPA Equals 99999
Chapter 12 Modifying Discount And Interest Data -- MODPRV
Chapter 13 Add Provider Practice Addresses -- ADDPRA
Chapter 14 Display Provider Practice Addresses -- DISPRA
Chapter 15 Add Provider Payment Address -- ADDPPA
Chapter 16 Provider Payment Addresses Display -- DISPPA
Chapter 17 Define Tax Identification Owner -- DEFTAX
Chapter 18 Display Tax Identification Owner -- DISTAX
Chapter 19 Add Provider Comments -- ADDPCO
Chapter 20 Display Provider Comments -- DISPCO
Chapter 21 Display Providers By Drug Enforcement Agency Number -- DEAPRV
Chapter 22 Provider Internal Revenue Service Name List -- IRSPRV
Chapter 23 Provider Name List -- NAMPRV
Chapter 24 Title 19 Member Lookup -- T19PRY
</TABLE>
<TABLE>
<CAPTION>
ON-LINE SYSTEM VOLUME 6
CERTIFICATION SUBSYSTEM
<S> <C>
Chapter 1 Users Reference Manual System Overview
Chapter 2 On-Line Certification Subsystem Overview
Chapter 3 Adding Procedure Authorizations -- ADDPXA
Chapter 4 Adding Procedure Authorization Review Lines -- ADDPXA
Chapter 5 Displaying Procedure Certifications -- DISPXA
Chapter 6 Modifying Procedure Authorizations -- MODPXA
Chapter 7 Modifying Procedure Authorization Review Lines -- MODPXA
Chapter 8 Adding Outpatient Surgery Authorizations -- ADDOSA
Chapter 9 Adding Outpatient Authorization Comments -- ADDOSA
Chapter 10 Display Outpatient Surgery Authorization -- DISOSA
Chapter 11 Modifying Outpatient Surgery Authorizations -- MODOSA
Chapter 12 Modifying Outpatient Authorization Comments -- MODOSA
Chapter 13 Add Inpatient Certification -ADDLOG
</TABLE>
D-10
<PAGE> 57
<TABLE>
<S> <C>
Chapter 14 Adding Inpatient Certification Review Data -- ADDLOG
Chapter 15 Display Inpatient Certification -- DISLOG
Chapter 16 Modify Inpatient Certification o MODLOG
Chapter 17 Modifying Inpatient Certification Review Data -- MODLOG
Chapter 18 List Hospital Certification -- HOSLOG
Chapter 19 Member Certifications -- MBRCRT
Chapter 20 Display Member Certification Eligibility -- DISMCE
Chapter 21 List Member Certification -- MBRLOG
Chapter 22 Member Procedure Certification List -- MBRPXA
Chapter 23 Provider Procedure Certification List -- PRVPXA
Chapter 24 Delete Procedure Authorization -- DELPXA
Chapter 25 Delete Inpatient Certification -- DELLOG
Chapter 26 Add Referral Certification -- ADDREF
Chapter 27 Modify Referral Certification -- MODREF
Chapter 28 Display Referral Certification -- DISREF
Chapter 29 Member Referral Certification -- MBRREF
Chapter 30 Provider Referral Certification Listing -- PRVREF
</TABLE>
<TABLE>
<CAPTION>
ON-LINE SYSTEM VOLUME 7
CLAIMS SUBSYSTEM
<S> <C>
Chapter 1 Users Reference Manual System Overview
Chapter 2 On-Line Claims Subsystem Overview
Chapter 3 Add General Claim -- ADDGEN
Chapter 4 Adding Additional Claim Lines -- ADDGEN
Chapter 5 Modifying & Viewing General Claim Pricing & Payments -- ADDGEN
Chapter 8 Displaying Payment Address Verifications -- ADDGEN
Chapter 7 Add Inpatient Claim -- ADDINP
Chapter 8 Adding Claim Line Details -- ADDINP
Chapter 9 inpatient Claim Payment Category Billing Breakout -- ADDINP
Chapter 10 Modifying Inpatient Claim Pricing & Payments -ADDINP
Chapter 11 Displaying Payment Address Verifications -- ADDINP
Chapter 12 Modify General Claims -- MODCLM
Chapter 13 Modify Inpatient Claims -- MODCLM
Chapter 14 Modify Credit Claims -- MODCLM
</TABLE>
D-11
<PAGE> 58
<TABLE>
<S> <C>
Chapter 15 Displaying Payment Address Verifications -- MODCLM
Chapter 16 Display Old Claim Numbers -- OLDCLM
Chapter 17 Suspended Claim List -- SUSCLM
Chapter 18 Add Coordination Of Benefits Recovery -- ADDCOB
Chapter 19 Add Credit Claim -- ADDCRE
Chapter 20 Adjust Claim -- ADJCLM
Chapter 21 Batch Reprocessing Suspended Claims -- BRSCLM
Chapter 22 Manual Claim Payment -- PAYCLM
Chapter 23 Add Refund -- REFUND
Chapter 24 Unset Claim To Pay -- UNSCLM
Chapter 25 Void Check -- VODCHK
Chapter 26 Claim Comments -- CLMCOM
Chapter 27 BATCLM -- Batch Claims Processing This chapter is currently under development 11/15/95 KLM.
Chapter 28 Check Input -- CHKINP
Chapter 29 Check Input By Run Type code -- CKINP2
Chapter 30 Add Transfer Business Data -- ADDTBD
Chapter 31 Modify Transfer Business Data -- MODTBD
Chapter 32 Display Benefit Thresholds -- BENINQ
Chapter 33 Claims Associated With Benefits -- BENINQ
Chapter 34 Check Claim List -- CHKCLM
Chapter 35 Reverse / Voided Check Claim -- CHKCLM
Chapter 36 Display General Claim -- DISCLM
Chapter 37 Display Inpatient Claims -- DISCLM
Chapter 38 Display Credit Claim -- DISCLM
Chapter 39 Member Claim List -- MBRCLM
Chapter 40 Provider Claim List -- PRVCLM
Chapter 41 Set To Pay Claim List -- STPCLM
Chapter 42 Add New Carrier -- ADDCAR
Chapter 43 Display Carrier -- DISCAR
Chapter 44 Modify Carrier -- MODCAR
Chapter 45 Carrier Name List -- NAMCAR
Chapter 46 Add Claim Comments -- ADDCMC
</TABLE>
D-12
<PAGE> 59
<TABLE>
<S> <C>
Chapter 47 Display Claim Comments -- DISCMC
Chapter 48 Modify Claim Comments -- MODCMC
</TABLE>
<TABLE>
<CAPTION>
ON-LINE SYSTEM VOLUME 8
CAPITATION & FUND ACCOUNTING SUBSYSTEM
<S> <C>
Chapter 1 Users Reference Manual System Overview
Chapter 2 Capitation & Fund Accounting Subsystem Overview
Chapter 3 Define Capitation Claim Deduction Report -- DEFCCR
Chapter 4 Display Capitation Claim Deduction Report Definition -- DISCCR
Chapter 5 Define Capitation Detail Report -- DEFCDR
Chapter 6 Display Capitation Detail Report Definition -- DISCDR
Chapter 7 Define Capitation Summary Report -- DEFCSR
Chapter 8 Display Capitation Summary Report -- DISCSR
Chapter 9 Define Cluster Code -- DEFCLC
Chapter 10 Display Cluster Code -- DISCLC
Chapter 11 Add Entity -- ADDENT
Chapter 12 Adding Entity Contract- ADDENT
Chapter 13 Displaying Rate Verification -
Chapter 14 Adding / Modifying Entity Comments -- ADDENT
Chapter 15 Display Entity -- DISENT
Chapter 16 Modify Entity -- MODENT
Chapter 17 Adding and Modifying Entity Contracts -- MODENT
Chapter 18 Displaying Rate Verification -- MODENT
Chapter 19 Adding / Modifying Entity Comments -- MODENT
Chapter 20 Define Completion And Credibility Factors -- DEFCCF
Chapter 21 Display Completion And Credibility Factors -- DISCCF
Chapter 22 Update Member Capitation Status -- ADDMCS
Chapter 23 Display Member Capitation Status -- DISMCS
Chapter 24 Capitation Processes Run Dates -- CAPDTE
Chapter 25 Display Capitation Payment Data -- DISCAP
Chapter 26 Manual Capitation Adjustment -- CAPADJ
Chapter 27 Cluster Codes By Name Within Type -- NAMCLC
Chapter 28 Entity List By Name -- NAMENT
</TABLE>
D-13
<PAGE> 60
<TABLE>
<CAPTION>
ON-LINE SYSTEM VOLUME 9
LETTER WRITING SUBSYSTEM
<S> <C>
Chapter 1 Users Reference Manual System Overview
Chapter 2 On-Line Letter Writing Subsystem Overview
Chapter 3 Add Letter Paragraph -- ADDLPA
Chapter 4 Display Letter Paragraph -- DISLPA
Chapter 5 Modify Letter Paragraph -- MODLPA
Chapter 6 Add Letter Run Type -- ADDLRT This chapter is currently under development 11/15/96 KLM.
Chapter 7 Display Letter Run Type -- DISLRT This chapter is currently under development 11/15/96 KLM.
Chapter 8 Modify Letter Run Type -- MODLRT This chapter is currently under development 11/15/96 KLM.
Chapter 9 Add Letter Type -- ADDLTP
Chapter 10 Display Letter Type -- DISLTP
Chapter 11 Modify Letter Type -- MODLTP
Chapter 12 Add Letter Series -- ADDSRS
Chapter 13 Display Letter Series -- DISSRS
Chapter 14 Modify Letter Series -- MODSRS
Chapter 15 Add Letter Definition -- ADDLTR
Chapter 16 Defining Database Inserts -- ADDLTR
Chaplet 17 Defining Letter Text -- ADDLTR
Chapter 18 Display Letter Definition -- DISLTR
Chapter 19 Displaying Letter Text -- DISLTR
Chapter 20 Modify Letter Definition -- MODLTR
Chapter 21 Defining Database Inserts -- MODLTR
Chapter 22 Modifying Letter Text -- MODLTR
Chapter 23 Find Letter -- FINLTR
Chapter 24 Send Letter -- SNDLTR
Chapter 25 Display Review Letters -- DISRLT
Chapter 26 Display Letter By User -- LTRENT
Chapter 27 Response to Letter -- LTRRSP
Chapter 28 Review Letter -- RVWLTR
Chapter 29 Display History Letter -- DISHLT
Chapter 30 Find Letters In History File -- FINHLT
</TABLE>
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<TABLE>
<CAPTION>
ON-LINE SYSTEM VOLUME 10
SET-UPS, REFERENCE & UVAM INFORMATION SUBSYSTEM
<S> <C>
Chapter 1 Users Reference Manual System Overview
Chapter 2 Set-Ups, Reference & UVAM Information Overview
Chapter 3 HIO / POE User Value Assignment Module
Chapter 4 Type Of Service User Value Assignment Module
Chapter 5 Certification Requirement User Value Assignment Module
Chapter 6 Certification Action User Value Assignment Module
Chapter 7 Care Set User Value Assignment Module
Chapter 8 Point of Service User Value Assignment Module
Chapter 9 Fee Group User Value Assignment Module
Chapter 10 Checking Account User Value Assignment Module
Chapter 11 Member Class User Value Assignment Module
Chapter 12 Certification Number User Value Assignment Module
Chapter 13 Group Access User Value Assignment Module
Chapter 14 Member Network User Value Assignment Module This chapter is currently under development 11/15/96 KLM.
Chapter 15 Benefit Plan
Chapter 16 Element Variables
Chapter 17 Display HMO Information -- DISHMO
Chapter 18 Display Control E File -- DISCTE
Chapter 19 Display Control 2 File -- DISCT2
Chapter 20 Display Object Module -- DISOBJ
Chapter 21 Display Benefit Plan -- DISPLN
Chapter 22 Define Procedure -- DEFPX
Chapter 23 Display Procedure -
Chapter 24 Display Diagnosis -- DISDX
Chapter 25 Document Definition Codes -- DOCDEF
Chapter 26 Define Account Code -- DEFACT
Chapter 27 Display Checking Account Number -- DISACT
Chapter 28 Define Provider Pricing Data -- ADDPPD
Chapter 29 Adding Hospital Fees
Chapter 30 Display Provider Pricing Data -- DISPPD
Chapter 31 Define General Fee -- DEFFEE
</TABLE>
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<TABLE>
<S> <C>
Chapter 32 Display Fee History -- DISFEE
Chapter 33 Add Conversion Factors -- ADDCFC
Chapter 34 Display Conversion Factors -- DISCFC
Chapter 35 Define Procedure Modifier -- DEFMOD
Chapter 36 Display Procedure Modifier -- DISMOD
Chapter 37 Display Usual & Customary Rate Data This chapter is currently under development 11/15/96 KLM.
Chapter 38 DEFVMP -- Define Place Of Service Codes
Chapter 39 DISVMP -- Display Place Of Service Codes
Chapter 40 Define Adjusted Average Per Capita Cost -- DEFAPC
Chapter 41 Display Adjusted Average Per Capita Cost -- DISAPC
Chapter 42 Internal Security System -- SECURE
Chapter 43 HMO2 Record
Chapter 44 Outpatient Case Rate Pricing
Chapter 45 Case Rate User Value Assignment Module
</TABLE>
<TABLE>
<CAPTION>
ON-LINE SYSTEM VOLUME 11
COMMUNICATIONS TRACKING SUBSYSTEM
<S> <C>
Chapter 1 Users Reference Manual System Overview
Chapter 2 Communications Tracking Subsystem Overview This chapter is currently under development 11/15/96 KLM.
Chapter 3 Add Telephone Log
Chapter 4 Displaying Telephone Logging -- DISTEL
Chapter 5 Modify Telephone Logging Records-MODTEL Function
Chapter 6 List of Logged Calls -- LSTTEL
</TABLE>
<TABLE>
<CAPTION>
DATA LISTING REPORTING SYSTEM
<S> <C>
Chapter 1 Users Reference Manual System Overview
Chapter 2 Data Listing Reporting System Overview
Chapter 3 Define List Report -- DEFLST
Chapter 4 List Report -- LSTRPT
</TABLE>
<TABLE>
<CAPTION>
ROWS AND COLUMNS REPORTING SYSTEM
<S> <C>
Chapter 1 Users Reference Manual System Overview
Chapter 2 Define Rows And Columns Report -- DEFRAC
</TABLE>
D-16
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<TABLE>
<S> <C>
Chapter 3 Submit Rows And Columns Report -- RACRPT
</TABLE>
[The balance of this page left intentionally blank.]
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SCHEDULE E
TRAVEL GUIDELINES
The guidelines for reimbursement below are for reasonable MPOWER and Customer
travel and out of pocket expenses related to an approved Work Order or in the
case of Customer, for authorized MPOWER related marketing Expenses (Schedule H).
Air Travel: Customer will reimburse MPOWER for staff air travel at coach rates
unless unavailable for the travel time frames requested by Customer. Trips by
MPOWER staff will be booked as far in advance as possible to receive the maximum
discount from the airlines provided for unrestricted airfares.
Auto Rental: Customer will reimburse MPOWER for staff auto rental at no more
than intermediate car rates, unless three (3) or more MPOWER staff share the
same auto in which case Customer will reimburse MPOWER at full size car rates.
Meals: Customer will reimburse MPOWER for staff meals.
Hotels: Customer will reimburse MPOWER for staff expenses incurred for hotel
costs, including telephone. This reimbursement shall be for single rooms only,
and specifically excludes suites, office space and services, movie charges,
health club charges, etc.
Receipts: MPOWER will, upon Customer request, include full explanations and will
provide receipts for expenses of over $25.00. Customer agrees to reimburse
MPOWER for travel expenses within thirty (30) days of receipt.
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SCHEDULE F
NON-DISCLOSURE AGREEMENT
This Agreement is entered into as of this ___ day of ________________ __, 19___
by _________________________________________________ ("CUSTOMER"), located at
___________________________________________________________________ and
___________________________________________________________________ ("Company")
with its principal place of business located at ________________________________
______________________________________________________________________ in
connection with ________________________________________________________________
______________________________________ services (hereinafter the "Services")
provided by Company to CUSTOMER, Company will have access to MPOWER(TM)
software. MPOWER Solutions Inc. (hereinafter "MPOWER") is the copyright owner of
the MPOWER(TM) software, which bears the appropriate copyright notice. In
addition, Company recognizes that the MPOWER(TM) software is proprietary,
confidential and the trade-secret property of MPOWER and that it represents the
culmination of a substantial investment of time and money. The MPOWER(TM)
software is made available only to non-MPOWER personnel who agree to maintain
its confidential and trade-secret nature, to make no disclosure of any portion
of the MPOWER(TM) software to any third party, and to protect adequately its
usage.
Accordingly, in consideration of the disclosure of the MPOWER(TM) software and
any accompanying materials for the limited purpose of providing Services to
CUSTOMER, Company and its officers and other employees agree to the following
specific requirements:
1. Company, its officers and employees, shall preserve the confidential and
trade-secret nature of the MPOWER(TM) software and its contents in whole or
part and not disclose the MPOWER(TM) software or its contents in whole or
part to any third party or entity, nor use it, including any source code,
or any concepts, ideas, know-how or anything else learned from it, for any
purpose except to provide Services to CUSTOMER. Further, Company
specifically agrees that it will instruct its officers and employees who
have access to the MPOWER(TM) software of the confidential and trade-secret
nature of the MPOWER(TM) software and instruct them that they are forbidden
to disclose the MPOWER(TM) software or the contents thereof in whole or
part to any third party or entity.
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2. Company shall use the MPOWER(TM) software solely for the purpose of
providing Services to CUSTOMER. Company shall exercise sufficient control
over the MPOWER(TM) software to preserve said confidential and trade-secret
interests, safeguarding the MPOWER(TM) software from theft, access by
unauthorized personnel, and assuring that suck materials or the contents
thereof are neither used in an unauthorized manner. Company shall not copy,
reproduce, translate into another language or format, transmit, (including
without limitation, electronic transmission over any network) reverse
engineer, disassemble or decompile, any of the MPOWER(TM) software.
3. On completion of the Services or at the request of CUSTOMER or MPOWER,
Company shall immediately return to CUSTOMER or MPOWER all copies of the
MPOWER(TM) software made available to it. Company agrees that the duties of
nondisclosure and confidentiality concerning the subject matter and
contents of the MPOWER(TM) software will survive the return of the
MPOWER(TM) software
4. The restrictions herein shall not apply to information which: (a) is or
falls into the public domain through no wrongful act of Company; or (b) is
approved for release by written authorization of MPOWER.
5. All of Company's employees who provide Services to CUSTOMER, and any other
employees of Company who may have access to the MPOWER(TM) software may
not, while providing Services to CUSTOMER and for a period of five (5)
years following the later of (i) the return of the MPOWER(TM) software or
(ii) the completion of the Services hereunder, participate or have any
involvement (including an advisory or consultative role) in the
development, modification or enhancement of a competing product to
MPOWER(TM) software, or create a software similar to the MPOWER(TM)
software for itself or another individual or entity.
6. The title and full ownership to the MPOWER(TM) software is agreed to be and
shall remain the proprietary, confidential and trade-secret property of
MPOWER, whether or not any portion of these materials are or may be
protected by copyright law. Company's right to use of the MPOWER(TM)
software as a result of this Agreement may not be assigned, subleased, or
otherwise
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transferred (voluntarily, by operation of law, or otherwise) without
MPOWER's prior written consent.
7. The obligations sat forth in this Agreement shall continue even if any such
employees and officers are no longer employed by Company.
Company agrees that in the event of a breach or threatened breach of any of the
provisions of this Agreement, MPOWER and CUSTOMER shall have no adequate remedy
in money or damages and, accordingly, shall be entitled to an injunction
against such breach, in addition to any other legal or equitable remedies
available to MPOWER and CUSTOMER.
Company shall indemnify and hold harmless CUSTOMER and MPOWER from any and all
losses (including, without limitation, reasonable attorneys' fees) resulting
from a breach of this Agreement.
Nothing contained in this Agreement shall be construed as granting, conferring,
or implying any rights by license or otherwise.
This Agreement shall be governed by and construed in accordance with the laws of
the State of New Mexico, except for its conflict of laws principles.
IN WITNESS WHEREOF, the parties by their duly authorized representatives have
caused this Agreement to be executed as of the date first written above.
CUSTOMER COMPANY
By: By:
---------------------------------- -------------------------------------
(Authorized Signature) (Authorized Signature)
Title: Title:
------------------------------- ----------------------------------
Date: Date:
-------------------------------- -----------------------------------
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<PAGE> 68
SCHEDULE G
MPOWER IDENTIFIED PARTIES FOR NON-DISCLOSURE
In accordance with Section 13 of the Agreement, Customer may not disclose
MPOWER's Confidential Information to direct competitors of MPOWER, including but
not limited to, the companies listed below, including such companies' parents,
subsidiaries and affiliates, and such parents' subsidiaries and affiliates:
Computer Science Corporation (CSC)
Electronic Data Systems Corporation (EDS)
ERISCO
AMISYS Managed Care Information Systems, Inc.
Health Systems Design, Inc. (HSD)
Health Systems Integration, Inc. (HSII)
GTE Health Systems
Resource Information Management Systems (RIMS)
HBO & Co.
TXEN
Perot Systems
IDX
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<PAGE> 69
SCHEDULE H
WORK ORDERS
A work order is the document the Customer uses to authorize MPOWER to perform
Supplemental Services ("Work Order"). Some examples of Supplemental Services are
modifications, enhancements, conversion support, additional training, etc. The
steps in completing a Work Order are as follows:
Step 1. The Customer determines that Supplemental Services are required from
MPOWER.
Step 2. The Customer, assisted by MPOWER if requested, provides, in writing,
the functional requirements for the Supplemental Services desired.
Step 3. Provided Customer has provided sufficient information in Step 2, MPOWER
creates a project plan. (If information is incomplete, Step 2 needs to
be repeated or expanded upon.) The contents of a typical project plan
are given below:
Contents of Typical Project Plan
I. Statement of work, including description of task, goal, scope of
effort, assumptions/constraints, approach, success factors, and
risks.
II. Term
III. Estimated Hours (if applicable)
IV. Staffing and Roles
V. Schedule and Milestones
VI. Deliverables
VII. Estimated Non-Personnel Charges (such as, if applicable, but not
limited to, supplemental computer
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processing usage, telecommunications charges, physical
materials, special equipment, etc.)
Step 4. Customer reviews project plan. If necessary based on Customer's
comments, MPOWER revises project plan.
Step 5. MPOWER prepares a Work Order (see sample on the next page) with the
project plan as an attachment.
Step 6. Customer approves Work Order.
Step 7. Work begins upon receipt by MPOWER of an approved Work Order.
NOTE: Any change in scope (e.g., a modification or an expansion to the
functional requirements in Step 2) to an existing Work Order requires a
new Work Order and a repeat of the above steps.
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<PAGE> 71
Sample Work Order
[Date]
[Customer Name]
[Customer Address]
Re: Work Order Number [insert sequential number of Work Order]
Dear [Customer Authorized Representative]:
This letter is a "Work Order" issued in accordance with the Master License,
Processing and Service Agreement between [Customer] and MPOWER, dated [date of
Master Agreement] ("Master Agreement"), and confirms the agreements reached
between you and
MPOWER for the services specified herein.
[Customer] Coordinator: [name].
MPOWER Coordinator: [name].
Task Description: See attached Project Plan.
Term: See attached Project Plan.
Rate: Per Schedule B of Master Agreement or per Schedule H of Master Agreement
dated [date], the rate shall be: [add appropriate rate].
Estimated Charge: [state if appropriate].
Assignment Location: MPOWER Headquarters, Albuquerque, NM.
Deliverables: See attached Project Plan.
Production Impact: [state].
Travel Expenses: Shall be reimbursed in accordance with Schedule
E of the Master Agreement dated [date].
Other:
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<PAGE> 72
[Customer name] hereby represents that it has the right and authority to execute
this Work Order and agrees to be bound by the terms and conditions of both the
Master Agreement and this Work Order. The terms and conditions of this Work
Order shall take precedence over any conflicting terms and conditions contained
in the Master Agreement. Please indicate [name] 's acceptance of this Work Order
by returning one signed copy to MPOWER.
Sincerely,
MPOWER Corporation
By:_____________________________________
Name:___________________________________
Title:__________________________________
Accepted on this________________________ day of __________________ __, 19__
[CUSTOMER NAME]
By:_____________________________________
Name:___________________________________
Title:__________________________________
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<PAGE> 73
Schedule I
Marketing Partner Terms
MPOWER and Customer agree as follows:
o Customer will serve as the initial test site for the implementation of:
MPOWER 6000 the DB2 version of MPOWER(TM) operating on the IBM RS6000
platform.
The first release of the MPOWER(TM) GUI system.
o Customer will serve as the development site and "test lab" for developing a
new mid-range Implementation Plan for MPOWER.
o Customer will assist MPOWER in marketing the MPOWER Software and will serve
as a reference site, provide interviews, allow Customer's name and logo to
be utilized in promotional materials and attend selected conferences and
presentations. There will be no use of Customer's clients' names and logos
without written consent. MPOWER will pay for any travel, lodging or other
travel related expenses for Customer's assistance in marketing.
o MPOWER will provide reasonable assistance to Customer in "selling" MPOWER
capabilities to current and future clients, which shall include, but not be
limited to, on-site presentations, providing promotional materials and
participating in proposals. Customer will pay for any travel, lodging or
other travel related expenses for MPOWER's assistance in marketing. MPOWER
will provide one (1) visit without charge to present MPOWER to Customer's
clients identified in Schedule A.
o Customer will be reimbursed for reasonable Expenses relating to MPOWER
marketing activity in accordance with Schedule E.
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<PAGE> 74
SCHEDULE J
MPOWER SOLUTIONS, INC. HUBLINK, INC.
MPOWER Solutions, Inc. HealthScope/United, Inc.
2305 Renard Place, S.E. 345 Hudson Street, 16th Floor
Albuquerque, NM 87106 New York, NY 10014
("MPOWER") ("Customer")
This Agreement constitutes a Software License Agreement
THE PARTIES ACKNOWLEDGE THAT THEY HAVE READ THIS AGREEMENT, INCLUDING EXHIBITS,
understand it, and agree to be bound by all of its provisions. This Agreement
constitutes the complete and exclusive statement of the Software License
Agreement between the parties, and supersedes all prior oral and written
communications concerning the Software License.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date(s)
shown below.
MPOWER HEALTHSCOPE/UNITED, INC.
(CUSTOMER)
BY:________________________________ BY:____________________________________
PRINTED NAME:______________________ PRINTED NAME:__________________________
TITLE:_____________________________ TITLE:_________________________________
DATE:______________________________ DATE:__________________________________
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<PAGE> 75
DEFINITIONS
Whenever used in this Agreement, the following terms shall have the meaning
ascribed to them below. Other capitalized terms used in this Agreement are
defined in the context in which they are used and shall have the meanings
ascribed therein. The terms defined below include the plural as well as the
singular.
1) LICENSE AGREEMENT means the Agreement between MPOWER ("Licensor") and the
Customer for the purchase of a non-exclusive and nontransferable site
license (the "License) to use the Software in accordance with the
Documentation for Customer's internal business purposes in interfacing the
Licensor's system to other Customer-owned or -licensed systems for purposes
principally related to the data exchange needs of the Licensor system, but
not for remarketing, time-sharing, or service bureau use.
2) SOFTWARE DESCRIPTION AND PRICE SCHEDULE means collectively the
HUBLink-owned programs licensed to the Customer pursuant to the terms and
conditions of this Agreement and the fees therefor, attached to this
Agreement.
3) SOFTWARE SUPPORT means support and maintenance services for Software
provided in this Agreement.
4) DOCUMENTATION means collectively: all of the written, printed, electronic
or other format materials identified in this Agreement.
Standard Documentation provided to Customers includes:
Technical Reference Manual -- Includes an overview of the system and
required skill set, a discussion and working examples of the internal
configuration table, a section on HL7, details on the structure of the
internal files, a methodology for determining data specifications, mappings
and conversions, a step-by-step walk through of the interface and routing
construction process, look-up tables, testing, and creating/modifying the
internal data definition standard.
Operations Manual -- Includes an introduction to the system and required
skill set, a short technical overview, a description of the duties of the
operator, the access procedures, a walk-through of the screens and
available functions, and an error analysis process,
Training Manuals -- (Extended Expressions, Table Configuration, and
Task-Based Send/Receive) Includes specific examples and lessons for the
needed skills to manage the communications, application to Integrator
interfaces, and conversion mapping.
5) THIRD PARTY PRODUCTS means software and hardware which are supplied by
persons, corporations or entities other than HUBLink or Customer or either
party's affiliates.
6) THIRD PARTY means person, corporations and entities other than HUBLink or
Customer, or either party's affiliates.
7) SUBSTANTIALLY CONFORM means materially conforms, as opposed to perfect,
error free conformity.
8) OUT-OF-POCKET EXPENSES mean any and all actual out-of-pocket expenses
incurred by HUBLink and MPOWER related to this Agreement, including, but
not limited to reasonable travel expenses, remote dial-up charges, and any
required equipment.
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<PAGE> 76
9) ACT OF GOD means any act of nature, including, but not limited, to
tornadoes, hurricanes, and earthquakes.
All other terms shall have the meanings defined in the Master License and
Services Agreement between MPOWER and Customer.
1. LICENSE
(a) MPOWER ("Licensor") grants to Customer a non-exclusive and nontransferable
site license (the "License") to use the Software in accordance with the
Documentation for Customer's internal business purposes }n interfacing the
Licensor's system to other Customer-owned or-licensed systems for purposes
principally related to the data exchange needs of the Licensor system, but not
for remarketing, time-sharing, or service bureau use. Customer is prohibited
from using the Software under this Agreement for the principal purpose of
exchanging or interfacing data between other systems. The Software License is
for use on a single computer functioning as a single server, and for use with
Customer's own data only. Customer may prepare a reasonable number of copies of
the Software for archive and backup purposes and of the Documentation for
internal business purposes as long as all copies of the Software and
Documentation contain the proprietary notices appearing on the copies initially
furnished to Customer.
(b) The License term shall commence upon the date this Agreement is executed,
and unless indicated otherwise herein, shall continue perpetually.
(c) The License Fee shall be paid in the amount, at the times and subject to
the terms specified in the Software Description and Price Schedule.
2. COPYRIGHT
The Software is owned by HUBLink and }s protected by United States copyright
laws and international treaty provisions. Copies may only be made as provided in
Section 1 for archival and backup purposes. The Documentation may not to be
copied other than as provided by Section I.
3. SOFTWARE SUPPORT SERVICES
Software Support Services ordered by Customer will be provided under Licensor's
Software Support policies in effect on the date that Software Support is
ordered, subject to the payment by Customer of the applicable fees.
Reinstatement of lapsed Software Support is subject to Licensor's Software
Support reinstatement fees in effect on the date Software Support is reordered.
4. IMPLEMENTATION AND CONSULTING SERVICES
MPOWER will provide implementation and consulting services agreed to by the
parties and under the terms of this Agreement, All implementation and consulting
services shall be billed on a time and materials basis, unless the parties
expressly agree otherwise in writing. Any implementation and consulting services
acquired from MPOWER shall be bid separately from Software licenses.
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<PAGE> 77
5. PAYMENT TERMS
MPOWER shall invoice Customer for all charges, at the times and in accordance
with the provision specified in the Master License and Services Agreement,
provided that MPOWER shall not invoice Customer for any charge that under the
provision of this Agreement is due upon execution.
6. SOFTWARE WARRANTIES
(a) Licensor and HUBLink warrant that the Software shall Substantially Conform
with the Documentation for 60 days from the date of Software receipt (the
"Warranty Period"). If Customer notifies Licensor in writing during the Warranty
Period that the Software does not function as warranted, Licensor, at its
expense, shall use its best efforts to confirm the existence of and correct the
reported nonconformity. Modifications of the Software without the express
written consent of Licensor will render Licensor's and HUBLink's warranty void.
(b) THE WARRANTIES EXPRESSED IN THIS SECTION 6 OF THE LICENSE AGREEMENT ARE IN
LIEU OF, AND LICENSOR AND HUBLink HEREBY DISCLAIM ALL OTHER WARRANTIES, EXPRESS
OR IMPLIED, REGARDING THE SOFTWARE ASSETS, THIRD PARTY PRODUCTS OR OTHER
SERVICES OR PRODUCTS PROVIDED UNDER. THIS AGREEMENT INCLUDING, BUT NOT LIMITED
TO, ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE.
7. INFRINGEMENT INDEMNIFICATION
(a) HUBLink will defend and indemnify Customer against a claim that Software
infringes a copyright or patent provided that: (i) Customer notifies HUBLink or
Licensor in writing within 30 days of the claim, (ii) HUBLink has sole control
of defense and all related settlement negotiation, and (iii) Customer provides
HUBLink with assistance, information and authority necessary to perform
HUBLink's obligations under this Section. Reasonable out-of-pocket expenses
incurred by Customer in providing such assistance will be reimbursed by HUBLink.
8. LIMITATION OF LIABILITY
(a) Customer may recover direct damages against HUBLink and Licensor up to the
limits set forth below, if after reasonable efforts HUBLink or Licensor fails to
make the Software operate as warranted in Section 3(a) of this License
Agreement, provided that the foregoing shall not diminish any cure rights
granted to HUBLink or Licensor or supersede any exclusive remedies expressly
provided under this Agreement.
(b) Except for personal injury or damage to property caused solely by HUBLink's
or Licensor's gross negligence or willful misconduct, HUBLink's or Licensor's
maximum liability to Customer with respect to the transactions contemplated by
this Agreement, regardless of the form of action, shall be limited to the
charges actually paid by Customer under this Agreement. In no event will HUBLink
or Licensor be liable to Customer for (i) any damage, loss or expense arising
from performance or nonperformance of any Third Party Products, (ii) lost
profits, incidental or consequential damages (except in the case of HUBLink's or
Licensor's gross negligence or willful misconduct), even if HUBLink or Licensor
has been advised of the possibility or such damages, or (iii) for any third
party claim against Customer concerning the Software.
(c) Without limiting the foregoing, Customer agrees that the use of the
Software by Customer or Customers personnel for any purpose cannot be controlled
by HUBLink or Licensor and must not be substituted for Customer's professional
skill and judgment. Customer acknowledges that HUBLink and Licensor are in no
way
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responsible for information contained in, entered into, or used in connection
with the Software and Customer independently will verify the accuracy and
completeness of such information.
(d) The remedies set forth throughout this Agreement constitute Customer's sole
and exclusive remedies and HUBLink's and Licensor's entire liability in the
event of a breach and/or termination of this Agreement or any Schedule to this
Agreement.
9. TERMINATION
(a) Customer may terminate the Agreement by giving Licensor at least ninety
(90) days advance written notice if, after reasonable efforts, Licensor fails to
cure a breach of its Software warranty set forth in Section 3 (a) of the License
Agreement.
(b) Licensor or HUBLink may terminate the Agreement by giving Customer written
notice of termination if Customer:
(i) Breaches any of its obligations under Section 6 of this Agreement to
protect HUBLink's proprietary information or commits a material breach
of its obligations under Section 1, and in either event, fails to
correct the breach within ninety (90) days after receiving written
notification from HUBLink of the breach.
(ii) Customer terminates the License, Processing and Services Agreement for
Licensor system between MPOWER and Customer.
10. PROPRIETARY INFORMATION
(a) Customer acknowledges that all work products or ideas developed by HUBLink
pursuant to this Agreement for Customer which may be subject to patent,
copyright, trade secret or other proprietary protection shall be owned by
HUBLink and licensed to Customer as Software in accordance with the terms and
conditions of this Agreement.
(b) To the extent either party's employees are exposed to confidential
information belonging to or in the custody of the other party, such persons
shall take the same steps to protect such information as they are required to
take to protect their employer's confidential information of like kind. If
requested, a party shall demonstrate to the other party that its employees,
consultants and agents are obligated to it in writing to protect such
confidential information; provided, however, that Customer shall not provide
access to source code to its consultant or agent without the prior written
permission of HUBLink. The foregoing does not require either party to protect
any information ([) currently in the public domain or rightfully in the
possession of such party, (ii) subsequently entering the public domain for any
reason other than a party's failure to meet its obligations under this
Agreement, (iii) rightfully acquired by a party without obligation of
confidentiality or (iv) independently developed by a party without use of the
other party's confidential information.
(c) Customer shall use, copy and disclose the Software only as permitted under
Section 1 of the License Agreement and shall ensure that all persons receiving
access to the Software are obligated to Customer in writing or under standard
operating procedures to protect the Software in a manner consistent with the
terms of this Section 10. In no event will Customer reverse assemble or reverse
compile the Software for the purpose of revealing the proprietary information
contained in the Software or otherwise use the Software to develop functionally
similar computer software or to compete with HUBLink.
(d) This Agreement will not prevent HUBLink from providing to other customers
services and any products that are identical or similar to services and products
furnished to Customer under this Agreement. Title and full ownership rights to
the Software remain with HUBLink.
11. MISCELLANEOUS
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<PAGE> 79
(a) This Agreement is deemed to have been entered into in the State of
[Customer] and its interpretation, construct[on, and the remedies for its
enforcement or breach are to be applied pursuant to, and in accordance with, the
laws of the State of Delaware exclusive of its choice of law rules.
(b) Neither party shall be held responsible for any delay or failure in
performance under this Agreement arising out of any Act of God, provided that
the foregoing shall not excuse either party from its obligations under this
Agreement to protect the other's proprietary information.
(c) Customer may, upon written notice to Licensor, assign this Agreement in
whole to any party, other than a competitor of HUBLink or Licen sor, acquiring
substantially all of Customer's assets or with which Customer merges or
consolidates and who, in either event, agrees in writing to assume each and
every obligation conferred upon Customer under this Agreement. Customer may not
otherwise assign this Agreement without HUBLink's or Licensor's prior written
consent and any attempted unauthorized assignment shall be void. In the event of
a proper assignment, this Agreement shall be binding upon and inure to the
benefit of the parties and their successors and
(d) Customer shall not, without the prior written consent of Licensor, disclose
the terms and conditions Agreement or disclose any information concerning the
details of this Agreement, except as may be required for internal corporate,
accounting or legal review or as required by law, and upon any such disclosures,
Customer shall take all necessary actions to prevent such further disclosure to
the maximum extent possible. Any failure by Customer in this regard shall
constitute a material breach of this Agreement. Such nondisclosure requirement
shall survive termination or expiration of this Agreement.
(e) Licensor shall perform all services under this Agreement as an independent
contractor and not as an agent or employee of Customer. Licensor may perform its
obligation under this Agreement through the use of a subcontractor(s) provided
that the use of a subcontractor(s) shall not diminish Customer's rights or
HUBLink's or Licensor's liability under this Agreement.
(f) Both parties agree that Licensor may publicize the fact that the Customer is
a user of the Software. The Customer will be provided a copy of the planned
publicity releases a reasonable time in advance and given opportunity to reject
or make changes to the publicity release.
(g) The Customer will afford the Licensor reasonable access to its premises for
the sole purpose of verifying that the terms and conditions of this License are
being observed.
(h) Any controversy or claim arising out of or relating to this contract, or the
breach thereof, shall be settled by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association, and
judgment upon the award rendered by the Arbitrator(s) may be entered in any
Court having jurisdiction thereof. In lieu of arbitration, if both parties agree
to mediation as an alternative at the time the controversy or claim arises, a
mediator will be mutually selected by the parties to perform under the laws and
rules of mediation so then determined and agreed upon by both parties.
(i) None of the terms of this Agreement shall be deemed to be waived or amended
by either party unless such waiver or amendment is in writing and signed by both
parties, and recites specifically that it is a waiver of, or amendment to, the
terms of this Agreement. The failure of MPOWER or Customer in any one or more
instances to insist upon strict performance of any of the terms of this
Agreement shall not be construed as a waiver or relinquishment, to any extent,
of the right to assert or rely upon any such terms or provisions on any future
occasion.
(j) In the event that a court of competent jurisdiction holds that a particular
provision or requirement of this Agreement is in violation of any applicable
law, each such provision or requirement shall be enforced only to the extent it
is not in violation of such law or is not otherwise unenforceable and all other
provisions and requirements of this Agreement shall remain in full force and
effect.
J-6
<PAGE> 80
(k) All notices to be given under this Agreement shall be made in writing and
mailed by certified mail, return receipt requested, to the other pant at its
address set forth below or at such other address as the party may specify in
writing.
To: MPOWER
________________________
________________________
________________________
To Customer: HEALTHSCOPE/UNITED, INC.
________________________
________________________
________________________
PROGRAM DESCRIPTION AND PRICE SCHEDULE
Customer: HealthScope/United Inc.
SOFTWARE ORDER:
<TABLE>
<CAPTION>
Number of Authorized for
Program Name. Version Authorized Links Production (Y) Other Description Price
- ------------- ------- ---------------- -------------- ----------------- -----
<S> <C> <C> <C> <C> <C>
Integrator 4.25 Not Applicable Not Applicable $[*]
</TABLE>
Software Payment Terms
- ----------------------
100% due with execution of this Agreement, net -30-
PROGRAM SUPPORT ORDER:
<TABLE>
<CAPTION>
Support Description Support Period Price
- ------------------- -------------- -----
<S> <C> <C>
Software support, maintenance and upgrades One year $[*]
</TABLE>
Support Payment Terms
- ---------------------
Commences on the date Customer places software on production use, that being the
point in time that software is used to perform normal business operations for
the first Customer service bureau client. Use of live data for test procedures
does not constitute production use. Payable in twelve equal monthly
installments. Net 30.
* Confidential Treatment Requested
J-7
<PAGE> 81
PROGRAM DESCRIPTION AND PRICE SCHEDULE (CONT'D)
CUSTOMER: HEALTHSCOPE/UNITED INC.
Customer contact:
Primary: Phone:
Secondary: Phone:
Invoice Address:
--------------------
--------------------
Installation Address:
--------------------
--------------------
This is a Schedule to the MPOWER Software License and Services Agreement
dated , by Customer.
--------
J-8
<PAGE> 1
EXHIBIT 10.9
ADDENDUM
OPERATIONAL SYSTEMS MANAGEMENT SERVICES
XCARE.NET(formerly MPOWER Solutions Inc.) will provide Operational Systems
Management Services for Customer's technical environment through a dedicated
dial-up line or location of Customer's computer system which houses the
XCARE.NET software on XCARE.NET managed premises
As defined below, Operational Systems Management Services will include:
- Database maintenance (table and file space);
- IBM Transaction Server maintenance;
- Performance management;
- Capacity planning;
- Security management; and
- Recovery procedures.
To help facilitate XCARE.NET's provision of Operational Systems
Management Services, in instances where Customer's computer system does
not reside on XCARENET managed premises, Customer will provide onsite
system administration resources with access to the system console to
handle such activities as coordination of hardware troubleshooting,
network/security administration and backups/loading of tapes.
FEES AND TERM
Operational Systems Management Services described above will be provided
by XCARE.NET to Customer for the fee of [*] ($[*]) Dollars per month for
a term of one (1) year from the effective date of this Addendum. subject
to annual cost of living increases based upon National CPI, not m exceed
5% per annum. After the initial period this agreement will renew
annually for one (i) year terms unless Customer provides ninety (90)
days prior notice of its intent not to renew.
Effective Date of Contract is April 1, 1999, monthly fees will be
invoiced at the beginning of each month and are payable upon receipt of
invoice.
* Confidential Treatment Requested
<PAGE> 2
The parties have read this Addendum and agree to be bound by all of its
provisions This Addendum supersedes any and all prior agreements and
understandings between the parties pertaining to XCARE.NET (R) and take
precedence over the provisions of any purchase orders submitted to
XCARE.NET by customer. This Addendum may be amended only in writing
signed by both parties.
Advica Health Resources XCARE.NET
By: /s/ Mark X. Cronin By: /s/ Lorine Sweeney
--------------------------------- ---------------------------
Signature of Authorized Signatory
Mark X. Cronin Lorine Sweeney
--------------------------------- ---------------------------
Name Printed Name Printed
Chief Operating Officer President & CEO
--------------------------------- ---------------------------
Title Title
3/29/99 3-24-99
--------------------------------- ---------------------------
Date Date
<PAGE> 3
ADVICA
HEALTH RESOURCES
March 25, 1999
XCARE Technologies, Inc.
Attention: Tammy McLaren
6400 S. Fiddler's Green Circle, Suite 540
Englewood, GO 80111
Sent via fax: 303-488-9705
Dear Tammy,
I am pleased to inform you that Advica Health Resources, Inc would like to
contract with XCARE Technologies to provide Operational Systems Management
Services as outlined in the MOWER Operational Systems Management Addendum - Rev.
2/99. We would like to proceed on the basis that the hardware will remain at our
offices and XCARE would perform their work remotely via the dedicated
communications line. It is understood that in this setup Advica will be
responsible for providing the labor locally to support such activities as
changing backup tapes and having access to the system console m handle such
activities as coordination of hardware troubleshooting and network/security
administration. I have incorporated the changes that we discussed earlier today.
TERM:
Advica would like to modify the term of the agreement slightly. The term calls
for a three year contract with a minimum term of one year with a fee of [*]
per month. This is acceptable. We would want to add the following clauses:
- - Advica reserves the right to terminate services with a minimum of 90 days
written notice, recognizing the minimum term of the contract is one year. We
Understand that resources have to be allocated for this task and believe that
90 days notice would provide sufficient time to reallocate these resources.
- - If XCARE does nor meet mutually agreed upon performance standards and does
not cure deficiencies in a mutually agreed upon time frame, then Advica would
reserve right to terminate the agreement.
XCARE OBLIGATIONS:
- - XCARE would be responsible for all scripts required for nodal system
operations, including backups, system startup/shutdown and required batch
processes.
- - XCARE would be responsible for monitoring file growth on a frequent enough
time interval to ensure that Advica no longer receives table space full
messages.
- - XCARE will be responsible all maintenance required by DB2 and AIX to run
efficiently.
- - XCARE will he responsible For helping to resolve ODBC errors that are caused
by the host.
- - XCARE will provide a list of resources currently in their employ capable of
performing this type of work.
- - XCARE will take whatever remedial actions necessary to prevent a crash which
appears to be imminent
- - XCARE will work with ADVICA to finalize a workplan by April 15, 1990
outlining the actions required to restore the system to an acceptable state
of performance. Remedial actions will continue as required while the workplan
is being created.
ADVICA HEALTH RESOURCES, INC.
* Confidential Treatment Requested
<PAGE> 4
- - XCARE will assist Advica in system related tasks such as setting up printer
queues.
- - XCARE will work with Advica in installing any operating system upgrades or
patches as needed. It is understood that this type of work would require
local resource availability from Advica.
ADVICA OBLIGATIONS:
- - Advica will perform the daily mounting and unmounting of backup media.
- - Advica will have available as needed personnel to operate the system console
to handle such operations as hardware troubleshooting and network security,
administration.
- - Advica will upgrade hardware, if necessary to adequately support system
growth requirements.
- - Advica will maintain a service contract for both hardware and operating
system support.
- - Advica will contact XCARE before performing any Systems Administration
functions (i.e. adding table space. deleting logs, etc.), except for
standard operations such as backups.
- - Advica will provide XCARE with a schedule of planned system shutdown and
startup times associated with the normally weekly backup which is normally
performed on Sunday's.
- - Advica will with reasonable prior notice make all reasonable efforts to make
the system available to XCARE on Saturday afternoons for the purpose of file
maintenance.
PERFORMANCE STANDARDS:
- - XCARE will provide a contact (could be a pager) that is available 24 x 7.
- - XCARE will respond to help desk issues associated with systems management
within I hour during normal working hours (gain - 7pm, Monday - Friday,
EST/EDT and 8am-1 pm. Saturday, EST/EDT).
REPORTING REQUIREMENTS:
- - XCARE on an weekly basis will provide Advica with a summary report of the
services they have performed. Advica is not looking for a detailed breakdown
with times associated for the tasks. bur rather an overview of the tasks that
were performed. For example, A review of tablespace was done on Monday. Five
rabies were above x% and needed to have space added. The five tables were
updated on Wednesday. A review of the Log Files on Friday showed nothing out
of the ordinary, etc.
- - XCARE will on a monthly basis will provide Advica with a report detailing
disk space used during the prior month and a forecast of when additional disk
space will likely be needed. Furthermore, this monthly report should detail
any concerns XCARE may have about system performance that may necessitate
system enhancements.
DATABASE SETUP:
- - Ideally, Advica would like to have included as pan of this agreement that any
future databases that need to be added would be covered as part of the
Maintenance Services. What would be included in this is the allocation of the
database environment and copying standard code files as needed. If this is
not acceptable an alternative would be for both parties to agree upon a fixed
price for these services as opposed to the current time and materials
arrangement.
If you concur with the statements above and XCARE can provide a list of
resources available to supply this support then Advica is prepared to move
forward with this agreement immediately.
<PAGE> 5
Advica's primary point of' contact for system related issues will be our new
Systems and Operations Manager, Chris Doff. There are also other resources
available in IS Operations to act as backup for Chris.
If you have any questions or need additional information please let me know. I
can be reached at 516-233 4611.
Your cooperation in this matter has been greatly appreciated.
Sincerely yours,
/s/ FARLEY KAMHI
- --------------------------------------
Farley Kamhi
Director of Information Services
cc: Mark Cronin
Chris Dorr
<PAGE> 1
EXHIBIT 10.10
MPOWER SOLUTIONS, INC.
ADMINISTRATIVE SERVICES AGREEMENT
THIS MASTER AGREEMENT (the "Agreement"), effective March 29, 1999 (the
"Effective Date"), is made and entered into by and between MPOWER SOLUTIONS,
INC., a Delaware corporation with its principal place of business located at
6400 S. Fiddler's Green Circle, Suite 540, Englewood, CO 80111 ("MPOWER") and
AMERICAN MEDICAL PATHWAYS, INC., a Delaware corporation and wholly-owned
subsidiary of American Medical Response, Inc. ("AMK"), a Delaware corporation,
with its principal place of business located at 2821 South Parker Road, Aurora,
CO 80014 ("Customer") and sets forth the promises of the parties with respect to
the products and services of MPOWER which are described in this Agreement, with
reference to the following facts:
WHEREAS, MPOWER is in the business of providing automated managed health care
information software and third-party administrative services of medical
insurance programs to businesses providing managed health care and insurance
services, and desires to provide such services and software to Customer, subject
to the terms hereof; and
WHEREAS, Customer provides medical transportation services and network
management functions to managed care health plans;
WHEREAS, Customer desires to retain MPOWER, and MPOWER desires to be so
retained, to provide third-party-administrative services to Customer in
connection with Customer's contracts to provide medical transportation services
to various managed care health plans in a multi-state region, in accordance with
the terms and conditions set forth in this Agreement;
NOW THEREFORE, in consideration of the mutual promises made, the terms and
conditions hereunder described and other valuable consideration, the parties
agree as follows:
I. DEFINITIONS
1. Administrative Manual means a manual of the policies and procedures of
a Contracted Health Plan that will be jointly developed and followed by
Customer and the Contracted Health Plan with respect to administration
of the applicable Health Plan Agreement. The Administrative Manual(s)
are hereby incorporated by reference into this Agreement.
2. Contracted Health Plan means a health maintenance organization or
health plan with which Customer has contracted to provide medical
transportation services.
3. Health Plan Agreement means the contract between Customer and a
Contracted Health Plan pursuant to which Customer provides medical
transportation services to Members of a Contracted Health Plan.
4. Medical Necessity means services that are covered as basic covered
benefits under the applicable Membership Agreement and are appropriate
and necessary for the symptoms or treatment of a medical condition.
Whether a covered service is Medically Necessary shall be determined
based on criteria set forth in the applicable Administrative Manual.
-1-
<PAGE> 2
5. Member means an individual or his or her dependents, as the case may
be, who is entitled to receive health care services from a Contracted
Health Plan pursuant to that individual's Membership Agreement.
6. Membership Agreement means the agreement between a Contracting Health
Plan and an individual or group pursuant to which a Member receives,
among other things, medical transportation services.
II. RESPONSIBILITIES OF MPOWER
1. SERVICES TO BE PROVIDED.
A. SERVICES. MPOWER shall provide (i) claims processing services
in connection with the medical transportation services
provided by Customer pursuant to its Health Plan Agreements;
(ii) medical review services associated with such claims
processing; (iii) receipt of inquiries concerning eligibility,
benefits, and claims status; and (iv) related reports required
to be provided by Customer pursuant to its Health Plan
Agreements. Such services shall be provided in accordance with
this Agreement and the requirements of the applicable
Administrative Manual. Customer shall consult with MPOWER in
connection with developing the portions of each Administrative
Manual applicable to claims processing, and MPOWER shall have
the opportunity to appoint a representative to participate on
the team established by Customer to develop each
Administrative Manual. Customer shall also provide MPOWER
promptly with all information from Health Plan Agreements and
Member Agreements that is necessary for MPOWER to perform its
obligations under this Agreement.
MPOWER shall cooperate with and assist Customer in
establishing and providing effective communication links and
working relationships with the Contracted Health Plans and
other program administrators retained by Customer with respect
to administration of other aspects of Customer's Health Plan
Agreements. The key assumptions used to establish services to
be provided by MPOWER and compensation hereunder are more
particularly described on Exhibit A, attached hereto and made
a part of this Agreement.
This Agreement shall apply to all Health Plan Agreements, both
current and those that will be entered into by Customer during
the term of this Agreement.
B. CLAIMS PROCESSING. MPOWER shall promptly process all claims in
accordance with the terms of the applicable Membership
Agreement, Health Plan Agreement, and Administrative Manual,
which process shall include, without limitation, the
following:
1. Receive and date stamp all claims, indicating the
date of receipt of each claim, in the case of paper
claims, and the date of transmission of each claim to
MPOWER, in the case of claims electronically
submitted to MPOWER.
2. Verify Member eligibility.
-2-
<PAGE> 3
3. Determine the Medical Necessity of medical transportation
services in accordance with the Medical Necessity standards
set forth in the applicable Administrative Manual. Any claim
that would be denied on the basis of Medical Necessity shall
be referred to the Contracted Health Plan prior to denial.
Except as otherwise provided in the applicable Administrative
Manual, (a) the Contracted Health Plan, or its designee, shall
be solely responsible for notifying the Member of the denial
of any claim; and (b) MPOWER shall not contact the Member with
respect to any denial of claims. If the Contracted Health
Plan approves the claim, Customer shall notify MPOWER of the
approval, and MPOWER shall promptly pay the claim.
Notwithstanding the foregoing, if Customer's referral
authorization is included in the claims submission, then the
Medical Necessity of the claims will be deemed to be
determined, and further review will not be required.
4. Deny claims that are not covered benefits for reasons other
than Medical Necessity and notify the Contracted Health Plan,
as required, of the Member's right to appeal such denial in
accordance with the Contracted Health Plan's appeal process.
5. Calculate and promptly pay to the appropriate transportation
or other network provider the amount to be paid as covered
benefits in accordance with the applicable network provider
agreement and Membership Agreement. Unless a claim is
disputed, MPOWER shall make payment on the claim within the
time frame required by applicable state or federal law or
regulation or such other period of time as set forth in the
applicable Administrative Manual and Membership Agreement.
6. Calculate and notify provider via statement of remittance for
Member liability only as provided in the Health Plan
Agreements.
7. The specific time limits for performing the functions set
forth in this Section II.1.B shall be specified in the
applicable Administrative Manual.
2. IMPLEMENTATION. MPOWER shall take all actions necessary to establish
all administrative and other connections and arrangements necessary for
the transfer of data and processing of claims, including, without
limitation, the establishment and maintenance of electronic data
interface or electronic data transfer capabilities for the electronic
transfer of encounter and other data related to claims. processing in a
timely manner. MPOWER and Customer shall agree on an implementation
project plan and schedule, which shall be set forth on Exhibit B,
attached to this Agreement and made a part hereof. The implementation
project plan and schedule wilt identify the steps necessary to achieve
implementation of this Agreement, the responsibilities of the
respective parties, and the timeframe for completion of each step.
Provided that Customer completes any requirements it has within the
implementation plan in a timely manner, the plan shall result in
completion of the implementation process in accordance with the
implementation table set forth on Exhibit A of this Agreement. MPOWER
agrees that it will be ready for implementation of this Agreement in
connection with the first Health Plan Agreement by [*].
* Confidential Treatment Requested
-3-
<PAGE> 4
In the event Customer enters into Health Plan Agreements with
additional Contracted Health Plans, MPOWER shall cooperate diligently
with Customer to implement services in connection with such Health Plan
Agreements. In consideration for such implementation, Customer shall
pay MPOWER for MPOWER's costs for such implementation based on mutually
agreed upon work orders. One half of the estimated amount of such costs
shall be paid to MPOWER prior to commencement of such implementation
and the balance shall be paid upon successful completion of
implementation.
3. QUALIFICATIONS AND SERVICE LEVEL REQUIREMENTS. Consistent, high quality
service to Customer, policyholders, Contracted Health Plans, and
providers is an essential requirement. MPOWER will meet the following
qualifications and service level commitments.
A. On or before [*], MPOWER shall file initial applications to
obtain all applicable licenses/certifications required for
MPOWER to perform its obligations hereunder, including without
limitation, licensure as a third party administrator and
utilization review agent, if applicable, and MPOWER shall
obtain such licenses/certifications. Thereafter, MPOWER shall
at all times during the term of this Agreement remain
appropriately licensed in each state in which MPOWER performs
services hereunder.
B. Subject to Section 3.A above, MPOWER shall remain in
compliance with all applicable local, state, and federal laws,
rules and regulations relating to the services provided by
MPOWER hereunder, including without limitation, fulfillment of
third party administrator financial obligations pertaining to
payment of penalties for late claims, interest, or other
penalties, as well as any claim reserves or other funding
requirements.
C. MPOWER will maintain compliance with all Customer requirements
pertaining to claims processing procedures, including without
limitation, those requirements set forth in the Administrative
Manual. The parties will establish procedures regarding
handling and disbursement of funds as part of the
implementation process, to be finalized prior to [*].
D. MPOWER shall meet or exceed the performance standards set
forth herein relating to claims processing, including but not
limited to claims turnaround time, payment accuracy, and
reporting.
E. MPOWER will establish and maintain throughout the life of the
Agreement a dedicated staff of personnel responsible for
servicing Customer's individual business.
F. MPOWER will maintain backup tapes of all programs, data,
and/or any other information used in the administration of
claims.
G. MPOWER represents and warrants that all hardware/software
required to perform MPOWER's obligations hereunder is Year
2000 compatible and that the information and services to be
provided by MPOWER will not be impaired, disrupted, or
interrupted, in whole or in part, by deficiencies or
inaccuracies related to the processing and display of
date/time data (including, but not limited to, century
recognition, calculations that
* Confidential Treatment Requested
-4-
<PAGE> 5
accommodate the same century and multi-century formulas and
date values, and interface values that reflect the century)
from, into, and between the 20th and 21st centuries, and the
years 1999 and 2000, and leap year calculations. In the event
that Customer becomes aware that MPOWER(R) has not processed
data containing any dates correctly, Customer shall
immediately notify MPOWER of this fact, and MPOWER agrees to
correct or replace MPOWER(R) to eliminate the problem.
4. PERFORMANCE STANDARDS AND ASSOCIATED FINANCIAL PENALTIES.
A. MPOWER shall meet the following performance goals in
connection with the following performance standards:
1. Claims Processing Accuracy. Not less than [*] percent
([*]%) of the claims submitted to MPOWER will be
accurately adjudicated in accordance with the
applicable Administrative Manual, the Network
Provider Agreement and the applicable Membership
Agreement. The performance assessment for claims
adjudication accuracy shall be based on audits
performed by Customer.
2. Timing of Claims Payments. Not less than [*] percent
([*]%) of all claims shall be processed within thirty
(30) calendar days of receipt.
3. Accuracy of Claims Payments. Not less than [*]
percent ([*]%) of the claims submitted to MPOWER
shall be priced in accordance with Customer's
instructions regarding pricing.
4. Written inquiry response time. Not less than [*]
percent ([*]%) of Member's written questions
regarding medical transportation services will be
responded to within five (5) working days after
receipt of such inquiry, Not less than [*]
percent ([*]%) of Member's written requests regarding
medical transportation services will be responded to
within seven (7) working days after receipt of such
inquiry. MPOWER shall report all written inquiries to
Customer on a monthly basis in a format mutually
acceptable to the parties and to the Contracted
Health Plans. In addition, MPOWER shall report all
phone and written complaints and grievances to
Customer within two (2) business days of receipt.
5. Telephone inquiry response time. Not less than [*]
percent ([*]%) of all incoming phone calls shall be
responded to within a time not to exceed twenty (20)
seconds. No telephone inquiries during normal
business hours from Members or Contracted Health Plan
inquiries regarding denials or disputes will be
blocked due to MPOWER's failure to maintain its
system.
6. Abandoned Call Rate. MPOWER's abandoned call rate
shall not exceed [*] percent ([*]%) on not less than
[*] percent ([*]%) of business days.
B. The parties acknowledge that Customer may be subject to
penalties for failure to meet each performance goals set forth
above at least [*] percent ([*]%) of the time during each
calendar quarter. In connection with the assessment of
MPOWER's performance of these
* Confidential Treatment Requested
-5-
<PAGE> 6
goals, MPOWER. may be audited by Customer, by a Contracted
Health Plan, or by an independent auditor on behalf of
Customer and/or a Contracted Health Plan. MPOWER shall be
responsible for, and shall reimburse Customer for, penalties
incurred by Customer under any Health Plan Agreement
(including Administrative Manual) due to MPOWER's failure to
meet each performance goals set forth above [*] percent ([*]%)
of the time during each calendar quarter. Such penalties shall
be paid by MPOWER, to Customer within thirty (30) days after
notification by Customer of the amount of such penalty(ies).
Penalties for specific Contracted Health Plans are more fully
described in Exhibit A hereof and subsequent exhibits
addressing scope of services for each Contracted Health Plan.
5. REPORTING.
A. MPOWER shall accurately measure and report service levels to
Customer. MPOWER, shall provide to Customer (or directly to
the Contracted Health Plans, if so directed by Customer)
reports containing information required by Customer and the
applicable Contracted Health Plan, in accordance with the
applicable Administrative Manual or Contracted Health Plan
Amendment. Such reports must be sent via magnetic tape,
electronic transmission, or diskette (or hard copy, if
requested by a Contracted Health Plan) in a standard format
established by Customer and the Contracted Health Plans, for
each encounter that Member receives during the previous month.
Such information shall be complete and accurate and shall be
provided to Customer (or to a Contracted Health Plan directly,
if so directed by Customer) by the fifteenth (15th) day of the
month, or if the fifteenth (15th) day falls on a weekend or a
holiday, as of the next business day thereafter. However, for
a period, not to exceed nine months, the California Department
of Corporations shall require for all California Contracted
Health Plans weekly reporting. Such encounter data reporting
shall be segregated by Contracted Health Plan. MPOWER shall
promptly provide Customer (or the Contracted Health Plan, as
appropriate) with all corrections and revisions of such
encounter data. Encounter data shall include, at a minimum,
those data elements identified on the HCFA 1500, or its
successor form.
B. MPOWER shall provide to Customer reports related to the
performance of each standard set forth in Paragraph II.4.A
above in the format identified in the applicable
Administrative Manual. Such reports shall be provided on a
monthly or quarterly basis, as determined by Customer and the
applicable Contracted Health Plan, and shall be segregated by
Contracted Health Plan.
C. Upon request, MPOWER shall provide to Customer, or shall
assist Customer to prepare, quality reports in a format
identified in the applicable Administrative Manual. Such
reports shall be prepared at least quarterly and shall be
segregated by Contacted Health Plan.
6. AUDITS. Customer and the Contracted Health Plans shall have the right
to audit MPOWER at any time in connection with MPOWER's performance
pursuant to this Agreement. MPOWER will provide Customer and the
Contracted Health Plans, or their designees, with access at any time to
all of MPOWER's books, records, and systems prepared, maintained, and
utilized in connection with the performance of MPOWER's obligations
pursuant to this Agreement, in every format utilized by MPOWER.
Customer and the Contracted Health Plans, or their designees, shall
have
* Confidential Treatment Requested
-6-
<PAGE> 7
access to MPOWER's personnel during normal business hours, and such
personnel shall cooperate fully with Customer and the Contracted Health
Plans or their designees in the performance of such audits. Customer
shall have the right to copy any and all books and records associated
with MPOWER's services provided to Customer hereunder. Customer agrees
that it will use its best commercially reasonable efforts not to
disrupt the business of MPOWER during the performance of such audits.
7. KEY PERSONNEL. MPOWER will identify and commit key personnel to the
implementation and management of services to be provided under this
Agreement. Any staffing changes involving key personnel will be
discussed in advance between Customer and MPOWER.
8. CONFIDENTIALITY. MPOWER shall maintain the confidentiality of all
Customer and Contracted Health Plan data, including, but not limited
to, contracts, provider information, strategic objectives, enrollment,
financial information, etc. Except as described below, MPOWER shall not
disclose the details of Customer's or any Contracted Health Plan
program experience, including such information as price, claims
history, profit/loss, etc., to any third party. Except as described
below, MPOWER shall maintain the confidentiality of all Customer and
Contracted Health Plan policyholder data, including any medical records
information, operative reports, fee schedule information, and the like.
MPOWER shall disclose information described in this Section only: (a)
in response to a court order; (b) for an examination conducted by the
applicable Office of the Insurance Commissioner; (c) for an audit or
investigation conducted under the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1001, et seq.); (d) to or at the request of
Customer; or (e), with respect to individual patient information, with
the written consent of the insured or certificate holder (or a
designated legal representative) to which the information applies.
MPOWER shall obtain a confidentiality agreement protecting Customer's
confidential information from any subcontractor in a form satisfactory
to Customer.
MPOWER and Customer mutually covenant to keep confidential any
proprietary or confidential information of the other party, and to
implement safeguards designed to prevent disclosure of any proprietary
or confidential information of either party to a third party without
the express written consent of the other party. Such information shall
include internal business practices, business records, trade secrets,
contracts, the terms of this Agreement, or business methods, in any
form whatsoever. MPOWER and Customer further mutually covenant that the
proprietary confidential information of the other will be disclosed
only to such of its employees and representatives as have a need for
such information in furtherance of the purpose contemplated by this
Agreement and, in any case, will be responsible for breaches of this
Section by such employees and representatives. Upon request, the party
receiving such information shall either return or destroy confidential
information, as directed by the disclosing party.
9. TRAINING. MPOWER shall complete any necessary training of Customer
staff and/or staff from other administrators with whom Customer has
contracted for specific services. Customer shall provide training to
MPOWER staff regarding (a) pertinent portions of the applicable
Membership Agreements, including without limitation covered benefits
for medical transportation services, (b) applicable portions of the
Administrative Manuals pertaining to MPOWER's obligations
-7-
<PAGE> 8
hereunder; and (c) any special processes, procedures, or benefits
applicable to a specific Contracted Health Plan that are necessary in
order for MPOWER to satisfy its obligations under this Agreement.
MPOWER. shall make available staff members designated as key contacts
for all administrators and Contracted Health Plans to attend sessions
conducted by Customer for product training, provider issues resolution
or training, and to help build effective working relationships among
administrators and Contracted Health Plans. Such sessions shall be
sponsored by Customer and scheduled as far in advance as possible.
III. PRICE AND PAYMENT
1. PRICE. The fees for the services of MPOWER pursuant to this Agreement
are identified on Exhibit A. These fees cover those services provided
by MPOWER pursuant to this Agreement and are based on the key
assumptions identified on Exhibit A, as well as the cost of toll-free
telephone lines and supplies. In the event of the addition of new
Contracted Health Plans, the encounter pricing set forth on Exhibit A
shall remain applicable to services provided in connection with such
new Contracted Health Plans, except that if the requirements for such
services are materially greater or less than the assumptions set forth
on Exhibit A, the per encounter charge may be changed accordingly upon
mutual agreement of the parties. Notwithstanding the foregoing, the
parties acknowledge that the price set forth in Exhibit A is not
contingent upon the continuation of any specific Health Plan Agreement
between Customer and a Contracted Health Plan.
2. PAYMENT. On or before the fifteenth (15th) day of each month, MPOWER
shall provide Customer with a report of the aggregate number of
encounters processed by MPOWER during the previous month. Customer will
pay MPOWER the applicable tiered encounter fee for such encounters on
or before the last day of the month during which such report was
received by Customer. Customer's obligation to pay MPOWER hereunder
shall be subject to Customer's right to audit MPOWER's books and
records to verify encounters processed by MPOWER in connection with
this Agreement. Customer shall be entitled to offset and withhold from
MPOWER any amounts due Customer for penalties or otherwise.
3. CHARGES. Customer agrees that MPOWER shall have the right to charge
interest of one and one-half percent (1.5%) of the outstanding balance
per month, or the highest amount allowed by law, whichever is less, on
any and all late payments (except to the extent that such amounts are
reasonably disputed by Customer), and Customer agrees to pay such
charges.. All prices mentioned in this Agreement are in U.S. Dollars.
The parties agree that the prices set out in this Agreement do not
include any sales, use or gross receipts taxes, any duties, any similar
assessments, or any other tax imposed on any party by virtue of this
Agreement, all of which, excluding only taxes based on MPOWER's income,
shall be the sole liability of, and shall be paid solely by, Customer.
IV. INDEMNIFICATION
1. Customer agrees to defend, indemnify, and hold harmless MPOWER, and its
parent and subsidiaries, and their officers, directors, agents, and
employees, from and against any claim, expenses (including reasonable
attorney fees and litigation costs), losses, lawsuits, damages, fines,
penalties, or other liability to any third party, including
participating providers, nonparticipating providers, and Customer's
insureds, arising out of or related to any negligent, wrongful, or
- 8-
<PAGE> 9
unauthorized act or omission of Customer or act or omission of MPOWER
expressly required by Customer. MPOWER acknowledges its responsibility
to notify Customer if the officers or directors of MPOWER has knowledge
that direction provided by Customer is negligent, wrongful, or
unauthorized.
2. MPOWER agrees to defend, indemnify, and hold harmless Customer, the
Contracted Health Plans, their respective parents, subsidiaries and
affiliates, and their officers, directors, agents, and employees, from
and against any claim, expenses (including reasonable attorney fees and
litigation costs), losses, lawsuits, damages, fines, penalties, or
other liability to any third party, arising out of or related to any
negligent, wrongful, or unauthorized act or omission of MPOWER.
Customer acknowledges its responsibility to notify MPOWER if the
officers or directors of Customer has knowledge that any action on the
part of MPOWER is negligent, wrongful, or unauthorized.
3. Each party will promptly notify the other if it becomes aware Of any
lawsuit, insurance department complaint, or demand by an attorney,
which may affect the other; provided, however, that the failure to give
such notice will not relieve any such other party from liability under
this Article IV with respect to such lawsuit, insurance department
complaint or attorney demand, except to the extent that such other
party has been actually prejudiced as a result of such failure.
Customer shall be fully responsible for defending lawsuits based solely
on claims arising under the provisions of its policies. MPOWER shall be
fully responsible for defending lawsuits based solely on allegations of
MPOWER's own misconduct. If either party is named as a defendant in a
lawsuit for any matter for which the other party is responsible under
this provision, the other party shall be responsible for defending such
matter. Responsibilities under this provision includes liability for
judgments, reasonable attorney fees, costs, penalties, and fines.
4. Notwithstanding other provisions of this Article IV, the duty of either
party to notify the other, defend, indemnify, or hold harmless under
this Article shall not arise unless and until such claim, expense,
loss, damage, fine, penalty, or other liability to any third party
shall exceed $25,000.
V. DISPUTE RESOLUTION
1. NOTIFICATION AND RESOLUTION OF COMPLAINTS. MPOWER shall notify Customer
within forty-eight (48) hours of receipt of any complaint received from
a Member, a Member's representative, a Contracted Health Plan (if such
complaint involves administrative services rendered by MPOWER pursuant
to this Agreement) or a provider of medical transportation services in
connection with services rendered by MPOWER hereunder. MPOWER agrees to
cooperate fully with Customer and with the applicable Contracted Health
Plan in resolving any Member or provider complaint regarding services
provided by MPOWER in connection with this Agreement, in accordance
with the dispute resolution procedure set forth in the applicable
Membership Agreement, Administrative Manual or provider agreements, as
appropriate. In addition, MPOWER agrees to be joined in any dispute
between Customer and a Contracted Health Plan involving administrative
services rendered by MPOWER pursuant to this Agreement, and to
cooperate fully in the resolution of such dispute in accordance with
the dispute resolution procedure set forth in the applicable Health
Plan Agreement.
2. DISPUTE BETWEEN THE PARTIES. If any dispute shall arise between the
parties in connection with this Agreement that is unrelated to a
Member, provider, or Contracted Health Plan
-9-
<PAGE> 10
complaint, the parties shall make every effort to amicably resolve the
dispute pursuant to this Section V.2. The following procedures shall be
adhered to in order to expeditiously resolve any disputes arising
during the term of this Agreement.
A. The party invoking the procedures of this Section V.2 shall
provide written notice to the other party. Each party shall
designate an individual empowered to bind the organization to
a negotiated resolution of the dispute. Unless the dispute is
resolved with fewer meetings, these parties shall meet and
confer at least two (2) times within forty-five (45) days to
attempt to reach such resolution. If the matter has not been
resolved informally within such forty-five (45) days (which
period may be extended by mutual agreement), the dispute shall
be settled by binding arbitration, in accordance with the
provisions of Sections B through G of this Section V.2.
B. Either party may commence arbitration by sending a written
demand for arbitration to the other party, setting forth the
nature of the controversy, the dollar amount involved, if any,
and the remedies sought, and attaching a copy of this Article
V to the demand. The parties shall attempt to agree upon
either one or three (3) arbitrators, as they jointly deem
appropriate. If the parties fail to agree upon the appropriate
number of arbitrators and the identity of the arbitrator(s)
within ten (10) days after the demand for arbitration is
mailed, then the parties stipulate to arbitration before three
(3) neutral arbitrators sitting on the JAMS/Endispute ("JAMS")
panel administered by the Denver, Colorado, JAMS office. Each
party shall select one such arbitrator from the panel, and the
third arbitrator shall be selected by the first two so
selected. All three arbitrators shall be neutrals, and no
arbitrator shall have a conflict of interest unless waived by
both parties.
C. The parties shall share all costs of arbitration.
D. The arbitrator(s) shall apply the substantive law of Colorado.
The parties shall have the rights of discovery as provided for
any judicial proceeding. The Colorado evidence code shall
apply to testimony and documents submitted to the
arbitrator(s).
E. Arbitration shall take place in Denver, Colorado unless the
parties otherwise agree. As soon as reasonably practicable,
the arbitrator(s) shall conduct a hearing on the dispute or
matter to be resolved. As soon as reasonably practicable
thereafter, the arbitrator(s) shall arrive at a final
decision, which shall be reduced to writing, signed by the
arbitrator(s) and mailed to each of the parties and their
legal counsel.
F. All decisions of the arbitrator(s) shall be final, binding and
conclusive on the parties and shall constitute the only method
of resolving disputes or matters subject to arbitration under
this Agreement. The arbitrator(s) or a court of appropriate
jurisdiction may issue a writ of execution to enforce the
arbitrator's judgment. Judgment may be entered upon such a
decision in accordance with applicable law in any court having
jurisdiction.
G. Notwithstanding the foregoing, because time is of the essence
of this Agreement, the parties specifically reserve the right
to seek a judicial temporary restraining order, preliminary
injunction, or other similar short term equitable relief, and
grant the
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<PAGE> 11
arbitrator(s) the right to make a final determination of the
parties' rights, including whether to make permanent or
dissolve such court order.
VI. TERM AND TERMINATION
1. TERM. The initial term of this Agreement shall commence on the
Effective Date hereof and shall continue for a period of [*] ([*])
years unless sooner terminated in accordance with this Article VI.
Thereafter, this Agreement shall automatically renew for consecutive
one (1) year periods.
2. DELAYS IN IMPLEMENTATION. In the event this Agreement is not
implemented in accordance with the implementation schedule set forth on
Exhibit A as to any service area noted in such schedule, and such delay
is caused by the acts or omissions of MPOWER (except as such acts or
omissions were directed by Customer), MPOWER shall be liable for any
damages incurred by Customer as a result of such delay, including such
damages payable by Customer to a Contracted Health Plan under the
applicable Health Plan Agreement in connection with such delay in
implementation. MPOWER shall continue implementation of the remaining
service areas in accordance with the implementation schedule. If the
delayed service area is not implemented within ninety (90) days of the
scheduled implementation date, such delay by MPOWER shall be deemed to
be a material breach of this Agreement. This section shall not apply to
any delays in implementation resulting from the actions of Customer or
the applicable Contracted Health Plan.
3. TERMINATION WITHOUT CAUSE. This Agreement may be terminated without
cause by either party by providing one hundred twenty (120) days prior
written notice to the other party; provided, however, that if MPOWER
terminates this Agreement pursuant to this Section, Customer shall have
the right to exercise the option set forth on Attachment A-2 of Exhibit
A of this Agreement, regardless of when during the term of this
Agreement such termination occurs.
4. TERMINATION FOR CAUSE. This Agreement may be terminated immediately
upon written notice thereof given by either party if any one oft he
following occurs, but in no event shall such termination relieve either
party from any of its obligations incurred at the time of termination
under this Agreement.
A. Except as provided in Section 4.B below, either party may
terminate this Agreement upon failure of the other party to
cure non-compliance with any material provision of this
Agreement within thirty (30) days after the terminating party
gives written notice of such non-compliance to the other
party, unless cure of the non-compliance cannot be reasonably
completed within thirty (30) days, in which case such cure
shall be commenced within such thirty (30) day period and
diligently pursued to completion, which completion shall occur
no later than forty-five (45) days after the initial notice of
termination. Any such termination shall be effective as of the
date of expiration of the applicable cure period.
B. In the event of breach by MPOWER, Customer may terminate this
Agreement in whole or in part (i.e., only as to specific
service areas or Contracted Health Plans).
5. IMMEDIATE TERMINATION.
* Confidential Treatment Requested
-11-
<PAGE> 12
A. Subject to Section II.3.A hereof, this Agreement shall
automatically terminate if MPOWER fails to maintain applicable
licensure as a third party administrator and/or such other
licenses or certifications required for MPOWER to perform its
obligations hereunder.
B. In the event of any material adverse change in MPOWER's
insurance coverage, Customer may immediately terminate this
Agreement.
C. In the event of termination of a Health Plan Agreement for any
reason, Customer may terminate this Agreement in whole or in
part effective on the date of termination of the Health Plan
Agreement. Customer shall provide MPOWER with not less than
forty-five (45) days notice of such termination.
D. This Agreement may be terminated if either party becomes
insolvent, or is adjudicated as bankrupt, or its business
comes into possession or control, even temporarily, of any
trustee in bankruptcy, or a receiver is appointed for it, or
it makes a general assignment for the benefit of creditors,
and no interest in this Agreement shall be deemed an asset of
creditors. No interest in this Agreement shall be deemed an
asset or liability of either party, nor shall any interest in
this Agreement pass by operation of law without the consent of
both parties.
6. EFFECT OF TERMINATION. Upon termination of this Agreement for any
reason, the Agreement shall be of no further force or effect, except as to the
rights and obligations of the parties arising out of transactions occurring
prior to the effective date of termination. MPOWER shall cooperate fully with
Customer and all Contracted Health Plans to ensure a smooth transition of
administrative functions assumed by MPOWER hereunder to Customer or directly to
another administrative services vendor. Such cooperation shall include but not
be limited to the following:
A. MPOWER shall continue to pay claims incurred during the term
of this Agreement unless directed by Customer to transfer such
functions to Customer or directly to the new administrative
services vendor.
B. MPOWER. shall transfer, as soon as possible, both
electronically and on diskette, all data, records, and other
information connected with claims processing and other
services provided by MPOWER to Customer or directly to the new
administrative services vendor.
C. MPOWER shall provide a final accounting of claims processed
within thirty (30) days after the end of the month in which
this Agreement was terminated.
VII. GENERAL PROVISIONS
1. OPTION TO LICENSE SOFTWARE. MPOWER hereby grants Customer an option to
license the MPOWER(R)software system in accordance with Attachment A-2
of Exhibit A of this Agreement. Customer may exercise such option only
after completion of the first two (2) years of the initial term this
Agreement, unless MPOWER terminates this Agreement without cause in
accordance with Section VI.3 hereof, in which case, Customer may
exercise this option at that time, regardless of when such termination
occurs. In the event Customer exercises the option pursuant to this
Section, this Agreement shall terminate upon Acceptance of the software
by Customer, as defined in Paragraph 5 of Attachment A-2 of Exhibit A
of this Agreement.
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<PAGE> 13
2. COVENANT NOT TO HIRE. During the life of the Agreement between
Customer and MPOWER, and for a period of one (1) year after termination
of the Agreement by either party for any reason, both parties agree not
to knowingly hire, directly or indirectly, for the purpose of
performing or assisting others in the performance of, any service or
function provided pursuant to this Agreement, who was an employee of
the other party during the life of this Agreement without the prior
written consent of the other party. "Knowingly" as used in the
preceding sentence is intended to refer to the actual knowledge of the
officers and senior management of the parties hereto. This covenant
applies to both parties and to any of their affiliated companies,
including, but not limited to, a parent or subsidiary company. Both
parties agree that calculating damages that a breach of this section
would cause is difficult and agree to liquidated damages in the mount
of [*] Dollars ($[*]) per breach. Injunctive relief shall also be
available to the parties.
3. SUBCONTRACTING. All services proposed by MPOWER will be performed by a
combination of its own staff and designated subcontractor(s). All
subcontractors operating on behalf of MPOWER will be subject to the
terms and. conditions of this Agreement. Customer shall have the fight
to approve all subcontractors prior to their contracting with MPOWER.
4. CUSTOMER SATISFACTION SURVEYS. Customer may periodically conduct
"customer" satisfaction surveys of policyholders, Contracted Health
Plans, and providers with whom Customer has contracted. MPOWER agrees
to record all interactions with these parties and provide those
records, including the callers' telephone numbers, to Customer as
requested. MPOWER will provide other reasonable support to Customer's
customer satisfaction survey activities as requested.
5. INSURANCE. Each party shall obtain and carry general liability
insurance, including errors and omissions coverage, in a form and with
an insurer acceptable to the other, with limits of at least $1,000,000
per occurrence and $3,000,000 in the aggregate. Within sixty (60) days
of execution of this Agreement, each party shall deliver to the other a
certificate of notice which provides that, should either party
discontinue its errors and omissions coverage, the other will be
notified by the errors and omissions carrier. In the event any such
coverage is provided on a claims made basis, such coverage shall be
manufactured (or such party shall procure equivalent tail coverage) for
a period of five (5) years after the termination hereof.
6. BUSINESS RELATIONSHIP. The business relationship of MPOWER to Customer
hereunder is that of an independent contractor and not as partner,
joint venture, employee, or agent.
7. NO ADVERTISING. MPOWER shall not engage in any marketing or advertising
of any Customer products or services without the express written
consent of Customer.
8. NOTICE. Any notice required or permitted hereunder shall be deemed
served if personally delivered or mailed by registered or certified
mail, return receipt requested, postage prepaid, and properly addressed
to the respective party to whom such notice relates at the address set
forth below, or at such other address as shall be specified by notice
given in the manner herein provided.
Notice to Customer: AMERICAN MEDICAL PATHWAYS
* Confidential Treatment Requested
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<PAGE> 14
2821 South Parker Road
Aurora, CO 80014
Attn: President and Chief Operating Officer
With a copy to: AMERICAN MEDICAL RESPONSE
2821 South Parker Road
Aurora, CO 80014
Attn: President and Chief Operating Officer
Notice to MPOWER: MPOWER SOLUTIONS, INC.
6400 S. Fiddler's Green Circle
Suite 540
Englewood, CO 80111
Attn: Chief Executive Officer
9. PARTIES BOUND. This Agreement shall be binding upon and shall inure to
the benefit of the parties And their respective successors and
permitted assigns. Neither party shall assign or otherwise transfer
this Agreement without the prior written consent of the other party;
provided, however, that either party may assign this Agreement to any
subsidiary of such party (or in the case of Customer any subsidiary of
AMR) in which such party owns an equity position of fifty one percent
(51%) or more, by giving thirty (30) days' prior written notice to the
other party, provided that any such assignee has at least the financial
and other capabilities to perform hereunder as the original parties
hereto.
10. AMENDMENT. This Agreement may be amended at any time but only by the
written agreement of the parties.
11. SEVERABILITY. The invalidity or unenforceability of any term or
provision hereof shall in no way affect the validity or enforceability
of any other term or provision of this Agreement.
12. GOVERNING LAW. This Agreement and the rights, obligations, and remedies
of the parties hereunder shall b e governed by the laws of the state of
Colorado.
13. HEADINGS. The table of contents and headings to the various paragraphs
of this Agreement have been inserted for convenient reference only and
shall not modify, define, limit, or expand the express provisions of
this Agreement.
14. AUTHORIZATION FOR AGREEMENT. The execution and performance of this
Agreement by the parties has been duly authorized by all necessary
laws, resolutions, or corporate action, and this Agreement constitutes
a valid and enforceable obligation of the parties in accordance with
its terms.
15. FORCE MAJEURE. No party shall be liable for any failure to perform its
obligations under this Agreement, including without limitation
compliance with the performance standards set forth in Section II.4, to
the extent that such failure results from any act of God, riot, war,
civil unrest, natural disaster or labor dispute.
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<PAGE> 15
16. ENTIRE AGREEMENT. This Agreement, including exhibits and
attachments, contains the entire agreement between the
parties, and this Agreement may not be modified or terminated
except as expressly provided herein or by an agreement in
writing signed by the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
the day and year first set forth above.
AMERICAN MEDICAL PATHWAYS, INC. MPOWER SOLUTIONS, INC.
[ILLEGIBLE] ["MPOWER"]
/s/ ROBERT E. WATSON /s/ MARK S. RANGELL
- ------------------------------ ---------------------------------
SIGNATURE SIGNATURE
ROBERT E. WATSON MARK S. RANGELL
- ------------------------------ ---------------------------------
NAME PRINTED NAME PRINTED
VP & CEO, PATHWAYS SENIOR VICE PRESIDENT
- ------------------------------ ---------------------------------
TITLE TITLE
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<PAGE> 16
EXHIBIT A
SCOPE OF SERVICES
IN CONNECTION WITH
KAISER FOUNDATION HEALTH PLANS
STATEMENT OF WORK
ELIGIBILITY
KEY ASSUMPTIONS:
o A full eligibility data load will be provided to MPOWER from Customer
and Kaiser Foundation Health Plans ("Kaiser") in a format agreed to
between Customer and Kaiser, which shall be in the MPOWER-specific
electronic format
o Customer and the Contracted Health Plan will provide eligibility on an
agreed to monthly date and be loaded by MPOWER within 24 hours of
receipt with each new eligibility load representing the current
"eligible population"
o No retroactive enrollments and disenrollments
o No reconciliation of monthly eligibility
o No retroactive claim adjustments
IMPLEMENTATION SCHEDULE
<TABLE>
<CAPTION>
LIVES ENCOUNTERS ENCOUNTERS
PHASE REGION (000,000) (YEARLY) (MONTHLY) LIVE DATE
- ----- ------ --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
1 Rocky Mountain Division* [* * * *
2 Southern CA * * * *
3 AMR Other * * * *
4 K.C. * * * *
5 Northern CA * * * *
6 Oregon, Hawaii, WA * * * *
7 Georgia, N.C. * * * *
8 Maryland, Ohio, Wash D.C., VA * * * *
9 NY, MA, VT, CT * * * *]
--------- ---------- ---------
Total [* * *]
</TABLE>
*The financial provisions connected with this service area will be implemented
on June 1, 1999.
* Confidential Treatment Requested
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<PAGE> 17
CAPITATION/FUND POOL MANAGEMENT/FINANCIAL
KEY ASSUMPTIONS:
o Set-up and maintain fund pools applicable to Kaiser satellite
locations
o Load and maintain provider and vendor data for 100 network
providers
o Set-up and maintain roll-up hierarchy of Customer transports
by division
o Set-up and maintain roll-up hierarchy of transports by Kaiser
satellite
o Provide 1099s for up to 100 non-Customer network providers
o Perform fee-for-service claims payments and issue remittance
advice with checks to providers (100 checks/me.)
AUTHORIZATIONS/CLAIMS
KEY ASSUMPTIONS:
o 56% of claims will require medical necessity checking (60%
submitted electronically)
o 44% will auto-adjudicate according to role set (85% submitted
electronically)
o Encounter volume breakdown according to Attachment A
o Denials are disbursed to Providers and Kaiser for distribution
o Customer Service is limited to 100 Providers and
Customer/Contracted Health Plan staff
o No EOBs are submitted to members
o Claims are submitted in standard HCFA 1500 or UB92 format
o Maintenance of out of network providers will be limited to 500
providers
o Customer service calls to Contracted Health
Plans/Customer/contracted providers will be limited to 2% of
the volume attributed to Medical Necessity claims. Excess
Customer services requirements shall be managed by Customer
o Medical necessity checking will be limited to Contracted
Health Plan approved protocol compliance and subject to
"prudent person" rule, if applicable
REPORTING
o Provide encounter data reporting electronically
o Limited to reports which are included in standard MPOWER
system format, and as agreed to by the Contracted Health Plan
PRICING ASSUMPTIONS
The following assumptions have been made within the generic pricing model.
1. IMPLEMENTATION - Implementation has been scoped on the basis of a
standard implementation without consideration for custom reporting or
custom interfaces. These customizations would be provided on a time and
materials basis (based on mutually agreed upon scope-of-work orders) or
could be quoted fixed fee if a detailed specification is available.
2. VOLUMES - are based on attached estimated encounter volumes.
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<PAGE> 18
3. Encounter Tiers - were scoped based on anticipated roll-out of the
Kaiser contract and reflect higher fees in the earlier stages of the
contract.
4. Travel & Expenses - Any travel which is required to AMERICAN MEDICAL
PATHWAYS client sites is not included.
5. Training - of AMERICAN MEDICAL PATHWAYS staff in MPOWER system
operations is not included. However, MPOWER shall be financially
responsible for training the individual responsible for providing such
training to AMERICAN MEDICAL PATHWAYS.
6. Dedicated Telecommunications - between MPOWER Denver Operations and
AMERICAN MEDICAL PATHWAYS is included.
7. Location - Computer Operations will be housed in MPOWER facilities with
claims processing staff located in Federal Way, WA and Jacksonville,
FL.
PENALTIES
In accordance with Section II.4.B of this Agreement, MPOWER is responsible for
reimbursing Customer for penalties incurred by Customer due to MPOWER's failure
to meet the performance goals set forth in Section II.4.A of this Agreement.
Such penalty shall be equal to [*] percent ([*]%) of the administrative fees set
forth in Article II hereof in connection with the particular service area(s) (as
defined in the applicable Health Plan Agreement) that has been deemed not to
have met the performance goals set forth in Section II.4 of this Agreement.
* Confidential Treatment Requested
-18-
<PAGE> 19
PRICING MODEL
The pricing model is broken down into two components.
1. Fixed infrastructure.
2. Monthly encounter processing.
FIXED INFRASTRUCTURE
The benefit of the MPOWER outsourcing project is the ability of Customer to
bring a fully implemented turnkey system operation in-house at the end of the
processing contract. As such, MPOWER has broken out fixed fee infrastructure
costs as follows:
o Operations Hardware/Software
o MPOWER System Software
o Implementation Services
A description of the hardware and software system is more specifically described
in Attachment A-1, attached to this Exhibit A and made a part of this Agreement.
The cost for these fixed infrastructure fees is $[*]. Software for on-site
Customer workstations will be approximately an additional cost of
$[*]/workstation. Customer shall pay MPOWER [*] Dollars ($[*]) upon execution of
this Agreement, [*] percent ([*]%) of the remaining balance within forty-five
(45) days after execution of this Agreement, and the remaining [*] percent
([*]%) of the balance plus additional costs for workstations upon completion of
initial implementation. If this Agreement is terminated by Customer for cause
prior to completion of implementation, MPOWER shall refund to Customer the
greater of: (a) any amounts not spent by MPOWER on its actual costs of
implementation or (b) [*] percent ([*]%) of the fee paid to MPOWER up until the
effective date of termination.
MONTHLY ENCOUNTER PRICING
<TABLE>
<CAPTION>
TIERS
(MONTHLY)
ENCOUNTERS $/ENCOUNTER
---------- -----------
<S> <C>
0 - 9999 $[*]
10000 - 19999 $[*]
20000 - 34999 $[*]
35000+ $[*]
</TABLE>
The foregoing encounter numbers include all encounters from all Contracted
Health Plans aggregated.
* Confidential Treatment Requested
-19-
<PAGE> 20
ATTACHMENT A-1
DESCRIPTION OF HARDWARE AND SOFTWARE
IBM KS-6000, Model J-50
MPOWER(R) Managed Care Software Application
IBM Transaction Server
IBM Universal Data Base (UDB)
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<PAGE> 21
ATTACHMENT A-2
TERMS OF LICENSE AGREEMENT
Upon exercise of the Option, the terms of the license agreement ("Agreement")
between MPOWER SOLUTIONS, INC. ("MPOWER") and AMERICAN MEDICAL PATHWAYS, INC.
("AMP") shall be as follows:
1. The software to be licensed by AMP from MPOWER ("the Software") is the
MPOWER Managed Care Software Application.
2. The license to be granted by MPOWER to AMP ("the License") is a
perpetual, nonexclusive, nontransferable (except to affiliates and
successors), license to utilize the Software at all locations and for
any number of stations and/or users.
3. The License shall be of the then latest existing version of the
Software. The License shall include all documentation related to the
Software.
4. The fee for the License (the "License Fee") shall be the lesser of (i)
$[*], or (ii) the then-existing fee for the Software charged by MPOWER
to its best customers, after giving effect to the rate of discount
given by MPOWER to its best customers, less the sum of $[*].
5. The License Fee shall be payable as follows. [*] percent ([*]%) thereof
at execution of a formal License Agreement. [*] percent ([*]%) thereof
upon installation. The remaining [*] percent ([*]%) upon Acceptance,
which shall be defined as sixty (60) days' continuous performance of
the Software in AMP's live environment in accordance with its
specifications and with acceptable system up-time and acceptable system
response time.
6. Support, maintenance, updates and enhancements ("maintenance and
support") shall be provided by MPOWER, at the option of AMP, for up to
five years after Acceptance. The annual fee therefor for the first two
(2) years after Acceptance shall be [*] percent [*]% of the License
Fee. The annual fee for years three (3), four (4) and five (5) after
Acceptance shall be [*] percent ([*]%) plus an amount equal to the
Consumer Price Index ("CPI") in the Denver Colorado Area as published
by the United States Department of Labor, Bureau of Labor Statistics on
the day preceding the first day of each such year.
7. At its option, from time to time during the maintenance and support
period described In paragraph 6 above AMP may obtain additional
Operational Systems Management Services from MPOWER. The fee therefor
shall be the sum of [*] Dollars ($[*]) per month.
8. The License shall be granted to AMP and the maintenance and support
shall be provided to AMP pursuant to a formal license agreement, i.e.
the Agreement referred to above, and upon exercise of the option both
MPOWER and AMP agree to negotiate in good faith toward the drafting,
mutual acceptance and execution of such an Agreement at the earliest
practicable time.
9. The Agreement shall provide at least the following warranties by MPOWER
to AMP: a) that the Software is Year 2000 compliant; b) that the
License does not infringe the patent, copyright, or other legal rights
of any third party; and c) that MPOWER has not and will not introduce
any virus, time-bomb, etc. into the Software.
* Confidential Treatment Requested
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<PAGE> 22
10. If the Agreement limits the liability of MPOWER as to incidental and
consequential damages, such limitation shall not apply to damages
caused by breach of any warranty of MPOWER under the Agreement, nor to
damages due to the Set, are or to the acts or omissions of MPOWER.
11. If the Agreement limits the liability of MPOWER to a maximum dollar
amount, such amount shall not be less than the License Fee.
12. The License Fee shall not include the costs of installation,
implementation nor reasonable training of AMP personnel. Further,
reasonable out-of-pocket travel expenses of MPOWER shall be payable in
addition to the License Fee.
13. The Agreement shall provide for settlement of disputes by arbitration
in Denver, Colorado, and that the Agreement shall be governed by the
internal laws of the state of California.
-22-
<PAGE> 23
EXHIBIT B
IMPLEMENTATION PLAN
NEW ACCOUNT IMPLEMENTATION WORKPLAN SCHEDULE
The following attachment provides a sample implementation plan, indicating key
activities and milestones to be accomplished during the implementation process.
This schedule normally covers a period of ninety (90) days from contract
signing. MPOWER and Customer will work in conjunction with the first Contracted
Health Plan to expedite the standard timeframe, in support of a [*] initial live
date for the first service area (Rocky Mountain Division).
* Confidential Treatment Requested
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<PAGE> 24
<TABLE>
<CAPTION>
%
ID TASK NAME COMPLETE DURATION START* FINISH
- -- --------- -------- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
1 x [*]
2 x
3 x
4 x
5 x
6 x
7 x
8 x
9 x
10 x
11 x
12 x
13 x
14 x
15 x
16 x
17 x
18 x
19 x
20 x
21 x
22 x
23 x
24 x
25
26
27
28
29
30
31
32
33
34
35
36
37
38
</TABLE>
* Confidential Treatment Requested
-24-
<PAGE> 25
<TABLE>
<CAPTION>
%
ID TASK NAME COMPLETE DURATION START* FINISH
- -- --------- -------- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
39 [*]
40
41
42
43
44
45
46
47 x
48
49
50
51
52
53
54
55 x
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
</TABLE>
* Confidential Treatment Requested
-25-
<PAGE> 26
<TABLE>
<CAPTION>
%
ID TASK NAME COMPLETE DURATION START* FINISH
- -- --------- -------- -------- ------ ------
<S> <C> <C> <C> <C> <C>
79 [*]
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
107
108
109
110
111
112
113
114
115
116
117
118
</TABLE>
* Confidential Treatment Requested
-26-
<PAGE> 27
<TABLE>
<CAPTION>
%
ID TASK NAME COMPLETE DURATION START* FINISH
- -- --------- -------- -------- ------ ------
<S> <C> <C> <C> <C> <C>
119 [*]
120
121
122
123
124
125
126
127
128
129
130
131
132
133
134
135
136
137
138
139
140
141
142
143
144
145
146
147
148
149
150
151
152
153
154
155
156
157
158
</TABLE>
* Confidential Treatment Requested
-27-
<PAGE> 28
<TABLE>
<CAPTION>
%
ID TASK NAME COMPLETE DURATION START* FINISH
- -- --------- -------- -------- ------ ------
<S> <C> <C> <C> <C> <C>
159 [*]
160
161
162
163
164
165
166
167
168
169
170
171
172
173
174
175
176
177
178
179
180
181
182
183
184
185
186
187
188
189
190
191
192
193
194
195
196
197
198
</TABLE>
* Confidential Treatment Requested
-28-
<PAGE> 29
<TABLE>
<CAPTION>
%
ID TASK NAME COMPLETE DURATION START* FINISH
- -- --------- -------- -------- ------ ------
<S> <C> <C> <C> <C> <C>
199 [*]
200
201
202
203
204
205
206
207
208
209
210
211
</TABLE>
* Tasks may not be started earlier than this date
* Confidential Treatment Requested
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<PAGE> 30
NON-DISCLOSURE AGREEMENT ("AGREEMENT")
This Agreement is entered into as of ,19__, by and between MPOWER Solutions
Inc., a Delaware corporation ("MPOWER"), with its principal place of business at
6400 South Fiddler's Green Circle, Suite 540, Englewood, CO 80111 and___________
____________________________________ ("Consultant") with its principal place of
business located at ____________________________________________________________
__________________________________________________________________________
WHEREAS, each party wishes to disclose and to receive from the other party
certain proprietary information for the purpose of _____________________________
________________________________________________________________________________
_______________________
WHEREAS, the parties wish to protect certain confidential information winch may
be disclosed between them.
NOW THEREFORE, in consideration of access to said information the parties hereto
agree that for a period of three (3) years from the date of this Agreement,
neither party shall copy, reproduce or disclose any information it receives from
the other that is marked "Confidential" to any other person, farm, or
corporation, or use such data for its own benefit, except as provided herein,
and shall use the same degree of care to avoid publication or use of such
information as each employs with respect to its own information of like
importance which it does not desire to have published or disseminated.
Information disclosed orally shall be confirmed in writing within thirty (30)
days to be deemed Confidential hereunder. Within thirty (30) days of receipt of
written request from the other party, each party agrees to return to the other
party, and to delete from any of its electronic storage devices, all
Confidential information received from the other, in whatever form.
The parties hereto agree that information shall not be deemed proprietary and
each party shall have no obligation with respect to any information which
(i) is or falls into the public domain through no wrongful act of the
receiving party;
(ii) is rightfully received from a third party without restriction and
without breach of this Agreement;
(iii) is approved for release by written authorization of the disclosing
party;
(iv) is disclosed pursuant to the requirement of a governmental agency or
operation of law; or
(v) has been previously and independently developed by the receiving party.
Nothing contained in this Agreement shall be construed as granting, conferring,
or implying any rights by license or otherwise.
IN WITNESS WHEREOF, the parties by their duly authorized representatives have
caused this Agreement to be executed as of the date first written above.
MPOWER SOLUTIONS INC. CONSULTANT
By: By:
---------------------------------- ------------------------------------
(Authorized Signature) (Authorized Signature)
Title: Title:
------------------------------- ----------------------------------
Date: Date:
-------------------------------- -----------------------------------
<PAGE> 1
EXHIBIT 10.11
TABLE OF CONTENTS
Processing and Services Agreement
1. Definitions
2. Remote Processing
3. Ongoing Basic Support
4. Incremental Support
5 System Modifications
6. Problem Resolution
7 Customer Responsibilities
8 Warranties
9. Limitation of Liability
10. Fees and Charges
11. Term of Agreement
13. Dispute Resolution and Termination
14. Confidentiality
15. Backup and Disaster Recovery and Audit
16. Relationship Management
17. General
Schedule A - Processing and Service Fees
Schedule B - Ongoing Basic Support
Schedule C - Remote Processing
i
<PAGE> 2
Schedule D - Work orders
Schedule E - Addendum to Processing and Services Agreement
(to implement client server product at Customer
site)
1. Definitions
2. MPOWER Software; License; Core Services
3. Supplemental Service
5. Acceptance
5. Fees and Charges
6. Problem Resolution
7. Customer Responsibilities
8. Warranties
9. Limitation of Liability
10. Other Provisions
11. Additional Provisions Relating to Termination
12. Provisions Relating to Confidentiality
13. Amendments to Section 13., General
Exhibit 1 - Definition of Core Services
Exhibit 2 - License, Processing and Service Fees
Exhibit 3 - MPOWER Identified Parties for Non-Disclosure
Exhibit 4 - Documentation Outline
Exhibit 5 - Non-Disclosure Agreement
Exhibit 6 - Third Party Vendor Software and Hardware to
Hardware to Implement MPOWER software on Client Server
ii
<PAGE> 3
PROCESSING AND SERVICES AGREEMENT
This Agreement, effective as of the 1st day of January, 1997 is
entered into by and between Brokerage Services, Incorporated, a New Mexico
corporation with offices at 11200 Lomas Boulevard, N. E., Albuquerque, New
Mexico, 87112 ("Customer"), and MPOWER Solutions Inc., a Delaware corporation
with offices at 2305 Renard Place, S.E, Albuquerque, New Mexico 87106
("MPOWER").
WHEREAS, MPOWER is in the business of providing automated managed
health care information services to businesses providing managed health care
insurance services, and desires to provide such services to Customer, subject to
the terms hereof; and
WHEREAS, Customer is in the business of providing managed health
care and other health benefits administration services to its customers' and
desires to use the services of MPOWER, subject to the terms hereof;
WHEREAS, a Managed Care Management Information Services
Agreement, terminating July 31, 1996 and extended by Letters dated June 27,
1996, August 29, 1996, and December 12, 1996, until December 31, 1996, currently
exist between MPOWER and Customer, and both parties desire to replace that
Agreement in totality.
NOW, THEREFORE, in consideration of the mutual promises made, the
terms and conditions hereunder described and other valuable consideration, the
parries agree as follows:
SECTION 1. DEFINITIONS
1.1 As used in this Agreement, the following terms shall have the meanings
indicated, unless the context clearly requires otherwise;
(a)"Effective Date" shall mean the date first set forth above.
(b) "Expenses" shall mean any out of pocket expenses, including,
without limitation, travel and travel-related expenses, incurred by MPOWER in
connection with the performance of the MPOWER Services pursuant to this
Agreement.
(c) "Fees" shall mean the fees for MPOWER Services set forth in
the Schedule A attached hereto including the Remote Processing Fees, Ongoing
Basic Support Fees, and the Personnel Resources Fees.
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<PAGE> 4
(d) "Incremental Support" shall be any support required by
Customer and agreed to be provided by MPOWER in addition to that provided as
part of Ongoing Basic Support, and which shall be provided for the Personnel
Resources Fees specified in Schedule A and including but not limited to the
services described in Schedule B annexed hereto, and herein, subject to the
terms hereof.
(e) "Member" shall mean an individual who has been or will be
eligible for certain benefits provided by or through Customer, which individual
becomes eligible either (a) directly as the subscriber to a Customer sponsored
and administered insurance or benefit program, or as an eligible employee to an
employer sponsored benefit plan administered by Customer, or Co) indirectly as a
dependent of that subscriber or employee. For example, in a family of four (4)
individuals, where the employee is the primary insured individual, the employee,
the spouse and the two (2) dependent children are each a Member for a total of
four (4) Members:
(f) "Member Month" shall mean, respectively, during any
applicable month, the number of active eligible Customer Members as enrolled and
entered by Customer onto the MPOWER System, adjusted for actual retroactive
Customer Member enrollment or disenrollment occurring in the prior twelve (12)
months. Such retroactive adjustments shall include the twelve (12) months prior
to the Effective Date of this is Agreement. Retroactive disenrollment shall not
apply to a month in which the Member was, at any prior time, eligible for
processing on MPOWER's system under a Customer's subscriber contras, and are
limited to late enrollments and disenrollments by employer groups.
(g) "Ongoing Basic Support" shall be the support provided by
MPOWER and limited by the conditions of Schedule A and which includes services
as described in Schedule B annexed hereto, and herein.
(h) "MPOWER Services" shall mean the Remote Processing Services,
Ongoing Basic Support, Incremental Support and other services provided by
M_POWER to Customer as described herein.
(i) "MPOWER Site" shall mean the site of the MPOWER System,
currently located at 2305 Renard Place, S. E., Albuquerque, New Mexico.
(j) "MPOWER Software" shall mean a single database version of the
MPOWER(TM) software which is used to perform the MPOWER Services for Customer,
and any updates, revisions, enhancements, or additions thereto made by MPOWER.
(k) "MPOWER System" shall mean the computer hardware, MPOWER
Software and other hardware and software at the MPOWER Site linking the M. POWER
Site to the communication network and to Customer's facility(ies).
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<PAGE> 5
(l) "Remote Processing Fees" shall mean the Fees for Remote
Processing Services set forth on Schedule A.
(m) "Remote Processing Services" shall mean those MPOWER Services
which allow Customer's use of the MPOWER Software by remote access to the MPOWER
System at the MPOWER Site as described Herein.
(n) "User Documentation" shall mean the User Documentation as
published and updated periodically by MPOWER.
(o)"General System Enhancements" shall mean enhancements,
revisions or updates to the MPOWER Software that are made available generally to
licensees of the MPOWER Software, as and when such enhancement, revisions or
updates are made available generally.
SECTION 2. REMOTE PROCESSING
2.1 Remote Processing Services. MPOWER shall provide Customer
with Remote Processing Services, as described in Schedule C annexed Hereto,
until termination or expiration of this Agreement. In addition, for the Remote
Processing Fees, MPOWER shall provide Customer with the number of hours of
Ongoing Basic Support set forth in Schedule A. Customer shall be required to
continue to receive Remote Processing Services for the term of this Agreement
unless Customer exercises his rights as delineated in Section 12 Conversion to
Customer Processing.
2.2 Remote Processing Fees. The Remote Processing Fees are set
forth in .Schedule A. In addition, Customer shall be responsible for all network
costs related to data communications with the MPOWER Site, including costs of
equipment at the Customer site necessary. for Customer to communicate with the
M-POWER Site, and the installation, operation and maintenance thereof.
2.3 Data Integrity. Customer acknowledges that, the quality and
integrity of all Customer data is solely Customer's responsibility.
2.4 Remote Processing Errors. MPOWER shall use due care in
processing all information transmittal to it by Customer. In the event of any
errors attributable to a malfunction of the MPOWER System, errors of MPOWER
operators, programmers or other personnel, or otherwise attributable to MPOWER,
MPOWER shall correct the errors, at no additional cost to Customer.
SECTION 3. ONGOING BASIC SUPPORT
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<PAGE> 6
3.1 Ongoing Basic Support. MPOWER. shall provide Ongoing Basic
Support subject to the terms hereof. Ongoing Basic Support may include high
level consultation regarding Customer system usage and coordination of the
following: a) Customer requirements, b) training, c) system maintenance and
enhancement support, and other consultation, as more fully described on Schedule
B.
3.2 Customer Support Personnel. Each parry shall designate a
primary liaison as set forth in Section 15.2. The Customer designated personnel
shall support Customer's users, including providing first line ongoing problem
resolution.
3.3 User Documentation. MPOWER shall provide a complete set of
User Documentation, including updates, at least once annually.
SECTION 4. INCREMENTAL SUPPORT
4.1 Incremental Support. If Customer desires to arrange for
Incremental Support, Customer shall submit a work order to M-POWER as defined in
Schedule D.
4.2 Fees for Incremental Support. MPOWER shall provide
Incremental Support on a rime and materials basis at the Personnel Resources
Fees specified in Schedule A.
For services requested by Customer which are beyond the scope of the services
contemplated hereunder, for special circumstances, or if the geographic location
in which any MPOWER Services are to be provided for Customer demands higher
labor or resource costs, MPOWER reserves the right to propose a new fee
structure or different rates.
SECTION 5. SYSTEM MODIFICATIONS
During the term of this Agreement Customer may identify enhancements or
modifications which it desires to have MPOWER make to the MPOWER Software such
as integration to other software systems, modifications for legal requirements
and other functional enhancements. Customer shall be responsible for providing
to MOWER. a description of the changes which Customer requests to be made in the
MPOWER Software. MPOWER shall have the right to design any Customer requested
modifications in a way which, in MPOWER's reasonable opinion, will not adversely
affect the MPOWER Services or the structure or performance of the MPOWER
Software or will have general applicability. In the event MPOWER agrees to
provide such enhancements or modifications to the MPOWER Software, such
enhancements and modifications shall be owned by MPOWER as part of the MPOWER
Software. Resources utilized by MPOWER in providing services pursuant to any
such requests will be charged to Customer as
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<PAGE> 7
Incremental Support, unless expressly agreed to otherwise in writing by the
parties. Customer will also be responsible for any associated Expenses.
In order for these enhancements or modifications to be completed in a
timely and successful manner, Customer will provide MPOWER with applicable
information and access to key personnel during the period these services are
being performed. MPOWER will be entitled to submit various materials, including
time schedules, business requirement, specifications, and test results, for
Customer's review, comment or approval. Customer will respond to each such
request as soon as reasonably practicable, and, in any event, in a time frame
consistent with the time schedules, and shall nor unreasonably withhold any
sign-off or approval requested by MPOWER.
SECTION 6. PROBLEM RESOLUTION
6.1 In the event MPOWER receives notice from Customer of a
Critical Failure (as defined herein), MPOWER agrees to respond to such notice by
assigning a qualified individual to attempt to remedy the Critical Failure, and
agrees to use best efforts to remedy the Critical Failure commensurate with the
severity of the problem and the timeliness and quality of information regarding
the problem received from Customer. A Critical Failure shall be defined as a
failure of the MPOWER System to perform in accordance with the User
Documentation which has a material impact on Customer's mission-critical system
related functions. By way of example, a Critical Failure may include inability
to generate checks, unavailability of the M.POWER System, inability to perform
on-line adjudication of all types of claims, or incorrect adjudication of all
types of claims. MPOWER will use reasonable efforts to correct Non-critical
Failures (defined as any other failure of the M_POWER System) in a timely
manner.
SECTION 7. CUSTOMER RESPONSIBILITIES
7.1 Customer Responsibilities. Customer acknowledges that the
MPOWER Software reflects certain interdependent relationships, such as exist
among the data variables, logic rules and system functions of the MPOWER
Software. Customer further acknowledges that it is required and has a
responsibility to understand such data variables, logic rules and system
functions, and their interdependent relationships, and to define for its
own-purposes such data variables, logic rules and system functions to. the
MPOWER Software in such a way that the MPOWER Software will provide the
functionality desired by Customer. Customer acknowledges that it has or will
hire and will maintain on its staff personnel who are able to understand and
define such data variables, logic rules, system functions and interdependent
relationships. Customer further acknowledges that, even though. MPOWER may
assist Customer personnel in performing these tasks, the responsibility for the
effective definition and maintenance of these data variables, logic rules
page 5
<PAGE> 8
and system functions resides with Customer and not with MPOWER, unless Customer
specifically requests MPOWER to perform these tasks at the Incremental Support
rates.
7.2 Customer Data. Customer shall be responsible for inputting
and ensuring the accuracy, validity and completeness of all data variables,
logic rules, system functions and Customer data, including but not limited to
group, subscriber, Member, provider, utilization, encounter, claims, capitation,
fund accounting, billing, collection, broker, benefits, product contract,
provider contract, provider fees, standard business measures, and other similar
or related data. Customer shall also be responsible for inputting and ensuring,
the accuracy, validity and completeness of all user-defined report definitions,
all report and batch production job specifications and priority scheduling
criteria. Customer shall also be responsible for initiating, monitoring,
operating, printing and ensuring the accuracy, validity, and completeness of all
print outputs and file downloads, such as but limited to all reports, premium
bills, checks, and the like, determining how many and on what print stock such
outputs are to be printed or into which files or programs on Customer-
controlled computers such files are to be downloaded and manipulated, at
Customer's own initiative, responsibility and risk. Customer hereby acknowledges
responsibility for generally controlling all aspects related to the production,
distribution and control of such outputs. Customer further acknowledges that,
notwithstanding the responsibility of MPOWER to have used due care and diligence
in the design, programming, documentation and operation of the System, the
accuracy of Customer's data base within the MPOWER Software and the accuracy of
the several outputs of the MPOWER Software, including bur not limited to,
outputs that control the billing, receipt or expenditure of moneys, will be
dependent on the accuracy and use of the data variables, logic rules, system
functions and Customer data input into the MPOWER Software by Customer and
verified by Customer.
7.3 Other Customer Obligations. In addition to its other
obligations hereunder, Customer will on a timely basis:
a) Establish appropriate priorities for Customer, on a
regular basis and no less frequently than every three months, that relate to
MPOWER Services and communicate the same to MPOWER. Customer recognizes that
changes in such priorities may result in additional fees hereunder for
additional staff, as Incremental Support, or reordering of other priorities to
provide MPOWER Services within the current Fee structure.
(b) Cooperate with MPOWER by, among other things, making
available, as reasonably requested by MPOWER, management decisions,'
information, approvals, and acceptances in order that MPOWER may properly
accomplish its obligations and responsibilities hereunder;
(c) Carefully inspect and review all MPOWER generated
reports and other output and notify M-POWER of any incorrect reports or output.
MPOWER
page 6
<PAGE> 9
(d) Personalize, maintain, reproduce and distribute
(solely for Customer's internal use) procedure manuals and documentation used by
Customer personnel in connection with the MPOWER Services hereunder.
(e) Train applicable Customer personnel to properly
prepare input for and to effectively utilize output from the systems operated by
MPOWER hereunder.
(f) Pay all costs of acquisition, installation, use and
maintenance of equipment at Customer's site, as required for the performance of
the MPOWER Services.
(g) Such other responsibilities as set forth herein.
Customer agrees that to the extent its failure to meet its
obligations set forth in this Section 7.3 affects the ability of MPOWER to
perform MPOWER's obligations under this Agreement, MPOWER shall be relieved of
such obligations, and Customer shall indemnify MPOWER against any claims or
liabilities arising, out of such failure by Customer.
7.4 Reprocessing or Reconstructing of Data. During any period of
MPOWER Processing to the extent that any Customer data must be corrected,
recreated, restored or reprocessed due to the fault or negligence of Customer,
its employees or agents, or by a breach by Customer of any of its obligations
hereunder, MPOWER will do so, and in such event Customer shall pay MPOWER at the
Personnel Resources Rates and reimburse MPOWER for any costs incurred by MPOWER
in correcting, recreating, restoring or reprocessing such data or in providing
assistance therewith.
SECTION 8. WARRANTIES
MPOWER warrants that it either owns the rights to the MPOWER
Software or has the right to perform the MPOWER Services herein, and that it
either owns or has licensed in the manner contemplated by this Agreement any
other software used in the provision of the MPOWER Services to Customer. MPOWER
agrees to defend Customer against all claims arising from the infringement by
the MPOWER Software of the rights of third parties, provided that Customer
notifies MPOWER in writing within seventy-two (72) hours of the receipt by
Customer of any such claim or notice of any such claim and permits MPOWER upon
request, and at MPOWER's cost and expense, to assume and control the defense or
settlement thereof Customer agrees to cooperate with MPOWER in every reasonable
manner in the defense of such claim. In defending or settling any such claim
MPOWER may elect, at its sole discretion, to (i) obtain the right of continued
use of such MPOWER Software or pare thereof, which is alleged to be infringing
or (ii) replace or modify such MPOWER Software, or part thereof, so as to avoid
such claim of infringement, or (iii) terminate this Agreement, in which event
MPOWER shall have no further obligation or liability to Customer with respect to
the MPOWER Services.
page 7
<PAGE> 10
MPOWER DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, EXCEPT THOSE
WARRANTIES EXPRESSLY SET FORTH IN THIS AGREEMENT. MPOWER SPECIFICALLY DISCLAIMS
ANY WARRANTY, EXPRESS OR IMPLIED, AS TO THE MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PUP, POSE OF THE MPOWER SERVICES OR THE MPOWER SYSTEM, OR THE
COMPLIANCE OF THE FOREGOING WITH ANY LAW, REGULATIONS OR ORDER.
SECTION 9. LIMITATION OF LIABILITY
NEITHER PARTY SHALL HAVE LIABILITY WITH RESPECT TO ITS
OBLIGATIONS UNDER THIS AGREEMENT OR OTHERWISE FOR CONSEQUENTIAL, EXEMPLARY,
INCIDENTAL OR PUNITIVE DAMAGES EVEN IF IT HAS BEEN ADVISED OF THE POSSIBILITY
SUCH DAMAGES. MPOWER SHALL NOT BE LIABLE FOB ANY CLAIM ARISING FROM THE USE OF
SOFTWARE OR DATA WHICH HAS BEEN MODIFIED BY ANYONE OTHER THAN MPOWER, ITS
AGENTS, ASSIGNS OR SUBCONTRACTORS, NOR FOR ANY CLAIM ARISING FROM THE USE OF ANY
SOFTWARE OR EQUIPMENT DEVELOPED OR MODIFIED BY CUSTOMER OR WHICH HAS BEEN
PROVIDED TO OR ACQUIRED BY CUSTOMER UNDER ANY LICENSE OR OTHERWISE FROM ANY
THIRD PARTY.
MPOWER'S LIABILITY FOR THE CORRECTION OF ERRORS IN THE PROCESSING
OF CUSTOMER'S DATA AND FILES IS LIMITED, AS PROVIDED IN SECTION 2.4, TO
CORRECTING THE ERRORS AND REPROCESSING THE INFORMATION IF SUCH ERRORS ARE BROUGH
TO MPOWER'S ATTENTION IN A TIMELY MANNER. IN NO EVENT SHALL MPOWER'S TOTAL
LIABILITY TO CUSTOMER RELATED TO THIS AGREEMENT, WHETHER IN CONTRACT OR IN TORT
OR OTHERWISE, EXCEED THE SUM OF THE AMOUNTS PAID BY CUSTOMER TO MPOWER FOR THE
SPECIFIC PRODUCT OR SERVICE AND IMPLEMENTATION WHICH IS THE SUBJECT OF THE
ACTION OR CLAIM DURING THE SIX (6) MONTHS IMMEDIATELY PRIOR TO THE BREACH FOR
WHICH THE DAMAGES ARE CLAIMED. THIS LIMITATION APPLIES TO ALL CAUSES OF ACTIONS
OR CLAIM IN THE AGGREGATE INCLUDING WITHOUT LIMITATION, BREACH OF CONTRACT,
BREACH OF WARRANTY, NEGLIGENCE, STRICT LIABILITY, MISREPRESENTATION AND OTHER
TORTS. FURTHER NO CAUSE OF ACTION WHICH ACCRUED MORE THAN TWO (2) YEARS PRIOR TO
THE FILING OF A SUIT ALLEGING SUCH CAUSE OF ACTION MAY BE ASSERTED AGAINST
MPOWER.
MPOWER hereby is not assuming or otherwise responsible for,
expressly or implicitly, any obligation or liability of any kind whatsoever of
Customer. Customer shall
page 8
<PAGE> 11
and hereby does agree to indemnify and hold MPOWER harmless from any and all
claims, lawsuits, liabilities, expenses, costs, damages and fees arising from or
in connection with Customer's breach of its obligations hereunder or relative to
Customer's provision of services or products to any third party.
SECTION 10. FEES AND CHARGES
10.1 Fees and Charges. The Fees for the MPOWER Services are
described in Schedule A attached hereto.
10.2 Timeliness of Payment. All Fees payable by Customer
hereunder shall be paid by Customer on a monthly basis. The Remote Processing
Fees shall be due and payable in advance at the beginning of each month. Any
other sum due M_POWER hereunder for which a time for payment is not otherwise
specified will be due and payable within twenty (20) days after the date of an
invoice therefor from MPOWER. If Customer fails to pay any amount due within
thirty (30) days from the due date, late charges of 1 1/2% per month shall also
become payable by Customer to MPOWER. In addition, failure of Customer to fully
pay any amount due within sixty (60) days after the due date shall be deemed a
material breach of this Agreement and shall be sufficient cause for immediate
termination hereof. If Customer fails to pay, when due, any amount payable
hereunder or fails to fully perform its obligations hereunder, Customer agrees
to pay, in addition to any amount past due, plus interest accrued thereon, all
reasonable expenses incurred by MPOWER in enforcing this Agreement including but
not limited to all expenses of any legal proceeding related thereto and all
reasonable attorneys' fees incurred in connection therewith. No failure by
MPOWER to request any such payment or to demand any such performance shall be
deemed a waiver by MPOWER of Customer's obligations hereunder or a waiver of
MPOWER's right to terminate this Agreement.
10.3 Fee Changes. If, during the term of this Agreement, the
Consumer Price Index for All Urban Consumers, U.S. City Average, Other Goods and
Services published by the Bureau of Labor Statistics of the Department of Labor
(the "CPI"), shall at any anniversary of the Effective Date (the "Current
Index") be higher than the CPI twelve (12) months prior thereto (the "Base
Index"), then, effective as of such anniversary, the then current Ongoing Basic
Support Fees, and Personnel Resources Fees, may be increased by one and a half
(1.5x) the percentage that the Current Index increased from the Base Index, but
not to exceed 10%. In addition, effective as of such anniversary, MPOWER may
increase the Processing Fees by the percentage (1x) that the Current Index
increased from the Base Index. MPOWER shall notify Customer of each increase by
a written statement. MPOWER's notice may be given after the applicable
anniversary date of the increase, and Customer shall pay MPOWER the accrued
adjustment of the months elapsed between the effective date of the increase and
MPOWER's notice.
10.4 Taxes. There will be added to may charges under this
Agreement, and
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Customer will pay to MPOWER, amounts equal to any taxes, however designated or
levied, based upon such charges, or upon this Agreement or the services or
materials provided hereunder, or Customer's use thereof, including state and
local sales, use, privilege or excise taxes based on gross revenue, and any
taxes or amounts in lieu thereof paid or payable by MPOWER in respect of the
foregoing, but excluding any franchise taxes, taxes based on the adjusted gross
income of MPOWER, and employee withholding, FICA, and other taxes relating to
MPOWER personnel performing services hereunder.
SECTION 11. TERM OF AGREEMENT
ll.1 Term of Agreement. The term of this Agreement shall commence
on the Effective Date and shall continue for thirty six (36) months unless
otherwise terminated pursuant to this Agreement. The agreement will be extended
for an additional 36 months upon the mutual written agreement of the parties.
The parties mutually agree to inform the other party, at least 120 days prior to
the Termination of this Agreement, as to whether or not they wish to negotiate a
new agreement which would be effective upon the Termination of this Agreement.
SECTION 12. CONVERSION TO CUSTOMER PROCESSING
12.1 Customer's Right to Convert at Will. At any time during the
initial or extended term of this Agreement, Customer may provide MPOWER with one
hundred- twenty (120) days notice of its intent to execute its right to license
the MPOWER software to run on Customer's own IBM hardware. At that time,
Customer and MPOWER will execute Schedule E MPOWER's License Agreement.
SECTION 13. DISPUTE RESOLUTION AND TERMINATION.
13.1 Dispute Resolution. In the event of a dispute between the
parties arising out of or relating to this Agreement, then, upon the written
request of either party, each of the parries will appoint a designated
representative to endeavor to resolve such dispute. The designated
representatives will negotiate in good faith to resolve the dispute. Initially,
disputes will be bandied by the M. POWER Director of Relationship Management and
the Customer's PRESIDENT, DEVELOPMENT or his/her equivalent, and if they are
unable to reach a resolution, the dispute will be presented to the COO of MPOWER
and the Customer for resolution. If the mercer has not been resolved pursuant to
the aforesaid mediation procedure within sixty (60) days of the commencement of
such procedure (which period may be extended by mutual agreement), the
controversy shall be settled by arbitration in accordance with the American
Arbitration Association. (the "Association) under the Commercial Arbitration
Rules of the Association there in effect, by a panel of three (3) arbitrators
knowledgeable in the computer area. The arbitration shall be governed by the
United States Arbitration Act, 9 U.S.C. Sec. 1-16, and judgment upon the award
by the arbitrator may be entered by any court having
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jurisdiction thereof. The place of arbitration shall be Albuquerque, New Mexico.
Each party shall pay its own costs and expenses.
13.2 Termination for Cause. In the event that either parry hereto
materially or repeatedly defaults in the performance of any of its duties or
obligations hereunder (except for a default in payments to MPOWER) and does not
substantially cure such default within one hundred twenty (120) days after being
given written notice specifying the default, or, with respect to those defaults
which cannot reasonably be cured within one hundred twenty (120) days, if the
defaulting parry fails to proceed promptly after being given such notice to
commence curing the default and thereafter to proceed to cure the same, then the
parry not in default may, by giving written notice thereof to the defaulting
parry, terminate this Agreement as of a date specified in such notice of
termination.
13.3 Termination for Nonpayment. In the event that Customer
defaults in the payment when due of any amount due to MPOWER hereunder, and does
not cure such default within sixty (60) days after the date of receipt the
invoice, then MPOWER may, by giving written notice thereof to Customer,
terminate this Agreement as of a date specified in such notice of termination.
13.4 Termination for Relocation. Should MPOWER relocate "it's"
service Bureau facility and resources outside the state of New Mexico, then
customer may terminate this Agreement without penalty upon 90 days notice. Such
notification, however, must be given within 120 days of such relocation
13.5 Termination for Insolvency. In the event that either parry
hereto becomes or is declared insolvent or bankrupt, is the subject of any
proceedings relating to its liquidation, insolvency or for the appointment of a
receiver or similar officer for it, makes an assignment for the benefit of all
or substantially all of its creditors, or enters into an agreement for the.
composition, extension, or readjustment of all or substantially all of its
obligations, then the other party hereto may, by giving written notice thereof
to such party, terminate this Agreement as of a date specified in such notice of
termination
13.6 Termination Assistance. Upon the termination of this
Agreement for any reason, MPOWER will provide to Customer such termination
assistance, at MPOWER's Personnel Resources Rate plus Expenses, as may be
reasonably requested by Customer and scheduled by M_POWER. if this Agreement is
terminated, then Customer will pay MPOWER, on the first day of each month and as
a condition to MPOWER's obligation to provide such termination assistance to
Customer during that month, an amount equal to MPOWER's reasonable estimate of
the total amount payable to MPOWER for such termination assistance for that
month.
13.7 Outstanding Amounts. Termination of this Agreement shall
entitle MPOWER to payment and Customer shall be obligated to pay for the
provisions of any and all
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MPOWER Services rendered by MPOWER under this Agreement prior to the date of
such termination.
13.8 Customer Data. In the event that either party terminates
this Agreement, Customer retains ownership of all membership data and all other
Customer data in the MPOWER System. MPOWER shall return same to Customer at the
time of termination in MPOWER's standard tape record format. Any support by
MPOWER to provide data in other than MPOWER's standard format shall be billed as
Termination Assistance per section 13.5 above.
SECTION 14. CONFIDENTIALITY
14.1 Confidential Information. "Confidential Information" shall
mean information such as customer lists, business plans, operation plans, client
information, application software programs and documentation licensed by third
parties to Customer or MPOWER, the MPOWER Software, and all other materials
relating to MPOWER's business or the business of Customer, which are designated
in writing as confidential at the time of disclosure by Customer or MPOWER, or
is identified orally at the time of the disclosure as confidential and confirmed
in writing within one week of such disclosure, and which are disclosed by
Customer or MPOWER to the other party, its employees, agents, contractors,
assignees or successors in the conduct of business under this Agreement.
14.2 Standard of Care. Each party hereby agrees that and its
respective officers, employees, agents, contractors, assignees and successors
shall (i) keep all Confidential Information received from the other party
strictly confidential, (ii) instruct their officers, employees, agent's,
contractors, and permitted assignees and successors to use the same degree of
care and discretion with respect to the Confidential Information of the other
parry, or of any third party utilized hereunder, that MPOWER and Customer each
require with respect to their own most confidential information, (iii) use and
disclosure of such information solely for the purposes and in the manner set
forth in this Agreement, (iv) not disclose any such information to any other
person, corporation, governmental agency or other entity without the express
written permission of the other and (v) institute the necessary security
policies and procedures to meet its obligations hereunder. Notwithstanding the
foregoing, the confidentiality obligations set forth in this Section 12 will not
apply to any information which the recipient parry can establish to have (x)
become publicly available without breach of this Agreement, (y) been
independently developed by the recipient parry outside the scope of this
Agreement and without reference to the Confidential Information received under
this Agreement, or (z) been rightfully obtained by the recipient parry from
third parries which are not obligated to protect its confidentiality.
SECTION 15. BACKUP AND DISASTER RECOVERY SERVICES AND AUDIT
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15.1 Backup. MPOWER will establish and maintain reasonable
safeguards against the destruction, loss or alteration of Customer data in the
possession of MPOWER. In the event that additional safeguards for Customer data
are reasonably requested by Customer, MPOWER will provide such additional
safeguards and Customer shall reimburse MPOWER for any additional costs incurred
by MPOWER.
15.2 Disaster Recovery. M.POWER shall maintain an agreement or
arrangement with a third party to provide MPOWER a disaster recovery site with
facilities sufficient to enable MPOWER to provide a continuation of MPOWER
Services in the event the MPOWER System is unavailable for an extended period
of time.
15.3 Notification. MPOWER will provide customer with a current
copy of MPOWER's Backup and Disaster Recovery procedures and the results from
Annual Testing and EDI Audit.
SECTION 16. RELATIONSHIP MANAGEMENT
16.1 Meetings. MPOWER and Customer agree to regularly discuss business
and relationship strategies affecting both parties. MPOWER and Customer further
agree to have regularly scheduled communications to summarize current
activities, performance results, error corrections and work efforts, as well as
the future planned activities.
16.2 Liaison. During the term of this Agreement, each party will
provide a liaison who (i) will have overall management responsibility for the
performance by the party hereunder, (ii) will have primary operational
responsibility, and (iii) will serve as the party's primary liaison with the
other party with respect to performance under this Agreement. Customer may have
primary liaison replaced for cause.
SECTION 17. GENERAL
17.1 Independent Contractor. MPOWER, in performing its
obligations under this Agreement, is acting only as an independent contractor of
Customer and the rights and responsibilities of the parties shall be determined
accordingly.
17.2 Force Majeure. Each party hereto shall be excused from
performance hereunder for any period and to the extent that it is prevented from
performing any services pursuant hereto, in whole or in part, as a result of
delays caused by the other parry or an act of God, war, civil disturbance, court
order, labor dispute of the other parry or any third party, or other cause
beyond its reasonable control and which it could not have prevented by
reasonable precautions, and such nonperformance shall not be a default hereunder
or a ground for termination hereof. In the event that either party is excused
from performance hereunder
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pursuant co this Section, then that party shall cake all reasonable actions to
resume, or provide alternative performance of its obligations hereunder as soon
as feasible.
17.3 Governing Law: Jurisdiction and Venue. This Agreement shall be
construed and enforced according to the laws of the State of New Mexico without
reference to principles of conflicts of laws. The sole and exclusive forum for
any disputes arising out of or relating to this Agreement shall be in a court of
competent jurisdiction in the City of Albuquerque, New Mexico, and the parties
hereby irrevocably consent to such jurisdiction.
17.4 Notices. All notices and other communications under this Agreement
shall be in writing mad may be girth by any of the following methods: (a)
personal delivery against signed receipt; (b) facsimile transmission; (c)
registered or certified mail, postage prepaid, return receipt requested; or (d)
over-night delivery service. Notices shall be sent to the appropriate parry at
its address or facsimile number given below (or at such other address or
facsimile number for such party as shall be specified by notice given
hereunder):
17.4.1. If to MPOWER, to:
MPOWER Solutions Inc.
2305 Renard Place, S. E.
Albuquerque, NM 87106
17.4.2. If to Customer, to:
Brokerage Services, Inc.
11200 Lomas Boulevard, N. E.,
Albuquerque, New Mexico, 87112
All such notices and communications shall be deemed delivered upon (a) actual
receipt thereof by the addressee, (b) actual delivery thereof to the appropriate
address, or (c) in the case of a facsimile transmission, upon transmission
thereof: by the sender and issuance by the transmitting machine of a
confirmation slip confirming that the number of pages constituting the notice
have been transmitted without error. In the case of notices sent by facsimile
transmission, the sender shall contemporaneously dispatch a copy of the notice
to the addressee at the address(es) provided for above by an overnight courier
service. However, such mailing shall in no way alter the time at which the
facsimile notice is deemed received.
17.5 Insurance. During the term of this Agreement, each parry
will insurance coverage, such coverage to bear the risks associated with the
performance of this Agreement as is reasonable, prudent and advisable under the
circumstances and will provide evidence of or otherwise demonstrate such
capability to the other party upon the other party's reasonable request from
time to time.
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17.6 Assignment. This Agreement and Customer's rights or
obligations hereunder may not be assigned or transferred by Customer to another
entity whether by assignment, merger, transfer of assets, sale of stock of
Customer, operation of law or otherwise without the prior written consent of M.
POWER. MPOWER may assign this Agreement upon notice to, but without the consent
of, Customer. This Agreement shall inure to the benefit of and be binding upon
the parties, their permitted successors and their permitted assigns.
17.7 Hiring of Employees. Except as otherwise provided in this
Agreement, MPOWER and Customer each agree that, during the term of this
Agreement arid for three years thereafter, it shall not, except with the prior
written consent of the other, offer employment to or employ any person employed
then or within the preceding twelve months by the other. This shall not apply to
employees of either party who have termination agreements which specifically
allow their hiring or retention as consultants by the other party.
17.8 Entire Agreement. This Agreement, including any Schedules
referred to herein and attached hereto, constitute the entire agreement between
the parties hereto with respect to the subject matter hereof and there are no
representations, understandings or agreements relative hereto which are not
fully expressed herein. No amendment, change, waiver, or discharge hereof shall
be valid unless in writing and signed by an authorized representative of the
party against which such amendment, change, waiver, or discharge is sought to be
enforced.
17.9 General. All provisions of this Agreement relating to
confidentiality, nondisclosure, publicity, proprietary rights-and indemnity
shall survive the cancellation, termination or expiration of this Agreement. The
waiver or failure of either parry to exercise any right in any instance shall
not be deemed a waive? of any other or further right hereunder. If for any
reason a court of competent jurisdiction finds any provision of this Agreement,
or portion thereof to be unenforceable, that provision shall be enforced to the
maximum extent permissible so as to effect the intent of the parties, and the
remainder of this Agreement shall continue in full force and effect. The section
headings used herein are for reference and convenience only and shall not enter
into the interpretation thereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives.
MPOWER Solutions Inc. CUSTOMER
By: /s/ WILLIAM F. REILLY By: /s/ JAMES L. HEALY
-------------------------- -------------------------------------
Name: William F. Reilly Name: James L. Healy
------------------------ -----------------------------------
Title: EVP Title: Exec VP
----------------------- ----------------------------------
Date 1-10-97 Date: 1-10-97
------------------------- -----------------------------------
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SCHEDULE A
PROCESSING AND SERVICE FEES
REMOTE PROCESSING FEES
The Processing Fee shall be $[*] per member per month. Fees for Life Insurance
and/or Dental only members, is $[*].
As part of the service provided by MPOWER, included in this processing fee,
Ongoing Basic Support as defined in Schedule B.
PERSONNEL RESOURCES FEES - STANDARD RATE
The Personnel Resources Fee for the year 1996 is $[*]/hour for most of
MPOWER Staff with a Fee of $[*]/hour for billable support provided by
MPOWER senior management and lead technical staff. Personnel Resources
provided include customer support personnel, analysis and programming
personnel used for initial implementation and ongoing maintenance and
enhancement activities directly related to the MPOWER System.
EXPENSES
Customer shall reimburse MPOWER for reasonable MPOWER travel and out of
pocket expenses for which advance approval has been received from the
Customer either as part of and or incidental to an approved Work Order
(Schedule X), or for a specific trip requested by Customer.
SPECIAL PROJECT FEES
Customer arid MPOWER agree to consider "Special Projects" which may be mutually
beneficial. Customer and MPOWER may establish a separate "preferred" hourly rate
for MPOWER services related to such projects. Operating guidelines for
establishing and monitoring such projects shall he specified in separate letter
agreements between the parties.
Other Services
At the request of Customer, MPOWER may provide other services, such as the
printing of year end Provider 1099 Tax Forms. MPOWER shall invoice Customer for
any direct cost, such as the expense of pre-printed forms, associated with these
services.
* Confidential Treatment Requested
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SCHEDULE B
ONGOING BASIC SUPPORT
Ongoing Basic Support includes the following services directly related to the
MPOWER(TM) System:
Customer Support (telephone and on-site).
o Access to the MPOWER Help Desk for routine simple queries and
logging of issues
o Resolution of issues relating to production status
o Account Management and coordination
Work Order Support
o Assistance with. preliminary analysis to support creation of a
Work Order
Ongoing Basic Support does not include the following services:
o Assistance with actual coding of setups or UVAMs or development of
setups or UVAMs for new Benefit Plans
o Actual-analysis, design or programming and test of any
Customer-requested enhancements to the System
o Formal training
INCREMENTAL SUPPORT
Subject to the specifics of any given Work Order, Incremental Support includes
the following services directly related to the MPOWER(TM) System:
Customer Support (on-site and telephone)
- System set-ups
- Ad-Hoc reporting
- Possible problem analysis
- Documentation
- Training
- Appropriate overlap and backup of Analysis
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Analysis
- Possible problem analysis
- Business requirements definition
- System testing
- Business consulting regarding use of system
- Documentation
- Appropriate overlap and backup of Customer Support and Programming
Programming
- Programming of client prioritized business requirements
- Possible problem analysis
- Documentation
- Appropriate overlap and backup of Analysis and Customer Support
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SCHEDULE C
REMOTE PROCESSING
I. ONLINE AVAILABILITY
The MPOWER System shall achieve [*] percent ([*]%) availability between
the hours of 7:30 a.m. and 6:00 p.m. Mountain Time weekdays, Saturdays
between the hours of 6:00 a.m. and 12:00 noon. Mountain Time, excluding
MPOWER holidays, and during any additionally requested and agreed upon
on-line processing hours.
Measurement
Availability shall be calculated on a monthly basis utilizing MPOWER's
standard availability performance cools. The MPOWER System availability
shall be measured at MPOWER's system in Albuquerque, NM and MPOWER shall
not be penalized for non-availability of the MPOWER System for reasons
not in MPOWER's direct control.
In addition, the following conditions shall be calculated as if the
MPOWER System were 100% available:
1. Customer has requested on-line downtime during normal operating
hours.
2. The parties have mutually agreed to a reorganization/purge of
client data during normal Saturday operating hours.
II ONLINE PERFORMANCE
The MPOWER System shall achieve three (3) second response time [*]
percent ([*]) of the time during the Working Hours.
Measurement
Response time shall be calculated on a monthly basis utilizing MPOWER's
standard on-line performance measurement performance tools. The MPOWER
System on-line performance shall be measured at MPOWER's system in
Albuquerque, NM and MPOWER shall not be penalized for response time
delays of the M_POWER System for reasons not in MPOWER's direct control.
The parties understand that running Void Check, Batch Claim (for EDI
claims), batch jobs or Reprocessing Claim transactions, RAC Output
(reporting) and UVAM generation during normal on-line hours will
adversely affect response time.
* Confidential Treatment Requested
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Accordingly, if Customer chooses to run the aforementioned transactions
during normal on-line hours, for purposes of the response time
calculation said time shall be deemed to have met the 3 second standard.
On-line Availability of Information: MPOWER will maintain on-line
availability of claim information for a period of up to twenty-four (24)
months from the date of payment in the MPOWER System, unless otherwise
agreed by the parties. Other data will be archived on a regular basis
based upon criteria to be mutually agreed to within the first 60 days of
the contract.
MPOWER Current Standard On-Line Availability Fees for Remote Processing.
Customer may request that the MPOWER System be available for additional
hours for Remote Processing. Subject to the mutual agreement of the
parties as to the timing of such additional hours of system
availability, Customer will pay MPOWER at MPOWER's then standard fees
for such service. MPOWER's current standard fee for additional requested
on-line processing time is $[*] per hour, with a minimum of two (2)
hours, plus any personnel resource fees for incremental support.
MPOWER's remote processing service will accommodate processing of
customer membership up to [*] members, should client grow membership
to that level.
MPOWER will make ANSI Standard EDI capabilities available to customer
within 1 year of the contract date. Such services may be chargeable to
customer at rates not to exceed those charged to other customers of
MPOWER.
* Confidential Treatment Requested
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SCHEDULE D
WORK ORDERS
A work order is the document the Customer uses to authorize MPOWER to perform
Incremental Support ("Work Order"). Some examples of Incremental Services are
modifications, enhancements, conversion support, additional training, etc. to
the extent that such activities require MPOWER. resource commitments beyond
those provided as part of Ongoing Basic Support. The steps in completing a Work
Order are is follows:
Step 1. The Customer determines that Incremental Support is required from
MPOWER.
Step 2. The Customer, assisted by M. POWER, if requested and as part of
provision of Ongoing Basic Support, provides, in writing, the high level
functional requirements for the desired Incremental Support.
Step 3. Provided Customer has provided sufficient information in Step 2.,
MPOWER creates a project plan. (IF information is incomplete, Step 2.
Needs to be repeated or expanded upon.) The contents of a typical
project plan are given below:
Contents of Typical Project Plan
I. Statement of work, including description of task, goal, scope of
effort, assumptions/constraints, approach, success factors, and
II. Term
III. Estimated Hours (if applicable)
IV. Staffing and Roles
V. Schedule and Milestones
VI. Deliverables
VII. Estimated Non-Personnel Charges (such. as, it: applicable, but
not limited to, supplemental computer processing usage,
telecommunications charges, physical materials, special
equipment, etc.)
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Step 4. Customer reviews project plan. If necessary based on Customer's
comments, MPOWER revises project plan.
Step 5. MPOWER prepares a Work Order (see sample on the next page) with the
project plan as an attachment.
Step 6. Customer approves Work Order.
Step 7. Work begins upon receipt by MPOWER. of an approved Work Order.
NOTE: Any change in scope (e.g., a modification or an expansion to the
functional requirements in Step 2) to an existing Work Order requires
either a new Work Order or a signed amendment to the existing Work
Order and a repeat of the above steps. Customer may execute Work Orders
for initial phases of a project in order to arrange for MPOWER to
provide analysis support of the creation of functional specifications.
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Sample Work Order
[Date]
[Customer Name]
[Customer Address}
Re: Work Order Number [ Insert sequential number of Work Order]
Dear [Customer Authorized Signator]:
This letter is a "Work Order" in accordance with the Processing and
Services Agreement between [Customer Name] and MPOWER, dated [date of
Agreement] ("Agreement"), and confirms the agreements reached between
you and MPOWER for the services specified herein.
[Customer] Coordinator: [name]
MPOWER Coordinator: [name]
Task Description: See attached Project Plan.
Term: See Attached Project Plan.
Rate.: Per Schedule A of the Agreement dated [date] or by special
agreement of the parties pursuant to Schedule A with respect to Special
Project Fees, the rate shall be [add appropriate rate].
Estimated Charge: [state if applicable]
Assignment Location: MPOWER Headquarters, Albuquerque, NM.
Deliverables: See attached Project Plan.
Production Impact: [state].
Travel Expenses: Shall be reimbursed in accordance with Schedule A of
the Agreement dated [date].
Other:
[Customer name] hereby represents that it has the right and authority to
execute this Work Order and agrees to be bound by the terms and
conditions of both the
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Agreement and this Work Order. The terms and conditions of this Work
Order shall take precedence over any conflicting terms and conditions
contained in the Master Agreement. Please indicate [Customer's name]'s
acceptance of this is Work Order by returning one signed copy to MPOWER.
Sincerely,
MPOWER Solutions Inc.
By:____________________________
Name:__________________________
Title:_________________________
Accepted on this___________day of____________, 19__.
[CUSTOMER NAME]
By:____________________________
Name:__________________________
Title:_________________________
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Schedule E
ADDENDUM TO PROCESSING AND SERVICES AGREEMENT
This Agreement is entered into as of this ___________ day of
___________, _____ , by and between Brokerage Services, Incorporated, a New
Mexico corporation with its principal place of business located at 11200 Lomas
Blvd., NE, Albuquerque, New Mexico 87112(hereinafter referred to as
"Customer"),and MPOWER Solutions Inc., a Delaware corporation with its principal
place of business located at 2305 Renard Place, S. E., Albuquerque, New Mexico
87106 (hereinafter referred to as "MPOWER").
WHEREAS, MPOWER is in the business of providing automated managed health
care information services and licensing software to businesses providing managed
health care and insurance services, and desires to provide such services, and
license such software, to Customer, subject to the terms hereof; and
WHEREAS, Customer is in the business of providing managed health care
and insurance services to its customers and desires to use the services of,
and/or software licensed by MPOWER, subject to the terms hereof; and
WHEREAS, Customer has previously engaged MPOWER to provide Remote
Processing Services as set forth in the Agreement dated January 1, 1997, 1996,
and whereas Customer wishes to invoke Section 12 of said Agreement.
NOW, THEREFORE, in consideration of the mutual promises made, the terms
and conditions hereunder described and other valuable consideration?? the
parties agree as follows:
1. DEFINITIONS
1.1 As used in this Agreement, the following terms shall have the
meanings indicated unless the context clearly requires otherwise;
-1-
<PAGE> 28
(a) "Core Services" shall mean those services provided by MPOWER
(as described and set forth in Exhibit 1) in consideration of Customer's payment
of the License Fees.
(b) A "Critical Failure" shall mean a verifiable Nonconformity
in the Shelf Version of the MPOWER Software (or verifiable failure of the MPOWER
System hardware if the problem arises with respect to Remote Processing) which
has a material impact on Customer's mission critical system related functions.
By way of example, a Critical Failure may include the inability of Customer to
generate checks, complete failure of availability of the on-line system,
inability to perform on-line adjudication of any types of claims, or incorrect
adjudication of any types of claims.
(c) "Customer Processing" shall mean the use of the MPOWER
Software on Customer equipment at a Customer site, as set forth herein.
(d) "Derivative Work" shall mean any computer program,
application, interface or related documentation of any kind that is based, to
any extent, on MPOWER Software, or any component part thereof.
(e) "Documentation" shall mean collectively, the System
Documentation, the Functional Documentation and the User Documentation.
(f) "Effective Date" shall mean the date first set forth above.
(g) "Expenses" shall mean any reasonable out of pocket expenses,
including, travel and travel-related expenses, incurred by MPOWER in connection
with the performance of this Agreement.
(h) "Fees" shall mean the fees for MPOWER Services as described
and set forth in Exhibit 2 of this Addendum attached hereto.
(i) "General System Enhancements" shall mean enhancements,
revisions or updates to the MPOWER Software that are made available generally to
licensees of the MPOWER Software as part of the Maintenance Fee (MF), as and
when such enhancements, revisions or updates are made available generally,
-2-
<PAGE> 29
and shall not include any separate products where MPOWER charges a separate
license fee to its licensees.
(j) "Implementation" shall mean the conversion and installation
of Customer's managed health care and/or insurance processing from remote
processing to Customer Processing using the MPOWER(TM) system as set forth in
this agreement.
(k) "Implementation Date" shall mean the actual date that the
first Member transaction is processed, by Customer at Customer's site.
(1) "License" shall mean the license granted by MPOWER to
Customer for the MPOWER Software, to the extent set forth herein.
(m) "License Fees" shall include the Initial License Fee(s)
("ILF"), the Maintenance Fee ("MF"), and any Transfer Fee(s), as described in
Exhibit 2 herein.
(n) "Maintenance Services" shall include the Maintenance Support
Services".
(o) "Maintenance Support Services" shall mean the
post-production services provided by MPOWER as part of the Core Services that do
not provide for upgrades or general enhancements to the MPOWER Software, which
are provided through the Maintenance FEE.
(p) "Member" shall mean an individual who is as of a certain
effective date eligible for certain benefits provided by or through Customer or
a Related Party, which individual becomes eligible either (a) directly as the
subscriber to a Customer or Related Party sponsored and administered insurance
or benefit program, (b) as an eligible employee to an employer sponsored benefit
plan administered by Customer or a Related Party, or (c) as a beneficiary of a
government sponsored benefit plan, or (d) indirectly as a dependent of that
subscriber, employee or beneficiary. For example, in a family of four (4)
individuals, where the employee is the primary participant individual, the
employee, the spouse and the two (2) dependent children are each a Member for a
total of four (4) Members.
(q) "Member Month" shall mean, respectively, as of
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the first of each applicable month, the number of active eligible Members as
enrolled and entered by Customer, as of a given effective date, onto the MPOWER
System (for Remote Processing) or processed using the MPOWER Software (for
Customer Processing), adjusted for actual retroactive Customer Member enrollment
or disenrollment occurring in the prior twelve (12) months.
(r) "Nonconformity" shall mean a failure of a specific Release
of the MPOWER Software to materially conform to the User Documentation and
Functional Documentation of such Release.
(s) "MPOWER Services" shall mean services furnished by MPOWER
according to the terms of this Agreement and attached Schedules and other
services described in any Work Order.
(t) "MPOWER Site" shall mean the site of the MPOWER System,
currently located at 2305 Renard Place, S. E., Albuquerque, New Mexico, 87106.
(u) "MPOWER Software" shall mean the copies of the MPOWER
Software licensed by Customer under this Agreement. MPOWER Software is marketed
under the trade name "MPOWER(TM)".
(v) "MPOWER Client-Server Software" shall mean the MPOWER(TM)
software owned by MPOWER, migrated to and operating on the IBM RS6000 computer
(or operating on other hardware to which MPOWER(TM) has been migrated and on
which the MPOWER(TM) software is generally marketed under the name of
MPOWER(TM)), and any updates, revisions, enhancements, or additions thereto
supplied by MPOWER, (including but not limited to those updates, revisions,
enhancements, or additions supplied to Customer pursuant to Work Orders under
this Agreement) or made by Customer and incorporated by MPOWER, as described in
Section 2.7 of this Addendum.
(w) "MPOWER Standard Interface Specifications" shall mean the
MPOWER written specifications for the file size, format, blocking factors, field
content and frequency of batch transmission for interfacing software programs
for data exported from or imported into the MPOWER(TM) software-maintained
databases. MPOWER agrees that with respect to those specifications for
interfacing programs not yet developed, MPOWER agrees to consult with Customer
on such specifications and the resulting specifications shall comply with normal
industry standards.
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(x) "Related Party" shall mean an entity as to which Customer
directly owns a greater than fifty percent (50%) equity interest in the assets
of such entity, but excludes any entity as to which another co-owner, partner or
joint venture participant or affiliate is a competitor of MPOWER as set forth in
Exhibit 3.
(y) A "Release" shall mean a new version or new release of the
MPOWER Software containing General System Enhancements that is made available to
MPOWER's customers generally.
(z) A "Release Date" is the date that a Release is made
available to MPOWER's customers generally.
(aa) "Shelf Version" shall mean the Releases of the MPOWER
Software which are accepted by Customer pursuant to Section 4 herein.
(bb) "Source Code Buyout Option" shall mean the option of
Customer to acquire the right to make modifications to the source code of the
MPOWER Software and to no longer pay the Maintenance Services Fees, in
accordance with the Fees stated in Exhibit 2 hereto.
(cc) "Supplemental Services" shall mean any support or services
required by Customer and agreed to be provided by MPOWER in addition to that
provided as part of the License, as fully specified in each Work Order, which
Supplemental Services may include, but not be limited to, conversion support,
modification and enhancements, and System Set-ups.
(dd) "System Documentation" shall mean the MPOWER system
documentation provided to Customer pursuant to the terms of this Agreement. An
outline of the current System Documentation is set forth in Exhibit 4 attached
hereto.
(ee) "User Documentation" shall mean the MPOWER user
documentation provided to Customer pursuant to the terms of this Agreement. An
outline of the current User Documentation is set forth in Exhibit 4 attached
hereto.
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(ff) "Work Order" shall mean a document that is separately
executed by both parties, substantially in the format of the template included
in Schedule D of the original Agreement, that authorizes MPOWER to perform
Supplemental Services or other services for Customer and obligates Customer to
pay for such Supplemental Services or other services under the terms of that
separate document, and which document is incorporated and made part of this
Agreement.
(gg) "Workaround" shall mean a change in the procedures followed
or data supplied to avoid a Nonconformity without materially impairing
performance of the MPOWER Software.
Definitions not modified by this Addendum shall have the meaning set forth in
the Agreement dated January 1, 1997.
2. MPOWER SOFTWARE; LICENSE; CORE SERVICES
2.1 MPOWER Software License.
MPOWER grants to Customer, a nonexclusive, non-transferable (except as
specified herein) license (the "License") to use the MPOWER Software for Members
while this Agreement is in effect, which MPOWER Software includes the
Documentation, subject to the terms and conditions set forth herein.
(a) MPOWER shall prepare and provide Customer one (1) copy of
the Documentation for the MPOWER Software and update same as required due to
enhancements, upgrades, error correction or other changes made by MPOWER to the
MPOWER Software.
(b) Until such time as Customer exercises the Source Code Buyout
Option, Customer's license extends only to the right to use the object code of
the MPOWER Software and not to make modifications to the source code of the
MPOWER Software, even though the source code to the MPOWER Software may be
resident on a Customer computer for purposes of compiling, ease in debugging, or
for some other reason of operational ease, integrity or efficiency.
2.2 Payment. In consideration of the License, Customer shall timely pay
the ILF, the MF, the Maintenance Services Fees and the Transfer Fees in
accordance with Exhibit 2.
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Schedule A of the Processing and Service Agreement is Superseded when remote
processing is terminated by Customer.
2.3 Scope of Use.
(a) Customer, shall use the MPOWER Software and Documentation
solely for its own use as a provider or administrator of managed health care
and/or other insurance services to its Members and the Members of its Related
Parties, solely as expressly set forth herein, pursuant to the terms herein and
not for the benefit of any other entity, and further subject to the geographical
and Related Party restrictions in the License granted.
(b) Customer shall have the right to provide the use of certain
limited functions and features of the MPOWER Software, as described in the
Documentation, to its clients (including Members, providers of health care
services to Members, the employers of Members, which employers have signed a
contract with Customer to pay for health care services or the administration of
benefit plans for their employees, or government agencies that have signed a
contract with Customer for Members for which Customer provides administration
services, and to providers of health care services, subject to the
confidentiality restrictions set forth in Section 14 as amended in this
Addendum.
(c) Customer shall not copy the MPOWER Software or permit same
to be copied, except for production copies for use within the restrictions of
the License granted herein, and for a reasonable number of backup and test
copies: (i.) for the specific data center(s) where the MPOWER Software will be
installed where Customer is performing Customer Processing, and (ii.) for
testing and modification of the MPOWER Software (pursuant to Section 3.6).
Customer shall promptly notify MPOWER in writing as to the number of production
and test copies and location of said copies of the MPOWER Software which it
intends to make in each instance.
(d) In addition, Customer shall be permitted to make a
reasonable number of copies of the User Documentation solely for Customer's
internal use and for distribution to Related Parties and Non-Related Parties
pursuant to Section 14.2, not to exceed one (1) copy per workstation, and only
if the original copyright and other proprietary rights notices are preserved.
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(e) In addition, Customer shall be permitted to make a
reasonable number of copies of the Functional Documentation for Customer's
internal use and for distribution to Related Parties pursuant to Section 14.2
solely for use by business or technical analysts with a need to know and only if
the original copyright and other proprietary rights notices are preserved.
(f) Furthermore, Customer shall be permitted to make a very
limited number of copies, but not more than five (5) of the System Documentation
solely for Customer's internal use by senior business or technical analysts with
a need to know and only if the original copyright and other proprietary rights
notices are preserved and if Customer maintains such System Documentation under
the tightest security and destroys copies that are no longer needed.
(g) Notwithstanding anything herein to the contrary, in no event
shall Customer allow any third party to copy the System Documentation.
(h) Distribution of the Functional Documentation and of the
System Documentation is to be tightly controlled, subject to a need to know. No
identifying marks, copyright or other proprietary right notices may be deleted
from any copies of the MPOWER Documentation and all backup copies of the MPOWER
Software created shall include all such notices.
(i) MPOWER Software used for Customer Processing may be
temporarily transferred to backup equipment owned by Customer or by a third
party provider of disaster recovery services and used thereon only for so long
as the Customer size is inoperative. The use of such third party provider of
disaster recovery services shall not require the consent of MPOWER provided
such provider agrees to be bound by the confidentiality restrictions set forth
herein, and is not a competitor of MPOWER. Simultaneous use of more than the
authorized number of copies of the MPOWER Software is expressly prohibited.
(j) Customer shall not modify the MPOWER Software (except as set
forth in Section 2.7) or the Documentation, nor translate, or adapt the MPOWER
Software or the Documentation in any way or use it to create a Derivative Work
or permit the foregoing. Except as set forth in Section 8.2 with respect to the
Shelf Version, MPOWER shall not be responsible for the functioning of updates,
revisions, enhancements, additions or
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conversions or otherwise maintaining the MPOWER Software if the MPOWER Software
is modified by Customer or if Customer installs or attempts to install software,
other than MPOWER Software, which interfaces with the MPOWER Software in a
manner which is inconsistent with MPOWER Standard Interface Specifications, or
writes to any data files maintained by the MPOWER Software. Customer shall be
solely responsible for the results of such modifications or interfaces,
including the integrity of data used or generated by the MPOWER Software. In the
event that Customer makes a permitted modification or enhancement to the MPOWER
Software, as set forth in Section 2.7 herein, and it is subsequently determined
that such modification or enhancement was the cause of a Nonconformity in the
MPOWER Software, then MPOWER shall be reimbursed at the Supplemental Service
Fees rates set forth in Schedule B for the time spent in determining that such
modification or enhancement was the cause of the Nonconformity, and MPOWER
agrees to provide Supplemental Services support as specified on a Work Order to
correct such Nonconformity.
2.4 General System Enhancements. In consideration of the ILF and MF,
MPOWER shall provide to Customer General System Enhancements, if and when such
General System Enhancements are made available to licensees of the MPOWER
Software generally, except as otherwise provided in Exhibit 2. Any General
System Enhancements supplied to Customer by MPOWER shall become part of, and
subject to, this Agreement and License. MPOWER shall only provide General System
Enhancements for the then most current Release of the MPOWER Software. In
addition, MPOWER agrees also to provide support for the one prior Release
immediately preceding the most current Release of the MPOWER Software and to
provide support for any other Releases for up to one (1) year from the Release
Date of such other Releases. During any applicable support period, support for
any such prior Release of the MPOWER Software that has been replaced or modified
by General System Enhancements or by a subsequent Release shall be limited to
correction of identified and reproducible defects in the Shelf Version of such
prior Release from the published specifications therefor. MPOWER shall not be
obligated to provide General System Enhancements for any Release other than the
most current Release. Any additional MPOWER Services provided in connection with
an older Release of the MPOWER Software shall be provided as Supplemental
Services.
2.5 Correction of Nonconformities. In consideration of the ILF and MF,
and subject to the terms of this Agreement, upon
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written notification by Customer of a Nonconformity in the most current Release
of the MPOWER Software or in the one prior Release immediately preceding the
most current Release of the MPOWER Software, MPOWER will analyze the
Nonconformity and notify Customer of its estimate of when and how such
Nonconformity will be corrected or any Workaround provided and MPOWER shall use
commercially reasonable efforts to correct such Nonconformity in accordance with
the procedures and priorities established in Schedule A under Help Desk.
Notwithstanding the prior sentence, MPOWER's sole obligation hereunder shall be
limited to correcting identified and reproducible Nonconformities in the Shelf
Version of the MPOWER Software in accordance with Section 4 herein and the
relevant portions of Exhibit 1 which deal with Definitions, Support and Time
Frame for Resolution of issues logged through the MPOWER Help Desk.
2.6 Proprietary Rights and Confidentiality. MPOWER represents and
Customer acknowledges that the MPOWER Software, including the Documentation, is
the sole and exclusive property of MPOWER, including, but not limited to, all
applicable rights to patents, copyrights, trademarks and trade secrets inherent
therein and appurtenant thereto, and MPOWER retains title to the MPOWER Software
and any copies thereof. Customer is not purchasing title to the MPOWER Software
or copies thereof, but rather is being granted a license to use the MPOWER
Software pursuant to the terms herein. Customer shall not sell, license,
transfer, or otherwise make available (except as expressly provided herein) any
portion of the MPOWER Software to others, including but not limited to Related
Parties and Non-Related Parties for which Customer is providing processing
services pursuant to the terms hereof, nor permit the foregoing, except for
disclosure of the MPOWER Software to Customer consultants and auditors pursuant
to the provisions of Section 14.2 herein, and the disclosure of the User
Documentation to Related Parties and Non-Related Parties, pursuant to the
provisions of Sections 2.3 and 14.2 herein. Customer agrees to use at least
Commercially reasonable methods to secure and protect the MPOWER Software and
the Documentation as MPOWER Confidential Information as defined herein, in a
manner consistent with the manner in which it protects its own most sensitive
confidential information.
2.7 Modification by Customer. In the event that Customer exercises its
option for the Source Code Buyout Option, Customer shall have the right to
modify the MPOWER Software for
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Customer Processing without notifying MPOWER and without obtaining MPOWER's
consent provided that (i.) Customer's ownership of such modifications shall be
subject to MPOWER's proprietary rights in the MPOWER Software and to the
provisions of this Section, (ii.) MPOWER's warranties and support obligations
related to the MPOWER Software shall apply only to the Shelf Version, and (iii.)
Customer shall not market or distribute such modifications (except Customer may
distribute descriptions and/or documentation of such modifications to Related
Parties and Non-Related Parties) which distribution or marketing shall be deemed
a violation of MPOWER's proprietary rights in the MPOWER Software. If Customer
desires MPOWER to continue to provide support services, Customer shall offer all
modifications made by Customer to MPOWER for inclusion in the MPOWER Software,
subject to the mutual agreement by the parties as to the consideration, if any,
to be paid to Customer in return for Customer costs and efforts in development
of such modification(s). MPOWER shall have the right to distribute such
modifications as General System Enhancements, and if MPOWER does so, such
modification shall be covered by the MPOWER warranty and support obligations as
set forth in this Agreement. Subject to the foregoing, Customer agrees that all
modifications accepted by MPOWER in writing shall be owned by MPOWER. All right,
title and interest in such accepted modifications are hereby irrevocably
assigned by Customer to MPOWER. All such modifications shall belong exclusively
to MPOWER, with MPOWER having the right to obtain and to hold in its own name
copyright registrations, patents and such other intellectual property protection
as may be appropriate to the subject matter and any extensions and renewals
thereof. Customer agrees to give MPOWER reasonable assistance, at MPOWER's
expense, required to perfect MPOWER's rights set forth herein.
2.8 Support for Modifications
(a) Modifications Not Included in the MPOWER Software; Support
Costs. In the event (i.) MPOWER modifies or enhances the MPOWER Software at
Customer's request pursuant to Section 3.2, or Customer modifies the MPOWER
Software pursuant to Section 2.7; and (ii.) such modifications or enhancements
do not have general applicability for MPOWER's customers and are not offered as
General Systems Enhancements, in order to provide support for such modifications
and enhancements, MPOWER will need to agree, in writing, to provide support for
such modifications and enhancements, and Customer agrees that there may need to
be
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an increase in the MF and/or the Fees for Maintenance Support Services. In the
event that MPOWER agrees, in writing, to provide such support, and reasonably
believes that an increase in the MF or the Fees for Maintenance Support Services
is required due to Customer specific modifications, the parties shall meet and
discuss the nature of the increase. In the event that MPOWER does not agree to
provide such support, or if the parties fail to agree upon the amount of the
increase to the MF or the Fees for Maintenance Support Services, MPOWER shall
have no obligation to support such modifications and enhancements.
(b) Modifications Included in the MPOWER Software. Modifications
made to the MPOWER Software either by Customer , pursuant to Section 2.7, or by
MPOWER, pursuant to Section 3.2, which are included in the MPOWER Software as
General System Enhancements by MPOWER shall be supported by MPOWER as set forth
in Section 2.4.
2.9 Core Services. In consideration of the payment of the License Fees
by Customer , MPOWER shall, during the term of this Agreement, provide the Core
Services set forth in Exhibit ! except as otherwise provided in Exhibit 2.
Schedule C of the Processing and Service Agreement is superseded after the
effective date of this Schedule.
3. SUPPLEMENTAL SERVICES
3.1 Supplemental Services. Supplemental Services may include as
applicable (i.) conversion services to convert Customer data; (ii.) System Setup
such as the establishment of benefit plans, pricing information, tracking
information, capitation rules, procedure and diagnosis code files and fund
accounting and billing rules; (iii.) services for modifying the MPOWER Software
for enhancements and modifications; (iv.) -training support after initial
training; (v.) consulting services; (vi.) the efforts required to be put forth
by MPOWER to respond to the excessive or inappropriate use of the MPOWER Help
Desk by Customer for issues resulting from the lack of adequately trained
Customer personnel or from the lack of use or inadequate utilization of the
Documentation by Customer ; and (vii.) project Coordination and management for
the above Supplemental Services. All. such Supplemental Services shall be
described in an applicable Work Order and shall be undertaken by MPOWER only
pursuant to a Work Order. For services requested by Customer
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which are beyond the scope of the services generally contemplated hereunder, for
special circumstances, or if the geographic location in which any MPOWER
services are to be provided for Customer demands higher labor or resource costs,
MPOWER will provide Customer with written notice, and MPOWER reserves the right
to propose a new fee structure or different rates, which fee structure or rates
will be detailed in the appropriate Work Order.
3.2 Enhancements and Modifications Under Work Orders. Pursuant to this
Section 3.2 and the applicable Work Order, Customer may identify enhancements or
modifications which it desires to have MPOWER make to the MPOWER Software, such
as integration to other software systems, modifications for legal requirements,
and other functional enhancements. Customer shall be responsible for providing
to MPOWER a description of the changes which Customer requests to be made in the
MPOWER Software. MPOWER shall have the right to design any Customer requested
enhancements or modifications in a way which, in MPOWER's reasonable opinion,
will not adversely affect the MPOWER Services or the structure or performance of
the MPOWER Software or will have general applicability. In the event MPOWER
agrees to provide such enhancements or modifications to the MPOWER Software,
suck enhancements or modifications shall be owned by MPOWER and licensed to
Customer as part of the MPOWER Software subject to Section 2. Resources utilized
by MPOWER in providing services pursuant to any suck requests will be detailed
in applicable Work Orders.
3.2 Data Integrity. Customer acknowledges that, although MPOWER may, as
part of Supplemental Services, perform certain conversion tasks (for which
MPOWER shall be responsible), including development of files and programs for
the conversion of Customer data into formats for the MPOWER Software, the
quality and integrity of all Customer data provided to MPOWER, and the results
obtained or resulting from poor or inaccurate data are solely Customer's
responsibility.
3.3 Access. In order for the Supplemental Services to be completed in a
timely and successful manner, Customer shall provide MPOWER with such access to
applicable information and key Customer personnel as MPOWER may reasonably
request from time to time during the period the Supplemental Services are being
performed. In connection with the Supplemental Services, MPOWER will be entitled
to submit various materials, including time
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schedules, business requirements, specifications, and test results, for
Customer's review, comment, sign-off, or approval. Customer will respond to each
such request as soon as reasonably practicable, and, in any event, in a time
frame consistent with the applicable project plan, and shall not unreasonably
withhold any sign-off or approval requested by MPOWER.
3.4 Schedule B of the Processing and Service Agreement is superseded by
this Schedule.
4. ACCEPTANCE
For all deliverables, including the MPOWER Software and General System
Enhancements and Customer-specific enhancements and modifications provided
pursuant to an applicable Work Order, whether for MPOWER Processing or for
Customer Processing, Customer shall, within thirty (30) days of receipt of the
deliverable, or within such other time period as may be agreed to in writing by
the parties, review and, if applicable, test-the deliverable and approve it or
notify MPOWER in writing of non-approval, documenting in reasonable detail any
and all material' defects in the deliverable which prevent it from conforming to
the Documentation or specifications therefor, as applicable. Work Orders for
Customer enhancement requests will include specification of an acceptance test
period that is mutually agreed to by Customer and MPOWER and which shall be
reflective of the estimated size and complexity of the deliverable specified by
the Work Order. MPOWER shall, upon receipt of such notice, use its best efforts
to correct any such material failures and shall notify Customer of its
completion thereof. Customer shall, after receipt of said notice, review the
deliverable and report. Customer shall do so promptly using diligent efforts,
but in no event shall such process exceed fifteen (15) days. The above cycle
shall be repeated as is necessary. A deliverable shall be deemed accepted by
Customer if either:
(a) Customer notifies MPOWER in writing of its acceptance and
the acceptance date shall then be the date of such notice;
(b) Customer fails to notify MPOWER in writing within the
applicable time period of any material defect in the deliverable and the
acceptance date shall then be the last day of said period; or
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(c) Customer places in productive use any portion of the
deliverable and the acceptance date shall then be the first day of such
productive use. Productive use for purposes of the foregoing shall not include
the use by Customer of the MPOWER Software in a parallel processing environment
where Customer is utilizing the MPOWER Software to process a limited number of
Members during a reasonable period of time for the purpose of testing the MPOWER
Software.
Customer agrees that it will so test any modifications or enhancements
made by MPOWER for Customer under an applicable Work Order and made part of a
Release and all General System Enhancements. The version and release of the
MPOWER Software so accepted by Customer shall be deemed the current Shelf
Version. Customer and MPOWER shall maintain copies of each Shelf Version. The
obligation of MPOWER to maintain any enhancements or modifications made
specifically for Customer that are not part of either General System
Enhancements or a Release shall be specified in the Work Order that authorizes
such enhancements or modifications or in a subsequent Work Order.
5.FEES AND CHARGES
5.1 Fees and Charges. The Fees for the MPOWER License and Services are
described in Exhibit 2 attached hereto.
5.2 Timeliness of Payment. Customer will pay the ILF, MF and all other
fees in accordance with the schedule set forth in Exhibit 2. All other
provisions of Section 10.2 of the Agreement dated January 1, 1997, remain in
force.
6.PROBLEM RESOLUTION
Subject to the limitations in support for prior Releases provided by
MPOWER as set forth in Section 3 hereof, in the event MPOWER receives notice
from Customer of a Critical Failure in the most current Release of the MPOWER
Software or in the one prior Release immediately preceding the most current
Release of the MPOWER Software, MPOWER agrees to respond to such notice by
assigning a qualified individual to attempt to remedy
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the Critical Failure, and agrees to use commercially reasonable efforts to
remedy the Critical Failure in accordance with the provisions of Section 9.2
herein commensurate with the severity of the problem and the timeliness and
quality of information regarding the problem received from Customer in
accordance with the Definition, Support and Time Frame for Resolution paragraphs
of the Help Desk section of Exhibit 1.
7. CUSTOMER RESPONSIBILITIES
Sections 7.1 and 7.2 of the Agreement dated January 1, 1997, are replaced with
sections 7.1, 7.2 and 7.3 below:
7.1 Customer Responsibilities. Customer acknowledges that the MPOWER
Software reflects certain interdependent relationships, such as exist among the
data variables, logic rules and system functions of the MPOWER Software.
Customer further acknowledges that it is required and has a responsibility to
understand such data variables, logic rules and system functions, and their
interdependent relationships, and to define for its own purposes such data
variables, logic rules and system functions to the MPOWER Software in such a way
that the MPOWER Software will provide the functionality desired by Customer.
Customer acknowledges that it has or will hire and will maintain on its staff
personnel who are able to understand and define such data variables, logic
rules, system functions and interdependent relationships. Customer further
acknowledges that, even though MPOWER may assist Customer personnel in
performing these tasks, the responsibility for the effective definition and
maintenance of these data variables, logic rules and system functions resides
with Customer and not with MPOWER, unless Customer specifically requests MPOWER
to perform these tasks at the Supplemental Services Fees. Notwithstanding the
foregoing, nothing herein shall relieve MPOWER of responsibility for the
assistance that it may provide to Customer hereunder.
7.2 Testing. Customer acknowledges that it will undertake testing of
the MPOWER Software and of the basic functionality and interdependency of its
customer-defined data variables, logic rules and system functions as set forth
in Section 4 herein, prior to commencing use of the MPOWER Software for its
business.
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7.3 Customer Data. Except as may be provided under an applicable Work
Order, Customer shall be responsible for inputting and ensuring the accuracy,
validity and completeness of all data variables, logic rules, system functions
and Customer data, including but not limited to group, subscriber, Member,
provider, utilization, encounter, claims, capitation, fund accounting, billing,
collection, broker, benefits, product contract, provider contract, provider
fees, standard business measures, and other similar or related data. Customer
shall also be responsible for inputting and ensuring the accuracy, validity and
completeness of all user-defined report definitions, all report and batch
production job specifications and priority scheduling criteria. Customer shall
also be responsible for initiating, monitoring, operating, printing and ensuring
the accuracy, validity, and completeness of all print outputs and file
downloads, including but not limited to all reports, premium bills, checks,
etc., determining how many and on what print stock such outputs are to be
printed or into which files or programs on Customer controlled computers such
files are to be downloaded and manipulated, at Customer's own initiative,
responsibility and risk. Customer hereby acknowledges responsibility for
generally controlling all aspects related to the production, distribution and
control of such outputs. Customer further acknowledges that, notwithstanding
the responsibility of MPOWER to have used due care and diligence in the design
and documentation of the System, the accuracy of Customer's database within the
MPOWER Software and the accuracy of the several outputs of the MPOWER Software,
including but not limited to, outputs that control the billing, receipt or
expenditure of moneys, will be dependent on the accuracy and use of the data
variables, logic rules, system. functions and Customer data input into the
MPOWER Software by Customer and verified by Customer. Notwithstanding the
foregoing, nothing herein shall relieve MPOWER of responsibility for the
assistance that it may provide to Customer hereunder.
7.4 Other Customer Obligations. section 7.3 is renumbered 7.4. In
addition to those responsibilities set forth in the former Section 7.3 of the
Agreement dated January 1, 1997, the following additional obligations of new
Section 7.4 will apply to Customer:
(a) Pay all costs of acquisition, installation and use of
equipment and services at all Customer sites.
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(b) Properly maintain the Customer equipment at all Customer
sites.
(c) Properly maintain the operating environment, operating
system, network and database software as agreed to between the parties.
8. WARRANTIES
Section 8. Warrantees of the Agreement dated January 1, 1997, is replaced in its
entirety with the following:
8.1 MPOWER warrants that it either owns the rights to the MPOWER
Software or has the right to grant the license to Customer herein, and that it
either owns or has licensed in the manner contemplated by this Agreement any
other software used in the provision of the MPOWER Services to Customer,
including but not limited to the enhancements or modifications provided by
MPOWER pursuant to an applicable Work Order. MPOWER warrants that the MPOWER
Software, including without limitation each component or part thereof, does not
and will not infringe upon or violate any patent, copyright, trademark, trade
secret or other proprietary or contractual rights of any third party.
MPOWER shall, at its own expense indemnify, defend, settle and hold harmless
Customer and its officers and employees, from and against any and all claims,
damages, losses, liabilities, costs and expenses (including reasonable legal.
fees) directly arising out of any such claim that the Shelf Version of the
MPOWER Software infringes upon or violates any United States patents,
copyrights, trademarks, trade secrets or other proprietary, contractual or
intellectual property rights of any third party; provided, however, Customer
must send MPOWER written notice of any claim relating to such infringement
promptly after Customer receives notice of the same and Customer fully
cooperates, at MPOWER'S expense, in the defense of any such claim. Following
such notice of a claim or of a threatened or actual suit, MPOWER shall, upon
written notice to Customer and at MPOWER's expense, either: (a) procure for
Customer the right to continue using such MPOWER Software; (b) replace or modify
same so that it becomes non-infringing; or, (c) grant to Customer a refund for
said MPOWER Software based upon a five (5) year straight line depreciation upon
its return to MPOWER if neither (a) nor (b) are reasonably possible, in MPOWER's
sole discretion. The foregoing states the entire liability of MPOWER and the
sole remedy of
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Customer with respect to any infringement or claimed infringement by the MPOWER
Software.
Notwithstanding the foregoing, MPOWER shall not be obligated to defend,
indemnify or hold Customer harmless from and against any claim, suit proceeding
or allegation (i.) asserted by a parent, subsidiary or affiliate of Customer or
any Related Party, (ii.) resulting from Customer's additions to, changes in, or
enhancements or modifications of the MPOWER Software, (iii.) resulting from
Customer's Use of the MPOWER Software in combination with non-MPOWER Software,
or (iv.) resulting from Customer's misuse of the MPOWER Software.
8.2 MPOWER warrants that the Shelf Version of the MPOWER Software will
function as set forth in MPOWER's User Documentation, including all updates and
enhancements thereto. Upon receipt of Customer's notice given pursuant to
Section 17.4, of the Agreement dated January !, 1997, MPOWER and Customer shall
cooperate to attempt to duplicate the problem on the Shelf Version of the MPOWER
Software. If the problem can be duplicated, MPOWER's sole obligation under this
warranty and Customer's sole remedy shall be for MPOWER to comply with the
service obligations set forth in Section 6 herein. If the problem cannot be
duplicated, MPOWER's warranty shall not apply and MPOWER shall have no
obligation to remedy the cited defect. MPOWER covenants and warrants that all
improvements and enhancements of the MPOWER Software provided by MPOWER will be
compatible with, and will not materially diminish the features or functions of,
or the specifications of the Shelf Version of the MPOWER Software, and that the
Shelf Version of the MPOWER Software will be compatible with the equipment
described in the Documentation. MPOWER warrants that User Documentation shall
reflect the operation of the MPOWER Software, and MPOWER shall, at no additional
cost to Customer, correct any User Documentation that does not conform to this
warranty.
8.3 MPOWER DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, EXCEPT
THOSE WARRANTIES EXPRESSLY SET FORTH IN THIS SECTION 8. MPOWER SPECIFICALLY
DISCLAIMS ANY WARRANTY, EXPRESS OR IMPLIED, AS TO THE MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE OF THE MPOWER SERVICES OR THE MPOWER SYSTEM, OR THE
COMPLIANCE OF THE FOREGOING WITH ANY LAW, REGULATION OR ORDER.
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<PAGE> 46
9. LIMITATION OF LIABILITY
Section 9. Limitation of Liability of the Agreement Dated January 1, 1997, is
replaced in its entirety with the following:
NEITHER PARTY SHALL HAVE ANY LIABILITY WITH RESPECT TO ITS OBLIGATIONS
UNDER THIS AGREEMENT OR OTHERWISE FOR CONSEQUENTIAL, EXEMPLARY, INCIDENTAL OR
PUNITIVE DAMAGES EVEN IF IT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
MPOWER SHALL NOT BE LIABLE FOR ANY CLAIM ARISING FROM THE USE OF SOFTWARE OR
DATA WHICH HAS BEEN MODIFIED BY ANYONE OTHER THAN MPOWER, NOR FOR ANY CLAIM
ARISING FROM THE USE OF ANY SOFTWARE OR EQUIPMENT DEVELOPED OR MODIFIED BY
CUSTOMER OR WHICH HAS BEEN PROVIDED TO OR ACQUIRED BY CUSTOMER UNDER ANY LICENSE
OR OTHERWISE FROM ANY THIRD PARTY.
EXCEPT AS PROVIDED IN SECTION 8.1 WITH RESPECT TO MPOWER's EXPRESS
OBLIGATIONS TO INDEMNIFY CUSTOMER FOR LIABILITIES TO THIRD PARTIES, MPOWER's
SOLE AND TOTAL LIABILITY TO CUSTOMER RELATED TO THIS AGREEMENT WHETHER IN
CONTRACT OR IN TORT OR OTHERWISE SHALL BE LIMITED TO CUSTOMER'S ACTUAL DIRECT
DAMAGES NOT TO EXCEED THE SUM OF THE LICENSE FEES AND REMOTE PROCESSING FEES
PAID BY CUSTOMER TO MPOWER UNDER THIS AGREEMENT DURING THE SIX (6) MONTHS'
IMMEDIATELY PRIOR TO THE BREACH OR CAUSE FOR WHICH THE DAMAGES ARE CLAIMED. THIS
LIMITATION APPLIES TO ALL CAUSES OF ACTIONS OR CLAIMS IN THE AGGREGATE INCLUDING
WITHOUT LIMITATION, BREACH OF CONTRACT, BREACH OF WARRANTY, NEGLIGENCE, STRICT
LIABILITY, MISREPRESENTATION AND OTHER TORTS. FURTHER, NO CAUSE OF ACTION WHICH
ACCRUED MORE THAN TWO(2) YEARS PRIOR TO THE FILING OF A SUIT ALLEGING SUCH CAUSE
OF ACTION MAY BE ASSERTED AGAINST MPOWER, EXCEPT THAT IN NO EVENT SHALL THE
FOREGOING LIMITATION EXTEND ANY APPLICABLE STATUTORY LIMITATION PERIOD. CUSTOMER
AND MPOWER EXPRESSLY ACKNOWLEDGE AND AGREE THAT THE LIMITATIONS AND EXCLUSIONS
CONTAINED HEREIN REPRESENT THE PARTIES' AGREEMENT AS TO THE ALLOCATION OF RISK
BETWEEN THE PARTIES IN CONNECTION WITH MPOWER's OBLIGATIONS UNDER THIS
AGREEMENT. THE PAYMENTS PAYABLE TO MPOWER IN CONNECTION HEREWITH REFLECT THIS
ALLOCATION OF RISK AND THE EXCLUSION OF CONSEQUENTIAL DAMAGES IN THIS AGREEMENT.
MPOWER hereby is not assuming or otherwise responsible for, expressly or
implicitly, any obligation or liability of any kind whatsoever of Customer.
Customer shall and hereby does agree to indemnify and hold MPOWER harmless from
any and all claims, lawsuits, liabilities, expenses, costs, damages and fees
arising
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from or in connection with Customer's use or misuse of the MPOWER Services or
MPOWER Software in breach of its obligations hereunder or relative to Customer's
provision of services or products to any third party.
10. OTHER PROVISIONS
10.1 Inspection Rights. MPOWER will provide such auditors and inspectors
as Customer may from time to time designate in writing, with reasonable access
to any data center from which MPOWER is providing services hereunder for the
limited purpose of performing audits or examinations of Customer. MPOWER will
provide to such auditors and inspectors any routine assistance that they
reasonably require, rendered in connection with any such audit or inspection.
10.2 MPOWER Audits. Customer shall maintain adequate books and records
relating to its usage of the MPOWER Software and MPOWER Services and the Fees
due to MPOWER hereunder. MPOWER shall have the right, upon request, and in
connection with Customer's annual audit, to have Customer's auditors perform an
audit of Customer's books and records with respect to the MPOWER Software and
MPOWER Services and the Fees due to MPOWER hereunder. The cost of such audit
shall be borne by MPOWER solely to the extent that the auditors' services are
substantially different from or greater than those that the auditors would
ordinarily perform for Customer. Any over/under payment between the reported
usage of the MPOWER Software and the MPOWER Services and the Fees due to MPOWER
hereunder and the actual amount shall be paid by the appropriate party, or
applied as a credit by MPOWER, within thirty (30) days of notification of said
amount.
11. Additional Provisions Relating For Termination
The following provision is added to Section 13 of the Agreement dated January 1,
1997:
13.5 Termination Without Cause. In the event Customer ceases all
Customer Processing or Remote Processing Services, then MPOWER may terminate, at
its option, this Agreement and License upon thirty (30) days written notice.
Customer may terminate this Agreement without cause with one hundred eighty
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<PAGE> 48
(180) days advance written notice to MPOWER subject to Customer's payment to
MPOWER of all outstanding fees incurred prior to the date of termination, all
applicable termination fees as provided in any Exhibit 2, and any applicable
early termination fees specified in Exhibit 2.
Section 13.5 Termination Assistance is renumbered Section 13.6.
Section 13.6 Outstanding Amounts is renumbered 13.7 and is amended to read as
follows:
13.7 Outstanding Amounts. Termination of this Agreement shall entitle
MPOWER to payment and Customer shall be obligated to pay for the provisions of
any and all MPOWER Services rendered by MPOWER under this Agreement prior to the
date of such termination, all outstanding fees incurred prior to the date of
termination and the lump sum of all remaining ILF payments due by Customer under
Exhibit 2 (except as provided in Section 13.3 herein).
Section 13.7 Customer Data is renumbered 13.8.
Section 13.9 is added to the Agreement dated January 1, 1997.
13.9 MPOWER Software. Unless otherwise provided in this Agreement,
Customer agrees that upon termination of this Agreement, the License granted
hereunder shall also terminate and Customer shall .cease using the MPOWER
Software and shall return to MPOWER or destroy, within thirty (30) days after
such termination, the original and all copies of such MPOWER Software and
Documentation. Except for termination resulting from the material breach on the
part of Customer, including without limitation, breach of its Confidentiality
obligations or failure to timely make any payment hereunder, Customer shall be
permitted to continue to use the MPOWER Software pursuant to all the terms and
conditions set forth in this Agreement for up to a maximum of six (6) months
following such termination for the sole purpose of transitioning Members to an
alternate processing software, provided (i.) Customer remains obligated to pay
MF during such period; (ii.) MPOWER has no further obligations to provide Core
Services, new Releases, fixes to Nonconformities or Critical Failures, and
(iii.) the MPOWER Software is no longer warranted. If Customer destroys the
MPOWER Software, all copies thereof and Documentation, within thirty (30) days
of such destruction an officer of Customer shall certify to MPOWER in writing
that the
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MPOWER Software and all copies and Documentation thereof have been destroyed.
Due to the nature of the MPOWER Software and the need for its protection as a
trade secret and confidential proprietary information, time is of the essence in
its return or destruction, and in the event of Customer's failure to do so
within the time provided herein, Customer agrees that MPOWER shall be entitled
to obtain injunctive relief to require such return or destruction and reasonable
attorneys' fees and costs incurred in obtaining such injunctive relief.
12. Provisions Relating to Confidentiality
Section 14. Confidentiality is replaced in its entirety with the following:
14. CONFIDENTIALITY
14.1 Confidential Information. "Confidential Information" shall mean
information such as customer lists, business plans, operation plans, client
information, application software programs and documentation licensed by third
parties to Customer or MPOWER, the MPOWER Software, the User Documentation,
Functional Documentation and the System Documentation, which are disclosed by
Customer or MPOWER to the other party, its employees, agents, contractors,
assignees or successors in the conduct of business under this Agreement. In
addition, Confidential Information shall also include any other materials
relating to MPOWER's business or the business of Customer which are designated
in writing as confidential at the time of disclosure by Customer or MPOWER, or
is identified orally at the time of the disclosure as confidential and confirmed
in writing within one week of such disclosure, and which are disclosed by
Customer or MPOWER to the other party, its employees, agents, contractors,
assignees or successors in the conduct of business under this Agreement. The
following information shall not-be deemed Confidential Information, and a party
and that party's employees shall have no obligation with respect to any such
information which:
a. is or falls into the public domain through no wrongful act of
a party or that party's agents or employees; or
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<PAGE> 50
b. is rightfully received from a third party without restriction
and without breach of this Agreement; or
c. is approved for release by written authorization of an
officer of a party; or
d. is disclosed pursuant to the requirements of a governmental
agency or operation of law; or
e. is already in possession of a party or that party's employees
as evidenced by their records and is not the subject of a
separate non-disclosure or confidentiality agreement with
either of them.
14.2 Standard of Care. Each party hereby agrees that it and its
respective officers, employees, agents, contractors, assignees, and successors
shall (i.) keep all Confidential Information received from the other party
strictly confidential, (ii.) instruct their officers, employees, agents,
contractors, and permitted assignees and successors, who have access to such
Confidential Information, to use the same degree of care and discretion with
respect to the Confidential Information of the other party, or of any third
party utilized hereunder, that MPOWER and Customer each require with respect to
their own most confidential information, (iii.) use and disclose such
information solely for the purposes and in the manner set forth in this
Agreement, (iv.) not disclose any such information to any other person,
corporation, governmental agency or other entity without the express written
permission of the other party, except that Customer may (v.) disclose the MPOWER
Software and Documentation to outside consultants or other third parties having
a need to know such Confidential Information for purposes of this Agreement, and
provided said consultants or third parties agree to hold the MPOWER Software and
Documentation in confidence, and have executed a Non-Disclosure Agreement in the
form annexed hereto as Schedule F, and (vi.) disclose the User Documentation to
Related Parties and Non-Related Parties in order for Customer to be able to
provide and for such parties to be able to effectively receive and utilize
Customer Processing, provided said Related and Non-Related Parties agree to hold
the User Documentation in confidence subject to the provisions herein, and have
executed a Non-Disclosure Agreement in the form
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<PAGE> 51
annexed hereto as Schedule F. NOTWITHSTANDING THE FOREGOING, WITH RESPECT TO
MPOWER SOURCE CODE AND SYSTEM DOCUMENTATION, IN ADDITION TO ITS OBLIGATIONS SET
FORTH HEREIN, CUSTOMER SKILL USE NO LESS THAN THE SAME DEGREE OF CARE AND
DISCRETION THAT CUSTOMER REQUIRES WITH RESPECT TO ITS MOST VALUABLE TRADE SECRET
INFORMATION. Notwithstanding the foregoing, Customer may not disclose MPOWER's
Confidential Information to any of the parties identified by MPOWER in Exhibit
3, as such Exhibit may be updated from time to time by MPOWER, or to their
employees, agents, or consultants. Customer shall institute the necessary
security policies and procedures to meet its obligations hereunder.
Notwithstanding the foregoing, the mere viewing of data input screens or the
review of output screens and reports generated by released MPOWER Software by
third parties, not in competition with MPOWER, shall not be deemed a disclosure
of MPOWER Confidential Information.
Without limiting the foregoing, Customer shall use its reasonable
efforts to cooperate with MPOWER in identifying and preventing unauthorized use,
copying, or disclosure of the MPOWER Software and MPOWER Confidential
Information, or any portion thereof.
Customer shall indemnify and hold harmless MPOWER and its officers and
employees from and against any and all damages, losses, liabilities, costs and
expenses (including reasonable legal fees) arising in any way out of use not in
compliance with this Agreement or of any breach of the Confidentiality
obligations hereunder by Customer, or its subsidiaries and affiliates, or any
entity controlling, controlled by or under common control with Customer or any
Related Party.
13. Amendments to Section 17. General
Section 17. A new Section 17.8 is added.
17.8 Publicity. Neither party shall use the name, trade name, service
marks, trademarks, trade dress or logo of the other in publicity releases,
advertising or similar activities without the prior written consent of the
other. Notwithstanding the foregoing, MPOWER shall have the right to list
Customer's name on customer lists, provided that such listing(s) does not state
or imply a recommendation, approval or testimonial by Customer.
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<PAGE> 52
A new section 17.9 is added:
17.9 Export Assurance. Notwithstanding anything contained herein to the
contrary and regardless of any disclosure made by Customer to MPOWER of any
ultimate destination of the MPOWER Software, Customer shall not export or
re-export directly or indirectly the MPOWER Software acquired from MPOWER, or
any technical data derived therefrom, without first obtaining the written
approval or required export license to do so from the United States Department
of Commerce or any other agency of the United States Government or of any
foreign government having jurisdiction over such transaction, when required by
an applicable statute, regulation or order. Customer hereby assures MPOWER that
it does not intend to nor will it knowingly, without the prior written consent,
if required, of the Office of Export Administration of the U.S. Department of
Commerce, Washington, DC, transmit or ship the MPOWER Software or any
modifications thereto or product thereof, directly or indirectly, to Afghanistan
or to the Peoples Republic of China or to any Group Q, S, W, Y or Z country
specified in Supplements to Section 370 of the Export Administration Regulations
issued by the U.S. Department of Commerce, as may be amended from time to time;
or any other applicable regulation.
A new section 17.10 is added:
17.10 Governmental Restrictions. Customer shall be responsible for
complying with all applicable governmental regulations of the United States or
any foreign countries with respect to Customer's transport or use of the MPOWER
Software outside of the United States, including, but not limited to import and
export restrictions, obtaining any necessary consents, registering or filing any
documents and paying any duties, fees or taxes. Customer shall be solely
responsible for all costs associated with such compliance. Customer shall
defend, indemnify and hold MPOWER harmless from and against any and all claims,
judgments, costs, awards, expenses (including reasonable attorneys, fees) and
liability of any kind arising out of the non-compliance with applicable
governmental regulations, statute, decree or other obligation with respect to
the MPOWER Software outside the United States.
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<PAGE> 53
Sections 17.8 and 17.9 of the Agreement dated January 1,1997, are renumbered
17.11 and 17.12 respectively.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives.
MPOWER SOLUTIONS INC. Brokerage Services, Inc.
(Customer)
By: /s/ WILLIAM F.X. O'NEIL By: /s/ TIMOTHY R. FISCHER
-------------------------------- --------------------------------
Name: William F.X. O'Neil Name: Timothy R. Fischer
Title: EVP & COO Title: CFO
Date: 7-25-97 Date: July 25, 1997
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<PAGE> 54
INDEX OF EXHIBITS
<TABLE>
<S> <C>
Exhibit 1 - DEFINITION OF CORE SERVICES
Exhibit 2 - LICENSE, PROCESSING AND SERVICE FEES
Exhibit 3 - MPOWER IDENTIFIED PARTIES FOR NON-DISCLOSURE
Exhibit 4 - DOCUMENTATION OUTLINE
Exhibit 5 - NON-DISCLOSURE AGREEMENT
Exhibit 6 - THIRD PARTY VENDOR SOFTWARE AND HARDWARE TO
IMPLEMENT MPOWER SOFTWARE ON CUSTOMER'S CLIENT
SERVER PLATFORM (TBD)
</TABLE>
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<PAGE> 55
Exhibit 1
DEFINITION OF CORE SERVICES
"Core Services" are those services, in addition to the License, that are
provided to Customer by MPOWER in consideration for the payment of the License
Fees, except as otherwise provided in Schedule B. Core Services shall include
the following:
Conversion Plan: MPOWER will provide a template plan for migrating and
converting Customer members to the MPOWER Software or the MPOWER System. The
template plan will include a description of tasks to be performed, milestones,
and deliverables. Customer and MPOWER will mutually agree on initial
modifications to the template plan to fit the Customer's specific situation and
circumstances. This modified template plan shall be referred to as the
"Conversion Plan", which may be subsequently modified by agreement of the
parties from time to time.
Software Installation (if applicable): In accordance with the Conversion Plan,
MPOWER will provide up to one hundred-twenty (120) hours of systems support to
help install the MPOWER Software on a single Customer CPU(s) designated as
follows:
CPU Model Number(s):
--------------------------------------------------------
CPU Serial Number(s):
--------------------------------------------------------
Prior to installation of MPOWER Software, Customer shall have installed the
vendor software detailed on Exhibit 6.
Delivery: Unless otherwise requested in writing at the time of final delivery
to Customer of any deliverable of the MPOWER Software or of the enhancement or
modification provided under any Work Order under the License or applicable Work
Order to Customer or any Related Party, all deliverables to Customer or any
Related Party shall be by electronic delivery. Customer shall provide
appropriate communications linkages to receive such deliveries and shall pay
MPOWER the fees stated therefor in Exhibit 2.
-A-1-
<PAGE> 56
Documentation: MPOWER will provide User Documentation and, if applicable, System
Documentation and the Functional Documentation for the functions and in the form
outlined in Exhibit 4, Documentation.
Help Desk: MPOWER shall provide a "Level Two" Help Desk to answer Customer
questions and solve Customer problems for acceptance testing and production
activities as further described herein. (Questions that are training related, or
answers to which can be found in the User Documentation, or that are related to
initial setups and definitions should be referred to the MPOWER
implementation-support team.) The Help Desk is staffed 8:00 am to 5:00 p.m.,
Mountain Time, Monday through Friday. Calls to the Help Desk outside of these
hours are rolled over either to MPOWER Operations or pager response. An Inward
WATS number (currently 1-800-993-3677) is available for Help Desk calls at no
charge to the Customer. Calls to the Help Desk that represent problems related
to the MPOWER Software or MPOWER System are assigned a Problem Number and
entered into the MPOWER Problem Reporting and Tracking System, where current
status is available for reporting back to the Customer.
A "Level Two" Help Desk call is a call from the Customer's internal Help Desk
seeking support for questions and problems for production activities that the
Customer's Help Desk was not able to resolve on its own (each a "Service Call").
MPOWER represents that Service Calls will be logged and responded to as follows:
A. Severity Level/Priority: 1
Definition: A Critical Failure.
Support: MPOWER will provide telephone support twenty-fours (24) hours
per day, seven (7) days per week for Severity Level 1 problems.
Time Frame for Resolution: Service Calls will be responded to by
knowledgeable MPOWER staff via telephone within thirty (30) minutes of
receipt of a Service Call between the hours of 8:00 am to 5:00 p.m.,
Mountain Time, Monday through Friday, and one (1) hour during other
periods. MPOWER will use its best
-A-2-
<PAGE> 57
efforts to provide a resolution of the problem (permanent or temporary)
within twenty-four (24) hours of receipt of the Service Call, or
verification by MPOWER of the problem, either through replication or
receipt by MPOWER of complete documentation from Customer needed to
resolve the problem -- whichever occurs last. Customer shall maintain
immediate resource availability during all hours that MPOWER is working
on a Service Call.
B. Severity Level/Priority: 2
Definition: Production degraded -- defined as a verifiable Nonconformity
in the Shelf Version of the MPOWER Software (or verifiable failure of
the MPOWER System hardware, if the problem arises with respect to Remote
Processing) that does not disrupt critical business processing, but
causes disruption to normal work flow.
Support: MPOWER will provide telephone support twenty-fours (24) hours
per day, Mountain Time, Monday through Friday for Severity Level 2
problems.
Time Frame for Resolution: Service Calls will be responded to by
knowledgeable MPOWER staff via telephone within the same working day,
Monday through Friday, if the Service Call is received prior to 3:00
p.m. Mountain Time. Otherwise, if the Service Call is received after
3:00 p.m. Mountain Time, the call will be responded to by 10:00 a.m.,
Mountain Time, the next morning, except Saturdays and Sundays. MPOWER
will use its best efforts to provide a resolution of the problem
(permanent or temporary) within the later of three (3) business days of
receipt of the Service Call; or verification by MPOWER of the problem,
either through replication or receipt by MPOWER of complete
documentation from Customer. needed to resolve the problem.
C. Severity Level/ Priority: 3
Definition: Normal response to either non-critical questions or
non-critical problems. A non-critical problem is defined as a verifiable
Nonconformity in the Shelf Version of the MPOWER Software (or verifiable
failure of the MPOWER System hardware, if the problem arises with
respect to Remote
-A-3-
<PAGE> 58
Processing), that does not cause disruption to normal work flow or
degrade production.
Support: MPOWER will provide telephone support from 8:00 a.m. to 5:00
p.m. Mountain Time, Monday through Friday, for Severity Level 3
situations.
Time Frame for Resolution: Service Calls for Severity Level 3 situations
are handled differently whether the Service Call is a non-critical
question or a non-critical MPOWER Software or MPOWER System problem. If
a non-critical MPOWER Software or MPOWER System problem, it will be
entered into the MPOWER Problem Reporting and Tracking System. MPOWER
and the Customer shall jointly prioritize these non-critical problems at
least weekly up to one year after first production use, and at least
monthly thereafter. After prioritization, MPOWER shall produce a
schedule for their resolution.
Within ten (10) working days after month-end, MPOWER will provide reports and
graphs to the customer liaison (see Section 16.2) comparing Service Call
performance against standards for Severity 1, 2, and 3 Service Calls -- both
for the month and the year-to-date.
For two successive calendar quarters, beginning with the first calendar quarter
after the initial Implementation Date, the Customer shall be entitled to
unlimited Service Calls from the Customer's help desk to the Help Desk (or its
"after hours" rollover to Operations). Thereafter, Service Calls to the Help
Desk in excess of sixty (60) calls per calendar quarter shall be billed as
Supplemental Services.
Ongoing Support: MPOWER provides ongoing support in the areas of General System
Enhancements, correction of Nonconformities, and in certain specific situations,
support for modifications, whether made by Customer or MPOWER:
General System Enhancements: See Section 2.4.
Correction of Nonconformities: See Section 2.5.
Support for Modifications: See Sections 2.7 and 2.8(b).
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<PAGE> 59
Annual Audit: Annually, beginning within thirty (30) days after the anniversary
of the Effective Date, MPOWER, with Customer agreement, will audit the way the
Customer is using the MPOWER Software or MPOWER System, and offer
recommendations for more efficient utilization. This MPOWER audit will be
performed only with the express proviso that Customer makes available to MPOWER
audit team knowledgeable personnel who can fully represent Customer's use of
MPOWER Software or MPOWER System.
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<PAGE> 60
Exhibit 2
LICENSE, PROCESSING AND SERVICE FEES
I. LICENSE FEES
A. License Fees. MPOWER License Fees for the use of the MPOWER Software
are broken into two(2) components: (i) Initial License Fee (ILF) and
(ii) Maintenance Fee (MF) . These components are intended to provide
Customer with initial and ongoing rights to use the Software pursuant
to the terms of the License, Processing and Services Agreement.
1. Initial License Fee: The ILF is the initial fee payable by
Customer for the License to use the MPOWER Software. The ILF for
Customer and Related Parties is set forth in Section B(1) below.
2. Maintenance Fee: The MF is the fee payable by Customer for the
ongoing License and support for the MPOWER Software, as described
in Sections 3.4 and 3.5 of the Agreement
B. License Fees (ILF, and MF) and Advanced Payments for
Customer and Related Parties
1. Initial License Fee. The initial License Fee payable by Customer
for the License of the MPOWER Software for Customer and Related
Parties is $[*] which will be payable by Customer in twelve (12)
equal installments commencing January 2, 1998.
2. Fee for Customer and Related Parties. Maintenance The Maintenance
Fee for Customer and Related Parties will be paid by Customer in
accordance with the following schedule:
* Confidential Treatment Requested
B-1
<PAGE> 61
$[*] per year paid in twelve equal monthly installments with the
first payment due January 2, 1999, for the year 1999.
3. Source Code Buyout Provisions. Customer shall have the option to
buyout the rights to the MPOWER Software source code ("Source Code
Buyout") upon providing MPOWER with three (3) months advance
written notice, according to the following schedule:
- up to the third anniversary of the date of this Agreement, upon
the single payment to MPOWER of $[*] and any MF Prepayment owed
by Customer to MPOWER pursuant to paragraph B.2 above;
- upon or after the third anniversary of the date of this
Agreement, upon the single payment to MPOWER of $[*]
- upon or after the fourth anniversary of the date of this
Agreement, upon the single payment to MPOWER of $[*]; or
- upon or after the fifth anniversary of the date of this
Agreement, upon the single payment to MPOWER of $[*].
Upon the exercise of the MF Buyout, the terms of the Agreement shall
remain unchanged except, (a) Customer shall have the right to modify
the MPOWER Software without first obtaining the consent of MPOWER and
without notifying MPOWER; (b) Customer shall no longer be entitled to
future Releases or General System Enhancements, and (c) Customer
shall not be entitled to the future provision of the Core Services.
Any services provided by MPOWER to Customer subsequent to Customer's
completion of the Source Code Buyout shall be provided
* Confidential Treatment Requested
B-2
<PAGE> 62
as Supplemental Services at MPOWER's then current rates.
V. FEES FOR SUPPLEMENTAL SERVICES
Supplemental Services Fees, as incorporated in Work Orders, may be
either fixed-price or time and materials. Time and materials will be
charged at the then-current rates for such services. Current (as of
January 1997 through December 1997) rates for time and materials shall
be held constant by MPOWER for Customer through December 31, 1997, and
are as follows:
A. Supplemented. Services are billable at the following rate: $[*] per
hour
B. Total fees for the conversion of Customer from Remote Processing to
Customer Processing shall be capped at the sum of $[*], accrued
at the amount set forth above. The cap shall apply only to MPOWER
services related directly to conversion services and shall not
include services and products of third party contractors nor shall it
include services of MPOWER related to suck third party products or
contractors. The conversion period will end when Customer commences
Customer Processing for any of its customers.
C. During conversion MPOWER shall charge Customer for third party
services as a direct pass through.
D. After Conversion, the rates for outside independent contractors
provided by MPOWER for Supplemental Services shall be the greater of
(i.) the rates set forth above (for applicable skill sets) or (ii.) a
rate to be mutually agreed upon in advance by Customer and
* Confidential Treatment Requested
B-3
<PAGE> 63
MPOWER.
VII. OTHER FEES.
Other fees may pertain to the use by Customer of the MPOWER System for
set-up, testing, training, acceptance testing or other uses not related
to the production use of the MPOWER System for processing active Members
of Customer or of a Related Party. Such other fees will be indicated in
a Work Order and may include fees for third party consultants and
vendors.
B-4
<PAGE> 64
Exhibit 3
MPOWER IDENTIFIED PARTIES FOR NON-DISCLOSURE
In accordance with Section 15 of the Agreement, Customer may not
disclose MPOWER's Confidential Information to direct competitors of MPOWER,
including but not limited to, the companies listed below, including such
companies' parents, subsidiaries and affiliates, and such parents' subsidiaries
and-affiliates:
Computer Science Corporation (CSC)
Electronic Data Systems Corporation (EDS)
ERISCO
AMISYS Managed Care Information Systems, Inc.
Health Systems Design, Inc. (HSD)
Health Systems Integration, Inc. (HSII)
GTE Health Systems
Resource Information Management Systems (RIMS)
HBO & Co. (HBOC)
TXEN
Perot Systems
IDX
H-1
<PAGE> 65
Exhibit 4
DOCUMENTATION OUTLINE
[To Be Attached]
D-1
<PAGE> 66
Exhibit 5
NON-DISCLOSURE AGREEMENT ("Agreement")
This Agreement is entered into as of __________, 19__, by and between MPOWER
Solutions Inc., a Delaware corporation ("MPOWER"), with its principal place of
business at 2305 Renard Place, S. E., Albuquerque, New Mexico 87106 and
Brokerage Services, Inc. ("Customer") with its principal place of business
located at 11200 Lomas Blvd., NE, Albuquerque, NM 87112. WHEREAS, each party
wishes to disclose and to receive from the other party certain proprietary
information for the purpose of conveying the MPOWER software license as set
forth in the Agreement.
WHEREAS, the parties wish to protect certain confidential and proprietary
information which may be disclosed between them, and for and in consideration of
the disclosures made and to be made hereunder, the parties agree as follows:
1. For purposes of this Agreement, "Owner" means the party disclosing Trade
Secrets and Confidential Information hereunder, whether such party is MPOWER
or Customer, and "Recipient" means the party receiving any Trade Secrets or
Confidential Information hereunder, whether MPOWER or the Customer.
2. Recipient acknowledges and agrees that Owner claims that the Trade Secrets
and the Confidential Information of Owner are the sole and exclusive
property of Owner (or a third party providing such information to Owner) and
that Owner owns all worldwide copyrights, trade secret rights, confidential
information rights and all other property rights therein.
3. Recipient acknowledges and agrees that disclosures of the Trade Secrets and
the other Confidential Information of Owner to Recipient does not confer
upon Recipient any license, interest or rights of any kind in and to the
Trade Secrets and Confidential Information.
4. Recipient will hold in confidence and, without the prior written consent of
Owner, will not reproduce, distribute transmit, reverse engineer, decompile,
disassemble or transfer, directly or indirectly, in any form, by any means,
or for any purpose, the Trade Secrets or the Confidential Information of
Owner or any portion thereof communicated, discussed, delivered or made
available by Owner to or received by Recipient. Notwithstanding the
foregoing, Recipient may only disclose the Trade Secrets and Confidential
Information to its employees with a need to know such information, provided
each such employee shall be obligated in writing to comply with the terms
and conditions of this Agreement. Recipient will not use the Trade Secrets
or the Confidential Information of Owner or any portion thereof
communicated, discussed, delivered or made available by Owner to or received
by Recipient with our the prior written consent of Owner.
5. Recipient acknowledges that its obligations under this Agreement with regard
to the Trade Secrets of Owner shall remain in effect for as long as such
information shall remain a Trade Secret under applicable law. Recipient
acknowledges that its obligations with regard to the Confidential
Information of Owner shall remain in effect for one (1) year after its
disclosure under this Agreement. The foregoing shall not apply if and to the
extent that information shall not be deemed proprietary and each part shall
have no obligation with respect to any information which:
Page 1
<PAGE> 67
(i.) is or falls into the public domain through no wrongful act of the
receiving party;
(ii.) is rightfully received from a third party without restriction and
without breach of this Agreement;
(iii.) is approved for release by written authorization of the
disclosing party;
(iv.) is disclosed pursuant to the requirement of a governmental agency
or operation of law; or
(v.) has been previously and independently developed by the receiving
party.
6. Recipient agrees to. return to Owner, upon request by Owner, the Trade
Secrets and Confidential Information of Owner and all materials relating
thereto, disclosed by Owner to Recipient.
7. As used herein, "Trade Secrets" means information, including, but not
limited to, technical or non-technical data, formulas, patterns,
compilations, programs, devices, methods, techniques, drawings, processes,
financial data, financial plans, product plans or a list of actual or
potential customers or suppliers, computer source code and related
documentation, which: (a) derives economic value, actual or potential, for
its Owners, from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can obtain economic
value from its disclosure or use; and (b) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy. "Confidential
Information" means information, other than "Trade Secrets", that is of value
to its Owner and is treated as confidential, including, but not limited to,
licensing strategies, advertising campaigns, information regarding
executives and employees, the terms and conditions of this Agreement, any
information designated by Owner as Confidential Information, and any data or
information defined herein as a Trade Secret, but which is determined by a
court of competent jurisdiction not to rise to be a trade secret under
applicable law.
8. Recipient shall use its reasonable efforts to cooperate with Owner in
identifying and preventing unauthorized use, copying, or disclosure of the
Owner's Trade Secrets and Confidential Information.
9. Recipient shall indemnify and hold harmless Owner and its officers and
employees from and against any and all damages losses, liabilities, costs
and expenses (including reasonable legal fees) arising in any way out of use
not in compliance with this Agreement or of any breach of the
confidentiality obligations hereunder by Recipient or its employees.
10. Each party hereto agrees that during the term of this Agreement and for a
period of one (1) year following termination or expiration of this Agreement
for any reason, neither party will solicit for employment, attempt to employ
or affirmatively assist any other person, entity or enterprise in employing
or soliciting for employment any person employed or hired by the other part.
Page 2
<PAGE> 68
11. If any provision or any part of any provision of the Agreement shall not be
valid for any reason, such provision shall be entirely severable from, and
shall have no effect upon, the remainder of this Agreement. Any such invalid
provision shall be subject to partial enforcement to the extent necessary to
protect the interests of the parties.
12. This Agreement shall inure to the benefit of, and be binding upon, any
successor in interest of the parties.
13. The intent of this Agreement is to provide the parties with all remedies
afforded to them under applicable law. Each party acknowledges and agrees to
the other party that monetary damages may be inadequate to compensate Owner
for any breach under this Agreement. Accordingly, Recipient agrees that
Owner will, in addition to any other remedies available to it at law or
equity, be entitled in injunctive relief to enforce the terms of this
Agreement.
14. This Agreement together with Exhibits hereto, if any, constitutes the entire
agreement of the parties with respect to the subject matter hereof, and
supersedes any prior agreements or understandings, whether oral or written,
between the parties with respect to such subject matter. No amendment or
waiver of this Agreement or any provision hereof shall be effective unless
in a writing signed by both of the parties.
15. This Agreement shall be governed by and construed and interpreted in
accordance with the laws of the State of New Mexico, without giving effect
to its conflict of laws.
N WITNESS WHEREOF, the parties by their duly authorized representatives have
caused this Agreement to be executed as of the date first written above.
MPOWER Solutions Inc. Customer
By: By:
-------------------------------- --------------------------------
(Authorized Signature) (Authorized Signature)
Title: Title:
----------------------------- -----------------------------
Date: Date:
------------------------------ ------------------------------
Page 3
<PAGE> 1
EXHIBIT 10.12
ADDENDUM TO PROCESSING AND SERVICES AGREEMENT
This Addendum to the Processing and Services Agreement is entered into
as of this 25th day of, July, 1997, by and between Brokerage Services,
Incorporated, a New Mexico corporation with its principal place of business
located at 11200 Lomas Blvd., NE, Albuquerque, New Mexico 87112 (hereinafter
referred to as "Customer"), and MPOWER Solutions Inc., a Delaware corporation
with its principal place of business located at 2305 Renard Place, S. E.,
Albuquerque, New Mexico 87106 (hereinafter referred to as "MPOWER").
WHEREAS, MPOWER is in the business of providing automated managed health
care information services and licensing software to businesses providing managed
health care and insurance services, and desires to provide such services, and
license such software, to Customer, subject to the terms hereof; and
WHEREAS, Customer is in the business of providing managed health care
and insurance services to its customers and desires to use the services of,
and/or software licensed by MPOWER, subject to the terms hereof; and
WHEREAS, Customer has previously engaged MPOWER to provide Remote
Processing Services as set forth in the Agreement dated January 1, 1997, and
whereas Customer wishes to invoke Section 12 of said Agreement; and
WHEREAS, Customer and MPOWER wish to more fully outline the financial
terms for MPOWER license and other services.
NOW, THEREFORE, in consideration of the mutual promises made, the terms
and conditions hereunder described and other valuable consideration, the parties
agree as follows:
Exhibit 2
LICENSE, PROCESSING AND SERVICE FEES
In addition to the license fees and other fees set forth in Exhibit 2, Customer
and MPOWER have agreed that rather than the time periods set forth in Exhibit 2,
such fees will be paid in 36 equal installments beginning on October 31, 1997,
unless changed by mutual agreement, and except as set forth in the schedules
below.
-1-
<PAGE> 2
1. FEES
<TABLE>
<CAPTION>
Hardware/Software/Service Item Charge
- ------------------------------ ----------------------------
<S> <C>
License Fee
The license fee for the MPOWER Software $[*]
Implementation Support
Support fees for installing MPOWER
Software on the RS6000 $[*]
HUBLink License Fee
Cost of the license for the HUBLink
interface engine. $[*]
HUBLink Annual Maintenance Fee
Mandatory maintenance fee for HUBLink
product at a cost of $[*] per year
for [*] years. $[*]
RS6000 Hardware/Software
Rental of fifty-five percent (55%) RS/6000 J50 Deskside Server.
8-Way SMP 200 mhz 604E chip
1gb RAM
6 9.1gb disk drives
1 8mm tape drive
1 9trk tape drive
AIX, CICS, DB2, COBOL $[*]
Subsequent software upgrades billable as pass through cost.
PC and Network Set Up Fee
Charges for PC and network customization, and CICS/DB2 definition
on the RS6000. $[*]
Subtotal of License and Other Fees $[*]
$[*] per month
Monthly Support Fee*
Monthly charge for operational support of the RS6000. Includes
such support personnel as a Systems Administrator, Systems
Programmer, PC Support, Ops and Production Control. $[*] per month
</TABLE>
Monthly Support Fee. There is a monthly support fee that varies with membership.
The base fee is $[*] per month for an active membership base of up to [*]
members. The monthly fee will thereafter increase by an additional $[*] per
month for every increment of [*] members or fraction thereof. The monthly
support fee may also be reduced for reductions in Customer enrollment, below the
applicable [*] step, provided that the fee will not be reduced below the
$[*] base.
MPOWER MAINTENANCE
* Confidential Treatment Requested
-2-
<PAGE> 3
<TABLE>
<CAPTION>
Charge
----------------------------
<S> <C>
MPOWER Annual Maintenance Fee**
Annual fee for maintenance of the MPOWER
software, commencing the beginning of year
two. $[*] per year for 2 years. $[*] $[*] per month
</TABLE>
** MPOWER Annual Maintenance Fee. The fee is $[*] per year for years [*] and
[*]. The total reflects the cost of [*] years and the monthly fees are shown
to commence in year [*].
2. Term of MPOWER Monthly Support
Customer may not terminate MPOWER monthly support during the first thirty-six
(36) months of this agreement. Thereafter, this Agreement will operate month to
month, provided that beginning on the thirty-seventh (37th) month of this
agreement, Customer may, at its option and with 180 days advance written notice
to MPOWER, terminate MPOWER's monthly support. In the event that Customer elects
to terminate MPOWER monthly support, Customer will pay MPOWER MPOWER's fees
associated with installing hardware at Customer's site, if requested by
Customer, and installing the Customer licensed software at Customer's site.
Customer will be responsible for all other shipping and installation charges at
Customer's site.
3. BSI PC Upgrade Assistance
MPOWER agrees to assist Customer in Customer's PC upgrade activities as listed
below with fees listed in section one above. Customer is responsible for all
expenses associated with the project. MPOWER will act as Customer's agent in
negotiating terms and prices. All such terms and prices will be "signed-off" by
Customer. The costs set forth below are based on a 36 month rental arrangement.
At the end of the 36 month rental period Customer will receive title to the
equipment listed herein. Customer will receive rights to a MPOWER software
license subject to Customer' execution of a license agreement for the MPOWER
software. Third party software is excluded and Customer will be required to
acquire right to the use of such software directly with such third party.
Customer is responsible for all expenses associated with the project. MPOWER
will pay vendors and Customer will pay MPOWER for goods and services supplied to
Customer under this project. MPOWER retains a security interest in funds of
Customer and in hardware and software installed at Customer site(s), to the
extent of Customer's liability to MPOWER. The interest rate applied to periodic
payments will be [*]% per year.
MPOWER will provide the following services:
a. PC Set Up
* Confidential Treatment Requested
-3-
<PAGE> 4
- - Receive, un-crate and set up PCs in a staging area (e.g. training room).
- - Install Windows 95 and Rumba.
- - Configure software (per BSI standards) and test all hardware and software
components.
- - Re-package and return any hardware or software that failed tests.
- - Disassemble PC and transport to User work area.
- - Install PC in User area and test connection to LAN.
- - Isolate and correct connection failures (if any), or coordinate with cabling
supplier for correction.
b. VT Terminals
- - Disconnect terminal from network and transport to staging area.
- - Package terminal for shipment.
c. Existing PCs
- - Upgrade to Windows 95
- - Configure software (per BSI standards) and test all hardware and software
components.
- - Isolate and correct any problems encountered during testing.
<TABLE>
<CAPTION>
Service and Equipment Fees Charge
- -------------------------- -----------
<S> <C>
(Subject to revision on date of purchase by MPOWER)
Acquire New PCs
Fifty-five (55) additional PC(P200/32mb, 17" monitors)
at $[*] per PC.
Included software is Windows/95 MS Office 97 $ [*]
Shipping [*]
Acquire Windows NT Server
Dell PowerEdge 6100 Base, 200MHz/512K Redundant
(Server includes licenses for 10 NT users)
15" monitor, Ethernet Card $ [*]
Shipping [*]
Acquire New Printers
Laser Jet 5N - 3 @ $[*] $ [*]
Laser Jet 5SI - 5 @ $[*] $ [*]
Hoppers for 5SI Printers (5 @ $[*]/set) $ [*]
Cisco Router and CSU/DSU with cables $ [*]
Total $ [*]
</TABLE>
Monthly Payment $[*] Principal $[*] Interest $[*]
* Confidential Treatment Requested
-4-
<PAGE> 5
4. Network Upgrade Assistance
MPOWER will provide the following services:
a. New Server Set Up
- - Receive, un-crate and set up server in Computer Room.
- - Configure and optimize Windows NT.
- - Configure and optimize gateway software.
- - Test all hardware and software components including a load test which
simulates 150 simultaneous users.
- - Isolate and correct any problems encountered during testing or remove,
re-package and return failed component.
b. Printer Set Ups
- - Receive, un-crate and set up printers in area to be determined by BSI.
- - Install Printer Management software on all PCs in IS Department.
- - Configure Printers and test operation with sample files provided by BSI.
- - Isolate and correct and problems encountered during testing or remove,
re-package and return failed component.
The charges for the MPOWER services provided under this section will be current
MPOWER staff rates plus MPOWER expenses.
5. Recap of Payments
<TABLE>
<S> <C>
a. Year 1 $ [*]
+ [*] (gross receipt tax)
----------
$ [*] per month subject to recalculation
based on final configuration of system.
b. Year 2 and 3 $ [*]
+ [*] (gross receipt tax)
----------
$ [*] per month subject to recalculation
based on final configuration of system.
</TABLE>
c. For years 1 through 3, any charges for MPOWER Network Upgrade
Assistance services provided under Section 4 above, as billed.
6. Other Amendments
a. Software Installation in Exhibit 1 is superseded by this document.
b. The license and maintenance fee schedules in Section I. B. of Exhibit
2 are superseded by this document.
c. Section V. B. of Exhibit 2 pertaining to fees for the conversion from
Remote Processing are deleted. The Customer will remain on remote
processing.
* Confidential Treatment Requested
-5-
<PAGE> 6
d. Section 2.2 of Schedule E is superseded by this document.
e. The last sentence of Section 2.9 of Schedule E is deleted.
f. Section 3.4 of Schedule E is deleted.
g. Section 13.5 of Schedule E is superseded by this document.
7. In the event changes in nationally recognized accounting standards materially
affect the method of MPOWER revenue recognition contemplated by this Agreement,
Customer and MPOWER agree to modify this Agreement in such a manner as the
originally intended method of MPOWER revenue recognition is preserved.
8. This Amendment is effective upon execution and ends on the last day of the
month of the month the 36th lease payment is due.
9. All other provisions of the Agreement dated January 1, 1997, are unchanged.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives.
MPOWER Solutions Inc. CUSTOMER
By: /s/ WILLIAM F.X. O'NEIL BY: /s/ TIMOTHY R. FISCHER
-------------------------------- --------------------------------
Name: William F.X. O'Neil Name: Timothy R. Fischer
Title: EVP & COO Title: Chief Financial Officer
Date: 25 July 1997 Date: 25 July 1997
-6-
<PAGE> 1
EXHIBIT 10.13
SUPPLEMENTAL AGREEMENT
This Supplemental Agreement ("Agreement") made and entered this 24th day
of December, 1997 by and between Brokerage Services, Inc., a New Mexico
corporation with its principal place of business located at 11200 Lomas Blvd.,
N.E., Albuquerque, New Mexico 87112 (hereinafter "BSI"), and MPOWER Solutions,
Inc., a Delaware corporation with its principal place of business located at
2305 Renard Place, S.E., Albuquerque, New Mexico 87106 (hereinafter "MPOWER").
WHEREAS BSI and MPOWER have entered into a Processing and Services
Agreement dated January 1, 1997, as well as one or more addenda to such
agreement ("Prior Agreement"); and
WHEREAS BSI and MPOWER wish to clarify, mend, and supplement that Prior
Agreement as provided herein;
NOW THEREFORE it is agreed as follows:
1. HUBLINK CONTINGENCY. MPOWER has specified HUBLINK as the electronic
data interchange software engine (EDI Engine) to be utilized in conjunction with
the MPOWER system to be utilized by BSI. Until such time as BSI has paid to
MPOWER in full its Initial License Fee for the MPOWER Software and the
sub-license fee for the HUBLINK software, then the event HUBLINK becomes subject
to any bankruptcy, insolvency, liquidation or other similar proceedings which
are not dismissed within 60 days after commencement, or withdraws support of the
EDI Engine without an entity to assume such support obligations, or should the
HUBLINK EDI Engine prove to be inappropriate or inadequate software for the
MPOWER system utilized by BSI, then in any of such events MPOWER shall either
(i) provide at its own cost a replacement EDI Engine software package acceptable
to BSI, or (ii) remove such HUBLINK software and refund all fees paid by BSI
with respect to such HUBLINK software.
2. SOURCE CODE ESCROW. In the event that MPOWER becomes subject to any
bankruptcy, insolvency, liquidation or other similar proceedings which are not
dismissed within 60 days after commencement, or in the event that MPOWER ceases
to provide support reasonably acceptable to BSI for a current release of the
MPOWER software, or for such earlier releases for which MPOWER in the Prior
Agreement has committed to provide support to BSI, and MPOWER has not assigned
its rights and obligations to another entity reasonably acceptable to BSI which
has agreed to provide such support to BSI, then BSI shall have access to and
shall be granted without any further cost to BSI a perpetual, fully paid up,
non-exclusive license to the source code of the current release, (and the
current release used by BSI, if different) of the MPOWER Software to use the
source code and the MPOWER Software for its own use, as defined in the Prior
Agreement, and not for relicense or to create derivative works for relicense,
and BSI shall be considered to have exercised and to have satisfied its payment
obligations for the Source Code Buyout Option. BSI access shall be through
Norwest Bank New Mexico, N.A. as escrow agent. The escrow account shall be
established on or before December 29, 1997. In addition to the source code,
there shall also be escrowed all MPOWER documentation related to the software
procedures manual, system
<PAGE> 2
restoration procedure, and disaster recovery system, and in any of the events
specified above BSI shall also have access and be granted all necessary rights
to utilize such information without further cost or payment.
3. BSI DATA ESCROW. MPOWER acknowledges that the data used on the MPOWER
System by BSI is the property of BSI. MPOWER routinely provides backup tapes of
this data and deposits such backups in backup storage. MPOWER agrees to
instruct its backup storage agent, who may change from time to time to another
agent reasonably acceptable to BSI, to release such data to BSI at any time, as
it is the property of BSI in custody with MPOWER. Should MPOWER elect to change
the data escrow company, MPOWER will promptly notify BSI as to the name and
address of the new company.
4. ONSITE PROCESSING. Anytime after October 1, 1998, upon 90 days prior
written notice, BSI shall have the fight and option to cancel the Remote
Processing. Services being provided by MPOWER and to transfer the processing of
the MPOWER Software to BSI Premises under BSI direction (the "Onsite Processing
Option"). The license fee, maintenance charges, and other charges, to be paid by
BSI to MPOWER in such event shall be as set forth in Exhibit A hereto.
Additionally, BSI shall have the right and option to acquire the RISC/6000 Model
J50 computer utilized by MPOWER in processing BSI data at such point
(acquisition price for the RISC/6000 is set forth in Exhibit A), or
alternatively, to acquire another computer on which to run the MPOWER system on
the BSI premises.
5. NOTICES. Notice under this Agreement shall be in writing and shall be
effective when actually delivered. If mailed, notice shall be deemed effective
48 hours after mailing as registered or certified mail, postage prepaid,
directed to the other party at the address set forth above or such other address
as the party may indicate by written notice to the other.
6. SURVIVAL. Any of the terms and covenants contained in this Agreement
which require the performance of either party after the termination shall
survive the termination.
7. WAIVER. Failure of either party at any time to require performance of
any provision of this Agreement shall not limit the party's right to enforce the
provision, nor shall any waiver of any breach of any provision be a waiver of
any succeeding breach of any provision or a waiver of the provision itself for
any other provision.
8. ASSIGNMENT. Except as otherwise provided with. this Supplemental
Agreement, the assignment and transfer provisions of Section 17.6 of the Prior
Agreement shall apply as well to this Supplemental Agreement.
9. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New Mexico without references to
principles of conflicts of law.
10. PREVAILING PARTY CLAUSE. In the event an arbitration, suit or action
is brought by any party under this Agreement to enforce any of its terms, or in
any appeal therefrom, it is agreed that
<PAGE> 3
the prevailing party shall be entitled to reasonable attorneys fees and costs to
be fixed by the mediator, arbitrator, and/or court.
11. FURTHER ACTION. The parties hereto shall execute and deliver all
documents, provide all information and take or forbear from all such action as
may be necessary or appropriate to achieve the purposes of this Agreement.
12. GOOD FAITH. The parties hereto covenant, warrant and represent to
each other good faith, complete cooperation, due diligence and honesty in fact
in the performance of all obligations of the parties pursuant to this Agreement.
All promises and covenants are mutual and dependent.
13. SAVINGS PROVISION. If any provision of this Agreement, or the
application of such provision to any person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to persons or circumstances other than those as to which it is held invalid,
shall not be affected thereby.
14. DEFINITIONS INCORPORATED FROM PRIOR AGREEMENT. Any of the
capitalized terms or definitions used in this Agreement that are not
specifically defined in this Agreement shall have the meaning assigned to them
in the Prior Agreement.
15. PAYMENTS DETAILED ON EXHIBIT A. The payment schedule in Exhibit A
hereto redistributes the Fees agreed to in the Addendum to Processing and
Services Agreement, dated July 25, 1997 (the "Addendum"), which Addendum is part
of the Prior Agreement. Such redistribution takes into account the change in
timing for the use by BSI of the MPOWER Software license on the RISC/6000
environment and the potential exercise of the Onsite Processing Option. Any
other Fees outlined in the Prior Agreement, not affected by this redistribution
remain in full force and effect. If the Onsite Processing Option is not
exercised on October 1, 1998, then the prior payment terms remain in effect. If
the Onsite Processing Option is exercised after October 1, 1998, then the One-
time Cash Payment for the RISC/6000 shall be reduced by [*] ([*]) of $[*] for
each month that such exercise is postponed.
16. NEW MEXICO MEDIATION\ARBITRATION. If either party believes that a
controversy or claim arising out of this Agreement cannot be settled informally
by the parties, either party may invoke this Section, in which case the
controversy or claim shall be settled by mediation in Bernalillo County, New
Mexico. Within ten (10) days after written request for mediation shall be made
by a party on one side to the party on the other, the parties shall jointly
select a mediator. If the parties are unable to agree upon a mediator, then each
party shall designate a representative who shall, with the representative
designated by the other party, select a mediator. The mediator shall hear and
attempt to resolve the dispute. The hearing on the dispute shall be held no
later than thirty (30) days after the request for appointment of a mediator.
Whenever any action is required to be taken under this Agreement within a
specified period of time and the taking of such action is materially affected by
a matter submitted to mediation, such period shall automatically be extended by
ten (10) days plus the number of days that are taken for the determination of
the matter by mediation.
* Confidential Treatment Requested
<PAGE> 4
If any controversy or claim arising out of this Agreement cannot be
settled by the parties through mediation as provided in this Section within
forty five (45) days after the request for mediation, the controversy or claim
shall be settled by arbitration in Bernalillo County, New Mexico. Within twenty
(20) days after written request for arbitration shall be made by a party on one
side to the party on the other, the parties shall jointly select an arbitrator.
If the parties are unable to agree upon an arbitrator, an arbitrator shall be
appointed as provided in the New Mexico Uniform Arbitration Act. The arbitrator
shall hear and decide the dispute, adhering to the New Mexico Uniform
Arbitration Act. The hearing on the dispute shall be held no later than sixty
(60) days after the request for appointment of an arbitrator. Any award made by
a majority of such arbitrators shall be final, binding, and conclusive on all
parties hereto for all purposes, and judgment may be entered thereon in any
court having jurisdiction thereof. Whenever any action is required to be taken
under this Agreement within a specified period of time and the taking of such
action is materially affected by a matter submitted to arbitration, such period
shall automatically be extended by ten (10) days plus the number of days that
are taken for the determination of the matter by mediation.
BROKERAGE SERVICES, INC.
By: /s/ James L. Healy
---------------------------------
President
MPOWER
By: /s/ William F. Reilly
---------------------------------
Vice Chairman
<PAGE> 5
EXHIBIT A
PAYMENT TERMS: [*] - CONVERSION ACCEPTANCE (EST. [*])
1. Current Remote Processing Fees as defined in the Prior Agreement.
2. Service and Equipment Fees - $[*]
3. PC and Network Setup Fees - $[*]
PAYMENT TERMS: CONVERSION ACCEPTANCE (EST. [*]) - [*]
1. License and other fees
- License - $[*]
- Implementation Support
- $[*]
- HUBLINK - $[*]
- HUBLINK Maintenance - $[*]
- PC and Network Setup Fee - $[*]
2. Monthly Support Fee - $[*]
3. Service Equipment Fees - $[*]
PAYMENT TERMS: [*] - [*]
1. License and other fees
- License- $[*]
- Implementation Support - $[*]
- HUBLINK - $[*]
- HUBLINK Maintenance - $[*]
- PC and Network Set-Up Fee - $[*]
2. Service and Equipment Fees - $[*]
3. One-time Cash Payment Risc/6000 - [*]
PAYMENT TERMS: [*] - [*]
1. License and other fees
- License - $[*]
- Implementation Support - $[*]
- HUBLINK - $[*]
- HUBLINK Maintenance - $[*]
- PC and Network Set-Up Fee - $[*]
* Confidential Treatment Requested
<PAGE> 6
2. Service and Equipment Fees - $[*]
3. MPOWER Annual Maintenance Fee - $[*]
PAYMENT TERMS: [*] - [*]
1. License and other fees
- License-$[*]
- Implementation Support - $[*]
- HUBLINK - $[*]
- HUBLINK Maintenance - $[*]
2. MPOWER Annual Maintenance Fee - $[*]
* Confidential Treatment Requested
<PAGE> 1
EXHIBIT 10.14
EMPLOYERS MUTUAL, INC.
August 5, 1999
[LOGO]
9716 SAN JOSE BOULEVARD
SUITE 200
JACKSONVILLE, FL 32257-5436
TELEFAX 904 262-0663
TELEPHONE 904 260-0035
Lorine R. Sweeney
President & CEO
Xcare.net
6400 S. Fiddler's Green Circle
Englewood, CO 80111
Dear Lorine:
This letter is to confirm our agreement regarding the purchase by and
assignment to our company, Employers Mutual, Inc. ("EMI") of certain
assets of Group Brokerage, Inc. and/or Brokerage Services, Inc.
(collectively, "GBI/BSI").
Upon the payment to you of $[*], you will terminate the lease of PC's
and other equipment as described in the addendum to processing and
services agreement, dated July 25, 1997 releasing GBI/BSI of all
obligations thereunder, and will sell and transfer title to EMI of these
PC's and other equipment as described in the addendum to processing and
services agreement, dated July 25, 1997 free and clear of all liens and
encumbrances, such sale and transfer to be evidenced by a bill of sale,
in form satisfactory to EMI, containing a warranty and fall indemnity
with respect to title and freedom from claims of others.
Upon the payment to you of $[*], you will hereby agree that all
obligations of GBI/BSI under its software license as described in the
addendum to processing and services agreement, dated July 25, 1997 are
thereupon terminated and that EMI may thereafter use and obtain the
benefits of such license for a period of three (3) months (as the same
may be extended from month to month, "the Extension Period"). Any
additional months beyond these three will be billed at $[*] per month.
Upon the payment to you of $[*], you hereby acknowledge the accord and
satisfaction of all other receivables due or to become due from GBI/BSI.
EMI will continue to pay the GBI/BSI monthly support fee of $[*] during
the Extension Period, at which time the support fee will be renegotiated
pursuant to EMI's contract with you.
EMI agrees to continue to pass through the amounts billed by Xcare for
programming the Mutual of Omaha electronic file transmission program to
Mutual of Omaha, and to pay the same to Xcare when received from Mutual
of Omaha.
* Confidential Treatment Requested
<PAGE> 2
EMPLOYERS MUTUAL, INC.
Lorine R. Sweeney 2 August 5, 1999
You also confirm that GBI/BSI's members will be converted to EMI's Xcare
software license without payment of the $[*] per member specified in
EMI's contract with you.
By their signatures below, GBI/BSI do hereby consent and agree to the
terms of this letter agreement.
If this letter properly documents our agreement, please sign below and
return this letter and a copy of the above described bill of sale to me
via facsimile to be followed by the original via federal express).
Sincerely,
/s/ Robert B. Finch
----------------------------
Robert B. Finch
Vice President
Consented and Agreed to:
Group Brokerage, Inc. Brokerage Services, Inc.
By: /s/ Timothy R. Fischer By: /s/ James L. Henry
------------------------ ------------------------
Name: TIMOTHY R. FISCHER Name: JAMES L. HENRY
----------------------- -----------------------
Title: President Title: President
---------------------- ----------------------
Date: 8-6-99 Date: 8-6-99
----------------------- -----------------------
Agreed to:
Xcare.net
By: /s/ Lorine Sweeney
-------------------------
Name: LORINE SWEENEY
-----------------------
Title: President and CEO
----------------------
Date: 8-6-99
-----------------------
* Confidential Treatment Requested
<PAGE> 1
EXHIBIT 10.15
MASTER LICENSE AND SERVICES AGREEMENT
This Agreement is catered into as of this 24th day of June, 1998, by and
between Employers Mutual, Inc., a Florida corporation with its principal place
of business located at 9715 San Jose boulevard, Suite 200, Jacksonville, FL
32257 (hereinafter referred to as "EMI"), and MPOWER Solutions Inc., a Delaware
corporation with its principal place of Business located at 2305 Renard Place,
S. E., Suite 128, Albuquerque, New Mexico 87106 (hereinafter referred to as
"MPOWER"). EMI together with its parent corporation, McCreary Corporation, a
Florida corporation with its principal place of business located at 700 Central
Parkway, Stuart, Florida 34994 ("McCreary") and together with McCreary's parent
corporation, FPIC Insurance Group, Inc., a Florida corporation with its
principal place of business located at 1000 Riverside Avenue, Jacksonville,
Florida 32204 ("FPIC"), shall jointly and severally be hereinafter referred to
as "Customer".
WHEREAS, MPOWER is in the business of providing automated managed health
care information services and licensing software to businesses providing managed
health care and insurance services, and desires to provide such services, and
license such software, to EMI, subject to the terms hereof; and
WHEREAS, Customer is in the business of providing managed heath care and
insurance services to its customers and desires to use the software licensed By,
and the services of MPOWER, subject to rile terms hereof, and
WHEREAS, EMI has previously engaged MPOWER to provide Remote Processing
Services as set forth in the Processing and Services Agreement dated as of
January 1, 1996 and any amendments hereto ("Prior Agreement"), and whereas EMI
wishes to enter into this Agreement to license directly the MPOWER software.
NOW, THEREFORE, in consideration of the mutual promises made, the terms
and conditions hereunder described and or her valuable consideration, the
parties agree as follows:
1. DEFINITIONS
1.1 As used in this Agreement, the following terms shall have the
meanings indicated unless the context clearly requires otherwise;
(a) "Core Services" shall mean those services provided by MPOWER (as
described and set forth in Exhibit 1) in consideration of Customer's payment of
the License Fees.
Page 1 of 59
<PAGE> 2
(b) A "Critical Failure" shall mean a verifiable Nonconformity in
the Shelf Version of the MPOWER Software (or verifiable failure of the MPOWER
System hardware if the problem arises with respect to Remote Processing) which
has a material impact on Customer's mission critical system related functions. A
Critical Failure may include, but is not limited to, the inability of Customer
to generate checks, complete failure of availability of the on-line system,
inability to perform on-line adjudication of any types of claims, or incorrect
adjudication of any types of claims.
(c) "Customer Processing" shall mean the use of the MPOWER Software
on Customer equipment, as set forth herein.
(d) "Derivative Work" shall mean any computer program, application,
interface or related documentation of any kind that is based, to any extent, on
MPOWER Software, or any component part thereof.
(e) "Documentation" shall mean collectively, the System
Documentation, the Functional Documentation and the User Documentation.
(f) "Effective Date" shall mean the date first set forth above.
(g) "Expenses" shall mean any reasonable out of pocket expenses,
including without limitation, travel and travel-related expenses, incurred by
MPOWER in connection with the performance of this Agreement.
(h) "Fees" shall mean the fees for MPOWER. Services as described and
set forth in Exhibit 2 of this Agreement attached hereto.
(i) "General System Enhancements" shall mean enhancements, revisions
or updates to the MPOWER Software that are made available generally to licensees
of the MPOWER Software as part of the Maintenance Fee (MF), as and when such
enhancements, revisions or updates are made available generally, and shall not
include any separate products where MPOWER charges a separate license fee to its
licensees.
(j) "Implementation" shall mean the conversion and installation of
Customer's managed health care and/or insurance processing from remote
processing to Customer Processing using the MPOWER(TM) system as set forth in
this agreement.
(k) "Implementation Date" shall mean the actual date that the first
Member transaction is processed, by Customer on Customer's equipment.
"Incremental Support" shall mean Supplemental Services.
(m) "License" shall mean the license granted by MPOWER to Customer
for the MPOWER Software, to the extent set forth herein.
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<PAGE> 3
(n) "License Fees" shall include the Initial License Fee(s) ("ILF"),
the Maintenance Fee ("MF"), and any applicable License Extension Fee(s), as
hereinafter defined or described in Exhibit 2 herein.
(o) "Maintenance Services" shall include the "Maintenance Support
Services".
(p) "Maintenance Support Services" shall mean the post-production
services provided by MPOWER as part of the Core Services that do not provide for
upgrades or general enhancements to the MPOWER Software, which are provided
through the Maintenance Fee.
(q) "Member" shall mean an individual who is as of a certain
effective date eligible for certain benefits provided by or through Customer or
a Related Party, which individual becomes eligible either (a) directly as the
subscriber to a Customer or a Related Party sponsored and administered insurance
or benefit program, Co) as an eligible employee to an employer sponsored benefit
plan administered in whole or in part by Customer or a Related Party, or (c) as
a beneficiary of a government sponsored benefit plan administered in whole or in
part by Customer or a Related Party, or (d) indirectly as a dependent of that
subscriber, employee or beneficiary. For example, in a family of four (4)
individuals, where the employee is the primary participant individual, the
employee, the spouse and the two (2) dependent children are each a Member for a
total of four (4) Members.
(r) "Member Month" shall mean, respectively, as of the first of each
applicable month, the number of active eligible Members as enrolled and entered
by Customer, as of a given effective date, onto the MPOWER System (for Remote
Processing) or processed using the MPOWER Software (for Customer Processing,
adjusted for actual retroactive Customer Member enrollment or disenrollment
occurring in the prior twelve (12) months.
(s) "MPOWER Services" shall mean services furnished by MPOWER
according to the terms of this Agreement and attached Schedules and other
services described in any Work Order.
(t) "MPOWER Site" shall mean the site of the MPOWER System,
currently located at 2305 Renard Place, S. E., Albuquerque, New Mexico, 87106.
(u) "MPOWER Software" shall mean the copies of the MPOWER
Client-Server Software licensed by Customer under this Agreement. MPOWER
Software is marketed under the trade name "MPOWER(TM)"
(v) "MPOWER Client-Server Software" shall mean the
Page 3 of 59
<PAGE> 4
MPOWER(TM) software owned by MPOWER, migrated to and operating on the IBM
RS/6000 computer (or operating on other hardware to which MPOWER(TM) has been
migrated and on which the MPOWER(TM) software is generally marketed under the
name of MPOWER(TM), and any updates, revisions, enhancements, or additions
thereto supplied by MPOWER, (including but not limited to those updates,
revisions, enhancements, or additions supplied to Customer pursuant to Work
Orders under this Agreement) or made by Customer and incorporated by MPOWER, as
described in Section 2.7 of this Agreement, and shall not include any separate
products for which MPOWER charges a separate licence fee for such products. The
subsystems included with the MPOWER Client-Server Software are set forth in
Exhibit 2.
(w) "MPOWER Standard Interface Specifications" shall mean the MPOWER
written specifications for the file size, format, blocking factors, field
content and frequency of batch transmission for interfacing software programs
for data exported from or imported into the MPOWER(TM) software-maintained
databases.
(y) "Nonconformity" shall mean a failure of a specific Release of
the MPOWER Software to materially conform to the User Documentation and
Functional Documentation of such Release.
(z) "Ongoing Basic Support" shall be the support provided by MPOWER
in consideration of the License Fees and the Maintenance Fee and limited by the
conditions of Core Services as defined in Exhibit 1 and which includes the
services described in Exhibit 1, attached hereto.
(aa) "Related Party" shall mean an entity as to which Customer
directly owns a greater than fifty percent (50%) equity interest in the assets
of such entity, but excludes any entity as to which another co-owner, partner or
joint venture participant or affiliate is a competitor of MPOWER as set forth in
Exhibit 5.
(bb) A "Release" shall mean a new version or new release of the
MPOWER Software containing General System Enhancement that is made available to
MPOWER's customers generally.
(cc) A "Release Date" is the date that a Release is made available
to MPOWER's customers generally.
(dd) "Remote Processing Fees" shall mean the Fees for Remote
Processing set forth in Exhibit 2
(ee) "Remote Processing Services" shall mean the MPOWER Services
which allows Customer's use of the MPOWER Software by remote access to the
MPOWER System at the MPOWER Site, if Customer and MPOWER agree to the terms for
Remote Processing Services set forth in Exhibit 2.
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<PAGE> 5
(ff) "Shelf Version" shall mean the Releases of the MPOWER Software
which are accepted by Customer pursuant to Section 4 herein.
(gg) "Source Code Buyout Option" shall mean the option of Customer
to acquire the right to make modifications to the source code of the MPOWER
Software and to no longer pay the Maintenance Services Fees, in accordance with
the Source Code Buyout Option Fees stated in Exhibit 2 hereto.
(hh) "Supplemental Service(s)" shall mean any support or services
required by Customer and agreed to be provided by MPOWER in addition to that
provided as part of the License, as fully specified in each Work Order, which
Supplemental Services may include, but not be limited to, conversion support,
modification and enhancements, and system set-ups.
(ii) "System Documentation" shall mean the MPOWER system
documentation provided to Customer pursuant to the terms of this Agreement. An
outline of the current System Documentation is set forth in Exhibit 3 attached
hereto.
(jj) "User Documentation" shall mean the MPOWER user documentation
provided to Customer pursuant to the terms of this Agreement. An outline of the
current User Documentation is set forth in Exhibit 3 attached hereto.
(kk) "Work Order" shall mean a document that is separately executed
by both parties that authorizes MPOWER to perform Supplemental Services or other
services for Customer and obligates Customer to pay for such Supplemental
Services or other services under the terms of that separate document, and which
document is incorporated and made part of this Agreement.
(ll) "Workaround" shall mean a change in the procedures followed or
data supplied to avoid a Nonconformity without materially impairing performance
of the MPOWER Software.
2. MPOWER SOFTWARE; LICENSE; CORE SERVICES
2.1 MPOWER Software License.
MPOWER grants to EMI on behalf of Customer a nonexclusive,
non-transferable (except as specified herein) license (the "License") to use one
(1) production copy of the MPOWER Software on one (1) IBM R.S/6000 computer at a
single site for Members while this Agreement is in effect, which MPOWER Software
includes the Documentation, subject to the terms and conditions set forth
herein.
Page 5 of 59
<PAGE> 6
(a) MPOWER shall prepare and provide Customer either one (1) paper-based
copy or one (1) electronic copy of the User Documentation and Functional
Documentation for the MPOWER Software and update same as required due to
enhancements, upgrades, error correction or other changes made by MPOWER to the
MPOWER Software.
(b) Until such time as EMI exercises the Source Code Buyout Option,
EMI's license extends only to the right to use the object code of the MPOWER.
Software and nor to make modifications to the source code of the MPOWER
Software, even though the source code to the MPOWER Software may be resident on
a Customer computer for purposes of compiling, ease in debugging, or for some
other reason of operational ease, integrity or efficiency.
2.2 Payment.
In consideration of the License, Customer shall timely pay the ILF, the MF, and
the License Extension Fees in accordance with Exhibit 2. The ILF shall extend to
Members as of the date hereof and shall also include Members added to Customer's
business as a result of internal growth of such business. EMI may acquire a
license extension ("License Extension") to cover Members added as a result of
merger or acquisition, either of Customer, or of another corporation or of a
block of business by Customer from another corporation, by payment of the
License Extension Fee in accordance with Exhibit 2.
2.3 Scope of Use.
(a) Customer, shall use the MPOWER Software and Documentation solely for
its own use as a provider or administrator of managed health care and/or other
insurance services to its Members, solely as expressly set forth herein,
pursuant to the terms herein and nor for the behest of any other entity, and
further subject to the Related Party restrictions in the License granted.
(b) Customer shall have the right to provide the use of certain limited
functions and features of the MPOWER Software, as described in the
Documentation, to its clients, including Members, providers of health care
services to Members, the employers of Members, which employers have signed a
contract with Customer to pay for health care services or the administration of
benefit plans for their employees, or government agencies that have signed a
contract With Customer for Members for which Customer provides administration
services, and to providers of health care services, subject to the
confidentiality restrictions set forth in Section 12 of this Agreement.
(c) Customer shall not copy the MPOWER Software or permit same to be
copied, except for production copies for use within the restrictions of the
License granted herein, and for a reasonable number of backup and test copies:
(i.) for the specific data center(s) where the MPOWER Software will be installed
where Customer is performing Customer Processing, and (ii.) for testing and
modification of the MPOWER Software.
Page 6 of 59
<PAGE> 7
Customer shall promptly notify MPOWER in writing as to the number of production
and test copies and location of said copies of the MPOWER Software which it
intends to make in each instance.
(d) In addition, Customer shall be permitted to make a reasonable number
of copies of the User Documentation solely for Customer's internal use and for
distribution to Related Parties and non-Related Parties pursuant to Section
12.2, not to exceed one (1) copy per workstation, and only if the original
copyright and other proprietary rights notices are preserved.
(e) In addition, Customer shall be permitted to make a reasonable number
of copies of the Functional Documentation for Customer's internal use and {or
distribution to Related Parties pursuant to Section 12.2 solely for use by
business or technical analysts with a need to know and only if the original
copyright and other proprietary rights notices are preserved.
(f) Furthermore, Customer shall be permitted to make a very limited
number of copies, but not more than five (5) of the System Documentation solely
for Customer's internal use by senior business or technical analysts with a need
to know and only if the original copyright and other proprietary rights notices
are preserved and if Customer maintains such System Documentation under the
tightest security and destroys copies that are no longer needed.
(g) Notwithstanding anything herein to the contrary, in no event shall
Customer allow any third party to copy the System Documentation.
(h) Distribution of the Functional Documentation and of the System
Documentation is to be tightly controlled, subject to a need to know. No
identifying marks, copyright or other proprietary right notices may be deleted
from any copies of the MPOWER Documentation and all backup copies of the MPOWER
Software created shall include all such notices.
(i) MPOWER Software used for Customer Processing and testing of the
MPOWER Software or of Customer data to be used with the MPOWER Software may be
temporarily transferred to backup equipment owned by Customer or by a third
party provider of disaster recovery services and used thereon only for so long
as the Customer site is inoperative or Customer is testing the backup recovery
process itself. The use of such third party provider of disaster recovery
services shall not require the consent of MPOWER provided such provider agrees
to be bound by the confidentiality restrictions set forth herein, and is not a
competitor of MPOWER as set forth in Exhibit 5. Simultaneous use of more than
the authorized number of copies of the MPOWER Software is expressly prohibited.
(j) Customer shall not modify the MPOWER Software (except as set forth
in Section 2.7) or the Documentation, nor translate, or adapt the MPOWER
Software or the
Page 7 of 59
<PAGE> 8
Documentation in any way or use it to create a Derivative Work or permit the
foregoing. Except as set forth in Section 8.2 with respect to the Shelf Version,
MPOWER shall nor be responsible for the functioning of updates, revisions,
enhancements, additions or conversions or otherwise maintaining the MPOWER
Software if the MPOWER Software is modified by Customer or if Customer installs
or attempts to install software, other than MPOWER Software, which interfaces
with the MPOWER Software in a manner which is inconsistent with MPOWER standard
interface specifications, or writes to any data files maintained by the MPOWER
Software. Customer shall be solely responsible for the results of such
modifications or interfaces, including the integrity of data used or generated
by the MPOWER Software. In the event that Customer makes a permitted
modification or enhancement to the MPOWER Software, as set forth in Section 2.7
herein, and it is subsequently determined that such modification or enhancement
was the cause of a Nonconformity in the MPOWER Software, then MPOWER shall be
reimbursed at the Supplemental Service Fees rates set forth in Exhibit 2 for the
time spent in determining that such modification or enhancement was the cause of
the Nonconformity, and MPOWER agrees to provide Supplemental Services support as
specified on a Work Order to correct such Nonconformity. Notwithstanding the
above, MPOWER acknowledges that there are certain permitted interfaces to third
party software that MPOWER supports and that are provided as part of the MPOWER
Software or as permitted interfaces thereto, as outlined in the Documentation,
or in an applicable Work Order or contract addendum. If an error occurs to the
data as a result of Customer's use of these interfaces, then MPOWER will provide
support to those interfaces in the same way that it supports the MPOWER
Software.
2.4 General System Enhancements. In consideration of the ILF and MF,
MPOWER shall provide to Customer General System Enhancements, if and when such
General System Enhancements are made available to licensees of the MPOWER
Software generally, except as otherwise provided in Exhibit 2. Any General
System Enhancements supplied to Customer by MPOWER shall become part of, and
subject to, this Agreement and License. MPOWER shall only provide General System
Enhancements for the then most current Release of the MPOWER Software. In
addition, MPOWER agrees also to provide support for the one prior Release
immediately preceding the most current Release of the MPOWER Software and to
provide support for any other Releases for up to one (1) year from the Release
Date of such other Releases. During any applicable support period, support for
any such prior Release of the MPOWER Software that has been replaced or modified
by General System Enhancements or by a subsequent Release shall be limited to
correction of identified and reproducible defects in the Shelf Version of such
prior Release from the published specifications therefor. MPOWER shall not be
obligated to provide General System Enhancements for any Release other than the
most current Release. Any additional MPOWER Services provided in connection with
an older Release of the MPOWER Software shall be provided as Supplemental
Services.
2.5 Correction of Nonconformities. In consideration of the ELF and MF,
and subject to the terms of this Agreement, upon written notification by
Customer of a Nonconformity in the most current Release of the MPOWER Software
or in the one prior
Page 8 of 59
<PAGE> 9
Release immediately preceding the most current Release of the MPOWER Software,
MPOWER will analyze the Nonconformity and notify Customer of its estimate of
when and how such Nonconformity will be corrected or any Workaround provided and
MPOWER. shall use commercially reasonable efforts to correct such Nonconformity
in accordance with the procedures and priorities established in Exhibit 1 under
Help Desk. Notwithstanding the prior sentence, MPOWER's sole obligation
hereunder shall be limited to correcting identified and reproducible
Nonconformities in the Shelf Version of the MPOWER Software in accordance with
Section 4 herein and the relevant portions of Exhibit 1 which deal with
Definitions, Support and Time Frame for Resolution of issues logged through the
MPOWER Help Desk.
2.6 Proprietary Rights and Confidentiality.
(a) MPOWER represents and Customer acknowledges that the MPOWER
Software, including the Documentation, is the sole and exclusive
property of MPOWER, including, but not limited to, all applicable
rights to patents, copyrights, trademarks and trade secrets
inherent therein and appurtenant thereto, and MPOWER retains
title to the MPOWER Software and any copies thereof. Customer is
not purchasing title to the MPOWER Software or copies thereof,
but rather is being granted a license to use the MPOWER Software
pursuant to the terms herein. Customer shall not sell, License,
transfer, or otherwise make available (except as expressly
provided herein) any portion of the MPOWER Software to others,
including but not limited to Related Parties and non-Related
Parties for which Customer is providing processing services
pursuant to the terms hereof, nor permit the foregoing, except
for disclosure of the MPOWER Software to Customer consultants and
auditors pursuant to the provisions of Section 12.2 herein, and
the disclosure of the User Documentation to Related Parties and
non-Related Parties, pursuant to the provisions of Sections 2.3
and 12.2 herein.
(b) MPOWER represents and Customer acknowledges that all
information, data, designs, the structural definitions of any
system setups, benefit plans, provider contracts, fee groups, ad
hoc reports, letter formats, sample letter, content, business
process workflow diagrams, and any other structural templates and
other similar information provided by, developed or reviewed by
or in conjunction with MPOWER, or used by MPOWER in assisting
Customer in the installation, implementation or on-going use of
the MPOWER Product, and methodologies related thereto
("Proprietary Information") are the exclusive property of MPOWER
or MPOWER's suppliers and that such Proprietary Information is
confidential, has tangible value and includes trade secret
information of MPOWER and/or MPOWER's suppliers. MPOWER
Page 9 of 59
<PAGE> 10
and/or MPOWER's suppliers shall retain all rights to the
Proprietary Information, including all copyright fights therein,
except to the extent to which MPOWER grants rights to Customer to
use the Proprietary Information pursuant to this Agreement.
Customer may not create Derivative Works based upon the
Proprietary Information in whole or in part. All improvements,
enhancements and modifications to the Proprietary Information
shall be owned exclusively by MPOWER or MPOWER's suppliers.
Without MPOWER's prior written consent, Customer shall nor
decompile, disassemble or reverse engineer any Proprietary
Information.
(c) Notwithstanding the above, Customer and MPOWER acknowledge
that the structural definitions of any system setups, benefit
plans, provider contracts, fee groups, ad hoc reports, letter
formats, sample letter content, workflow diagrams of Customer
business processes, and any other structural templates, that have
been provided, developed, reviewed or verified in whole or in
part by or with the support of MPOWER, its employees or agents,
do not constitute Proprietary Information of Customer within the
meaning of this Section 2,6, but that the License to the MPOWER
Software granted in Section 2.1 includes the right to use under
license such Proprietary Information; provided, however, that
specific provider and benefit contract rates, the names,
demographic information, contractual relationships, and medical
information of any group, member, provider or other entity with a
contractual relationship with Customer shall be considered
Proprietary Information of Customer, unless such information is
available through public sources (that have not been released by
or through the agency of MPOWER) or through publicly available
filings with any insurance or health care regulatory agency or
with any industry accreditation or reporting body.
(d) Customer agrees to use at least commercially reasonable
methods to secure and protect the MPOWER Software and the
Documentation as MPOWER Confidential Information as defined
herein, in a manner consistent with the manner in which it
protects its own most sensitive confidential information.
(e) MPOWER agrees to use at least commercially reasonable methods
to secure and protect the Confidential Information of Customer as
defined herein, in a manner consistent with the manner in which
it protects its own most sensitive confidential information.
2.7 Modification by Customer. In the event that Customer exercises its
option for the Source Code Buyout Option, Customer shall have the right to
modify the MPOWER
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<PAGE> 11
Software for Customer Processing without notifying MPOWER and without obtaining
MPOWER's consent provided that (i.) Customer's ownership of such modifications
shall be subject to MPOWER's proprietary rights in the MPOWER Software and to
the provisions of this Section, (ii.) MPOWER's warranties and support
obligations related to the MPOWER Software shall apply only to the Shelf
Version, and (iii.) Customer shall not market or distribute such modifications
(except Customer may distribute descriptions and/or documentation of such
modifications to Related Parties and non-Related Parties) which distribution or
marketing shall be deemed a violation of MPOWER's proprietary rights in the
MPOWER Software. If Customer desires MPOWER to continue to provide support
services, Customer shall offer all modifications made by Customer to MPOWER for
inclusion in the MPOWER Software, subject to the mutual agreement by the parties
as to the consideration, if any, to be paid to Customer in return for Customer
costs and efforts in development of such modification(s). MPOWER shall have the
right to distribute such modifications as General System Enhancements, and if
MPOWER does so, such modification shall be covered by the MPOWER warranty and
support obligations as set forth in this Agreement. Subject to the foregoing,
Customer agrees that all modifications accepted by MPOWER in writing shall be
owned by MPOWER. All right, tide and interest in such accepted modifications are
hereby irrevocably assigned by Customer to MPOWER. All such modifications shall
belong exclusively to MPOWER, with MPOWER having the right to obtain and to hold
in its own name copyright registrations, patents and such other intellectual
property protection as may be appropriate to the subject matter and any
extensions and renewals thereof. Customer agrees to give MPOWER reasonable
assistance, at MPOWER's expense, required to perfect MPOWER's rights set forth
herein.
2.8 Support for Modifications.
(a) Modifications Not Included in the MPOWER Software; Support
Costs. In the event (i.) MPOWER modifies or enhances the MPOWER Software at
Customer's request pursuant to Section 3.2, or Customer modifies the MPOWER
Software pursuant to Section 2.7; and (ii.) such modifications or enhancements
do not have general applicability for MPOWER's customers and are not offered as
General Systems Enhancements, in order to provide support for such modifications
and enhancements, MPOWER will need to agree, in writing, to provide support for
such modifications and enhancements, and Customer agrees that there may need to
be an increase in the MF and/or the Fees for Maintenance Support Services. In
the event that MPOWER agrees, in writing, to provide such support, and
reasonably believes that an increase in the MF or the Fees for Maintenance
Support Services is required due to Customer Specific modifications, the parties
shall meet and discuss the nature of the increase. In the event that MPOWER does
not agree to provide such support, or if the parties fall to agree upon the
amount of the increase to the MF or the Fees for Maintenance Support Services,
MPOWER shall have no obligation to support such modifications and enhancements.
(b) Modifications Included in the MPOWER Software. Modifications
made to the MPOWER Software either by Customer, pursuant to Section 2.7, or by
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<PAGE> 12
MPOWER, pursuant to Section 3.2, which are included in the MPOWER Software as
General System Enhancements by MPOWER shall be supported by MPOWER as set forth
in Section 2.4.
2.9 Core Services. In consideration of the payment of the License Fees
by Customer, M. POWER shall, during the term of this Agreement, provide the Core
Services set forth in Exhibit 1, except as otherwise provided in Exhibit 2.
3. SUPPLEMENTAL SERVICES
3.1 Supplemental Services. Supplemental Services may include as
applicable (i.) conversion services to convert Customer data; (ii.) system setup
such as the establishment of benefit plans, pricing information, tracking
information, capitation rules, procedure and diagnosis code files and fund
accounting and billing rules; (iii.) services for modifying the MPOWER Software
for enhancements and modifications; (iv.) training support after initial
training; (v.) consulting services; and (vi.) project coordination and
management for the above Supplemental Services. All such Supplemental Services
shall be described in an applicable Work Order and shall be undertaken by MPOWER
only pursuant to a Work Order. For services requested by Customer which are
beyond the scope of the services generally contemplated hereunder, for special
circumstances, or if the geographic location in which any MPOWER services are to
be provided for Customer demands higher labor or resource costs, MPOWER will
provide Customer with written notice, and MPOWER reserves the right to propose a
new fee structure or different rates, which fee structure or rates will be
detailed in the appropriate Work Order.
3.2 Enhancements and Modifications Under Work Orders. Pursuant to this
Section 3.2 and the applicable Work Order, Customer may identify enhancements or
modifications which it desires to have MPOWER make to the MPOWER Software, such
as integration to other software systems, modifications for legal requirements,
and other functional enhancements. Customer shall be responsible for providing
to MPOWER a description of the changes which Customer requests to be made in the
MPOWER Software. MPOWER shall have the right to design any Customer requested
enhancements or modifications in a way which, in MPOWER's reasonable opinion,
will not adversely affect the MPOWER Services or the structure or performance of
the MPOWER Software or will have general applicability. In the event MPOWER
agrees to provide such enhancements or modifications to the MPOWER Software,
such enhancements or modifications shall be owned by MPOWER and licensed to
Customer as part of the MPOWER Software subject to Section 2. Resources utilized
by MPOWER in providing services pursuant to any such requests will be detailed
in applicable Work Orders.
3.3 Data Integrity. Customer acknowledges that, although MPOWER may, as
part of Supplemental Services, perform certain conversion tasks (for which
MPOWER shall be responsible), including development of files and programs for
the conversion of Customer data into formats for the MPOWER Software, the
quality and integrity of all Customer data
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<PAGE> 13
provided to MPOWER, and the results obtained or resulting from poor or
inaccurate data are solely Customer's responsibility.
3.4 Access. In order for the Supplemental Services to be completed in a
timely and successful manner, Customer shall provide MPOWER with such access to
applicable information and key Customer personnel as MPOWER may reasonably
request from time to time during the period the Supplemental Services are being
performed. In connection with the Supplemental Services, MPOWER will be entitled
to submit various materials, including time schedules, business requirements,
specifications, and test results, for Customer's review, comment, sign-off, or
approval. Customer will respond to each such request as soon as reasonably
practicable, and, in any event, in a time frame consistent with the applicable
project plan, and shall not unreasonably withhold any sign-off or approval
requested by MPOWER.
4. ACCEPTANCE
For all deliverables, including the MPOWER Software and General System
Enhancements and Customer-specific enhancements and modifications provided
pursuant to an applicable Work Order, whether for MPOWER Processing or for
Customer Processing, Customer shall, within thirty (30) days of receipt of the
deliverable, or within such other time period as may be agreed to in writing by
the parties, review and, if applicable, test the deliverable and approve it or
notify MPOWER in writing of non-approval, documenting in reasonable detail any
and all material defects in the deliverable which prevent it from conforming to
the Documentation or specifications therefor, as applicable. Work Orders for
Customer enhancement requests will include specification of an acceptance text
period that is mutually agreed to by Customer and MPOWER and which shall be
reflective of the estimated size and complexity of the deliverable specified by
the Work Order. MPOWER shall, upon receipt of such notice, use its best efforts
to correct any such material failures and shall notify Customer of its
completion thereof. Customer shall, after receipt of said notice, review the
deliverable and report. Customer shall do so promptly using diligent efforts,
but in no event shall such process exceed fifteen (15) days. The above cycle
shall be repeated as is necessary. A deliverable shall be deemed accepted by
Customer if either:
(a) Customer notifies MPOWER in writing of its acceptance and the
acceptance date shall then be the date of such notice;
(b) Customer fails to notify MPOWER in writing within the applicable
time period of any material defect in the deliverable and the acceptance date
shall then be the last day of said period; or
(c) Customer places in productive use any portion of the deliverable
and the acceptance date shall then be the thirtieth day of such productive use.
Productive use for purposes of the foregoing shall not include the use by
Customer of the MPOWER Software in a parallel processing environment where
Customer is utilizing the MPOWER Software to
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<PAGE> 14
process a limited number of Members during a reasonable period of time for the
purpose of testing the MPOWER Software. Furthermore, notwithstanding the above,
the acceptance date shall not be considered completed as long as any online
production processing is still being conducted by Customer on the MPOWER
mainframe because of MPOWER's inability to transfer all of Customer's business
processing from the mainframe platform to Customer's client-server platform.
Customer agrees that it will so test any modifications or enhancements
made by MPOWER for Customer under an applicable Work Order and made part of a
Release and all General System Enhancements. The version and release of the
MPOWER Software so accepted by Customer shall be deemed the current Shelf
Version. Customer and MPOWER shall maintain copies of each Shelf Version. The
obligation of MPOWER to maintain any enhancements or modifications made
specifically for Customer that are nor part of either General System
Enhancements or a Release shall be specified in the Work Order that authorizes
such enhancements or modifications or in a subsequent Work Order.
5. FEES AND CHARES
5.1 Fees and Charges. The Fees for the MPOWER License and Services are
described in Exhibit 2 attached hereto.
5.2 Timeliness of Payment. All Fees payable by Customer hereunder shall
be paid by Customer on a monthly basis. Any applicable Remote Processing Fees
shall be due and payable in advance at the beginning of each month. Any other
sum due MPOWER hereunder for which a time for payment is not otherwise specified
will be due and payable within twenty (20) days after the date of Customer's
receipt of an invoice therefor from MPOWER. If Customer fails to pay any amount
due within thirty (30) days from the due date, late charges of 1 1/2% per month
shall also become payable by Customer to MPOWER. In addition, failure of
Customer to fully pay any amount due within sixty (60) days after the due date
shall be deemed a material breach of this Agreement and shall be sufficient
cause for immediate termination hereof. If Customer fails to pay, when due, any
amount payable hereunder or fails to fully perform its obligations hereunder,
Customer agrees to pay, in addition to any amount past due, plus interest
accrued thereon, all reasonable expenses incurred by MPOWER in enforcing this
Agreement including but not limited to all expenses of any legal proceeding
related thereto and all reasonable attorneys' fees incurred in connection
therewith. No failure by MPOWER to request any such payment or to demand any
such performance shall be deemed a waiver by MPOWER of Customer's obligations
hereunder or a waiver of MPOWER's right to terminate this Agreement.
5.3 Fee Changes. Not Applicable.
5.4 Taxes. There will be added to any charges under this Agreement, and
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<PAGE> 15
Customer will pay to MPOWER, amounts equal to any taxes, however designated or
levied, based upon such charges, or upon this Agreement or the services or
materials provided hereunder, or Customer's use thereof, including state and
local sales, use, privilege or excise taxes based on gross revenue, and any
taxes or amounts in lien thereof paid or payable by MPOWER in respect of the
foregoing, but excluding any franchise taxes, taxes based on the adjusted gross
income of MPOWER, and employee withholding, FICA., and other taxes relating to
MPOWER personnel performing services hereunder.
6. PROBLEM RESOLUTION
Subject to the limitations in support for prior Releases provided by
MPOWER as set forth in Section 3 hereof, in the event MPOWER receives notice
from Customer of a Critical Failure in the most current Release of the MPOWER
Software or in the one prior Release immediately preceding the most current
Release of the MPOWER Software, pursuant the notice provisions of Section 16.4,
MPOWER agrees to respond to such notice by assigning a qualified individual to
attempt to remedy the Critical Failure, and agrees to use commercially
reasonable efforts to remedy the Critical Failure in accordance with the
provisions of Section 8.2 herein commensurate with the severity of the problem
and the timeliness and quality of information regarding the problem received
from Customer in accordance with the Definition, Support and Time Frame for
Resolution paragraphs of the Help Desk section of Exhibit 1.
7. CUSTOMER RESPONSIBILITIES
7.1 Customer Responsibilities. Customer acknowledges that MPOWER
Software reflects certain interdependent relationships, such as exist among the
data variables, logic rules and system functions of the MPOWER Software.
Customer further acknowledges that it is required and has a responsibility to
understand such data variables, logic rules and system functions, and their
interdependent relationships, and to define for its own purposes such data
variables, logic rules and system functions to the MPOWER Software in such a way
that the MPOWER Software will provide the functionality desired by Customer.
Customer acknowledges that it has or will hire and will maintain on its staff
personnel who are able to understand and define such data variables, logic
rules, system functions and interdependent relationships. Customer further
acknowledges that, even though MPOWER may assist Customer personnel in
performing these tasks, the responsibility for the effective definition and
maintenance of these data variables, logic rules and system functions resides
with Customer and not with MPOWER, unless Customer specifically requests MPOWER
to perform these tasks at the Supplemental Services Fees. Notwithstanding the
foregoing, nothing herein shall relieve MPOWER of responsibility for the
assistance that it may provide to Customer hereunder.
7.2 Testing. Customer acknowledges that it will undertake testing of the
MPOWER Software and of the basic functionality and interdependency of its
customer-
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defined data variables, logic rules and system functions as set forth in Section
4 herein, prior :o commencing use of the MPOWER Software for its business.
7.3 Customer Data. Except as may be provided under an applicable Work
Order, Customer shall be responsible for inputting and ensuring the accuracy,
validity and completeness of all data variables, logic rules, system functions
and Customer data, including but not limited to group, subscriber, Member,
provider, utilization, encounter, claims, capitation, fund accounting, billing,
collection, broker, benefits, product contract, provider contract, provider
fees, standard business measures, and other similar or related data. Customer
shall also be responsible for inputting and ensuring the accuracy, validity and
completeness of all user-defined report definitions, all report and batch
production job specifications and priority scheduling criteria. Customer shall
also be responsible for initiating, monitoring, operating, printing and ensuring
the accuracy, validity, and completeness of all print outputs and file
downloads, including but not limited to all reports, premium bills, checks,
etc., determining how many and on what print stock such outputs are to be
printed or into which files or programs on Customer controlled computers such
files are to be downloaded and manipulated, at Customer's own initiative,
responsibility and risk. Customer hereby acknowledges responsibility for
generally controlling all aspects related to the production, distribution and
control of such outputs. Customer further acknowledges that, notwithstanding the
responsibility of MPOWER to have used due care and diligence in the design and
documentation of the System, the accuracy of Customer's database within the
MPOWER. Software and the accuracy of the several outputs of the MPOWER Software,
including but not limited to, outputs that control the billing, receipt or
expenditure of moneys, will be dependent on the accuracy and use of the data
variables, logic rules, system functions and Customer data input into the MPOWER
Software by Customer and verified by Customer. Notwithstanding the foregoing,
nothing herein shall relieve/MPOWER of responsibility for the assistance that it
may provide to Customer hereunder.
7.4 Other Customer Obligations. In addition to its obligations
hereunder, Customer will on a timely basis:
(a) Establish appropriate priorities for Customer, on a regular
basis and no less frequently than every three months, that relate
to MPOWER Services and communicate the same to MPOWER. Customer
recognizes that changes in such priorities may result in
additional fees hereunder for additional staff, as Incremental
Support, or reordering of other priorities to provide MPOWER
Services within the current Fee structure;
(b) Cooperate with MPOWER by, among other things, making
available, as reasonably requested by MPOWER, management
decisions, information, approvals, and acceptances in order that
MPOWER may properly accomplish its obligations and
responsibilities hereunder;
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(c) Carefully inspect and review all MPOWER generated reports and
other output and notify MPOWER of any incorrect reports or
output;
(d) Personalize, maintain, reproduce and distribute (solely for
Customer's internal use) procedure manuals and documentation used
by Customer personnel in connection with the MPOWER Services and
Software;
(e) Train applicable Customer personnel in the proper use of
MPOWER Software;
(f) Pay all costs of acquisition, installation, use and
maintenance of equipment at Customer's site, as required for the
performance of MPOWER Software and Services;
(g) Properly maintain the Customer equipment at all Customer
sites;
(h) Properly maintain the operating environment, operating
system, network and database software as agreed to between the
parties;
(i) Such other responsibilities as set forth herein.
Customer agrees that to the extent its failure to meet its obligations set forth
in this Section affects the ability of MPOWER to perform MPOWER's obligations
under this Agreement, MPOWER shall be relieved of such obligations.
8. WARRANTIES
8.1 MPOWER warrants that it either owns the rights to the MPOWER
Software or has the right to grant the license to Customer herein, and that it
either owns or has licensed in the manner contemplated by this Agreement any
other software used in the provision of the MPOWER Services to Customer,
including but not limited to the enhancements or modifications provided by
MPOWER pursuant to an applicable Work Order. MPOWER warrants that the MPOWER.
Software, including without limitation each component or part thereof, does not
and will not infringe upon or violate any patent, copyright, trademark, trade
secret or other proprietary or contractual rights of any third party.
MPOWER shall, at its own expense indemnify, defend, settle and hold harmless
Customer and its officers and employees, from and against any and all claims,
damages, losses, liabilities, costs and expenses (including reasonable legal
fees) directly arising out of any such claim that the Shelf Version of the
MPOWER Software infringes upon or violates any United States patents,
copyrights, trademarks, trade secrets or other proprietary, contractual or
intellectual property rights of any third party; provided, however, Customer
must send MPOWER written notice of any claim relating to such infringement
promptly after Customer receives
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notice of the same and Customer fully cooperates, at MPOWER's expense, in the
defense of any such claim. Following such notice of a claim or of a threatened
or actual suit, MPOWER shall, upon written notice to Customer and at MPOWER's
expense, either: (a) procure for Customer the right to continue using such
MPOWER Software; (b) replace or modify same so that it becomes non-infringing;
or, (c) grant to Customer a refund for said MPOWER Software based upon a five
(5) year straight line depreciation if neither (a) nor (b) are reasonably
possible, in MPOWER's sole discretion. The foregoing states the entire liability
of MPOWER and the sole remedy of Customer with respect to any infringement or
claimed infringement by the MPOWER Software.
Notwithstanding the foregoing, MPOWER shall not be obligated to defend,
indemnify or hold Customer harmless from and against any claim, suit proceeding
or allegation (i.) asserted by a parent, subsidiary or affiliate of Customer or
any Related Party; (ii.) resulting from Customer's additions to, changes in, or
enhancements or modifications of the MPOWER Software; (iii.) resulting from
Customer's use of the MPOWER Software in combination With non-MPOWER Software,
unless MPOWER has agreed to provide support for the interface in which case,
MPOWER agrees to the warranties described in the applicable Work Order or
contract addendum; or (iv.) resulting from Customer's misuse of the MPOWER
Software.
8.2 MPOWER warrants that the Shelf Version of the MPOWER Software will
function as set forth in MPOWER's User Documentation, including all updates and
enhancements thereto. MPOWER covenants and warrants that all improvement and
enhancements of the MPOWER. Software provided by MPOWER will be compatible with,
and will not materially diminish the features or functions of, or the
specification of the Shelf Version of the MPOWER Software, and that the Shelf
Version of the MPOWER Software will be compatible with the equipment described
in the Documentation. MPOWER warrants that User Documentation shall reflect the
operation of the MPOWER Software, and MPOWER shall, at no additional cost to
Customer, correct any User Documentation that does not conform to this warranty.
If the Shelf Version of the MPOWER Software fails to meet the warranty described
in this Section 8.2 and Customer gives MPOWER notice thereof, MPOWER shall
correct the failure, provided that Customer gives MPOWER derailed information
regarding such failure.
8.3 MPOWER DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, EXCEPT
THOSE WARRANTIES EXPRESSLY SET FORTH IN THIS SECTION 8. MPOWER SPECIFICALLY
DISCLAIMS ANY WARRANTY, EXPRESS OR IMPLIED, AS TO THE MERCHANTABILITY OR FITNESS
FOR. A PARTICULAR PURPOSE OF THE MPOWER SERVICES OR THE MPOWER SYSTEM, OR THE
COMPLIANCE OF THE FOREGOING WITH ANY LAW, REGULATION OR ORDER.
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9. LIMITATION OF LIABILITY
NEITHER PARTY SHALL HAVE ANY LIABILITY WITH RESPECT TO ITS OBLIGATIONS
UNDER THIS AGREEMENT OR OTHERWISE FOR CONSEQUENTIAL, EXEMPLARY, INCIDENTAL OR
PUNITIVE DAMAGES EVEN IF IT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
MPOWER SHALL NOT BE LIABLE FOR ANY CLAIM ARISING FROM TILE USE OF SOFTWARE OR
DATA WHICH HAS BEEN MODIFIED BY ANYONE OTHER THAN MPOWER, NOR FOR ANY CLAIM
ARISING FROM THE USE OF ANY SOFTWARE OR EQUIPMENT DEVELOPED OR MODIFIED BY
CUSTOMER OR WHICH HAS BEEN PROVIDED TO OR ACQUIRED BY CUSTOMER UNDER ANY LICENSE
OR OTHERWISE FROM ANY THIRD PARTY.
EXCEPT AS PROVIDED IN SECTION 8.1 WITH RESPECT TO MPOWER's EXPRESS
OBLIGATIONS TO INDEMNIFY CUSTOMER FOR LIABILITIES TO THIRD PARTIES, MPOWER's
SOLE AND TOTAL LIABILITY TO CUSTOMER RELATED TO THIS AGREEMENT WHETHER IN
CONTRACT OR TORT OR OTHERWISE SHALL BE LIMITED TO CUSTOMER'S ACTUAL DIRECT
DAMAGES NOT TO EXCEED THE SUM OF THE LICENSE FEES AND REMOTE PROCESSING FEES
PAID BY CUSTOMER TO MPOWER UNDER THIS AGREEMENT DURING THE SIX (6) MONTHS
IMMEDIATELY PRIOR TO THE BREACH OR CAUSE FOR WHICH THE DAMAGES ARE CLAIMED. THIS
LIMITATION APPLIES TO ALL CAUSES OF ACTIONS OR CLAIMS IN THE AGGREGATE INCLUDING
WITHOUT LIMITATION, BREACH OF CONTRACT, BREACH OF WARRANTY, NEGLIGENCE, STRICT
LIABILITY, MISREPRESENTATION AND OTHER TORTS. FURTHER, NO CAUSE OF ACTION WHICH
ACCRUED MORE THAN TWO (2) YEARS PRIOR TO THE FILING OF A SUIT ALLEGING SUCH
CAUSE OF ACTION MAY BE ASSERTED AGAINST MPOWER, EXCEPT THAT IN NO EVENT SHALL
THE FOREGOING LIMITATION EXTEND ANY APPLICABLE STATUTORY LIMITATION PERIOD.
CUSTOMER AND MPOWER EXPRESSLY ACKNOWLEDGE AND AGREE THAT THE LIMITATIONS AND
EXCLUSIONS CONTAINED HEREIN REPRESENT THE PARTIES' AGREEMENT AS TO THE
ALLOCATION OF RISK BETWEEN THE PARTIES IN CONNECTION WITH MPOWER's OBLIGATIONS
UNDER THIS AGREEMENT. THE PAYMENTS PAYABLE TO MPOWER IN CONNECTION HEREWITH
REFLECT THIS ALLOCATION OF RISK AND THE EXCLUSION OF CONSEQUENTIAL DAMAGES IN
THIS AGREEMENT.
MPOWER hereby is not assuming or otherwise responsible for, expressly or
implicitly, any obligation or liability of any kind whatsoever of Customer.
Customer shall and hereby does agree to indemnify and hold MPOWER harmless from
any and all claims, lawsuits, liabilities, expenses, costs, damages and fees
arising from or in connection with Customer's misuse of the MPOWER Services or
MPOWER Software in breach of its
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obligations hereunder. Customer, and not MPOWER, shall be responsible for
Customer's provision of services or products to any third party.
10. OTHER PROVISIONS
10.1 Inspection Rights. If MPOWER provides Remote Processing Services to
Customer, MPOWER will provide such auditors and inspectors as Customer may from
time to time designate in writing, with reasonable access to any data center
from which MPOWER is providing services hereunder for the limited purpose of
performing audits or examinations of Customer. MPOWER will provide to such
auditors and inspectors any routine assistance that they reasonably require,
rendered in connection with any such audit or inspection.
10.2 MPOWER Audits. Customer shall maintain adequate hooks and records
relating to its usage of the MPOWER Software and MPOWER Services and the Fees
due to MPOWER hereunder. MPOWER shall have the right, upon request, and in
connection with Customer's annual audit, to have Customer's auditors perform an
audit of Customer's books and records with respect to the MPOWER Software and
MPOWER Services and the Fees due to MPOWER hereunder. The cost of such audit
shall be borne by MPOWER solely to the extent that the auditors' services are
substantially different from or greater than those that the auditors would
ordinarily perform for Customer. Any over/under payment between the reported
usage of the MPOWER Software and the MPOWER Services and the Fees due to MPOWER
hereunder and the actual amount shall be paid by the appropriate party, or
applied as a credit by MPOWER, within thirty (30) days of notification of said
amount.
11. TERM OF AGREEMENT AND PROVISIONS FOR TERMINATION
11.1 Term of Agreement. The term of this Agreement shall commence on the
Effective Date and shall continue for seven (7) years unless otherwise
terminated pursuant to this Agreement. The agreement will be extended for an
additional 36 months upon the mutual written agreement of the parties. The
parties mutually agree to inform the other party, at least 120 days prior to the
Termination of this Agreement, as to whether or not they wish to negotiate a new
agreement which would be effective upon the Termination of this Agreement.
11.2 Termination for Cause. In the event that either party hereto
materially or repeatedly defaults in the performance of any of its duties or
obligations hereunder (except for a default in payments to MPOWER) and does not
substantially cure such default within one hundred twenty (120) days after being
given written notice specifying the default, or, with respect to those defaults
which cannot reasonably be cured within one hundred twenty (120) days, if the
defaulting party fails to proceed promptly after being given such notice to
commence curing the default and thereafter to proceed to cure the same, then the
party not in
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default may, by giving written notice thereof to the defaulting party, terminate
this Agreement as of a date specified in such notice of termination.
11.3 Termination for Nonpayment. In the event that Customer defaults in
the payment when due of any amount due to MPOWER hereunder, and does not cure
such default within sixty (60) days after the date of receipt the invoice, then
MPOWER may, by giving written notice thereof to Customer, terminate this
Agreement as of a date specified in such notice of termination.
11.4 Termination for Insolvency. In the event that either party hereto
becomes or is declared insolvent or bankrupt, is the subject of any proceedings
relating to its liquidation, insolvency or for the appointment of a receiver or
similar officer {or k, makes an assignment for the benefit of all or
substantially all of its creditors, or enters into an agreement for the
composition, extension, or readjustment of all or substantially all of its
obligations, then the other party hereto may, by giving written notice thereof
to such party, terminate this Agreement as of a date specified in such notice of
termination. Furthermore, in the event that MPOWER becomes or is declared
insolvent or bankrupt, is the subject of any proceedings relating to its
liquidation, insolvency or for the appointment of a receiver or similar officer
for it, makes an assignment for the benefit of all or substantially all of its
creditors, or enters into an agreement for the composition, extension, or
readjustment of all or substantially all of its obligations, then Customer may
exercise the Source Code Buyout for 50% of the fees shown in Exhibit 2,
provided, however, that Customer may only use the source code for the same
purposes granted by the object code License and may nor create Derivative Works
therefrom, not use the source code for relicense nor resale.
11.5 Termination Without Cause. In the event Customer ceases all
Customer Processing or Remote Processing Services, then MPOWER may terminate, at
ks option, this Agreement and License upon thirty (30) days written notice.
Customer may terminate this Agreement without cause with one hundred eighty
(180) days advance written notice to MPOWER subject to Customer's payment to
MPOWER of all outstanding fees incurred prior to the date of termination, all
applicable termination fees as provided in any Exhibit 2, and any applicable
early termination fees specified in Exhibit 2.
11.6 Termination Assistance. Upon the termination of this Agreement for
any reason, MPOWER will provide to Customer such termination assistance, at
MPOWER's Personnel Resources Rate plus Expenses, as may be reasonably requested
by Customer and scheduled by MPOWER. If this Agreement is terminated, then
Customer will pay MPOWER, on the first day of each month and as a condition to
MPOWER's obligation to provide such termination assistance to Customer during
that month, an amount equal to MPOWER's reasonable estimate of the total amount
payable to MPOWER for such termination assistance for that month.
11.7 Outstanding Amounts. Termination of this Agreement shall entitle
MPOWER to payment and Customer shall be obligated to pay for the provisions of
any and all
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MPOWER Services rendered by MPOWER under this Agreement prior to the date of
such termination, all outstanding fees incurred prior to the date of termination
and the lump sum of all remaining ILF payments due by Customer under Exhibit 2
(except as provided in Section 11.2 herein).
11.8 Customer Data. In the event that either party terminates this
Agreement, Customer retains ownership of all membership data and all other
Customer data in the MPOWER System. If MPOWER is providing Customer with Remote
Processing Services, MPOWER shall return same go Customer at the time of
termination in MPOWER's standard tape record format. Any support by MPOWER to
provide data in other than MPOWER's standard format shall be billed as
Termination Assistance per section 11.5 above.
11.9 MPOWER Software. Unless otherwise provided in this Agreement,
Customer agrees that upon termination of this Agreement, the License granted
hereunder shall also terminate and Customer shall cease using the MPOWER
Software and shall return to MPOWER or destroy, within thirty (30) days after
such termination, the original and all copies of such MPOWER Software and
Documentation. Except for termination resulting from the material breach on the
part of Customer, including without Limitation, breach of its Confidentiality
obligations or failure to timely make any payment hereunder, Customer shall be
permitted to continue to use the MPOWER Software pursuant to all the terms and
conditions set forth in this Agreement for up to a maximum of six (6) months
following such termination for the sole purpose of transitioning Members to an
alternate processing software, provided (i.) Customer remains obligated to pay
MF during such period; (ii.) MPOWER has no further obligations to provide Core
Services, new Releases, fixes to Nonconformities or Critical Failures, and
(iii.) the MPOWER Software is no longer warranted. If Customer destroys the
MPOWER Software, all copies thereof and Documentation, within thirty (30) days
of such destruction an officer of Customer shall certify to MPOWER in writing
that the MPOWER Software and all copies and Documentation thereof have been
destroyed. Due to the nature of the MPOWER Software and the need for its
protection as a trade secret and confidential proprietary information, time is
of the essence in its return or destruction, and in the event of Customer's
failure to do so within the time provided herein, Customer agrees that MPOWER
shall be entitled to obtain injunctive relief to require such return or
destruction and reasonable attorneys' fees and costs incurred in obtaining such
injunctive relief.
12. CONFIDENTIALITY
12.1 Confidential Information. "Confidential Information" shall mean
information such as customer lists, business plans, operation plans, client
information, application software programs and documentation licensed by third
parties to Customer or MPOWER, the MPOWER Software, the User Documentation,
Functional Documentation and the System Documentation, which are disclosed by
Customer or MPOWER to the other party, its employees, agents, contractors,
assignees or successors in the conduct of business
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under this Agreement. In addition, Confidential Information shall also include
any other materials relating to MPOWER's business or the business of Customer
which are designated in writing as confidential at the time of disclosure by
Customer or MPOWER, or is identified orally at the time of the disclosure as
confidential and confirmed in writing within one week of such disclosure, and
which are disclosed by Customer or MPOWER to the other party, its employees,
agents, contractors, assignees or successors in the conduct of business under
this Agreement. The following information shall not be deemed Confidential
Information, and a party and that party's employees shall have no obligation
with respect to any such information which:
(a) is or falls into the public domain through no wrongful act
of a party or that party's agents or employees; or
(b) is rightfully received from a third party without
restriction and without breach of this Agreement; or
(c) is approved for release by written authorization of an
officer of a party; or
(d) is disclosed pursuant to the requirements of a
governmental agency or operation of law; or
(e) is already in possession of a party or that party's
employees as evidenced by their records and is not the
subject of a separate non-disclosure or confidentiality
agreement with either of them.
12.2 Standard of Care. Each party hereby agrees that it and its
respective officers, employees, agents, contractors, assignees, and successors
shall (i.) keep all Confidential Information received from the other party
strictly confidential, (ii.) instruct their officers, employees, agents,
contractors, and permitted assignees and successors, who have access to such
Confidential Information, to use the same degree of care and discretion with
respect to the Confidential Information of the other party, or of any third
party utilized hereunder, that MPOWER and Customer each require with respect to
their own most confidential information, (iii.) use and disclose such
information solely for the purposes and in the manner set forth in this
Agreement, (iv.) not disclose any such information to any other person,
corporation, governmental agency or other entity without the express written
permission of the other party, except that Customer may (a) allow, with Customer
applying reasonable standards of system security, Customer's clients, providers,
Members, Members' employers and others with a need to use the MPOWER. Software
as users in the normal course of the Customer's business and may disclose to
such persons as much of the User Documentation as is necessary for their
effective use of the MPOWER Software in the normal course of the Customer's
business without obtaining a Non-Disclosure Agreement and (b) Customer may
disclose the MPOWER Software and Documentation to outside consultants or other
third parties having a need to know such Confidential Information for purposes
of this Agreement,
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and provided said consultants or third parties agree to hold the MPOWER Software
and Documentation in confidence, and have executed a Non-Disclosure Agreement in
the form annexed hereto as Exhibit 4, and (c) disclose the User Documentation to
Related Parties and Non-Related Parties in order for Customer to be able to
provide and for such parties to be able to effectively receive and utilize
Customer Processing, provided said Related and Non-Related Parties agree to hold
the User Documentation in confidence subject to the provisions herein, and have
executed a Non-Disclosure Agreement substantially in the form annexed hereto as
Exhibit 4. NOTWITHSTANDING THE FOREGOING, WITH RESPECT TO MPOWER SOURCE CODE AND
SYSTEM DOCUMENTATION, IN ADDITION TO ITS OBLIGATIONS SET FORTH HEREIN, CUSTOMER
SHALL USE NO LESS THAN THE SAME DEGREE OF CARE AND DISCRETION THAT CUSTOMER
REQUIRES WITH RESPECT TO ITS MOST VALUABLE TRADE SECRET INFORMATION.
Notwithstanding the foregoing, Customer may not disclose MPOWER's Confidential
Information to any of the parties identified by MPOWER in Exhibit 5, as such
Exhibit may be updated from time to time by MPOWER, or to their employees,
agents or consultants. Customer shall institute the necessary security policies
and procedures to meet its obligations hereunder. Notwithstanding the foregoing,
the mere viewing of data input screens or the review of output screens and
reports generated by released MPOWER Software by third parties, not in
competition with MPOWER, shall not be deemed a disclosure of MPOWER Confidential
Information.
Without limiting the foregoing, Customer shall use its reasonable
efforts to cooperate with MPOWER in identifying and preventing unauthorized use,
copying, or disclosure of the MPOWER Software and MPOWER Confidential
Information, or any portion thereof.
Customer shall indemnify and hold harmless MPOWER and its officers and
employees from and against any and all damages, losses, liabilities, costs and
expenses (including reasonable legal fees) arising in any way out of use not in
compliance with this Agreement or of any breach of the Confidentiality
obligations hereunder by Customer, or its subsidiaries and affiliates, or any
entity controlling, controlled by or under common control with Customer or any
Related Party. Customer's liability shall be limited to MPOWER's actual direct
damages not to exceed the sum of the license fees and remote processing fees
paid by Customer to MPOWER under this Agreement during the six (6) months
immediately prior to the breach or cause for which the damages are claimed.
MPOWER shall indemnify and hold harmless Customer and its officers and
employees from and against any and all damages, losses, liabilities, costs and
expenses (including reasonable legal fees) arising in any way out of use not in
compliance with this Agreement or of any breach of the Confidentiality
obligations hereunder by MPOWER, or its subsidiaries and affiliates, or any
entity controlling, controlled by or under common control with MPOWER, subject
to the limitations of liability outlined in Section 9.
13. DISPUTE RESOLUTION
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In the event of a dispute between the parties arising out of or relating
to this Agreement, then, upon the written request of either party, each of the
parties will appoint a designated representative to endeavor to resolve such
dispute. The designated representatives will negotiate in good faith to resolve
the dispute. Initially, disputes will be handled by the MPOWER Account
Representative and the Customer's designated liaison with MPOWER, or his/her
equivalent, and if they are unable to reach a resolution, the dispute will be
presented to the Chief Executive Officer of MPOWER and the Chief Executive
Officer of Customer for resolution. If the matter has not been resolved pursuant
to the aforesaid mediation procedure within sixty (60) days of the commencement
of such procedure (which period may be extended by mutual agreement), the
controversy shall be serried by arbitration in accordance with the American
Arbitration Association (the "Association) under the Commercial Arbitration
Rules of the Association there in effect, by a panel of three (3) arbitrators
knowledgeable in the computer area. The arbitration shall be governed by the
United States Arbitration Act, 9 U.S.C. Sec. 1-16, and judgment upon the award
by the arbitrator may be entered by any court having jurisdiction thereof. The
place of arbitration shall be in the jurisdiction in which the principal place
of business of the party not filing arbitration is located (i.e., Albuquerque,
New Mexico for MPOWER and Jacksonville, Florida for Customer). Each party shall
pay its own costs and expenses.
14. BACKUP AND DISASTER RECOVERY SERVICES AND AUDIT
14.1 Backup. In the event that MPOWER provides Customer with Remote
Processing Services, MPOWER will establish and maintain reasonable safeguards
against the destruction, loss or alteration of Customer data in the possession
of MPOWER. In the event that additional safeguards for Customer data are
reasonably requested by Customer, MPOWER will provide such additional safeguards
and Customer shall reimburse MPOWER for any additional costs incurred by MPOWER.
14.2 Disaster Recovery. In the event that MPOWER provides Customer with
Remote Processing Services, MPOWER shall maintain an agreement or arrangement
with a third party to provide MPOWER a disaster recovery sire with facilities
sufficient to enable MPOWER to provide a continuation of MPOWER Services in the
event the MPOWER System is unavailable for an extended period of time.
14.3 Notification. In the event that MPOWER provides Customer with
Remote Processing Services, MPOWER will provide customer with a current copy of
MPOWER's Backup and Disaster Recovery procedures and the results from Annual
Testing and EDI Audit.
15. RELATIONSHIP MANAGEMENT
15.1 Meetings. MPOWER and Customer agree to regularly discuss business
and relationship strategies affecting both parties. MPOWER and Customer further
agree to have
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regularly scheduled communications to summarize current activities, performance
results, error corrections and work efforts, as well as the future planned
activities.
15.2 Liaison. During the term of this Agreement, each party will provide
a liaison who (i) will have overall management responsibility for the
performance by the party hereunder, (ii) will have primary operational
responsibility, and (iii) will serve as the party's primary liaison with the
other party with respect to performance under this Agreement. Customer may have
primary liaison replaced for cause.
16. GENERAL
16.1 Independent Contractor. MPOWER, in performing its obligations under
this Agreement, is acting only as an independent contractor of Customer and the
rights and responsibilities of the parties shall be determined accordingly.
16.2 Force Majeure. Each party hereto shall be excused from performance
hereunder for any period and to the extent that it is prevented from performing
any services pursuant hereto, in whole or in part, as a result of delays caused
by the other party or an act of God, war, civil disturbance, court order, labor
dispute of the other party or any third party, or other cause beyond its
reasonable control and which it could not have prevented by reasonable
precautions, and such nonperformance shall not be a default hereunder or a
ground for termination hereof. In the event that either party is excused from
performance hereunder pursuant to this Section, then that party shall take all
reasonable actions to resume, or provide alternative performance of its
obligations hereunder as soon as feasible.
16.3 Governing Law: Jurisdiction and Venue. This Agreement shall be
construed and enforced according to the laws of the State of New Mexico without
reference to principles of conflicts of laws. Any action or proceeding seeking
to enforce any provision of, or based on any right arising out of, this
Agreement may be brought against any of the parties in the courts of the
jurisdiction in which the defendant's principal place of business is located
(i.e., the State and Federal courts of Albuquerque, New Mexico for MPOWER and
the State and Federal courts of Jacksonville, Florida for Customer), and each of
the parties consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection to
venue laid therein. Process in any action or proceeding referred to in the
preceding sentence may be served on any party anywhere in the world.
16.4 Notices. All notices and other communications under this Agreement
shall be in writing and may be given by any of the following methods: (a)
personal delivery against signed receipt; (b) facsimile transmission; (c)
registered or certified mail, postage prepaid, return receipt requested; or (d)
over-night delivery service. Notices shall be sent to the appropriate party at
its address or facsimile number given below (or at such other address or
facsimile number for such party as shall be specified by notice given
hereunder):
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16.4.1. If to MPOWER, to:
MPOWER Solutions Inc.
2300 Buena Vista S. E., Suite 128
Albuquerque, NM 87106
Attn.: Chief Executive Officer
Fax 505.244.5913
16.4.2. If to Customer, to:
Employers Mutual, Inc.
9716 San Jose Boulevard, Suite 200
Jacksonville, FL 32257
Attn.: Chief Executive Officer
Fax 904.262.0663
All such notices and communications shall be deemed delivered upon (a) actual
receipt thereof by the addressee, (b) actual delivery thereof to the appropriate
address, or (c) in the case of a facsimile transmission, upon transmission
thereof by the sender and issuance by the transmitting machine of a confirmation
slip confirming that the number of pages constituting the notice have been
transmitted without error. In the case of notices sent by facsimile
transmission, the sender shall contemporaneously dispatch a copy of the notice
to the addressee at the address(es) provided for above by an overnight courier
service. However, such mailing shall in no way alter the time at which the
facsimile notice is deemed received.
16.5 Insurance. During the term of this Agreement, each party will
maintain insurance coverage, such coverage to bear the risks associated with the
performance of this Agreement as is reasonable, prudent and advisable under the
circumstances and will provide evidence of or otherwise demonstrate such
capability to the other party upon the other party's reasonable request from
time to time.
16.6 Assignment. Customer may assign this Agreement, upon notice to, but
without the consent of, MPOWER, to a third party which is not a direct
competitor, as set forth in Exhibit 5, of MPOWER's software business if all, or
substantially all, of Customer's business utilizing the MPOWER Software is
concurrently sold, assigned or transferred to such third party, and, further
provided, that such third party agrees in writing to adhere to the limitations
of the license granted herein, including that the license extends only to the
business transferred or to logical extensions thereof, and not to other business
conducted by the third party at the time of the assignment, transfer or sale, or
thereafter acquired, unless additional license fees are paid to MPOWER. This
Agreement and Customer's rights or obligations hereunder may not be otherwise
assigned or transferred by Customer to another entity whether by assignment,
merger, transfer of assets, sale of stock of Customer, operation of law or
otherwise without the prior written consent of MPOWER. MPOWER may assign this
Agreement upon notice to, but without the consent of, Customer, provided that
the assignee
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agrees to continue the obligations of the Agreement, otherwise, MPOWER may not
assign this Agreement to a third party without the prior written consent of
Customer. This Agreement shall inure to the benefit of and be binding upon the
parties, their permitted successors and their permitted assigns.
16.7 Termination of the Prior Agreement. Customer and MPOWER agree that
upon (i) the conversion of Customer data from the MPOWER mainframe computer to
Customer's RS6000 computer, (ii) the processing of such data in a live
transaction environment, and (iii) the payment by Customer, and receipt by
MPOWER, of the first installment of the ILF, rhea the Prior Agreement shall be
considered thereby immediately terminated according to the terms thereof,
provided that any terms of the Prior Agreement that survive the termination
thereof shall, in accordance with the terms of the Prior Agreement, survive the
termination thereof. It is the intention of this Agreement that Customer shall
not be liable for duplicate payment in any month of the Remote Processing Fees
defined in the Prior Agreement and the ILF in this Agreement, unless Customer
decides to prepay an ILF installment prior to the commencement of production
processing under this Agreement.
16.8 Entire Agreement. This Agreement, including any Exhibits or
Schedules referred to herein and attached hereto, constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof
and there are no representations, understandings or agreements relative hereto
which are not fully expressed herein. No amendment, change, waiver, or discharge
hereof shall be valid unless in writing and signed by an authorized
representative of the party against which such amendment, change, waiver, or
discharge is sought to be enforced.
16.9 Publicity. It is the intent of Customer to reference MPOWER's name
and the MPOWER Software in its sales and marketing material. It is the intent
MPOWER to use Customer's name in its customer list and in marketing and sales
material. Customer shall have the right to list MPOWER's name and the MPOWER
Software in its sales and marketing materials and presentations, provided that
such listing(s) does not state or imply a recommendation, approval or
testimonial by MPOWER, and MPOWER shall have the right to list Customer's name
on customer lists, provided that such listing(s) does not state or imply a
recommendation, approval or testimonial by Customer. Each party hereby gives the
other party approval to use its name, trade name, service marks, trademarks,
trade dress or logo in such publicity releases, advertising or similar
activities. Each party agrees to cooperate with the other party- in developing
case study or other material that may be used in sales and marketing material
that may state a recommendation, approval or testimonial of the other party.
16.10 Export Assurance. Notwithstanding anything contained herein to the
contrary and regardless of any disclosure made by Customer to MPOWER of any
ultimate destination of the MPOWER Software, Customer shall not export or
re-export directly or indirectly the
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<PAGE> 29
MPOWER Software acquired from MPOWER, or any technical data derived therefrom,
without first obtaining the written approval or required export license to do so
from the United States Department of Commerce or any other agency of the United
States Government or of any foreign government having jurisdiction over such
transaction, when required by an applicable statute, regulation or order.
Customer hereby assures MPOWER that it does not intend to nor will it knowingly,
without the prior written consent, if required, of the Office of Export
Administration of the U.S. Department of Commerce, Washington, DC, transmit or
ship the MPOWER Software or any modifications thereto or product thereof,
directly or indirectly, to Afghanistan or to the Peoples Republic of China or to
any Group Q, S, W, Y or Z country specified in Supplements to Section 370 of the
Export Administration Regulations issued by the U.S. Department of Commerce, as
may be amended from time to time, or any other applicable regulation.
16.11 Governmental Restrictions. Customer shall be responsible for
complying with all applicable governmental regulations of the United States or
any foreign countries with respect to Customer's transport or use of the MPOWER
Software outside of the United States, including, but nor limited to import and
export restrictions, obtaining any necessary consents, registering or filing any
documents and paying any duties, fees or taxes. Customer shall be solely
responsible for all costs associated with such compliance. Customer shall
defend, indemnify and hold MPOWER harmless from and against any and all claims,
judgments, costs, awards, expenses (including reasonable attorneys' fees) and
liability of any kind arising out of the non-compliance with applicable
governmental regulations, statute, decree or other obligation with respect to
the MPOWER Software outside the United States.
16.12 General. All provisions of this Agreement relating to
confidentiality, nondisclosure, publicity, proprietary rights and indemnity
shall survive the cancellation, termination or expiration of this Agreement. The
waiver or failure of either party to exercise any right in any instance shoji
not be deemed a waiver of any other or further right hereunder. If for any
reason a court of competent jurisdiction finds any provision of this Agreement,
or portion thereof to be unenforceable, that provision shall be enforced to the
maximum extent permissible so as to effect the intent of the parties, and the
remainder of this Agreement shall continue in full force and effect. The section
headings used herein are for reference and convenience only and shall not enter
into the interpretation thereof.
16.13 Provided Customer signs a Work Order authorizing the following
interfaces, MPOWER will provide Customer with eligibility interfaces to Customer
for OneCare, Pacificare and PCA within sixty (60) days after live production on
the MPOWER ClientServer Software, through an interface engine recommended by
MPOWER. and licensed by Customer, provided however that Customer and Customer's
clients (OneCare, Pacificare and PCA) support the implementation and eligibility
interface processes, as described and to the extent described in the applicable
Work Order(s), and authorizes the Work Order(s) in sufficient time to accomplish
the tasks. If MPOWER is not able to achieve such interfaces within the timeframe
designated in the Work Order, then MPOWER will reimburse
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Customer for the equivalent cost of one full time equivalent employee at an
annual cost of $[*] until such time as the interfaces are working.
16.14 MPOWER will sub-license to Customer for additional license and
support fees an interface engine to facilitate electronic data interchange. In
no event shall the initial sub-license for such an interface engine exceed
$[*] for the initial license fee, nor $[*] per year for annual maintenance
for at least the first three (3) years of annual maintenance.
16.15 MPOWER has provided to Customer, a benchmark study. Customer may
review this benchmark study to judge whether the RS/6000 equipment configuration
that MPOWER has recommended for Customer's current and projected Member volume.
16.16 Customer and MPOWER will use their best efforts to migrate
Customer from Remote Processing Services on MPOWER's mainframe computer to
Remote Processing on Customer's RS/6000 equipment at the MPOWER. site.
16.17 MPOWER and Customer agree as follows:
a. Customer will serve as a development site and "test lab"
implementing MPOWER Solutions new mid-range Implementation plan for MPOWER.
b. Customer will assist MPOWER Solutions in marketing the MPOWER
Software and will serve as a reference site, provide interviews, allow
Customer's name and logo to be used in promotional materials and attend selected
conferences and presentations on MPOWER's behalf. There will be no use of
Customer's clients' names and logos without written consent. MPOWER Solutions
will pay Customer for any reasonable travel, lodging or other expenses related
to Customer's performance of services under this section 16.17.
c. MPOWER Solutions will provide reasonable assistance to Customer
in "selling" MPOWER capabilities to current and future clients, which shall
include, but not be limited to, on-site presentations, providing promotional
materials and participating in proposals. Customer will pay MPOWER for any
reasonable travel, lodging or other expenses related to MPOWER's performance of
services under this section 16.17.
* Confidential Treatment Requested
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<PAGE> 31
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives.
MPOWER Solutions Inc. CUSTOMER
By: By: [SIGNATURE ILLEGIBLE]
--------------------------- -----------------------------
Name: Name: [ILLEGIBLE]
------------------------- ---------------------------
- ------------------------------ --------------------------------
Title: Title: CEO
------------------------ --------------------------
Date: Date: 6/24/98
------------------------- ---------------------------
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<PAGE> 32
INDEX OF EXHIBITS
Exhibit 1 - DEFINITION OF CORE SERVICES
Exhibit 2 - LICENSE, PROCESSING AND SERVICE FEES
Exhibit 3 - DOCUMENTATION OUTLINE
Exhibit 4 - NON-DISCLOSURE AGREEMENT
Exhibit 5 - MPOWER IDENTIFIED PARTIES FOR NON-
DISCLOSURE
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<PAGE> 33
Exhibit 1
DEFINITION OF CORE SERVICES
"Core Services" are those services, in addition to the License, that are
provided to Customer by MPOWER in consideration for the payment of the License
Fees, except as otherwise provided in Schedule B. Core Services shall include
the following:
Conversion Plan: MPOWER will provide a template plan for migrating and
converting Customer members to the MPOWER Soft, are or the MPOWER System. The
template plan will include a description of tasks to be performed, milestones,
and deliverables. Customer and MPOWER will mutually agree on initial
modifications to the template plan to fit the Customer's specific situation and
circumstances. This modified template plan shall be referred to as the
"Conversion Plan"; which may be subsequently modified by agreement of the
parties from time to time.
Software Installation (if applicable): In accordance with the Conversion Plan,
MPOWER will provide up to one hundred-twenty (120) hours of systems support to
help install the MPOWER Software on a single Customer CPU(s) designated as
follows:
CPU Model Number(s): RS6000/050
------------------------
CPU Serial Number(s): 1063136
-----------------------
Prior to installation of MPOWER Software, Customer shall have installed rise
vendor software detailed on Exhibit 6.
Delivery: Unless otherwise requested in writing at the time of final delivery to
Customer of any deliverable of the MPOWER Software or of the enhancement or
modification provided under any Work Order under the License or applicable Work
Order to Customer or any Related Party, all deliverables to Customer or any
Related Party shall be by electronic delivery. Customer shall provide
appropriate communications linkages to receive such deliveries and shall pay
MPOWER the fees stated therefor in Exhibit 2.
Documentation: MPOWER will provide User Documentation and, if applicable, System
Documentation and the Functional Documentation for the functions and in the form
outlined in Exhibit 4, Documentation.
Help Desk: MPOWER shall provide a "Level Two" Help Desk to answer Customer
questions and solve Customer problems for acceptance testing and production
activities as further described herein. The Help Desk is staffed 8:00 am to 5:00
p.m., Mountain Time, Monday through Friday. Calls to the Help Desk outside of
these hours are rolled over either
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to MPOWER Operations or pager response. An Inward WATS number (currently
1-800-993- 3677) is available for Help Desk calls at no charge to the Customer.
Calls to the Help Desk that represent problems related to the MPOWER. Software
or MPOWER System are assigned a Problem Number and entered into the MPOWER.
Problem Reporting and Tracking System, where current status is available for
reporting back to the Customer.
A "Level Two" Help Desk call is a call from the Customer's internal Help Desk
seeking support for questions and problems for production activities that the
Customer's Help Desk was notable to resolve on its own (each a "Service Call").
MPOWER represents that Service Calls will be logged and responded to in
accordance with its then current Help Desk protocols for severity designation
and related response times. MPOWER's current severity designations and related
response time protocols are shown in Exhibit 1-A hereto.
Ongoing Support: MPOWER provides ongoing support in the areas of General System
Enhancement, correction of Nonconformities, and in certain specific situations,
support for modifications, whether made by Customer or MPOWER:
General System Enhancements: See Section 2.4.
Correction of Nonconformities: See Section 2.5.
Support for Modifications: See Sections 2.7 and 2.8(b).
Annual Audit: Annually, beginning within thirty (30) days after the anniversary
of the Effective Date, MPOWER, with Customer agreement, will audit the way the
Customer is using the MPOWER. Software or MPOWER System, and offer
recommendations for more efficient utilization. This MPOWER audit will be
performed only with the express proviso that Customer makes available to MPOWER
audit team knowledgeable personnel who can fully represent Customer's use of
MPOWER Software or MPOWER System.
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<PAGE> 35
Exhibit 1-A
Severity Definitions and Resolution Process
- - Severity 1.
The problem causes complete loss of service ha the production and
staging environment and work cannot reasonably continue. The problem or defect
has one or more of the following characteristics:
- Data corruption. Physical or logical data is unavailable or
incorrect. Examples: Block format corruption, invalid indices,
corruption of meta-data, incorrect results.
- Critical functionality is not available.
- System hangs. The process hangs indefinitely or there is severe
performance degradation, causing unreasonable waits for resources or
response, as if the system is hanging.
- The entire MPOWER application crashes repeatedly.
- Database process or background processes fall and continue to fall
after restart attempts.
- Potential for above occurrences is deemed imminent.
Resolution of severity 1: Until the issue is resolved MPOWER Solutions will work
on Severity 1 around the dock (7x24). As a result of the severity, the customer
must provide MPOWER with a point of contact during the 7x24 period. The
customer's point of contact will assist the MPOWER customer support and
development scarf in gathering data, testing fixes in the customer's tearing
region, and applying fixes to the customer production environment.
- - Severity 2:
Problem or product defect causes a severe impact on the customer's
business regardless of customer environment. No workaround is available, however
operations can continue in a restricted fashion. The problem or defect has one
or more of the following characteristics:
- Business Impact Examples: The customer can handle current volume,
but will not be able to handle quarter dose, At dose, customer finds
totals wrong, but close is not for a few weeks.
- Internal software error, causing the application to fail to run to
completion, or return wrong results, or software error severely
decades performance.
- Some important functionality is unavailable, yet the system can
continue to operate in a restricted fashion.
- Potential for above occurrences is defined imminent.
Resolution of Severity 2: MPOWER Solutions will work on Severity 2 bug
based on customer assigned priority. Severity 2 fixes will be added in the next
scheduled maintenance or patch release.
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- - Severity 3.
Problem or product defect causes minimal impact on the Customer's
business. The impact of the problem or defect is minor or an inconvenience, such
as a manual bypass to restore product functionality. The problem or defect has
one or more of the following characteristics:
- A software error for which there is an acceptable workaround.
- Software error minimally degrades performance. Software error or
- incorrect behavior has minor impact the operation of the system.
Resolution of Severity 3: Fixes for severity 3 bugs will be added to the
priority list for the next major scheduled release of the product. The order of
priority for resolving severity 3 issues will be assigned jointly by the
Customer and MPOWER.
- - Severity 4.
The problem or product defect causes NO impact on the Customer's
business. The problem or defect is a minor error, incorrect behavior, or a
documentation error that in no way impedes the operation of a system.
Resolution of Severity 4: Fixes for severity 4 bugs will be added to the
priority list for the next major scheduled release of the product. The order of
priority for resolving severity 4 issues will be assigned jointly by the
Customer and MPOWER.
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<PAGE> 37
Exhibit 2
LICENSE, PROCESSING AND SERVICE FEES
I. LICENSE FEES
A. License Fees. MPOWER License Fees for the use of the MPOWER Software
are broken into three(3) components: (i.) Initial License Fee (ILF) (ii) License
Extension Fee and (iii) Maintenance Fee (MF). These components are intended to
provide Customer with initial and ongoing rights to use the Software pursuant to
the terms of the License, Processing and Services Agreement.
1. Initial License Fee: The ILF is the initial fee payable by
Customer for the License to use the MPOWER Software. The
ILF for Customer is set forth in Section B(1) below.
2. License Extension Fee. The License Extension Fee covers
Members added to Customer's business beyond Members
covered by the ILF. It is set forth in Section B (2)
below.
2. Maintenance Fee: The MF is the fee payable by Customer for
the ongoing License and support for the MPOWER Software,
as described in Sections 3.4 and 3.5 of the Agreement.
B. License Fees (ILF, and MF) and Advanced Payments for Customer and
Related Parties
1. Initial License Fee.
The Initial License Fee payable by Customer for the
License of the MPOWER Software for the Subsystems listed
below in Subsection II. in this Exhibit B for Customer is
$[*] (less a credit of $[*]) which will be payable by
Customer in twelve (12) equal installments commencing as
of the processing of Members on Customer's RS6000 in a
live production environment. The ILF shall permit Customer
to use the MPOWER Software for Members that are Members as
of the date of this Agreement and for Members that become
Members as the result of the natural growth of Customer's
existing business. It is the intent of this Agreement that
the first month for which Remote Processing Fees under the
Prior Agreement are not due is the month when the first
installment of the ILF under this Agreement is due.
2. License Extension Fee. Members added to Customer's
business as a result of merger or acquisition, either of
Customer, or of another corporation or of a block of
business by Customer from another
* Confidential Treatment Requested
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<PAGE> 38
corporation, may be added to the License by payment of a
license extension fee ("License Extension Fee") of [*]
($[*]) per Member when such Members are initially added
to the MPOWER Software in a production environment.
Subsequent normal growth of Members to this business shall
then be covered under the License
3. Extension Fee thus paid. Maintenance Fee for Customer and
Related Parties. The Maintenance Fee for the MPOWER
Software for the Subsystems listed below in Subsection II
in this Exhibit B for use by Customer will be paid by
Customer in accordance with the following schedule:
a. $[*] per year paid in twelve equal monthly
installments with the first payment due
July 1, 1999 for Members covered under
the ILF.
b. For Members covered under a License
Extension, the MF shall be an annual fee of
[*]% of the License Extension Fee paid by
Customer, payable in twelve equal monthly
installments with the first payment due in
the month following the occurrence of the
event triggering the License Extension.
4. Source Code Buyout Provisions. Customer shall have the
option to buyout the rights to the MPOWER Software source
code ("Source Code Buyout") upon providing MPOWER with
three (3) months advance written notice, according to the
following schedule:
- up to the third anniversary of the date of this
Agreement, upon the single payment to MPOWER of
$[*] and any MF payment owed by Customer to
MPOWER pursuant to paragraph B.3 above;
- upon or after the third anniversary of the date of
this Agreement, upon the single payment to MPOWER of
$[*];
- upon or after the fourth anniversary of the date of
this Agreement, upon the single payment to MPOWER of
$[*]; or
- upon or after the fifth anniversary of the date of
this Agreement, upon the single payment to MPOWER of
$[*].
* Confidential Treatment Requested
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<PAGE> 39
Upon the exercise of the Source Code Buyout, the terms of the
Agreement shall remain unchanged except, (a) Customer shall have
the right to modify the MPOWER Software without first obtaining
the consent of MPOWER and without notifying MPOWER; (b) Customer
shall no longer be entitled to future Releases or General System
Enhancements, and (c) Customer shall not be entitled to the
future provision of the Core Services. Any services provided by
MPOWER to Customer subsequent to Customer's completion of the
Source Code Buyout shall be provided as Supplemental Services at
MPOWER's then current rates. Upon exercise of the Source Code
Buyout, Customer's License shall not change and Customer may use
the source code only to the same extent as Customer's License and
License Extensions permit. Furthermore, it is explicitly noted
that Customer is not permitted to create Derivative Works from
the source code not to use it for re-license or re-sale nor on
behalf of entities not covered by the License or License
Extension.
II. SUBSYSTEMS OF MPOWER SOFTWARE INCLUDED WITHIN LICENSE FEE
Group &: Subscriber/Member Enrollment
Premium Billing & AR
Provider
Certification
Claims
Capitation & Fund Accounting
Accounting & Financial Reports (Batch Only)
Letter Writing
Communications Tracking
Data Listing &: Row & Columns Reporting
III. FEES FOR SUPPLEMENTAL SERVICES
Supplemental Services Fees, as incorporated in Work Orders, may be
either fixed-price or time and materials. Time and materials rates will
include the Personnel Resources
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<PAGE> 40
Fees for MPOWER personnel and its subcontractors relative to the MPOWER
Software. The Personnel Resource Fees are as follows:
A. Personnel Resource Fees for MPOWER personnel and its
subcontractors relative to Supplemental Services for the MPOWER
Software are billable at the following rates:
For 1998:$[*] per hour
For 1999:$[*] per hour
Thereafter: at MPOWER's then current applicable fee schedule.
B. Total fees for the conversion of Customer from Remote Processing
to Customer Processing shall be capped at the sum of $[*],
accrued at the mount set forth above as Personnel Resource Fees.
The cap shall apply only to MPOWER services related directly to
conversion services and shall nor include services and products
of third party contractors for third party products, nor shall it
include services of MPOWER related to such third party products
or contractors. The conversion period will end when Customer
commences Customer Processing for any of its customers.
C. During conversion MPOWER shall charge Customer for third party
services as a direct pass through.
D. After conversion, the rates for outside independent contractors
provided by MPOWER for Supplemental Services shall be the greater
of (i.) the rates set forth above (for applicable skill sets) or
(ii.) a rate to be mutually agreed upon in advance by Customer
and MPOWER and set forth in an applicable Work Order
IV. COMPUTER OPERATIONS FEES
MPOWER will, at Customer's request, provide, as part of the ILF,
computer operations services for Customer by operating Customer's RS6000
computer at MPOWER's facility without additional charge to Customer for
the first month of a live production environment on the RS6000, provided
Customer is current with its payment of the ILF. After Customer has been
in a live production environment for one (1) month, MPOWER will continue
to provide computer operations services for Customer by operating
Customer's RS6000 computer at MPOWER's facility, at Customer's request,
at the rate of [*] dollars ($[*]) per month. Customer must remain
current in its payment of the ILF. Computer operations services shall
be indicated in an applicable Work Order.
* Confidential Treatment Requested
Page 40 of 59
<PAGE> 41
V. REMOTE PROCESSING FEES
Remote Processing Fees shall continue under the Prior Agreement until
Customer commences a live production environment under this Agreement.
It is not anticipated that there will be Remote Processing Fees under
this Agreement, as that term is used in the Prior Agreement. There may
be computer operations services under this Agreement and, if so, they
will be covered under an applicable Work Order.
VI. OTHER FEES.
Other fees may pertain to the use by Customer of the MPOWER System for
set-up, testing, training, acceptance testing or other uses not related
to the production use of the MPOWER System for processing active Members
of Customer or of a Related Party. Such other fees will be indicated in
a Work Order and may include fees for third party consultants and
vendors.
VII. PAYMENT BY MPOWER TO EMI FOR CONVERSION OF EMI CUSTOMER
TO MPOWER LICENSE
Each Party acknowledges that from time to time a customer of EMI may
elect to acquire a license to use the MPOWER Software on its own, and
not through EMI. In those cases, where a customer of EMI elects to
acquire a license from MPOWER and uses the data and data setups from
EMI, MPOWER will pay to EMI a royalty payment of $[*], over the
timeframe of the implementation of such customer and initial use by such
customer of its own licensed software instance for the MPOWER Software,
in consideration of the reduced implementation effort for the MPOWER
Software because MPOWER and such customer can use the data and setups
already accomplished by EMI. For this consideration, EMI permits MPOWER
to use such setups and data for the respective customer. Notwithstanding
the above, MPOWER will owe no such payment to EMI for customers that are
jointly marketed to and signed as "joint" customers by both MPOWER and
EMI under the MPOWER QuickStart program or a similar program. And
further, notwithstanding anything else in this Agreement, such
QuickStart customers will not be covered under this Agreement and will
be assessed computer license or usage fees outside of this Agreement and
under a separate agreement or agreements among the parties, including
EMI and MPOWER.
* Confidential Treatment Requested
Page 41 of 59
<PAGE> 42
Exhibit 3
DOCUMENTATION OUTLINE
MPOWER - USER REFERENCE MANUAL
TABLE OF CONTENTS
BATCH SYSTEM VOLUME 1
GROUP & SUBSCRIBER/MEMBER ENROLLMENT SUBSYSTEM
Chapter 1 Users Reference Manual System Overview
Chapter 2 Batch Group & Subscriber/Member Enrollment Overview
Chapter 3 Group Termination - GRPTRM
Chapter 4 Change Member identification - CHGSID
Chapter 5 Dual / Duplicate Member Report - DUPMEM
Chapter 6 Special Identification Card Program - IDCARD
Chapter 7 Member Month Report - MBRMTH
Chapter 8 Ad Hoc Membership Reporting System - MBRRPT
Chapter 9 MEMCHG
Chapter 10 MEMELG
Chapter 11 Member Outputs - MEMOUT
Chapter 12 Member Listing - NEWLST
Chapter 13 Overage Dependent Label & Listing Program - OVDPLB
Chapter 14 Health Care Financing Administration Reply Data Report
Chapter 15 Subscriber Mailing Labels - SBLBGR
Chapter 16 Subscriber Mailing Labels By Primary Care Physician
(PCP) - SBLBPV
Chapter 17 Send HCFA Transmission - SDHCFA
Chapter 18 Senior Choice Enrollment - SRCHOI
Chapter 19 Subscriber Labels - SUBLBL
BATCH SYSTEM VOLUME 2
PREMIUM BILLING & ACCOUNTS RECEIVABLE SUBSYSTEM
Chapter 1 Users Reference Manual System Overview
Chapter 2 Batch Premium Billing & Accounts Receivable Subsystem Overview
Chapter 3 Aged Accounts Receivable Report - AGARMO
Chapter 4 Detailed Accounts Receivable Report - ARDET
Chapter 5 Accounts Receivable Reconciliation - ARRECN
Chapter 6 Cash Receipts List - CSHRCP
Chapter 7 Current Accounts Receivable Report - CURAR
Chapter 8 Produce Premium Bills - PRMBIL
Page 42 of 59
<PAGE> 43
Chapter 9 Detail Of Premium Revenue - PRMREV
Chapter 10 Reset Billing Run - RESBIL
BATCH SYSTEM VOLUME 4
PROVIDER SUBSYSTEM
Chapter 1 Users Reference Manual System Overview
Chapter 2 Batch Provider Subsystem Overview
Chapter 3 Provider List By Hospital -
Chapter 4 Independent Practice Association Eligibility - IPAELG
Chapter 5 Primary Care Physician Availability Report - PCPAVL
Chapter 6 Provider Information Report - PVINFO
Chapter 7 Provider Mailing Labels - PVLBLS
Chapter 8 Terminated Provider's List Of Members - TRMPCP
BATCH SYSTEM VOLUME 5
CERTIFICATION SUBSYSTEM
Chapter 1 Users Reference Manual System Overview
Chapter 2 Batch Certification Subsystem Overview
Chapter 3 Acute & Sub-Acute Bed days Report - ASABED
Chapter 4 Catastrophic Utilization Management Report - CATUMA
Chapter 5 Medical Management Detail Report - CRTMMI
Chapter 6 Quality Management Detail - CRTQMI
Chapter 7 Pended Certification Reports - CRTPND
Chapter 8 Hospital Log Listing Report - GENLOG
Chapter 9 Hospital Census Reports - HOSCEN
Chapter 10 Inpatient Summary by Hospital Admissions Report - INPHOS
Chapter 11 inpatient Summary By Physicians Admissions - INPPHY
Chapter 12 Mortality Report - MRTLTY
Chapter 13 Certification By Procedure Grouping - PXAPXG
Chapter 14 Hospital Service Category Report - SVCCAT
Chapter 15 Certification Monthly Statistical Summary - UMSTAT
BATCH SYSTEM VOLUME 6
CLAIMS SUBSYSTEM
Chapter 1 Users Reference Manual System Overview
Chapter 2 Batch Claims Subsystem Overview
Chapter 3 Aging Report - Claims Set To Pay - AGECLM
Chapter 4 Member Claim Audit - AUDCLM
Chapter 5 Carrier List With Comments - CARCOM
Page 43 of 59
<PAGE> 44
Chapter 6 Carrier Listing - CARLST
Chapter 7 Check Run Program - CHKRUN
Chapter 8 Catastrophic Claims Report - CLMCAT
Chapter 9 Claims Control Listing - CLMCTL
Chapter 10 Claims Processing Performance Report - CLMPPL
Chapter 11 Claim Transaction Report - CLMTRN
Chapter 12 COB Suspended Claims Processing - COBSUS
Chapter 13 Explanation Of Benefits - EOB
Chapter 14 Denial Letter Generation - DENLTR KLM
Chapter 15 Hold Claims - HLDCLM
Chapter 16 Member Claim Detail Report - MBRCDR
Chapter 17 Provider Claim Detail Report - PRVCDR
Chapter 18 Reset Checking Account Codes - RESACT
Chapter 19 Reset Check Run - RESCKS
Chapter 20 Reverse / Unset Claims - REVUNS
Chapter 21 Set Checking Account Code - SETACT
Chapter 22 Disconnect Paid Claims - SETCHK
Chapter 23 Claims Summary By Employee - SUBCLM
Chapter 24 Suspended Claims List - SUSCLA
Chapter 25 Suspended Claims Summary - SUSSUM
Chapter 26 Unpaid Claims Report - UNPDCL
Chapter 27 Batch Claims Processing - BATCLM
BATCH SYSTEM VOLUME 7
CAPITATION & FUND ACCOUNTING
Chapter 1 Users Reference Manual System Overview
Chapter 2 Batch Capitation & Fund Accounting Overview
Chapter 3 Capitation And Fund Budgeting - CAP JOB
Chapter 4 Fund Status - CFSRPT
Chapter 5 Capitation Deduction Run - CAPDED
Chapter 6 Batch Capitation & Fund Accounting Subsystem Output
Error Messages
BATCH VOLUME 8
ACCOUNTING & FINANCIAL REPORTS
Chapter 1 Users Reference Manual System Overview
Chapter 2 Batch Accounting & Financial Reports
Chapter 3 Claims Lag Report - AETLAG
Chapter 4 Define Report Grouping Codes - DEFINC
Page 44 of 59
<PAGE> 45
Chapter 5 Display Report Grouping Codes - DISINC
BATCH SYSTEM VOLUME 9
LETTER WRITING SUBSYSTEM
Chapter 1 Users Reference Manual System Overview
Chapter 2 Letter Writing Subsystem Overview
Chapter 3 Submit Batch Letters - BATLTR KLM
Chapter 4 Print Letters - PRTLTR
BATCH SYSTEM VOLUME 10
INTERFACES SUBSYSTEM
Chapter 1 Users Reference Manual System Overview
Chapter 2 Interfaces Subsystem Overview
Chapter 3 Dental
Chapter 4 Pharmacy Management Interface - INTAPM
Chapter 5 Accounts Receivable Reconciliation - AR Interface
Chapter 6 Autocoder(R) Interface
Chapter 7 Claims Reporting System Interface - CRS
Chapter 8 Electronic Eligibility
Chapter 9 Electronic Encounters
Chapter 10 Enterprise Provider Database Interface - EPDB
Chapter 11 General Ledger Interface
Chapter 12 Lockbox Interface - LOCKBOX
Chapter 13 Marketing Survey Interface
Chapter 14 Medsyte(TM) Interface
Chapter 15 Provider Eligibility Rosters Interface
Chapter 16 Regional Event Tracking System Interface - RETS
Chapter 17 Sales Performance & Compensation System Interface - SPCS
Chapter 18 Data Migrator
Chapter 19 MCI interface
Chapter 20 Electronic Claims EDI Interface
Chapter 21 Accounts Payable/General Ledger Interface
Chapter 22 Send HCFA Transmission - SDHCFA
Chapter 23 Health Care Financing Administration Reply Data Report
BATCH SYSTEM VOLUME 11
SET-UPS & REFERENCE INFORMATION SUBSYSTEM
Chapter 1 Users Reference Manual System Overview
Chapter 2 Batch Set-Ups & Reference Information Subsystem Overview
Chapter 3 Procedure File Listing Editing Information - C4EDIT
Chapter 4 Procedure File Listing Pricing Information - C4PRIC
Page 45 of 59
<PAGE> 46
Chapter 5 Document File Listing - DOCLST
Chapter 6 Diagnosis Listing - DXLST
Chapter 7 Fee File Listing - FEELST
Chapter 8 Fee Schedule Report - FEESCH
Chapter 9 ICD9-CM Procedure File Listing - ICD9PX
Chapter 10 Provider Participation Area Report - PPDRPT
- -------------------------------------------------------------------------------
ON-LINE SYSTEM
SET-UPS, REFERENCE & UVAM SUBSYSTEM VOLUME 1
Chapter 1 Users Reference Manual System Overview
Chapter 2 On-Line Group Enrollment Subsystem Overview
Chapter 3 Add New Group - ADDGRP
Chapter 4 Adding Group Contract - ADDGRP
Chapter 5 Adding Benefits - ADDGRP
Chapter 6 Adding Premium Billing Rates - ADDGRP
Chapter 7 Adding Average Contract Size Definitions - ADDGRP
Chapter 8 Adding Benefit Riders Information - ADDGRP
Chapter 9 Display Group - DISGRP
Chapter 10 Displaying Contract For Group - DISGRP
Chapter 11 Displaying Benefits For Group - DISGRP
Chapter 12 Displaying Rates For Group - DISGRP
Chapter 13 Displaying The Average Contract Size - DISGRP
Chapter 14 Modify Group - MODGRP
Chapter 15 Modifying Group Contract - MODGRP
Chapter 16 Modifying Benefits For Group - MODGRP
Chapter 17 Modifying Benefit Riders Information - MODGRP
Chapter 18 Modifying Premium Billing Rates - MODGRP
Chapter 19 Modifying Average Contract Size Definitions - MODGRP
Chapter 20 Add Market Projections - ADDPRJ
Chapter 21 Display Market Projections - DISPRJ
Chapter 22 Add Group Comments - ADDGCO
Chapter 23 Display Group Comments - DISGCO
Chapter 24 Group Name List - NAMGRP
Chapter 25 Define Group Contract Riders - DEFRDR
Chapter 26 Display Rider Details - DISRDR
Page 46 of 59
<PAGE> 47
ON-LINE SYSTEM VOLUME 2
SUBSCRIBER & MEMBER ENROLLMENT SUBSYSTEM
Chapter 1 Users Reference Manual System Overview
Chapter 2 On-Line Subscriber & Member Enrollment Subsystem Overview
Chapter 3 Add Family - ADDFAM
Chapter 4 Display Family - DISFAM
Chapter 5 Modify Family - MODFAM
Chapter 6 Display Commercial Member Status History - DISMST
Chapter 7 Display Other Billing Information - DISOTH
Chapter 8 Display Subscriber Status - DISSST
Chapter 9 Subscriber Identification Number Assignment - NEXTID
Chapter 10 Add Duplicate Insurance Coverage Information - ADDDCI
Chapter 11 Duplicate Coverage Comments - DClCOM
Chapter 12 Display Duplicate Coverage - DISDCI
Chapter 13 Update Pre-Existing Condition - ADDPEC
Chapter 14 Display Pre-Existing Medical Conditions - DISPEC
Chapter 15 Add Family Comments - ADDFCO
Chapter 16 Display Family Comments - DISFCO
Chapter 17 Find Member List - FNDMBR
Chapter 18 Cross Reference Identification Number - IDXREF
Chapter 19 Member Name List - NAMMBR
Chapter 20 Title 19 Member - T19MBR
Chapter 21 Adding Member Dual Coverage - ADDMDC
Chapter 22 Display Member Dual Coverage - DISMDC
Chapter 23 Add Medicare Member - ADDMED
Chapter 24 Display Medicare Member - DISMED
Chapter 25 Modify Medicare Member - MODMED
ON-LINE SYSTEM VOLUME 3
PREMIUM BILLING & ACCOUNTS RECEIVABLE
Chapter 1 Users Reference Manual System Overview
Chapter 2 On-Line Premium Billing & Accounts Receivable
Chapter 3 Define Premium Rate Table - DEFRTB
Chapter 4 Display Premium Rate Table - DISRTB
Chapter 5 Define Premium Billing Format - BILFMT
Chapter 6 Add Customer Account - ADDCUS
Chapter 7 Display Customer Account - DISCUS
Page 47 of 59
<PAGE> 48
Chapter 8 Add Payment - ADDPAY
Chapter 9 Adjust Customer Account - ADJACT
Chapter 10 Add Customer Account Comments - ADDCAC
Chapter 11 Display Customer Account Comments - DISCAC
Chapter 12 Add Premium Billing History Records - ADDHST
Chapter 13 Display Subscriber Premium Billing History - DISHST
Chapter 14 Modify Premium Billing History Records - MODHST
Chapter 15 Change Billed Through Date - CHGBIL
ON-LINE SYSTEM VOLUME 5
PROVIDER SUBSYSTEM
Chapter 1 Users Reference Manual System Overview
Chapter 2 On-Line Provider Subsystem Overview
Chapter 3 Define Provider Category - DEFCAT
Chapter 4 Display Provider Category - DISCAT
Chapter 5 Add New Provider - ADDPRV
Chapter 6 Adding A Provider In Multiple Networks - The IPA Equals 99999
Chapter 7 Adding Discount And Interest Data
Chapter 8 Display Provider- DISPRV
Chapter 9 Displaying Network/HIO/POE Data
Chapter 10 Modify Provider Information - MODPRV
Chapter 11 Modifying A Provider In Multiple Networks - MODPRV - The IPA
Equals 99999
Chapter 12 Modifying Discount And Interest Data - MODPRV
Chapter 13 Add Provider Practice Addresses - ADDPRA
Chapter 14 Display Provider Practice Addresses - DISPRA
Chapter 15 Add Provider Payment Address - ADDPPA
Chapter 16 Provider Payment Addresses Display - DISPPA
Chapter 17 Define Tax Identification Owner - DEFTAX
Chapter 18 Display Tax identification Owner - DISTAX
Chapter 19 Add Provider Comments - ADDPCO
Chapter 20 Display Provider Comments - DISPCO
Chapter 21 Display Providers By Drug Enforcement Agency Number - DEAPRV
Chapter 22 Provider internal Revenue Service Name List - IRSPRV
Chapter 23 Provider Name List - NAMPRV
Chapter 24 Title 19 Member Lookup - T19PRV
Page 48 of 59
<PAGE> 49
ON-LINE SYSTEM VOLUME 6
CERTIFICATION SUBSYSTEM
Chapter 1 Users Reference Manual System Overview
Chapter 2 On-Line Certification Subsystem Overview
Chapter 3 Adding Procedure Authorizations - ADDPXA
Chapter 4 Adding Procedure Authorization Review Lines - ADDPXA
Chapter 5 Displaying Procedure Certifications - DISPXA
Chapter 6 Modifying Procedure Authorizations - MODPXA
Chapter 7 Modifying Procedure Authorization Review Lines - MODPXA
Chapter 8 Adding Outpatient Surgery Authorizations - ADDOSA
Chapter 9 Adding Outpatient Authorization Comments - ADDOSA
Chapter 10 Display Outpatient Surgery Authorization - DISOSA
Chapter 11 Modifying Outpatient Surgery Authorizations - MODOSA
Chapter 12 Modifying Outpatient Authorization Comments - MODOSA
Chapter 13 Add Inpatient Certification - ADDLOG
Chapter 14 Adding Inpatient Certification Review Data - ADDLOG
Chapter 15 Display Inpatient Certification - DISLOG
Chapter 16 Modify Inpatient Certification - MODLOG
Chapter 17 Modifying Inpatient Certification Review Data - MODLOG
Chapter 18 List Hospital Certification - HOSLOG
Chapter 19 Member Certifications - MBRCRT
Chapter 20 Display Member Certification Eligibility - DISMCE
Chapter 21 List Member Certification - MBRLOG
Chapter 22 Member Procedure Certification List - MBRPXA
Chapter 23 Provider Procedure Certification List - PRVPXA
Chapter 24 Delete Procedure Authorization - DELPXA
Chapter 25 Delete Inpatient Certification - DELLOG
Chapter 26 Add Referral Certification - ADDREF
Chapter 27 Modify Referral Certification - MODREF
Chapter 28 Display Referral Certification - DISREF
Chapter 29 Member Referral Certification - MBRREF
Chapter 30 Provider Referral Certification Listing - PRVREF
ON-LINE SYSTEM VOLUME 7
CLAIMS SUBSYSTEM
Chapter 1 Users Reference Manual System Overview
Chapter 2 On-Line Claims Subsystem Overview
Chapter 3 Add General Claim - ADDGEN
Page 49 of 59
<PAGE> 50
Chapter 4 Adding Additional Claim Lines - ADDGEN
Chapter 5 Modifying & Viewing General Claim Pricing & Payments - ADDGEN
Chapter 6 Displaying Payment Address Verifications - ADDGEN
Chapter 7 Add Inpatient Claim - ADDINP
Chapter 8 Adding Claim Line Details -ADDINP
Chapter 9 Inpatient Claim Payment Category Billing Breakout - ADDINP
Chapter 10 Modifying Inpatient Claim Pricing & Payments - ADDINP
Chapter 11 Displaying Payment Address Verifications - ADDINP
Chapter 12 Modify General Claims - MODCLM
Chapter 13 Modify Inpatient Claims - MODCLM
Chapter 14 Modify Credit Claims - MODCLM
Chapter 15 Displaying Payment Address Verifications - MODCLM
Chapter 16 Display Old Claim Numbers - OLDCLM
Chapter 17 Suspended Claim List - SUSCLM
Chapter 18 Add Coordination Of Benefits Recovery- ADDCOB
Chapter 19 Add Credit Claim - ADDCRE
Chapter 20 Adjust Claim - ADJCLM
Chapter 21 Batch Reprocessing Suspended Claims - BRSCLM
Chapter 22 Manual Claim Payment - PAYCLM
Chapter 23 Add Refund - REFUND
Chapter 24 Unset Claim To Pay - UNSCLM
Chapter 25 Void Check - VODCHK
Chapter 26 Claim Comments - CLMCOM
Chapter 27 BATCLM - Batch Claims Processing
Chapter 28 Check Input - CHKINP
Chapter 29 Check Input By Run Type Code - CKINP2
Chapter 30 Add Transfer Business Data - ADDTBD
Chapter 31 Modify Transfer Business Data - MODTBD
Chapter 32 Display Benefit Thresholds - BENINQ
Chapter 33 Claims Associated With Benefits - BENINQ
Chapter 34 Check Claim List - CHKCLM
Chapter 35 Reverse / Voided Check Claim - CHKCLM
Chapter 36 Display General Claim - DISCLM
Chapter 37 Display Inpatient Claims - DISCLM
Chapter 38 Display Credit Claim - DISCLM
Chapter 39 Member Claim List - MBRCLM
Chapter 40 Provider Claim List - PRVCLM
Page 50 of 59
<PAGE> 51
Chapter 41 Set To Pay Claim List - STPCLM
Chapter 42 Add New Carrier - ADDCAR
Chapter 43 Display Carrier - DISCAR
Chapter 44 Modify Carrier - MODCAR
Chapter 45 Carrier Name List - NAMCAR
Chapter 46 Add Claim Comments - ADDCMC
Chapter 47 Display Claim Comments - DISCMC
Chapter 48 Modify Claim Comments - MODCMC
ON-LINE SYSTEM VOLUME 8
CAPITATION & FUND ACCOUNTING SUBSYSTEM
Chapter 1 Users Reference Manual System Overview
Chapter 2 Capitation & Fund Accounting Subsystem Overview
Chapter 3 Define Capitation Claim Deduction Report - DEFCCR
Chapter 4 Display Capitation Claim Deduction Report Definition - DISCCR
Chapter 5 Define Capitation Detail Report - DEFCDR
Chapter 6 Display Capitation Detail Report Definition - DISCDR
Chapter 7 Define Capitation Summary Report - DEFCSR
Chapter 8 Display Capitation Summary Report - DISCSR
Chapter 9 Define Cluster Code - DEFCLC
Chapter 10 Display Cluster Code - DISCLC
Chapter 11 Add Entity - ADDENT
Chapter 12 Adding Entity Contract - ADDENT
Chapter 13 Displaying Rate Verification -
Chapter 14 Adding / Modifying Entity Comments - ADDENT
Chapter 15 Display Entity - DISENT
Chapter 16 Modify Entity - MODENT
Chapter 17 Adding and Modifying Entity Contracts - MODENT
Chapter 18 Displaying Rate Verification - MODENT
Chapter 19 Adding / Modifying Entity Comments - MODENT
Chapter 20 Define Completion And Credibility Factors - DEFCCF
Chapter 21 Display Completion And Credibility Factors - DISCCF
Chapter 22 Update Member Capitation Status - ADDMCS
Chapter 23 Display Member Capitation Status - DISMCS
Chapter 24 Capitation Processes Run Dates - CAPDTE
Chapter 25 Display Capitation Payment Data - DISCAP
Chapter 26 Manual Capitation Adjustment - CAPADJ
Chapter 27 Cluster Codes By Name Within Type - NAMCLC
Page 51 of 59
<PAGE> 52
Chapter 28 Entity List By Name - NAMENT
ON-LINE SYSTEM VOLUME 9
LETTER WRITING SUBSYSTEM
Chapter 1 Users Reference Manual System Overview
Chapter 2 On-Line Letter Writing Subsystem Overview
Chapter 3 Add Letter Paragraph - ADDLPA
Chapter 4 Display Letter Paragraph - DISLPA
Chapter 5 Modify Letter Paragraph - MODLPA
Chapter 6 Add Letter Run Type - ADDLRT
Chapter 7 Display Letter Run Type - DISLRT
Chapter 8 Modify Letter Run Type - MODLRT
Chapter 9 Add Letter Type - ADDLTP
Chapter 10 Display Letter Type - DISLTP
Chapter 11 Modify Letter Type - MODLTP
Chapter 12 Add Letter Series - ADDSRS
Chapter 13 Display Letter Series - DISSRS
Chapter 14 Modify Letter Series - MODSRS
Chapter 15 Add Letter Definition - ADDLTR
Chapter 16 Defining Database Inserts - ADDLTR
Chapter 17 Defining Letter Text - ADDLTR
Chapter 18 Display Letter Definition - DISLTR
Chapter 19 Displaying Letter Text - DISLTR
Chapter 20 Modify Letter Definition - MODLTR
Chapter 21 Defining Database Inserts - MODLTR
Chapter 22 Modifying Letter Text - MODLTR
Chapter 23 Find Letter - FINLTR
Chapter 24 Send Letter - SNDLTR
Chapter 25 Display Review Letters - DISRLT
Chapter 26 Display Letter By User - LTRENT
Chapter 27 Response to Letter- LTRRSP
Chapter 28 Review Letter - RVWLTR
Chapter 29 Display History Letter - DISHLT
Chapter 30 Find Letters In History File - FINHLT
ON-LINE SYSTEM VOLUME 10
SET-UPS, REFERENCE & UVAM INFORMATION SUBSYSTEM
Chapter 1 Users Reference Manual System Overview
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<PAGE> 53
Chapter 2 Set-Ups, Reference & UVAM Information Overview
Chapter 3 HIO / POE User Value Assignment Module
Chapter 4 Type Of Service User Value Assignment Module
Chapter 5 Certification Requirement User Value Assignment Module
Chapter 6 Certification Action User Value Assignment Module
Chapter 7 Care Set User Value Assignment Module
Chapter 8 Point of Service User Value Assignment Module
Chapter 9 Fee Group User Value Assignment Module
Chapter 10 Checking Account User Value Assignment Module
Chapter 11 Member Class User Value Assignment Module
Chapter 12 Certification Number User Value Assignment Module
Chapter 13 Group Access User Value Assignment Module
Chapter 14 Member Network User Value Assignment Module
Chapter 15 Benefit Plan
Chapter 16 Element Variables
Chapter 17 Display HMO Information - DISHMO
Chapter 18 Display Control E File - DISCTE
Chapter 19 Display Control 2 File - DISCT2
Chapter 20 Display Object Module - DISOBJ
Chapter 21 Display Benefit Plan - DISPLN
Chapter 22 Define Procedure - DEFPX
Chapter 23 Display Procedure -
Chapter 24 Display Diagnosis - DISDX
Chapter 25 Document Definition Codes - DOCDEF
Chapter 26 Define Account Code - DEFACT
Chapter 27 Display Checking Account Number - DISACT
Chapter 28 Define Provider Pricing Data - ADDPPD
Chapter 29 Adding Hospital Fees
Chapter 30 Display Provider Pricing Data - DISPPD
Chapter 31 Define General Fee - DEFFEE
Chapter 32 Display Fee History - DISFEE
Chapter 33 Add Conversion Factors - ADDCFC
Chapter 34 Display Conversion Factors - DISCFC
Chapter 35 Define Procedure Modifier - DEFMOD
Chapter 36 Display Procedure Modifier- DISMOD
Chapter 37 Display Usual & Customary Rate Data
Chapter 38 DEFVMP - Define Place Of Service Codes
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<PAGE> 54
Chapter 39 DISVMP - Display Place Of Service Codes
Chapter 40 Define Adjusted Average Per Capita Cost - DEFAPC
Chapter 41 Display Adjusted Average Per Capita Cost - DISAPC
Chapter 42 Internal Security System - SECURE
Chapter 43 HMO2 Record
Chapter 44 Outpatient Case Rate Pricing
Chapter 45 Case Rate User Value Assignment Module
ON-LINE SYSTEM VOLUME 11
COMMUNICATIONS TRACKING SUBSYSTEM
Chapter 1 Users Reference Manual System Overview
Chapter 2 Communications Tracking Subsystem Overview
Chapter 3 Add Telephone Log
Chapter 4 Displaying Telephone Logging - DISTEL
Chapter 5 Modify Telephone Logging Records-MODTEL Function
Chapter 6 List of Logged Calls - LSTTEL
DATA LISTING REPORTING SYSTEM
Chapter 1 Users Reference Manual System Overview
Chapter 2 Data Listing Reporting System Overview
Chapter 3 Define List Report - DEFLST
Chapter 4 List Report - LSTRPT
ROWS AND COLUMNS REPORTING SYSTEM
Chapter 1 Users Reference Manual System Overview
Chapter 2 Define Rows And Columns Report - DEFRAC
Chapter 3 Submit Rows And Columns Report - RACRPT
Page 54 of 59
<PAGE> 55
Exhibit 4
NON-DISCLOSURE AGREEMENT ("Agreement")
This Agreement is entered into as of 24th June, 1998, by and between MPOWER
Solutions Inc., a Delaware corporation ("MPOWER"), with its principal place of
business at 2305 Renard Place, S.E., Albuquerque, New Mexico 87106 and Employers
Mutual, Inc. ("Customer") with its principal place of business located at 5716
San Jose Blvd., Jacksonville, Florida. WHEREAS, each party wishes to disclose
and to receive from the other party certain proprietary information for the
purpose of conveying the MPOWER software license as set forth in the Agreement.
WHEREAS, the parties wish to protect certain confidential and proprietary
information which may be disclosed between them, and for and in consideration of
the disclosures made and to be made hereunder, the parties agree as follows:
1. For purposes of this Agreement, "Owner" means the party disclosing Trade
Secrets and Confidential Information hereunder, whether such party is
MPOWER or Customer, and "Recipient" means the party receiving any Trade
Secrets or Confidential Information hereunder, whether MPOWER or the
Customer.
2. Recipient acknowledges and agrees that Owner claims that the Trade Secrets
and the Confidential Information of Owner are the sole and exclusive
property of Owner (or a third party providing such information to Owner)
and that Owner owns all worldwide copyrights, trade secret fights,
confidential information rights and all other property rights therein.
3. Recipient acknowledges and agrees that disclosures of the Trade Secrets
and the other Confidential Information of Owner to Recipient does not
confer upon Recipient any license, interest or rights of any kind in and
to the Trade Secrets and Confidential Information.
4. Recipient will hold in confidence and, without the prior written consent
of Owner, will not reproduce, distribute transmit, reverse engineer,
decompile, disassemble or transfer, directly or indirectly, in any form,
by any means, or for any purpose, the Trade Secrets or the Confidential
Information of Owner or any portion thereof communicated, discussed,
delivered or made available by Owner to or received by Recipient.
Notwithstanding the foregoing, Recipient may only disclose the Trade
Secrets and Confidential Information to its employees with a need to know
such information, provided each such employee shall be obligated in
writing to comply with the terms and conditions of this Agreement.
Recipient will not use the Trade Secrets or the Confidential Information
of Owner or any portion thereof communicated, discussed, delivered or made
available by Owner to or received by Recipient with our the prior written
consent of Owner.
Page 55 of 59
<PAGE> 56
5. Recipient acknowledges that its obligations under this Agreement with
regard to the Trade Secrets of Owner shall remain in effect for as long as
such information shall remain a Trade Secret under applicable law.
Recipient acknowledges that its obligations with regard to the
Confidential Information of Owner shall remain in effect for one (1) year
after its disclosure under this Agreement. The foregoing shall not apply
if and to the extent that information shall not be deemed proprietary and
each part shall have no obligation with respect to any information which:
(i.) is or falls into the public domain through no wrongful act of the
receiving party;
(ii.) is rightfully received from a third party without restriction and
without breach of this Agreement;
(iii.) is approved for release by written authorization of the
disclosing party;
(iv.) is disclosed pursuant to the requirement of a governmental agency
or operation of law; or
(v.) has been previously and independently developed by the receiving
party.
6. Recipient agrees to return to Owner, upon request by Owner, the Trade
Secrets and Confidential Information of Owner and all materials relating
thereto, disclosed by Owner to Recipient.
7. As used herein, "Trade Secrets" means information, including, but not
limited to, technical or non-technical data, formulas, patterns,
compilations, programs, devices, methods, techniques, drawings, processes,
financial data, financial plans, product plans or a list of actual or
potential customers or suppliers, computer source code and related
documentation, which: (a) derives economic value, actual or potential, for
its Owners, from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can obtain economic
value from its disclosure or use; and Co) is the subject of efforts that
are reasonable under the circumstances to maintain its secrecy.
"Confidential Information" means information, other than "Trade Secrets",
that is of value to its Owner and is treated as confidential, including,
but not limited to, licensing strategies, advertising campaigns,
information regarding executives and employees, the terms and conditions
of this Agreement, any information designated by Owner as Confidential
Information, and any data or information defined herein as a Trade Secret,
but which is determined by a court of competent jurisdiction not to rise
to be a trade secret under applicable law.
8. Recipient shall use its reasonable efforts to cooperate with Owner in
identifying and preventing unauthorized use, copying, or disclosure of the
Owner's Trade Secrets and Confidential Information.
Page 56 of 59
<PAGE> 57
9. Recipient shall indemnify and hold harmless Owner and its officers and
employees from and against any and all damages losses, liabilities, costs
and expenses (including reasonable legal fees) arising in any way our of
use not in compliance with this Agreement or of any breach of the
confidentiality obligation hereunder by Recipient or its employees.
10. Each party hereto agrees that during the term of this Agreement and for a
period of one (1) year following termination or expiration of this
Agreement for any reason, neither party will solicit for employment,
attempt to employ or affirmatively assist any other person, entity or
enterprise ha employing or soliciting for employment any person employed
or hired by the other part.
11. If any provision or any part of any provision of the Agreement shall not
be valid for any reason, such provision shall be entirely severable from,
and shall have no effect upon, the remainder of this Agreement. Any such
invalid provision shall be subject to partial enforcement to the extent
necessary to protect the interests of the parties.
12. This Agreement shall inure to the benefit of, and be binding upon, any
successor in interest of the parties.
13. The intent of this Agreement is to provide the parties with all remedies
afforded to them under applicable law. Each party acknowledges and agrees
to the other party that monetary damages may be inadequate to compensate
Owner for any breach under this Agreement. Accordingly, Recipient agrees
that Owner will, in addition to any other remedies available to it at law
or equity, be entitled in injunctive relief to enforce the terms of this
Agreement.
14. This Agreement together with Exhibits hereto, if any, constitutes the
entire agreement of the parties with respect to the subject matter hereof,
and supersedes any prior agreements or understandings; whether oral or
written, between the parties with respect to such subject matter. No
amendment or waiver of this Agreement or any provision hereof shall be
effective unless ha a writing signed by both of the parties.
15. This Agreement shall be governed by and construed and interpreted in
accordance with the laws of the State of New Mexico, without giving effect
to its conflict of laws.
Page 57 of 59
<PAGE> 58
IN WITNESS WHEREOF, the parties by their duly authorized representatives have
caused this Agreement to be executed as of the date first written above.
MPOWER Solutions Inc. Customer
By: By: [Signature Illegible]
------------------------- ------------------------
(Authorized Signature) (Authorized Signature)
Title: Title: CEO
---------------------- ---------------------
Date: Date: 6/24/98
----------------------- ----------------------
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<PAGE> 59
Exhibit 5
MPOWER IDENTIFIED PARTIES FOR NON-DISCLOSURE
In accordance with Section 12 of the Agreement, other references in the
Agreement, and certain other conditions regarding disaster backup and recovery,
Customer may not disclose MPOWER's Confidential Information to direct
competitors of MPOWER, including but not limited to, the companies listed below,
including such companies' parents, subsidiaries and affiliates, and such
parents' subsidiaries and affiliates:
Computer Science Corporation (CSC)
Electronic Data Systems Corporation (EDS)
ERISCO
AMISYS Managed Care In:formation Systems, Inc.
Health Systems Design, Inc. (HSD)
Health Systems Integration, Inc. (HSII)
GTE Health Systems
Resource Information Management Systems (RIMs)
HBO & Co.
TXEN
Perot Systems
IDX
Sunquest
Paragon Systems
Electronic Healthcare Systems
The Medical Manager
Synertek
Page 59 of 59
<PAGE> 1
EXHIBIT 10.16
MPOWER SOLUTIONS, INC.
CONTRACTOR AGREEMENT
THIS CONTRACTOR AGREEMENT (the "Agreement"), effective February 19, 1999 (the
"Effective Date"), is made and entered into by and between MPOWER SOLUTIONS,
INC., a Delaware corporation with its principal place of business located at
6400 S. Fiddler's Green Circle, Suite 540, Englewood, Colorado 80111 ("MPOWER")
and EMPLOYERS MUTUAL, INC., a Florida corporation with its principal place of
business located at 9716 San Jose Boulevard, Suite 200, Jacksonville, Florida
32257 ("EMI") hereinafter referred to as "CONTRACTOR". This Agreement sets forth
the promises of the parties with respect to the products and services of MPOWER
and CONTRACTOR which are described herein, with reference to the following
facts:
WHEREAS, CONTRACTOR is in the business of providing third-party administrative
services of medical insurance programs to businesses providing managed health
care and insurance services and desires to provide such services under
subcontract to Customer(s) of MPOWER;
WHEREAS, MPOWER is in the business of providing automated managed health care
information software and services, and desires to collectively provide such
software and services in conjunction with those of CONTRACTOR to Customer(s) of
MPOWER subject to the terms hereof; and
WHEREAS, MPOWER has been retained to provide third-party administrative services
to Customer in connection with Customer's contracts to provide medical
transportation services to various managed care health plans in a multi-state
region, in accordance with the terms and conditions set forth in this Agreement;
NOW THEREFORE, in consideration of the mutual promises made, the terms and
conditions hereunder described and other valuable consideration, the parties
agree as follows:
I. DEFINITIONS
1. Customer, AMERICAN MEDICAL PATHWAYS, a subsidiary of American Medical
Response, Inc. a Delaware corporation with its principal place of
business located at 2821 South Parker Road, Aurora, CO 80014 shall be
hereinafter referred to as "Customer".
2. Master Agreement means the agreement between MPOWER and Customer under
which are pursuant the products and services set forth in this
Agreement.
3. Contracted Health Plan means a health maintenance organization or health
plan with which Customer has contracted to provide medical
transportation services.
4. Administrative Manual means a manual of the policies and procedures of a
Contracted Health Plan that will be jointly developed and followed by
Customer and the Contracted Health Plan with respect to administration
of the applicable Health Plan Agreement. The Administrative Manual(s)
are hereby incorporated by reference into this Agreement.
5. Health Plan Agreement means the contract between Customer and a
Contracted Health Plan pursuant to which Customer provides medical
transportation services to Members of a Contracted Health Plan.
6. Medical Necessity means services that are covered as basic covered
benefits under the applicable Membership Agreement and are appropriate
and necessary for the symptoms or treatment of a medical condition.
Whether a covered service is Medically Necessary shall be determined
based on criteria set forth in the applicable Administrative Manual.
7. Member means an individual and his or her dependents who are entitled to
receive health care
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services from a Contracted Health Plan pursuant to that individual's
Membership Agreement.
8. Membership Agreement means the agreement between a Contracted Health
Plan and an individual or group pursuant to which a Member receives,
among other things, medical transportation services.
II. RESPONSIBILITIES OF MPOWER AND CONTRACTOR
1. SERVICES TO BE PROVIDED.
A. SERVICES. CONTRACTOR shall provide (i) claims processing
services in connection with the medical transportation
services provided by Customer pursuant to its Health Plan
Agreements; (ii) medical review services associated with such
claims processing; (iii) receipt of inquiries concerning
eligibility, benefits, and claims status; and (iv) related
reports required to be provided by Customer pursuant to its
Health Plan Agreements. MPOWER shall also provide CONTRACTOR
promptly with all necessary information from Health Plan
Agreements and Member Agreements and requirements from the
applicable Administrative Manual for CONTRACTOR to perform its
obligations under this Agreement. The key assumptions used to
establish services to be provided by CONTRACTOR and
compensation hereunder are more particularly described on
Exhibit A, attached hereto and made a part of this Agreement.
B. CLAIMS PROCESSING. CONTRACTOR shall promptly process all
claims in accordance with the terms of the applicable
Membership Agreement, Health Plan Agreement, and
Administrative Manual, which process shall include, without
limitation, the following:
1. Receive and date stamp all claims, indicating the date
of receipt of each claim.
2. Verify Member eligibility.
3. Determine the Medical Necessity of medical
transportation services in accordance with the Medical
Necessity standards set forth in the applicable
Administrative Manual. Any claim that would be denied on
the basis of Medical Necessity shall be referred to the
Contracted Health Plan prior to denial. Except as
otherwise provided in the applicable Administrative
Manual, (a) the Contracted Health Plan, or its designee,
shall be solely responsible for notifying the Member of
the denial of any claim; and (b) CONTRACTOR shall not
contact the Member with respect to any denial of claims.
If the Contracted Health Plan approves the claim, it
shall notify CONTRACTOR of the approval, and CONTRACTOR
shall promptly pay the claim. Notwithstanding the
foregoing, if Customer's referral authorization is
included in the claims submission, then the Medical
Necessity of the claims will be deemed to be determined,
and further review will not be required.
4. Deny claims that are not covered benefits for reasons
other than Medical Necessity and notify the Contracted
Health Plan, as required, of the Member's right to
appeal such denial in accordance with the Contracted
Health Plan's appeal process.
5. Calculate and promptly pay to the appropriate
transportation or other network provider the amount to
be paid as covered benefits in accordance with the
applicable network provider agreement and Membership
Agreement. Unless a claim is disputed, CONTRACTOR shall
make payment on the claim within the time frame required
by applicable state or federal law or regulation or such
other period of time as set forth in the applicable
Administrative Manual and Membership Agreement.
6. Calculate and notify provider via statement of
remittance for Member liability only as defined in the
Health Plan Agreements.
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7. The specific time limits for performing the functions
set forth in this Section II. 1.B shall be specified in
the applicable Administrative Manual.
IMPLEMENTATION. MPOWER shall take all actions necessary to establish all
administrative and other connections and arrangements necessary for the transfer
of data, including, without limitation, the establishment and maintenance of
electronic data interface or electronic data transfer capabilities for the
electronic transfer of encounter and other data related to claims processing in
a timely manner. CONTRACTOR and MPOWER shall agree on an implementation project
plan and schedule, which shall be set forth on Exhibit B, attached to this
Agreement and made a pat hereof. CONTRACTOR agrees that it will be ready for
implementation of this Agreement in connection with the first Health Plan
Agreement by [*].
In the event Customer enters into Health Plan Agreements with additional
Contracted Health Plans, CONTRACTOR shall cooperate diligently with MPOWER to
implement services in connection with such Health Plan Agreements. In
consideration for such implementation, MPOWER shall pay CONTRACTOR for
CONTRACTOR'S costs for such implementation based on mutually agreed upon work
orders. One half of the estimated amount of such costs shall be paid to
CONTRACTOR prior to commencement of such implementation and the balance shall be
paid upon successful completion of implementation.
QUALIFICATIONS AND SERVICE LEVEL REQUIREMENTS. Consistent, high quality service
to Customer, policyholders, Contracted Health Plans, and providers is an
essential requirement. CONTRACTOR will meet the following qualifications and
service level commitments.
A. On or before [*], CONTRACTOR shall file initial applications
to obtain all applicable licenses/certifications required for
CONTRACTOR to perform its obligations hereunder, including without
limitation, licensure as a third party administrator, if applicable, in
Colorado, Missouri, Kansas and California. Thereafter, CONTRACTOR shall
at all times during the term of this Agreement file for and remain
appropriately licensed in each state in which CONTRACTOR performs
services hereunder.
B. Subject to Section 3.A above, CONTRACTOR shall remain in compliance
with all applicable local, state, and federal laws, rules and
regulations relating to the services provided by CONTRACTOR hereunder,
including without limitation, fulfillment of third party administrator
financial obligations pertaining to payment of penalties for late
claims, interest, or other penalties, as well as any claim reserves or
other funding requirements.
C. CONTRACTOR will maintain compliance with all Customer requirements
pertaining to claims processing procedures, including without
limitation, those requirements set forth in the Administrative Manual.
The parties will establish procedures regarding handling and
disbursement of funds as part of the implementation process, to be
finalized prior to [*].
D. CONTRACTOR shall meet or exceed the performance standards set forth
herein relating to claims processing, including but not limited to
claims turnaround time, payment accuracy, and reporting.
E. CONTRACTOR will establish and maintain throughout the life of this
Agreement a dedicated staff of personnel responsible for servicing
Customer's individual business.
F. MPOWER will maintain backup tapes of all programs, data, and/or any
other information used in the administration of claims.
G. MPOWER represents and warrants that all hardware/software required to
perform MPOWER'S obligations hereunder is Year 2000 compatible and that
the information and services to be provided by MPOWER will not be
impaired, disrupted, or interrupted, in whole or in part, by
* Confidential Treatment Requested
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deficiencies or inaccuracies related to the processing and display of
date/time data (including, but not limited to, century recognition,
calculations that accommodate the same century and multi-century
formulas and date values, and interface values that reflect the
century) from, into, and between the 20th and 21st centuries, and the
years 1999 and 2000, and leap year calculations. In the event that
Customer becomes aware that MPOWER(R) has not processed data containing
any dates correctly, Customer shall immediately notify MPOWER of this
fact, and MPOWER agrees to correct or replace MPOWER(R) to eliminate
the problem.
PERFORMANCE STANDARDS AND ASSOCIATED FINANCIAL PENALTIES.
A. CONTRACTOR shall meet the following performance goals in connection
with the following performance standards:
1. Claims Processing Accuracy. Not less than [*] percent ([*]%)
of the claims submitted.to CONTRACTOR will be accurately
adjudicated in accordance with the applicable Administrative
Manual and the applicable Membership Agreement. The
performance assessment for claims adjudication accuracy shall
be based on audits performed by Customer.
2. Timing of Claims Payments. Not less than [*] percent
([*]%) of all claims shall be processed within thirty (30)
calendar days of receipt.
3. Accuracy of Claims Payments. Not less than [*] percent ([*]%)
of the claims submitted to CONTRACTOR shall be priced in
accordance with Customer's instructions regarding pricing.
4. Written inquiry response time. Not less than [*]
percent ([*]%) of Member's written questions regarding medical
transportation services will be responded to within five (5)
working days after receipt of such inquiry. Not less than [*]
percent ([*]%) of Member's written requests regarding medical
transportation services will be responded to within seven (7)
working days of receipt of such inquiry. CONTRACTOR shall
report all written inquiries to Customer on a monthly basis in
a format mutually acceptable to the parties and to the
Contracted Health Plans. In addition, CONTRACTOR shall report
all phone and written complaints and grievances to Customer
within two (2) business days of receipt.
5. Telephone inquiry response time. Not less than [*]
percent ([*]%) of all incoming phone calls shall be responded
to within a time not to exceed twenty (20) seconds. No
telephone inquiries during normal business hours from Members
will be blocked due to CONTRACTOR'S failure to maintain its
system.
6. Abandoned Call Rate. CONTRACTOR'S abandoned call rate shall
not exceed [*] percent ([*]%) on not less than [*]
percent ([*]%) of business days.
B. The parties acknowledge that Customer may be subject to penalties for
failure to meet each performance goals set forth above at least [*]
percent ([*]%) of the time during each calendar quarter. In connection
with the assessment of CONTRACTOR's performance of these goals,
CONTRACTOR may be audited by Customer, by a Contracted Health Plan, or
by an independent auditor on behalf of Customer and/or a Contracted
Health Plan. CONTRACTOR shall be responsible for, and shall reimburse
Customer for, penalties incurred by Customer due to failure to meet
each performance goals set forth above [*] percent ([*]%) of the time
during each calendar quarter. Such penalties shall be paid by
CONTRACTOR to MPOWER within twenty (20) days after notification by
Customer of the amount of such penalty(ies). Penalties for specific
Contracted Health Plans are more fully described in Exhibit A hereof
and subsequent exhibits addressing scope of services for each
Contracted Health Plan.
* Confidential Treatment Requested
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REPORTING.
A. CONTRACTOR shall accurately measure and report service levels to
Customer. CONTRACTOR shall provide to Customer (or directly to the
Contracted Health Plans, if so directed by Customer) reports containing
information required by Customer and the applicable Contracted Health
Plan, in accordance with the applicable Administrative Manual. Such
reports must be sent via magnetic tape, electronic transmission, or
diskette (or hard copy, if requested by a Contracted Health Plan) in a
standard format established by Customer and the Contracted Health
Plans, for each encounter that Member receives during the previous
month. Such information shall be complete and accurate and shall be
provided to Customer (or to a Contracted Health Plan directly, if so
directed by Customer) by the fifteenth (15th) day of the month, or if
the fifteenth (15th) day falls on a weekend or a holiday, as of the
next business day thereafter. Such encounter data reporting shall be
segregated by Contracted Health Plan. CONTRACTOR shall promptly provide
Customer (or the Contracted Health Plan, as appropriate) with all
corrections and revisions of such encounter data. Encounter data shall
include, at a minimum, those data elements identified on the HCFA 1500,
or its successor form.
B. CONTRACTOR shall provide to Customer reports related to the performance
of each standard set forth in Paragraph II.4.A above in the format
identified in the applicable Administrative Manual. Such reports shall
be provided on a monthly or quarterly basis, as determined by Customer
and the applicable Contracted Health Plan, and shall be segregated by
Contracted Health Plan.
C. Upon request, CONTRACTOR shall provide to Customer, or shall assist
Customer to prepare, quality reports in a format identified in the
applicable Administrative Manual. Such reports shall be prepared at
least quarterly and shall be segregated by Contacted Health Plan.
AUDITS. Customer and the Contracted Health Plans shall have the right to audit
CONTRACTOR at any time in connection with CONTRACTOR'S performance pursuant to
the Agreement. CONTRACTOR will provide MPOWER, Customer and the Contracted
Health Plans, or their designees, with access at any time to all of CONTRACTOR'S
books, records, and systems prepared, maintained, and utilized in connection
with the performance of CONTRACTOR'S obligations pursuant to the Agreement.
Customer and the Contracted Health Plans, or their designees, shall have access
to CONTRACTOR'S personnel during normal business hours, and such personnel shall
cooperate fully with Customer and the Contracted Health Plans or their designees
in the performance of such audits. Customer shall have the right to copy any and
all books and records associated with CONTRACTOR'S services provided to Customer
hereunder.
KEY PERSONNEL. CONTRACTOR will identify and commit key personnel to the
implementation and management of services to be provided under this Agreement.
Any staffing changes involving key personnel will be discussed in advance
between CONTRACTOR and MPOWER.
CONFIDENTIALITY. CONTRACTOR shall maintain the confidentiality of all Customer
and Contracted Health Plan data, including, but not limited to, contracts,
provider information, strategic objectives, enrollment, financial information,
etc. Except as described below, CONTRACTOR shall not disclose the details of
Customer's or any Contracted Health Plan program experience, including such
information as price, claims history, profit/loss, etc., to any third party.
Except as described below, CONTRACTOR shall maintain the confidentiality of all
Customer and Contracted Health Plan policyholder data, including any medical
records information, operative reports, fee schedule information, and the like.
CONTRACTOR shall disclose information described in this Section only: (a) in
response to a court order; (b). for an examination conducted by the applicable
Office of the Insurance Commissioner; (c) for an audit or investigation
conducted under the Employee Retirement Income Security Act of 1974 (29 U.S.C.
1001, et seq.); (d) to or at the request of Customer; or (e), with respect to
individual patient information, with the
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written consent of the insured or certificate holder (or a designated legal
representative) to which the information applies.
MPOWER AND CONTRACTOR mutually covenant to keep confidential any proprietary or
confidential information of the other party, and to implement safeguards
designed to prevent disclosure of any proprietary or confidential information of
either party to a third party without the express written consent of the other
party. Such information shall include internal business practices, business
records, trade secrets, contracts, the terms of this Agreement, or business
methods, in any form whatsoever. Upon request, the party receiving such
information shall either return or destroy confidential information, as directed
by the disclosing party.
TRAINING. MPOWER shall arrange Customer training to CONTRACTOR'S staff regarding
(a) pertinent portions of the applicable Membership Agreements, including
without limitation covered benefits for medical transportation services, (b)
applicable portions of the Administrative Manuals pertaining to CONTRACTOR'S
obligations hereunder; and (c) any special processes, procedures, or benefits
applicable to a specific Contracted Health Plan that are necessary in order for
CONTRACTOR to satisfy its obligations under this Agreement. CONTRACTOR shall
make available staff members designated as key contacts for all administrators
and Contracted Health Plans to attend sessions conducted by or arranged by
MPOWER or Customer for product training, provider issues resolution or training,
and to help build effective working relationships among administrators and
Contracted Health Plans.
III. PRICE AND PAYMENT
PRICE. The fees for the services of CONTRACTOR pursuant to this Agreement are
identified on Exhibit A. These fees cover those services provided by Contractor
pursuant to this Agreement and are based on the key assumptions identified on
Exhibit A, as well as the cost of toll-free telephone lines and supplies. In the
event of the addition of new Contracted Health Plans, the encounter pricing set
forth on Exhibit A shall remain applicable to services provided in connection
with such new Contracted Health Plans, except that if the requirements for such
services are materially greater or less than the assumptions set forth on
Exhibit A, the per encounter charge may be changed accordingly upon mutual
agreement of the parties. Notwithstanding the foregoing, the parties acknowledge
that the price set forth in Exhibit A is not contingent upon the continuation of
any specific Health Plan Agreement between Customer and a Contracted Health
Plan.
PAYMENT. On or before the fifth (5th) day of each month, CONTRACTOR shall
provide MPOWER with a report of the aggregate number of encounters processed by
CONTRACTOR during the previous month. MPOWER will bill the Customer the
applicable tiered encounter fee for such encounters on or before the fifteenth
(15th) day of each month. MPOWER will, in turn, remit the applicable tiered
encounter fee to Contractor within two (2) working days of receipt from
Customer.
IV. INDEMNIFICATION
MPOWER asserts that Customer agrees to defend, indemnify, and hold harmless
CONTRACTOR, as agent of MPOWER, and its parent and subsidiaries, and their
officers, directors, agents, and employees, from and against any claim, expenses
(including reasonable attorney fees and litigation costs), losses, lawsuits,
damages, fines, penalties, or other liability to any third party, including
participating providers, nonparticipating providers, and Customer's insureds,
arising out of or related to any negligent, wrongful, or unauthorized act or
omission of Customer or act or omission of MPOWER or CONTRACTOR expressly
required by Customer. CONTRACTOR acknowledges its responsibility to notify
MPOWER if CONTRACTOR has knowledge that direction provided by MPOWER or Customer
is negligent, wrongful, or unauthorized.
CONTRACTOR agrees to defend, indemnify, and hold harmless MPOWER, Customer, the
Contracted Health Plans, their parents and subsidiaries, and their officers,
directors, agents, and employees, from and against any claim, expenses
(including reasonable attorney fees and litigation costs), losses, lawsuits,
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damages, fines, penalties, or other liability to any third party, arising out of
or related to any negligent, wrongful, or unauthorized act or omission of
CONTRACTOR. MPOWER acknowledges its responsibility to notify CONTRACTOR if
MPOWER has knowledge that any action on the part of CONTRACTOR is negligent,
wrongful, or unauthorized.
Each party (MPOWER and CONTRACTOR) will promptly notify the other if it becomes
aware of any lawsuit, insurance department complaint, or demand by an attorney,
winch may affect the other. If either party is named as a defendant in a lawsuit
for any matter for which the other party is responsible under this provision,
the other party shall be responsible for defending such matter. Responsibilities
under this provision includes liability for judgments, reasonable attorney fees,
costs, penalties, and fines.
Notwithstanding other provisions of this Article IV, the duty of either party to
notify the other, defend, indemnify, or hold harmless under this Article shall
not arise unless and until such claim, expense, loss, damage, free, penalty, or
other liability to any third party shall exceed $25,000.
V. DISPUTE RESOLUTION
NOTIFICATION AND RESOLUTION OF COMPLAINTS. CONTRACTOR shall notify MPOWER
and Customer within forty-eight (48) hours of receipt of any complaint received
from a Member, a Member's representative, a Contracted Health Plan (if such
complaint involves administrative services rendered by CONTRACTOR pursuant to
this Agreement) or a provider of medical transportation services in connection
with services rendered by CONTRACTOR hereunder. MPOWER and CONTRACTOR agree to
cooperate fully with Customer and with the applicable Contracted Health Plan in
resolving any Member or provider complaint regarding services provided by MPOWER
and CONTRACTOR in connection with this Agreement, in accordance with the dispute
resolution procedure set forth in the applicable Membership Agreement,
Administrative Manual or provider agreements, as appropriate. In addition,
MPOWER and CONTRACTOR agree to be joined in any dispute between Customer and a
Contracted Health Plan involving administrative services rendered by MPOWER and
CONTRACTOR pursuant to this Agreement, and to cooperate fully in the resolution
of such dispute in accordance with the dispute resolution procedure set forth in
the applicable Health Plan Agreement.
DISPUTE BETWEEN THE PARTIES. If any dispute shall arise between the parties in
connection with this Agreement that is [unrelated to a Member, provider, or
Contracted Health Plan complaint], the parties shall make every effort to
amicably resolve the dispute pursuant to this Section V.2. The following
procedures shall be adhered to in order to expeditiously resolve any disputes
arising during the term of this Agreement.
A. The party invoking the procedures of this Section V.2 shall provide
written notice to the other party. Each party shall designate an
individual empowered to bind the organization to a negotiated
resolution of the dispute. Unless the dispute is resolved with fewer
meetings, these parties shall meet and confer at least two (2) times
within forty-five (45) days to attempt to reach such resolution. If the
matter has not been resolved informally within such forty-five (45)
days (which period may be extended by mutual agreement), the dispute
shall be settled by binding arbitration in accordance with the
provisions of Sections B through G of this Section V.2.
B. Either party may commence arbitration by sending a written demand for
arbitration to the other party, setting forth the nature of the
controversy, the dollar amount involved, if any, and the remedies
sought, and attaching a copy of this Article V to the demand. The
parties shall attempt to agree upon either one or three (3)
arbitrators, as they jointly deem appropriate. If the parties fail to
agree upon the appropriate number of arbitrators and the identity of
the arbitrator(s) within ten (10) days after the demand for arbitration
is mailed, then the parties stipulate to arbitration before three (3)
neutral arbitrators sitting on the JAMS/Endispute ("JAMS") panel
administered by the Denver, Colorado, JAMS office. Each party shall
select one such arbitrator from the panel, and the third arbitrator
shall be selected by the first two so selected. All three
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<PAGE> 8
arbitrators shall be neutrals, and no arbitrator shall have a conflict
of interest unless waived by both parties.
C. The parties shall share all costs of arbitration.
D. The arbitrator(s) shall apply the substantive law of Colorado. The
parties shall have the rights of discovery as provided for any judicial
proceeding. The Colorado evidence code shall apply to testimony and
documents submitted to the arbitrator(s).
E. Arbitration shall take place in Denver, Colorado unless the parties
otherwise agree. As soon as reasonably practicable, the arbitrator(s)
shall conduct a hearing on the dispute or matter to be resolved. As
soon as reasonably practicable thereafter, the arbitrator(s) shall
arrive at a final decision, which shall be reduced to writing, signed
by the arbitrator(s) and mailed to each of the parties and their legal
counsel.
F. All decisions of the arbitrator(s) shall be final, binding and
conclusive on the parties and shall constitute the only method of
resolving disputes or matters subject to arbitration under this
Agreement. The arbitrator(s) or a court of appropriate jurisdiction may
issue a writ of execution to enforce the arbitrator's judgment.
Judgment may be entered upon such a decision in accordance with
applicable law in any court having jurisdiction.
G. Notwithstanding the foregoing, because time is of the essence of this
Agreement, the parties specifically reserve the right to seek a
judicial temporary restraining order, preliminary injunction, or other
similar short term equitable relief, and grant the arbitrator(s) the
right to make a final determination of the parties' rights, including
whether to make permanent or dissolve such court order.
VI. TERM AND TERMINATION
TERM. The initial term of this Agreement shall commence on the Effective Date
hereof and shall continue for a period of five (5) years unless sooner
terminated in accordance with this Article VI. Thereafter, this Agreement shall
automatically renew for consecutive one (1) year periods.
TERMINATION WITHOUT CAUSE. This Agreement may be terminated without cause by
either party by providing one hundred twenty (120) days' prior written notice to
the other party.
TERMINATION FOR CAUSE. This Agreement may be terminated immediately upon written
notice thereof given by either party if any one of the following occurs, but in
no event shall such termination relieve either party from any of its obligations
incurred at the time of termination under this Agreement.
A. Except as provided in Section 4.B below, either party may terminate
this Agreement upon failure of the other party to cure non-compliance
with any material provision of this Agreement within thirty (30) days
after the terminating party gives written notice of such non-compliance
to the other party, unless cure of the non-compliance cannot be
reasonably completed within thirty (30) days, in which case such cure
shall be commenced within such thirty (30) day period and diligently
pursued to completion, which completion shall occur no later than
forty-five (45) days after the initial notice of termination. Any such
termination shall be effective as of the date of expiration of the
applicable cure period.
B. In the event of breach by CONTRACTOR, MPOWER may terminate this
Agreement in whole or in part (i.e., only as to specific service areas
or Contracted Health Plans).
IMMEDIATE TERMINATION.
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<PAGE> 9
A. Subject to Section II.3.A hereof, this Agreement shall automatically
terminate if CONTRACTOR fails to apply for or maintain applicable
licensure as a third party administrator and/or such other licenses or
certifications required for CONTRACTOR to perform its obligations
hereunder.
B. In the event of any material adverse change in CONTRACTOR'S insurance
coverage, MPOWER may immediately terminate this Agreement.
C. In the event of termination of a Health Plan Agreement for any reason,
MPOWER may terminate this Agreement in whole or in part effective on
the date of termination of the Health Plan Agreement. MPOWER shall
provide CONTRACTOR with not less than forty-five (45) days notice of
such termination.
D. This Agreement may be terminated if either party becomes insolvent, or
is adjudicated as bankrupt, or its business comes into possession or
control, even temporarily, if any trustee in bankruptcy, or a receiver
is appointed for it, or it makes a general assignment for the benefit
of creditors, and no interest in this Agreement shall be deemed an
asset of creditors.
EFFECT OF TERMINATION. Upon termination of this Agreement for any reason, the
Agreement shall be of no further force or effect, except as to the rights and
obligations of the parties arising out of transactions occurring prior to the
effective date of termination, MPOWER and CONTRACTOR shall cooperate fully with
Customer and all Contracted Health Plans to ensure a smooth transition of
administrative functions assumed by CONTRACTOR hereunder to MPOWER or directly
to another administrative services vendor. Such cooperation shall include but
not be limited to the following:
A. CONTRACTOR shall continue to pay claims incurred during the term of
this Agreement unless directed by MPOWER and Customer to transfer such
functions to Customer or directly to the new administrative services
vendor at the encounter fee contained in Exhibit A.
B. CONTRACTOR shall transfer, as soon as possible, both electronically and
on diskette, all data, records, and other information connected with
claims processing and other services provided by CONTRACTOR to MPOWER
or directly to the new administrative services vendor. Cost associated
with this transfer will be billed by CONTRACTOR to MPOWER and paid by
MPOWER within thirty (30) days, subject to reasonable and customary
expenses incurred as a result of this transfer.
C. CONTRACTOR shall provide a final accounting of claims processed within
thirty (30) days after the end of the month in which this Agreement was
terminated.
VII. GENERAL PROVISIONS
SUBCONTRACTING. All services proposed by CONTRACTOR will be performed by a
combination of its own staff and designated subcontractor(s). All subcontractors
operating on behalf of CONTRACTOR will be subject to the terms and conditions of
this Agreement. MPOWER shall have the right to approve all subcontractors prior
to their contracting with CONTRACTOR.
CUSTOMER SATISFACTION SURVEYS. Customer may periodically conduct "customer"
satisfaction surveys of policyholders, Contracted Health Plans, and providers
with whom Customer has contracted. CONTRACTOR agrees to record all interactions
with these parties and provide those records, including the callers' telephone
numbers, to Customer as requested. CONTRACTOR will provide other reasonable
support to Customer's customer satisfaction survey activities as requested.
INSURANCE. Each party (MPOWER and CONTRACTOR) shall obtain and carry general
liability insurance, including errors and omissions coverage, in a form and with
an insurer acceptable to the other, with limits of at least $1,000,000 per
occurrence and $3,000,000 in the aggregate. Within sixty (60) days of execution
of this Agreement, each party shall deliver to the other a certificate of notice
which provides that, should either party discontinue its errors and omissions
coverage, the other will be notified of the
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<PAGE> 10
occurrence. In the event any such coverage is provided on a claims made basis,
such coverage shall be manufactured (or such party shall procure equivalent tail
coverage) for a period of five (5) years after the termination hereof.
BUSINESS RELATIONSHIP. The business relationship of CONTRACTOR to MPOWER
hereunder is that of an agent, and not as partner, joint venture or employee.
NOTICE. Any notice required or permitted hereunder shall be deemed served if
personally delivered or mailed by registered or certified mail, return receipt
requested, postage prepaid, and properly addressed to the respective party to
when such notice relates at the address set forth below, or at such other
address as shall be specified by notice given in the manner herein provided.
Notice to Customer: AMERICAN MEDICAL PATHWAYS
2821 South Parker Road
Aurora, CO 80014
Attn: President and Chief Operating Officer
With a copy to: AMERICAN MEDICAL RESPONSE
2821 South Parker Road
Aurora, CO 80014
Attn: President and Chief Operating Officer
Notice to MPOWER: MPOWER SOLUTIONS, INC.
6400 S. Fiddler's Green Circle
Suite 540
Englewood, CO 80111
Attn: Chief Executive Officer
Notice to CONTRACTOR: EMPLOYERS MUTUAL, INC.
9716 San Jose Boulevard, Suite 200
Jacksonville, FL 32257
Attn: Chief Executive Officer
PARTIES BOUND. This Agreement shall be binding upon and shall inure to the
benefit of the parties and their respective successors and permitted assigns.
Neither party shall assign or otherwise transfer this Agreement without the
prior written consent of the other party; provided, however, that either party
may assign this Agreement to any subsidiary of such party in which such party
owns an equity position of fifty-one percent (51%) or more, by giving thirty
(30) days' prior written notice to the other party.
AMENDMENT. This Agreement may be amended at any time but only by the written
agreement of the parties.
SEVERABILITY. The invalidity or unenforceability of any term or provision hereof
shall in no way affect the validity or enforceability of any other term or
provision of this Agreement.
GOVERNING LAW. This Agreement and the rights, obligations, and remedies of the
parties hereunder shall be governed by the laws of the state of Colorado,
HEADINGS. The table of contents and headings to the various paragraphs of this
Agreement have been inserted for convenient reference only and shall not modify,
define, limit, or expand the express provisions of this Agreement.
AUTHORIZATION FOR AGREEMENT. The execution and performance of this Agreement by
the parties has been duly authorized by all necessary laws, resolutions, or
corporate action, and this Agreement constitutes a valid and enforceable
obligation of the parties in accordance with its terms.
-10-
<PAGE> 11
12. FORCE MAJEURE. No party shall be liable for any failure to perform its
obligations under this Agreement, including without limitation
compliance with the performance standards set forth in Section II.4, to
the extent that such failure results from any act of God, riot, war,
civil unrest, natural disaster or labor dispute.
13. ENTIRE AGREEMENT. This Agreement, including exhibits and attachments,
contains the entire agreement between the parties, and this Agreement
may not be modified or terminated except as expressly provided herein
or by an agreement in writing signed by the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement effective the day
and year first set forth above.
MPOWER SOLUTIONS, INC. EMPLOYERS MUTUAL, INC.
("MPOWER") ("CONTRACTOR")
/s/ MARK S. RANGELL /s/ WYLIE L. ANDERSON
- --------------------------------- -----------------------------------------
SIGNATURE SIGNATURE
Mark S. Rangell Wylie L. Anderson
- --------------------------------- -----------------------------------------
NAME PRINTED NAME PRINTED
SENIOR VP VP & COO
- --------------------------------- -----------------------------------------
TITLE TITLE
-11-
<PAGE> 12
EXHIBIT A
SCOPE OF SERVICES
IN CONNECTION WITH
KAISER FOUNDATION HEALTH PLANS
STATEMENT OF WORK
ELIGIBILITY
Key Assumptions:
- A full eligibility data lead will be provided to MPOWER from
Customer and Kaiser Foundation Health Plans ("Kaiser") in a
format agreed to between Customer and Kaiser, winch shall be
in the MPOWER-specific electronic format
- Customer and the Contracted Health Plan will provide
eligibility on an agreed to monthly date and be loaded by
MPOWER within 24 hours of receipt with each new eligibility
lead representing the current "eligible population"
- No retroactive enrollments and disenrollments
- No reconciliation of monthly eligibility
- No retroactive claim adjustments
Implementation Schedule (related to regions under which CONTRACTOR will be
providing services)
<TABLE>
<CAPTION>
PHASE REGION LIVES ENCOUNTERS ENCOUNTERS LIVE DATE
(000,000) (YEARLY) (MONTHLY)
<S> <C> <C> <C> <C> <C>
1 Mountain Division* [*] [*] [*] [*]
2 Southern CA [*] [*] [*] [*]
3 K.C. [*] [*] [*] [*]
4 Northern CA [*] [*] [*] [*]
</TABLE>
* The financial provisions connected with this service area will be implemented
on June 1, 1999.
CAPITATION/FUND POOL MANAGEMENT/FINANCIAL
Key Assumptions:
- Set-up and maintain fund pools applicable to Kaiser satellite
locations
- Load and maintain provider and vendor data for 100 network
providers
- Set-up and maintain roll-up hierarchy of Customer transports
by division
- Set-up and maintain roll-up hierarchy of transports by Kaiser
satellite
- Provide 1099s for up to 100 non-Customer network providers
- Perform fee-for-service claims payments and issue remittance
advice with checks to providers (100 checks/mo.)
AUTHORIZATIONS/CLAIMS
Key Assumptions:
- 56% of claims will require medical necessity checking (60%
submitted electronically)
- 44% will auto-adjudicate according to role set (85% submitted
electronically)
* Confidential Treatment Requested
-12-
<PAGE> 13
- Encounter volume breakdown according to Attachment A
- Denials are disbursed to Providers and Kaiser for distribution
- Customer Service is limited to 100 Providers and
Customer/Contracted Health Plan staff
- No EOBs are submitted to members
- Claims are submitted in standard HCFA 1500 or UB92 format
- Maintenance of out of network providers will be limited to 500
providers
- Customer service calls to Contracted Health
Plans/Customer/contracted providers will be limited to 2% of
the volume attributed to Medical Necessity claims. Excess
Customer services requirements shall be managed by Customer
- Medical necessity checking will be limited to Contracted
Health Plan approved protocol compliance and subject to
"prudent person" rule, if applicable
REPORTING
- Provide encounter data reporting electronically
- Limited to reports which are included in standard MPOWER
system format, and as agreed to by the Contracted Health Plan
PRICING ASSUMPTIONS
The following assumptions have been made within the generic pricing model.
1. TRAVEL & EXPENSES - Any travel which is required to AMERICAN MEDICAL
PATHWAYS' client sites is not included.
2. LOCATION - Computer Operations will be housed in MPOWER facilities with
claims processing staff located in Federal Way, WA and Jacksonville,
FL.
PENALTIES
In accordance with Section II.4.B of this Agreement, CONTRACTOR is responsible
for reimbursing Customer for penalties incurred by Customer due to CONTRACTOR'S
failure to meet the performance goals set forth in Section II.4.A of this
Agreement. Such penalty shall be equal to [*] percent ([*]%) of the
administrative fees set forth in Article II hereof in connection with the
particular service area(s) (as defined in the applicable Health Plan Agreement)
that has been deemed not to have met the performance goals set forth in Section
II.4 of this Agreement.
* Confidential Treatment Requested
-13-
<PAGE> 14
PRICING MODEL
MONTHLY ENCOUNTER PRICING
<TABLE>
<CAPTION>
TIERS $/ENCOUNTER
(MONTHLY ENCOUNTERS)
<S> <C> <C>
0 - 5,000 $[*]
5,001 - 10,000 $[*]
10,001 - 20,000 $[*]
20,001 - 30,000 $[*]
30,001 - 40,000 $[*]
40,001- $[*]
</TABLE>
The foregoing encounter tiers reflect MPOWER'S remittance to CONTRACTOR based on
the sum of all monthly encounters processed by CONTRACTOR on behalf of Customer.
* Confidential Treatment Requested
-14-
<PAGE> 15
EXHIBIT B
IMPLEMENTATION PLAN
NEW ACCOUNT IMPLEMENTATION WORKPLAN SCHEDULE (SAMPLE)
The following attachment provides a sample implementation plan, indicating key
activities and milestones to be accomplished during the implementation process.
This schedule normally covers a period of ninety (90) days from contract
signing. MPOWER and Customer will work in conjunction with the Contracted Health
Plan(s) to expedite the standard timeframe, in support of a [*] initial live
date for the first service area (Rocky Mountain Division).
* Confidential Treatment Requested
-15-
<PAGE> 16
<TABLE>
<CAPTION>
%
ID TASK NAME COMPLETE DURATION START* FINISH
<S> <C> <C> <C> <C> <C> <C>
1 X [*]
2 X
3 X
4 X
5 X
6 X
7 X
8 X
9 X
10 X
11 X
12 X
13 X
14 X
15 X
16 X
17 X
18 X
19 X
20 X
21 X
22 X
23 X
24 X
25
26
27
28
29
30
31
32
33
34
35
36
37
</TABLE>
* Confidential Treatment Requested
16
<PAGE> 17
<TABLE>
<CAPTION>
%
ID TASK NAME COMPLETE DURATION START* FINISH
<S> <C> <C> <C> <C> <C> <C>
38 [*]
39
40
41
42
43
44
45
46
47 X
48
49
50
51
52
53
54
55 X
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
</TABLE>
* Confidential Treatment Requested
17
<PAGE> 18
<TABLE>
<CAPTION>
%
ID TASK NAME COMPLETE DURATION START* FINISH
<S> <C> <C> <C> <C> <C> <C>
75 [*]
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
107
108
109
110
111
</TABLE>
* Confidential Treatment Requested
18
<PAGE> 19
<TABLE>
<CAPTION>
%
ID TASK NAME COMPLETE DURATION START* FINISH
<S> <C> <C> <C> <C> <C> <C>
112 [*]
113
114
115
116
117
118
119
120
121
122
123
124
125
126
127
128
129
130
131
132
133
134
135
136
137
138
139
140
141
142
143
144
145
146
147
148
</TABLE>
* Confidential Treatment Requested
19
<PAGE> 20
<TABLE>
<CAPTION>
%
ID TASK NAME COMPLETE DURATION START* FINISH
<S> <C> <C> <C> <C> <C> <C>
149 [*]
150
151
152
153
154
155
156
157
158
159
160
161
162
163
164
165
166
167
168
169
170
171
172
173
174
175
176
177
178
179
180
181
182
183
184
185
</TABLE>
* Confidential Treatment Requested
20
<PAGE> 21
<TABLE>
<CAPTION>
%
ID TASK NAME COMPLETE DURATION START* FINISH
<S> <C> <C> <C> <C> <C> <C>
186 [*]
187
188
189
190
191
192
193
194
195
196
197
198
199
200
201
202
203
204
205
206
207
208
209
210
211
</TABLE>
* Tasks may not be started earlier than this date
* Confidential Treatment Requested
21
<PAGE> 1
EXHIBIT 10.17
MASTER AGREEMENT
BETWEEN
MPOWER SOLUTIONS INC.
AND
PROVIDER SERVICES INCORPORATED
Page 1 of 40
<PAGE> 2
MASTER AGREEMENT
THIS MASTER AGREEMENT (the "Agreement") effective Feb. 20 , 1998 (the "Effective
Date"), between MPOWER SOLUTIONS INC., a Delaware corporation with its principal
place of business located at 2300 Buena Vista, S.E., Suite 128, Albuquerque, New
Mexico 87106 ("MPOWER") and Provider Services Incorporated, a Washington
corporation with its principal place of business located at 909 South 336th
Street, Suite 100, Federal Way, Washington 98003 ("Customer") sets forth the
promises of the parties with respect to the products and services of MPOWER
which are described in this Agreement.
WHEREAS, MPOWER is in the business of providing automated managed health care
information software and services to businesses providing managed health care
and insurance services, and desires to provide such services and software to
Customer, subject to the terms hereof; and
WHEREAS, Customer is in the business of providing managed health care and
insurance services to its customers and desires to use the software and services
provided by MPOWER, subject to the terms hereof.
NOW THEREFORE, in consideration of the mutual promises made, the terms and
conditions hereunder described and other valuable consideration, the parties
agree as follows:
I. DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
A. CPI
"CPI" shall mean the Consumer Price Index for All Urban Consumers, U.S.
City Average, for All Items (1982-1984=100), as published by the Bureau
of Labor Statistics of the U.S. Department of Labor. If the Bureau of
Labor Statistics ceases to publish or substantially changes the content,
calculation or format of the CPI, the parties will substitute another
comparable index published by a mutually agreeable source; provided,
however, that if the change is merely to redefine the base period to
some other period, the parties will continue to use the affected index
but will convert either the current or prior level of such index to the
same basis as the other by using an appropriate conversion factor.
Page 2 of 40
<PAGE> 3
B. Documentation
"Documentation" shall mean the standard operational instructions,
manuals and related material regarding MPOWER Products (as defined
below) which MPOWER will deliver to Customer as set out in the
Attachments to this Agreement.
C. "MPOWER Products" shall mean those products which MPOWER will deliver to
Customer as set out in the Attachments to this Agreement.
D. Release
"Release" shall mean a set of computer programs and or associated
Documentation regarding an MPOWER Product which MPOWER makes available
for use by its customers who are covered under warranty or a maintenance
agreement regarding such MPOWER Product. MPOWER reserves the right to
charge an additional license fee for any optional modules which MPOWER
reasonably determines contains significant additional functionality.
Such significant additional functionality shall mean (a) new modules or
subsystems that are not a mere enhancement nor extension of existing
functionality, which enhancements and extensions are covered under
maintenance agreements, or (b) different hardware, operating system
platforms or databases. The major modules and/or functionality initially
covered under a given MPOWER Product are listed in an Exhibit to the
applicable Attachment to this Agreement.
E. Site(s)
"Site(s)" shall mean the physical location(s) at which Customer conducts
its business.
F. Live Production Environment
A live production environment ("Live Production Environment") is defined
whereby MPOWER(TM) is managing on-line the enrollment and processing of
subscribers or members, and, at a minimum, one line of business.
G. Licensed Plan(s)
A "Licensed Plan" ("Licensed Plans") shall mean a health benefit plan
which is either enabled by or regulated by the State(s) in which
Customer or a Plan Sponsor is operating, or which is enabled by Federal
legislation or regulations and is regulated by a Federal agency or under
the terms of the enabling Federal legislation, whether or not the health
benefit plan is also regulated by the State(s) in which the Customer or
Plan Sponsor is operating.
Page 3 of 40
<PAGE> 4
H. Life (Lives)
"Life" ("Lives") means an individual who is currently enrolled with a
Licensed Plan entitled to receive Covered Services or who has been
enrolled in such Licensed Plan at some time during the then-previous
twelve (12) months, whether or not such covered member has presented a
valid claim to such Licensed Plan ("Enrollee").
I. Covered Services
"Covered Services" shall mean those healthcare benefits that an Enrollee
is entitled to receive from a Participating Provider pursuant to the
applicable Enrollee Group Benefits Agreement.
J. Participating Provider
"Participating Provider" means a Provider that has entered into an
Agreement with Customer or Customer's customer to provide Covered
Services to Enrollees.
K. Group Benefits Agreement
"Group Benefits Agreement" means the document distributed by-Licensed
Plan to its Enrollees describing all Covered Services in the Licensed
Plan.
L. Work Order
"Work Order" shall mean a document that is separately executed by both
parties, that (a) describes a scope of services that Customer wishes
MPOWER to perform for Customer, (b) authorizes MPOWER to perform
services for Customer, (c) obligates MPOWER to perform such services and
(d) obligates Customer to pay for such services, all under the terms of
that separate document, and Which document, when executed, is
incorporated and made part of this Agreement.
M. Derivative Work
"Derivative Work" shall mean any computer program, application,
interface or related documentation that is based on an MPOWER Product,
or any component part thereof, that is used or intended to be used as a
commercial software product or as a competitive product to MPOWER.
N. Source Code
"Source Code" shall mean the commonly accepted source code of a computer
program describing in a formal language certain logic functions, from
which
Page 4 of 40
<PAGE> 5
source code a computer program is compiled or interpreted to perform
certain functions in a computer.
O. Object Code
Object Code" shall mean the commonly accepted object code of a computer
program, which is that version of the computer program logic that has
been translated from the Source Code into instructions that can be run
directly within a computer hi a predefined operating system environment.
P. Plan Sponsor
"Plan Sponsor" shall mean the health plan, organization or legal person
that offers a Licensed Plan either directly or through another
organization or legal entity to Enrollees.
II. CONFIDENTIAL AND PROPRIETARY INFORMATION
MPOWER, on behalf of itself, its employees, agents, vendors, successors,
and assigns, agrees to keep in confidence all data relating to
Customer's business to which MPOWER may have access as a result of
performing its obligations under this Agreement and the terms of this
Agreement.
MPOWER asserts and Customer acknowledges that all MPOWER Products, the
Documentation and the Releases, and all information, data, designs,
MPOWER Product structural definitions of any system setups, benefit
plans; provider contracts, fee groups, ad hoc reports, letter formats,
sample letter content, business process workflow diagrams, and any other
structural templates and other similar information provided by,
developed or reviewed by or in conjunction with MPOWER, and used by
MPOWER in assisting Customer in the installation, implementation or
ongoing use of the MPOWER Product, and methodologies related thereto
("Proprietary Information") are the exclusive property of MPOWER or
MPOWER's suppliers and that the Proprietary Information is confidential,
has tangible value and includes trade secret information of MPOWER
and/or MPOWER's suppliers. MPOWER and/or MPOWER's suppliers shall retain
all rights to the Proprietary Information, including all copyright
rights therein, except to the extent to which MPOWER grants rights to
Customer to use the Proprietary Information pursuant to this Agreement.
Customer may not create Derivative Works based upon the Proprietary
Information in whole or in part. All improvements, enhancements and
modifications to the Proprietary Information shall be owned exclusively
by MPOWER or MPOWER's suppliers. Without MPOWER's prior written consent,
Customer shall not decompile, disassemble or reverse engineer any
Proprietary Information.
Page 5 of 40
<PAGE> 6
Customer agrees not to sell, lease, assign or otherwise transfer,
disclose or make available, in whole or in part, any portion of the
Proprietary Information or the terms of this Agreement and Customer
shall prevent disclosure of any part of the Proprietary Information or
the terms of this Agreement to any third party for any reason (except
for disclosure or access to Customer's employees, contracted entities,
or Customer's customers which is necessary for Customer to be able to
use the Proprietary Information in accordance with this Agreement).
Customer agrees to notify those employees, contracted entities or
customers to whom Customer gives access to the Proprietary Information
of the restrictions contained in this Section II and to ensure their
compliance with such restrictions.
The duties and obligations which are included in this Section II shall
survive any termination of this Agreement and/or Customer's right and
license to use any MPOWER Product.
If Customer desires to disclose any Proprietary Information to any third
party or to permit any third party to have access to any Proprietary
Information, such third parry must have a legitimate need to have access
to such Proprietary Information (consistent with the purpose[s] for
which such disclosure was made to Customer) and, prior to any such
disclosure or access, Customer and such third party must enter into a
nondisclosure agreement with MPOWER in substantially the form set out in
the Addendum which is attached to this Master Agreement and made a part
hereof. In no event shall Customer disclose any Proprietary Information
to any competitor of MPOWER.
Notwithstanding the above, Customer and MPOWER acknowledge that the
MPOWER Product structural definitions of any system setups, benefit
plan, provider contracts, fee groups, ad hoc. reports, letter formats,
sample letter content, workflow diagram of Customer business processes,
and any other structural templates, that have been provided, developed,
reviewed or verified in whole or in part by or with the support of
MPOWER, its employees or agents, do not constitute Proprietary
Information of Customer within the meaning of this Section II; provided.
however, that specific provider and benefit contract rates, the names,
demographic information, contractual relationships, and medical
information of any group, member, provider or other entity with a
contractual relationship with Customer shall be considered Proprietary
Information of Customer or of such other entity contracted with
Customer, unless such information is available through public sources or
through publicly available filings with any insurance or health care
regulatory agency or with any industry accreditation or reporting body.
Further notwithstanding the above, Customer and MPOWER acknowledge that
Customer may create and distribute reports and data from its licensed
use of the MPOWER Products in the normal course of its business to its
customers, to
Page 6 of 40
<PAGE> 7
health care providers, Enrollees, employers or Plan Sponsors, government
agencies and others with a legitimate purpose in the conduct of the
Customer's business and the data processed by the licensed MPOWER
Products, and that such reports and distributed dam do not constitute
Derivative Works, unless they are used to create commercial software
products for reuse and/or license to other parties.
III. COPYING
Customer, for each licensed instance of the MPOWER Product being used in
a Live Production Environment, may make one (1) copy of each MPOWER
Product in machine-readable form in a test region for the purpose of
testing new releases or fixes and also one (1) copy of each MPOWER
Product in machine-readable form for backup purposes only. Customer
agrees that upon copying any MPOWER Product, Customer shall place a
label on the outside of each copy medium showing the program name,
version number and any/all copyright and proprietary notices in the same
form as contained on the original copy.
In addition, Customer may make automated backup copies of its production
and testing regions for operational backup purposes without applying the
above labels, provided that such operational backup copies are
maintained with the acceptable industry standard security measures and
not made available to outside parties except for the case of disaster
recovery purposes, in which case the disaster recovery agent will be
bound to all the confidentiality and Proprietary Information
restrictions to which Customer is bound hereunder, and further that no
such disaster recovery agent may be a competitor of MPOWER.
IV. SOURCE CODE ESCROW
At the request of Customer, MPOWER and Customer will enter into an
agreement with MPOWER's escrow agent ("Custodian") for the depositing of
the MPOWER Products' Source Code ("Source Code Copy"). [The current
Custodian is NORWEST Bank.] MPOWER shall notify Customer at least ten
(10) business days prior to a change in the entity identified as the
Custodian. Subject to Customer's payment of all fees due under this
Agreement in accordance with the applicable payment terms, the Source
Code Copy so deposited will be maintained during the period Customer
shall use and purchase, and MPOWER shall provide, software maintenance
services for the particular MPOWER Product. The Source Code Copy will be
updated by MPOWER upon each new Release of the particular MPOWER
Product.
The parties agree that the Source Code Copy shall be held by the
Custodian for delivery to Customer under the conditions that this
Agreement is terminated as a result of a material breach of the terms of
this Agreement by MPOWER or MPOWER files for bankruptcy under Chapter 7,
and its business is not continued
Page 7 of 40
<PAGE> 8
by virtue of a merger, consolidation, the sale of all or substantially
all of its assets, or through some other transaction by another
corporation or entity, and the Custodian of the Source Code has received
from Customer or from MPOWER, or from a court of competent jurisdiction:
(i) written notification of any such event or condition; (ii) demand
that a copy of the Source Code Copy be mailed to Customer; (iii) written
undertaking from Customer, which shall be legally binding, that the copy
of the Source Code Copy to be supplied to Customer will be used only for
Customer's maintenance of the MPOWER Products at a specified location
and will be promptly returned to the Custodian at the expiration of the
period during which Customer, under its agreement with MPOWER, has the
right to use the MPOWER Products, and that the copy of the Source Code
and the information and material contained therein shall be held
confidentially by Customer, its employees and agents who are involved in
the use and technical maintenance of the MPOWER Products, and shall not,
under any circumstances, be disclosed or made available to any other
person or entity; and (iv) specific instructions from Customer for the
delivery of a copy of the Source Code Copy, with a copy of such
instructions to MPOWER. Customer will pay the costs and expenses of the
Custodian in carrying out the requirements of this Section.
In addition, if Customer uses the MPOWER Product Source Code, it will
only be for the purposes for which the Object Code is licensed under
this Agreement and not for re-license, reverse engineering or to create
a derivative product. The Confidential and Proprietary Information
provisions of Section II apply also to the Source Code.
V. TERMINATION
Should Customer fail to pay any sum due and payable under this
Agreement, MPOWER shall notify Customer in writing of such failure to
pay. Customer shall then have thirty (30) days from the delivery of
MPOWER's written notice to pay such amount(s). The foregoing sentence in
no way relieves Customer from its obligation to pay any and all late
chargers which may become due as set forth in Section VI below. If
payment is not made within such thirty (30) days, MPOWER shall have the
immediate right to discontinue any and all services under this
Agreement. Furthermore, if payment is not made within Sixty (60) days
from the delivery of MPOWER's written notice, MPOWER shall have the
immediate right to terminate this Agreement.
Should either party commit a material breach of its obligations under
this Agreement, other than failing to pay money, the non-breaching party
may notify the breaching parry in writing, setting out the breach, and
the breaching party shall have sixty (60) days to remedy such breach. If
the breaching party fails to remedy the breach during this sixty
(60)-day period, or, with respect to those breaches which cannot
reasonably be remedied within sixty (60) days, if the breaching party
fails to proceed promptly after being given such notice to
Page 8 of 40
<PAGE> 9
commence remedying the breach and thereafter to proceed to remedy the
same, the other party shall have the fight to terminate this Agreement,
provided such party gives the breaching party thirty (30) days' prior
written notice to that effect. Notwithstanding the foregoing, either
party shall have the fight to immediately terminate this Agreement upon
any breach by the other of its obligations under Section II above.
Termination of this Agreement shall be without prejudice to all accrued
fights and remedies either party may have and shall not affect any
continuing rights and obligations of the parties under this Agreement.
Upon the termination of this Agreement and/or any Attachment to this
Agreement, Customer shall return to MPOWER all Proprietary Information
regarding the MPOWER Product whose license is being terminated, within
thirty (30) days after such termination and MPOWER shall return to
Customer any proprietary information obtained in the performance of this
Agreement within thirty (30) days after such termination.
VI. INVOICES AND CHARGES
Unless a specific payment date is set out in an Attachment to this
Agreement, Customer agrees to remit all payments under this Agreement so
that MPOWER shall receive such payments no later than thirty (30) days
from the date of MPOWER's invoice. Customer also agrees that MPOWER
shall have the right to charge interest charges of one and one-half
percent (1.5%) of the outstanding balance per month, or the highest
amount allowed by law, whichever is less, on any and all late payments,
and Customer agrees to pay such charges. All prices mentioned in this
Agreement are in U.S. Dollars. The parties agree that the prices set out
in this Agreement do not include any sales, use or gross receipts taxes,
any duties, any similar assessments, or any other tax imposed on any
party by virtue of this Agreement, all of which, excluding only taxes
based on MPOWER's income, shall be the sole liability of, and shall be
paid solely by, Customer. Exhibit A to Attachment 1 of this Agreement
provides a best efforts explanation of the currently known and
applicable state and local taxes, duties and any similar assessments
that are expected to apply to currently anticipated products and
services under the Attachment 1 .to this Agreement.
VII. FORCE MAJEURE
Neither party shall be liable to the other for failing to fulfill any
obligation under this Agreement if such failure is caused by an event
which is beyond such party's reasonable control and which is not caused
by such party's fault or negligence, including without limitation, acts
of God, acts of war, fires, strikes, lightning, floods, epidemics, civil
unrest, power shortages, equipment failure, delays in
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<PAGE> 10
transportation, or either party's inability to obtain necessary labor,
material or components due to muses beyond such party's reasonable
control.
VIII. LIMITATION OF LIABILITY
CUSTOMER AGREES THAT MPOWER SHALL HAVE NO LIABILITY TO CUSTOMER FOR
INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES, EVEN IF MPOWER IS ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES, OR FOR LOSS OF USE OR COMMERCIAL
LOSS (INCLUDING, BUT NOT LIMITED TO, LOSS OF REVENUES AND/OR PROFITS),
HOWEVER OCCASIONED AND WHATEVER THE FORM OF ACTION, FOR ACTUAL OR
IMPUTED NEGLIGENCE, BREACH OF CONTRACT, BREACH OF WARRANTY OR OTHERWISE.
FURTHERMORE, CUSTOMER AGREES THAT IN NO EVENT SHALL MPOWER BE LIABLE FOR
DIRECT DAMAGES IN EXCESS OF:
A. ALL LICENSE FEES CUSTOMER SHALL HAVE PAID MPOWER FOR THE PARTICULAR
MPOWER PRODUCT WHICH IS THE SUBJECT OF CUSTOMER'S CLAIM, SHOULD
CUSTOMER RAISE A CLAIM REGARDING SUCH MPOWER PRODUCT DURING THE
INITIAL TWELVE (12) MONTHS OF THE SUBJECT ATTACHMENT; AND
B. SEVENTY-FIVE PERCENT (75%) OF ALL LICENSE FEES CUSTOMER SHALL HAVE
PAID MPOWER FOR THE PARTICULAR MPOWER PRODUCT WHICH IS THE SUBJECT
OF CUSTOMER'S CLAIM, SHOULD CUSTOMER RAISE A CLAIM REGARDING SUCH
MPOWER PRODUCT DURING THE SECOND TWELVE (12) MONTHS OF THE SUBJECT
ATTACHMENT; AND
C. FIFTY PERCENT (50%) OF ALL LICENSE FEES CUSTOMER SHALL HAVE PAID
MPOWER FOR THE PARTICULAR MPOWER PRODUCT WHICH IS THE SUBJECT OF
CUSTOMER'S CLAIM, SHOULD CUSTOMER RAISE A CLAIM REGARDING SUCH MPOWER
PRODUCT SUBSEQUENT TO THE INITIAL TWENTY-FOUR (24) MONTHS OF THE
SUBJECT ATTACHMENT.
The parties agree that no action, regardless of form, which may arise
out of the transactions under this Agreement may be brought by either
party more than one (1) year after the cause of action is known, or
ought reasonably to have been known, to the party bringing the action;
provided, however, that this one (1)-year limitation on actions shall
not apply to any claim of MPOWER based upon Customer's failure to pay
any amount owed under this Agreement.
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<PAGE> 11
IX INFRINGEMENT
MPOWER agrees to defend, indemnify and hold Customer harmless against
any, and all claims that any MPOWER Product infringes a U.S. Letter
Patent, copyright, trade secret or the proprietary rights of others,
provided that MPOWER shall have received timely written notice of any
such claim and that MPOWER shall have sole control of the defense of
such claim and all negotiations for the settlement or compromise of such
claim.
As of the date first written above, MPOWER warrants that it is not aware
of any infringement, and has not been notified by any third party that
it may be infringing, any U.S. Letter Patent, copyright, trade secret or
the proprietary rights of others.
If use of an MPOWER Product by Customer is enjoined, or becomes, or, in
MPOWER's sole opinion, is likely to become, the subject of a claim of
infringement, MPOWER will, at its option and expense, either:
1. procure for Customer the right to continue using the MPOWER Product
in question; or
2. replace or modify the same so that it is functionally equivalent
[i.e. the MPOWER Product will achieve the same or similar business
logic result] (or contains more functionality) and non-infringing.
Notwithstanding the foregoing, if MPOWER determines that neither of the
alternatives set forth above is reasonably available, MPOWER will refund
to Customer any unamortized portion of the infringing MPOWER Product's
license fee which has then been paid by Customer. Amortization shall be
based upon a seven (7)-year life of the infringing MPOWER Product,
beginning on the date the infringing MPOWER Product was licensed by
Customer from MPOWER. Should such refund occur, Customer agrees to
return the infringing MPOWER Product to MPOWER.
Should any refund described above occur, the license for the infringing
MPOWER Product shall be terminated and MPOWER, its affiliates,
subsidiaries, assigns and successor corporations shall be released from
any and all liability arising from any and all claims, losses,
liabilities, damages, costs or deficiencies which are then-existing or
which may arise in the future with regard to such infringing MPOWER
Product(s) for which MPOWER has refunded fees pursuant to this Section
IX.
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<PAGE> 12
Notwithstanding anything contained herein to the contrary, MPOWER shall
have no liability for any loss, cost, claim or expense caused by:
1. alteration of any MPOWER Product provided hereunder by any party
other than MPOWER;
2. any loss, expense or liability resulting from any infringement which
is a consequence of MPOWER's compliance with designs or code
submitted to MPOWER by Customer;
3. the use of any MPOWER Product in combination with products not
licensed to customer by MPOWER;
4. continuation of the allegedly infringing activity by Customer after
Customer is notified in writing thereof and after the conclusion of a
reasonable grace period afforded Customer in the notice to migrate
from the infringing activity to an alternate solution; or
5. Customer's use of an MPOWER Product other than in compliance with the
terms and conditions of this Agreement.
The foregoing remedy set forth in this Section IX represents the
exclusive remedy of Customer and MPOWER's sole liability with regard to
any claim that an MPOWER Product infringes the rights of others.
X. RESOLUTION OF DISPUTES
If any dispute shall arise between the parties under this Agreement, the
parties shall make every effort to amicably resolve the dispute pursuant
to this Section X. The following procedures shall be adhered to in order
to expeditiously resolve any disputes arising during the term of this
Agreement.
The party invoking the procedures of this Section X shall provide
written notice to the other party and within five (5) business days
following the other party's receipt of such notice, the parties'
implementation team leaders shall attempt to resolve such dispute. If
the parties' team leaders do not resolve such dispute within seven (7)
business days following the date of the non-invoking party's receipt of
notice hereunder, either party hereto shall have the right to refer such
dispute for "Executive Review" as provided below.
"Executive Review" shall refer to the dispute resolution process which
shall be conducted as follows: within fifteen (15) days of any party's
request for Executive Review, each such party shall have designated an
executive-level employee of such party and such designated executive
shall have met, either in
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<PAGE> 13
person or via telephone, with the other party's executive-level designee
to attempt to resolve such dispute. If said executive-level designees
are unable to resolve the dispute within ten (10) business days of their
first telephone or in-person meeting pursuant to this paragraph, either
party may request that the dispute be referred to a second level of
Executive Review. Within ten (10) days of any party's request for such
second level of Executive Review, the Chief Executive Officers of both
parties hereto shall meet, in person or via telephone, to attempt to
settle such dispute. Notwithstanding anything in this Agreement to the
contrary, should either party feel the dispute cannot be amicably
resolved after having negotiated in good faith to resolve such dispute
pursuant to the foregoing provisions of this Section, such party shall
have the right to terminate such negotiations. Nothing in this Section
shall require either party to engage in negotiations to resolve a
dispute for a period of more than forty-five (45) days.
If the matter has not been resolved pursuant to the aforesaid Executive
Review procedure within forty-five (45) days of the commencement of such
procedure (which period may be extended by mutual agreement), the
controversy shall be settled by arbitration in accordance with the
American Arbitration Association. (the "Association) under the
Commercial Arbitration Rules of the Association there in effect, by an
arbitrator knowledgeable in the computer area. The arbitrator shall be
selected by mutual agreement of MPOWER and Customer. If MPOWER and
Customer can not agree upon an arbitrator, an arbitrator shall be
appointed by the Court with jurisdiction over the dispute. The
arbitration shall be governed by the United States Arbitration Act, 9
U.S.C. Sec. 1-16, and judgment upon the award by the arbitrator may be
entered by any court having jurisdiction thereof. The place of
arbitration shall be in the jurisdiction in which the principal place of
business of the party not filing arbitration is located (i.e.,
Albuquerque, New Mexico for MPOWER and King County, Washington for
Customer). Each party shall pay its own costs and expenses.
XI. SUCCESSORS AND ASSIGNS
This Agreement shall be binding upon and shall inure to the benefit of
the parties and their respective successors and (to the extent specified
in any assignments) assigns. Customer shall not assign or otherwise
transfer this Agreement without the prior written consent of MPOWER.
Customer, however, may assign this Agreement to any subsidiary of
Customer in which Customer owns an equity position of 51% or more, by
giving thirty (30) days notice to MPOWER.
XII OMNIBUS RECONCILIATION ACT COMPLIANCE
As applicable under the Omnibus Reconciliation Act of 1980, until the
expiration of four (4) years after the furnishing of services under this
Agreement, MPOWER
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<PAGE> 14
shall, upon receipt of written request, and if then required to make
such information available under the then. existing law, make available
to the Secretary of the United States Department of Health and Human
Services ("Secretary"), the Comptroller General, or any of their duly
authorized representatives, this Agreement, books, documents, and/or
records of MPOWER that are necessary to certify the nature and extent of
products and services delivered under this Agreement and costs
associated therewith. Furthermore, if MPOWER carries out any of the
duties of this Agreement through a subcontract with a value or cost of
Ten Thousand Dollars ($10,000.00) or more over a twelve (12)-month
period, such subcontract will contain a clause to the effect that, until
the expiration of four (4) years after the furnishing of such services
under such subcontract, the subcontractor shall, upon receipt of written
request and if then required to make such information available under
the then-existing law, make available to the Secretary, Comptroller
General, or any of their duly authorized representatives, the
subcontract, books, documents, and/or records of such subcontractor that
are necessary to verify the nature and extent of such costs.
XIII. RELATIONSHIP MANAGEMENT
A. Meetings. MPOWER and Customer agree to regularly discuss business and
relationship strategies affecting both parties. MPOWER and Customer
further agree to have regularly scheduled communications to summarize
current activities, performance results, error corrections and work
efforts, as well as the future planned activities.
B. Release Discussions. MPOWER agrees to discuss with Customer its
planned future Releases and share with Customer at least sixty (60)
to ninety (90) days in advance of a projected future Release its then
current Release priorities, release notes and expectations regarding
new or expanded functionality to be included in such future Release.
C. Liaison. During the term of this Agreement, each party will provide a
liaison who (i) will have overall management responsibility for the
performance by the party hereunder, (ii) will have primary
operational responsibility, and (iii) will serve as the party's
primary liaison with the other party with respect to performance
under this Agreement.
XIV. MISCELLANEOUS
A. Invalidity. If any of the provisions, or portions thereof, of this
Agreement are deemed to be invalid under any applicable statute or
rule of law, they are to that extent to be deemed omitted, and the
parties agree to negotiate in good faith to bring such provisions, or
portions thereof, into compliance.
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<PAGE> 15
B. Headings. The headings of Sections in this Agreement and in the
Attachments are included for convenience only and shall not be
considered by either party in construing the meaning of this
Agreement or any Attachment.
C. Notices. Any notice given under this Agreement shall be in writing
and shall be deemed to be delivered either:
i. when it is delivered in person; or
ii. five (5) days after it is deposited in the United States Postal
Services certified mail with return receipt requested, postage
prepaid.
All notices remitted to MPOWER shall be remitted to the attention of:
President and Chief Executive Officer. All notices remitted to Customer
shall be remitted to the attention of: President and Chief Executive
Officer.
D. Waiver. Neither party shall be deemed to have waived any term or
provision of this Agreement, nor consented to any breach of this
Agreement, unless such party shall waive such term or provision, or
shall consent to such breach, in writing. Any such written waiver
and/or consent must be signed by the party which is waiving such term
or provision or is consenting to a breach. Either party's consenting
to a waiver, or a breach, by the other, whether express or implied,
shall not constitute consent or waiver of any other different or
subsequent breach by the other.
E. Governing Law. This Agreement and all Attachments hereto shall be
governed by and construed according to the laws of the State of New
Mexico.
(REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.)
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<PAGE> 16
The parties have each read this Agreement and agree to be bound by all of its
provisions, and further agree that it constitutes the complete and exclusive
statement of the agreement between then, and supersedes any and all prior
agreements and understandings between them pertaining to the subject matter of
this Agreement and takes precedence over the provisions of any purchase orders
submitted to MPOWER by Customer. This Agreement may be amended only in writing
signed by both of the parties.
Provider Services, Inc. MPOWER SOLUTIONS INC.
- -------------------------------- ("MPOWER")
/s/ Daniel P. Bisk /s/ Mark S. Rangell
- -------------------------------- --------------------------------
/s/ Daniel P. Bisk /s/ Mark S. Rangell
- -------------------------------- --------------------------------
NAME PRINTED NAME PRINTED
President Senior Vice President
- -------------------------------- --------------------------------
TITLE TITLE
Page 16 of 40
<PAGE> 17
ADDENDUM TO MASTER AGREEMENT
NONDISCLOSURE AGREEMENT FOR PROPRIETARY INFORMATION
In consideration of Provider Services Incorporated, located at 909 South 336th
Street, Suite 100, Federal Way, Washington 98003, ("Customer") disclosing
certain confidential and proprietary information relating to the MPOWER(TM)
Managed Care Information System (and/or other MPOWER Product involved) and
information, data, designs, documentation and methodologies related thereto
(collectively, "Proprietary Information") to ___________________________,
located at ___________________, ("Third Party") for the sole purpose of allowing
Third Party to facilitate Customer's use of the Proprietary Information, Third
Party agrees to the following:
Third Party acknowledges that the Proprietary Information is the exclusive
property of MPOWER SOLUTIONS INC., a Delaware corporation, located at 2300
Buena Vista Drive SE, Albuquerque, New Mexico ("MPOWER") and that such
Proprietary Information is confidential, has tangible value and includes trade
secret information of MPOWER. MPOWER shall retain all fights to the Proprietary
Information, including all copyright rights therein, except to the extent to
which Third Party is allowed to use the Proprietary Information pursuant to this
Nondisclosure Agreement. All improvements, enhancements and modifications to the
Proprietary Information shall be owned exclusively by MPOWER.
Third Party agrees not to sell, lease, assign or otherwise transfer, disclose or
make available, in whole or in part, any portion of the Proprietary Information
and Third Party shall prevent disclosure of any part of the Proprietary
Information to any other third party for any reason (except for disclosure or
access to Third Party's and Customer's employees which is necessary for Third
Party to be able to use the Proprietary Information in accordance with this
Nondisclosure Agreement). Third Party agrees to notify its employees to whom
Third Party gives access to the Proprietary Information of the restrictions
contained in this Nondisclosure Agreement and to ensure their compliance with
such restrictions.
Third Party agrees to return all Proprietary Information promptly to Customer or
MPOWER upon the earlier of (i) MPOWER's or Customer's request or (ii) completion
of Third Party's assignment for Customer. Third Party agrees that it shall not
use, and it shall not permit the use of, the Proprietary Information for any
purpose other than as expressly authorized in this Nondisclosure Agreement.
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<PAGE> 18
This Nondisclosure Agreement shall be governed by the laws of the Stare of
Washington. If any provision of this Nondisclosure Agreement is invalid under
any applicable statute, it is to be deemed omitted. If any action is instituted
to enforce or interpret the terms of this Nondisclosure Agreement, MPOWER shall
be entitled to reasonable attorney's fees and expenses in addition to any other
entitled relief. This Nondisclosure Agreement shall be effective as of the date
the Proprietary Information is first disclosed to Third Party.
- ---------------------------------
("Third Party")
- ---------------------------------
Signature of Authorized Signatory
- ---------------------------------
Name Printed
- ---------------------------------
Title
- ---------------------------------
Date
In consideration of MPOWER's approval of the disclosure of Proprietary
Information to Third Party, Customer agrees to use its best efforts to ensure
the adherence by Third Party of all the terms of this Nondisclosure Agreement,
and shall support MPOWER in pursuing its remedies in the event of any breach by
Third Party of this Nondisclosure Agreement.
- ---------------------------------
Customer
- ---------------------------------
Signature of Authorized Signatory
- ---------------------------------
Name Printed
- ---------------------------------
Title
- ---------------------------------
Date
Page 18 of 40
<PAGE> 19
ATTACHMENT 1
I. DEFINITIONS
Except as set forth in this Section I of this Attachment, all
capitalized terms used in this Attachment shall have the same meaning as
set forth in the Master Agreement.
A. "Master Agreement" shall mean the agreement to which this Attachment 1 is
attached.
B. Agreement
"Agreement" shall mean the Master Agreement and all Addenda, Exhibits
and Attachments thereto.
C. MPOWER(TM)
"MPOWER(TM)" shall mean the soft, rare product marketed by MPOWER which
is being licensed by Customer under this Attachment and the Master
Agreement. The high level modules that are included in MPOWER(TM) as of
the date of this Attachment are listed in Exhibit F hereto.
II. GRANT OF LICENSE
In consideration of Customer's paying the Initial License Fee (as
hereinafter defined) and, when due, the Maintenance Fee, in accordance
with Section VIII of this Attachment, MPOWER grants Customer a
non-exclusive, nontransferable (except as allowed in Section XI of the
Master Agreement) and annually self-renewing license to operate a
single, Object Code instance version of MPOWER(TM) on a Windows NT
platform for a Live Production Environment for up to an aggregate of
[*] Lives under the Licensed Plans ("Initial License").
Customer may extend the license for such single, Object Code instance of
MPOWER(TM) ("License Extension(s)") for additional Lives by paying
MPOWER the fees for additional Lives defined in Section VIII below, and
abiding by the terms therein stipulated, and by providing the number of
such additional Lives in writing to MPOWER prior to Customer's first use
of MPOWER(TM) on behalf of such additional Lives.
Customer may copy MPOWER(TM) and/or the Documentation as allowed under
Section III of the Master Agreement. Furthermore, Customer may copy the
* Confidential Treatment Requested
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<PAGE> 20
Documentation in order to supply a copy of the Documentation to each end
user of MPOWER at each Site. Customer agrees that any and all copies of
MPOWER and/or the Documentation made by Customer shall include any/all
copyright and proprietary notices in the same form as contained on the
original copy. Except as allowed in Section III of the Master Agreement
and this paragraph, Customer may not otherwise make copies of
MPOWER(TM)" or the Documentation or any part thereof without the prior
written consent of MPOWER. Customer agrees there shall be no other use
of MPOWER(TM) or the Documentation without the prior written consent of
MPOWER. except as allowed in Section II of the Master Agreement.
In order to ensure that MPOWER(TM) is being used in conformity with the
license being granted under this Attachment, MPOWER Shall have the right
to conduct audits (either on-site or remotely, at MPOWER's option) of
Customer's use of MPOWER(TM) at periodic intervals. MPOWER agrees that
any such on-site audit shall be scheduled in advance and at a time so as
not to unduly interfere with Customer's business operations. Customer
agrees that any audit revealing unauthorized use of MPOWER(TM) will
result in Customer's being liable for the payment of additional fees to
MPOWER equal to MPOWER's fees as stated in Section VIII A of this
Attachment.
III. DELIVERY AND MEDIA-
Promptly after the full execution of this Attachment, MPOWER will
deliver to Customer:
A. one (1) copy of the then-current Release of MPOWER(TM) in Object Code
form; and
B. one (1) set of the then-current version of the Documentation in
electronic form.
IV. WARRANTY
MPOWER represents and warrants to Customer that MPOWER(TM) will function
in accordance with the Documentation in all ways which materially affect
the performance of MPOWER(TM). This warranty is contingent upon
Customer's using: 1) certain prerequisite hardware and software, a list
of which has been provided to Customer by MPOWER (Attachment I) for the
initial NT Release; and 2) the most recent Release of MPOWER(TM),
provided such Release has been available for Customer's use for thirty
(30) days, or more. If Customer wishes to use certain third party
software that is similar to but not the MPOWER defined "prerequisite
software" to perform the functions required by such "prerequisite
software", MPOWER and Customer agree to negotiate in good faith for
MPOWER to certify
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<PAGE> 21
whether such third party software will qualify as "prerequisite
software" which is a contingency to the warranties herein.
THE WARRANTY SET FORTH IN THIS SECTION IV CONSTITUTES THE ONLY WARRANTY
PROVIDED BY MPOWER REGARDING MPOWER(TM) AND SUCH WARRANTY IS IN LIEU OF
ALL OTHER WARRANTIES, WRITTEN OR ORAL, STATUTORY, EXPRESS OR IMPLIED.
MPOWER HEREBY SPECIFICALLY DISCLAIMS THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND THE WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE.
V. SOFTWARE MAINTENANCE SERVICES
In consideration of payment of the annual Maintenance Fee(s) set forth
in Section VIII B of this Attachment, Customer agrees to purchase, and
MPOWER agrees to provide Customer on an annually renewable basis with
software maintenance services for MPOWER(TM) as follows (provided
Customer allows MPOWER, at MPOWER's request, dial-up access to
MPOWER(TM)):
A. any and all Releases regarding MPOWER(TM) issued by MPOWER;
B. any and all updates to the Documentation issued by MPOWER; and
C. remote diagnostic support (including dial-up capabilities) regarding
MPOWER(TM) to include error analysis and, where possible, correction
services, twenty-four (24) hours per day, seven (7) days per week.
Any on-site assistance which Customer may request and which is
provided by MPOWER, which, in MPOWER's reasonable opinion, is not
necessary to determine the nature and resolution of any problems
Customer may have with MPOWER(TM) shall be provided by MPOWER at its
then-current rates. If Customer notifies MPOWER that it suspects a
material error in the program logic of MPOWER(TM) or in the
Documentation, MPOWER shall make all reasonable efforts to confirm
the existence of the error and correct it. If the parties mutually
determine that no such error exists, Customer agrees to pay MPOWER
for its services at MPOWER's hourly rates then in effect and to
reimburse MPOWER for any and all reasonable travel and living
expenses incurred by MPOWER in rendering such services. MPOWER will
use its Severity Designations in effect from time to time to provide
remote diagnostic support. The current Severity Designations and
attendant response times are given in Exhibit G to this Attachment.
For purposes of this subparagraph, MPOWER agrees to set the hourly
rate at $125.00 per hour for the first twelve months from the date
first written above, with increases for the subsequent two years not
to exceed the CPI. Prior to the end of this three year period,
CUSTOMER and
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<PAGE> 22
MPOWER shall negotiate in good faith the hourly rate to apply to
additional years.
D. Notwithstanding the foregoing, should Customer be utilizing any
Release of MPOWER(TM) other than the then-most-recent Release, or the
Release prior to the then-most-current Release, provided such Release
has been available for Customer's use for a period of six (6) months
or longer, MPOWER reserves the right, at its sole option, to
terminate its obligations to provide maintenance services under this
Section V at any time upon giving thirty (30) days' prior written
notice to Customer. If such a condition exists, MPOWER and Customer
agree to negotiate in good faith to define reasonable terms,
conditions and fees for MPOWER to provide Customer with maintenance
services for such then non-current Release.
MPOWER's providing Customer with maintenance services as described in
this Section V shall automatically continue, on an annual basis, unless
either party shall give written notice to the other that it desires not
to renew such maintenance services. The parties agree that such written
notice shall be remitted for receipt by the other no less than ninety
(90) days prior to the end of the then-current annual maintenance
period.
Attached as Exhibit H hereto is a list of requested enhancements to
MPOWER(TM) made by Customer. MPOWER agrees to add the items in this list
to the queue of enhancements for inclusion in future Releases, which
requested enhancements will be handled by MPOWER according to MPOWER's
development methodology and protocols and the terms of this Agreement
regarding future Releases. Items numbered 4 (UB-92 Requirements) and 6
(Referral/Authorizations) are considered the highest priority by
Customer and MPOWER states that these items have been added to the
priority list for the next Release, which is currently scheduled for the
end of the second quarter of 1998. Item number 7 (Original Date Stamp on
Claim) is recognized to be a critical enhancement for the processing of
Medicare claims and MPOWER agrees to add it to the priority list for
either the next Release or the second Release subsequent to the
effective date of this Agreement. All other enhancements indicated in
Exhibit H which were promised in the MPOWER response to the CUSTOMER
Request for Information or which relate to functionality that was
indicated within the MPOWER response to the CUSTOMER Request for
Information which require enhancement to accomplish will be added to the
MPOWER priority list for no later than the second Release subsequent to
the effective date of this Agreement. Collectively these enhancements
identified herein are considered to be material terms of the Agreement.
VI. IMPLEMENTATION AND CONVERSION SERVICES
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<PAGE> 23
MPOWER agrees to provide implementation services ("Implementation
Services") to assist Customer in implementing MPOWER(TM) at the Site(s).
These implementation services shall comprise: 1) analysis of the
Site's(s') business requirements; 2) assistance in the user set up
definitions and build; 3) testing of MPOWER; 4) pre/post activation
support for end users; 4) initial training services up to five (5) days;
and 5) project management. MPOWER shall charge Customer as set out in
Section VIII C below for all such Implementation Services requested by
Customer.
MPOWER agrees to provide conversion services ("Conversion Services") to
Customer to convert its current data fries from its existing software
system to the MPOWER(TM) database. MPOWER shall charge Customer as set
out in Section VIII C below for all such Conversion Services requested
by Customer.
MPOWER reserves the right to subcontract any Implementation Services
responsibilities it may accept under this Agreement. Customer shall have
the right to approve MPOWER's subcontractors, which approval shall not
be unreasonably withheld. If Customer objects to certain subcontractors
for a stated good cause, MPOWER and Customer agree to seek a mutually
agreeable resolution to Customer's objection.
VII. TRAINING SERVICES
MPOWER will provide Customer, at MPOWER's then-current fees, with
training sessions regarding MPOWER(TM) to a reasonable number of
Customer's personnel. All such training shall be in accordance with
MPOWER's published class-offering schedules and provided that adequate
classroom space exists at the time of Customer's request. For purposes
of this section, MPOWER agrees to set the Customer's per diem training
rate at $1,000.00 per day for the first twelve months from the date
first written above, with increases for the subsequent two years not to
exceed the CPI. Prior to the end of this three year period, CUSTOMER and
MPOWER shall negotiate in good faith the Customer's per diem rate to
apply to additional years.
VIII. FEES
A. MPOWER(TM) License Fees.
1. Fee for the Initial License.
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<PAGE> 24
Customer agrees to pay MPOWER a license fee ("Initial License
Fee") equal to [*] Dollars [$[*]] for the master license granted
in Section II of this Attachment for up to [*] Lives ("Initial
License"). Customer agrees this entire Initial License Fee is
due to MPOWER on the full execution of this Attachment and
payable according to the schedule shown in Exhibit C hereto,
subject to the Money Back Guarantee. Upon execution of this
Agreement, Customer will deposit the Initial License Fee with a
mutually acceptable escrow agent ("Escrow Agent") and the
Initial License Fee will be released from the Escrow Agent to
MPOWER upon Acceptance (as hereinafter defined).
2. Fees for License Extensions.
Customer may during the term of this Agreement, provided
Customer is current with all Maintenance Fees, exercise an
incremental license for an additional [*] ([*]) Lives
("License Extension") up to a total of [four hundred thousand]
([*]) Lives by paying to MPOWER an additional license fee
("License Extension Fee") of [*] Dollars ($[*]).
The Initial License Fee and the License Extension Fee(s) may be
referred to as the License Fee(s).
The License Extension Fees will be billed and paid in accordance
with the terms and conditions outlined in this Agreement.
B. Annual Maintenance Fees.
Customer agrees to pay to MPOWER for the software maintenance
services described above a software maintenance fee
("Maintenance Fee") equal to [*] percent ([*]%) of the
aggregate of the Initial License Fee and all License Fee
Extensions paid or payable by Customer to MPOWER.
The annual Maintenance Fee is due and payable as follows: the
first annual Maintenance Fee shall be due and payable forty (40)
days after the date that Customer first begin to use MPOWER(TM)
in a Live Production Environment or six (6) months from the full
execution of this Attachment, whichever occurs first.
Each subsequent annual Maintenance Fee shall be billed and due
annually, based on the anniversary date of the first annual
Maintenance Fee due
* Confidential Treatment Requested
Page 24 of 40
<PAGE> 25
date. MPOWER will invoice Customer on an annual basis for the
maintenance fee. Customer agrees to pay such invoices within
thirty (30) days after Customer's receipt of the invoice.
Maintenance Fees Payment Schedule is outlined in Exhibit D to
this Attachment.
C. Implementation and Conversion Fees.
The fixed fee for the initial Implementation Services shall
equal to [*] Dollars [*] ("Implementation Fee") and shall, cover
the scope of services identified in an applicable Work Order
prior to commencement .
Such fixed fee shall be due upon the full execution of this
Attachment and payable over [*] [*] [*] installments
beginning in the month that the initial implementation is
commenced, pursuant to the aforementioned Work Order, subject to
the Money Back Guarantee.
The fixed fee for the Conversion Services shall equal to [*]
Dollars $[*] ("Conversion Fee") and shall be due upon the full
execution of this Attachment and payable over [*] [*] [*]
installments beginning in the month that the initial
installation is commenced, subject to the Money Back Guarantee,
and shall cover the scope of services identified in an
applicable Work Order prior to commencement
The Implementation Fee and Conversion Fee Payment Schedules for
1998 are outlined in Exhibit E.
D. Travel and out of pocket expenses.
The fees set out above do not include travel and other
out-of-pocket expenses which may be incurred by MPOWER in the
course of delivering the products and services described in this
Attachment. MPOWER shall use all its reasonable efforts to keep
these travel and other out-of-pocket expenses to a minimum.
MPOWER will invoice Customer for MPOWER's travel and out of
pocket expenses on a monthly basis, as they are incurred, and
Customer agrees to pay such invoices within thirty (30) days
after receipt of the invoice.
MPOWER agrees to the following travel expense guidelines. MPOWER
and Customer agree to an annual review of travel expense
guidelines.
* Confidential Treatment Requested
Page 25 of 40
<PAGE> 26
MPOWER will use best effort in managing to the following expense
guidelines, as follows:
1. purchase of airline tickets with a minimum of seven (7) day
advance purchase required, unless otherwise specified by
Customer;
2. hotel lodging rate not to exceed the rates of a business
class hotel, and the rate does not include resort, local,
county or city applicable taxes,
3. daily food per diem not to exceed thirty five dollars,
4. car rental at the current economy rate except if the total
number of MPOWER employees equal or exceeds three (3) for
each visit.
E. Other Services
Customer may request and MPOWER may perform other services
("Other Services") for Customer, which services shall be
described in a Work Order, which shall be considered an addendum
to this Agreement and covered under the terms of this Agreement,
unless stated otherwise in the applicable Work Order.
F. [*]
MPOWER agrees that if a successful Live Production Environment
and Acceptance is not achieved based on the good faith effort of
both parties and based upon a mutually agreed to Implementation
Services and Conversion Services schedule and plan, that
Customer may request that the Agreement be terminated in
accordance with the procedures set out in Section V
(Termination) and Section X (Dispute Resolution) of the Master
Agreement. If the Agreement is terminated for this reason, the
[*].
IX. THIRD PARTY PRODUCTS
Customer has the option to utilize Third Party Products with MPOWER(TM)
as outlined in Exhibit .
XII. ADDITIONAL TERMS AND CONDITIONS
* Confidential Treatment Requested
Page 26 of 40
<PAGE> 27
In addition to the terms and conditions of this Attachment, the parties
agree that all the terms and conditions of the Master Agreement shall
also apply to Customer's use of MPOWER(TM). Should any terms or
conditions of this Attachment and the Master Agreement conflict, the
terms and conditions of this Attachment shall take precedence.
Page 27 of 40
<PAGE> 28
The parties have each read this Attachment and agree to be bound by all
of its provisions. The parties further agree that this Attachment
(including its Exhibits) and the Master Agreement constitute the
complete and exclusive statement of the agreement between the parties
regarding MPOWER(TM) and supersedes any and all prior agreements and
understandings between them pertaining to MPOWER(TM) and takes
precedence over the provisions of any purchase orders submitted to
MPOWER by Customer. This Attachment may be amended only in writing
signed by both parties.
CUSTOMER PROVIDE SERVICES, INC. MPOWER SOLUTIONS INC.
By: /s/ DANIEL P. BISK By: /s/ MARK S. RANGELL
--------------------------------- ---------------------------------
Signature of Authorized Signatory Signature of Authorized Signatory
DANIEL P. BISK MARK S. RANGELL
- ------------------------------------ ------------------------------------
Name Printout Name Printout
President Senior Vice President
- ------------------------------------ ------------------------------------
Title Title
2/20/98
- ---------------------------------- ----------------------------------
Date Date
Page 28 of 40
<PAGE> 29
EXHIBIT A
KPMG Peat Marwick Advice on Applicable State and Local Taxes
As of the date of this Agreement, KPMG Peat Marwick, LLP, MPOWER's tax advisor
and public auditor has provided excerpts from applicable tax guides to MPOWER,
which MPOWER has forwarded to Customer, and provided the following verbal
indications of applicable state and local taxes in Washington State for the
parties in this transaction, as of the date of this Agreement. The taxes will be
added to the fees assessed Customer in accordance with the terms of this
Agreement.
- There will be no New Mexico gross receipts tax assessed on either the
professional services rendered or the software or the maintenance
services, which are considered delivered in Washington State.
- If any training is conducted in New Mexico, the fees will be subject
to gross receipts tax (approximately 5.8125%).
- Washington State will assess Business and Occupancy (B & O) tax, but
not sales tax, on all professional services, including conversion
costs.
- Washington State will assess both B & O tax and sales tax on MPOWER's
software and third party software, and the annual maintenance fees
(since they include enhancements and upgrades of the software).
Page 29 of 40
<PAGE> 30
EXHIBIT B
PROPOSAL FOR EDI INTERFACE ENGINE
MPOWER currently provides interfaces to provider based systems through
an interface engine ("Interface Engine"). MPOWER currently has the right
to sublicense our integration partner HUBLink's HUBLink Integrator as
an Interface Engine to enable connectivity and message exchange between
applications without custom programming.
HUBLink Integrator supports industry standards such as HL7 for ADT and
patient/member registration, billing, scheduling and clinical decision
support (lab, radiology and pharmacy results and orders). In addition,
HUBLink and MPOWER have developed an industry standard X.12 EDI
interface that provides support for HCFA 1500, UB92 and other electronic
claim and certification processing.
HUBLink Integrator is licensed as a component of the MPOWER system that
enables easy participation in an enterprise-wide delivery system. In
addition, HUBLink Integrator may be used to facilitate message brokering
and distribution across all systems and has the scalability and
throughput to function as the heart of a diversified message brokering
architecture.
MPOWER may in the future use and/or sub-license a different interface
Engine. A preliminary estimate of the cost to Customer for an Interface
Engine is given below. Any acquisition of an Interface Engine to be used
with the MPOWER Product shall be governed by a separate agreement.
<TABLE>
<S> <C>
Preliminary Pricing for an Interface Engine (per server)
Interface Engine (per server) (Preliminary Estimate) [*]
Installation [*]
Estimated Annual Software Maintenance (Preliminary Estimate) [*]% annually
</TABLE>
* Confidential Treatment Requested
Page 30 of 40
<PAGE> 31
EXHIBIT C
MPOWER(TM) License Fee Payment Schedule for the License Fees. Refer to
Section VII A for MPOWER(TM) License terms and conditions.
<TABLE>
<CAPTION>
EXPECTED PERCENTAGE AMOUNT
PAYMENT TRIGGERING EVENT TIMEFRAME DUE DUE
------------------------ --------- ---------- ------
<S> <C> <C> <C>
Contract Execution [*] [*] [*]
Escrow established for the Initial Into Escrow
License Fee
Customer Setup commences either on [*] N/A
NT Platform or remotely on an
MPOWER UNIX Server
Acceptance Test on Remote UNIX [*] N/A
Platform or Begin Acceptance Test on
NT Platform, whichever occurs first
Completion of Acceptance Test on NT [*] N/A
Platform or Live Production
Environment on NT Platform,
whichever occurs first
40 Days after commencement of Live [*] Release
Production Environment on NT [*]
Platform ("Acceptance") from Escrow
Optional License Extension Indeterminate [*] [*]
Future (if and (Optional) (Optional)
when business
need dictates)
</TABLE>
NOTE: If a successful Live Production Environment and Acceptance is not
achieved based on the good faith efforts of both parties, both parties
may mutually terminate the Agreement and the [*].
NOTE: Customer may [*].
* Confidential Treatment Requested
Page 31 of 40
<PAGE> 32
EXHIBIT D
MPOWER Annual Maintenance Fee Payment Schedule.
MPOWER billing and Customer paying of Annual Maintenance Fees is outlined in
Section VIII B. Refer to Section VIII B for on-going and MPOWER Annual
Maintenance Fee terms and conditions. Based on Initial License Fee only.
<TABLE>
<CAPTION>
PAYMENT ESTIMATED ESTIMATED
TRIGGERING EVENT TIMEFRAME PERCENTAGE DUE AMOUNT DUE
- ---------------- --------- ------------------------- ----------
<S> <C> <C> <C>
40 days after [*] [*]% of First Year Annual [*]
commencement of Maintenance Fee
Live Production
Environment on
NT Platform
("Acceptance")
First and [*] [*]% of Annual Maintenance [*]% of Total
Subsequent Fee License Fee
Anniversaries of
Thereafter
Live Production
Environment
</TABLE>
Page 32 of 40
<PAGE> 33
EXHIBIT E
MPOWER Initial Implementation Fee and Conversion Fee Payment Schedules
MPOWER billing and Customer paying of Implementation Fees and Conversion
Fees are outlined in Section VIII C. Refer to Section VIII C.
for Terms and Conditions. Initial Implementation Fee is $[*].
Conversion Fee is $[*].
<TABLE>
<CAPTION>
PAYMENT ESTIMATED ESTIMATED
TRIGGERING EVENT TIMEFRAME PERCENTAGE DUE AMOUNT DUE
<S> <C> <C> <C>
Commencement of [*] [*] Implementation:
Setup Activities for $[*]
Initial Conversion: $[*]
Implementation
Services
2nd Month of Initial [*] [*] Implementation
Implementation: $[*]
Services Conversion: $[*]
3rd Month of Initial [*] [*] Implementation:
Implementation $[*]
Services Conversion: $[*]
</TABLE>
NOTE: If a successful Live Production Environment and Acceptance is not
achieved based on the good faith efforts of both parties, Customer may
request that both parties mutually terminate the Agreement, and if the
Agreement is so terminated, [*].
* Confidential Treatment Requested
Page 33 of 40
<PAGE> 34
EXHIBIT F
Modules Included in MPOWER(TM)
All modules are included by MPOWER and comprise MPOWER(TM) as of the
date of this Attachment:
- Set-ups
- Group Enrollment & Contracting
- Premium Billing & Accounts Receivable
- Member/Subscriber Enrollment
- Provider Contracting
- Capitation
- Claims Adjudication for UB92/HCFA 1500 Claims
- Certifications/Authorizations
- Customer Service
- Letter Generation
- Medicare Risk
- Medicaid Processing
- Ad Hoc Reporting
Page 34 of 40
<PAGE> 35
EXHIBIT G
SEVERITY DEFINITIONS AND RESOLUTION PROCESS
- - SEVERITY 1.
The problem causes complete loss of service in the production and
staging environment and work cannot reasonably continue. The problem or
defect has one or more of the following characteristics:
[ ] > Data corruption. Physical or logical data is unavailable or
incorrect.
Examples: Block format corruption, invalid indices, corruption of
meta-data, incorrect results.
[ ] > Critical functionality is not available.
[ ] > System hangs. The process hangs indefinitely or there is severe
performance degradation, causing unreasonable waits for resources
or response, as if the system is hanging.
[ ] > The entire MPOWER application crashes repeatedly.
[ ] > Database process or background processes fall and continue to
fail after restart attempts.
[ ] > Potential for above occurrences is defined imminent.
RESOLUTION OF SEVERITY 1: Until the issue is resolved MPOWER Solutions
will work on Severity 1 around the clock (7x24). As a result of the
severity, the customer must provide MPOWER with a point of contact
during the 7x24 period. The customer's point of contact will assist the
MPOWER customer support and development staff in gathering data, testing
fixes in the customer's testing region, and applying fixes to the
customer production environment.
- - SEVERITY 2:
Problem or product defect causes a severe impact on the customer's
business regardless of customer environment. No workaround is available,
however operations can continue in a restricted fashion. The problem or
defect has one or more of the following characteristics:
[ ] > Business Impact Examples: The customer can handle current
volume, but will not be able to handle quarter close; At close,
customer finds totals wrong, but close is not for a few weeks.
[ ] > Internal software error, causing the application to fall to run
to completion, or return wrong results, or software error
severely degrades performance.
[ ] > Some important functionality is unavailable, yet the system can
continue to operate in a restricted fashion.
[ ] > Potential for above occurrences is defined imminent.
Page 35 of 40
<PAGE> 36
RESOLUTION OF SEVERITY 2: MPOWER Solutions will work on Severity 2 bug
based on customer assigned priority. Severity 2 fixes will be added in
the next scheduled maintenance or patch release.
- - SEVERITY 3.
Problem or product defect causes minimal impact on the Customer's
business. The impact of the problem or defect is minor or an
inconvenience, such as a manual bypass to restore product functionality.
The problem or defect has one or more of the following characteristics:
[ ] > A software error for which there is an acceptable workaround.
[ ] > Software error minimally degrades performance.
[ ] > Software error or incorrect behavior has minor impact the
operation of the system.
RESOLUTION OF SEVERITY 3: Fixes for severity 3 bugs will be added to the
priority list for the next major scheduled release of the product. The
order of priority for resolving severity 3 issues will be assigned
jointly by the Customer and MPOWER.
- - SEVERITY 4.
The problem or product defect causes NO impact on the Customer's
business. The problem or defect is a minor error, incorrect behavior, or
a documentation error that in no way impedes the operation of a system.
Resolution of Severity 4: Fixes for severity 4 bugs will be added to the
priority list for the next major scheduled release of the product. The
order of priority for resolving severity 4 issues will be assigned
jointly by the Customer and MPOWER.
Page 36 of 40
<PAGE> 37
EXHIBIT H
PSI REQUESTED CUSTOMER ENHANCEMENTS
1. Bar Coding Capabilities/Document Control Tracking (priority_ for business
flow)
Ability for system to accept a bar code number from the claim form.
Bar code number would contain the document control number for tracking
and filing purposes.
The bar code number would be used for filing under a document imaging
system.
PSI will need to be able to capture a 15 digit document control number
to identify the following:
- Julian date for claim received at PSI
- IPA identifier
- Plan identifier
- Line of business
- Type of claim
2. Provider File
Ability to capture notes by provider (under provider file)
Termination dates for providers. Very important, we do not want to be
assigning members to or paying capitation and claim on a terminated
provider.
Add Provider fax number and e-mail address to provider file.
3. Percent of Premium Calculation
Due to the expected growth of the PSI business, it is imperative that
the system be able to calculate percent of premium. The current manual
calculation outside the system will not accommodate the growth
expectations.
4. UB-92 Requirements (priority _to meet delegated requirement)
Must capture the following data in order to meet the strict reporting
requirements of the Plans, HCFA, and the State of Washington MAA:
- Principal ICD-9-CM diagnosis code and nine additional
secondary ICD- 9-CM diagnosis codes.
Page 37 of 40
<PAGE> 38
- Principal ICD-9-CM procedure code and 5 additional secondary ICD-9- CM
procedure codes.
DRG codes.
DRG Grouper type and version, should be date of service sensitive.
Ability to track DRG codes and grouper version to Plan/line of
business.
Newborn birth weight.
Type of bill
Admit/Discharge date
Admit/Discharge hour
Attending physician name
Capture revenue codes and CPT codes together (Medicare and
Washington State Medicaid requirement).
Process CPT code modifiers on the UB-92 (new 1998 requirement for
Medicare)
5. Separate screens for UB-92 (inpatient and outpatient) and HCFA-1500
6. Referral/Authorizations
Ability to track appeals and grievances against a referral.
Track referral turn around times by:
- First date stamp
- Date entered into MPower
- Date deferred
- Date notes received on deferred referral
- Date reviewed again on deferred referral
- Date approved or denied
Ability to capture if the specialist has referred on for additional
services
Negotiated rates.
If referral is elective or emergent.
One screen.
7. Original Stamp Date on Claim
Necessity to capture an "original stamp date" or 'original receipt date"
which can be different from the document filing stamp date that is
contained in the Julian Date sub-field portion of the Claim Number
field. Since PSI is fully delegated by HMO insurance companies, claims
received by the upstream insurance company must be honored for
calculating the interest' due for Medicare claims received from
non-contracted providers that are paid more slowly than Medicare
regulations permit.
Page 38 of 40
<PAGE> 39
Reporting needs to calculate the time elapsed from "original receipt
date" to the "document filing stamp date", which is the date that the
downstream MSO has received the claim.
Dates that claim is entered, set-to-pay and paid are already captured in
the system as well as the document filing stamp date (within claim
number scheme)
Page 39 of 40
<PAGE> 40
ATTACHMENT I
Pre-Requisite Hardware and Software
for the Initial Release of MPOWER(TM) on an NT Server
Products required:
For the NT Server are
1.) IBM's Transaction Server for Windows NT (CICS operating system)
version 4.02
2.) MicroFocus's COBOL version 4.0.32.
3.) IBM's DB2 Universal Developers Edition for NT version 5.0
For an NT Client (PC running either Win95 or NT - 32bit OS):
1.) MultiSoft's WCL Toolkit version 5.0 32bit - WCL is the
communication interface product that passes data from a 3270
emulator to VB.
2.) Wall Data's Rumba for the Mainframe Win95/NT Client version
5.1uol - Rumba provides 3270-compatable connectivity to a host
computer. (Version 5.2 is scheduled for release mid-1st quarter
which we will be upgrading to)
3.) IBM's DB2 Client Setup Version 5.0 - Allows for ODBC connectivity
to back end databases.
For the client to communicate with the server:
Communication protocol is via TCP/IP, so the clients need to networked,
32 bit OS, PCs. The server machine should have at least the hardware
recommended by Microsoft for running the NT 4.0 Server operating system
and should also be attached to the network.
As MPOWER finalizes the testing of the MPOWER NT system, MPOWER will be firming
up installation, implementation, and requirements guides.
Page 40 of 40
<PAGE> 1
EXHIBIT 10.18
MPOWER SOLUTIONS, INC.
CONTRACTOR AGREEMENT
THIS CONTRACTOR AGREEMENT (the "Agreement"), effective April 27, 1999 (the
"Effective Date"), is made and entered into by and between MPOWER SOLUTIONS,
INC., a Delaware corporation with its principal place of business located at
6400 S. Fiddler's Green Circle, Suite 540, Englewood, Colorado 80111 ("MPOWER")
and PROVIDER SERVICES, INC., a Washington corporation with its principal place
of business located at 909 South 336th Street, Suite 100, Federal Way,
Washington 98003 ("PSI") hereinafter referred to as "CONTRACTOR". This Agreement
sets forth the promises of the parties with respect to the products and services
of MPOWER and CONTRACTOR, which axe described herein, with reference to the
following facts:
WHEREAS, CONTRACTOR is in the business of providing third-party administrative
services of medical insurance programs to businesses providing managed health
care and insurance services and desires to provide such services under
subcontract to Customer(s) of MPOWER;
WHEREAS, MPOWER is in the business of providing automated managed health care
information software and services, and desires to collectively provide such
software and services in conjunction with those of CONTRACTOR to Customer(s) of
MPOWER, subject to the terms hereof; and
WHEREAS, MPOWER has been retained to provide third-party administrative services
to Customer in connection with Customer's contracts to provide medical
transportation services to various managed care health plans in a multi-state
region, in accordance with the terms and conditions set forth in this Agreement;
NOW THEREFORE, in consideration of the mutual promises made, the terms and
conditions hereunder described and other valuable consideration, the parties
agree as follows:
I. DEFINITIONS
1. Customer, AMERICAN MEDICAL PATHWAYS, a subsidiary of American Medical
Response, Inc. a Delaware corporation with its principal place of business
located at 2821 South Parker Road, Aurora, CO 80014 shall be hereinafter
referred to as "Customer".
2. Master Agreement means the agreement between MPOWER and Customer under,
which are pursuant, the products and services set forth in this Agreement.
3. Contracted Health Plan means a health maintenance organization or health
plan with which Customer has contracted to provide medical transportation
services.
4. Administrative Manual means a manual of the policies and procedures of a
Contracted Health Plan that will be jointly developed and followed by
Customer and the Contracted Health Plan with respect to administration of
the applicable Health Plan Agreement. The Administrative Manual(s) are
hereby incorporated by reference into this Agreement.
5. Health Plan Agreement means the contract between Customer and a Contracted
Health Plan pursuant to which Customer provides medical transportation
services to Members of a Contracted Health Plan.
6. Medical Necessity means services that are covered as basic covered benefits
under the applicable Membership Agreement and are appropriate and necessary
for the symptoms or treatment of a medical condition. Whether a covered
service is Medically Necessary shall be determined based on criteria set
forth in the applicable Administrative Manual.
-1-
<PAGE> 2
7. Member means an individual and his or her dependents who are entitled to
receive health care services from a Contracted Health Plan pursuant to that
individual's Membership Agreement.
8. Membership Agreement means the agreement between a Contracted Health Plan
and an individual or group pursuant to which a Member receives, among other
things, medical transportation services.
II. RESPONSIBILITIES OF MPOWER AND CONTRACTOR
1. SERVICES TO BE PROVIDED.
A. SERVICES. CONTRACTOR shall provide (i) claims processing services in
connection with the medical transportation services provided by
Customer pursuant to its Health Plan Agreements; (ii) medical review
services associated with such claims processing; (iii) receipt of
inquiries concerning eligibility, benefits, and claims status; and
(iv) related reports required to be provided by Customer pursuant to
its Health Plan Agreements. MPOWER shall also provide CONTRACTOR
promptly with all necessary information from Health Plan Agreements
and Member Agreements and requirements from the applicable
Administrative Manual for CONTRACTOR to perform its obligations under
this Agreement. The key assumptions used m establish services to be
provided by CONTRACTOR and compensation hereunder are more
particularly described on Exhibit A, attached hereto and made a part
of this Agreement.
B. CLAIMS PROCESSING. CONTRACTOR shall promptly process all claims in
accordance with the terms of the applicable Membership Agreement,
Health Plan Agreement, and Administrative Manual, which process shall
include, without limitation, the following:
1. Receive and date stamp all claims, indicating the date of
receipt of each clam.
2. Verify Member eligibility.
3. Determine the Medical Necessity of medical transportation
services in accordance with the Medical Necessity standards set
forth in the applicable Administrative Manual. Any claim that
would be denied on the basis of Medical Necessity shall be
referred to the Contracted Health Plan prior to denial. Except
as otherwise provided in the applicable Administrative Manual,
(a) the Contracted Health Plan, or its designee, shall be sorely
responsible for notifying the Member of the denial of any claim;
and (b) CONTRACTOR shall not contact the Member with respect to
any denial of claims. If the Contracted Health Plan approves the
claim, it shall notify CONTRACTOR of the approval, and
CONTRACTOR shall promptly pay the claim. Notwithstanding the
foregoing, if Customer's referral authorization is included in
the claims submission, then the Medical Necessity of the claims
will be deemed to be determined, and further review will not be
required.
4. Deny claims that are not covered benefits for reasons other than
Medical Necessity and notify the Contracted Health Plan, as
required, of the Member's right to appeal such denial in
accordance with the Contracted Health Plan's appeal process.
5. Calculate and promptly pay to the appropriate transportation or
other network provider the amount to be paid as covered benefits
in accordance with the applicable network provider agreement and
Membership Agreement. Unless a claim is disputed, CONTRACTOR
shall make payment on the claim within the time frame required
by applicable state or federal law or regulation or such other
period of time as set forth in the applicable Administrative
Manual and Membership Agreement.
6. Calculate and notify provider via statement of remittance for
Member liability only as provided in the Health Plan Agreements.
-2-
<PAGE> 3
7. The specific time limits for performing the functions set forth
in this Section II.1.B shall be specified in the applicable
Administrative Manual.
2. IMPLEMENTATION. MPOWER shall take all actions necessary to establish all
administrative and other connections and arrangements necessary for the
transfer of data, including, without limitation, the establishment and
maintenance of electronic data interface or electronic data transfer
capabilities for the electronic transfer of encounter and other data related
to claims processing in a timely manner. CONTRACTOR and MPOWER shall agree
on an implementation project plan and schedule, which shall be set forth on
Exhibit B, attached to this Agreement and made a part hereof. CONTRACTOR
agrees that it will be ready for implementation of this Agreement in
connection with the first Health Plan Agreement that it will be providing
services hereunder by [*].
In the event Customer enters into Health Plan Agreements with additional
Contracted Health Plans, CONTRACTOR shall cooperate diligently with MPOWER
to implement services in connection with such Health Plan Agreements. In
consideration for such implementation, MPOWER shall pay CONTRACTOR for
CONTRACTOR'S costs for such implementation based on mutually agreed upon
work orders. One half of the estimated amount of such costs shall be paid to
CONTRACTOR prior to commencement of such implementation and the balance
shall be paid upon successful completion of implementation.
3. QUALIFICATIONS AND SERVICE LEVEL REQUIREMENTS. Consistent, high quality
service to Customer, policyholders, Contracted Health Plans, and providers
is an essential requirement. CONTRACTOR will meet the following
qualifications and service level commitments.
A. CONTRACTOR shall remain in compliance with all applicable local, state,
and federal laws, rules and regulations relating to the services
provided by CONTRACTOR hereunder, including without limitation,
fulfillment of third party administrator financial obligations
pertaining to payment of penalties for late claims, interest, or other
penalties, as well as any claim reserves or other funding requirements.
B. CONTRACTOR will maintain compliance with all Customer requirements
pertaining to claims processing procedures, including without
limitation, those requirements set forth in the Administrative Manual.
The parties will establish procedures regarding handling and
disbursement of funds as part of the implementation process.
C. CONTRACTOR shall meet or exceed the performance standards set forth
herein relating to claims processing, including but not limited to
claims turnaround time, payment accuracy, and reporting.
D. CONTRACTOR will establish and maintain throughout the life of this
Agreement a dedicated staff of personnel responsible for servicing
Customer's individual business.
E. MPOWER will maintain backup tapes of all programs, data, and/or any
other information used in the administration of claims.
F. MPOWER represents and warrants that all hardware/software required to
perform MPOWER'S obligations hereunder is Year 2000 compatible and that
the information and services to he provided by MPOWER will not be
impaired, disrupted, or interrupted, in whole or in part, by
deficiencies or inaccuracies related to the processing and display of
date/time data (including, but not limited to, century recognition,
calculations that accommodate the same century and multi-century
formulas and date values, and interface values that reflect the century)
from, into, and between the 20th and 21st centuries, and the years 1999
and 2000, and leap year calculations. In the event that Customer becomes
aware that MPOWER(R) has not processed data containing any dates
correctly, Customer shall immediately notify MPOWER of this fact, and
MPOWER agrees to correct or replace MPOWER(R) to eliminate the problem.
4. PERFORMANCE STANDARDS AND ASSOCIATED FINANCIAL PENALTIES.
* Confidential Treatment Requested
-3-
<PAGE> 4
A. CONTRACTOR shall meet the following performance goals in connection with the
following performance standards:
1. Claims Processing Accuracy. Not less than [*] percent ([*]%) of the
claims submitted to CONTRACTOR will be accurately adjudicated in
accordance with the applicable Administrative Manual and the applicable
Membership Agreement. The performance assessment for claims adjudication
accuracy shall be based on audits performed by Customer.
2. Timing of Claims Payments. Not less than [*] percent ([*]%) of
all claims shall be processed within thirty (30) calendar days of
receipt.
3. Accuracy of Claims Payments. Not less than [*] percent ([*]%) of the
claims submitted to CONTRACTOR shall be priced in accordance with
Customer's instructions regarding pricing.
4. Written inquiry response time. Not less than [*] percent ([*]%) of
Member's written questions regarding medical transportation services
will be responded to within five (5) working days after receipt of such
inquiry. Not less than [*] percent ([*]%) of Member's written requests
regarding medical transportation services will be responded to within
seven (7) working days of receipt of such inquiry. CONTRACTOR shall
report all written inquiries to Customer on a monthly basis in a format
mutually acceptable to the parties and to the Contracted Health Plans.
In addition, CONTRACTOR shall report all phone and written complaints
and grievances to Customer within two (2) business days of receipt.
5. Telephone inquiry response time. Not less than [*] percent ([*]%) of all
incoming phone calls shall be responded to within a time not to exceed
twenty (20) seconds. No telephone inquiries during normal business hours
from Members will be blocked due to CONTRACTOR'S failure to maintain its
system.
6. Abandoned Call Rate. CONTRACTOR'S abandoned call rate shall not exceed
[*] percent ([*]%) on not less than [*] percent ([*]%) of business days.
B. The parties acknowledge that Customer may be subject to penalties for
failure to meet each performance goals set forth above at least [*] percent
([*]%) of the time during each calendar quarter. In connection with the
assessment of CONTRACTOR'S performance of these goals, CONTRACTOR may be
audited by Customer, by a Contracted Health Plan, or by an independent
auditor on behalf of Customer and/or a Contracted Health Plan. CONTRACTOR
shall be responsible for, and shall reimburse Customer for, penalties
incurred by Customer due to failure to meet each performance goals set forth
above [*] percent ([*]%) of the time during each calendar quarter. Such
penalties shall be paid by CONTRACTOR to MPOWER within twenty (20) days
after notification by Customer of the amount of such penalty(ies). Penalties
for specific Contracted Health Plans are more fully described in Exhibit A
hereof and subsequent exhibits addressing scope of services for each
Contracted Health Plan.
5. REPORTING.
A. CONTRACTOR shall accurately measure and report service levels to
Customer. CONTRACTOR shall provide to Customer (or directly to the
Contracted Health Plans, if so directed by Customer) reports containing
information required by Customer and the applicable Contracted Health
Plan, in accordance with the applicable Administrative Manual. Such
reports must be sent via magnetic tape, electronic transmission, or
diskette (or hard copy, if requested by a Contracted Health Plan) in a
standard format established by Customer and the Contracted Health Plans,
for each encounter that Member receives during the previous month. Such
information
* Confidential Treatment Requested
-4-
<PAGE> 5
shall be complete and accurate and shall be provided to Customer (or to
a Contracted Health Plan directly, if so directed by Customer) by the
fifteenth (15th) day of the month, or if the fifteenth (15th) day falls
on a weekend or a holiday, as of the next business day thereafter. Such
encounter data reporting shall be segregated by Contracted Health Plan.
CONTRACTOR shall promptly provide Customer (or the Contracted Health
Plan, as appropriate) with all corrections and revisions of such
encounter data. Encounter data shall include, at a minimum, those data
elements identified on the HCFA 1500, or its successor form.
B. CONTRACTOR shall provide to Customer reports related to the performance
of each standard set forth in Paragraph II.4.A above in the format
identified in the applicable Administrative Manual. Such reports shall
be provided on a monthly or quarterly basis, as determined by Customer
and the applicable Contracted Health Plan, and shall be segregated by
Contracted Health Plan.
C. Upon request, CONTRACTOR shall provide to Customer, or shall assist
Customer to prepare, quality reports in a format identified in the
applicable Administrative Manual. Such reports shall be prepared at
least quarterly and shall be segregated by Contacted Health Plan.
6. AUDITS. Customer and the Contracted Health Plans shall have the right to
audit CONTRACTOR at any time in connection with CONTRACTOR'S performance
pursuant to the Agreement. CONTRACTOR will provide MPOWER, Customer and the
Contracted Health Plans, or their designees, with access at any time to all
of CONTRACTOR'S books, records, and systems prepared, maintained, and
utilized in connection with the performance of CONTRACTOR'S obligations
pursuant to the Agreement. Customer and the Contracted Health Plans, or
their designees, shall have access to CONTRACTOR'S personnel during normal
business hours, and such personnel shall cooperate fully with Customer and
the Contracted Health Plans or their designees in the performance of such
audits. Customer shall have the right to copy any and all books and records
associated with CONTRACTOR'S services provided to Customer hereunder.
7. KEY PERSONNEL. CONTRACTOR will identify and commit key personnel to the
implementation and management of services to be provided under this
Agreement. Any staffing changes involving key personnel will be discussed in
advance between CONTRACTOR and MPOWER.
8. CONFIDENTIALITY. CONTRACTOR shall maintain the confidentiality of all
Customer and Contracted Health Plan data, including, but not limited to,
contracts, provider information, strategic objectives, enrollment, financial
information, etc. Except as described below, CONTRACTOR shall not disclose
the details of Customer's or any Contracted Health Plan program experience,
including such information as price, claims history, profit/loss, etc., to
any third party. Except as described below, CONTRACTOR shall maintain the
confidentiality of all Customer and Contracted Health Plan policyholder
data, including any medical records information, operative reports, fee
schedule information, and the like.
CONTRACTOR shall disclose information described in this Section only: (a) in
response to a court order; (b). for an examination conducted by the
applicable Office of the Insurance Commissioner; (c) for an audit or
investigation conducted under the Employee Retirement Income Security Act of
1974 (29 U.S.C. 1001, et seq.); (d) to or at the request of Customer; or
(e), with respect to individual patient information, with the written
consent of the insured or certificate holder (or a designated legal
representative) to which the information applies.
MPOWER AND CONTRACTOR mutually covenant to keep confidential any proprietary
or confidential information of the other party, and to implement safeguards
designed to prevent disclosure of any proprietary or confidential
information of either party to a third party without the express written
consent of the other party. Such information shall include internal business
practices, business records, trade secrets, contracts, the terms of this
Agreement, or business methods, in any form whatsoever. Upon request, the
party receiving such information shall either return or destroy confidential
information, as directed by the disclosing party.
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<PAGE> 6
9. TRAINING. MPOWER shall arrange Customer training to CONTRACTOR'S staff
regarding (a) pertinent portions of the applicable Membership Agreements,
including without limitation covered benefits for medical transportation
services, (b) applicable portions of the Administrative Manuals pertaining
to CONTRACTOR'S obligations hereunder; and (c) any special processes,
procedures, or benefits applicable to a specific Contracted Health Plan that
are necessary in order for CONTRACTOR to satisfy its obligations under this
Agreement. CONTRACTOR shall make available staff members designated as key
contacts for all administrators and Contracted Health Plans to attend
sessions conducted by or arranged by MPOWER or Customer for product
training, provider issues resolution or training, and to help build
effective working relationships among administrators and Contracted Health
Plans.
III. PRICE AND PAYMENT
1. PRICE. The fees for the services of CONTRACTOR pursuant to this Agreement
are identified on Exhibit A. These fees cover those services provided by
Contractor pursuant to this Agreement and are based on the key assumptions
identified on Exhibit A, as well as the cost of toll-free telephone lines
and supplies. In the event of the addition of new Contracted Health Plans,
the encounter pricing set forth on Exhibit A shall remain applicable to
services provided in connection with such new Contracted Health Plans,
except that if the requirements for such services are materially greater or
less than the assumptions set forth on Exhibit A, the per encounter charge
may be changed accordingly upon mutual agreement of the parties.
Notwithstanding the foregoing, the parties acknowledge that the price set
forth in Exhibit A is not contingent upon the continuation of any specific
Health Plan Agreement between Customer and a Contracted Health Plan.
2. PAYMENT. On or before the fifth (5th) day of each month, CONTRACTOR shall
provide MPOWER with a report of the aggregate number of encounters processed
by CONTRACTOR during the previous mouth. MPOWER will bill the Customer the
applicable tiered encounter fee for such encounters on or before the
fifteenth (15th) day of each month. Customer will pay MPOWER the applicable
tiered encounter fee for such encounters on or before the last day of the
month during which such report was received by Customer. MPOWER will, in
turn, remit the applicable tiered encounter fee to CONTRACTOR within two (2)
working days of receipt from Customer. MPOWER'S obligation to pay CONTRACTOR
hereunder shall be subject to Customer's fight to audit CONTRACTOR'S books
and records to verify encounters processed by CONTRACTOR in connection with
this Agreement. Customer shall be entitled to offset and withhold from
MPOWER, and subsequently MPOWER shall be entitled to offset and withhold
from CONTRACTOR, any amounts due Customer for penalties or otherwise.
3. CHARGES. MPOWER agrees that CONTRACTOR shall have the right to charge
interest of one and one-half percent (1.5%) of the outstanding balance per
month, or the highest amount allowed by law, whichever is less, on any and
all late payments (except to the extent that such amounts are reasonably
disputed by Customer), and Customer agrees to pay such charges. All prices
mentioned in this Agreement are in U.S. Dollars. The parties agree that the
prices set out in this Agreement do not include any sales, use or gross
receipts taxes, any duties, any similar assessments, or any other tax
imposed on any party by virtue of this Agreement, all of which, excluding
only taxes based on MPOWER'S or CONTRACTOR'S income, shall be the sole
liability of, and shall be paid solely by, Customer.
IV. INDEMNIFICATION
1. MPOWER asserts that Customer agrees to defend, indemnify, and hold harmless
CONTRACTOR, as agent of MPOWER, and its parent and subsidiaries, and theft
officers, directors, agents, and employees, from and against any claim,
expenses (including reasonable attorney fees and litigation costs), losses,
lawsuits, damages, frees, penalties, or other liability to any third party,
including participating providers, nonparticipating providers, and
Customer's insureds, arising out of or related to any negligent, wrongful,
or unauthorized act or omission of Customer or act or omission of MPOWER or
CONTRACTOR expressly required by Customer. CONTRACTOR acknowledges its
responsibility to notify MPOWER if
-6-
<PAGE> 7
CONTRACTOR has knowledge that direction provided by MPOWER or Customer is
negligent, wrongful, or unauthorized.
2. MPOWER agrees to defend, indemnify, and hold harmless CONTRACTOR, and its
parent and subsidiaries, and their officers, directors, agents, and
employees, from and against any claim, expenses (including reasonable
attorney fees and litigation costs), losses, lawsuits, damages, fines,
penalties, or other liability to any third party, including participating
providers, nonparticipating providers, and Customer's insureds, arising out
of or related to any negligent, wrongful, or unauthorized act or omission of
MPOWER or act or omission of MPOWER or CONTRACTOR expressly required by
Customer.
3. CONTRACTOR agrees to defend, indemnify, and hold harmless MPOWER, Customer,
the Contracted Health Plans, their parents and subsidiaries, and their
officers, directors, agents, and employees, from and against any claim,
expenses (including reasonable attorney fees and litigation costs), losses,
lawsuits, damages, flues, penalties, or other liability to any third party,
arising out of or related to any negligent, wrongful, or unauthorized act or
omission of CONTRACTOR. MPOWER acknowledges its responsibility to notify
CONTRACTOR if MPOWER has knowledge that any action on the part of CONTRACTOR
is negligent, wrongful, or unauthorized.
4. Each party (MPOWER and CONTRACTOR) will promptly notify the other if it
becomes aware of any lawsuit, insurance department complaint, or demand by
an attorney, which may affect the other. If either party is named as a
defendant in a lawsuit for any matter for which the other party is
responsible under this provision, the other party shall be responsible for
defending such matter. Responsibilities under this provision includes
liability for judgments, reasonable attorney fees, costs, penalties, and
fines.
5. Notwithstanding other provisions of this Article IV, the duty of either
party to notify the other, defend, indemnify, or hold harmless under this
Article shall not arise unless and until such claim, expense, loss, damage,
free, penalty, or other liability to any third party shall exceed $25,000.
V. DISPUTE RESOLUTION
1. NOTIFICATION AND RESOLUTION OF COMPLAINTS. CONTRACTOR shall notify MPOWER
and Customer within two (2) business days of receipt of any complaint
received from a Member, a Member's representative, a Contracted Health Plan
(if such complaint involves administrative services rendered by CONTRACTOR
pursuant to this Agreement) or a provider of medical transportation services
in connection with services rendered by CONTRACTOR hereunder. MPOWER and
CONTRACTOR agree to cooperate fully with Customer and with the applicable
Contracted Health Plan in resolving any Member or provider complaint
regarding services provided by MPOWER and CONTRACTOR in connection with this
Agreement, in accordance with the dispute resolution procedure set forth in
the applicable Membership Agreement, Administrative Manual or provider
agreements, as appropriate. In addition, MPOWER and CONTRACTOR agree to be
joined in any dispute between Customer and a Contracted Health Plan
involving administrative services rendered by MPOWER and CONTRACTOR pursuant
to this Agreement, and to cooperate fully in the resolution of such dispute
in accordance with the dispute resolution procedure set forth in the
applicable Health Plan Agreement.
2. DISPUTE BETWEEN THE PARTIES. If any dispute shall arise between the parties
in connection with this Agreement that is [unrelated to a Member, provider,
or Contracted Health Plan complaint], the parties shall make every effort to
amicably resolve the dispute pursuant to this Section V.2. The following
procedures shall be adhered to in order to expeditiously resolve any
disputes arising during the term of this Agreement.
A. The party invoking the procedures of this Section V.2 shall provide
written notice to the other party. Each party shall designate an
individual empowered to bind the organization to a negotiated resolution
of the dispute. Unless the dispute is resolved with fewer meetings,
these parties shall meet and confer at least two (2) times within
forty-five (45) days to attempt to reach such resolution. If the matter
has not been resolved informally within such forty-five (45) days (which
-7-
<PAGE> 8
period may he extended by mutual agreement), the dispute shall be
settled by binding arbitration in accordance with the provisions of
Sections B through G of this Section V.2.
B. Either party may commence arbitration by sending a written demand for
arbitration to the other party, setting forth the nature of the
controversy, the dollar amount involved, if any, and the remedies
sought, and attaching a copy of this Article V to the demand. The
parties shall attempt to agree upon either one or three (3) arbitrators,
as they jointly deem appropriate. If the parties fail to agree upon the
appropriate number of arbitrators and the identity of the arbitrator(s)
within ten (10) days after the demand for arbitration is mailed, then
the parties stipulate to arbitration before three (3) neutral
arbitrators sitting on the JAMS/Endispute ("JAMS") panel administered by
the Denver, Colorado, JAMS office. Each party shall select one such
arbitrator from the panel, and the third arbitrator shall be selected by
the first two so selected. All three arbitrators shall be neutrals, and
no arbitrator shall have a conflict of interest unless waived by both
parties.
C. The parties shall share all costs of arbitration. Each party shall be
responsible for its own legal fees.
D. The arbitrator(s) shall apply the substantive law of Colorado. The
parties shall have the rights of discovery as provided for any judicial
proceeding. The Colorado evidence code shall apply to testimony and
documents submitted to the arbitrator(s).
E. Arbitration shall take place in Denver, Colorado unless the parties
otherwise agree. As soon as reasonably practicable, the arbitrator(s)
shall conduct a hearing on the dispute or matter to be resolved. As soon
as reasonably practicable thereafter, the arbitrator(s) shall arrive at
a final decision, which shall be reduced to writing, signed by the
arbitrator(s) and mailed to each of the parties and their legal counsel.
F. All decisions of the arbitrator(s) shall be final, binding and
conclusive on the parties and shall constitute the only method of
resolving disputes or matters subject to arbitration under this
Agreement. The arbitrator(s) or a court of appropriate jurisdiction may
issue a writ of execution to enforce the arbitrator's judgment. Judgment
may be entered upon such a decision in accordance with applicable law in
any court having jurisdiction.
G. Notwithstanding the foregoing, because time is of the essence of this
Agreement, the parties specifically reserve the right to seek a judicial
temporary restraining order, preliminary injunction, or other similar
short term equitable relief, and grant the arbitrator(s) the right to
make a final determination of the parties' rights, including whether to
make permanent or dissolve such court order.
VI. TERM AND TERMINATION
1. TERM. The initial term of this Agreement shall commence on the Effective
Date hereof and shall continue for a period of five (5) years unless sooner
terminated in accordance with this Article VI. Thereafter, this Agreement
shall automatically renew for consecutive one (1) year periods.
2. TERMINATION WITHOUT CAUSE. This Agreement may be terminated without cause by
either party by providing one hundred twenty (120) days' prior written
notice to the other party.
3. TERMINATION FOR CAUSE. This Agreement may be terminated immediately upon
written notice thereof given by either party if any one of the following
occurs, but in no event shall such termination relieve either party from any
of its obligations incurred at the time of termination under this Agreement.
-8-
<PAGE> 9
A. Except as provided in Section 4.B below, either party may terminate this
Agreement upon failure of the other party to cure non-compliance with
any material provision of this Agreement within thirty (30) days after
the terminating party gives written notice of such non-compliance to the
other party, unless cure of the non-compliance cannot be reasonably
completed within thirty (30) days, in which case such cure shall be
commenced within such thirty (30) day period and diligently pursued to
completion, which completion shall occur no later than forty-five (45)
days after the initial notice of termination. Any such termination shall
be effective as of the date of expiration of the applicable cure period.
B. In the event of breach by CONTRACTOR, MPOWER may terminate this
Agreement in whole or in part (i.e., only as to specific service areas
or Contracted Health Plans).
4. IMMEDIATE TERMINATION
A. Subject to Section II.3.A hereof, this Agreement shall automatically
terminate if CONTRACTOR fails to apply for or maintain applicable
licensure as a third party administrator and/or such other licenses or
certifications required for CONTRACTOR to perform its obligations
hereunder.
B. In the event of any material adverse change in CONTRACTOR'S insurance
coverage, MPOWER may immediately terminate this Agreement.
C. In the event of termination of a Health Plan Agreement for any reason,
MPOWER may terminate this Agreement in whole or in part effective on the
date of termination of the Health Plan Agreement. MPOWER shall provide
CONTRACTOR with not less than forty-five (45) days' notice of such
termination.
D. This Agreement may be terminated if either party becomes insolvent, or
is adjudicated as bankrupt, or its business comes into possession or
control, even temporarily, if any trustee in bankruptcy, or a receiver
is appointed for it, or it makes a general assignment for the benefit of
creditors, and no interest in this Agreement shall be deemed an asset of
creditors.
5. EFFECT OF TERMINATION. Upon termination of this Agreement for any reason,
the Agreement shall be of no further force or effect, except as to the
rights and obligations of the parties arising out of transactions occurring
prior to the effective date of termination. MPOWER and CONTRACTOR shall
cooperate fully with Customer and all Contracted Health Plans to ensure a
smooth transition of administrative functions assumed by CONTRACTOR
hereunder to MPOWER or directly to another administrative services vendor.
Such cooperation shall include but not be limited to the following:
A. CONTRACTOR shall continue to pay claims incurred during the term of this
Agreement unless directed by MPOWER and Customer to transfer such
functions to Customer or directly to the new administrative services
vendor.
B. CONTRACTOR shall transfer, as soon as possible, both electronically and
on diskette, all data, records, and other information connected with
claims processing and other services provided by CONTRACTOR to MPOWER or
directly to the new administrative services vendor.
C. CONTRACTOR shall provide a final accounting of claims processed within
thirty (30) days after the end of the month in which this Agreement was
terminated.
VII. GENERAL PROVISIONS
1. SUBCONTRACTING. All services proposed by CONTRACTOR will be performed by a
combination of its own staff and designated subcontractor(s). All
subcontractors operating on behalf of CONTRACTOR will be subject to the
terms and conditions of this Agreement. MPOWER shall have the right to
approve all subcontractors prior to their contracting with CONTRACTOR.
-9-
<PAGE> 10
2. CUSTOMER SATISFACTION SURVEYS. Customer may periodically conduct "customer"
satisfaction surveys of policyholders, Contracted Health Plans, and
providers with whom Customer has contracted. CONTRACTOR agrees to record all
interactions with these parties and provide those records, including the
callers' telephone numbers, to Customer as requested. CONTRACTOR will
provide other reasonable support to Customer's customer satisfaction survey
activities as requested,
3. INSURANCE. Each party (MPOWER and CONTRACTOR) shall obtain and carry general
liability insurance, including errors and omissions coverage, in a form and
with an insurer acceptable to the other, with limits of at least $1,000,000
per occurrence and $3,000,000 in the aggregate. Within sixty (60) days of
execution of this Agreement, each party shall deliver to the other a
certificate of notice, which provides that, should either party discontinue
its errors and omissions coverage, the other will be notified of the
occurrence. In the event any such coverage is provided on a claims made
basis, such coverage shall be manufactured (or such party shall procure
equivalent tail coverage) for a period of five (5) years after the
termination hereof.
4. BUSINESS RELATIONSHIP. The business relationship of CONTRACTOR to MPOWER
hereunder is that of an agent, and not as partner, joint venture or
employee.
5. NOTICE. Any notice required or permitted hereunder shall be deemed served if
personally delivered or mailed by registered or certified mall, return
receipt requested, postage prepaid, and properly addressed to the respective
party to whom such notice relates at the address set forth below, or at such
other address as shall be specified by notice given in the manner herein
provided.
Notice to Customer: AMERICAN MEDICAL PATHWAYS
2821 South Parker Road
Aurora, CO 80014
Attn.: Chief Operating Officer
With a copy to: AMERICAN MEDICAL RESPONSE
2821 South Parker Road
Aurora, CO 80014
Attn.: President and Chief
Operating Officer
Notice to MPOWER: MPOWER SOLUTIONS, INC.
6400 S. Fiddler's Green Circle
Suite 540
Englewood, CO 80111
Attn: Chief Executive Officer
Notice to CONTRACTOR: PROVIDER SERVICES, INC.
909 South 336th Street
Suite 100
Federal Way, WA 98003
Attn: President
6. PARTIES BOUND. This Agreement shall be binding upon and shall inure to the
benefit of the parties and their respective successors and permitted
assigns. Neither party shall assign or otherwise transfer this Agreement
without the prior written consent of the other party; provided, however,
that either party may assign this Agreement to any subsidiary of such party
in which such party owns an equity position of fifty-one percent (51%) or
more, or in the case of CONTRACTOR, a new company in which Daniel P. Bisk
owns an equity position of fifty-one percent (51%) or more, by giving thirty
(30) days' prior written notice to the other party.
7. AMENDMENT. This Agreement may be amended at any time but only by the written
agreement of the parties.
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<PAGE> 11
8. SEVERABILITY. The invalidity or unenforceability of any terra or provision
hereof shall in no way affect the validity or enforceability of any other
term or provision of this Agreement.
9. GOVERNING LAW. This Agreement and the fights, obligations, and remedies of
the parties hereunder shall be governed by the laws of the state of
Colorado.
10. HEADINGS. The table of contents and headings to the various paragraphs of
this Agreement have been inserted for convenient reference only and shall
not modify, define, limit, or expand the express provisions of this
Agreement.
11. AUTHORIZATION FOR AGREEMENT. The execution and performance of this Agreement
by the parties has been duly authorized by all necessary laws, resolutions,
or corporate action, and this Agreement constitutes a valid and enforceable
obligation of the parties in accordance with its terms.
12. FORCE MAJEURE. No party shall be liable for any failure to perform its
obligations under this Agreement, including without limitation compliance
with the performance standards set forth in Section II.4, to the extent that
such failure results from any act of God, riot, war, civil unrest, natural
disaster or labor dispute.
13.. ENTIRE AGREEMENT. This Agreement, including exhibits and attachments,
contains the entire agreement between the parties, and this Agreement may
not be modified or terminated except as expressly provided herein or by an
agreement in writing signed by the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement effective the day
and year first set forth above.
MPOWER SOLUTIONS INC. PROVIDES SERVICES, INC.
("MPOWER") ("CONTRACTOR")
/s/ Mark S. Rangell /s/ Daniel P. Bisk
- -------------------------------- -----------------------------------
SIGNATURE SIGNATURE
Mark S. Rangell Daniel P. Bisk
- -------------------------------- -----------------------------------
NAME PRINTED NAME PRINTED
SENIOR VICE PRESIDENT PRESIDENT
- -------------------------------- -----------------------------------
TITLE TITLE
MAY 17, 1999 MAY 7, 1999
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<PAGE> 12
EXHIBIT A
SCOPE OF SERVICES
IN CONNECTION WITH
KAISER FOUNDATION HEALTH PLANS
STATEMENT OF WORK
ELIGIBILITY
Key Assumptions:
- A full eligibility data load will be provided to MPOWER from
Customer and Kaiser Foundation Health Plans ("Kaiser") in a format
agreed to between Customer and Kaiser, which shall be in the
MPOWER-specific electronic format
- Customer and the Contracted Health Plan will provide eligibility on
an agreed to monthly date and be loaded by MPOWER within 24 hours of
receipt with each new eligibility load representing the current
"eligible population"
- No retroactive enrollments and disenrollments
- No reconciliation of monthly eligibility
- No retroactive claim adjustments
Implementation Schedule (related to regions UNDER WHICH CONTRACTOR WILL BE
PROVIDING SERVICES)
<TABLE>
<CAPTION>
EST. LIVES EST. ENCOUNTERS EST. ENCOUNTERS
PHASE REGION (000,000) (YEARLY) (MONTHLY) LIVE DATE
- ----- ------ ---------- --------------- --------------- ---------
<C> <C> <C> <C> <C> <C>
1 AMR Other
2 Oregon, Hawaii, WA [*]
3 Georgia, N.C.
4 Maryland, Ohio, Wash D.C., VA
5 NY, MA, VT, CT
</TABLE>
CAPITATION/FUND POOL MANAGEMENT/FINANCIAL
Key Assumptions:
- Set-up and maintain fund pools applicable to Kaiser satellite
locations
- Load and maintain provider and vendor data for 100 network providers
- Set-up and maintain roll-up hierarchy of Customer transports by
division
- Set-up and maintain roll-up hierarchy of transports by Kaiser
satellite
- Provide 1099s for up to 100 non-Customer network providers
- Perform fee-for-service claims payments and issue remittance advice
with checks to providers (100 checks/mo.)
AUTHORIZATIONS/CLAIMS
Key Assumptions:
- 56% of claims will require medical necessity checking (60% submitted
electronically)
- 44% will auto-adjudicate according to rule set (85% submitted
electronically)
- Encounter volume breakdown according to Attachment A
- Denials are disbursed to Providers and Kaiser for distribution
* Confidential Treatment Requested
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<PAGE> 13
- Customer Service is limited to 100 Providers and Customer/Contracted
Health Plan staff
- No EOBs are submitted to members
- Claims are submitted in standard HCFA 1500 or UB92 format
~ Maintenance of out of network providers will be limited to 500
providers
- Customer service calls to Contracted Health
Plans/Customer/contracted providers will be limited to 2% of the
volume attributed to Medical Necessity claims. Excess Customer
services requirements shall be managed by Customer
- Medical necessity checking will be limited to Contracted Health Plan
approved protocol compliance and subject to "prudent person" rule,
if applicable
REPORTING
- Provide encounter data reporting electronically
- Limited to reports, which are included in standard MPOWER system
format, and as agreed to by the Contracted Health Plan
PRICING ASSUMPTIONS
The following assumptions have been made within the generic pricing model.
1. Travel & Expenses - Any travel, which is required to AMERICAN MEDICAL
PATHWAYS' client sites is not included.
2. Location - Computer Operations will be housed in MPOWER facilities with
claims processing staff located in Federal Way, WA and Jacksonville, FL.
PENALTIES
In accordance with Section II.4.B of this Agreement, CONTRACTOR is responsible
for reimbursing Customer for penalties incurred by Customer due to CONTRACTOR'S
failure to meet the performance goals set forth in Section II.4.A of this
Agreement. Such penalty shall be equal to [*] percent ([*]%) of the
administrative fees set forth in Article II hereof in connection with the
particular service area(s) (as defined in the applicable Health Plan Agreement)
that has been deemed not to have met the performance goals set forth in Section
II.4 of this Agreement.
* Confidential Treatment Requested
-13-
<PAGE> 14
PRICING MODEL
MONTHLY ENCOUNTER PRICING
<TABLE>
<CAPTION>
TIERS
(MONTHLY ENCOUNTERS) $/ENCOUNTER
-------------------- -----------
<S> <C> <C>
0 - 5,000 $
5,001 - 10,000 $
10,001 - 20,000 $ [*]
20,001 - 30,000 $
30,001 - 40,000 $
40,001+ $
</TABLE>
The foregoing encounter tiers reflect MPOWER'S remittance to CONTRACTOR based on
the sum of all monthly encounters processed by CONTRACTOR on behalf of Customer.
* Confidential Treatment Requested
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<PAGE> 15
EXHIBIT B
IMPLEMENTATION PLAN
NEW ACCOUNT IMPLEMENTATION WORKPLAN SCHEDULE (SAMPLE)
The following attachment provides a sample implementation plan, indicating key
activities and milestones to be accomplished during the implementation process.
This schedule normally covers a period of ninety (90) days from contract
signing. MPOWER and Customer will work in conjunction with the Contracted Health
Plan(s) to expedite the standard timeframe, in support of a [*] initial live
date for the first service area (Rocky Mountain Division).
* Confidential Treatment Requested
-15-
<PAGE> 16
<TABLE>
<CAPTION>
%
ID TASK NAME COMPLETE DURATION START* FINISH
- ---- ------ ---------------------------------------------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
1 X [*]
2 X
3 X
4 X
5 X
6 X
7 X
8 X
9 X
10 X
11 X
12 X
13 X
14 X
15 X
16 X
17 X
18 X
19 X
20 X
21 X
22 X
23 X
24 X
25
26
27
28
29
30
31
32
33
34
35
36
37
</TABLE>
* Confidential Treatment Requested
16
<PAGE> 17
<TABLE>
<CAPTION>
%
ID TASK NAME COMPLETE DURATION START* FINISH
- --- ----- ---------------------------------------------- -------- -------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
38 [*]
39
40
41
42
43
44
45
46
47 X
48
49
50
51
52
53
54
55 X
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
</TABLE>
* Confidential Treatment Requested
17
<PAGE> 18
<TABLE>
<CAPTION>
%
ID TASK NAME COMPLETE DURATION START FINISH
- ---- ----- ---------------------------------------------- -------- -------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
75 [*]
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
107
108
109
110
111
</TABLE>
* Confidential Treatment Requested
18
<PAGE> 19
<TABLE>
<CAPTION>
%
ID TASK NAME COMPLETE DURATION START* FINISH
- ---- ----- ---------------------------------------------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
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[*] Confidential Treatment Requested
21
<PAGE> 1
EXHIBIT 10.19
MASTER AGREEMENT
THIS MASTER AGREEMENT (the "Agreement"), effective 24 Aug., 1998 the "Effective
Date"), between MPOWER SOLUTIONS INC., a Delaware corporation with its principal
place of business located at 6400 S. Fiddler's Green Circle, Suite 540,
Englewood, CO 80111 ("MPOWER") and QUEST DIAGNOSTICS INCORPORATED, a Delaware
corporation with its principal place of business located at One Malcolm Avenue,
Teterboro, NJ 07608 ("Customer") sets forth the promises of the parties with
respect to the products and services of MPOWER which are described in this
Agreement.
WHEREAS, MPOWER is in the business of providing automated managed health care
information software and services to businesses providing managed health care
and insurance services, and desires to provide such services and software to
Customer, subject to the terms hereof; and
WHEREAS, Customer is in the business of providing laboratory services to its
customers, including managed health care providers, and desires to use the
software and services provided by MPOWER, subject to the terms hereof.
NOW THEREFORE, in consideration of the mutual promises made, the terms and
conditions hereunder described and other valuable consideration, the parties
agree as follows:
I. DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
A. CPI
"CPI" shall mean the Consumer Price Index for All Urban Consumers, U.S.
City Average, for All Items (1982-1984= 100), as published by the Bureau
of Labor Statistics of the U.S. Department of Labor. If the Bureau of
Labor Statistics ceases to publish or substantially changes the content,
calculation or format of the CPI, the parties will substitute another
comparable index published by a mutually agreeable source; provided,
however, that if the change is merely to redefine the base period to some
other period, the parties will continue to use the affected index but will
convert either the current or prior level of such index to the same basis
as the other by using an appropriate conversion factor.
B. Documentation
"Documentation" shall mean the standard operational instructions, manuals
and
Page 1 of 43
<PAGE> 2
related material regarding MPOWER Products (as defined below) which MPOWER
will deliver to Customer as set out in the Attachments to this Agreement.
C. MPOWER(R) Product(s)
"MPOWER(R) Product(s)" shall mean those product(s) which MPOWER will
deliver to Customer as set out in the Attachments to this Agreement.
D. Release
"Release" shall mean a set of computer programs and/or associated
Documentation regarding an MPOWER Product which MPOWER makes available for
use by its customers who are covered under warranty or a maintenance
agreement regarding such MPOWER Product. MPOWER reserves the right to
charge an additional license fee for any optional modules which MPOWER
reasonably determines contains significant additional functionality. Such
significant additional functionality shall mean (a) new modules or
subsystems that are not a mere enhancement nor extension of existing
functionality, which enhancements and extensions are covered under
maintenance agreements, or (b) different hardware, operating system
platforms or databases. The major modules and/or functionality initially
covered under a given MPOWER Product are listed in an Exhibit to the
applicable Attachment to this Agreement.
E. Site(s)
"Site(s)" shall mean the physical location(s) at which Customer conducts
its business.
F. Live Production Environment
A live production environment ("Live Production Environment') is defined
whereby MPOWER(TM) is managing on-line the enrollment and processing of
subscribers or members, and, at a minimum, one line of business.
G. Plan(s)
A "Plan" (" Plans") shall mean a health benefit in which Customer or a
Plan Sponsor is operating
H. Enrollee
"Enrollee" shall mean an individual who is currently enrolled with a Plan
entitled to receive Covered Services or who has been enrolled in such Plan
at some time during the then-previous twelve (12) months, whether or not
such covered member has presented a valid claim to such Plan.
Page 2 of 43
<PAGE> 3
I. Covered Services
"Covered Services" shall mean those healthcare or related benefits that an
Enrollee is entitled to receive from a Participating Provider or other
Provider pursuant to the applicable Enrollee Group Benefits Agreement.
J. Participating Provider
"Participating Provider" means Provider that has entered into an Agreement
with Customer or Customer's customer to provide Covered Services to
Enrollees.
K. Group Benefits Agreement
"Group Benefits Agreement" means the document distributed by Plan to its
Enrollees describing all Covered Services in the Plan.
L. Work Order
"Work Order" shall mean a document that is separately executed by both
parties, that (a) describes a scope of services that Customer wishes
MPOWER to perform for Customer, (b) authorizes MPOWER to perform services
for Customer, (c) obligates MPOWER to perform such services and (d)
obligates Customer to pay for such services, all under the terms of that
separate document, and which document, when executed, is incorporated and
made part of this Agreement.
M. Derivative Work
"Derivative Work" shall mean any computer program, application, interface
or related documentation that is based on an M. POWER Product, or any
component part thereof, that is used or intended to be used as a
commercial software product or as a competitive product to MPOWER.
N. Source Code
"Source Code" shall mean the commonly accepted source code of a computer
program describing in a formal language certain logic functions, from
which source code a computer program is compiled or interpreted to perform
certain functions in a computer.
O. Object Code
"Object Code" shall mean the commonly accepted object code of a computer
program, which is that version of the computer program logic that has been
translated from the Source Code into instructions that can be run directly
within a
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<PAGE> 4
computer in a predefined operating system environment.
P. Plan Sponsor
"Plan Sponsor" shall mean the health plan, organization or legal person
that offers a Plan either directly or through another organization or
legal entity to Enrollees.
Q. Provider
"Provider" shall mean a medical services provider, clinic, laboratory or
other institution or facility that customarily provides Covered Services
or other medical, surgical, laboratory, radiology, therapies, alternative
medical services or any other commonly accepted services of a medical or
medically related nature, whether licensed or unlicensed, to Enrollees of
Customer or Customer's customers.
R. Claim Transaction
"Claim Transaction" shall mean a medical, surgical, laboratory, radiology,
therapy or other service claim or encounter, whether for a Covered Service
or any other service or product, submitted to Customer by a Provider
detailing services or products provided by such Provider to an Enrollee.
S. Encounter File
"Encounter File" shall mean the codified output of one or more of the
aforementioned services performed by such Provider to an Enrollee,
resulting in claim transaction(s) to be processed.
T. "Life" ("Lives")
"Life" ("Lives") shall mean an Enrollee.
U. End User
"End User" shall mean all such authorized individuals deemed by Customer
to require access to the then current release of MPOWER Product in Object
Code form, based upon conformance to the terms and conditions set forth in
Paragraph II (Confidential and Proprietary Information) of this Agreement.
V. Customer
"Customer" means Quest Diagnostics Incorporated, its wholly owned
subsidiaries
Page 4 of 43
<PAGE> 5
and affiliates, and any other entity in which Quest Diagnostics
Incorporated's ownership interest is no less than 45% of that entity.
II. CONFIDENTIAL AND PROPRIETARY INFORMATION
MPOWER, on behalf of itself, its employees, agents, vendors, successors,
and assigns, agrees to keep in confidence all data relating to Customer's
business to which MPOWER may have access as a result of performing its
obligations under this Agreement and the terms of this Agreement.
MPOWER asserts and Customer acknowledges that all MPOWER Products, the
Documentation and the Releases, and all information, data, designs, MPOWER
Product structure definitions of any system setups, benefit plans,
provider contracts, fee groups, adhoc reports, letter formats, sample
letter content, business process workflow diagrams, and any other
structural templates and other similar information provided by, developed
or reviewed by or in conjunction with MPOWER, and used by MPOWER in
assisting Customer in the installation, implementation or on-going use of
the MPOWER Product, and methodologies related thereto ("Proprietary
Information") are the exclusive property of MPOWER or MPOWER's suppliers
and that the Proprietary Information is confidential, has tangible value
and includes trade secret information of MPOWER and/or MPOWER's suppliers.
MPOWER and/or MPOWER's suppliers shall retain all rights to the
Proprietary Information, including all copyright rights therein, except to
the extent to which MPOWER grants rights to Customer to use the
Proprietary Information pursuant to this Agreement. Customer may not
create Derivative Works based upon the Proprietary Information in whole or
in part. All improvements, enhancements and modifications to the
Proprietary Information shall be owned exclusively by MPOWER or MPOWER's
suppliers. Without MPOWER's prior written consent, Customer shall not
decompile, disassemble or reverse engineer any Proprietary Information.
Customer agrees not to sell, lease, assign or otherwise transfer, disclose
or make available, in whole or in part, any portion of the Proprietary
Information or the terms of this Agreement and Customer shall prevent
disclosure of any pan of the Proprietary Information or the terms of this
Agreement to any third party for any reason (except for disclosure or
access to Customer's employees, contracted entities, or Customer's
customers which is necessary for Customer to be able to use the
Proprietary Information in accordance with this Agreement). Customer
agrees to notify those employees, contracted entities or customers to whom
Customer gives access to the Proprietary Information of the restrictions
contained in this Section II and to ensure their compliance with such
restrictions.
The duties and obligations which are included in this Section II shall
survive any
Page 5 of 43
<PAGE> 6
termination of this Agreement and/or Customer's right and license to use
any MPOWER Product.
If Customer desires to disclose any Proprietary Information to any third
party or to permit any third party to have access to any Proprietary
Information, such third party must have a legitimate need to have access
to such Proprietary Information (consistent with the purpose[s] for which
such disclosure was made to Customer) and, prior to any such disclosure or
access, Customer and such third party must enter into a nondisclosure
agreement with MPOWER in substantially the form set out in the Addendum
which is attached to this Master Agreement and made a part hereof. In no
event shall Customer disclose any Proprietary Information to any
competitor of MPOWER.
Customer and MPOWER specifically acknowledge that specific provider and
benefit contract rates, the names, demographic information, contractual
relationships, and medical information of any group, member, provider or
other entity with a contractual relationship with Customer shall be
considered Proprietary Information of Customer or of such other entity
contracted with Customer, unless such information is available through
public sources or through publicly available filings with any insurance or
health care regulatory agency or with any industry accreditation or
reporting body.
Further notwithstanding the above, Customer and MPOWER acknowledge that
Customer may create and distribute reports and data from its licensed use
of the MPOWER Products in the normal course of its business to its
customers, to health care providers, Enrollees, employers or Plan
Sponsors, government agencies and others with a legitimate purpose in the
conduct of the Customer's business and the data processed by the licensed
MPOWER Products, and that such reports and distributed data do not
constitute Derivative Works, unless they are used to create commercial
software products for reuse and / or license to other parties.
Customer and MPOWER agree that MPOWER has no rights in the data that is
input by Customer or its agents in the use of the MPOWER Products, and
agree that all of such data, and any subsequent information developed from
such data by Customer in its use of the MPOWER Products is confidential
information solely for the use of Customer. MPOWER shall not use the data
and subsequent information developed by Customer in any manner, and it is
agreed that such data and information is Proprietary Information of
Customer.
III. COPYING
Customer, for each licensed instance of the MPOWER Product being used in a
Live Production Environment, may make one (I) copy of each MPOWER Product
in machine-readable form in a test region for the purpose of testing new
releases or
Page 6 of 43
<PAGE> 7
fixes and also one (1) copy of each MPOWER Product in machine-readable
form for backup purposes only. Customer agrees that upon copying any
MPOWER Product, Customer shall place a label on the outside of each copy
medium showing the program name, version number and any/all copyright and
proprietary notices in the same form as contained on the original copy.
In addition, Customer may make automated backup copies of its production
and testing regions for operational backup purposes without applying the
above labels, provided that such operational backup copies are maintained
with the acceptable industry standard security measures and not made
available to outside parties except for the case of disaster recovery
purposes, in which case the disaster recovery agent will be bound to all
the confidentiality and Proprietary Information restrictions to which
Customer is bound hereunder, and further that no such disaster recovery
agent may be a competitor of MPOWER.
IV. SOURCE CODE ESCROW
At the request of Customer, MPOWER and Customer will enter into an
agreement with MPOWER's escrow agent ("Custodian") for the depositing of
the MPOWER Products' Source Code ("Source Code Copy"). [The current
Custodian is NORWEST Bank.] MPOWER shall notify Customer at least ten (10)
business days prior to a change in the entity identified as the Custodian.
Subject to Customer's payment of all fees due under this Agreement in
accordance with the applicable payment terms and Customer's payment of all
fees related to' Custodian's administration of said escrow (the current
rate as of the date of this Agreement being One Thousand Five Hundred
($1,500.00) Dollars per annum), the Source Code Copy so deposited will be
maintained during the period Customer shall use and purchase, and MPOWER
shall provide, software maintenance services for the particular MPOWER
Product. The Source Code Copy will be updated by MPOWER within thirty (30)
days after each new Release of the particular MPOWER Product.
The parties agree that the Source Code Copy shall be held by the Custodian
for delivery to Customer under the conditions that this Agreement is
terminated as a result of a material breach of the terms of this Agreement
by MPOWER or MPOWER riles for bankruptcy under Chapter 7, and its business
is not continued by virtue of a merger, consolidation, the sale of all or
substantially all of its assets, or through some other transaction by
another fiscally sound and technically qualified corporation or entity,
and the Custodian of the Source Code has received from Customer or from
MPOWER, or from a court of competent jurisdiction: (i) written
notification of any such event or condition; (ii) demand that a copy of
the Source Code Copy be mailed to Customer; (iii) written undertaking from
Customer, which shall be legally binding, that the copy 'of the Source
Code Copy to be supplied to Customer will be used only for Customer's
maintenance of the
Page 7 of 43
<PAGE> 8
MPOWER Products at a specified location and will be promptly returned to
the Custodian at the expiration of the period during which Customer, under
its agreement with MPOWER, has the right to use the MPOWER Products, and
that the copy of the Source Code and the information and material
contained therein shall be held confidentially by Customer, its employees
and agents who are involved in the use and technical maintenance of the
MPOWER Products, and shall not, under any circumstances, be disclosed or
made available to any other person or entity; and (iv) specific
instructions from Customer for the delivery of a copy of the Source Code
Copy, with a copy of such instructions to MPOWER. Customer will pay the
costs and expenses of the Custodian in carrying out the requirements of
this Section.
In addition, if Customer uses the MPOWER Product Source Code, it will only
be for the purposes for which the Object Code is licensed under this
Agreement and not for re-license, reverse engineering or to create a
derivative product. The Confidential and Proprietary Information
provisions of Section II apply also to the Source Code.
V. TERMINATION
Should Customer fail to pay any sum due and payable under this Agreement,
MPOWER shall notify Customer in writing of such failure to pay. Customer
shall then have thirty (30) days from the delivery of MPOWER's written
notice to pay such amount(s). The foregoing sentence in no way relieves
Customer from its obligation to pay any and all late charges which may
become due as set forth in Section VI below. If payment is not made within
such thirty (30) days, MPOWER shall have the immediate right to
discontinue any and all services under this Agreement. Furthermore, if
payment is not made within sixty (60) days from the delivery of MPOWER's
written notice, MPOWER shall have the immediate right to terminate this
Agreement, except that the License granted hereunder shall not be
terminated unless the sum due and unpaid is specifically for the License
granted hereunder.
Should either party commit a material breach of its obligations under this
Agreement, other than failing to pay money, the non-breaching party may
notify the breaching party in writing, setting out the breach, and the
breaching party shall have thirty (30) days to remedy such breach. If the
breaching party fails to remedy the breach during this thirty (30)-day
period, or, with respect to those breaches which cannot reasonably be
remedied within thirty (30) days, if the breaching party fails to proceed
promptly after being given such notice to commence remedying the breach
and thereafter to diligently proceed to remedy the same, the other party
shall have the right to terminate this Agreement, provided such party
gives the breaching party ten (10) days' prior written notice to that
effect. Notwithstanding the foregoing, either party shall have the right
to
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<PAGE> 9
immediately terminate this Agreement upon any breach by the other of its
obligations under Section II above.
Termination of this Agreement shall be without prejudice to all accrued
rights and remedies either party may have and shall not affect any
continuing rights and obligations of the parties under this Agreement.
Upon the termination of this Agreement and/or any Attachment to this
Agreement, Customer shall return to MPOWER all Proprietary Information
regarding the MPOWER Product whose license is being terminated, within
thirty (30) days after such termination and MPOWER shall return to
Customer any proprietary information obtained in the performance of this
Agreement within thirty (30) days after such termination.
Notwithstanding anything to the contrary herein, the License granted
hereunder shall not be terminated due to any breaches that relate to
Software Maintenance services; Implementation services; Training services;
Conversion services and/or Other services as identified in this Agreement
or the Attachments hereto. In the instances of such breaches MPOWER'S
termination remedies shall be limited to termination of this Agreement as
it applies to such services.
VI. INVOICES AND CHARGES
Unless a specific payment date is set out in an Attachment to this
Agreement, Customer agrees to remit all payments under this Agreement so
that MPOWER shall receive such payments no later than thirty (30) days
from the date of Customer's receipt of MPOWER's invoice. Customer also
agrees that MPOWER shall have the right to charge interest of one percent
(1.0%) of the outstanding balance per month, and Customer agrees to pay
such charges if assessed. All prices mentioned in this Agreement are in
U.S. Dollars. The parties agree that the prices set out in this Agreement
do not include any sales, use or gross receipts taxes, any duties, any
similar assessments, or any other tax imposed on any party by virtue of
this Agreement, all of which, excluding only taxes based on MPOWER's
income, shall be the sole liability of, and shall be paid solely by,
Customer.
VII. FORCE MAJEURE
Neither party shall be liable to the other for failing to fulfill any
obligation under this Agreement if such failure is caused by an event
which is beyond such party's reasonable control and which is not caused by
such party's fault or negligence, including without limitation, acts of
God, acts of war, fires, strikes, lightning, floods, epidemics, civil
unrest, power shortages, a third party's equipment failure,
Page 9 of 43
<PAGE> 10
delays in transportation, or either party's inability to obtain necessary
labor, material or components due to causes beyond such party's reasonable
control.
VIII. CUSTOMER RESPONSIBILITIES
A. Customer Responsibilities
Customer acknowledges that MPOWER(R) reflects certain interdependent
relationships, such as exist among the data variables, logic rules and
system functions of MPOWER(R). Customer further acknowledges that it is
required and has a responsibility to understand such data variables, logic
rules and system functions, and their interdependent relationships, and to
define for its own purposes such data variables, logic rules and system
functions to MPOWER(R) in such a way that MPOWER(R) will provide the
functionality desired by Customer. Customer acknowledges that it has or
will hire and will maintain on its staff personnel who are able to
understand and define such data variables, logic rules, system functions
and interdependent relationships. Customer further acknowledges that, even
though MPOWER may assist Customer personnel in performing these tasks, the
responsibility for the effective definition and maintenance of these data
variables, logic rules and system functions resides with Customer and not
with MPOWER, unless Customer specifically requests MPOWER to perform these
tasks at agreed upon rates specified in a Work Order.
B. Customer Data
Customer shall be responsible for inputting and ensuring the accuracy,
validity and completeness of all data variables, logic rules, system
functions and Customer data, including but not limited to group,
subscriber, member, provider, utilization, encounter, claims, capitation,
fund accounting, billing, collection, broker, benefits, product contract,
provider contract, provider fees, standard business measures, and other
similar or related data. Customer shall also be responsible for inputting
and ensuring, the accuracy, validity and completeness of all user-defined
report definitions, all report and batch production job specifications and
priority scheduling criteria. Customer shall also be responsible for
initiating, monitoring, operating, printing and ensuring the accuracy,
validity, and completeness of all print outputs and file downloads, such
as but not limited to all reports, premium bills, checks, and the like,
determining how many and on what print stock such outputs are to be
printed or into which files or programs on Customer-controlled computers
such files are to be downloaded and manipulated, at Customer's own
initiative, responsibility and risk. Customer hereby acknowledges
responsibility for generally controlling all aspects related to the
production, distribution and control of such outputs. Customer further
acknowledges that, notwithstanding the responsibility of MPOWER to have
used
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<PAGE> 11
due care and diligence in the design, programming, documentation and
operation of the System, the accuracy of Customer's data base within
MPOWER(R) and the accuracy of the several outputs of the MPOWER(R),
including but not limited to, outputs that control the billing, receipt or
expenditure of monies, will be dependent on the accuracy and use of the
data variables, logic rules, system functions and Customer data input into
MPOWER(R) by Customer and verified by Customer.
C. Other Customer Obligations
In addition to its other obligations hereunder, Customer will on a timely
basis:
1. Establish appropriate priorities for Customer, on a regular
basis and no less frequently than every ninety (90) days, that
relate to MPOWER(R) and communicate the same to MPOWER.
Customer recognizes that changes in such priorities may result
in additional fees hereunder for additional staff, as
incremental support, or reordering of other priorities to
provide MPOWER services within the current fee structure.
2. Cooperate with MPOWER by, among other things, making
available, as reasonably requested by MPOWER, management
decisions, information, approvals, and acceptances in order
that MPOWER may properly accomplish its obligations and
responsibilities hereunder.
3. Carefully inspect and review all MPOWER generated reports and
other output and notify MPOWER of any incorrect reports or
output.
4. Personalize, maintain, reproduce and distribute (solely for
Customer's internal use) procedure manuals and documentation
used by Customer personnel in connection with the MPOWER
services hereunder.
5. Train applicable Customer personnel to properly prepare input
for and to effectively utilize output from the systems
operated by MPOWER hereunder.
6. Pay all costs of acquisition, installation, use and
maintenance of equipment at Customer's site, as required for
the performance of MPOWER services.
7. Such other responsibilities as set forth herein.
Customer agrees that to the extent its failure to meet its obligations set
forth in this Section VIII C affects the ability of MPOWER to perform
MPOWER's obligations under this Agreement, MPOWER shall be relieved of
such
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<PAGE> 12
obligations, and Customer shall indemnify MPOWER against any claims or
liabilities arising, out of such failure by Customer, subject to the
liability limitations set forth elsewhere herein.
D. Reprocessing or Reconstructing of Data
During any period of use of MPOWER(R), to the extent that any Customer
data must be corrected, recreated, restored or reprocessed due to the
fault or negligence of Customer, its employees or agents, or by a breach
by Customer of any of its obligations hereunder, MPOWER will do so, and in
such event Customer shall pay MPOWER at the service fee rates outlined in
an applicable Work Order and reimburse MPOWER for any reasonable direct
costs incurred by MPOWER in correcting, recreating, restoring or
reprocessing such data or in providing assistance therewith.
IX. LIMITATION OF LIABILITY
CUSTOMER AGREES THAT MPOWER SHALL HAVE NO LIABILITY TO CUSTOMER FOR
INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES, EVEN IF MPOWER IS ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES, OR FOR LOSS OF USE OR OTHER COMMERCIAL
LOSS (INCLUDING, BUT NOT LIMITED TO, LOSS OF REVENUES AND/OR PROFITS),
HOWEVER OCCASIONED AND WHATEVER THE FORM OF ACTION, FOR ACTUAL OR IMPUTED
NEGLIGENCE, BREACH OF CONTRACT, BREACH OF WARRANTY OR OTHERWISE.
FURTHERMORE, CUSTOMER AGREES THAT IN NO EVENT SHALL MPOWER BE LIABLE FOR
DIRECT DAMAGES IN EXCESS OF ALL FEES CUSTOMER SHALL HAVE PAID MPOWER UNDER
THIS AGREEMENT.
The parties agree that no action, regardless of form, which may arise out
of the transactions under this Agreement may be brought by either party
more than two (2) years after the cause of action is known, or ought
reasonably to have been known, to the party bringing the action.
MPOWER AGREES THAT CUSTOMER SHALL HAVE NO LIABILITY TO MPOWER FOR
INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES, EVEN IF CUSTOMER IS ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES, OR FOR LOSS OF USE OR OTHER COMMERCIAL
LOSS (INCLUDING, BUT NOT LIMITED TO, LOSS OF REVENUES AND/OR PROFITS),
HOWEVER OCCASIONED AND WHATEVER THE FORM OF ACTION, FOR ACTUAL OR IMPUTED
NEGLIGENCE, BREACH OF CONTRACT, BREACH OF WARRANTY OR OTHERWISE.
Page 12 of 43
<PAGE> 13
X. INFRINGEMENT
MPOWER agrees to defend, indemnify and hold Customer harmless against any
and all claims that any MPOWER Product infringes a U. S. Letter Patent,
copyright, trade secret or the proprietary fights of others, provided that
MPOWER, shall have received timely written notice of any such claim and
that MPOWER shall have sole control of the defense of such claim and all
negotiations for the settlement or compromise of such claim.
As of the date first written above, MPOWER warrants that it is not aware
of any infringement, and has not been notified by any third party that it
may be infringing, any U.S. Letter Patent, copyright, trade secret or the
proprietary fights of others.
If use of an MPOWER Product by Customer is enjoined, or becomes, or, in
MPOWER's sole opinion, is likely to become, the subject of a claim of
infringement, MPOWER will, at its option and expense, either:
1. procure for Customer the right to continue using the MPOWER Product
in question; or
2. replace or modify the same so that it is functionally equivalent
[i.e. the MPOWER Product will achieve the same or similar business
logic result] (or contains more functionality) and is
non-infringing.
Notwithstanding the foregoing, if MPOWER determines that neither of the
alternatives set forth above is reasonably available, MPOWER will refund
to Customer any unamortized portion of the infringing MPOWER Product's
license fee which has then been paid by Customer. Amortization shall be
based upon a seven (7)-year life of the infringing MPOWER Product,
beginning on the date the infringing MPOWER Product was licensed by
Customer from MPOWER. Should such refund occur, Customer agrees to return
the infringing MPOWER Product to MPOWER.
Should any refund described above occur, the license for the infringing
MPOWER Product shall be terminated and MPOWER, its affiliates,
subsidiaries, assigns and successor corporations shall be released from
any and all liability arising from any and all claims, losses,
liabilities, damages, costs or deficiencies which are then-existing or
which may arise in the future with regard to such infringing MPOWER
Product(s) for which MPOWER has refunded fees pursuant to this Section X.
Notwithstanding anything contained herein to the contrary, MPOWER shall
have no liability for any loss, cost, claim or expense caused by:
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<PAGE> 14
1. alteration of any MPOWER Product provided hereunder by any party
other than MPOWER;
2. any loss, expense or liability resulting from any infringement which
is a consequence of MPOWER's compliance with designs or code
submitted to MPOWER by Customer;
3. the use of any MPOWER Product in combination with products not
licensed to customer by MPOWER;
4. continuation of the allegedly infringing activity by Customer after
Customer is notified in writing thereof and after the conclusion of
a reasonable grace period afforded Customer in the notice to migrate
from the infringing activity to an alternate solution; or
5. Customer's use of an MPOWER Product other than in compliance with
the terms and conditions of this Agreement.
Notwithstanding the foregoing, MPOWER shall not be obligated to defend,
indemnify or hold Customer harmless from and against any claim, suit
proceeding or allegation asserted by a parent, subsidiary or affiliate of
Customer.
The foregoing remedy set forth in this Section X represents the exclusive
remedy of Customer and MPOWER's sole liability with regard to any claim
that an MPOWER Product infringes the rights of others.
XI. RESOLUTION OF DISPUTES
If any dispute shall arise between the parties under this Agreement, the
parties shall make every effort to amicably resolve the dispute by
providing written notice of the dispute, setting forth the nature of the
dispute in sufficient detail for the other party to evaluate the matter
and respond to the claims of the other party. The other party will provide
a written response in reasonable detail (to the extent allowable based on
the sufficiency of details provided by the notifying party), within a
reasonable time, but no greater than 30 business days after receipt of
such notice, to the allegations of the notifying party. If the parties are
unable to resolve the dispute within 30 business days of the receiving
party's response to the notifying party, then the parties may seek to
invoke the arbitration provision set forth below.
If the matter has not been resolved pursuant to the aforesaid dispute
resolution procedures (which may be extended by mutual agreement) the
controversy shall be settled by arbitration in accordance with the
American Arbitration Association.
Page 14 of 43
<PAGE> 15
(the "Association) under the Commercial Arbitration Rules of the
Association then in effect, by an arbitrator knowledgeable in the computer
area. The arbitrator shall be selected by mutual agreement of MPOWER and
Customer. If MPOWER and Customer can not agree upon an arbitrator, an
arbitrator shall be appointed by the Court with jurisdiction over the
dispute. The arbitration shall be governed by the United States
Arbitration Act, 9 U.S.C. Sec. 1-16, and judgment upon the award by the
arbitrator may be entered by any court having jurisdiction thereof. The
place of arbitration shall be in Bergen County, New Jersey. Each party
shall pay its own costs and expenses.
XII. SUCCESSORS AND ASSIGNS
This Agreement shall be binding upon and shall inure to the benefit of the
parties and their respective successors and (to the extent specified in
any assignments) assigns. Customer shall not assign or otherwise transfer
this Agreement without the prior written consent of MPOWER. Customer,
however, may assign this Agreement to any subsidiary or affiliate of
Customer in which Customer owns an equity position of 51% or more, or to
any successor company to Customer in the event that Customer conveys
substantially all of its assets (or stock) to, or merges with, another
Company, by giving notice to MPOWER within 30 days of any such conveyance.
XIII. OMNIBUS RECONCILIATION ACT COMPLIANCE
As applicable under the Omnibus Reconciliation Act of 1980, until the
expiration of four (4) years after the furnishing of services under this
Agreement, MPOWER shall, upon receipt of written request, and if then
required to make such information available under the then-existing law,
make available to the Secretary of the United States Department of Health
and Human Services ("Secretary"), the Comptroller General, or any of their
duly authorized representatives, this Agreement, books, documents, and/or
records of MPOWER that are necessary to certify the nature and extent of
products and services delivered under this Agreement and costs associated
therewith. Furthermore, if MPOWER carries out any of the duties of this
Agreement through a subcontract with a value or cost of Ten Thousand
Dollars ($10,000.00) or more over a twelve (12)-month period, such
subcontract will contain a clause to the effect that, until the expiration
of four (4) years after the furnishing of such services under such
subcontract, the subcontractor shall, upon receipt of written request and
if then required to make such information available under the
then-existing law, make available to the Secretary, Comptroller General,
or any of their duly authorized representatives, the subcontract, books,
documents, and/or records of such subcontractor that are necessary to
verify the nature and extent of such costs.
Page 15 of 43
<PAGE> 16
XIV. RELATIONSHIP MANAGEMENT
A. Meetings. MPOWER and Customer agree to discuss business and
relationship strategies affecting both parties, as is required to
effectively manage the relationship between the parties. MPOWER and
Customer further agree to have regularly scheduled communications to
summarize current activities, performance results, error corrections
and work efforts, as well as the future planned activities.
B. Release Discussions. MPOWER agrees to discuss with Customer its
planned future Releases and share with Customer at least sixty (60)
to ninety (90) days in advance of a projected future Release its
then current Release priorities, release notes and expectations
regarding new or expanded functionality to be included in such
future Release.
C. Liaison. During the term of this Agreement, each party will provide
a liaison who (i) will have overall management responsibility for
the performance by the party hereunder, (ii) will have primary
operational responsibility, and (iii) will serve as the party's
primary liaison with the other party with respect to performance
under this Agreement.
XV. MISCELLANEOUS
A. Invalidity. If any of the provisions, or portions thereof, of this
Agreement are deemed to be invalid under any applicable statute or
rule of law, they are to that extent to be deemed omitted, and the
parties agree to negotiate in good faith to bring such provisions,
or portions thereof, into compliance.
B. Headings. The headings of Sections in this Agreement and in the
Attachments are included for convenience only and shall not be
considered by either parry in construing the meaning of this
Agreement or any Attachment.
C. Notices. Any notice given under this Agreement shall be in writing,
sent by Certified Mail, Return Receipt Requested or overnight
courier such as FedEx or equivalent, and shall be deemed to be
delivered upon receipt by the receiving party.
All notices remitted to MPOWER shall be remitted to the attention
of: Chief Executive Officer. All notices remitted to Customer shall
be remitted to the attention of Vice President, General Manager of
Quest Informatics, with a cc: Deputy General Counsel.
Page 16 of 43
<PAGE> 17
D. Waiver. Neither party shall be deemed to have waived any term or
provision of this Agreement, nor consented to any breach of this
Agreement, unless such party shall waive such term or provision, or
shall consent to such breach, in writing. Any such written waiver
and/or consent must be signed by the party which is waiving such
term or provision or is consenting to a breach. Either party's
consenting to a waiver, or a breach, by the other, whether express
or implied, shall not constitute consent or waiver of any other
different or subsequent breach by the other.
E. Governing Law. This Agreement and all Attachments hereto shall be
governed by and construed according to the laws of the State of New
Jersey.
The parties have each read this Agreement and agree to be bound by all of its
provisions, and further agree that it constitutes the complete and exclusive
statement of the agreement between them with regard to the subject matter
referenced herein, and supersedes any and all prior agreements and
understandings between them pertaining to the subject matter of this Agreement
and takes precedence over the provisions of any purchase orders submitted to
MPOWER by Customer. This Agreement may be amended only in writing signed by
authorized representatives of both of the parties.
QUEST DIAGNOSTICS INCORPORATED MPOWER SOLUTIONS INC.
("CUSTOMER") ("MPOWER")
GERALD C. MARRONE MARK S. RENGELL
- -------------------------------- -----------------------------------
SIGNATURE SIGNATURE
GERALD C. MARRONE MARK S. RENGELL
- -------------------------------- -----------------------------------
NAME PRINTED NAME PRINTED
SENIOR VICE PRESIDENT SENIOR VICE PRESIDENT
- -------------------------------- -----------------------------------
TITLE TITLE
Page 17 of 43
<PAGE> 18
ADDENDUM TO MASTER AGREEMENT
NONDISCLOSURE AGREEMENT FOR PROPRIETARY INFORMATION
In consideration of _____________________________________ ("Customer")
disclosing certain confidential and proprietary information relating to the
MPOWER(R) Managed Care Information System (and / or other MPOWER Product
involved) and information, data, designs, documentation and methodologies
related thereto (collectively, "Proprietary Information") to __________________,
located at _____________________________________,("Third Party") for the sole
purpose of allowing Third Party to facilitate Customer's use of the Proprietary
Information, Third Party agrees to the following:
Third Party acknowledges that the Proprietary Information is the exclusive
property of MPOWER SOLUTIONS INC., a Delaware corporation, located at 6400 S.
Fiddler's Green Circle, Suite 540, Englewood, CO 80111("MPOWER") and that such
Proprietary Information is confidential, has tangible value and includes trade
secret information of MPOWER. MPOWER shall retain all rights to the Proprietary
Information, including all copyright rights therein, except to the extent to
which Third Party is allowed to use the Proprietary Information pursuant to this
Nondisclosure Agreement. All improvements, enhancements and modifications to the
Proprietary Information shall be owned exclusively by MPOWER.
Third Party agrees not to sell, lease, assign or otherwise transfer, disclose or
make available, in whole or in part, any portion of the Proprietary Information
and Third Party shall prevent disclosure of any part of the Proprietary
Information to any other third party for any reason (except for disclosure or
access to Third Party's and Customer's employees which is necessary for Third
Party to be able to use the Proprietary Information in accordance with this
Nondisclosure Agreement). Third Party agrees to notify its employees to whom
Third Party gives access to the Proprietary Information of the restrictions
contained in this Nondisclosure Agreement and to ensure their compliance with
such restrictions.
Third Party agrees to return all Proprietary Information promptly to Customer or
MPOWER upon the earlier of (i) MPOWER's or Customer's request or (ii) completion
of Third Party's assignment for Customer. Third Party agrees that it shall not
use, and it shall not permit the use of, the Proprietary Information for any
purpose other than as expressly authorized in this Nondisclosure Agreement.
Page 18 of 43
<PAGE> 19
This Nondisclosure Agreement shall be governed by the laws of the State of New
Jersey. If any provision of this Nondisclosure Agreement is invalid under any
applicable statute, it is to be deemed omitted. If any action is instituted to
enforce or interpret the terms of this Nondisclosure Agreement, the prevailing
party shall be entitled to reasonable attorney's fees and expenses in addition
to any other entitled relief. This Nondisclosure Agreement shall be effective as
of the date the Proprietary Information is first disclosed to Third Party.
- --------------------------------------
("Third Party")
- --------------------------------------
Signature of Authorized Signatory
- --------------------------------------
Name Printed
- --------------------------------------
Title
- --------------------------------------
Date
In consideration of MPOWER's approval of the disclosure of Proprietary
Information to Third Party, Customer agrees to use its best efforts to ensure
the adherence by Third Party of all the terms of this Nondisclosure Agreement,
and shall support MPOWER in pursuing its remedies in the event of any breach by
Third Party of this Nondisclosure Agreement.
- --------------------------------------
Customer
- --------------------------------------
Signature of Authorized Signatory
- --------------------------------------
Name Printed
- --------------------------------------
Title
- --------------------------------------
Date
Page 19 of 43
<PAGE> 20
ATTACHMENT 1
I. DEFINITIONS
Except as set forth in this Section I of this Attachment, all capitalized
terms used in this Attachment shall have the same meaning as set forth in
the Master Agreement.
A. Master Agreement
"Master Agreement" shall mean the agreement to which this Attachment 1 is
attached.
B. Agreement
"Agreement" shall mean the Master Agreement and all Addenda, Exhibits and
Attachments thereto.
C. MPOWER(R)
"MPOWER(R)" shall mean the software product marketed by MPOWER which is
being licensed by Customer under this Attachment and the Master Agreement.
The high level modules that are included in' MPOWER(R) as of the date of
this Attachment are listed in Exhibit F hereto.
II. GRANT OF LICENSE
In consideration of Customer's paying the Initial License Fee (as
hereinafter defined) MPOWER grants Customer a non-exclusive,
nontransferable (except as allowed in Section XI of the Master Agreement)
and perpetual license to operate an Object Code instance version of
MPOWER(TM) on a Windows NT platform for a Live Production Environment for
claims processing of encounter files up to an aggregate of [*] per
month ("Initial License"), with additional volume of up to [*]% due to
reprocessing of denials, associated with the first client of Customer's
laboratory network business initiative. The License granted hereunder is
an enterprise wide License, subject to the claims processing volume
adjustments referenced herein, which will allow Customer to operate MPOWER
on as many platforms, and at as many of Customer's sites as Customer deems
necessary to service its needs.
Customer may extend the license for such single, Object Code instance of
MPOWER(R) ("License Extension(s)") for additional encounter file
transaction processing per month by paying MPOWER the fees for such
additional transactions per month defined in Section VIII below, and
abiding by the terms
* Confidential Treatment Requested
Page 20 of 43
<PAGE> 21
therein stipulated, and by providing the number of such additional
encounter file transactions per month in writing to MPOWER within sixty
(60) days of Customer's determination that the monthly encounter file
transaction per month exceeds the total of [*] referenced above.
Customer may copy MPOWER(R) and/or the Documentation as allowed under
Section III of the Master Agreement. Furthermore, Customer may copy the
Documentation in order to supply a copy of the Documentation to each End
User of MPOWER at each Site. Customer agrees that any and all copies of
MPOWER and/or the Documentation made by Customer shall include any/all
copyright and proprietary notices in the same form as contained on the
original copy. Except as allowed in Section III of the Master Agreement
and this paragraph, Customer may not otherwise make copies of MPOWER(R) or
the Documentation or any part thereof without the prior written consent of
MPOWER. Customer agrees there shall be no other use of MPOWER(R) or the
Documentation without the prior written consent of MPOWER except as
allowed in Section II of the Master Agreement.
In order to ensure that MPOWER(R) is being used in conformity with the
license being granted under this Attachment, MPOWER shall have the right
to conduct audits (either on-site or remotely, at MPOWER's option) of
Customer's use of MPOWER(R) at periodic intervals, no more frequently than
semi-annually. MPOWER agrees that any such on-site audit shall be
scheduled in advance and at a time so as not to unduly interfere with
Customer's business operations. Customer agrees that any audit revealing
unauthorized use of MPOWER(R) will result in Customer's being liable for
the payment of additional fees to MPOWER equal to MPOWER's fees as stated
in Section VIII A of this Attachment.
III. DELIVERY AND MEDIA
Promptly after the full execution of this Attachment, MPOWER will deliver
to Customer:
A. one (1) copy of the then-current Release of MPOWER(R) in Object Code
form; and
B. one (1) set of the then-current version of the Documentation in
electronic form in conformance with the hardware and software
requirements identified in Exhibit H.
MPOWER and Customer agree that time is of the essence in performance of
this Agreement, and the following Milestones constitute material
performance dates under this Agreement:
* Confidential Treatment Requested
Page 21 of 43
<PAGE> 22
1. [*] after signing of the Agreement, the ,Implementation Workplan
Schedule (Exhibit K) will be completed.
2. No later than [*] the MPOWER Products provided hereunder will be ready
to test for operational performance with sample transactions as specified
in lines 347 through 355 of Exhibit K.
3. The MPOWER Products provided hereunder will be capable of full on-line
business operation no later than [*].
IV. WARRANTY
A. General Terms
M-POWER represents and warrants to Customer that MPOWER(R) will function
in accordance with the Documentation in all ways which materially affect
the performance of MPOWER(R) Products. Tiffs warranty is contingent upon
Customer's using: 1) certain prerequisite hardware and software, a list of
which has been provided to Customer by MPOWER (Exhibit H) for the Windows
NT Release; and 2) the most recent Release of MPOWER(R), provided such
Release has been available for Customer's use for thirty (30) days, or
more. If Customer wishes to use certain third party software that is
similar to but not the MPOWER defined "prerequisite software" to perform
the functions required by such "prerequisite software", MPOWER and
Customer agree to negotiate in good faith under an appropriate Work Order
for MPOWER to certify whether such third party software will qualify as
"prerequisite software" which is a contingency to the warranties herein.
MPOWER further represents and warrants that MPOWER owns the MPOWER
Products, that it has the right to grant the licenses granted hereunder
without violating the rights of any third parties, and that the licenses
are free and clear of all liens and encumbrances, other than security
interests related to financial instruments between MPOWER and lending
institutions.
B. Year 2000 Compliance
MPOWER represents and warrants that the MPOWER Product(s) subject to the
Agreement shall be Year 2000 Compliant. Year 2000 Compliant means that
performance and functionality is not affected by dates prior to, during,
and after January 1, 2000. Specifically: no value for current dates will
cause any interruption in operation; date-based functionality must behave
consistently for dates prior to, during and after January 1, 2000; in all
interfaces and data storage, the century in any date should be specified
explicitly (CCYY); the Year 2000
* Confidential Treatment Requested
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<PAGE> 23
must be recognized as a leap year.
In the event the MPOWER Product(s) require(s) modification to prevent
MPOWER from being in breach of the foregoing warranty, MPOWER represents
and warrants to Quest Diagnostics that it will immediately assign Senior
engineering staff to work continuously until such software program is
returned to the same level of functionality as warranted herein at no
charge to Quest Diagnostics, time being of the essence.
In the event MPOWER breaches the foregoing warranty, MPOWER shall defend,
indemnify and hold harmless (including reasonable attorney's fees) Quest
Diagnostics, its employees, officers, and directors against all costs,
expenses, and liability arising from or in connection with such breach,
however such indemnification is limited to the sum equal to two (2) times
the sum of all payments made to MPOWER under this agreement.
MPOWER shall also provide Quest Diagnostics, free of charge, with any new
versions, upgrades, etc. of all software which prevents or corrects a
breach of warranty.
The obligations of this section shall survive the termination of the
Agreement.
MPOWER hereby grants to Quest Diagnostics a limited use source code
license for MPOWER Products to be used by Quest Diagnostics or a third
party vendor for the sole purpose of testing for Year 2000 compliance.
The foregoing is Customer's sole and exclusive remedy for breach of
warranty. The warranty set forth above is made to and for Customer's
benefit only. The warranty will apply only if no modification, alteration
or addition has been made to MPOWER(R) by persons other than MPOWER or
MPOWER's authorized representative.
THE WARRANTY SET FORTH IN THIS SECTION IV CONSTITUTES THE ONLY WARRANTY
PROVIDED BY MPOWER REGARDING MPOWER AND SUCH WARRANTY IS IN LIEU OF ALL
OTHER WARRANTIES, WRITTEN OR ORAL, STATUTORY, EXPRESS, OR IMPLIED. MPOWER
HEREBY SPECIFICALLY DISCLAIMS THE IMPLIED WARRANTY OF MERCHANTABILITY AND
THE WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE.
V. SOFTWARE MAINTENANCE SERVICES
In consideration of payment of the annual Maintenance Fee(s) set forth in
Section
Page 23 of 43
<PAGE> 24
VIII B of this Attachment, Customers agrees to purchase for a minimum of
(3) three years, but only if Customer is using the MPOWER Product, and
MPOWER agrees to provide customer on an annually renewable basis with
software maintenance services for MPOWER(R) as follows (provided Customer
allows MPOWER, at MPOWER's request, dial-up access to MPOWER(R)):
A. any and all Releases regarding MPOWER(R) issued by MPOWER;
B. any and all updates to the Documentation issued by MPOWER; and
C. remote diagnostic support (including dial-up capabilities) regarding
MPOWER(R)to include error analysis and, where possible, correction
services, twenty-four (24) hours per day, seven (7) days per week.
Any on-site assistance which Customer may request and which is
provided by MPOWER, which, in MPOWER's and Customer's reasonable
opinions, is not necessary to determine the nature and resolution of
any problems Customer may have with MPOWER(R)shall be provided by
MPOWER at its then-current rates. If Customer notifies MPOWER that
it suspects a material error in the program logic of MPOWER(R)or in
the Documentation, MPOWER shall make all reasonable efforts to
confirm the existence of the error and correct it. If the parties
mutually determine that no such error exists, Customer agrees to pay
MPOWER for its services at MPOWER's hourly rates then in effect and
to reimburse MPOWER for any and all reasonable travel and living
expenses incurred by MPOWER in rendering such services. MPOWER will
use its Severity Designations in effect from time to time to provide
remote diagnostic support. The current Severity Designations and
attendant response times are given in Exhibit G to this Attachment.
D. Extended Support Services:
MPOWER will provide Extended Support Services for Customer's
technical environment through a dedicated dial-up line. As defined
below, Extended Support Services will include:
- Database maintenance (table and file space);
- IBM Transaction Server maintenance;
- System utilities; and
- Application maintenance and patches.
To help facilitate MPOWER's provision of Extended Support Services,
Customer will provide onsite system administration resources with
access to the system console to handle such activities as
coordination of hardware troubleshooting, network/security
administration and backups/loading of tapes.
Page 24 of 43
<PAGE> 25
Notwithstanding the foregoing, should Customer be utilizing any Release of
MPOWER(R) other than the then-most-recent Release, or the Release prior to
the then-most-current Release, provided such Release has been available
for Customer's use for a period of six (6) months or longer, MPOWER
reserves the right, at its sole option, to terminate its obligations to
provide maintenance services under this Section V at any time upon giving
thirty (30) days' prior written notice to Customer. If such a condition
exists, MPOWER and Customer agree to negotiate in good faith to define
reasonable terms, conditions and fees for MPOWER to provide Customer with
maintenance services for such then non-current Release.
MPOWER's providing Customer with maintenance services as described in this
Section V shall automatically continue, on an annual basis, unless either
party shall give written notice to the other that it desires not to renew
such maintenance services. The parties agree that such written notice
shall be remitted for receipt by the other no less than ninety (90) days
prior to the end of the then-current annual maintenance period.
VI. IMPLEMENTATION AND CONVERSION SERVICES
MPOWER agrees to provide implementation services ("Implementation
Services") to assist Customer in implementing MPOWER(R) at the Site(s).
These implementation services shall comprise: 1) analysis of the
Site's(s') business requirements; 2) assistance in the user set up
definitions and build; 3) testing of MPOWER(R); 4) pre/post activation
support for end users; 5) up to forty (40) hours of initial training
services and 6) project management.
MPOWER shall charge Customer as set out in Section VIII C below for all
such Implementation Services requested by Customer. Additionally, to help
accommodate Customer's stated functional requirements that may not be
currently operational or in sufficient compliance with Customer needs
within the existing system, MPOWER shall provide up to forty (40) hours of
programming modifications, as defined in Work Order(s) to be submitted,
within the scope of Implementation Services, at no additional charge.
Beyond the scope of the aforementioned forty (40) hours, programming
modifications requested by Customer will be billed at rates set forth in
Section VIII E below.
Upon request, MPOWER agrees to provide conversion services ("Conversion
Services") to Customer to convert its current data files from its existing
software system to the MPOWER(R) database. MPOWER shall charge Customer as
set out in Section VIII E below for all such Conversion Services requested
by Customer.
Page 25 of 43
<PAGE> 26
MPOWER reserves the right to subcontract any Implementation Services
responsibilities it may accept under this Agreement. Customer shall have
the right to approve MPOWER's subcontractors, which approval shall not be
unreasonably withheld. If Customer objects to certain subcontractors for a
stated good cause, MPOWER and Customer agree to seek a mutually agreeable
resolution to Customer's objection. MPOWER's agreements with
Subcontractors shall require subcontractors to agree to confidentiality
terms set forth in this Agreement.
VII. TRAINING SERVICES
MPOWER will provide up to forty (40) hours of initial End User training
within the scope of payment of initial Implementation Fees, as indicated
in Section VIII.C of this Attachment. Initial training will focus on
Customer's education of functionality contained within key subsystems of
MPOWER(R) and will be inclusive of the following:
- Mapping of business rules to benefit plan templates;
- Establishment of workflow procedures and user-defined variables;
- Use of standard and ad-hoc reporting systems; and
- Methods for maintenance of key information being stored in the
system.
MPOWER will provide Customer under an appropriate Work Order, at MPOWER's
then-current fees, with additional training sessions regarding MPOWER(R)
to a reasonable number of Customer's personnel. All such training,
including initial End User training, shall be conducted at location(s)
elected by Customer at time(s) which are mutually acceptable to both
parties. Current fees for additional training sessions are provided in
Section VIII F.
VIII. FEES
A. MPOWER(R) License Fees.
1. Fee for the Initial License.
Customer agrees to pay MPOWER a license fee ("Initial License Fee")
equal to [*] Dollars [$[*]] for the master license granted in
Section II of this Attachment for claims processing of encounter
files up to an aggregate of [*] per month ("Initial License"),
with additional volume of up to [*]% due to reprocessing of denials,
associated with Customer's laboratory network business initiative.
Customer agrees the Initial License Fee is due to MPOWER and payable
according to the schedule shown in Exhibit C hereto.
* Confidential Treatment Requested
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<PAGE> 27
2. Fees for License Extensions.
Customer may, during the term of this Agreement, provided Customer
is current with all Maintenance Fees, exercise an incremental
license or incremental licenses for claims processing of additional
[*] encounter files per month ["License Extension(s)"] by paying to
MPOWER an additional license fee ("License Extension Fee") as shown
on Exhibit C hereto for each such License Extension.
The Initial License Fee and the License Extension Fee(s) may be
referred to as the License Fee(s).
The License Extension Fees will be billed and paid in accordance
with the terms and conditions outlined in this Agreement.
B. Annual Maintenance Fees.
Customer agrees to pay to MPOWER for the software maintenance
services described above a software maintenance fee ("Maintenance
Fee") equal to [*] percent ([*]%) of the aggregate of the Initial
License Fee and all License Fee Extensions paid or payable by
Customer to MPOWER.
Extended Support Services described in Section V.D above will be
provided by MPOWER to Customer at no additional charge to the
aforementioned Maintenance Fee during the first year of maintenance.
Subsequent to the first year of maintenance, the fee for Extended
Support Services will be [*] ($[*]) Dollars per month. Any such
annual increases in Extended Support Service fees shall not exceed
the CPI. Customer may elect not to renew Extended Support Services
pursuant to the notification procedure outlined in Section V above.
The annual Maintenance Fee is due and payable as follows: the first
annual Maintenance Fee shall be due and payable upon the occurrence
of Final Acceptance as indicated in Exhibit A hereto.
Each subsequent annual Maintenance Fee shall be billed and due
annually, based on the anniversary date of the first annual
Maintenance Fee due date. MPOWER will invoice Customer on an annual
basis for the maintenance fee. Customer agrees to pay such invoices
within thirty (30) days after Customer's receipt of the invoice.
* Confidential Treatment Requested
Page 27 of 43
<PAGE> 28
Maintenance Fees Payment Schedule is outlined in Exhibit D to this
Attachment.
C. Implementation Fees.
As outlined in Section VI above, MPOWER will provide set-up,
implementation, interface development, programming modifications,
training and installation services based upon the functional
requirements forwarded by Customer on [*], as seen in Exhibit I, and
furthermore defined on [*], as seen in Exhibit J, in anticipation of
meeting a target operational live date of [*]. A sample New Account
Implementation Workplan Schedule is provided in Exhibit K. The
activities and sequence of events depicted in this template may be
modified as necessary according to the requirements of the project.
The Implementation Fee of [*] Dollars ($[*]) will be payable as
outlined in the schedule provided in Exhibit E.
D. Travel and out of pocket expenses.
The fees set out above do not include travel and other out-of-pocket
expenses which may be incurred by MPOWER in the course of delivering
the products and services described in this Attachment. MPOWER shall
use all its reasonable efforts to keep these travel and other
out-of-pocket expenses to a minimum. MPOWER will invoice Customer
for MPOWER's actual travel and out of pocket expenses on a monthly
basis, as they are incurred, and Customer agrees to pay such
invoices within thirty (30) days after receipt of the invoice, which
shall provide reasonably sufficient detail, as required by Customer.
E. Other Services
Customer may request and MPOWER may perform other services ("Other
Services") for Customer, which services shall be described in a Work
Order, which shall be considered an addendum to this Agreement and
covered under the terms of this Agreement, unless stated otherwise
in the applicable Work Order. The Service Fee rate in effect through
calendar year 1999 is [*] ($[*]) dollars per hour. Any such
increases in Service Fee rates beyond 1999 shall not exceed the CPI.
F. Additional Training Sessions
Customer may request and MPOWER may perform additional training
sessions beyond the scope of the aforementioned initial End User
training,
* Confidential Treatment Requested
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<PAGE> 29
as described in Section VII of this Attachment. Additional training
services shall be described in a Work Order, which shall be
considered an addendum to this Agreement and covered under the terms
of this Agreement, unless stated otherwise in the applicable Work
Order. The rate in effect for additional training services through
calendar year 1999 is [*] ($[*]) dollars per day. Customer may
include as many of its personnel in such sessions as may reasonably
be accommodated within a classroom environment. Any such increases
in additional training session rates beyond 1999 shall not exceed
the CPI.
IX. THIRD PARTY PRODUCTS
Customer has the option to utilize Third Party Products with MPOWER(R) as
outlined in Exhibit B.
X. ACCEPTANCE
As soon as practicable after completion of preliminary testing, Customer
shall begin using MPOWER(R) in a simulated processing environment using
Customer's data. MPOWER(R) shall be deemed fully accepted ("Final
Acceptance") upon the conclusion of any consecutive five (5) day period in
which the MPOWER(R) functions in simulated processing mode without any
Severity 1 program errors, as described in Exhibit G hereto. Customer
shall execute a Certificate of Acceptance (Exhibit A), which shall be
attached hereto and made a part of this Agreement. The date shown on the
Certificate of Acceptance will be the beginning date of any warranty or
maintenance periods provided for in this Agreement or any Exhibit hereto.
Notwithstanding the above, MPOWER(R) shall be deemed fully accepted upon
the earlier to occur of the date of the Certificate of Acceptance or the
placement of MPOWER(R) in a Live Production Environment.
XI. ADDITIONAL TERMS AND CONDITIONS
In addition to the terms and conditions of this Attachment, the parties
agree that all the terms and conditions of the Master Agreement shall also
apply to Customer's use of MPOWER(R). Should any terms or conditions of
this Attachment and the Master Agreement conflict, the terms and
conditions of this Attachment shall take precedence. Should any terms or
conditions of an applicable Work Order and this Attachment or the Master
Agreement conflict, the terms and conditions of the applicable Work Order
shall take precedence.
* Confidential Treatment Requested
Page 29 of 43
<PAGE> 30
The parties have each read this Attachment and agree to be bound by all of
its provisions. The parties further agree that this Attachment (including
its Exhibits) and the Master Agreement constitute the complete and
exclusive statement of the agreement between the parties regarding
MPOWER(R) and supersedes any and all prior agreements and understandings
between them pertaining to MPOWER(R) and takes precedence over the
provisions of any purchase orders submitted to MPOWER by Customer. This
Attachment may be amended only in writing signed by both parties.
QUEST DIAGNOSTICS INCORPORATED MPOWER SOLUTIONS INC.
("CUSTOMER") ("MPOWER")
BY: /s/ GERALD C. MARRONE BY: /s/ MARK S. RANGELL
----------------------------- -------------------------------
SIGNATURE OF AUTHORIZED SIGNATURE OF AUTHORIZED
SIGNATORY SIGNATORY
Gerald C. Marrone Mark S. Rangell
- -------------------------------- -----------------------------------
NAME PRINTED NAME PRINTED
SENIOR VICE PRESIDENT SENIOR VICE PRESIDENT
- -------------------------------- -----------------------------------
TITLE TITLE
8/24/98 8/12/98
- -------------------------------- -----------------------------------
DATE DATE
Page 30 of 43
<PAGE> 31
EXHIBIT A
FINAL ACCEPTANCE CERTIFICATE
Customer hereby acknowledges and MPOWER Solutions Inc. hereby accepts that
MPOWER(R) has been accepted by Customer per the date noted below. This will be
the basis for the beginning of any warranty or maintenance periods provided for
in this Agreement or any Exhibit hereto.
Date of Final Acceptance
------------
Accepted by Customer: Accepted by MPOWER:
QUEST DIAGNOSTICS INCORPORATED MPOWER SOLUTIONS INC.
By: By:
----------------------------- ---------------------------------
Name (Printed): Name (Printed):
----------------- ----------------------
Title: Title:
-------------------------- ------------------------------
Date: Date:
-------------------------- ------------------------------
Page 31 of 43
<PAGE> 32
EXHIBIT B
NOT CURRENTLY APPLICABLE.
Page 32 of 43
<PAGE> 33
EXHIBIT C
MPOWER(R) LICENSE FEE PAYMENT SCHEDULE FOR THE LICENSE FEES
Refer to Section VII A for MPOWER(R) License terms and conditions.
License Fees will become due and payable as set forth below.
License Fees will become due and payable as set forth below. Notwithstanding
anything to the contrary in the Agreement, the obligation of Customer to License
the Software, and pay full License Fees, may be cancelled by Customer's
providing notice to MPOWER no later than [*] of Customer's intent to cancel this
Agreement. In the event that such notice is provided, Customer shall have no
further liability to MPOWER under this Agreement, unless Customer exercises the
option to renew its rights under this Agreement by providing notice of its
intent to do so no later than [*]. In the event that Customer provides notice of
cancellation, Customer will forfeit any and all fees paid to MPOWER prior to
notice of cancellation, as well as pay any outstanding fees identified in
Section VIII of the Attachment I of the Agreement for services already performed
prior to MPOWER's receipt of notice of cancellation, in addition to $[*] which
is half of the First Year Annual Maintenance Fee (per Exh D). The $[*] will be
applied to the First Year Annual Maintenance Fee in the event that Customer
renews its rights under the Agreement by December 31, 1998.
<TABLE>
<CAPTION>
EXPECTED PERCENTAGE AMOUNT
PAYMENT TRIGGERING EVENT TIMEFRAME DUE DUE
- ------------------------------ -------------- ---------- -------------
<S> <C> <C> <C>
Contract Execution [*] [*] [*]
Customer Installation [*] [*] [*]
Completion of Acceptance Test [*] [*] [*]
Optional License Extension Indeterminate [*]% Per
Future (if and (Optional) Schedule
when business (Optional)
need dictates)
License Extension Fee(s):
- - Increments of clams processing
for up to [*] encounter
files/month $ [*]
</TABLE>
In the event that Customer provides notice of its intent to cancel this
Agreement,
* Confidential Treatment Requested
Page 33 of 43
<PAGE> 34
Customer shall have the option to renew its rights hereunder by providing notice
of same to MPOWER by December 31, 1998. If Customer renews its rights hereunder
the fees previously paid and forfeited shall be applied to the Agreement as if
there had been no temporary cancellation of this Agreement.
Page 34 of 43
<PAGE> 35
EXHIBIT D
MPOWER ANNUAL MAINTENANCE FEE PAYMENT SCHEDULE
MPOWER billing and Customer paying of Annual Maintenance Fees is outlined in
Section VIII B. Refer to Section VIII B for on-going and MPOWER Annual
Maintenance Fee terms and conditions.
<TABLE>
<CAPTION>
PAYMENT ESTIMATED ESTIMATED
TRIGGERING TIMEFRAME PERCENTAGE DUE AMOUNT DUE
- ---------- --------- -------------- ----------
<S> <C> <C> <C>
Final Acceptance [*] [*]% of First Year Annual $[*]
Maintenance Fee
First and Annually [*]% of Annual Maintenance [*]% of Total
Subsequent Thereafter Fee License Fee
Anniversaries of
Acceptance
Extended Support Annually n/a $[*] per month
Services Thereafter (Optional)
</TABLE>
* Confidential Treatment Requested
Page 35 of 43
<PAGE> 36
EXHIBIT E
MPOWER INITIAL IMPLEMENTATION FEE PAYMENT SCHEDULE
MPOWER billing and Customer payment of Implementation Fees are outlined in
Section VIII C. Refer to Section VIII C. for Terms and Conditions.
<TABLE>
<CAPTION>
PAYMENT ESTIMATED PERCENTAGE ESTIMATED
TRIGGERING EVENT TIMEFRAME DUE AMOUNT DUE
- ------------------- -------------- ---------- ----------
<S> <C> <C> <C>
Contract Execution [*] [*]% $ [*]
Customer
Installation [*] [*]% $ [*]
Completion of
Acceptance Test [*] [*]% $ [*]
</TABLE>
* Confidential Treatment Requested
Page 36 of 43
<PAGE> 37
EXHIBIT F
MODULES INCLUDED IN MPOWER(R)
All modules are included by MPOWER and comprise MPOWER(R) as of the date of this
Attachment:
- - Set-ups
- - Group Enrollment & Contracting
- - Premium Billing & Accounts Receivable
- - Member / Subscriber Enrollment
- - Provider Contracting
- - Capitation
- - Claims Adjudication for UB92 / HCFA 1500 Claims
- - Certifications / Authorizations
- - Customer Service
- - Letter Generation
- - Medicare Risk
- - Medicaid Processing
- - Ad Hoc Reporting
Page 37 of 43
<PAGE> 38
EXHIBIT G
SEVERITY DEFINITIONS AND RESOLUTION PROCESS
- - SEVERITY 1.
The problem causes complete loss of service in the production and
staging environment and work cannot reasonably continue. The problem or
defect has one or more of the following characteristics:
> Data corruption. Physical or logical data is unavailable or
incorrect.
Examples: Block format corruption, invalid indices, corruption of
meta-data, incorrect results.
> Critical functionality is not available.
> System hangs. The process hangs indefinitely or there is severe
performance degradation, causing unreasonable waits for resources or
response, as if the system is hanging,
> The entire MPOWER application crashes repeatedly.
> Database process or background processes fail and continue to fail
after restart attempts.
> Potential for above occurrences is defined imminent.
RESOLUTION OF SEVERITY 1: Until the issue is resolved MPOWER Solutions
will work on Severity 1 around the clock (7x24). As a result of the
severity, the customer must provide MPOWER with a point of contact during
the 7x24 period. The customer's point of contact will assist the MPOWER
customer support and development staff in gathering data, testing fixes in
the customer's testing legion, and applying fixes to the customer
production environment.
- - SEVERITY 2:
Problem or product defect causes a severe impact on the customer's
business regardless of customer environment. No workaround is available,
however operations can continue in a restricted fashion. The problem or
defect has one or more of the following characteristics:
> Business Impact Examples: The customer can handle current volume,
but will not be able to handle quarter close; At close, customer
finds totals wrong, but close is not for a few weeks.
> Internal software error, causing the application to fail to run to
completion, or return wrong results, or software error severely
degrades performance.
> Some important functionality is unavailable, yet the system can
continue to operate in a restricted fashion.
> Potential for above occurrences is defined imminent.
RESOLUTION OF SEVERITY 2: MPOWER Solutions will work on Severity 2 bug
based on customer assigned priority. Severity 2 fixes will be added in the
next scheduled maintenance or patch release.
Page 38 of 43
<PAGE> 39
- - SEVERITY 3.
Problem or product defect causes minimal impact on the Customer's
business. The impact of the problem or defect is minor or an
inconvenience, such as a manual bypass to restore product functionality.
The problem or defect has one or more of the following characteristics:
> A software error for which there is an acceptable workaround.
> Software error minimally degrades performance.
> Software error or incorrect behavior has minor impact the operation
of the system.
RESOLUTION OF SEVERITY 3: Fixes for severity 3 bugs will be added to the
priority list for the next major scheduled release of the product. The
order of priority for resolving severity 3 issues will be assigned jointly
by the Customer and MPOWER.
- - SEVERITY 4.
The problem or product defect causes NO impact on the Customer's business.
The problem or defect is a minor error, incorrect behavior, or a
documentation error that in no way impedes the operation of a system.
RESOLUTION OF SEVERITY 4: Fixes for severity 4 bugs will be added to the
priority list for the next major scheduled release of the product. The
order of priority for resolving severity 4 issues will be assigned jointly
by the Customer and MPOWER.
Page 39 of 43
<PAGE> 40
EXHIBIT H
PRE-REQUISITE HARDWARE AND SOFTWARE
FOR THE RELEASE OF MPOWER(R) ON AN NT SERVER
Products required:
For the NT Server are
1.) IBM'S TRANSACTION SERVER FOR WINDOWS NT VERSION 4.02
2.) MICROFOCUS'S COBOL VERSION 4.0.32.
3.) IBM'S UDB UNIVERSAL DEVELOPERS EDITION FOR NT VERSION 5.0
For an NT Client (PC running either Win95 or NT - 32bit OS):
1.) MULTISOFT'S WCL TOOLKIT VERSION 5.0 32BIT - WCL is the communication
interface product that passes data from a 3270 emulator to VB.
2.) WALL DATA'S RUMBA FOR THE MAINFRAME WIN95/NT CLIENT VERSION 5.2 -
Rumba provides 3270-comparable connectivity to a host computer.
3.) IBM'S UDB CLIENT SETUP VERSION 5.0 - Allows for ODBC connectivity to
back end databases.
For the client to communicate with the server:
Communication protocol is via TCP/IP, so the clients need to networked, 32
bit OS, PCs. The server machine should have at least the hardware
recommended by Microsoft for running the NT 4.0 Server operating system
attached to the network.
Page 40 of 43
<PAGE> 41
EXHIBIT I
CUSTOMER FUNCTIONAL REQUIREMENTS
(AS COMMUNICATED ON MAY 5, 1998)
[Two page "Requirements" document to follow]
Page 41 of 43
<PAGE> 42
EXHIBIT J
CUSTOMER FUNCTIONAL REQUIREMENTS
(AS COMMUNICATED ON JULY 24, 1998)
[Three Page "Functional Analysis Grid" to follow]
Page 42 of 43
<PAGE> 43
EXHIBIT K
NEW ACCOUNT IMPLEMENTATION WORKPLAN SCHEDULE (SAMPLE)
[Twenty Page "Client Implementation Schedule.xls" to follow]
Page 43 of 43
<PAGE> 1
EXHIBIT 10.20
[MPOWER SOLUTIONS LOGO]
September 22, 1997
Ms. Lorine Sweeney
5462 S. Franklin Lane
Littleton, CO 80121
Dear Lorine:
We are pleased to extend to you this to join MPOWER in a senior
management role Following are the terms and conditions of our employment
agreement.
<TABLE>
<S> <C>
TITLE President & Chief Operating Officer
BASE SALARY: $175,000 per annum
BONUS: For your first year of employment, you will receive
a guaranteed bonus of $30,000, payable on the first
anniversary of your employment with MPOWER. On a
long-term basis you will help to develop and then
participate in the Company's bonus program.
EQUITY: You will participate in a stock option plain at an
ownership level of 3% of currently outstanding
shares of MPOWER after giving effect to currently
anticipated stock re-pricing. In addition, it is
agreed that MPOWER will make available to you
additional performance driven options currently
targeted at the 1% level. This incremental amount
will be tied to/triggered by the achievement of
certain criteria. These criteria will be mutually
agreed to once you are on board, and are able to
work with MPOWER's investors/management in
delineating same. In terms of a vesting schedule,
25% of your total granted will vest in October 1998
upon the one-year anniversary date of your
employment and thereafter will vest monthly over a
36-month period on a pro rata monthly basis for the
remaining 75% of the total options grant. Should
there be a change of ownership or control in MPOWER
and/or an initial public offering, you will vest
immediately in all outstanding shares of this
initial options grant.
</TABLE>
MPOWER SOLUTIONS INC.
<PAGE> 2
[MPOWER SOLUTIONS LOGO]
Ms. Lorine Sweeney
September 22, 1997
Page 2
<TABLE>
<S> <C>
COMMUNICATIONS: MPOWER will reimburse you for all reasonable travel
to and from Denver/Albuquerque until a final
decision is made as to where MPOWER's headquarters
will reside. The Company will reimburse you for
your (or your husband's should be come to New
Mexico rather than you returning to Colorado)
economy fare air travel each weekend;
transportation to and from Denver airport; a
rental/leased vehicle for your use in Albuquerque
and an apartment/hotel lodging during the week in
New Mexico. It is expected that unless you spend
the weekend in Albuquerque, you will travel to
MPOWER Monday morning and return to Denver Friday
afternoon.
BENEFITS: You will be eligible to participate in MPOWER's
benefit plan. These benefits include a medical
plan, five weeks of paid vacation on and holidays,
life insurance, long-term disability, sick leave,
and a 401k savings plan. Your health benefits will
become effective November 1, 1997. We will however,
cover your COBRA costs for a one month period. Most
of these benefits are fully paid and some are
contributions by you. Please note that the benefits
are subject to modification at any time and that
any benefit may be increased, decreased, changed or
possibly eliminated in the future.
START DATE: On or about 6, 1997. It is hoped that you will be
able to represent the Company at the upcoming MGMA
meeting in Washington DC that week.
MPOWER POLICY: I realize your original draft did not include the
following verbiage, but it is standard text for all
offer letters.
This offer is contingent upon your execution of
this letter and the attached Employee Agreement. I
know that you will appreciate the business
considerations behind such an agreement, which you
should read carefully before signing.
The position is offered to you as a regular, exempt
employee on an at-will basis. By signing this
letter, you authorize MPOWER, to the extent
permitted by law, to deduct from final wages or
other monies due you at termination, any financial
obligations that you owe MPOWER. This offer is
subject to a satisfactory check of references,
academic credentials, professorial designations
and, if appropriate, supplemental security checks.
In addition, this offer is contingent upon
compliance with the Immigration Reform and Control
Act of 1986, in essence, the act requires you to
establish your identity and employment eligibility,
You will receive a performance evaluation after the
completion of your 90 day orientation period and
semi-annually, thereafter.
</TABLE>
<PAGE> 3
[MPOWER SOLUTIONS LOGO]
Ms. Lorine Sweeney
September 22, 1997
Page 3
Lorine, we look forward to having you join the MPOWER senior management team. If
you have any questions, please do not hesitate to contact Larry Ross or me
directly. Please signify your understanding of these terms and acceptance of
this offer by signing below and returning one copy of this letter to my
attention at MPOWER.
Sincerely,
/s/ WILLIAM F. REILLY By: [Signature Illegible]
------------------------------------------------
William F. Reilly
Chairman & CEO
I have read and agree to the terms
as stated above and I accept the
above offer of employment.
/s/ LORINE SWEENEY 9/24/97
- ----------------------------------------
Lorine Sweeney Date
<PAGE> 1
EXHIBIT 10.21
[MPOWER SOLUTIONS LOGO]
December 12, 1997
Mr. Mark Rangell
5731 E. Glen Stone Drive
Highlands Ranch, Colorado 80125
Dear Mark:
We are pleased to extend to you this offer to join MPOWER in a senior
management role. Following are the terms and conditions of our employment
agreement.
<TABLE>
<S> <C>
TITLE: Senior Vice President - Sales and Marketing
BASE SALARY: $135,000 per annum.
COMMISSION: In addition to your base salary you will be eligible
for a sales commission based on achieving planned
sales department objectives for the MPOWER
organization. Although the 1998 revenue plan has not
been formalized by MPOWER, we estimate that the
revenue objectives for new business will be in the
range of $5M to $6M.
Your commission sales targets would be devised as
follows:
1st quarter target = 10% of 1998 goal
2nd quarter target = 20% of 1998 goal
3rd quarter target = 30% of 1998 goal
4th quarter target = 40% of 1998 goal
The quarterly commission structure would consist of
the following:
</TABLE>
<TABLE>
<CAPTION>
Target Level Commission
------------ ----------
<S> <C> <C>
< 100% - achievement of target 1% of new sales
100% - achievement of target 1.5% of new sales
110% - 150% - achievement of target 2.0% of new sales
160% + - achievement of target 2.5% of new sales
</TABLE>
<TABLE>
<S> <C>
*Note: Deficits in 100% goal achievement from the
previous quarter must be made up for in the future
quarter, for commission targets to apply.
EQUITY: I will recommend to the board of directors that you
participate in MPOWER's stock option plan at an
ownership level of approximately two and one half
(2.5%) percent of currently outstanding shares of
MPOWER which have been set aside for "new
management". The board of directors will make the
official grant. In terms of a vesting schedule, 25%
of your total options granted will vest in January.
1999 upon the one-year anniversary date of your
employment, and thereafter will vest monthly over a
36-month period on a pro ram monthly basis for the
remaining 75% of the total options grant. Under the
terms of the stock option plan, should mere be a
change of ownership or control in MPOWER that
terminates or substantially alters the stock option
plan, you will vest immediately in all outstanding
shares of this initial options grant.
COMMUTATION: MPOWER will reimburse you for all reasonable travel
to and from Denver/Albuquerque until a final decision
is made as to when an official office
</TABLE>
MPOWER Solutions Inc.
<PAGE> 2
[MPOWER SOLUTIONS LOGO]
Mr. Mark Rangell
December 12, 1997
Page 2
<TABLE>
<S> <C>
will be located in Denver. It is expected in the
interim that you will work out of a home office in
Denver and a remote office in Albuquerque. The
Company will reimburse you for your economy fare air
travel between Denver and Albuquerque; transportation
to and from the Denver airport a shared rental/leased
vehicle for your use in Albuquerque; and an
apartment/hotel lodging during your time in New
Mexico.
BENEFITS: You will be eligible to participate in MPOWER's
benefit plan. These benefits include a medical plan,
Five weeks of paid vacation on and holidays, life
insurance, long-term disability, sick leave, and a
401k savings plan. Your health benefits will become
effective January 1, 1998. Most of these benefits are
fully paid and some are contributions by you. Please
note that the benefits are subject to modification at
any time and that any benefit may be increased,
decreased, changed or possibly eliminated in the
future.
START DATE: On or about January 1, 1998.
MPOWER POLICY: This offer is contingent upon your execution of this
letter and the attached Employee Agreement. I knew
that you will appreciate the business considerations
behind such an agreement, which you should read
carefully before signing.
The position is offered to you as a regular, exempt
employee on an at-will basis. By signing this letter,
you authorize MPOWER, to the extent permitted by law,
to deduct from final wages or other monies due you at
termination, any financial obligations that you owe
MPOWER. This offer is subject to a satisfactory check
of references, academic credentials, professorial
designations and, if appropriate, supplemental
security checks. In addition, this offer is
contingent upon compliance with the Immigration
Reform and Control Act of 1986, in essence, the act
requires you to establish your identity and
employment eligibility, You will receive performance
evaluation after the completion of your 90 day
orientation period and semi-annually, thereafter,
</TABLE>
Mark, we look forward to having you join the MPOWER senior management team. If
you have any questions, please do not hesitate to contact me directly. Please
signify your understanding of these terms and acceptance of this offer by
signing below and returning one copy of this letter to my attention at MPOWER.
Sincerely,
/s/ LORINE R. SWEENEY
------------------------------------
Lorine R. Sweeney
President & COO
I have read and agree to the terms
as stated above and I accept the
above offer of employment.
/s/ MARK RANGELL 12/19/97
- -------------------------------------------------
Mark Rangell Date
<PAGE> 1
EXHIBIT 10.22
[MPOWER LOGO]
June l2, 1998
Tammy L. McLaren
2215 S. Eagle Court
Aurora, CO 80014
Dear Tammy:
I am pleased to extend to you this offer to join MPOWER Solutions Inc., The
following are the terms and conditions of your employment.
TITLE: DIRECTOR OF DEVELOPMENT & IMPLEMENTATION
REPORTING: Oswaldo (Oz) Leon.
BASE SALARY: An annual salary of $ 95,000 payable over
twenty-six (26) pay periods.
BENEFIT: You will be eligible to participate in MPOWER
Solutions' benefit plan under the terms provided
for. A summary of the main provisions is enclosed.
MPOWER Solutions' benefits include a medical plan, 4
weeks paid vacation and holidays, life insurance,
long-term disability, sick leave, and 401(k) savings
plan. Your health benefits will become effective at
the beginning of the month following the date of your
employment. Some of these benefits are fully paid and
some require contributions by you as defined on the
attached sheet. Please note that the benefits are
subject to modification at any time and that any
benefit may be increased, decreased, changed or
possibly eliminated in the future.
Currently, we are evaluating the loosening of
eligibility requirements for the 401(k) plan. No
decision has been made on any of the specifics of the
restructuring as yet, but the purpose is to keep
MPOWER Solutions fully competitive as an employer.
EQUITY: In order to tie your success more directly to the
Company's success, you will be eligible to
participate in a stock option plan for key MPOWER
Solutions employees. The proposed stock option plan
has been drafted by Wilson Sonsini Goodrich & Rosati,
a law firm in Palo Alto, California, who represent us
for matters relating to corporate structure and
financing. MPOWER Solutions has authorized an
expansion of authorized shares, a stock split and
other related shareholder resolutions to prepare us
for a venture financing round. In terms of a vesting
schedule, according to the stock option plan, 25% of
your total options granted will vest upon the
one-year anniversary date of your employment, and
thereafter will vest monthly over a 36-month period
on a pro rata monthly basis for the remaining 75% of
the total options grant according to the terms of the
final, approved plan. Should there be a change of
ownership or control in MPOWER Solutions, you will
vest immediately in all outstanding shares of this
initial options grant, according to the terms of the
final, approved plan. Under this plan, you are
eligible to receive a minimum of 50,000 stock
options.
START DATE: Your start date shall be July 13th unless otherwise
mutually agreed to by you and Oz Leon.
<PAGE> 2
Tammy L. McLaren
6/12/98
Page 2
As discussed, this offer is contingent upon your execution of this letter and
the attached Employee Agreement. I know that you will appreciate the business
considerations behind such an agreement, which you should read carefully before
signing.
The position is offered to you as a regular, exempt employee on an at-will
basis. By signing this letter, you authorize MPOWER, to the extent permitted by
law, to deduct from final wages or other monies due you at termination, any
financial obligations that you owe MPOWER. This offer is subject to a
satisfactory check of references, academic credentials, professional
designations and, if appropriate, supplemental security checks. In addition,
this offer is contingent upon compliance with the Immigration Reform and Control
Act of 1986. In essence, the act requires you to establish your identity and
employment eligibility. You will receive a performance evaluation after the
completion of your 90 day orientation period and semi-annually, thereafter.
Tammy, we look forward to having you join the MPOWER Solutions team.
Please signify your understanding of these terms and acceptance of this offer by
signing below and returning one copy of this letter to me at MPOWER Solutions
Inc. by June 30, when this offer will cease to be valid.
Sincerely,
/s/ OSWALDO H. LEON
-----------------------------------------
Oswaldo H. Leon.
Senior Vice President
I have read and agree to the terms as stated above, and I accept the offer of
employment.
/s/ TAMMY L. MCLAREN
- -----------------------------------
Tammy L. McLaren
Attachments: Employment Agreement
Benefits Summary
<PAGE> 1
EXHIBIT 10.23
SUBLEASE
THIS SUBLEASE (this "Sublease") is made as of the 11 day of May 1998 by
and between ECHO BAY MANAGEMENT CORP., a Delaware corporation ("Sublessor"), and
MPOWER SOLUTIONS, INC., a Delaware corporation ("Sublessee").
ARTICLE 1
GENERAL
1.1 Lease. As used herein, the term "Lease" shall mean that certain
Plaza Tower One Office Lease, dated April 21, 1995, as amended by the First
Amendment to Plaza Tower Office Lease, dated May 24, 1995, and the Second
Amendment to Plaza Tower Office Lease, dated December 15, 1995, by and between
Huntington Beach Company, a California corporation ("HBC"), and Sublessor. A
copy of the Lease is attached hereto as Exhibit A and is by this reference
incorporated herein and made a part hereof.
1.2 Landlord. Property Colorado OBJLW One Corporation, an Oregon
corporation (the "Landlord") is the current owner of the Building and is the
successor to all of the rights and obligations of HBC under the Lease.
1.3 Building Terms. As used herein, the terms Improved Area,
Building, Tower, Retail Area, and Parking Garage, shall have the meanings
ascribed to such terms in Paragraph 1 of the Lease.
1.4 Premises. As used herein, the term "Premises" shall mean 3,667
rentable square feet of space located on a portion of the 5th Floor of the Tower
as shown on the floor plan attached hereto as Exhibit B and by this reference
incorporated herein and made a part hereof.
1.5 Furnishings. As used herein, the term "Furnishings" shall mean
and include all of the furnishings currently located in the Premises which shall
consist of the items identified on Exhibit C attached hereto and by this
reference made a part hereof.
1.6 Sublease Term. As used herein, the term "Sublease Term" shall
mean the term of this Sublease, which shall commence as of June 1, 1998 (the
"Commencement Date") and shall expire on November 30, 1999 (the "Expiration
Date"), unless terminated sooner pursuant to any term or provision of this
Sublease.
<PAGE> 2
ARTICLE 2
DEMISE OF PREMISES
2.1 Demise of Premises. Under and subject to the provisions,
covenants, and agreements contained herein and in the Lease, Sublessor hereby
subleases to Sublessee, and Sublessee hereby subleases from Sublessor, the
Premises for the Sublease Term.
2.2 Demise of Furnishings. Under and subject to the provisions,
covenants, and agreements contained herein and in the Lease, Sublessor hereby
leases to Sublessee, and Sublessee hereby leases from Sublessor, the Furnishings
for the Sublease Term. The Furnishings are leased to Sublessee in their "AS IS"
condition without any representations or warranties by Sublessor of any kind or
nature whatsoever, including, without limitation, any warranties as to the
physical condition or state of repair of the Furnishings or their fitness for
any particular purpose. Sublessee shall keep, maintain and repair all of the
Furnishings in good and sightly condition during the Sublease Term and shall
surrender the Furnishings to Sublessor upon the expiration or earlier
termination of the Sublease Term in the same condition as the Furnishings were
in on the Commencement Date (including, if necessary, by repairing any damage
thereto), ordinary wear and tear excepted.
2.3 Landlord's Approval. Both Sublessor and Sublessee acknowledge
that this Sublease is subject to the Landlord's approval as required by the
terms of the Lease. From and after the date of this Sublease, both parties shall
use reasonable efforts to obtain the Landlord's approval of this Sublease,
including, without limitation, supplying any information or documents which the
Landlord may reasonably request in connection therewith.
ARTICLE 3
BASIC RENT AND OTHER AMOUNTS
3.1 Rental Covenant. Sublessee covenants and agrees to pay the Rent,
as hereinafter defined, to Sublessor during the Sublease Term, without notice
and without offset, deduction, or abatement.
3.2 Base Rent. As used herein, the term "Base Rent" shall mean
$121,011.00 during the Sublease Term payable in monthly installments of
$6,722.83 each, which amount is based upon an annual rental rate equal to the
product of $22.00 per rentable square foot in the Premises multiplied by 3,667
rentable square feet.
3.3 Operating Costs. Pursuant to the terms of the Lease, Sublessor
is obligated to pay a share of the "Operating Costs" for the Building and the
Improved Area. Sublessor and Sublessee acknowledge and agree that the Base Rent
is intended to be a gross full-service rental rate for the Premises and that
consequently Sublessee shall not be obligated to pay to Sublessor any Operating
Costs under this Sublease; provided, however, that Sublessee shall be obligated
to pay to Sublessor certain costs as more particularly provided in Section 3.4.
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<PAGE> 3
3.4 Additional Fees and Expenses. Sublessee shall pay for all
charges, fees, and expenses (other than Operating Costs) imposed under the terms
of the Lease for any special purposes relating to Sublessee's use of the
Premises, including, without limitation, any fees charged for any
disproportionate use of utility services at the Premises, any charges for any
after-hour or extra services provided to the Premises, any charges for any
repairs performed by the Landlord to or for the Premises, and any and all
similar charges. Sublessee shall pay such costs directly to the Sublessor within
ten (10) days after the date that Sublessor delivers a written statement to
Sublessee together with supporting documentation provided to Sublessor by the
Landlord. If Sublessor first pays Landlord for any such costs, Sublessee shall
reimburse Sublessor for such costs within ten (10) days after the date that
Sublessor delivers a written statement for such costs to Sublessee.
3.5 Payment. As used herein, the term "Rent" shall mean Base Rent,
all costs payable by Sublessee under Section 3.4 of this Sublease, and all other
amounts payable by Sublessee under this Sublease. Except as otherwise provided
herein, Rent shall be payable in advance in monthly installments commencing on
the Commencement Date and continuing on the first day of each month thereafter
for the balance of the Sublease Term. Rent shall be prorated for any partial
month occurring during the Sublease Term. All items of Rent payable by Sublessee
to Sublessor under this Sublease shall be paid to Sublessor at the address for
Sublessor which is set forth in Section 5.1 of this Sublease.
ARTICLE 4
OTHER AGREEMENTS OF THE PARTIES
4.1 Lease Provisions Binding On Sublessee. Except for the Retained
Obligations (as hereinafter defined), except for the Inapplicable Provisions (as
hereinafter defined), and except as otherwise specifically set forth herein,
Sublessee: shall take subject to and be bound by all of the terms, conditions
and provisions of the Lease which are applicable to the "Tenant" as provided in
the Lease and to the extent that the same apply to the Premises (which terms,
conditions and provisions are incorporated herein as terms, conditions and
provisions of this Sublease); shall comply with and shall be obligated to
perform all of Sublessor's obligations, duties and liabilities in, under, and
with respect to the Lease to the extent that the same apply to the Premises; and
shall indemnify and hold Sublessor harmless from any failure by Sublessee to
comply with its obligations under this sentence and from all liabilities, costs
and expenses, including, without limitation, reasonable attorney's fees,
asserted against or incurred by Sublessor in connection therewith; provided,
however, that for the purposes of this Sublease: (A) the first paragraph of
Paragraph 30 of the Lease shall be applicable only to Landlord and not to
Sublessor and the provisions of the second paragraph of Paragraph 30 of the
Lease applicable to the "Tenant" under the Lease shall be deemed to apply to
each of Sublessor and Sublessee; and (B) the rights reserved to the Landlord
under Paragraph 31 of the Lease shall be exclusively for the benefit of Landlord
and not of Sublessor. Sublessee Shall not commit or permit to be committed any
act or omission which shall violate any term or condition of the Lease. As used
herein, the term "Retained Obligations" shall mean and include (i) the
obligation of Sublessor to pay the Base Rent to the Landlord under Paragraph 3A
of the Lease, (ii) the obligation of Sublessor to pay its share of the Operating
Costs to the Landlord under Paragraph 3B of the Lease, and (iii) all obligations
of the Sublessor under the
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<PAGE> 4
Lease which relate to the portion of the space leased to Sublessor under the
Lease which is not included in the Premises. As used herein, the term
"Inapplicable Provisions" shall mean (a) all of the terms and provisions set
forth in Paragraphs 3B, 15, 16, 18, 27, 38, 43, 44, 45 and 46 of the Lease and
the terms set forth in Exhibits C to the Lease, and (b) any other provisions set
forth in the Lease which are clearly by their terms inapplicable to,
inconsistent with, or superseded by the terms set forth in this Sublease. During
the Sublease Term, so long as there are no uncured defaults by Sublessee under
this Sublease, Sublessor (1) shall comply with and perform all of the Retained
Obligations, (2) shall take any reasonable actions which may be necessary to
endeavor to cause the Landlord to comply with its obligations under the Lease,
except that in no case shall Sublessor be obligated hereby to commence any
lawsuit or other legal proceedings to compel such performance, and (3) shall
not, as to any of the space included in the Premises hereunder, exercise the
option to terminate the Lease as set forth in Paragraph 44 thereof. Sublessee
shall have no right to exercise any of the options granted to Sublessor under
the Lease, including, without limitation, those set forth in Paragraphs 43, 44,
45, and 46, of the Lease. Sublessee shall promptly deliver to Sublessor true and
complete copies of any and all notices or other material correspondence
regarding the Lease, this Sublease, the Building, or the Premises received by
Sublessee at any time during the Sublease Term.
4.2 Sublessee's Rights Under the Lease. Except as otherwise
specifically provided herein, Sublessor hereby grants to Sublessee during the
Sublease Term all of the rights, powers, and privileges that Sublessor has under
the Lease with respect to the Premises. Sublessee shall be entitled during the
Sublease Term to receive any and all services, utilities, repairs, and
facilities to and for the Premises which the Landlord is required to provide
pursuant to the Lease on and subject to the terms thereof; provided, however,
that Sublessor does not hereby guaranty that the same will be provided to the
Premises or that the Landlord will perform any or all of its obligations under
the Lease with respect to the Premises.
4.3 Insurance and Waiver of Claims. Without limiting the generality
of the terms of Section 4.1 above, Sublessee shall obtain and keep in full force
and effect at all times during the Sublease Term all of the liability insurance
coverages required to be maintained by Sublessor under the Lease with regard to
the Premises and casualty insurance coverage on the Furnishings and on all of
its trade fixtures, supplies, inventory, equipment, and personal property
located in the Premises. Sublessee hereby waives and releases Landlord and
Sublessor from and against any and all claims, damages, losses, and liabilities
for any bodily injury, loss of life, or property damage occurring on or about
the Premises, or any part thereof, from any cause whatsoever, including, without
limitation, the negligence of Sublessor or the Landlord, or any of their
respective agents, employees, contractors, or guests, or the negligence of any
other party leasing, occupying, or otherwise using any part of the Building.
Sublessee shall indemnify and hold Sublessor harmless from and against any and
all claims asserted against Sublessor or the Landlord arising from any such
damages, injuries, or losses incurred by Sublessee or any of its agents,
employees, contractors, guests, or other parties upon the Premises. Sublessee
shall cause all policies of insurance maintained by Sublessee hereunder to
contain waiver of subrogation provisions in favor of Sublessor and the Landlord.
4.4 Premises Taken "AS IS". Sublessee agrees that it is taking the
Premises in an "AS IS" condition and without any representations or warranties
by Sublessor of any kind or nature whatsoever. Sublessee agrees that Sublessor
shall have no responsibility to make, arrange
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<PAGE> 5
for, or pay for any tenant improvements whatsoever to the Premises. Furthermore,
Sublessee agrees that it shall be solely responsible for obtaining and
installing, at its own expense, a phone system for the Premises. The
Commencement Date hereunder shall not be extended because of any failure of
Sublessee or any of Sublessee's agents to complete the installation of a phone
system for the Premises by June 1, 1998.
4.5 No Assignment by Sublessee. Sublessee may not assign or
otherwise transfer any of its rights, duties, liabilities, or obligations under
this Sublease without the prior written consent of Sublessor, which consent
shall not be unreasonably withheld, and without the prior written consent of the
Landlord pursuant to the terms of the Lease.
4.6 Right of Reentry. Sublessor reserves the fight to re-enter the
Premises in the event Sublessor defaults under this Sublease or otherwise
inspect the Premises to verify Sublessee's compliance with the terms of this
Sublease.
4.7 Repair and Maintenance. Sublessee shall keep and maintain the
Premises and the Furnishings in good order and repair in a manner consistent
with the terms and conditions set forth in the Lease and this Sublease.
ARTICLE 5
MISCELLANEOUS
5.1 Notices. All notices, demands, consents or other instruments or
communications provided for under this Sublease, or otherwise given under or in
connection with this Sublease, shall be in writing, shall be signed by or on
behalf of the party giving the same, and shall be deemed properly given and
received when the same is actually received or refused if a copy thereof,
addressed to the recipient at the address set forth below, is delivered
personally, by messenger service, by facsimile, by a nationally-recognized
commercial overnight courier service such as Federal Express, or by certified or
registered mail, return receipt requested. All such notices shall be delivered
or sent with transmission, postage, and/or delivery charges paid, to the address
of the intended recipient set forth below or such other address as such party
may designate by written notice given to the other party in accordance with the
terms set forth in this Section 5.1. All notices to Sublessor shall he addressed
to Sublessor at the following address and/or facsimile number:
Echo Bay Management Corp.
6400 South Fiddlers Green Circle, Suite 1000
Englewood, Colorado 80111
Attention: Corporate Secretary
Telephone: (303) 714-8838
Facsimile: (303) 714-8998
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All notices to Sublessee shall be addressed to Sublessee at the
following address and/or facsimile number:
MPOWER Solutions, Inc.
6400 South Fiddlers Green Circle, Suite 540
Englewood, Colorado 80111
Attention: Lorine Sweeney, President
Telephone: (505) 248-3931
Facsimile: (505) 744-5913
5.2 Parking. Sublessee hereby subleases from Sublessor, and
Sublessor hereby subleases and demises to Sublessee, for the Sublease Term a
total of 11 non-reserved spaces in the Parking Garage located in the Improved
Area. The rental rate for the parking spaces subleased by Sublessee hereunder
shall be $25.00 per space per month from the Commencement Date through the
expiration of the Sublease Term. Sublessee's use of the Parking Garage shall be
subject to all of the rules, regulations, and limitations established from time
to time by the Landlord. In no event shall Sublessor have any liability or
responsibility for any losses, damages, or injuries to person or property in
connection with the use of the Parking Garage by Sublessee or any of its agents,
employees, contractors, or guests.
5.3 Remedies. In the event of any breach or default by Sublessee
under this Sublease, Sublessor shall have the right to enforce any of the
remedies provided for in Paragraphs 21, 24, and 25 of the Lease and any other
remedies otherwise available to Sublessor for such default. For purposes of this
Section 5.3, Paragraphs 21, 24, and 25 of the Lease shall be incorporated herein
and the term "Landlord" therein shall be substituted with the term Sublessor,
the term "Tenant" therein shall be substituted with the term Sublessee, and the
term "Lease" therein shall be substituted with the term Sublease.
5.4 No Implied Waiver. No failure by Sublessor to insist upon the
strict performance of any term, covenant or agreement contained in this
Sublease, no failure by Sublessor to exercise any right or remedy under this
Sublease, and no acceptance of full or partial payment during the continuance of
any default by Sublessee, shall constitute a waiver of any such term, covenant
or agreement, or a waiver of any such right or remedy, or a waiver of any such
default by Sublessee.
5.5 Entire Agreement - No Representation. This Sublease and all
exhibits referred to herein, constitute the final and complete expression of the
parties' agreements with respect to the subject matter hereof. Each party agrees
that it has not relied upon or regarded as binding any prior agreements,
negotiations, representations, or understandings, whether oral or written,
except as expressly set forth herein. Sublessor and Sublessee acknowledge and
agree that, except as otherwise may be specifically provided for herein, neither
party has made any representations, warranties, or agreements to or on behalf
of the other party as to any matter concerning the Premises or this Sublease.
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<PAGE> 7
5.6 Modifications in Writing. No amendments or modifications of this
Sublease, and no approvals, consents or waivers by Sublessor under this
Sublease, shall be valid or binding unless in writing and executed by the party
to be bound thereby.
5.7 Severability. If any provision of this Sublease shall be
invalid, illegal or unenforceable it shall not affect or impair the validity,
legality or enforceability of any other provision of this Sublease, and there
shall be substituted for the affected provision, a valid and enforceable
provision as similar as possible to the affected provision.
5.8 Binding Effect. This Sublease shall extend to and be binding
upon the heirs, personal representatives, successors and assigns of the
respective parties hereto. The terms, covenants, agreements and conditions in
this Sublease shall be construed as covenants running with the Land.
5.9 Time of the Essence. Time is of the essence under this Sublease,
and all provisions herein relating thereto shall be strictly construed.
5.10 Survival of Provisions. Notwithstanding any termination of this
Sublease, the same shall continue in force and effect as to any provisions
hereof which require observance or performance by Sublessee subsequent to
termination and as to any provisions which required performance by Sublessee
prior to such termination but which Sublessee failed to perform at such time.
5.11 Applicable Law. This Lease shall be interpreted and enforced
according to the laws of the State of Colorado.
5.12 Brokers. Sublessor hereby represents and warrants to Sublessee
that it has not been represented by any broker in connection with this Sublease
and the transaction contemplated herein except for CB Richard Ellis, Inc. ("CB
Richard Ellis"). Sublessee hereby represents and warrants to Sublessor that it
has not been represented by any broker in connection with this Sublease and the
transaction contemplated herein. Sublessor shall pay any amounts due to CB
Richard Ellis on account of this Sublease and the transaction contemplated
herein pursuant to the terms of a separate agreement between Sublessor and CB
Richard Ellis and Sublessor shall indemnify and hold harmless Sublessee from and
against any and all claims for commissions, fees, or other compensation payable
to or claimed by CB Richard Ellis and any other real estate broker, agent,
salesman, finder, or other person on account of any implied or express
commitment or undertaking made by Sublessor as a result of this Sublease or the
consummation of the transaction contemplated herein. Sublessee shall indemnify
and hold harmless Sublessor from and against any and all claims for commissions,
fees, or other compensation payable to or claimed by any real estate broker,
agent, salesman, finder, or other person (except for CB Richard Ellis) on
account of any implied or express commitment or undertaking made by Sublessee as
a result of this Sublease or the consummation of the transaction contemplated
herein.
5.13 Counterparts: Execution. This Sublease may be executed in
counterparts and, when counterparts of this Sublease have been executed and
delivered by all of the parties hereto, this
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Sublease shall be fully binding and effective, just as if all of the parties
hereto had executed and delivered a single counterpart hereof. Without limiting
the manner in which execution of this Sublease may otherwise be effected
hereunder, execution by any party may be effected by facsimile transmission of a
signature page hereof executed by such party. If any party effects execution in
such manner, such party shall also promptly deliver to the other parties the
counterpart physically signed by such party, but the failure of any such party
to do so shall not invalidate the execution hereof effected by facsimile
transmission.
IN WITNESS WHEREOF, the parties hereto have caused this Sublease to be
executed the day and year first above written.
SUBLESSOR:
ECHO BAY MANAGEMENT CORP., a Delaware
corporation
By: /s/ L. BRODRICK
-------------------------------------
Name: Lois Ann L. Brodrick
-----------------------------------
Its: Secretary
-------------------------------------
SUBLESSEE:
MPOWER SOLUTIONS, INC., a Delaware
corporation
By: /s/ LORINE SWEENEY, President
-------------------------------------
Name: Lorine Sweeney
-----------------------------------
Its: President
-------------------------------------
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EXHIBIT A
IMPROVED AREA
[GREENWOOD PLAZA SOUTH DIAGRAM]
A-1
<PAGE> 10
EXHIBIT B
LEASED PREMISES
[TENTH (10TH) FLOOR DIAGRAM]
B-1
EXHIBIT B
LEASED PREMISES
[NINTH (9TH) FLOOR DIAGRAM]
B-2
EXHIBIT B
LEASED PREMISES
[FIFTH (5TH) FLOOR DIAGRAM]
B-3
<PAGE> 11
EXHIBIT C
Work Agreement
The undersigned, as Landlord and Tenant, are executing simultaneously with this
Work Agreement a Lease covering the Leased Premises therein described (the
"Lease"). This Work Agreement is attached to the Lease as Exhibit C.
Landlord and Tenant agree as follows:
1. Defined Terms
The following terms have the respective definitions indicated for
purposes of this Work Agreement:
(a) "Tenant's Architect" means Saiber. Saiber, Inc., an architectural
firm approved by Landlord to design the Leasehold Improvements on
Tenant's behalf and to represent Tenant during construction, design
and pricing of the Leasehold Improvements.
(b) "Construction Drawings" means the Engineering Working Drawings and
the Architectural Working Drawings.
(c) "Project Engineers" means ABS Consultants, the mechanical engineer,
Martin. Martin, the structural engineer, and Michael J. Hutchison &
Associates, the electrical engineer who shall prepare the
Engineering Working Drawings providing for the construction of the
Leasehold Improvements in accordance with the Space Plan, which
firms have been selected and retained by Tenant's Architect, and
approved by Landlord.
(d) "General Contractor" means the person or firm from time to time
selected by Tenant and approved by Landlord as herein provided,
which approval shall not be unreasonably withheld, to construct and
install the Leasehold Improvements in the Leased Premises.
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(e) "Improvement Allowance" means the allowance to be provided by
Landlord to Tenant as more particularly described in Section 4.1
of this Work Agreement,
(f) "Planning Allowance" means the allowance to be provided by
Landlord to Tenant as more particularly described in Section 4.2
of this Work Agreement
(g) "Moving Allowance" means the allowance to be provided by
Landlord to Tenant as more particularly described in Section 4.3
of this Work Agreement.
(h) "Landlord Delay" means the sum of number of days (i) by which
Landlord was late in providing Landlord's responses contemplated
in this Exhibit C, (ii) of delay caused by changes requested by
Landlord to any aspect of the Leasehold Improvements after the
Construction Drawings have been prepared and approved (including
any delay in preparing any of the documents or drawings
described herein), (iii) of delay caused by Landlord, its
agents, or contractors' interference (if any) in the
construction or delay in processing General Contractor's
submittals as provided herein, (iv) of delay caused by the
inclusion at the instance of Landlord of any work or materials
not shown on the Construction Drawings, (vi) of delay in
completing the Landlord's Work as described herein, (vii) of
delay in inspecting or approving any work completed in
connection With the Leasehold improvements, and (viii) of delay
in taking reasonable steps to cooperate with Tenant in
completing the Leasehold improvements, including, without
limitation, providing access to the Building and the Premises
and completing permit applications' or executing other documents
which may be necessary in connection with the Leasehold
Improvements.
(i) "Landlord's Representative" means Melissa Witkowski (or another
individual employee of Landlord identified by Landlord as the
substitute Landlord's Representative upon reasonable prior
notice to Tenant), the individual employee of Landlord who has
been assigned by Landlord to review and approve the plans and
specifications for the Leasehold Improvements and
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to monitor the construction of the Leasehold Improvements, and
to assist and cooperate with Tenant in connection therewith, as
contemplated herein.
(j) "Landlord's Plan Architect" means the independent architect
hired by Landlord, if any, to assist in Landlord's review of the
Space Plan and the Construction Drawings.
(k) "Landlord's Construction Architect" means the independent
architect hired by Landlord, if any, to assist Landlord and
Landlord's Representative in monitoring the construction of the
Leasehold Improvements, which architect may be the same
architect as Landlord's Plan Architect.
(l) "Leasehold Improvements" means the improvements to the Leased
Premises shown on the Construction Drawings.
(m) "Substantial Completion" means the date that the Leasehold
Improvements are certified by Tenant's Architect as sufficiently
complete, such that Tenant can reasonably occupy and utilize the
Leased Premises for the Permitted Purpose.
Unless otherwise defined herein, capitalized terms used in this Work
Agreement shall have the meanings ascribed to such terms in the Lease.
2. Space Planning and Engineering
2.1 Space Plan. Landlord shall provide to Tenant's Architect the
architectural and engineering drawings for the base building improvements for
the Building and the as-built drawings, plans and specifications, and all other
drawings and construction documents in Landlord's possession or control relating
to the prior improvements made to the Leased Premises ("Landlord Drawings").
Tenant shall provide to Landlord's Representative a space plan for the Leased
Premises (referred to herein as the "Space Plan") prepared by Tenant's
Architect. The Space Plan shall be prepared by the Tenant's Architect at
Tenant's sole cost and expense, subject to Landlord's payment of the Planning
Allowance as hereinafter provided.
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2.2 Approval of Space Plan. Within five (5) business days after the
receipt by Landlord's Representative of the Space Plan, Landlord shall review
the Space Plan. If Landlord determines, in its reasonable good faith judgment,
that the Space Plan is incompatible with the base building specifications for
the Building, Landlord shall so advise Tenant's Architect and Tenant's Architect
shall revise the Space Plan accordingly and resubmit it to Landlord's
Representative and the review procedure and time frames set forth above shall be
repeated. Otherwise, Landlord shall notify Tenant's Architect of its approval of
the Space Plan as promptly as reasonably possible. If no notice of approval or
disapproval is given by Landlord to Tenant's Architect within five (5) business
days after the receipt Of the Space Plan by Landlord's Representative, the
Scheduled Commencement Date shall be automatically extended one day for each day
after such period until Landlord notifies Tenant's Architect of its approval or
disapproval.
2.3 Engineering Working Drawings. Based upon the approved Space
Plan, the Project Engineers shall prepare the structural, plumbing, fire
protection, mechanical, electrical, and life safety engineering drawings
("Engineering Working Drawings"). The Engineering Working Drawings shall be
submitted to Landlord's Representative for review and approval by Landlord,
which approval shall not be unreasonably withheld. If no notice of approval or
disapproval of the Engineering Work Drawings is given by Landlord to Tenant's
Architect within five (5) business days after the receipt thereof by Landlord's
Representative, the Scheduled Commencement Date shall be automatically extended
one day for each day after such period until Landlord notifies Tenant's
Architect of its approval or disapproval. The costs for the preparation of the
Engineering Working Drawings shall be borne by Tenant, subject to Landlord's
payment of the Planning Allowance and the Improvement Allowance as hereinafter
provided.
2.4 Architectural Working Drawings. Tenant's Architect shall
provide Landlord's Representative with architectural working drawings prepared
by the Tenant's Architect (the "Architectural Working Drawings") for the Leased
Premises for review and approval by Landlord, which approval shall not be
unreasonably withheld. The Architectural Working Drawings shall include the
following: (a) partition layout and door locations; (b) electrical outlets,
including the location and usage thereof; (c) telephone outlets, including a
description of the system and the size
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<PAGE> 15
of conduit servicing each outlet, (d) a ceiling plan showing standard and
non-standard lighting, switching requirements, and ceiling construction or
constraints; (e) Tenant's occupancy capacity and usage equipment loads for all
spaces, particularly special usage rooms, including, but not limited to,
conference rooms, lounges, coffee rooms, copy rooms, computer terminal or
keypunch rooms, audio-visual rooms, and reproduction or print rooms which
require special heating, ventilating, air conditioning or fire protection; (f)
Tenant's floor loading for all spaces, particularly special usage rooms; and (g)
floor penetrations, including but not limited to special stairs, dumbwaiters,
conveyors, pneumatic systems, elevators, or architectural features. If Landlord
determines, in its reasonable good faith judgment, that the Architectural
Working Drawings contain design errors, Landlord shall give notice thereof to
Tenant within five (5) business days after the receipt thereof by Landlord's
Representative. If the Architectural Working Drawings are acceptable to
Landlord, Landlord shall communicate its approval to Tenant's Architect as
promptly as reasonably possible, but in any event on or before the expiration of
such five business day period. If Landlord does not reply within such period of
time, the Scheduled Commencement Date shall be automatically extended one day
for each day after such period until Landlord notifies Tenant's Architect of its
approval or disapproval. If Landlord notifies Tenant's Architect of design
errors, Tenant shall revise the Architectural Working Drawings accordingly and
resubmit them to Landlord's Representative and the review procedure set forth
above shall be repeated. When approved by Landlord and Tenant, the Engineering
Working Drawings and the Architectural Working Drawings shall be acknowledged as
such by Tenant and Landlord in writing and such approved drawings shall be
deemed to constitute the "Construction Drawings."
2.5 Changes. If Tenant wishes to make any material changes to the
Construction Drawings, Tenant shall submit a written request describing such
changes to Landlord's Representative. Any such changes may be made by Tenant
only upon the prior written approval of Landlord's Representative, which
approval shall not be unreasonably withheld. Landlord's Representative shall
respond to all written requests for any such changes within five (5) days of
receipt of the same by Landlord's Representative. If Landlord's Representative
does not respond within such period of time, the Scheduled Commencement Date
shall be automatically extended one day for each day after such period until
Landlord notifies Tenant's Architect of its approval or disapproval.
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<PAGE> 16
3. Construction of Leasehold Improvements
3.1 Tenant to Construct Leasehold Improvements. Following approval
of the Construction Drawings, Tenant shall be responsible to the completion of
the Leasehold Improvements in substantial compliance with the Construction
Drawings, at its sole cost and expense, subject to Landlord's payment of the
improvement Allowance. Landlord shall deliver possession of the Leased Premises
to Tenant for the purpose of constructing the Leasehold Improvements (and
installing Tenant's trade fixtures, furnishings, equipment, and other personal
property) on or before June 1, 1995; except that, as to those portions of the
Leased Premises which are occupied as of the date of this Lease, Landlord shall
deliver such possession to Tenant on or before June 30, 1995. It is understood
and agreed that Landlord is making the Leased Premises available to Tenant for
such purposes prior to the Lease Commencement Date and prior to the commencement
of Tenant's obligations for the payment of Rent under the Lease. Tenant's use
and occupancy of the Leased Premises prior to the Lease Commencement Date shall
be subject to all of the terms and provisions of the Lease, except for Tenant's
obligation to pay Rent. There shall be no charge to Tenant for its early access
to the Building and the Leased Premises or for the use by Tenant of electrical
power and other Building services during the construction of the Leasehold
improvements.
3.2 General Contractor. Tenant shall enter into a direct contract
for construction services to complete the Leasehold improvements with the
General Contractor. Prior to execution of the contract between Tenant and the
General Contractor, Tenant shall provide a copy of the contract to Landlord's
Representative for its review and approval, which approval shall not be
unreasonably withheld. Landlord shall review the contract and approve or
disapprove the contract in writing within five (5) days thereafter. If Landlord
fails to notify Tenant's Architect of its approval or disapproval of the
contract within such 5-day period, the Scheduled Commencement Date shall be
automatically extended one day for each day after such period until Landlord
notifies Tenant's Architect of its approval or disapproval. Tenant and the
General Contractor shall have the right to select and contract directly with all
sub-contractors and all other parties supplying work or materials to the Leased
Premises. The Genera Contractor and all sub-contractors shall be required to
comply with the Construction Procedures set forth on Exhibit K attached hereto,
as the same
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<PAGE> 17
may be amended from time to time by Landlord upon reasonable prior notice to the
General Contractor.
3.3 Compliance with Laws. Tenant shall cause Tenant's Architect, the
General Contractor, and all Sub-contractors to: (i) conduct their work in such a
manner so as not to unreasonably interfere with any other construction occurring
on or in the Building or any other tenants of the Building, (ii) comply with all
laws, codes, permits, rules, and regulations relating to the construction
activities in or on the Building; and (iii) maintain such insurance in force
and effect as required by the Lease, but in any event not less than that
required by applicable law.
4. ALLOWANCES
4.1 Improvement Allowance. Landlord shall pay to Tenant an
Improvement Allowance for the costs incurred by Tenant in the construction of
the Leasehold Improvements to be made to the Leased Premises in an amount equal
to the product of $20.00 multiplied by the total number of rentable square feet
in the Leased Premises.
4.2 Planning Allowance. Landlord shall pay to Tenant a Planning
Allowance for costs incurred by Tenant in the planning and designing of the
Leasehold Improvements to be made to the Leased Premises in an amount equal to
the product of $2.00 multiplied by the total number of rentable square feet in
the Leased Premises. The Planning Allowance shall be payable by Landlord to
Tenant upon Landlord's approval of the Architectural Working Drawings and the
Engineering Working Drawings.
4.3 Moving Allowance. Landlord shall pay to Tenant a Moving
Allowance for the costs incurred by Tenant in relocating its business to the
Leased Premises in an amount equal to the product of $1.00 multiplied by the
total number of rentable square feet contained in the Leased Premises. The
Moving Allowance shall be payable by Landlord to Tenant upon the Lease
Commencement Date.
4.4 Payment of Improvement Allowance. Tenant shall from time to time
submit to Landlord's Representative invoices for any costs and expenses incurred
in connection with the Leasehold Improvements, together with evidence of payment
of
C-7
<PAGE> 18
such invoices, lien waivers, and any other documentation reasonably requested by
Landlord's Representative, and, subject to the approval of such items by
Landlord's Representative, Landlord shall pay Tenant the amount set forth on
such invoice or invoices as promptly as reasonably possible but in no event
later than thirty (30) days after the receipt of such items by Landlord's
Representative. Landlord shall from time to time pay amounts against the
Improvement Allowance in accordance with the terms set forth herein up to the
total amount of the Improvement Allowance; provided that, Landlord shall have
the right to retain up to a total of 10% of the Improvement Allowance until
after the General Waiver (as defined below) is delivered to Landlord's
Representative. Upon completion of the Leasehold Improvements, Tenant shall
obtain and deliver to Landlord's Representative a general lien waiver covering
the Leasehold Improvements from the General Contractor, which lien waiver shall
be in form and substance reasonably acceptable to Landlord (the "General
Waiver").
5. Landlord's Work
5.1 Existing Improvements. All existing improvements in the Leased
Premises as of the date of this Lease, including, without limitation, all doors,
door frames, hardware, ceiling grids and tiles, light fixtures, millwork,
built-ins, end all similar items (the "Existing Improvements"), may be used by
Tenant at no charge. Tenant shall have the right to demolish and remove from the
Leased Premises any and all of the Existing Improvements which Tenant elects not
to use; provided that, prior to such demolition, Tenant shall offer any such
items to Landlord's Representative. If Landlord elects to salvage any such
items, Landlord shall, at Landlord's expense, remove such items in a manner
which will not delay or interfere with the construction of the Leasehold
Improvements; provided that Tenant shall use reasonable efforts to cooperate
with Landlord in Landlord's removal of any such items.
5.2 Core and Shell Work. All core and shell work required to be done
in connection with the Leasehold Improvements, including without limitation,
floor leveling to a specification of a variation of not more than one quarter
inch for every ten feet, shall be done by Landlord, at Landlord's expense.
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<PAGE> 19
6. Relocation of Existing Tenants and Relinquishment of Rights
6.1 Relocation and Relinquishments. In order for the Leased Premises
to be ready for Tenant's use and occupancy at the times contemplated herein, it
will be necessary to take the following actions:
(A) Chrysler Financial Corporation will be relocated from the space
which it currently occupies on the 9th Floor of the Tower to
other space containing 5,904 rentable square feet on the 16th
Floor of the Tower (the "Chrysler Relocation").
(B) Budget Rent-A-Car will relinquish all expansion and any other
rights and options which it currently has on the 5th Floor of
the Tower (the "Budget Relinquishment").
(C) Sybase will relinquish all expansion and any other rights and
options which it currently has on the 5th Floor of the Tower,
except for a right of first refusal on the space on the 5th
Floor of the Tower (containing approximately 5,100 rentable
square feet) which will continue to be leased to Thompson Pipe &
Steel after the Thompson Contraction described in Paragraph
6.1(D) below (the "Sybase Relinquishment").
(D) Thompson Pipe & Steel will contract the space it leases on the
5th Floor of the Tower to a total of approximately 5,100
rentable square feet, and will relinquish all other rights and
options which it currently has on the 5th Floor of the Tower
(the "Thompson Contraction").
(E) Missing Link will cancel all rights and options to lease space
on the 5th Floor of the Tower (the "Missing Link Cancellation").
The foregoing actions are hereinafter referred to collectively as the
"Relinquishments." Both Landlord and Tenant shall use their best efforts and
shall cooperate with each other to cause all of the Relinquishments to be
completed as promptly as reasonably possible. In the event that any of the
Relinquishments is not completed in a manner
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<PAGE> 20
which is reasonably satisfactory to either party hereto on or before May 20,
1995, both Landlord and Tenant shall have the right to terminate this Lease by
giving written notice of termination to the other party at any time after such
date and on or before June 5, 1995.
6.2. Coordination. Landlord shall, at Landlord's expense (subject to
Tenant's obligation to pay the amounts set forth in Section 6.3 below),
coordinate all aspects of the Chrysler Relocation, the Budget Relinquishment,
the Sybase Relinquishment, the Thompson Contraction, and the Missing Link
Cancellation in a manner which will cause all portions of the Leased Premises to
be available to Tenant at the times contemplated herein.
6.3 Payments by Tenant. Tenant shall reimburse Landlord for the
following costs incurred in connection with the Chrysler Relocation, the Budget
Relinquishment, the Sybase Relinquishment, the Thompson Contraction, and the
Missing Link Cancellation:
(A) In connection with the Chrysler Relocation, Tenant shall
reimburse Landlord for all Relocation Costs paid by Landlord in
connection with the Chrysler Relocation; provided that in no
event shall Tenant be obligated hereby to pay any amount greater
than $159,400 for such Relocation Costs. As used herein, the
"Relocation Costs" shall mean all of the actual out-of-pocket
costs incurred by Landlord in connection with the Chrysler
Relocation, including, without limitation, all such costs
incurred by Landlord for: the preliminary space planning; final
space planning; construction documents; mechanical engineering
design and documentation; electrical design and documentation;
demolition; construction management costs including fees;
special consultants costs (structural, acoustical, vibration,
etc.), direct costs of construction; all required permits and
fees; the cost to move personal effects and furniture; the
reprinting of Stationary and related materials; the rewiring and
relocation of telecommunications equipment; and any other
reasonable expenses incurred by Landlord in connection with such
relocation.
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<PAGE> 21
(B) In connection with the Budget Relinquishment, Tenant shall
reimburse Landlord for all relinquishment fees and other costs
paid by Landlord for such relinquishment up to a total of
$50,000.
(C) In connection with the Sybase Relinquishment, Tenant shall
reimburse Landlord for all relinquishment fees and other costs
paid by Landlord for such relinquishment up to a total of
$9,750.
(D) Tenant shall have no obligation to pay or reimburse Landlord
for any costs incurred in connection with the Thompson
Contraction or the Missing Link Cancellation.
All costs payable by Tenant hereunder shall be paid by Tenant to Landlord within
ten (10) business days after Tenant's receipt of evidence of the payment of such
costs by Landlord.
7. Supervision Fee
Landlord shall be entitled to a fee (the "Supervision Fee") for the
actual out-of-pocket costs paid by Landlord to the Landlord's Plan Architect (at
a rate not to exceed $100 per hour), the Landlord's Construction Architect (at a
rate not to exceed $100 per hour, and the Landlord's Representative (at the rate
not to exceed $28 per hour) in connection with the Landlord's review and
approval of the Space Plan and the Construction Drawings and the supervision of
the construction of the Leasehold Improvements. Tenant shall pay amounts against
the Supervision Fee from time to time within ten (10) business days after
Tenant's receipt of evidence of the payment of such costs by Landlord.
Landlord and Tenant have executed this Work Agreement contemporaneously
with execution of the Lease.
LANDLORD: HUNTINGTON BEACH COMPANY, a California
Corporation, by its agent, Chevron
Real Estate Management Company, a
division of Chevron U.S.A. Inc., a
Delaware Corporation
By: /s/ W.R. MORRISON
--------------------------------
Its: Vice President
--------------------------------
TENANT: ECHO BAY MANAGEMENT CORP.
a Delaware Corporation
By: [SIGNATURE ILLEGIBLE]
--------------------------------
Its: Controller
--------------------------------
By: [SIGNATURE ILLEGIBLE]
--------------------------------
Its: Senior Vice President, Finance
--------------------------------
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<PAGE> 22
EXHIBIT A
TO
SUBLEASE
[Copy of the Lease]
SEE THE ATTACHED
A-1
<PAGE> 23
EXHIBIT A
PLAZA TOWER ONE
OFFICE
LEASE
Landlord:
HUNTINGTON BEACH COMPANY,
by its managing agent, Chevron Real Estate Management Company
Tenant:
ECHO BAY MANAGEMENT CORP.
<PAGE> 24
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. DEFINITIONS..........................................................6
2. GRANT: USES..........................................................8
3. RENT.................................................................9
4. UTILITIES...........................................................12
5. SERVICES............................................................13
6. INDEMNIFICATION AND INSURANCE.......................................15
7. WAIVER OF SUBROGATION...............................................17
8. REPAIRS.............................................................17
9. TENANT'S PROPERTY...................................................18
10. IMPROVEMENTS AND ALTERATIONS BY TENANT..............................18
11. CASUALTY............................................................19
12. ASSIGNMENT, LETTING AND SUBLETTING .................................19
13. LIENS AND INSOLVENCY................................................20
14. CONDEMNATION........................................................20
15. CONSTRUCTION CONDITIONS.............................................21
16. OCCUPANCY, LEASE COMMENCEMENT DATE..................................21
17. RULES AND REGULATIONS...............................................22
18. PARKING ............................................................22
19. ACCESS..............................................................22
20. SIGNS...............................................................23
21. TENANT'S DEFAULT....................................................23
</TABLE>
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<PAGE> 25
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
22. PERSONAL PROPERTY LIEN..............................................25
23. QUIET ENJOYMENT; INABILITY TO PERFORM ..............................25
24. HOLD OVER TENANCY...................................................26
25. ATTORNEYS' FEES.....................................................26
26. AMENDMENT, WAIVER...................................................26
27. NOTICES ............................................................27
28. BINDING EFFECT, GENDER .............................................27
29. ADDENDA AND ATTACHMENTS ............................................28
30. LIMITATION OF LIABILITY ............................................28
31. LANDLORD'S RESERVED RIGHTS .........................................28
32. OFFSET STATEMENT....................................................29
33. ACCORD AND SATISFACTION.............................................29
34. SEVERABILITY .......................................................30
35. SUBORDINATION ......................................................30
36. TIME................................................................30
37. APPLICABLE LAW .....................................................30
38. BROKER'S INDEMNIFICATION............................................31
39. SECURITY DEPOSIT ...................................................31
40. CONFLICTS OF INTEREST ..............................................31
41. TENANT REPRESENTATIONS .............................................31
42. ESTOPPEL CERTIFICATE ...............................................32
43. RIGHT TO RENEW .....................................................32
44. RIGHT TO TERMINATE .................................................33
</TABLE>
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<PAGE> 26
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
45. RIGHT OF FIRST REFUSAL .............................................34
46. RIGHTS OF FIRST OFFER ..............................................34
</TABLE>
EXHIBITS
EXHIBIT A: Map of Improved Area
EXHIBIT B: Floor Plan of Leased Premises
EXHIBIT C: Work Agreement
EXHIBIT D: Janitorial Specifications
EXHIBIT E: Lease Commencement Date Statement
EXHIBIT F: Rules and Regulations
EXHIBIT G: Attornment and Nondisturbance Agreement
EXHIBIT H: Estoppel Certificate
EXHIBIT I: HVAC Specifications
EXHIBIT J: Definition of Core and Shell
EXHIBIT K: Construction Procedures
EXHIBIT L: Chevron Self-Administered Claims Adjustment Program
- 4 -
<PAGE> 27
LEASE
This Lease ("Lease") is made as of the __day of April, 1995 by and
between HUNTINGTON BEACH COMPANY, a California corporation, ("Landlord"), by its
managing agent, Chevron Real Estate Management Company, a division of Chevron
U.S.A. Inc., and ECHO BAY MANAGEMENT CORP., a Delaware Corporation ("Tenant").
WITNESSETH:
Landlord and Tenant hereby agree as follows:
1. DEFINITIONS
A. "Improved Area" shall mean the real property located in Arapahoe
County, Colorado, described and shown outlined in blue on Exhibit A, attached
hereto, including the Building (as defined below) all land thereunder and all
appurtenances thereto, such as entries, sidewalks, curb areas, garage complexes,
driveways, landscaped areas, the Retail Area, and the Parking Garage.
B. "Leased Premises" shall mean the interior space shown outlined
in red on the floor plan of the Tower portion of the Building shown on Exhibit
B, attached hereto, containing approximately 55,510 rentable square feet,
amounting to approximately 50,827 BOMA usable square feet (computed by measuring
to the finished surface of the office side of the corridor and other permanent
walls, to the center of partitions that separate the Leased Premises from
adjoining usable areas, and to the inside surface of the exterior Building
glass, with no deductions made for columns and projections necessary to the
Building), plus the appurtenant right to use, in common with others, and the
entries, sidewalks, curb areas, driveways, cafeterias, health club facilities
(subject to the execution by Tenant of the form release and indemnity agreement
used from time to time by Landlord regarding the use of such health club
facilities by Tenant's employees), risers, conduit, and other public portions of
the Improved Area (the "Common Areas").
C. "Building" shall mean the building shown outlined in red on
Exhibit A, including the Tower, the Retail Area, and the Parking Garage, and
within which the Leased Premises are located.
D. "Tower" shall mean the portion of the Building shown outlined in
green on Exhibit A.
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<PAGE> 28
E. "Retail Area" shall mean the area of the Building shown outlined
in orange on Exhibit A.
F. "Parking Garage" shall mean the portion of the Building
identified as the Parking Garage on Exhibit A.
G. "Lease Commencement Date" shall have the meaning set forth in
Paragraph 16 of this Lease.
H. "Scheduled Commencement Date" shall mean September 1, 1995.
I. "Lease Term" shall mean the period beginning on the Lease
Commencement Date and ending one hundred twenty (120) months thereafter. Any
reference in this Lease to the Lease Term or the "term" shall all be deemed to
include any renewal period authorized under this Lease, if exercised by Tenant.
J. "Base Operating Costs" shall mean the Operating Costs for
calendar year 1996.
K. "Rent" shall mean Base Rent, Tenant's Pro Rata Share of
Operating Costs in excess of Base Operating Costs, and any other amounts payable
by Tenant to Landlord under this Lease.
L. "Base Rent" shall mean the following for the periods indicated:
<TABLE>
<CAPTION>
Period $/Sq. Ft./year; $/month
------ -----------------------
<S> <C>
Years one through five:
Years six through ten:
</TABLE>
M. "Tenant's Total Square Footage" shall mean 55,510 square feet,
which amount is equal to the sum of the square footage in the Leased Premises,
an allocated portion of Common Area square footage on the floors on which the
Leased Premises are located, and an allocated portion of the square footage of
the remaining Common Areas in the Tower.
N. "Total Square Footage of the Tower" shall mean 449,930 square
feet.
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<PAGE> 29
O. "Tenant's Pro Rata Share" shall mean 12.3375% calculated by
dividing Tenant's Total Square Footage by the Total Square Footage of the Tower.
P. "Permitted Purpose" shall mean use of the Leased Premises for
general office purposes and purposes incidental thereto, unless otherwise agreed
to in writing by Landlord in its Sole discretion.:
Q. "Landlord's Broker" shall mean F. Philipse Robinson.
R. "Tenant's Broker" shall mean Cushman Realty Corporation of
Colorado.
2. GRANT; USES
A. Subject to and on the terms and conditions set forth herein,
Landlord hereby demises and leases the Leased Premises to Tenant, and Tenant
hereby leases the Leased Premises from Landlord, to have and to hold during the
Lease Term.
B. Tenant agrees to use and occupy the Leased Premises for the
Permitted Purpose only, and for no other purpose whatsoever. Tenant covenants to
comply with all federal, state, and local statutes, laws, ordinances,
regulations, and rules (including, without limitation, as to the Leased Premises
and except as otherwise provided in this Lease, the laws and regulations
commonly known as the Americans with Disabilities Act) pertaining to Tenant's
use and occupancy of the Leased Premises and the Building. Tenant shall not do
or permit anything to be done in or about the Leased Premises or the Building
which will in any way (i) increase the existing rate of or affect any fire or
other insurance upon the Building or any of its contents; (ii) injure the
Building; (iii) constitute waste of the Leased Premises or the Building; or (iv)
be a nuisance, public or private, or menace to other tenants of the Building, or
anyone else.
C. Subject to the provisions of the Work Agreement attached hereto
as Exhibit C, and subject to the terms of Paragraph 16 below, Landlord and
Tenant shall cooperate with each other and use reasonable efforts to cause
Substantial Completion of the Leased Premises to occur on or before the
Scheduled Commencement Date.
D. Tenant agrees that it has determined to Tenant's satisfaction
that the Leased Premises can be used for the Permitted Purpose.
-7-
<PAGE> 30
E. By taking possession hereunder, Tenant shall have acknowledged
that it has examined the Leased Premises and accepts the same as being in the
condition called for by this Lease, except for any latent defects or any defects
identified by Tenant in a written notice given to Landlord within ten days after
Tenant takes possession of the Leased Premises. In the event any defects or
omissions appear in any of Landlord's Work (as defined in the Work Agreement) or
in any component of the building systems or structure, Landlord agrees, to
correct any such defect or omission.
3. RENT
A. Tenant shall pay to Landlord on the first day of each calendar
month during the Lease Term, at the mailing address as designated from time to
time by Landlord and without deduction or setoff (unless authorized by this
Lease), the Base Rent, any other charges provided for in this Lease, and
Tenant's Pro Rata Share of Operating Costs in excess of the Base Operating
Costs. Rent for any fractional calendar month shall be that proportion of the
Rent which the number of days during such month bears to the total number of
days in such month. If any Rent due hereunder is not paid by Tenant on the date
due, as to the second and all subsequent late payments during each calendar year
during the Lease Term, such amounts shall be subject to a late fee equal to two
percent (2%) per month until paid. For purposes of this Paragraph 3A, and until
directed to do otherwise, Tenant shall mail all payments required to be paid
under this Lease to the following address:
CHEVRON REAL ESTATE MANAGEMENT COMPANY
P.O. BOX. 297864
HOUSTON, TEXAS 77297
B. On and subject to the terms and conditions set forth in this
Paragraph 3B, during the Lease Term, Tenant shall pay to Landlord Tenant's Pro
Rata Share of Operating Costs in excess of the Base Operating Costs.
(1) As used herein, "Operating Costs" shall mean (unless
otherwise excluded herein) the sum of (i) the Tower Costs, plus (ii) the General
Project Expense, plus (iii) the Tax Cost. As used herein, the "Tower Cost" shall
mean all expenses, costs, and disbursements made or required to be made by
Landlord in connection with the maintenance, repair, and operation of the Tower,
including, without limitation, personal property taxes on personal property
located at and used in the operation of the Tower; utilities not separately
metered to individual tenants; costs of installing any energy reduction devices
and systems, except those included in the initial Building specifications,
amortized in accordance with generally accepted accounting principles applied on
a consistent basis (but in no event shall such costs exceed the amount of any
savings actually achieved by such device or system);
- 8 -
<PAGE> 31
janitorial service; operating supplies; tools and equipment used for the daily
operation of the Tower; air conditioning, heating, and elevator repair and
maintenance; and on site property management fees. As used herein, the "General
Project Expense" shall mean that portion of the costs and expenses for the
operation, maintenance, and repair of the Improved Area which are not fairly
allocable to the Parking Garage or to the Retail Area or any other rentable
components of the Improved Area and which Landlord determines from time to time
on a fair and equitable basis to be allocable to the Tower; including, without
limitation, costs incurred in connection with cleaning the Common Areas within
the Improved Area; property and general liability insurance coverages covering.
the Improved Area including the Building (including Landlord's estimated fair
market cost, not to exceed ISO (insurance Services Office) Market Rates for any
risks against which Landlord elects to self-insure); management and maintenance
personnel's wages, payroll taxes, welfare, and disability benefits reasonably
incurred in the operation of the Improved Area; snow and ice removal;
landscaping; rubbish removal; and on site security. As used herein, the "Tax
Cost" shall mean the aggregate of all taxes and assessments (exclusive of any
penalties or interest on any amounts not paid when due by Landlord) imposed by
any governmental authority upon the real property included within the Improved
Area (including, without limitation, any assessments imposed by the Greenwood
Plaza South Metropolitan District or any other special taxing districts whose
territorial boundaries include the Improved Area) which are not fairly allocable
to the Parking Garage, the Retail Area, or any other rentable components of the
Improved Area and which Landlord determines from time to time on a fair and
equitable basis to be allocable to the Tower.
(2) Operating Costs shall not include monies spent for
income tax accounting; expenses resulting from the negligence of Landlord;
expenses and costs associated with the operation of Landlord's business
organization; legal fees; space planning fees; real estate brokerage
commissions; decorating fees; advertising costs associated with development and
leasing of the Building; rent concessions, construction allowances, or other
leasing incentives; costs of repairs or replacements or other work occasioned by
fire, theft, vandalism, windstorm, or other casualty or by the exercise by any
governmental authority of the power of eminent domain; any and all costs
incurred in installing, operating, maintaining, and owning any services for
which a fee or other income for the use thereof is paid to or otherwise
collected by Landlord, including any restaurants, cafeterias, lunchrooms, or
other similar facilities; all costs associated with the Parking Garage and with
any other on-site or off-site parking facilities; all costs for services
provided by Landlord for which it receives a separate fee or other compensation
in any form or from any source whatsoever; all costs fairly attributable to the
Retail Area or to any other rentable components of the Improved Area;
depreciation, amortization, and interest on the capital retirement of debt,
payments of any type under any mortgage, deed of trust, ground lease, or other
similar obligations encumbering any portion of the Improved Area; bad debt or
rent losses of Landlord; fines, penalties, interest, or other charges
-9-
<PAGE> 32
paid by Landlord to any other tenant or third party; interest, depreciation, or
expenditures of a capital nature, except to the extent that such expenditures
are required due to a change in law after the Lease Commencement Date, or are
incurred to cause a reduction in any item of Operating Costs, in which case such
capital expenditures shall be amortized in accordance with generally accepted
accounting principles applied on a consistent basis (but in no event shall any
costs for any device or system installed to reduce any item of Operating Costs
exceed the amount of any savings actually achieved by such device or system);
and all costs incurred by Landlord in making any alterations to the Building
pursuant to the laws and regulations commonly known as the Americans with
Disabilities Act. Also, if Landlord constructs any other buildings for lease
within the boundaries of the Improved Area, Operating Costs, exclusive of those
incurred directly for the Building, shall be reasonably allocated by Landlord on
a fair and equitable basis between the Building hereunder and such other
buildings. The determination of Operating Costs and their allocation and
amortization shall be in accordance with generally accepted accounting
principles applied on a consistent basis.
(3) If the Building and other buildings located on the
Improved Area are not fully rented during all or a portion of any calendar year,
Landlord shall make an appropriate adjustment of the Operating Costs which vary
with occupancy for such year, employing sound accounting and management
principles, to determine the amount of Operating Costs payable by Tenant
hereunder had all such buildings been fully rented.
(4) Operating Costs shall not reflect any type or degree of
service or duty performed by or through Landlord for any other tenant which is
not required to be performed for Tenant under this Lease which results in a cost
this Lease.
(5) During December of each calendar year or as soon
thereafter as practicable, Landlord shall give Tenant written notice of
Landlord's estimate of Tenant's Pro Rata Share of Operating Costs in excess of
Base Operating Costs payable hereunder for the ensuing calendar year. On or
before the first day of each month during the ensuing calendar year, Tenant
shall pay to Landlord one twelfth (1/12) of such estimated amount, provided that
if such notice is not given in December, Tenant shall continue to pay on the
basis of the prior year's estimate until the month after such notice is given.
If at any time it appears to Landlord that Tenant's Pro Rata Share of Operating
Costs payable hereunder for the current calendar year will vary from its
estimate by more than twenty percent (20%), Landlord may, by written notice to
Tenant, revise its estimate for such year, and subsequent payments by Tenant for
such year shall be based upon such revised estimate.
(6) Within ninety (90) days after the close of each calendar
year, or as soon thereafter as practicable, Landlord shall deliver to Tenant a
statement
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<PAGE> 33
of additional Rent for Operating Costs payable hereunder for such calendar year.
If such statement shows an amount owing by Tenant that is less than the
estimated payments for such calendar year previously made by Tenant, Landlord
shall credit the excess to the next succeeding monthly installment or
installments of Rent, or, if no additional Rent is payable hereunder by Tenant
at the time that such determination is made, Landlord shall pay such amounts to
Tenant. If such statement shows an amount owing by Tenant that is more than the
estimated payments for such calendar year previously made by Tenant, Tenant
shall pay the deficiency to Landlord within thirty (30) days after delivery of
such statement.
(7) If, for any reason other than the default of Tenant,
this Lease shall terminate on a day other than the last day of a calendar year,
the additional Rent for Operating Costs payable by Tenant applicable to the
calendar year in which such termination shall occur shall be prorated on the
basis which the number of days from the commencement of such calendar year to
and including such date of termination bears to three hundred sixty-five (365).
(8) Landlord shall, upon Tenant's written request, deliver
to Tenant a written accounting showing how Operating Costs were calculated for
any year (the "Statement"). In the event Tenant objects to the Statement of
Operating Costs for any year, Tenant and Landlord agree to cooperate in good
faith to resolve any such objection. The foregoing notwithstanding, Tenant shall
in no way be relieved of its obligation to pay Tenant's Pro Rata Share of
Operating Costs in excess of the Base Operating Costs as calculated by Landlord
until such objection is resolved. If Landlord and Tenant are unable to resolve
such objection within thirty (30) days after Tenant's notice of objection was
given, Tenant shall have the right of access to all of Landlord's books and
records relating to the Operating Costs and may cause a review thereof to be
performed by an independent accountant for the period covered by the Statement
(the "Tenant's Audit"). After the completion of the Tenant's Audit, the
individual who prepared the Statement and the individual who prepared the
Tenant's Audit shall use reasonable good faith efforts to agree on any item in
dispute between the Statement and the Tenant's Audit and any items as to which
agreement is reached shall be resolved by such agreement. If the two individuals
fail to agree as to any items in dispute within twenty (20) days after the
completion of the Tenant's Audit, then the two individuals shall appoint an
independent certified public accountant (the "Third Accountant")-and shall
deliver copies of the Statement and the Tenant's Audit to such Third Accountant,
specifying the individual items still in dispute. The Third Accountant shall
resolve each item in dispute in an amount not higher than that determined by the
higher audit and not lower than that determined by the lower audit as determined
by the Third Accountant's review of the Statement, the Tenant's Audit, and such
further inquiries and investigations as the Third Accountant determines to make.
The Third Accountant shall make his decision as to each item in dispute and give
written notice of his decision to Landlord and Tenant within fifteen (15) days
after this appointment. The determination made as to any
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items in accordance with the foregoing procedures shall be final and binding on,
both Landlord and Tenant as to such items. Any adjustment required to be made to
any previous payment made by Tenant by reason of such decision shall be made by
Tenant or Landlord within fourteen (14) days after notice of the final decision
has been given to Landlord and Tenant. The party required to make payment under
such adjustment shall bear all costs of the Tenant's Audit and the Third
Accountant, unless such payment is less than $20,000.00, in which case Tenant
shall bear all such costs.
4. UTILITIES
Landlord shall provide to the Leased Premises the following utility
services: hot and cold running water, sewer, natural gas, and electric power in
an amount not less than an average of 6.0 watts per rentable square foot in the
Leased Premises. Electrical usage by Tenant shall be determined on an average
hourly basis by readings made in hourly increments during normal business hours
and such usage shall be calculated and determined on an annualized basis.
Utility charges for which separate billings are not available shall be treated
as Operating Costs. If Landlord shall from time to time reasonably determine
that the use of electricity or any other utility or service in the Leased
Premises is disproportionate to the use of other tenants, Landlord may require a
separate meter to be installed at Tenant's expense in the Leased Premises to
monitor the use of any such utility or service and Tenant shall pay the amount
of all charges for the separately metered use of such utility or service;
provided that in no event shall any electrical usage by Tenant which does not
exceed the 6.0 watts per square foot standard set forth above in this Paragraph
4 be considered disproportionate hereunder. To the extent that, during any year,
Tenant pays the charges incurred for its usage of any separately metered utility
or service directly to either Landlord or the provider of such service, based on
such separate metering for such utility or service, the Operating Costs shall be
adjusted in a fail' and equitable manner (as determined by Landlord in its
reasonable discretion) so that the Operating Costs payable by Tenant shall not
include costs attributable to providing to other rentable components in the
Improved Area the utilities or services which are separately metered and paid
for by Tenant.
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5. SERVICES
Landlord shall operate, maintain, repair, replace, and improve all
systems, facilities, equipment, and services provided to the Building, the
Common Areas, and all other portions of the Improved Area as and when needed in
accordance with standards from time to time prevailing for first class office
buildings in the Denver metropolitan area.
A. Landlord shall provide in the Leased Premises, and in the
Building and Improved Areas as indicated, the following services:
(1) Heat, ventilation, and cooling as required for the
comfortable use and occupancy of the Leased Premises and meeting the standards
Set forth in Exhibit J attached hereto during the hours of 6:00 a.m. through
6:00 p.m. Monday through Friday and 7:00 a.m. through 1:00 p.m. on Saturday
(referred to herein as the "Building Hours"); provided that, if Tenant gives
Landlord at least 24 hours prior notice that Tenant requires heating,
ventilation, or cooling of the Leased Premises at any other time, Landlord shall
provide the same at Landlord's actual cost therefor, which cost is currently
$25.00 per hour; provided further that, if Tenant does not give Landlord 24
hours prior notice of any such request, Landlord shall use reasonable efforts to
provide the same to Tenant at the times requested by Tenant, but Tenant shall
pay any additional charge reflecting the increased actual cost to Landlord in
providing such service at such times, which charge shall be disclosed to Tenant
when it orders such service.
(2) Janitorial services, including window washing, as
reasonably required to keep the Leased Premises in a clean and wholesome
condition and meeting the specifications set forth on Exhibit D attached hereto
for regular service on each Monday through Friday during the Lease Term.
(3) Electric power to the Leased Premises at all times for
normal lighting, office equipment, and general business operations in an amount
at least equal to an average of 6.0 watts per square foot in the Leased Premises
in accordance with the terms Set forth in Paragraph 4 hereof; provided that,
lighting to the Premises outside of the normal Building Hours shall be subject
to a charge to Tenant in an amount not to exceed Landlord's reasonable good
faith estimate of the actual out-of-pocket costs incurred by Landlord in
providing such lighting (which amount is currently $5.00 per floor per hour)and
shall be provided to the Premises at any time on a 24-hour basis upon request by
Tenant, or any of Tenant's employees, and Landlord shall maintain a procedure by
which Tenant may make such request at any time by telephone and such lighting
service shall, if requested by Tenant, be provided within one-half hour after
any such request is made by Tenant.
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<PAGE> 36
(4) Replacement of Building Standard fluorescent tubes,
light bulbs, and ballasts in the Leased Premises and in the Common Areas as
required from time to time as a result of normal usage.
(5) At all times, domestic hot and cold running water and
necessary supplies in washrooms sufficient for the normal use thereof by
occupants in the Building.
(6) Access to and egress from the Leased Premises and the
Parking Garage at all times, including elevator service.
(7) Heat, ventilation, cooling, lighting, electric power,
domestic running water, window cleaning, and janitorial service in all Common
Areas of the Building.
(8) Snow removal, landscaping, and janitorial services as
needed from time to time in all grounds and other Common Areas of the Improved
Area,
B. Landlord shall operate, maintain, repair and replace the
systems, facilities and equipment necessary for the proper operation of the
Building, the Common Areas, and all other portions of the Improved Area, and for
the provision of Landlord's services under this Lease, and shall be responsible
for and shall expeditiously maintain and repair the foundations, structure, and
roof of the Building, and repair damage to the Building, and shall be
responsible for the compliance of the Building (including the core and shell
portions described on Exhibit J attached hereto), all Common Areas, and all
other portions of the Improved Area with all recorded covenants affecting the
improved Area and with all applicable federal, state, and local laws, rules,
codes, and other regulations, including, without limitation, all building and
zoning codes and regulations, all environmental laws and regulations, and the
Americans with Disabilities Act.
C. Landlord shall not be liable to Tenant, nor shall Rent be
abated, due to any interruption of the services which Landlord is required to
provide under Paragraph 4 above or this Paragraph 5 resulting from any cause or
event which is beyond the reasonable control of Landlord; provided that, if any
such interruption of services causes the Leased Premises (or any part thereof)
to be untenantable for a period of five (5) business days, Rent shall be abated
proportionately'.
6. INDEMNIFICATION AND INSURANCE
A. Landlord shall not be liable to Tenant, and Tenant hereby waives
all claims against Landlord for any injury to or death of any person or damage
to any property (i) occurring in, on, or about the Leased Premises by or from
any cause
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whatsoever, whether or not such injury, death, or damage may be caused in part
by the passive negligence or fault of Landlord, its employees, agents, or
contractors, and excepting in all cases any such injury, death, or damage to the
extent caused by the sole or active negligence or willful misconduct of
Landlord, its employees, agents, or contractors, or (ii) occurring in, on, or
about the Improved Area by reason of any act or omission or any active, passive,
or concurrent negligence or fault of Tenant.
B. In addition to Tenant's obligations under Paragraphs 6D and 6F
below, except to the extent covered by any policies of insurance maintained, or
required hereby to be maintained, by Landlord (which policies shall, pursuant
to Paragraph 6F(iii) below, be secondary to the insurance coverages carried by
Tenant), Tenant agrees to indemnify, protect, and hold harmless Landlord, from
and against any and all claims or liability for any injury to or death of any
person (including employees of Tenant and Landlord) or damage to any property
(including property belonging to Tenant and Landlord) whatsoever (i) occurring
in, on, or about the Leased Premises; or any part thereof, from any cause
whatsoever, whether or not such injury, death, or damage may be caused in part
by the passive negligence or fault of Landlord, its employees, agents, or
contractors, and excepting in all cases any such injury, death, or damage to the
extent caused by the sole or active negligence or willful misconduct of
Landlord, its employees, agents, or contractors, or (ii) occurring in, on, or
about the Improved Area by reason of any act or omission or any active, passive,
or concurrent negligence or fault of Tenant. The obligations of Tenant set forth
in this Paragraph 6B shall survive termination of this Lease by expiration of
the Lease Term or otherwise for a period of one year.
C. Tenant shall, at its sole cost and expense, obtain and keep in
force during the Lease Term, fire and extended coverage insurance on Tenant's
improvements; fixtures, furnishings, and equipment in and upon the Leased
Premises or Building in an amount not less than one hundred percent (100%) of
the full replacement cost (without deduction for depreciation) thereof. All
amounts received from said insurance for any damage to or destruction of any of
the improvements in the Leased Premises shall be applied to the payment of the
cost of repair or replacement of such improvements (and the balance shall be
retained by Tenant), unless this Lease terminates prior to such repair or
replacement being made, in which case the portion of such amounts representing
damage to any such improvements which would have become Landlord's property
pursuant to Paragraph 10 hereof shall be paid over to Landlord, and the balance
shall be retained by Tenant.
D. Without in any way limiting Tenant's liability pursuant to
Paragraph 6B above, Tenant shall, at its sole cost and expense, obtain and keep
in force during the term of this Lease comprehensive general liability insurance
(bodily injury and property damage) with a limit of liability not less than one
million dollars ($1,000,000) per occurrence and with the following supplementary
coverages: (a) personal injury liability with the "employee" and "contractual"
exclusions deleted;
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and (b) broad form property damage liability. Landlord shall have the right, at
any time or from time to time, upon reasonable prior written notice to Tenant,
to require Tenant to make reasonable adjustments to the amount of insurance
required hereunder to reflect increases in the Consumer Price Index as published
by the U.S. Department of Commerce, and/or to modify its form.
E. During the Lease Term, Landlord shall insure the Building,
excluding any property which Tenant is obligated to insure, against damage by
fire and standard extended coverage perils and Landlord shall maintain
comprehensive general liability insurance in such amounts and with such
deductibles as are from time to time generally accepted as commercially
reasonable for first class office buildings in the Denver metropolitan area;
provided, however, that Landlord shall have the tight, at its election, to
maintain all or any part of such insurance under the Chevron Self-Administered
Claims Adjustment Program described in Exhibit L attached hereto. Landlord may,
but shall not be obligated to, takeout and carry any other form or forms of
insurance as it or Landlord's mortgagees may reasonably determine advisable.
Notwithstanding any contribution by, Tenant to the cost of insurance premiums,
as provided herein, Tenant acknowledges that it has no right to receive any
proceeds from any such insurance policies carried by, Landlord. Landlord will
not have to carry insurance of any kind on Tenant's furniture or furnishings, or
on any of Tenant's fixtures, equipment, improvements, or appurtenances under
this Lease.
F. All insurance required under this Paragraph 6 and all renewals
thereof shall be issued by such responsible companies qualified to do and doing
business in the State of Colorado as may be approved by Landlord. Each policy
required hereunder to be carried by Tenant (i) shall expressly provide' that the
policy shall not be cancelled or materially altered without thirty (30) days'
prior written notice to Landlord, (ii) shall name Landlord as an additional
insured, (iii) shall be primary and noncontributing with any insurance which may
be carried by Landlord, and (iv)shall expressly provide that Landlord, although
named as an additional insured, shall nevertheless be entitled to recover
against Tenant under the policy for any loss; injury or damage to Landlord, its
employees and contractors, and shall contain a standard "cross liability" or
"severability of interest" clause.
Upon the issuance thereof, Tenant shall cause a certificate of the insurance
coverages maintained by Tenant hereunder to be delivered to Landlord.
7. WAIVER OF SUBROGATION
Tenant hereby waives, for itself and on behalf of its insurers under all
policies of fire, theft, public liability, workers' compensation, and other
insurance now or hereafter existing during the Lease Term and purchased by or
for Tenant insuring or covering the Leased Premises, or any portion or any
contents thereof, or any
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<PAGE> 39
operations therein, or the Building, all rights of subrogation which any insurer
might otherwise have to any claims of Tenant against Landlord. Landlord hereby
waives, for itself and on behalf of its insurers under all policies of fire,
theft, public liability, workers' compensation, and other insurance now or
hereafter existing during the Lease Term and purchased by or for Landlord
insuring or covering the Improved Area or the Building or any portion or the
contents thereof, or any operations therein, all rights of subrogation which any
insurer might otherwise have to any claims of Landlord against Tenant. Landlord
and Tenant shall each, prior to or immediately after the execution of this
Lease, procure from each of such insurers a waiver of all rights of subrogation
which the insurer might otherwise have as against the other. This Paragraph 7
shall not be construed to require Landlord or Tenant to obtain any insurance
coverage not otherwise required by this Lease nor to waive any rights of
recovery that either Landlord or Tenant may have directly against the other to
the extent that any loss or damage giving rise to any such right of recovery is
not actually covered by insurance.
8. REPAIRS
Except for services provided by Landlord, Tenant shall maintain in a
clean, orderly, and sanitary condition and keep in good repair, the interior of
the Leased Premises, ordinary wear and tear and damage by fire or other casualty
excepted. Such maintenance and repair shall be at the sole cost of Tenant and
shall include but not be limited to the maintenance and repair of floor
covering, ceilings, and walls, front and rear doors, and all interior glass on
the Leased Premises. If Tenant fails to maintain or keep the Leased Premises in
good repair and such failure continues for thirty (30) days after written notice
from Landlord, Landlord may perform any such required maintenance and repairs
and the cost thereof shall be additional Rent payable by Tenant within ten (10)
days of receipt of any invoice therefor from Landlord.
9. TENANT'S PROPERTY
All furnishings, trade fixtures, and moveable equipment, including,
without limitation, the secretarial work stations installed in the Leased
Premises by Tenant, paid for and installed by Tenant, shall be the property of
Tenant. Upon expiration of this Lease, Tenant may remove any such property and
shall remove any such property if directed by Landlord. Tenant shall repair, or
reimburse Landlord for the cost of repairing, any damage resulting from removal
of Tenant's property. If Tenant fails to remove such property as required under
this Lease, Tenant shall be deemed to have abandoned all interest in any such
property remaining or then in or upon the Leased Premises and Landlord may
remove the same as its own property and dispose of such property as it desires
without liability to Tenant.
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<PAGE> 40
10. IMPROVEMENTS AND ALTERATIONS BY TENANT
Tenant may make such additional improvements or alterations to the
Leased Premises as it deems necessary or desirable, but only with Landlord's
prior written approval (which approval shall not be unreasonably withheld). Any
such improvements or alterations by Tenant shall be at Tenant's expense and
shall be done by a licensed contractor approved by Landlord in conformity with
plans and specifications approved by Landlord, which approvals shall not be
unreasonably withheld. If requested by, Landlord, Tenant will post a bond or
provide other security reasonably satisfactory to Landlord to protect Landlord
against liens arising from work performed for Tenant. All work performed shall
be done in a good and workmanlike manner, in accordance with applicable law, and
with materials (where not specifically described in the specifications) of the
quality and appearance comparable to those in the Building. Prior to the
commencement of any work or delivery of any materials to the Leased Premises,
Tenant shall furnish Landlord, for its approval (which approval shall not be
unreasonably withheld), copies of the following:
(a) Plans and specifications,
(b) Names and addresses of contractors,
(c) Copies of contracts, and
(d) Necessary permits.
Unless otherwise agreed in writing between the parties at the time of
Landlord's approval of any alterations, all alterations, fixtures (except trade
fixtures, including the secretarial workstations installed in the Leased
Premises by Tenant) and improvements, including those made or installed in or
upon the Leased Premises by or for Tenant, shall immediately become Landlord's
property and, at the end of the Lease Term, shall remain on the Leased Premises
without compensation to Tenant.
11. CASUALTY
If the Leased Premises or the Building are destroyed or damaged by
fire, earthquake, or other casualty to the extent that the Leased Premises are
untenantable in whole or in part, then Landlord shall, except as provided
below, proceed with reasonable diligence to rebuild and restore the Leased
Premises or such part thereof as may be destroyed or damaged, and during the
period of such rebuilding and restoration, this Lease shall remain in full force
and effect, and Rent shall be abated in the same ratio as the square footage in
the portion of the Leased Premises rendered untenantable, if any, shall bear to
the total square footage in the Leased Premises.
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If Landlord shall reasonably determine that such destruction or damage cannot be
rebuilt and restored within one-hundred-eighty (180) days of the occurrence, it
shall so notify Tenant within sixty (60) days after the occurrence of such
damage or destruction. In such event, either Landlord or Tenant may, within
twenty (20) days after such notice, terminate this Lease as of the date of such
casualty. If neither party terminates this Lease during such twenty (20) day
period, this Lease shall remain in effect and Landlord shall diligently proceed
to rebuild and restore the Leased Premises, and Rent shall abate as set forth
above. Anything in this Lease to the contrary notwithstanding, in the event the
Leased Premises are rendered untenantable due to the fault or neglect of Tenant,
its agents, employees, invitees, or licensees, there shall be no abatement of
Rent under this Paragraph 11.
12. ASSIGNMENT, LETTING AND SUBLETTING
A. Tenant, its legal representatives and successors in interest,
shall have no right to assign, let, or sublet or permit assigning, letting or
subletting of this Lease, the Leased Premises or any part thereof, respectively,
without first obtaining the written consent of Landlord, which consent shall not
be unreasonably withheld; provided that Tenant shall have the right, without
obtaining Landlord's prior consent, to sublease or assign this Lease, or all or
any portion of the Leased Premises, at any time and from time to time to any
entity which controls, is controlled by, or is under common control with Tenant,
or any successor to Tenant by merger, consolidation, or reorganization, or any
person or entity which purchases all or any substantial portion of the assets of
Tenant (which entities are referred to herein collectively as the "Tenant
Affiliates"). Any consent of Landlord required hereby, unless specifically
stated therein, shall not relieve Tenant from its obligations under this Lease,
and a consent by Landlord to any one assignment or subletting shall not
constitute a consent to any other or subsequent assignment or subletting.
B. In addition to any other reasonable basis, Landlord shall be
deemed to be acting reasonably in withholding its consent to any such assignment
or subletting, if such assignment or subletting would result in the assignment,
leasing or subleasing of the Leased Premises to any person or entity:
(1) who proposes to conduct a business therein which is not
in conformance with the provisions of Paragraph 2 hereof; or
(2) whose business is of a character which is not, in
Landlord's reasonable opinion, consistent with the character of the Building.
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C. Tenant shall provide Landlord with a copy of any assignment of
this Lease or any sublease of the Leased Premises and a copy of any document
pursuant to which any such assignment or sublease may be made. Except in the
event of any assignment or sublease to or with any Tenant Affiliate, Tenant
shall pay or deliver over to Landlord, as additional Rent hereunder, an amount
equal to one-half of any consideration received by Tenant in respect of any
such assignment or sublease (after deduction for all reasonable costs and
expenses incurred by Tenant in connection with such assignment or subletting,
including, without limitation, leasing commissions, tenant improvement costs,
marketing costs, lease takeover obligations, rent concessions and other
concessions or incentives, and all similar costs, and all Rent accruing
hereunder during the period of time that Tenant is marketing the Leased Premises
for such assignment or subletting) in excess of the Rent due under this Lease
attributable to such portion of the Leased Premises covered by such or
sublease.
13. LIENS AND INSOLVENCY
Tenant shall keep the Leased Premises, the Building, and the improved
Area free from any liens arising out of any work performed, materials furnished,
or obligations incurred by Tenant.
14. CONDEMNATION
If all or any part of the Leased Premises are taken under power of
eminent domain or like power, or sold under imminent threat thereof to any
public authority or private entity having such power, this Lease shall terminate
as to the part of the Leased Premises so taken or sold, effective as of the date
possession is required to be delivered to such authority or entity. Rent for the
remaining Lease Term shall be reduced in the proportion that the Tenant's Total
Square Footage is reduced by the taking. If a partial taking or sale of the
Building or the Leased Premises (i) substantially reduces the area of the Leased
Premises resulting in a substantial inability of Tenant to use the Leased
Premises for Tenant's business purposes, or (ii) renders the Building unviable
to Landlord, Tenant, in the case of (i), or Landlord, in the case of (ii), may
terminate this Lease by written notice delivered to the other party within
thirty (30) days after the terminating party receives notice of the portion to
be taken or sold, such termination to be effective one-hundred-eighty (180) days
thereafter, or when the portion, is taken or sold, whichever is sooner. All
condemnation awards and similar payments shall be paid and belong to Landlord,
except any amounts awarded or paid specifically for Tenant's furnishings, trade
fixtures, and other personal property, the value of Tenant's leasehold interest
in the Building hereunder, any loss of business and business interruption costs,
and all relocation costs; provided that in no event shall any such awards to
Tenant be
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<PAGE> 43
permitted to have the effect of reducing Landlord"s award. Nothing contained
herein shall diminish Tenant's right to deal on its own behalf with the
condemning authority.
15. CONSTRUCTION CONDITIONS
A. Tenant shall construct the Leasehold Improvements to the Leased
Premises pursuant to the Work Agreement (Exhibit C).
B. To the extent that any term or provision of this Lease conflicts
with the Work Agreement, the Work Agreement shall control.
16. OCCUPANCY, LEASE COMMENCEMENT DATE
As used, herein, the "Lease Commencement Date" shall mean the later of
(i) the Scheduled Commencement Date, or (ii) that date Which is determined by
adding to the Scheduled Commencement Date the number of days that Substantial
Completion of the Leasehold Improvements is delayed due solely to a Landlord
Delay (as defined in the Work Agreement) or due to any other cause which is in
the nature of an Unavoidable Delay as defined in Paragraph 23C. If the Lease
Commencement Date has not occurred on or before one hundred and twenty (120)
days following the Scheduled Commencement Date, Tenant shall have the right to
terminate this Lease by written notice given to Landlord at any time prior to
Substantial Completion of the Leasehold Improvements. Prior to occupying the
Leased Premises, Landlord and Tenant shall execute and deliver a letter in the
form attached hereto as Exhibit E, acknowledging the Lease Commencement Date. If
either Landlord or Tenant fails to deliver such letter, the date of Substantial
Completion of the Leased Premises shall be deemed to be the Scheduled
Commencement Date.
If Tenant commences the regular conduct of its business in any part of
the Leased Premises prior to Lease Commencement Date, Tenant shall pay to
Landlord rent for each day prior to the Lease Commencement Date, calculated on
the basis of the per diem Rent which would be due to Landlord from Tenant if the
Lease Term had commenced for the portion of the Leased Premises occupied by
Tenant for such purpose.
17. RULES AND REGULATIONS
Tenant covenants that Tenant and its agents, employees, invitees, or
those claiming under Tenant, will at all times observe, perform, and abide by
all reasonable rules and regulations promulgated by Landlord, from time to time
upon receipt of written notice thereof, as long as such rules and regulations do
not conflict
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with, or unreasonably modify, any provision of this Lease and are generally
applicable to all tenants in the Building. Landlord's rules and regulations in
effect on the date hereof are attached hereto as Exhibit F. All such rules and
regulations shall be interpreted and enforced by Landlord in a consistent manner
as to Tenant and all other tenants in the Building.
18. PARKING
Landlord shall provide to Tenant non-exclusive parking within the
Parking Garage contiguous to the Building at a ratio of one space for each 330
rentable square feet contained from time to time within the Leased Premises
(including any additional space taken by Tenant pursuant to Paragraph 45 or
Paragraph 46 hereof) (the "Regular Spaces"), and an additional 81 short-term
parking spaces in close proximity to the elevators, which shall be available for
use by Tenant's visitors at no cost for up to two hours. The Regular Spaces
(which, as of the Commencement Date, shall be 168 spaces) will be provided by
Landlord for use by the Tenant at a charge of _________ per space per month
during the first sixty (60) months Of the Lease Term and _________ per space per
month during months 61 through 120. Subject to Landlord's rules and regulations
adopted from time to time pursuant to Paragraph 17, Tenant's employees, invitees
and licensees shall be entitled to reasonable use of such parking spaces.
19. ACCESS
Landlord, or Landlord's employees, agents, or contractors; may enter the
Leased Premises at reasonable times for the purpose of inspecting, altering or
repairing the Leased Premises or other portions of the Building and for the
purpose of ascertaining compliance by Tenant with the provisions of this Lease.
Landlord may also show the Leased Premises to prospective purchasers or lenders
(or, during the last B months of the Lease Term, to prospective renters) during
regular business hours and upon reasonable prior notice. Landlord's entry shall
not unreasonably interfere with Tenant's business operations or with Tenant's
use and occupancy of the Leased Premises. Landlord shall repair, at Landlord's
expense, any damage to the Leased Premises resulting from the exercise of the
foregoing rights by Landlord or Landlord's employees, agents, or contractors.
20. SIGNS
All signs and symbols placed on the doors or windows or elsewhere about
the Leased Premises, or upon any other part of the Building, including building
directories, shall be subject to the approval of Landlord, which approval shall
not be
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<PAGE> 45
unreasonably withheld. Tenant shall have no right to place signs outside the
Building and within the Improved Area. Tenant shall be entitled to place signs
within the interior of the Leased Premises without having first obtained
Landlord's approval. Upon expiration of this Lease, all signs installed by
Tenant shall be removed and any damage resulting therefrom shall be promptly
repaired, or such removal and repair may be done by Landlord and the cost
thereof charged to Tenant as additional Rent hereunder. Landlord shall, at
Landlord's expense, provide space to Tenant for 16 names on the main directory
board located in the lobby of the Building, which names may be designated from
time to time by Tenant. Additionally, Landlord shall include Tenant's company
name on the group and alphabetical listings on such directory board.
21. TENANT'S DEFAULT
It shall be an "Event of Default" if (i) Tenant fails to pay Rent or any
other charge or payment required of Tenant hereunder when due and such failure
continues for ten (10) days after written notice thereof to Tenant by Landlord;
(ii) Tenant violates or fails to perform any of the other conditions, covenants,
or agreements herein made by Tenant, and such violation or failure continues for
fifteen (15) days after written notice thereof to Tenant by Landlord; (iii)
Tenant makes a general assignment for the benefit of its creditors or files a
petition for bankruptcy or other reorganization, liquidation, dissolution, or
similar relief; (iv) a proceeding is filed against Tenant seeking any relief
mentioned in (iii) above which is not dismissed within sixty (60) days after
Tenant receives notice of such proceeding; (v) a trustee, receiver, or
liquidator is appointed for Tenant or a substantial part of its property; (vi)
Tenant's interest under this Lease is taken upon execution or by other process
of law directed against Tenant or shall be made subject to any attachment by or
on behalf of any creditor of Tenant; or (viii) Tenant mortgages, assigns (except
as expressly permitted in this Lease) or otherwise encumbers Tenant's interest
under this Lease.
If an Event of Default occurs, Landlord may: (i) without obligation to
do so and without releasing Tenant from any obligation under this Lease, make
any payment or take any action Landlord may deem necessary or desirable to cure
such Event of Default, and the cost thereof shall be reimbursed by Tenant to
Landlord within ten (10) days after demand; (ii) terminate this Lease by written
notice to Tenant as of the date such notice is given or as of any other date
specified in such notice; (iii) with or without terminating this Lease, reenter
and take possession of the Leased Premises by legal proceedings; (iv) with or
without terminating this Lease, if Tenant has abandoned the Leased Premises,
reenter and take possession of the Leased Premises, or any part thereof, end
remove the effects therein without liability for any damages thereto and without
being deemed guilty of any manner of trespass and without prejudice to any other
remedies of Landlord hereunder; and (iv) exercise any other legal remedy,
including, without limitation, any applicable equitable
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remedies, on account of such Event of Default. All remedies of Landlord under
this Lease shall be cumulative, and the exercise of any of such remedies shall
not prevent the concurrent or subsequent exercise of any other remedy.
Should Landlord elect to reenter or take possession of the Leased
Premises pursuant to legal proceedings or otherwise, Landlord shall, from time
to time, without terminating this Lease, use reasonable efforts to relet the
Leased Premises or any part thereof on behalf of Tenant for such term or terms
and at such rent or rents, and upon such other terms and conditions, as Landlord
may deem reasonably advisable (including, without limitation, giving any
concessions, free rent, and any other concessions which may be reasonably
necessary under the circumstances), with the right to make alterations and
repairs to the Leased Premises. No such reentry or taking of possession of the
Leased Premises by Landlord shall be construed as an election on Landlord's pact
to terminate this Lease, unless a written notice of termination is given to
Tenant by Landlord, nor shall it preclude landlord from terminating this Lease
at a later time by giving written notice to Tenant.
If Landlord elects to take possession without terminating this Lease,
then such repossession shall not relieve Tenant of its obligations and
liabilities under this Lease, all of which shall survive such repossession. In
the event of such repossession, Tenant shall pay to Landlord, as rent, all Rent
which would be payable hereunder if such repossession had not occurred, less the
net proceeds, if any, of any reletting of the Leased Premises, after deducting
all of Landlord's reasonable expenses in connection with such reletting and any
reasonable rental concessions. Tenant shall pay such Rent to Landlord on the
days on which such Rent would have been payable hereunder if possession had not
been retaken.
If, however, this Lease is terminated by Landlord, Landlord shall be
entitled to recover as damages from Tenant, in addition to all other damage
suffered by Landlord on account of any Event of Default, the sum of (i) the
present Value of all of the Rent which would have been due for the remainder of
the Lease Term had this Lease not been terminated, plus all of Landlord's costs
of reletting the Leased Premises, including repair, alteration, and preparation
of the Leased Premises for reletting, brokerage commissions, attorneys' fees,
and rental concessions. Said amount shall be immediately due and payable by
Tenant to Landlord, minus (ii) the present value of the fair rental value of the
Leased Premises from the effective date of such termination through the date on
which the Lease Term would have expired had the Lease not been terminated. Any
amount due to Landlord hereunder may be collected after termination. For
purposes of calculating present values under this Paragraph 21, the applicable
discount rate shall be equal to the sum of 2% plus the prime lending rate in
effect as of the date of the Event of Default as quoted in the Wall Street
Journal (the "WSJ"), or, if the WSJ ceases to be published, a similar national
daily business publication identified by Landlord.
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<PAGE> 47
22. PERSONAL PROPERTY LIEN
[Intentionally omitted].
23. QUIET ENJOYMENT; INABILITY TO PERFORM
A. If, and so long as, Tenant pays Rent and keeps and performs each
and every term, covenant, and condition herein contained on the part and on
behalf of Tenant to be kept and performed, Tenant shall quietly enjoy the Leased
Premises without hindrance or molestation by Landlord, subject to the terms,
covenants, and conditions of this Lease.
B. Landlord shall pay all Taxes so as not to jeopardize Tenant's
use or the Leased Premises. The foregoing notwithstanding, Landlord shall be
entitled to contest any tax or assessment which it deems to be improperly levied
against the Improved Area, or any part thereof, so long as Tenant's use of the
Leased Premises is not interfered with.
C. Except as otherwise provided in Paragraphs 4, 5, 11, and 16 of
this Lease, this Lease and the obligations of Tenant to pay Rent and perform all
of the terms, covenants, and conditions on the part of Tenant to be performed
shall in no way be affected, impaired, or excused because Landlord, due to an
Unavoidable Delay, is (a) unable to fulfill any of its obligations under this
Lease, or (b) unable to supply or is, delayed in supplying any service expressly
or impliedly to be supplied, or (c) unable to make or delayed in making any
repairs, replacements, additions, alterations, or decorations, or (d) unable to
supply or is delayed in supplying any equipment or fixtures. Landlord shall in
each instance exercise reasonable diligence to effect performance when and as
soon as possible. 'Unavoidable Delay' shall mean any and all delays beyond
Landlord's reasonable control, including without limitation, to the extent they
affect Landlord's ability to perform, delay caused by any Event of Default
hereunder by Tenant, governmental restrictions, governmental regulations or
controls, undue delays by governmental authorities, order of civil, military, or
naval authority, governmental preemption, strikes, labor disputes, lockouts,
shortage of labor or materials, inability to obtain materials or reasonable
substitutes therefor, default of any contractor or subcontractor, acts of God,
fire, earthquake, floods, explosions, extraordinary actions of the elements,
extreme weather conditions, enemy action, civil commotion, Hot, or insurrection,
delays in obtaining governmental permits or approvals for which Landlord has
made diligent, timely, and appropriate application, and any other cause beyond
Landlord's reasonable control.
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<PAGE> 48
24. HOLD OVER TENANCY
If (without execution of a new lease or written extension) Tenant shall
hold over after the expiration of the Lease Term, Tenant shall be deemed to be
occupying the Leased Premises as a tenant from month to month, which tenancy may
be terminated as provided by law. During such tenancy, Tenant agrees to pay to
Landlord monthly installments of the Tenant's Pro Rata Share of Operating Costs
in excess of the Base Operating Costs and 150% of the then current Base Rent, as
set forth herein, unless a different rate is agreed upon, and to be bound by all
of the terms, covenants, and conditions as herein specified, so far as
applicable. The foregoing notwithstanding, in the event Landlord and Tenant are
negotiating in good faith over the extension of the Lease Term, Tenant, for a
period not to exceed sixty (60) days following the expiration of the Lease Term,
shall pay Rent at the same rate as was in effect immediately prior to such
expiration. At the and of such Sixty (60) day period, Tenant shall be deemed to
be occupying the Leased Premises as a tenant from month to month and Tenant
shall pay to Landlord, for such tenancy, monthly installments of the Tenant's
Pro Rata Share of Operating Costs in excess of the Base Operating Costs, all
other charges provided for in this Lease, and 200% of the then current Base Rent
until Tenant's occupancy is terminated.
25. ATTORNEYS' FEES
In the event either party requires the services of any attorney in
connection with enforcing the terms of this Lease, or in the event suit is
brought for the recovery of any Rent due under this Lease, or for the breach of
any covenant or condition of this Lease, or for the restitution of the Leased
Premises to Landlord and/or eviction of Tenant during the Lease Term, or after
the expiration thereof, the party prevailing in any such legal action shall be
entitled to an award for all legal costs and expenses, including, but not
limited to, a reasonable sum for attorney's fees
28. AMENDMENT, WAIVER
This Lease constitutes the entire agreement between the parties. This
Lease shall not be amended or modified except in writing by both parties. No
covenant or term of this Lease shall be waived except with the express written
consent of the waiving party whose forbearance or indulgence in any regard shall
not constitute a waiver of such covenant or term. Failure to exercise any right
in one or more instances shall not be construed as a waiver of the right to
strict performance or as an amendment to this Lease.
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<PAGE> 49
27. NOTICES
All notices required or permitted by this Lease shall be in writing,
sealed in an envelope and delivered in person, by a nationally recognized
overnight courier service, or by United States Registered or Certified Mail,
return receipt requested, postage prepaid, to the address specified below:
If intended for Landlord:
HUNTINGTON BEACH COMPANY
c/o Chevron Real Estate Management Company
6400 So. Fiddlers Green Circle, Suite 200
Englewood, CO 80111
with a copy to:
Leasing Manager
Chevron Real Estate Management Company
1301 McKinney, Room 654
Houston, TX 77010
If intended for Tenant:
Echo Bay Management Corp.
6400 South Fiddler's Green Circle
Suite 1000
Englewood, CO 80111
Attention: Senior Vice President for Finance
or to such other address(es) as either party designates by notice, as provided
in this Paragraph 27, to the other party, from time to time. Notice shall be
effective as of the date that such notice is actually received or the date
delivery is rejected by any representative of the addressee.
28. BINDING EFFECT, GENDER
Subject to the provisions in Paragraph 12, this Lease shall be binding
upon and inure to the benefit of the parties and their successors and assigns.
It is understood and agreed that the terms "Landlord" and "Tenant" and verbs
and pronouns in the singular number are uniformly used throughout this Lease
regardless of gender, number, or fact of incorporation of the parties hereto.
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<PAGE> 50
29. ADDENDA AND ATTACHMENTS
The addenda, exhibits, or supplemental provisions, if any, attached or
added hereto, are made a part of this Lease by reference.
30. LIMITATION OF LIABILITY
The obligations of Landlord under this Lease do not constitute personal
obligations of the individual partners, directors, officers, or shareholders of
Landlord, and Tenant shall look solely to the Improved Area and the revenues and
proceeds therefrom and to no other assets of the Landlord for satisfaction of
any liability in respect of this Lease and will not seek recourse against the
individual partners, directors, officers, or shareholders of Landlord or any of
their personal assets for such satisfaction or for any deficiency judgement
should Tenant be unable to satisfy any liability owed to it.
The obligations of Tenant under this Lease do not constitute personal
obligations of the individual partners, directors, officers, or shareholders of
Tenant, and Landlord shall look solely to the assets of Tenant for satisfaction
of any liability in respect of this Lease and will not seek recourse against the
individual partners, directors, officers, or shareholders of Tenant or any of
their personal assets for such satisfaction or for any deficiency judgment
should Landlord be unable to satisfy any liability owed to it.
31. LANDLORD'S RESERVED RIGHTS
Without notice and without liability to Tenant, Landlord shall have the
right to:
(1) Change (i) the name of the Building, but in no event
shall the name of the Building (or any other building constructed on the
Improved Area be changed to that of another mining company so long as Tenant
occupies 35,000 rentable square feet or more in the Building, and (ii) the
street address of the Building if required to do so by an appropriate authority;
(2) Install and maintain reasonable signs on the exterior of
the Building;
(3) Make reasonable rules and regulations as, in the
judgment of Landlord, may from time to time be needed for the safety of the
tenants, and the care
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<PAGE> 51
and cleanliness of the Building and the preservation of good order therein.
Tenant shall be notified in writing when each such rule and regulation is
promulgated;
(4) Grant utility easements or other easements to such
parties, or replat, subdivide, or make such other changes in the legal status of
the land underlying the Improved Area, as Landlord deems necessary, provided
such grant or changes do not substantially or materially interfere with Tenant's
use of the Leased Premises as intended under this Lease; and
(5) Sell the Building and assign this Lease to the
purchaser, and upon such assignment, Landlord shall be deemed to be released
from all obligations of Landlord under this Lease arising or accruing from and
after the date of such assignment, and such purchaser shall be deemed to have
assumed all such obligations arising or accruing from and after such date.
Tenant agrees to attorn to such purchaser, or any other successor or assign of
Landlord through foreclosure or deed in lieu of foreclosure or otherwise and to
recognize such person as Landlord under this Lease, as provided more fully in
Paragraph 35 below.
32. OFFSET STATEMENT
Within twenty (20) days after request therefor by Landlord, its agents,
successors, or assigns, Tenant shall deliver, in recordable form, a certificate
to any proposed mortgagee or purchaser, or to Landlord, together with a true and
correct copy of this Lease, certifying, if applicable, and making such changes
as may be necessary to make the matters certified accurate, the matters set
forth on Exhibit H attached hereto. Tenant's failure to deliver said statement
in time shall be conclusive upon Tenant; (a) that this Lease is in full force
and effect, without modification except as may be represented by Landlord, (b)
that there are no uncured defaults in Landlord's performance and Tenant has no
right of offset, counterclaims, defenses, or deductions against Rent or Landlord
hereunder; and (c) that no more than one month's Rent has been paid in advance.
33. ACCORD AND SATISFACTION
No receipt and retention by Landlord of any payment tendered by Tenant
in connection with this Lease will give rise to, or support, or constitute an
accord and satisfaction, notwithstanding any accompanying statement, instruction
or other assertion to the contrary (whether by notation on a check or in a
transmittal letter or otherwise), unless Landlord expressly agrees to an accord
and satisfaction in a separate writing duly executed by an authorized
representative of Landlord. Landlord may receive and retain, absolutely and for
itself, any and all payments so tendered, notwithstanding any accompanying
instructions by Tenant to the contrary. Landlord
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<PAGE> 52
will be entitled to treat any such payments as being received on account of any
item or items or Rent, interest, expenses, or damage due in connection herewith
in such amounts and in such order as Landlord may determine at it's sole option.
34. SEVERABILITY
The parties intend this Lease to be legally valid and enforceable in
accordance with all of its terms to the fullest extent permitted by law. If any
term hereof shall be finally held to be invalid or unenforceable, the parties
agree that such term shall be stricken from this Lease, the same as if it never
had been contained herein. Such invalidity or unenforceability shall not extend
to or otherwise affect any other term of this Lease, and the unaffected terms
hereof shall remain in full force and effect to the fullest extent permitted by
law, the same as if such stricken term never had been contained herein.
35. SUBORDINATION
The rights of Tenant hereunder are, and shall be, at the election of any
mortgagee, subject and subordinate to the lien of any deeds Of trust, mortgages,
the encumbrance of any leasehold financing, or the lien resulting from any other
method of financing or refinancing, now or hereafter in force against the
Improved Area or the Building, and to all advances made, or hereafter to be
made upon the security thereof (herein referred to as the "Superior
instruments"). Landlord hereby represents and warrants to Tenant that there are
no Superior Instruments presently executed which include any portion of the
Improved Area. The foregoing notwithstanding, for any Superior Instruments
executed by Landlord after the execution of this Lease, the rights of Tenant
under this Lease shall not be subject or subordinated to such liens or Superior
instruments unless and until the holders thereof execute a non-disturbance
agreement in form and substance similar to the Attornment and Nondisturbance
Agreement attached hereto as Exhibit G, or in any other form reasonably
acceptable to Tenant.
Tenant agrees to attorn to any purchaser of the Building, or any other
successor or assign of Landlord through foreclosure or deed in lieu of
foreclosure, in return for and upon delivery to Tenant by such purchaser or
mortgagee, as the case may be, of an agreement substantially in the form of the
Attornment and Nondisturbance Agreement, or in any other form reasonably
acceptable to Tenant.
36. TIME
Time is of the essence hereof.
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<PAGE> 53
37. APPLICABLE LAW
This, Lease shall be construed according to any and all applicable
federal laws and the laws of the State of Colorado, without regard to the
principles of conflicts of law and venue shall be in Arapahoe County, Colorado.
38. BROKER'S INDEMNIFICATION
Tenant hereby represents and warrants to Landlord that no broker or
agent negotiated or was instrumental in the negotiation or consummation of this
Lease except the Landlord's Broker and the Tenant's Broker. Tenant shall
indemnify Landlord against any loss, expense, cost, or liability incurred by
Landlord as a result of any claims for fees or commissions by any broker or
finder claiming through Tenant, except for any such claims by the Landlord's
Broker and any such claims by the Tenant's Broker. Landlord hereby represents
and warrants to Tenant that no broker or agent negotiated or was instrumental in
the negotiation or consummation of this Lease except the Landlord's Broker and
the Tenant's Broker. Landlord shall indemnify Tenant against any loss, expense,
cost, or liability incurred by Tenant as a result of any claims for fees or
commissions by any broker or finder claiming through Landlord, including,
without limitation, any such claims by the Landlord's Broker and any such claims
by the Tenant's Broker.
39. SECURITY DEPOSIT
[Intentionally Omitted]
40. CONFLICTS OF INTEREST
Conflicts of interest relating to this Lease are strictly prohibited.
Except as otherwise expressly provided herein with regard to Tenant's Broker,
neither Tenant nor any director, employee, or agent of Tenant, shall give to or
receive from any director, employee, or agent of Landlord any gift,
entertainment, or other favor of significant value, or any commission, fee, or
rebate. Likewise, neither Tenant nor any director, employee, or agent of Tenant
shall enter into any business relationship with any director, employee, or agent
of Landlord or of any affiliate of Landlord, unless such person is acting for
and on behalf of Landlord or such affiliate, without prior written notification
thereof to Landlord. Any representative(s) authorized by Landlord may audit any
and all records of Tenant for the sole purpose of determining whether there has
been a violation of the terms of this Paragraph 40. The terms of this
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<PAGE> 54
Paragraph 40 shall not survive any transfer by Landlord of its interest in the
Improved Area to any unaffiliated third party.
41. TENANT REPRESENTATIONS
If Tenant is a legal entity, Tenant hereby represents and warrants to
Landlord that (i) such entity is duly organized and validly existing under the
laws of the state of its formation and is qualified to do business in, and is in
good standing under, the laws of the State of Colorado; and (ii) this Lease and
all documents executed or to be executed by Tenant in connection herewith and
which are to be delivered to Landlord will be duly authorized, executed, and
delivered and will be legal, valid, and binding obligations of Tenant, and do
not violate any provisions of any agreement or currently existing judicial order
to which Tenant is a party or to which it is subject. Further, if requested by
Landlord, either prior to or after Landlord's execution of this Lease, Tenant
shall provide Landlord with certified evidence of the foregoing.
42. ESTOPPEL CERTIFICATE
[Intentionally Omitted].
43. RIGHT TO RENEW
A. Tenant shall have the option to renew the Term of this lease for
two (2) successive periods of five (5) years each by notifying Landlord in
writing of Tenant's election to exercise its option at least twelve (12) months
prior to the expiration of the then current term or renewal term of this Lease.
Tenant may exercise such option provided there is not then any uncured default
by Tenant in the payment of any item of Rent hereunder and there is not then any
other material uncured default hereunder by Tenant. The Rent during each renewal
period shall be the then Fair Market Rental Value, as hereinafter defined, and
the lease shall be upon all other terms and provisions of this Lease.
B. As used in this Lease, the term Fair Market Rental Value
("FMRV") shall mean the rent calculated at the then prevailing rate on the same
terms and conditions for the renewal term set forth in this Lease for similar
space in comparable Class A office buildings in the Denver Tech Center/Greenwood
Plaza market areas. In making such determination, no allowance shall be made for
any of the following:
(1) Whether Landlord or Tenant paid the cost of providing
the existing improvements to the Premises.
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<PAGE> 55
(2) The quality of the furniture or trade fixtures which
belong to Tenant and which Tenant is entitled to remove at the end of the Term.
(3) The expense and inconvenience to Tenant that would be
involved if Tenant were recruited to relocate to other space.
(4) The expense that Landlord would be required to incur to
find new tenants for the Premises.
(5) The presence of Tenant in the Building.
(6) The fact that Tenant has a renewal option.
C. FMRV shall be declared initially by Landlord in writing to
Tenant not less than ten (10) months prior to the end of the Lease Term. Tenant
shall have forty-five (45) days from the date of Landlord's declaration in which
to dispute, in writing, Landlord's finding of FMRV and to provide to Landlord
its written determination of FMRV. Failing such timely notice of dispute,
Landlord's declared FMRV shall be deemed to be acceptable by both parties. If
Tenant gives Landlord timely notice in dispute of Landlord's determination of
FMRV, then Landlord and Tenant shall each designate a licensed commercial real
estate broker who shall together designate a third licensed commercial real
estate broker, all of whom shall be experienced in evaluating rental properties
of the type and in the area of the Building. Within twenty (20) days of Tenant's
notice to Landlord, the third broker shall deliver to Tenant and Landlord its
written decision of the appropriate FMRV; provided that such broker's decision
shall be to accept either the FMRV determined by Landlord or the FMRV determined
by Tenant and such broker may not select an average of such determinations or
any other amount for the FMRV. Such determination shall be binding upon Landlord
and Tenant; provided that Tenant may, by written notice given to Landlord within
ten (10) days after Tenant's receipt of written notice of such broker's
determination of FMRV, revoke its notice to renew. All costs for the services of
the brokers selected by Landlord and Tenant and all costs for the services of
the third broker shall be paid by the party whose determination of FMRV was not
selected by the third broker as its FMRV.
44. RIGHT TO TERMINATE
Effective at any time and from time to time after the expiration of the sixtieth
(60th) month of the Lease Term, Tenant may elect to terminate this Lease as to
all or any portion of the Leased Premises which includes no less than all of
the space occupied by Tenant on any single floor of the Tower, provided there is
not then any uncured default by Tenant in the payment of any item of Rent
hereunder and there is not then any other material uncured default hereunder by
Tenant. In order to
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<PAGE> 56
exercise such option, Tenant shall give Landlord not less than six (6) months
prior written notice of its intent to terminate as of the date specified in such
notice (which date shall not be prior to the last day of the sixtieth month of
the Lease Term) (the "Termination Date"). Such notice shall identify the
portions of the Leased Premises which will be affected by such termination.
Tenant shall pay to Landlord, as of the Termination Date, and as to the portion
of the Leased Premises affected by any, such termination, the sum of (i) the
unamortized portion of the Improvement Allowance paid by Landlord to Tenant in
accordance with Exhibit C, (ii) the unamortized portion of the Moving Allowance
paid by Landlord to Tenant in accordance with Exhibit C, (iii) the unamortized
portion of the Space Planning Allowance paid by Landlord to Tenant in accordance
with Exhibit C, (iv) the unamortized portion of the commissions paid by Landlord
to the Landlord's Broker and the Tenant's Broker, and (v) three month's Base
Rent for the portion of the Leased Promises affected by any such, termination.
As used herein, unamortized costs shall mean the amounts applicable to any
period of time after the Termination Date for the relevant costs if the entire
costs thereof were amortized on a straight line basis over the entire ten (10)
year initial Lease Term.
45. RIGHT OF FIRST REFUSAL
During the Lease Term, or any extension thereof, Tenant shall have a
right of first refusal on all of the remaining space on the ninth floor of the
Tower as and when such space, or any part thereof, becomes available to Landlord
(which space is hereinafter referred to as the 'Expansion Space').
Each time Landlord receives from or is going to give a bona fide offer
to an actual third party ("Third Party Offer"), to lease part or all of the
Expansion Space, and such Expansion Space is then available, and such offer is
acceptable to Landlord, Landlord shall first offer such Expansion Space to
Tenant in writing ("Landlord's Notice") on the same Business Terms as were
offered to or by the third party. Expansion Space shall be considered
"available" when it becomes vacant after the termination or expiration of the
current lease of such space between Landlord and Telemedia North American
Communications. 'Business Terms' are hereby defined as: effective base rental
rate (base rental rate with any rent concession factored in); operating cost
stop; tenant improvement allowance; the number of rentable square feet contained
in such Expansion Space; and any other material economic terms. Tenant shall
have 10 business days after receipt of Landlord's Notice to accept Landlord's
offer in writing. If Tenant does not elect to accept Landlord's offer or fails
to respond within the 10 business day period, landlord shall be free to lease
the Expansion Space to the third party on terms that are not materially more
favorable to the third party than the Business Terms that were contained in the
third party's bone fide offer. If Tenant accepts the offer to lease such
Expansion Space, such Expansion
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<PAGE> 57
Space shall be leased by Tenant on the Business Terms offered to or by the third
party.
46. RIGHTS OF FIRST OFFER
A. Tenant shall have the right to lease any and all space on the
second through ninth floors of the Tower from time to time as and when portions
of such space become available to Landlord (which space is hereinafter referred
to as the "Offer Space"). As to any of the Offer Space which is now subject to
either an existing lease or any prior rights to lease, such Offer Space shall be
deemed to become available when such lease or such prior rights expire. Upon
the expiration of such lease or such rights, Landlord shall give written notice
thereof to Tenant (the "Offer Notice"), which notice shall set out the FMRV
which Landlord would at that time offer to other possible tenants of the Offer
Space.
B. Tenant shall have the right to lease such portions of the Offer
Space only if:
(1) Tenant delivers to Landlord written notice exercising
its option to lease the Offer Space within thirty (30) days after Tenant's
receipt of the Offer Notice for such Offer Space; and
(2) There is not any uncured default by Tenant in the
payment of any item of Rent hereunder and there is no other material uncured
default by Tenant hereunder at the time Landlord gives the Offer Notice or at
the commencement of the lease of Offer Space.
If Tenant fails to timely exercise its right to lease any portion of the
Offer Space after Tenant's receipt of the Offer Notice from Landlord for such
Offer Space, Tenant shall have no further right to lease that Offer Space under
this Paragraph 46.
C. The following terms shall apply to and govern each lease of any
portion of the Offer Space which Tenant elects to lease under this Paragraph 46:
(1) Base Rent shall be equal to the FMRV as determined in
accordance with the terms set forth in Paragraph 43 of this Lease based upon the
terms and conditions applicable to Tenant's lease of such Offer Space as set
forth in this Paragraph 46 and the Base Year Operating Costs for such Offer
Space shall be the Operating Costs for the year on which the lease for such
Offer Space commences hereunder.
(2) The term shall begin on the date the Offer Space becomes
available to Landlord for releasing and end on the expiration or earlier
termination of
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<PAGE> 58
the Lease Term, including any and all extensions thereof; provided that Rent for
such Offer Space shall not be payable until the 60th day after the beginning of
the term for such Offer Space.
(3) Tenant shall take the space in an "As is" condition with
all improvements to be Tenant's responsibility at Tenant's cost.
D. Landlord and Tenant shall execute those instruments Landlord
reasonably requests to evidence the inclusion of arty Offer Space leased by
Tenant under this Paragraph 46 into the balance of the Leased Premises then
leased by Tenant under this Lease.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of
the day and year first hereinabove written.
LANDLORD: HUNTINGTON BEACH COMPANY,
a California corporation, by its
managing agent, Chevron Real Estate
Management Company, a division
of Chevron U.S.A. Inc.
BY: /s/ W. R. MARVIN
-------------------------------------
ITS: Vice President
---------------------------------
TENANT: ECHO BAY MANAGEMENT CORP.,
a Delaware Corporation
BY: /s/ [Signature Illegible]
-------------------------------------
ITS: Controller
---------------------------------
BY: /s/ [Signature Illegible]
-------------------------------------
ITS: Senior Vice President Finance
---------------------------------
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<PAGE> 59
EXHIBIT A
IMPROVED AREA
[GREENWOOD PLAZA SOUTH DIAGRAM]
A-1
<PAGE> 60
EXHIBIT B
LEASED PREMISES
[NINTH (9TH) FLOOR DIAGRAM]
B-2
<PAGE> 61
EXHIBIT C
Work Agreement
The undersigned, as Landlord and Tenant, are executing simultaneously with this
Work Agreement a Lease covering the Leased Premises therein described (the
"Lease"). This Work Agreement is attached to the Lease as Exhibit C.
Landlord and Tenant agree as follows:
1. Defined Terms
The following terms have the respective definitions indicated for
purposes of this Work Agreement:
(a) "Tenant's Architect" means Saiber. Saiber, Inc., an architectural
firm approved by Landlord to design the Leasehold Improvements on
Tenant's behalf and to represent Tenant during construction, design
and pricing of the Leasehold Improvements.
(b) "Construction Drawings" means the Engineering Working Drawings and
the Architectural Working Drawings.
(c) "Project Engineers" means ABS Consultants, the mechanical engineer,
Martin. Martin, the structural engineer, and Michael J. Hutchison &
Associates, the electrical engineer who shall prepare the
Engineering Working Drawings providing for the construction of the
Leasehold Improvements in accordance with the Space Plan, which
firms have been selected and retained by Tenant's Architect, and
approved by Landlord.
(d) "General Contractor" means the person or firm from time to time
selected by Tenant and approved by Landlord as herein provided,
which approval shall not be unreasonably withheld, to construct and
install the Leasehold Improvements in the Leased Premises.
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(e) "Improvement Allowance" means the allowance to be provided by
Landlord to Tenant as more particularly described in Section 4.1
of this Work Agreement,
(f) "Planning Allowance" means the allowance to be provided by
Landlord to Tenant as more particularly described in Section 4.2
of this Work Agreement
(g) "Moving Allowance" means the allowance to be provided by
Landlord to Tenant as more particularly described in Section 4.3
of this Work Agreement.
(h) "Landlord Delay" means the sum of number of days (i) by which
Landlord was late in providing Landlord's responses contemplated
in this Exhibit C, (ii) of delay caused by changes requested by
Landlord to any aspect of the Leasehold Improvements after the
Construction Drawings have been prepared and approved (including
any delay in preparing any of the documents or drawings
described herein), (iii) of delay caused by Landlord, its
agents, or contractors' interference (if any) in the
construction or delay in processing General Contractor's
submittals as provided herein, (iv) of delay caused by the
inclusion at the instance of Landlord of any work or materials
not shown on the Construction Drawings, (vi) of delay in
completing the Landlord's Work as described herein, (vii) of
delay in inspecting or approving any work completed in
connection With the Leasehold improvements, and (viii) of delay
in taking reasonable steps to cooperate with Tenant in
completing the Leasehold improvements, including, without
limitation, providing access to the Building and the Premises
and completing permit applications' or executing other documents
which may be necessary in connection with the Leasehold
Improvements.
(i) "Landlord's Representative" means Melissa Witkowski (or another
individual employee of Landlord identified by Landlord as the
substitute Landlord's Representative upon reasonable prior
notice to Tenant), the individual employee of Landlord who has
been assigned by Landlord to review and approve the plans and
specifications for the Leasehold Improvements and
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to monitor the construction of the Leasehold Improvements, and
to assist and cooperate with Tenant in connection therewith, as
contemplated herein.
(j) "Landlord's Plan Architect" means the independent architect
hired by Landlord, if any, to assist in Landlord's review of the
Space Plan and the Construction Drawings.
(k) "Landlord's Construction Architect" means the independent
architect hired by Landlord, if any, to assist Landlord and
Landlord's Representative in monitoring the construction of the
Leasehold Improvements, which architect may be the same
architect as Landlord's Plan Architect.
(l) "Leasehold Improvements" means the improvements to the Leased
Premises shown on the Construction Drawings.
(m) "Substantial Completion" means the date that the Leasehold
Improvements are certified by Tenant's Architect as sufficiently
complete, such that Tenant can reasonably occupy and utilize the
Leased Premises for the Permitted Purpose.
Unless otherwise defined herein, capitalized terms used in this Work
Agreement shall have the meanings ascribed to such terms in the Lease.
2. Space Planning and Engineering
2.1 Space Plan. Landlord shall provide to Tenant's Architect the
architectural and engineering drawings for the base building improvements for
the Building and the as-built drawings, plans and specifications, and all other
drawings and construction documents in Landlord's possession or control relating
to the prior improvements made to the Leased Premises ("Landlord Drawings").
Tenant shall provide to Landlord's Representative a space plan for the Leased
Premises (referred to herein as the "Space Plan") prepared by Tenant's
Architect. The Space Plan shall be prepared by the Tenant's Architect at
Tenant's sole cost and expense, subject to Landlord's payment of the Planning
Allowance as hereinafter provided.
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2.2 Approval of Space Plan. Within five (5) business days after the
receipt by Landlord's Representative of the Space Plan, Landlord shall review
the Space Plan. If Landlord determines, in its reasonable good faith judgment,
that the Space Plan is incompatible with the base building specifications for
the Building, Landlord shall so advise Tenant's Architect and Tenant's Architect
shall revise the Space Plan accordingly and resubmit it to Landlord's
Representative and the review procedure and time frames set forth above shall be
repeated. Otherwise, Landlord shall notify Tenant's Architect of its approval of
the Space Plan as promptly as reasonably possible. If no notice of approval or
disapproval is given by Landlord to Tenant's Architect within five (5) business
days after the receipt Of the Space Plan by Landlord's Representative, the
Scheduled Commencement Date shall be automatically extended one day for each day
after such period until Landlord notifies Tenant's Architect of its approval or
disapproval.
2.3 Engineering Working Drawings. Based upon the approved Space
Plan, the Project Engineers shall prepare the structural, plumbing, fire
protection, mechanical, electrical, and life safety engineering drawings
("Engineering Working Drawings"). The Engineering Working Drawings shall be
submitted to Landlord's Representative for review and approval by Landlord,
which approval shall not be unreasonably withheld. If no notice of approval or
disapproval of the Engineering Work Drawings is given by Landlord to Tenant's
Architect within five (5) business days after the receipt thereof by Landlord's
Representative, the Scheduled Commencement Date shall be automatically extended
one day for each day after such period until Landlord notifies Tenant's
Architect of its approval or disapproval. The costs for the preparation of the
Engineering Working Drawings shall be borne by Tenant, subject to Landlord's
payment of the Planning Allowance and the Improvement Allowance as hereinafter
provided.
2.4 Architectural Working Drawings. Tenant's Architect shall
provide Landlord's Representative with architectural working drawings prepared
by the Tenant's Architect (the "Architectural Working Drawings") for the Leased
Premises for review and approval by Landlord, which approval shall not be
unreasonably withheld. The Architectural Working Drawings shall include the
following: (a) partition layout and door locations; (b) electrical outlets,
including the location and usage thereof; (c) telephone outlets, including a
description of the system and the size
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of conduit servicing each outlet, (d) a ceiling plan showing standard and
non-standard lighting, switching requirements, and ceiling construction or
constraints; (e) Tenant's occupancy capacity and usage equipment loads for all
spaces, particularly special usage rooms, including, but not limited to,
conference rooms, lounges, coffee rooms, copy rooms, computer terminal or
keypunch rooms, audio-visual rooms, and reproduction or print rooms which
require special heating, ventilating, air conditioning or fire protection; (f)
Tenant's floor loading for all spaces, particularly special usage rooms; and (g)
floor penetrations, including but not limited to special stairs, dumbwaiters,
conveyors, pneumatic systems, elevators, or architectural features. If Landlord
determines, in its reasonable good faith judgment, that the Architectural
Working Drawings contain design errors, Landlord shall give notice thereof to
Tenant within five (5) business days after the receipt thereof by Landlord's
Representative. If the Architectural Working Drawings are acceptable to
Landlord, Landlord shall communicate its approval to Tenant's Architect as
promptly as reasonably possible, but in any event on or before the expiration of
such five business day period. If Landlord does not reply within such period of
time, the Scheduled Commencement Date shall be automatically extended one day
for each day after such period until Landlord notifies Tenant's Architect of its
approval or disapproval. If Landlord notifies Tenant's Architect of design
errors, Tenant shall revise the Architectural Working Drawings accordingly and
resubmit them to Landlord's Representative and the review procedure set forth
above shall be repeated. When approved by Landlord and Tenant, the Engineering
Working Drawings and the Architectural Working Drawings shall be acknowledged as
such by Tenant and Landlord in writing and such approved drawings shall be
deemed to constitute the "Construction Drawings."
2.5 Changes. If Tenant wishes to make any material changes to the
Construction Drawings, Tenant shall submit a written request describing such
changes to Landlord's Representative. Any such changes may be made by Tenant
only upon the prior written approval of Landlord's Representative, which
approval shall not be unreasonably withheld. Landlord's Representative shall
respond to all written requests for any such changes within five (5) days of
receipt of the same by Landlord's Representative. If Landlord's Representative
does not respond within such period of time, the Scheduled Commencement Date
shall be automatically extended one day for each day after such period until
Landlord notifies Tenant's Architect of its approval or disapproval.
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3. Construction of Leasehold Improvements
3.1 Tenant to Construct Leasehold Improvements. Following approval
of the Construction Drawings, Tenant shall be responsible to the completion of
the Leasehold Improvements in substantial compliance with the Construction
Drawings, at its sole cost and expense, subject to Landlord's payment of the
improvement Allowance. Landlord shall deliver possession of the Leased Premises
to Tenant for the purpose of constructing the Leasehold Improvements (and
installing Tenant's trade fixtures, furnishings, equipment, and other personal
property) on or before June 1, 1995; except that, as to those portions of the
Leased Premises which are occupied as of the date of this Lease, Landlord shall
deliver such possession to Tenant on or before June 30, 1995. It is understood
and agreed that Landlord is making the Leased Premises available to Tenant for
such purposes prior to the Lease Commencement Date and prior to the commencement
of Tenant's obligations for the payment of Rent under the Lease. Tenant's use
and occupancy of the Leased Premises prior to the Lease Commencement Date shall
be subject to all of the terms and provisions of the Lease, except for Tenant's
obligation to pay Rent. There shall be no charge to Tenant for its early access
to the Building and the Leased Premises or for the use by Tenant of electrical
power and other Building services during the construction of the Leasehold
improvements.
3.2 General Contractor. Tenant shall enter into a direct contract
for construction services to complete the Leasehold improvements with the
General Contractor. Prior to execution of the contract between Tenant and the
General Contractor, Tenant shall provide a copy of the contract to Landlord's
Representative for its review and approval, which approval shall not be
unreasonably withheld. Landlord shall review the contract and approve or
disapprove the contract in writing within five (5) days thereafter. If Landlord
fails to notify Tenant's Architect of its approval or disapproval of the
contract within such 5-day period, the Scheduled Commencement Date shall be
automatically extended one day for each day after such period until Landlord
notifies Tenant's Architect of its approval or disapproval. Tenant and the
General Contractor shall have the right to select and contract directly with all
sub-contractors and all other parties supplying work or materials to the Leased
Premises. The Genera Contractor and all sub-contractors shall be required to
comply with the Construction Procedures set forth on Exhibit K attached hereto,
as the same
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may be amended from time to time by Landlord upon reasonable prior notice to the
General Contractor.
3.3 Compliance with Laws. Tenant shall cause Tenant's Architect, the
General Contractor, and all Sub-contractors to: (i) conduct their work in such a
manner so as not to unreasonably interfere with any other construction occurring
on or in the Building or any other tenants of the Building, (ii) comply with all
laws, codes, permits, rules, and regulations relating to the construction
activities in or on the Building; and (iii) maintain such insurance in force
and effect as required by the Lease, but in any event not less than that
required by applicable law.
4. ALLOWANCES
4.1 Improvement Allowance. Landlord shall pay to Tenant an
Improvement Allowance for the costs incurred by Tenant in the construction of
the Leasehold Improvements to be made to the Leased Premises in an amount equal
to the product of $20.00 multiplied by the total number of rentable square feet
in the Leased Premises.
4.2 Planning Allowance. Landlord shall pay to Tenant a Planning
Allowance for costs incurred by Tenant in the planning and designing of the
Leasehold Improvements to be made to the Leased Premises in an amount equal to
the product of $2.00 multiplied by the total number of rentable square feet in
the Leased Premises. The Planning Allowance shall be payable by Landlord to
Tenant upon Landlord's approval of the Architectural Working Drawings and the
Engineering Working Drawings.
4.3 Moving Allowance. Landlord shall pay to Tenant a Moving
Allowance for the costs incurred by Tenant in relocating its business to the
Leased Premises in an amount equal to the product of $1.00 multiplied by the
total number of rentable square feet contained in the Leased Premises. The
Moving Allowance shall be payable by Landlord to Tenant upon the Lease
Commencement Date.
4.4 Payment of Improvement Allowance. Tenant shall from time to time
submit to Landlord's Representative invoices for any costs and expenses incurred
in connection with the Leasehold Improvements, together with evidence of payment
of
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such invoices, lien waivers, and any other documentation reasonably requested by
Landlord's Representative, and, subject to the approval of such items by
Landlord's Representative, Landlord shall pay Tenant the amount set forth on
such invoice or invoices as promptly as reasonably possible but in no event
later than thirty (30) days after the receipt of such items by Landlord's
Representative. Landlord shall from time to time pay amounts against the
Improvement Allowance in accordance with the terms set forth herein up to the
total amount of the Improvement Allowance; provided that, Landlord shall have
the right to retain up to a total of 10% of the Improvement Allowance until
after the General Waiver (as defined below) is delivered to Landlord's
Representative. Upon completion of the Leasehold Improvements, Tenant shall
obtain and deliver to Landlord's Representative a general lien waiver covering
the Leasehold Improvements from the General Contractor, which lien waiver shall
be in form and substance reasonably acceptable to Landlord (the "General
Waiver").
5. Landlord's Work
5.1 Existing Improvements. All existing improvements in the Leased
Premises as of the date of this Lease, including, without limitation, all doors,
door frames, hardware, ceiling grids and tiles, light fixtures, millwork,
built-ins, end all similar items (the "Existing Improvements"), may be used by
Tenant at no charge. Tenant shall have the right to demolish and remove from the
Leased Premises any and all of the Existing Improvements which Tenant elects not
to use; provided that, prior to such demolition, Tenant shall offer any such
items to Landlord's Representative. If Landlord elects to salvage any such
items, Landlord shall, at Landlord's expense, remove such items in a manner
which will not delay or interfere with the construction of the Leasehold
Improvements; provided that Tenant shall use reasonable efforts to cooperate
with Landlord in Landlord's removal of any such items.
5.2 Core and Shell Work. All core and shell work required to be done
in connection with the Leasehold Improvements, including without limitation,
floor leveling to a specification of a variation of not more than one quarter
inch for every ten feet, shall be done by Landlord, at Landlord's expense.
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6. Relocation of Existing Tenants and Relinquishment of Rights
6.1 Relocation and Relinquishments. In order for the Leased Premises
to be ready for Tenant's use and occupancy at the times contemplated herein, it
will be necessary to take the following actions:
(A) Chrysler Financial Corporation will be relocated from the space
which it currently occupies on the 9th Floor of the Tower to
other space containing 5,904 rentable square feet on the 16th
Floor of the Tower (the "Chrysler Relocation").
(B) Budget Rent-A-Car will relinquish all expansion and any other
rights and options which it currently has on the 5th Floor of
the Tower (the "Budget Relinquishment").
(C) Sybase will relinquish all expansion and any other rights and
options which it currently has on the 5th Floor of the Tower,
except for a right of first refusal on the space on the 5th
Floor of the Tower (containing approximately 5,100 rentable
square feet) which will continue to be leased to Thompson Pipe &
Steel after the Thompson Contraction described in Paragraph
6.1(D) below (the "Sybase Relinquishment").
(D) Thompson Pipe & Steel will contract the space it leases on the
5th Floor of the Tower to a total of approximately 5,100
rentable square feet, and will relinquish all other rights and
options which it currently has on the 5th Floor of the Tower
(the "Thompson Contraction").
(E) Missing Link will cancel all rights and options to lease space
on the 5th Floor of the Tower (the "Missing Link Cancellation").
The foregoing actions are hereinafter referred to collectively as the
"Relinquishments." Both Landlord and Tenant shall use their best efforts and
shall cooperate with each other to cause all of the Relinquishments to be
completed as promptly as reasonably possible. In the event that any of the
Relinquishments is not completed in a manner
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which is reasonably satisfactory to either party hereto on or before May 20,
1995, both Landlord and Tenant shall have the right to terminate this Lease by
giving written notice of termination to the other party at any time after such
date and on or before June 5, 1995.
6.2. Coordination. Landlord shall, at Landlord's expense (subject to
Tenant's obligation to pay the amounts set forth in Section 6.3 below),
coordinate all aspects of the Chrysler Relocation, the Budget Relinquishment,
the Sybase Relinquishment, the Thompson Contraction, and the Missing Link
Cancellation in a manner which will cause all portions of the Leased Premises to
be available to Tenant at the times contemplated herein.
6.3 Payments by Tenant. Tenant shall reimburse Landlord for the
following costs incurred in connection with the Chrysler Relocation, the Budget
Relinquishment, the Sybase Relinquishment, the Thompson Contraction, and the
Missing Link Cancellation:
(A) In connection with the Chrysler Relocation, Tenant shall
reimburse Landlord for all Relocation Costs paid by Landlord in
connection with the Chrysler Relocation; provided that in no
event shall Tenant be obligated hereby to pay any amount greater
than $159,400 for such Relocation Costs. As used herein, the
"Relocation Costs" shall mean all of the actual out-of-pocket
costs incurred by Landlord in connection with the Chrysler
Relocation, including, without limitation, all such costs
incurred by Landlord for: the preliminary space planning; final
space planning; construction documents; mechanical engineering
design and documentation; electrical design and documentation;
demolition; construction management costs including fees;
special consultants costs (structural, acoustical, vibration,
etc.), direct costs of construction; all required permits and
fees; the cost to move personal effects and furniture; the
reprinting of Stationary and related materials; the rewiring and
relocation of telecommunications equipment; and any other
reasonable expenses incurred by Landlord in connection with such
relocation.
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(B) In connection with the Budget Relinquishment, Tenant shall
reimburse Landlord for all relinquishment fees and other costs
paid by Landlord for such relinquishment up to a total of
$50,000.
(C) In connection with the Sybase Relinquishment, Tenant shall
reimburse Landlord for all relinquishment fees and other costs
paid by Landlord for such relinquishment up to a total of
$9,750.
(D) Tenant shall have no obligation to pay or reimburse Landlord
for any costs incurred in connection with the Thompson
Contraction or the Missing Link Cancellation.
All costs payable by Tenant hereunder shall be paid by Tenant to Landlord within
ten (10) business days after Tenant's receipt of evidence of the payment of such
costs by Landlord.
7. Supervision Fee
Landlord shall be entitled to a fee (the "Supervision Fee") for the
actual out-of-pocket costs paid by Landlord to the Landlord's Plan Architect (at
a rate not to exceed $100 per hour), the Landlord's Construction Architect (at a
rate not to exceed $100 per hour, and the Landlord's Representative (at the rate
not to exceed $28 per hour) in connection with the Landlord's review and
approval of the Space Plan and the Construction Drawings and the supervision of
the construction of the Leasehold Improvements. Tenant shall pay amounts against
the Supervision Fee from time to time within ten (10) business days after
Tenant's receipt of evidence of the payment of such costs by Landlord.
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Landlord and Tenant have executed this Work Agreement contemporaneously
with execution of the Lease,
LANDLORD: HUNTINGTON BEACH COMPANY,
a California corporation, by its
managing agent, Chevron Real Estate
Management Company, a division
of Chevron U.S.A. Inc.
By: /s/ W. R. MARVIN
-------------------------------------
Its: Vice President
---------------------------------
TENANT: ECHO BAY MANAGEMENT CORP.,
a Delaware Corporation
By: /s/ [Signature Illegible]
-------------------------------------
Its: Controller
---------------------------------
By: /s/ [Signature Illegible]
-------------------------------------
Its: Senior Vice President, Finance
---------------------------------
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EXHIBIT D
JANITORIAL SERVICES
1. Supervision
A. Landlord will provide an adequate supervisory staff as required
to maintain the optimum level of cleanliness as defined herein.
B. In addition to the supervision of all cleaning services, the
supervisory staff Will be responsible to Landlord for the
following:
1. Securing all suite entrances in conjunction with the
Building's security requirements.
2. Locking those offices and other areas of the Leased
Premises from time to time designated by Tenant.
3. Report as soon as reasonably possible, in writing, all
accident and/or damage reports to Tenant via Landlord.
4. The supervisory staff shall be available on request by
Tenant, through Landlord, during the normal business
hours of the Building to visit with Tenant and answer
complaints of any nature relating to the janitorial
function.
2. Employee Bonding
A. Landlord will cause to be bonded all of its employees and all
employees of any janitorial contractor engaged by Landlord in
amounts to be mutually agreed upon.
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3. General Procedures
The following general procedures will be followed by Landlord's
janitorial personnel:
A. Report in writing all damage, breakage, and/or apparent plumbing
or electrical problems to Landlord immediately.
B. Report any evidence of security breaches to Landlord
immediately,
C. Maintain all janitor closets, slop sinks and storerooms in a
safe and clean condition at all times.
D. Lock all entrance doors during the entire cleaning operation.
Only the cleaner assigned to clean each tenant suite and the
supervisory staff are to be admitted to the respective tenant
areas.
E. Close all perimeter office doors after cleaning to prevent
excessive heat gain or heat loss in the interior spaces.
F. Diligence will be exercised to prevent damage to corners and
wall finishes by electrical extension cords.
G. Buckets will be emptied only in designated janitorial sinks
within designated janitorial closets on each floor.
H. Doors will be held open by door stops only, not by foreign
materials in the door jambs.
4. Scheduling
A. Nightly Services:
All nightly services will be performed Monday through Friday,
fifty-two weeks per year except on those holidays listed below:
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New Year's Day
President's Day
Memorial Day
Independence Day
Labor Day
Thanksgiving Day
Christmas Day
B. Periodic Services:
All periodic services listed in the specifications will be
performed at the indicated frequencies.
5. Janitorial Service Specifications for Tenant Suite and Common Areas on
Tenant Floors
A. Nightly Services:
1. Vacuum all carpets.
2. Spot shampoo traffic areas, when requested. (Complete
shampoo service is available by request but is subject
to a separate additional charge.)
3. Dust mop all resilient and composition floors with
treated dust mops. Damp mop to remove spills and water
stains, as required.
4. Dust all desks and office furniture with lambs' wool
duster. (Desks will only be dusted when clear of all
papers and personal items).
5. Empty and clean ash trays and ash urns.
6. Empty all wastepaper baskets and remove liners as
required.
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7. Remove all trash from floors.
8. Remove fingerprints, dirt smudges, etc., from all doors,
frames, glass partitions, windows, light switches,
walls, elevator door jambs, elevator interiors and glass
doors, as required.
9. Return chairs and wastebaskets to proper positions.
10. Clean, sanitize and polish drinking fountains, as
required,
11. Hand dust and clean stairwells interconnecting floors
and polish hand rails, as required.
12. Clean and remove debris from all metal door thresholds.
13. Wipe clean smudged bright work, as required.
14. Spot clean all carpets, resilient and composition
floors, as required.
B. Weekly Services
1. Dust all low reach areas including, but not limited to
chair rungs, furniture ledges, baseboards, wood paneling
molding, etc.
2. Dust all vinyl base.
3. Clean and buff all building standard resilient and/or
composition flooring.
4. Dust all high reach areas including, but not limited to,
tips of partitions.
5. Edge all carpeted areas.
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6. Dust all high reach areas including, but not limited to,
picture frames and similar wall hangings, as required.
C. Monthly Services
1. Dust all high reach areas including, but not limited to,
tops of door frames, furniture ledges, air conditioning
diffusers and return grills and graphs.
2. Vacuum or brush upholstered furniture.
D. Quarterly Services
1. Shower scrub or otherwise recondition all resilient or
composition flooring to provide a level of appearance
equivalent to a completely refinished floor as requited.
2. Dust venetian blinds and draperies.
3. Clean partition glass as requested.
4. Damp wipe outside of all supply and return air
diffusers. (Building engineers will damp wipe inside of
all supply and return air diffusers.)
E. Annual Services
1. Clean all parabolic light fixtures, as required.
6. Restroom Service Specifications
A. Nightly Services
1. Restock all restrooms with supplies including paper
towels, toilet tissue, seat covers and hand soap as
required.
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2. Restock all sanitary napkin and tampon dispensers as
required.
3. Wash and polish all mirrors, dispensers, faucets,
flushometers and bright work.
4. Wash and sanitize all toilet, toilet seats, urinals and
sinks. Wipe dry all sinks.
5. Remove stains, descale toilets, urinals and sinks as
required.
6. Mop all restroom floors with disinfectant germicidal
solution and remove all stains beneath urinals.
7. Empty all waste, sanitary napkin and tampon receptacles;
8. Remove all restroom trash.
9. Clean finger prints, marks arid graffiti from walls,
partitions, glass, aluminum and light switches where
required.
10. Clean and leave streak free all partition doors and
metal attachments.
B. Weekly Services
1. Clean tile grout, access doors and floor drains.
2. Thoroughly mop all ceramic tile floors.
C. Monthly Services
1. Dust all low reach and high reach areas including, but
not limited to ledges, mirror tops, partition tops and
edges, air conditioning diffusers and return air grills.
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2. Wipe down all tile walls, as required.
7. Main Floor and Elevator Lobbies
A. Nightly Services
1. Thoroughly wash and clean all swinging and revolving
glass doors and hardware.
2. Clean and polish lobby, including glass directories.
3. Clean and polish all bright work including kick plates,
base, partition top hand rails, waste paper receptacles,
planters, elevator call button plates, hose cabinets and
service elevator lobby, landings, elevator tracks and
visible hardware, as required.
4. Clean all interior architectural aluminum finishes, as
required.
5. Thoroughly clean all door saddles of dirt and debris.
6. Spot clean, sweep and damp mop all granite, brick paver
and seal as required.
7. Clean and dust countertops, work table, directory board
glass and ledges.
8. Empty all wastebaskets and refuse receptacles and
replace liners as required.
B. Weekly Services
1. Shampoo all first floor elevator lobby carpeting.
C. As Required
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9. Landlord personnel or special contractors shall clean
all painted, vinyl and granite wall surfaces, as
required.
8. Service Offices (Engineering Office and Janitor's Office and Closets);
Storerooms; Service Corridors and Roof
A. Nightly Services
1. Remove trash from all of the above areas.
2. Maintain an orderly arrangement of all janitorial
supplies and paper products in the storage rooms and
service sink closets.
3. Maintain in a clean and orderly arrangement all
equipment stored in these areas, such as mops, buckets,
brooms, vacuum cleaners, scrubbers, etc.
4. Clean and disinfect service sinks, as required.
5. Sweep and damp mop service sink closet floors. Deodorize
and disinfect as required, as required.
6. Sweep storeroom floors, as required.
Weekly Services
B. Weekly Services
1. Damp mop all composition floors in storeroom. Deodorize
and disinfect as required.
9. Passenger Elevator Cleaning Specifications
A. Nightly Services - As Required,
1. Clean all walls inside of cabs including base.
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2. Clean interior surfaces of cab walls and doors.
3. Spot clean elevator cab floor carpeting.
4. Vacuum all cab floor carpeting thoroughly. Edge all
carpeting thoroughly.
B. Weekly Services
1. Damp wipe clean entire cab ceiling.
C. Every Two Weeks
1. Shampoo and hot water extract with neutralizing rinse
all elevator cab floor carpets.
D. Monthly Services
2. Clean outside surfaces of all elevator doors and frames.
10. Service Elevator Cleaning Specifications
A. Nightly Services
1. Spot clean all surfaces of the interior of all cabs and
all exterior doors and frames.
B. Weekly Services
1. Spot clean all interior and exterior surfaces of cab
walls, doors and frames.
2. Clean and polish floor landing tracks.
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3. Thoroughly clean dirt and debris from grooves in both
cab and landing door tracks, polish cab tracks.
4. Sweep and scrub flooring of all cabs.
C. Monthly Services
1. Machine scrub and refinish where applicable.
1.1 Loading Area, Trash Area and Service Entrance Specifications
A. Nightly Services
1. Place all miscellaneous trash and debris, except
construction materials, in the Building's trash
receptacles, compactors or balers.
2. Neatly stack all trash in designated area (compactor or
bin).
3. Sweep entire area.
4. Hose down or mop entire trash area and disinfect as
required.
B. Weekly Services
1. Hose down entire loading dock area and service entrance
area. Deodorize and disinfect area as required.
12. Exterior Structure and Grounds Services Specifications
A. Nightly Services
1. Police entire perimeter of project, weather permitting.
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2. Spot sweep accumulations of dirt, papers and leaves in
all corner areas where wind tends to cause a collection
of this debris.
B. Weekly Services
1. Hose down entire perimeter of project, weather
permitting.
C. Quarterly Services
1. Wash clean all windows (two times per year), as
practicable.
(Exterior window cleaning is not provided by Landlord's
janitorial contractor but rather by a designated window
cleaning contractor.)
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EXHIBIT E
LEASE COMMENCEMENT DATE STATEMENT
Date:________ 19___
Chevron Real Estate Management Company
6400 South Fiddler's Green Circle
Suite 200
Englewood, Colorado 80111
Attention: Leasing Manager
This letter is being delivered to Chevron Real Estate Management Company
("CREMCO") in accordance with Paragraph 16 of that certain lease (the 'Lease')
dated _______, 19__, between Huntington Beach Company, a California Corporation,
by its agent, Chevron Real Estate Management Company, a Division of Chevron
U.S.A. Inc. and the undersigned.
We hereby acknowledge that the Lease Commencement Date (as defined in
the Lease) is _______________, the date of expiration of the Lease Term (as
defined in the Lease) is _____________,19__ and Tenant's Total Square Footage is
________________ , rentable square feet.
Very truly yours,
Tenant
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EXHIBIT F
RULES AND REGULATIONS
1. The sidewalks, entrances, halls, corridors, elevators and stairways of
the Building shall not be obstructed or used as a waiting or lounging
place by Tenant, or its agents, servants, employees, invitees,
licensees, and visitors.
2. Landlord reserves the right to refuse admittance to the Building at any
time other than between the hours of 6:00 a.m. and 6:00 p.m. weekdays,
or 7:00 a.m. to 1:00 p.m. on Saturdays, to any person not producing
either a key to the Leased Premises or a pass issued by Landlord. In
case of invasion, riot, public excitement or other commotion, Landlord
also reserves the right to prevent access to the Building during the
continuance of same. Landlord shall in no case be liable for damages for
the admission or exclusion of any person to or from the Building.
3. Landlord will furnish each Tenant with two keys to each door lock in the
Leased Premises, and Landlord may make a reasonable charge for any
additional keys requested by Tenant. No Tenant shall have any keys made
for the Leased premises; nor shall any Tenant alter any lock, or install
new or additional locks or bolts, on any door without the prior written
approval of Landlord. If a lock alteration or installation is made, the
new lock must accept the master key for the Building. Each Tenant, upon
the expiration or termination of its tenancy, shall deliver to Landlord
all keys in such Tenant's possession for all locks and bolts in the
Building.
4. In order that the Building may be kept in a state of cleanliness, each
Tenant shall, during the term of its Lease, permit Landlord's employees
(or Landlord's agent's employees) to take care of and clean the Leased
Premises, and Tenant shall not employ any person(s) other than
Landlord's employees (or Landlord's agent's employees) for such purpose.
No tenant shall cause any unnecessary labor by reason of such Tenant's
carelessness or indifference in the preservation
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of good order and cleanliness of the Leased premises. Tenant, will
ensure that before leaving the Leased Premises each day:
(a) the doors are securely locked; and
(b) all water faucets and other utilities are shut off: (so
as to prevent waste or damage).
In no event shall Tenant place such items for disposal in the public
hallways or other common areas of the Building or Improved Area.
5. Landlord reserves the right to prescribe the date, time, method and
conditions that any personal property, equipment, trade fixtures,
merchandise and other similar items shall be delivered to or removed
from the Building. No steel safe or other heavy or bulky object shall be
delivered to or removed from the Building except by experienced safe
men, movers, or riggers approved in writing by Landlord. All damage
done to the Building by the delivery or removal of such items, or by
reason of their presence in the Building, shall be paid by Tenant to
Landlord immediately upon demand therefor. For the delivery or receipt
of merchandise, only hand-trucks equipped with rubber tires shall be
used by Tenant jobbers or others.
6. The walls, partitions, skylights, windows, doors, and transoms that
reflect or admit light into passageways or into any other part of the
Building shall not be covered or obstructed nor have signs or
advertisements posted on them by any Tenant.
7. The toilet rooms, toilets, urinals, wash bowls and water apparatus shall
not be used for any purpose other than for those for which they were
constructed or installed, and no sweepings, rubbish, chemicals, or other
unsuitable substances shall be thrown or placed therein. The expense of
any breakage, stoppage or damage resulting from violations of this rule
by Tenant or by Tenant's agents, servants, employees, invitees,
licensees, or visitors, shall be borne by Tenant.
8. No sign, name, placard, advertisement, or notice visible from the
exterior of any Leased Premises shall be inscribed, painted or affixed
by any Tenant on any
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window or other part of the Building or Improved Area without the prior
written approval of Landlord. A directory containing the names of all
tenants of the Building shall be provided by landlord at an appropriate
place on the first floor of the Building.
9. No electronic signaling, telegraphic, or telephonic instruments or
devices, or other wires, instruments or devices, shall be installed in
connection with any Leased Premises without the prior written approval
of Landlord, which approval shall not be unreasonably withheld. Such
installations, and the boring or cutting of wires, shall be made at the
sole cost and expense Of Tenant and under the control and direction of
Landlord. Landlord retains, in all cases, the right to require:
(a) the installation and use of such electrical protecting
devices that prevent the transmission of excessive
currents of electricity into or through the Building;
(b) the changing of wires and of their installation and
arrangement underground or otherwise as Landlord may
direct; and
(c) compliance on the part of all using or seeking access to
such wires with such rules as Landlord may establish
relating thereto. All such wires used by Tenant must be
clearly tagged at the distribution boards and junction
boxes and elsewhere in the Building, with (x) the number
of the Leased Premises to which said wires lead, (y) the
purpose for which said wires are used, and (z) the name
of the company operating same.
10. Tenant, its agents, servants, and employees shall not:
(a) go upon the roof of the Building;
(b) use any additional method not approved in writing by the
Landlord of heating or air conditioning the Leased
Premises;
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<PAGE> 88
(c) sweep or throw any dirt or other substance from the
Leased Premises into any of the halls, corridors,
elevators, or stairways of the Building, or onto any
part of the Improved Area;
(d) bring in or keep in or about the Leased Premises any
vehicles or animals of any kind;
(e) install any radio or television antenna or any other
device or item on the roof, exterior walls, windows, or
window sills of the Building or anywhere in the Improved
Area;
(f) place objects against glass partitions, doors, or
windows which would be unsightly from the interior or
exterior of the Building;
(g) place pictures, plants, or any other items on window
sills which would interfere with closing of window
blinds by the janitors at night;
(h) use any portion of the Leased Premises: (i) for lodging
or sleeping, (ii) for cooking (except that the use by
any Tenant of Underwriter's Laboratory-approved
equipment for brewing coffee, tea and similar beverages
or the use by Tenant of e similarly-approved microwave
oven shall be permitted, provided that such use is in
compliance with law), or (iii) for any purpose other
than the Permitted Purpose provided for in the Lease; or
(i) permit the operation of any musical or other
sound-producing instruments or devices which may be
heard outside the Tenant's Leased Premises, or which may
emit signals which will impair radio or television
broadcast or reception from or into the Building.
11. Tenant shall not store, carry into, or use within Plaza Tower One or in
any Leased Premises or permit others to do so:
(a) any ether, naphtha, phosphorous, benzol, gasoline,
benzine, petroleum, crude or refined earth or coal oils,
kerosene or camphene;
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(b) any other flammable, combustible, explosive or
illuminating fluid, gas or material of any kind; or
(c) any other fluid, gas or material of any kind having an
offensive odor; or
(d) any firearm (loaded or unloaded) or any other weapon or
ammunition for a weapon.
12. No canvassing, soliciting, distribution of handbills or other written
material, or peddling shall be permitted in the Building or the Improved
Area, and Tenant shall cooperate with Landlord in prevention and
elimination of same.
13. Tenant shall give Landlord prompt notice of all accidents to, or defects
in, air conditioning equipment, plumbing, electrical facilities, or any
part or appurtenances of the Leased premises.
14. The Improved Area outside the Building may be used for the enjoyment of
Tenant, its agents, servants, and employees without restriction so long
as such parties conduct themselves in a manner so as not to disturb
others or disturb, destroy, or litter the Improved Area. All parties
using the Improved Area shall comply with all applicable governmental
laws, ordinances, rules and regulations and all rules and regulations of
Arapahoe County.
15. Tenant personnel and their guests shall observe 'No Smoking' signs where
posted in Plaza Tower One and refrain from smoking in the Leased
Premises, elevator lobbies, elevators, public corridors, building
stairwells and restrooms. Smoking is permitted only on the terrace area
outside the east end of Level Two.
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<PAGE> 90
EXHIBIT G
ATTORNMENT AND NONDISTURBANCE AGREEMENT
THIS AGREEMENT, made as of ______________ between _____________
hereinafter referred to as "Interest Holder" and __________________ hereinafter
referred to as "Tenant".
W I T N E S E T H:
THAT, WHEREAS, HUNTINGTON BEACH COMPANY, a California Corporation,
hereinafter referred to as 'Landlord', has by Lease executed on _______________,
leased to Tenant for a term of years, commencing on _________, and, ending on,
______________, or upon such postponed date as shall be designated
by written endorsement to the Lease, certain portions of the building located in
the County of Arapahoe, State of Colorado, such portions being hereinafter
called the "Leased Premises", and the building more particularly described as
follows:
WHEREAS, Interest Holder is the holder of a lien or other interest in
the form of a _________ and recorded at ________, and any amendments,
supplements or extensions thereto, hereinafter referred to as the "Encumbrance";
and
WHEREAS, the encumbered premises under the foregoing encumbrance are the
same premises as, or include the Leased Premises set forth in, the legal
description above;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, the parties hereto agree as follows:
1. Tenant agrees that in the event of any foreclosure or the
exercising of any other rights under the Encumbrance, whereby
Interest Holder shall cause Landlord to be ousted from
possession or assert any right of ownership inconsistent with
Tenant's right under the Lease, at any time arid from time
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<PAGE> 91
to time after commencement of the term of the Lease and prior to the
expiration, cancellation or other termination thereof, for any reason,
Tenant shall be bound to Interest Holder, the purchaser at a foreclosure
sale, any receiver appointed under the Encumbrance, assignment of rents,
or court order or any assignee or successor in interest (all of which
are hereinafter referred to as "Transferee") under all of the terms,
covenants, and conditions of the Lease during the remaining term
thereof, including any extensions or renewals which may be effected in
accordance with any option in the Lease, with the same force and effect
as if Transferee were Landlord under the Lease, and Tenant does hereby
attorn to Transferee as its Landlord.
2. The parties hereto do hereby covenant and agree that the Lease and any
modifications and amendments thereto subsequently approved by Interest
Holder, and all rights, options, liens or other charges created thereby,
are, and shall continue to be, subject and subordinate in all respects
to the Encumbrance and the lien created thereby, to any advance made
thereunder, to any consolidations, extensions, modifications, or
renewals thereof, and to any other mortgage on the Leased Premises held
by Interest Holder.
3. So long as no default exists and no event has occurred which would
entitle Landlord to terminate the Lease, Interest Holder agrees that in
the event of any foreclosure or the exercising of any other rights under
said Encumbrance whereby any such Transferee shall oust Landlord of
possession or assert any right of ownership which would, in the absence
of this Agreement, be inconsistent with Tenant's rights under the Lease
and prior to the expiration or termination thereof, the Lease shall, in
accordance with its terms, remain in full force and effect as a direct
Lease between Transferee and Tenant and the possession of Tenant under
the Lease shall not be disturbed by any such event. The Transferee shall
be entitled to all of the rights and benefits and subject to all of the
obligations of the immediately prior landlord under the Lease. If
successive rights should be asserted by any or several Transferees
separately or in any
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<PAGE> 92
combination, Tenant shall have the same rights to continue the Lease in
effect in each such instance.
4. In order to effect the provisions of the preceding paragraphs, Interest
Holder does hereby grant and demise to Tenant the Leased Premises for a
term of years to commence upon the exercise of any right described in
the preceding paragraphs.
Such term of years shall be upon the terms and conditions of the Lease
as though the Lease were between Transferee and Tenant.
5. The provisions of the preceding paragraphs are to be effective and self
operating without the execution of any further instruments upon
Transferee's succeeding to the interest of Landlord under the Lease.
6. This Agreement shall inure to the benefit of and be binding upon Tenant,
Interest Holder, Transferee, their successors and assigns.
7. The effective date of this Agreement is _____________, and the covenants
and conditions hereof shall apply from and after said date.
8. This Agreement shall remain in full force and effect and shall pertain
to said Lease now or as hereafter amended or extended.
9. Neither Interest Holder nor Transferee shall in any way or to any extent
(i) be obligated or liable to Tenant for any prior act, omission or
default on the part of Landlord under the Lease, or (ii) be obligated or
liable to Tenant for any security deposit of other sums deposited with
Landlord not physically delivered to Interest Holder or Transferee, or
(iii) be bound by any previous prepayment of rent for a period greater
than one month, unless such modification, amendment or prepayment shall
have been expressly authorized in writing by Interest Holder, and Tenant
shall have no right to set off assets or counterclaim against Interest
Holder or the Transferee for any of the acts or omissions of Landlord
referred to in (i), (ii), or (iii) above.
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<PAGE> 93
10. In the event of any act or omission by Landlord under the Lease which
would give Tenant the right to terminate the Lease or claim a partial or
total eviction, Tenant shall not exercise any such right until (i) it
has given notice thereof to Interest Holder, and (ii) Interest Holder,
following the giving of such notice, shall have failed to commence or
pursue action to remedy such act or omission in the manner set forth in
the Lease.
11. All notices hereunder shall be given in the manner prescribed in the
Lease.
TENANT: By:
-------------------------------------
Its:
---------------------------------
INTEREST HOLDER: By:
-------------------------------------
Its:
---------------------------------
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<PAGE> 94
EXHIBIT H
ESTOPPEL CERTIFICATE
The undersigned, a duly authorized __________________________ of
__________________________________ __________________________, hereby certifies
unto _____________________________________ as follows:
(1) ____________________________________ is the Tenant ("Tenant") and
_____________________________________________ is the Landlord ("Landlord") under
that certain Lease Agreement ("Lease") dated ___________________________,
relative to (___________________________) square feet of space in the Plaza
Tower One building located at 6400 S. Fiddler's Green Circle, Englewood,
Arapahoe County, Colorado, and the following improvements:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(2) Attached hereto as Exhibit "A" is a complete and accurate copy
of the Lease and, except as set forth in such exhibit, there are no other
amendments thereto or agreements relating to the subject matter thereof.
(3) The Lease is in full force and effect and Landlord is not in
default thereunder, except as may be indicated on any attached addendum. Tenant
has received no notice from landlord that Tenant is in default under the Lease
and Tenant has no present knowledge of any facts which would give rise to or
constitute a breech or default by either party thereunder.
(4) There is no claim of offset or other claim presently existing in
favor or Tenant against Landlord arising out of or relating to the Lease, except
as may be indicated on the attached addendum.
(5) The Lease is for a term of ___________, having commenced on
_______________________, with the present term expiring on
________________________, subject to renewal options as therein provided.
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<PAGE> 95
(6) Rent under the Lease has been paid through
___________________________________________________, subject to adjustment as
therein provided.
(7) Tenant has performed all tenant finish work with regard to the
Premises thereby leased and Tenant has accepted possession and is in occupancy
of such Premises.
(8) Tenant has no option or right of first refusal to purchase the
leased premises.
The undersigned understands that this Certificate may be relied upon by
a purchaser of the leased premises.
Dated at____________________,
TENANT
By:_________________________________,
Its:________________________________,
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<PAGE> 96
EXHIBIT I
HVAC SPECIFICATIONS
Landlord shall provide and operate a first class quality Heating, Ventilation
and Air Conditioning system with service available on a year round basis in all
occupied areas of the building. Remotely operated automated air dampers on each
floor permit Tenant to utilize after hours HVAC service on a floor-by-floor
basis.
The system shall have sufficient cooling and heating capacity to maintain an
average inside temperature of 72 degrees f +/- 2 degrees fdb during summer
outdoor temperatures consistent with 98% ASHRAE standards for Denver, Colorado.
And 70fdb at winter outside temperatures also consistent with 98% ASHRAE
standards for Denver, Colorado and based on internal heat loads generated by
occupancy levels of one person per 140 sq. ft., lighting load of 1.5 watts per
square foot and miscellaneous power loads equivalent to a heat output of 4.5
watts per square foot. Outdoor air ventilation shall be consistent with ASHRAE
Standard 62-1989.
The system tonnage is based on the calculated building loads, plus additional
capacity for Tenant's supplemental cooling requirements as needed. The building
includes general exhaust capability for Tenant's use for reproduction,
photocopy, computer room fire suppressant exhaust and other types of equipment
requiring special exhaust.
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EXHIBIT J
CORE AND SHELL
"Core and Shell" shall include the following:
1. At least two drinking fountains on each Floor of the Building.
2. Lavatories: At least one Ladies' and one Men's room on each
Floor of the Building, including all ceilings, vanities,
fixtures, trim, lighting, and all plumbing and mechanical
systems and facilities.
3. Telephone: Landlord will furnish and install a telephone company
frame room in the Building and conduit to telephone closets on
each Floor.
4. All electrical facilities and equipment.
5. Core:
(a) Full height solid oak fire-rated doors and first
quality, heavy duty butts, jambs and closers, including
doors for mechanical, electrical, telephone and
janitor's rooms, in addition to stairwells.
(b) Sound attenuation consistent around core to provide a
level of NC/37.
(c) Exit signs at core as required, including emergency
power requirements for exiting.
(d) Locking devices and closers for all exit, stairwell and
electrical/telephone doors.
6. All HVAC systems and facilities
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<PAGE> 98
7. All structural components of the Building, including shaft space
to accommodate Tenant's riser requirements for private
telephone.
8. Lobby: Stainless elevator doors completed with factory-applied
finishes, Landlord to advise Tenant of any deviation in standard
measurements of frames and Jambs.
9. Space clear of all pipes and ductwork including lighting,
Landlord's' systems for HVAC, electrical and sprinklers, to
provide for nominal ceiling height of 9'0".
10. All pipe sleeves in beams and walls to be packed tight,
11. A curtain wall completely installed which shall be energy
efficient and watertight under all design conditions.
12. All fire and life safety systems and facilities.
13. All plumbing and natural gas systems and facilities, including
access outside the core to domestic hot and cold water,
drainage and vent systems (No natural gas service is available
above the first floor level of the Building),
14. Blinds: Clean, operable vertical blinds for all exterior windows
and perimeter walls in the applicable Floors of the Leased
Premises.
15. All mechanical, electrical, escalator, base building systems.
16. Elevators: Elevators will provide a 28-30 second interval and
handle 13 percent of the population in a 5 minute period in
accordance with a population density of one (1) person per 150
square feet.
17. General exhaust requirements for reproduction, photocopy,
conference room and other types of equipment requiring special
exhaust systems in the Leased Premises.
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<PAGE> 99
EXHIBIT K
CONSTRUCTION PROCEDURES
[See Attached]
K - 1
<PAGE> 100
PLAZA TOWER ONE
Contractor Procedures
GENERAL INFORMATION
Plaza Tower One is a facility which is very customer focused. We pride in our
continued effort to please our clients and keep their best interests in mind. As
we all know, construction can be a very intrusive process and it takes great
patience and preplanning to anticipate it's effect on the existing tenant base.
To that end, procedures have been established to ensure the necessary steps are
in place to anticipate the impact of each project on the adjacent tenancy.
Chevron as a corporation is extremely focused on safety. Another important
aspect of construction preplanning is anticipating the risks inherent to each
job. Plaza Tower has established a work permit form to help CONTRACTORs assess
risks, consider safety concerns and communicate to the building engineers which
systems they will be affecting. The second page of the work permit is a "job
site check list". This check list asks several questions related to potential
safety concerns. This form is filled out by the mechanical, plumbing, fire
safety and electrical subCONTRACTORs and turned in to the building engineers
office prior to the beginning of each construction job.
Along with the work permit, the building also enforces lock out/log out for
those trades. Each of these CONTRACTORs will follow the procedure as it is
discussed in the attached documentation.
Through out construction, your primary building contact will be Melissa
Wilkowski. She is the Construction Project Mfr. for Chevron (Landlord
Representative) and is responsible for obtaining the necessary documentation for
the project, overseeing the day-to-day construction of the project on behalf of
the building and communicating with our tenants on possible impact to them. You
can reach her at (303) 930-3904.
BUILDING RULES & REGULATIONS
A document is enclosed which discusses the protocol for CONTRACTORs in the
building. This document discusses procedures for after hours work, notices we
require for adjacent or affected tenants as well as written authorization from
our tenants for access to their suite after hours. Please read it thoroughly.
APPROVED LIST OF BIDDERS
Chevron pays close attention to the mechanical, plumbing and electrical
CONTRACTORs who work in the building. By limiting the number of CONTRACTORs who
work on the building systems, we have been successful in maintaining the
integrity of the building and our tenants have experienced very few problems
during construction. A list of preferred CONTRACTORs is enclosed.
<PAGE> 101
BUILDING SUPPLIED MATERIALS FORM
Chevron maintains an inventory of building standard items such as light
fixtures, ceiling tile and grid tee materials. These are specialty items which
typically have a 6 - 8 week lead time. The building has elected to stock these
items so that construction projects are not delayed unnecessarily. Prior to the
beginning of each project, the general CONTRACTOR will estimate the number of
these items he will need to complete the job. During the construction of the
space, the project superintendent will fill out a "Building Supplied Materials"
form to request the amount of product he will need for the project. He will
submit that estimate to the Landlord Representative. The product is charged to
the job when the project is complete.
Many items are listed on the form. Please contact the Construction Project Mgr.
prior to submitting final pricing for the project, to ensure an adequate stock
of these items is available for your project.
LOCK OUT/TAG OUT PROCEDURES
The Plaza Tower One team put this document together to instruct all mechanical,
plumbing and electrical CONTRACTORs on our lock out/tag out procedures. The
building engineer supplies the locks, logs, and signs to the CONTRACTOR after
the CONTRACTOR has submitted a completed work permit for the job. Adequate
notice is required prior to scheduling work. A copy of the work permit is
enclosed.
Please read through all of the enclosed documentation. If you have any
questions, please call Melissa Wilkowski, Construction Project Manager for
Chevron Real Estate Mgt. Company prior to commencing any work. You can reach her
at (303) 930-3904.
<PAGE> 102
CHEVRON REAL ESTATE MANAGEMENT COMPANY
Plaza Tower One Rules and Regulations
1. Before performing any work, CONTRACTOR shall sign in the CONTRACTOR Work
Log at the lobby security console. Work completed Monday through Friday
must be entered the day prior to the work being completed and for after
hours work or weekend work it should be entered at least one week ahead
of time after being approved by the Landlord Representative. CONTRACTOR
supervision will be maintained at all times.
2. Any CONTRACTOR performing work on any of the following systems shall
check in with the Lead Building Engineer at the beginning and end of
every work day.
a. Fire Alarm
b. Fire Sprinkler
c. Electrical
d. HVAC
e. Plumbing
3. The sidewalks, walks, plaza entries, corridors, concourses, ramps,
staircases, and elevators shall not be obstructed or used for any
purpose other than ingress and egress to and from the Premises. No
bicycle or motorcycle shall be brought into the Building or kept on the
Premises without the consent of Real Estate Management.
4. No freight, furniture or bulky matter of any description will be
received into the Building through the front doors or carried into the
passenger elevators including ladders and hand trucks. The freight
elevator is available daily or can be scheduled through the Landlord
Representative for extended periods if requested in advance. Elevator
doors are not to be pried or propped open in any manner.
5. Landlord Representative shall have the right to prescribe the weight,
position and manner of installation of building materials and/or other
heavy equipment which, if considered necessary by Landlord
Representative, shall be installed in a manner which shall insure
satisfactory weight distribution. All damage done to the Building by
reason of overloading a floor shall be repaired at the expense of
CONTRACTOR. The time and manner of moving heavy equipment or material
shall be subject to prior approval of Landlord Representative.
6. CONTRACTOR shall use no other method of heating or cooling the premises
than that supplied by the building.
7. Building Management shall have the right to prohibit any advertising by
CONTRACTOR which, in reasonable opinion, tends to impair the reputation
of the Building or the desirability of its offices. Any such requests
must be submitted in writing and approved before implementation.
<PAGE> 103
8. Canvassing, soliciting or peddling in the Building is prohibited and
CONTRACTOR shall cooperate to prevent same.
9. CONTRACTOR shall not bring or permit to be brought or kept in or on the
Premises any inflammable, combustible, corrosive, caustic, poisonous or
explosive fluid, material, chemical or substance, or cause or permit any
odors to permeate in or emanate from the Premises.
10. No boring or cutting through floors of the Building shall be permitted
without prior consent of Landlord Representative (which consent shall
not be unreasonably withheld) and as Landlord Representative may
reasonably direct. X-rays and core drills will be allowed between the
hours of 8:00 p.m. and 6:00 a.m. A one week notice is requested for both
of these items. All cores existing or new must be fire safed. CONTRACTOR
supervision will be maintained at all times.
11. CONTRACTOR shall give immediate notice to Landlord Representative in
case of accidents in the Building or of defect therein or in any
fixtures or equipment or of any known emergency in the Building.
12. CONTRACTOR shall cooperate fully with Landlord Representative directives
upon the occurrence of a Life Safety emergency situation.
13. Landlord Representative shall have the right to challenge CONTRACTOR
when removal of other than CONTRACTOR property from the Building is
suspected.
14. No alcohol, illegal drugs or firearms are to be brought into the
building by CONTRACTOR or personnel.
15. CONTRACTOR shall become fully familiar with and shall fully comply with
the building security procedures.
16. CONTRACTOR shall confine operations at the site to areas permitted by
law, ordinances, permits and the Contract Documents and shall not
unreasonably encumber the site with any materials or equipment.
17. CONTRACTOR at all times and at minimum on daily basis shall keep the
premises free from accumulation of waste materials or rubbish caused by
his operations. At the completion of Work he shall remove all his waste
material and rubbish from and about the Project as well as all his
tools, construction equipment, machinery and surplus materials.
18. If the CONTRACTOR fails to clean up at the completion of the Work,
Building Management may do so and the cost thereof, including service
fee, shall be charged to the CONTRACTOR.
<PAGE> 104
19. Should the CONTRACTOR wrongfully cause damage to the work or property of
the Building, or to other work on the site, the CONTRACTOR shall
promptly remedy such damage.
20. CONTRACTOR shall promptly correct all Work rejected by the Landlord
Representative as defective or as failing to conform to the Contract
Documents, whether observed before or after Substantial Completion and
whether or not fabricated, installed or completed. CONTRACTOR shall bear
all costs for correcting such rejected Work, including compensation for
the additional Building Management work made necessary thereby.
21. Any questions regarding these Rules and Regulations or items omitted
should be directed to the Landlord Representative.
22. CONTRACTOR shall not perform any cutting, burning, or dust generating
activities without prior permission of Landlord Representative in order
that necessary mechanical and fire alarm systems be bypassed.
23. CONTRACTOR shall provide necessary protection for all existing building
finishes including temporary covers such as wood or Masonic, for floor
surfaces and wall surfaces when moving heavy loads.
24. CONTRACTOR may use the Plaza Tower One parking structure. CONTRACTOR
will be allowed to park on the first and second levels only. The
employee will sign the ticket with his name and company name and present
it to the parking attendant upon exiting the structure.
25. CONTRACTOR is not to park vehicles in the loading dock or exterior dock
apron except for loading and unloading. No parking is allowed in the
drive way in the front of the building. This is a fire lane and
violators will be ticketed by the local police.
26. CONTRACTOR will not smoke inside the building at any time. Smoking is
permitted outside the building in designated areas.
26. CONTRACTOR shall not complete any oil-based painting or odorous work
until after normal building hours (between 6:00 p.m. and 6:00 a.m.
weekdays and after 1:00 p.m. on Saturday during the weekends).
27. CONTRACTOR to complete all wood staining and finishing off site.
<PAGE> 105
CHEVRON REAL ESTATE MANAGEMENT COMPANY
List of Preferred Bidders
Plaza Tower One
Electrical Sturgeon Electric
Grand Electric
Mechanical Jebco Mechanical
Accurate Air
Natkin
Fire Protection Western States Fire Protection
Mile High Fire Protection
Grinnel Fire Protection
ABC Fire Protection
Air Balance Tab Services Inc.
Double T Balancing
Plumbing Belcon Mechanical, Inc.
Front Range Plumbing
Total Plumbing
Braconier Plumbing
Painting Bob Kuntz Painting
Craftsman Painting
Multiwork European Finish Inc.
Creative Woodworking
New World Multiworks
Design Studies
Glass/Glazing Builder's Glass
Denver West Glass
Gump Glass
Horizon Glass
Floor Coverings CSI
CDS
Perfection Carpet (Installers only)
<PAGE> 106
Date: 5/1/94
CREMCO_________.
PLAZA TOWER ONE
Lockout (and or Tagout) Procedure
BASIC RULES FOR USING LOCKOUT OR TAGOUT SYSTEM PROCEDURE
All equipment will be locked out and or tagged out to protect against accidental
or inadvertent operation when such operation could cause injury to personnel.
BASIC RULES
This program applies to all employees and contractors working at PTO:
- - Work Permit shall be filled out and signed before any work is to begin.
- - Additional Work Permits shall also be filled out and signed before any
work is to begin that affect building systems.
- - All Work Permits shall be signed by both parties upon completion of
work.
- - Any person who causes injury to themselves or another because of failure
to lockout and or tagout, shall be considered negligent and shall be
immediately removed from project
- - Each contractor shall be solely responsible for their work and for the
safety of their employees. This policy shall be presented to all new
employees immediately upon hire, and to all existing employees during
periodic safety meetings. Documentation of those safety meetings will be
placed on file.
- - Under no circumstances shall ignorance of these policies be considered
an excuse for failure to adhere to this policy.
- - Violators of this standard procedure will be subjected to one official
warning for the first violation. The second violation will be grounds
for immediate removal from the project
- - Do not attempt to operate any switch, valve, or other energy isolating
device if it is locked or tagged out.
1
<PAGE> 107
PLAZA TOWER ONE
Lockout (and or Tagout) Procedure
PURPOSE
This procedure establishes the minimum requirements for the lockout and or
tagout of energy isolating device(s). It shall be used to ensure that machines,
valves, and equipment are isolated from all potentially hazardous energy, and
locked out and or tagged out before employees perform any service or maintenance
activities where the unexpected energization, start-up or release of stored
energy could cause injury. If the employee's company lockout and or tagout
procedure exceeds these minimum requirements, that employee must abide by them.
RESPONSIBILITY
The following list of employees are authorized to lockout/tagout electrical and
mechanical equipment at PTO
<TABLE>
<CAPTION>
Name Job Title
---- ---------
<S> <C>
Mike Sears Chief Engineer
Glynn Parkman Assist. Chief Engineer
David McDonald Electrician
</TABLE>
PREPARATION FOR WORK PERMIT AND LOCKOUT/TAGOUT
One person in the list will be contacted by the person requesting Work Permit
beginning with Mike Sears, Chief Engineer, by calling 930-3920 or call 930-3099
to have anyone on the list paged at least 24 hours in advance.
One of the employees authorized to lockout/tagout equipment will meet with
person requesting Work Permit and assume the responsibility for ensuring that
the following steps are complied with:
Person authorizing Work Permit will conduct a survey to locate and identify all
isolating device(s) to be certain which switch(s), valve(s) or other energy
isolating device(s) apply to the equipment to be locked and or tagged out. More
than one energy source (electrical, mechanical, or other) may be involved.
2
<PAGE> 108
PLAZA TOWER ONE
Lockout (and or Tagout) Procedure
SEQUENCE OF LOCKOUT AND OR TAGOUT SYSTEM PROCEDURE
1) Person requesting equipment lockout/tagout will fill out and sign Work
Permit located at front lobby desk in designated folder and return it to
one of the employees authorized to lockout/tagout equipment at least 24
hours in advance.
2) Employees authorizing Work Permit will notify all affected employees
that a lockout and or tagout system is going to be utilized and the
reason therefore.
3) Employee authorizing lockout/tagout shall know the type and magnitude of
energy that the machine or equipment utilizes and understand the hazards
thereof or shall delay the work until he/she does.
4) If the machine or equipment is operating, the employee authorizing
lockout/tagout will shut it down by the normal stopping procedure
(depress stop button, open toggle switch etc.)
5) Employee authorizing lockout/tagout may then operate the switch(s),
valve(s), or other energy isolating device(s) so that the equipment is
isolated from its energy sources). Stored energy (such as that in
springs, elevated machine members, rotating flywheels, hydraulic
systems, and air, gas, steam, or water pressure, electricity, etc.) must
be dissipated or restrained by methods such as repositioning, blocking,
bleeding down, etc.
6) Employee authorizing lockout/tagout will lockout and or tagout the
energy isolating device(s) with individual lock(s) and or tag(s). Person
requesting equipment lockout and or tagout will then also install their
lock(s) and or tag(s).
7) The equipment is now locked out and or tagged out.
RESTORING MACHINES OR EQUIPMENT TO NORMAL OPERATIONS
1) After the servicing and/or maintenance is complete and equipment is
ready for normal production operations, one of the listed authorized
lockout/tagout employees will check the area around the machines or
equipment to ensure that no one will be exposed to a hazard that can
result from re-energizing a circuit, filling a line, etc.
3
<PAGE> 109
PLAZA TOWER ONE
Lockout (and or Tagout) Procedure
2) After all tools have been, removed from the machine or equipment, guards
have been reinstalled and employees are in the clear, authorized
lockout/tagout employee will remove all lockout and or tagout device(s),
operate the energy, isolating device(s) to restore energy to the
machine or equipment.
PROCEDURE INVOLVING MORE THAN ONE PERSON
In the preceding steps, if more than one individual requests to lockout and or
tagout the same equipment, employee authorizing lockout/tagout will provide
multiple lockout/tagout device(s). Employee authorizing lockout/tagout will
place his own personal lock and or tag on the multiple lockout/tagout device(s).
Persons requesting lockout/tagout will then place their lock and or tag on the
same multiple lockout/tagout device(s). Once all other locks are removed,
authorized lockout/tagout employee will check the area. If all tools have been
removed from the machine or equipment, guards have been reinstalled and
employees are in the clear, authorized lockout/tagout employee will remove all
lockout/tagout device(s), operate the energy isolating device(s) to restore
energy to the machine or equipment.
4
<PAGE> 110
PLAZA TOWER ONE
Electrical Room Lockout (and or Tagout) Procedure
This program applies to all employees and contractors working on electrical
equipment at PTO:
- - Only authorized personnel shall have access to electrical equipment or
electrical equipment rooms, vaults, cabinets, and disconnects.
- - Any unauthorized individual caught in an electrical equipment room will
be subject to immediate removal from project.
- - Authorized personnel shall be those individuals directly in charge of or
responsible for the work contained within an electrical equipment room,
or the work of or associated with any piece of electrical equipment.
- - All electrical equipment and electrical equipment room doors shall
remain closed locked at all times.
- - Every individual working on projects shall be part of the safety team by
being aware and closing any electrical equipment room doors which happen
to be left open.
- - Only individuals skilled and trained in the electrical trades shall be
allowed access to electrical equipment or electrical equipment rooms,
except for those individuals which may be performing work on the
supplementary aspects of the equipment room. This work is to be
coordinated through the electrical supervisor in charge of the area.
Where work in an area with exposed live parts is required, then an
electrician shall be present at all times during this work.
- - Electrical room or rooms containing electrical equipment which is
energized and may be or is having work performed on it shall have a
conspicuous sign on the door stating, in affect "Danger - Energized
Electrical Equipment", electrical voltage, and name of electrical
contractor.
- - Each electrical panelboard, switchboard, and switchgear shall have a
affixed to the exterior front an appropriate ledger with columns to
allow documentation of the following information:
5
<PAGE> 111
PLAZA TOWER ONE
Electrical Room Lockout (and or Tagout) Procedure
a) Electrical supervisor and company name in charge of the
authorized electrical person listed.
b) Authorized electrical person and company name in charge of
energizing or de-energizing the listed devices or equipment.
c) Date said equipment or device(s) was (were) energized or
de-energized with authorized electrical person's signature.
There shall be two separate columns, one for energization and
one for de-energization.
d) The ledger shall identify the name of the equipment to which it
applies, and its appropriate voltage characteristics.
- - Any work requiring de-energizing of electrical panelboards,
transformers, switchboards, or switchgear shall have Work Permit.
- - Once an electrical device or equipment is logged as de-energized, it may
NOT, under any circumstances, be re-energized without the express
consent of the individual (or individual's supervisor) who de-energized
the device or equipment. This consent shall be attested to, in writing,
on the energization/de-energization ledger.
- - Upon initial energization, each panelboard, switchgear, switchboard, and
motor control center shall have printed documentation, conspicuously
located, stating the word 'HOT' in letters at least 2 inches in height.
- - Each and every piece of equipment which is or eventually be connected to
a source of electrical energy shall be considered HOT, unless the
contrary is obvious through visual inspection or through a check by
means of an electrical testing device.
Procedures
Control Items:
- - The systems noted below are to be used in conjunction when applicable.
6
<PAGE> 112
PLAZA TOWER ONE
Electrical Room Lockout (and or Tagout) Procedure
a) Lock or Tree hangers for more than one lock. These types of
locks will be placed on all locking attachments.
b) Tags shall be placed on the original source of energy, i.e.,
panels, motor control center, disconnect control cabinets,
vaults and etc.
- - Documentation of procedures below will be placed on file and reviewed
during safety meetings.
c) Breaker tags will be used when locking device or tagging device
cannot be applied. (See attached)
d) Panel/Controlling Cabinets Log Sheet will be attached and
completed prior to performing work on panels. (See attached)
Group Lockout and Tagout Procedures
- - The placement of multiple lockout/tagout device(s) must be applied.
- - The placement of personal, lockout/tagout device(s) must be applied.
- - A personal device to ensure the employee that he or she is in complete
control of their protection scheme.
- - An employee's lockout/tagout device informs all other employees that
work is still being performed.
- - As long as the device or devices are attached, the authorized person in
charge knows that the work is not complete.
- - Until each device(s) in the group operation has been removed, each
employee involved with the servicing is protected.
7
<PAGE> 113
PLAZA TOWER ONE
Electrical Room Lockout (and or Tagout) Procedure
- - The authorized person in charge must not remove the multiple
lockout/tagout device(s) until each employee in the group operation
removes their personal device(s).
Items Included In Lockout and/or Tagout Systems
- - Tags (Tags will be placed to identify plainly the equipment or circuits
being worked upon).
- - Breaker tags will be applied when locking device can not be applied,
i.e., lock and tag.
- - Panel log sheets must be filled out prior to working on panel or
circuit/circuits. Only authorized persons can log dates in and out.
- - Documentation of procedures and previous safety meetings will be placed
on file, and reviewed during safety meetings where all employees are
present.
8
<PAGE> 114
Plaza Tower One
Work Permit
<TABLE>
<CAPTION>
No. 94- 000060
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Person Requesting Permit Company Name / Position Telephone / Pager Number(s)
- ---------------------------------------------------------------------------------------------------
General Contractor (if any) Contact Person Telephone / Pager Number(s)
- ---------------------------------------------------------------------------------------------------
Location of Work Date of Work Time of Work
From: To: From: To:
- ---------------------------------------------------------------------------------------------------
Type of Work System / Trades Affected
- ---------------------------------------------------------------------------------------------------
[ ] Maintenance [ ] Building Engineers [ ] Plumbing
[ ] New Construction [ ] Electrical [ ] Fire Protection
[ ] Remodel [ ] Security [ ] Elevators
[ ] Mechanical [ ] Others __________
- ---------------------------------------------------------------------------------------------------
Description:
- ---------------------------------------------------------------------------------------------------
Person Requesting Permit Signature Date
- ---------------------------------------------------------------------------------------------------
Completion/Back in Service Date
- ---------------------------------------------------------------------------------------------------
PTO Use Only
Isolating Device(s)
[ ] Electrical [ ] Air Pressure [ ] Hot Water [ ] Stored Energy
[ ] Hydraulic [ ] Water Pressure [ ] Natural Gas (Springs, Flywheel, Etc.)
[ ]Others______________________
- ---------------------------------------------------------------------------------------------------
Remarks;
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
Employees Authorized to Lockout/Tagout Signature Date
- ---------------------------------------------------------------------------------------------------
Completion/Back in Service Date
- ---------------------------------------------------------------------------------------------------
</TABLE>
cc: Construction Manager
Active File
<PAGE> 115
Plaza Tower One
Job Site Check List
<TABLE>
<CAPTION>
Work Permit No. 94-____________________________
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
I. HOUSEKEEPING Person Requesting Person Authorized to
Work Permit Lockout/Tagout
- ----------------------------------------------------------------------------------------------------------------
a. General Neatness of Working Areas?
- ----------------------------------------------------------------------------------------------------------------
b. Passage Ways and Walkways Clear?
- ----------------------------------------------------------------------------------------------------------------
c. Waste Containers Provided?
- ----------------------------------------------------------------------------------------------------------------
d. Proper Lighting?
- ----------------------------------------------------------------------------------------------------------------
II. SECURE WORK SITE
- ----------------------------------------------------------------------------------------------------------------
a. Barricades/Personnel for Traffic Control?
- ----------------------------------------------------------------------------------------------------------------
b. All Exits Secured as Needed
- ----------------------------------------------------------------------------------------------------------------
III. SAFETY
- ----------------------------------------------------------------------------------------------------------------
a. Personal Protection Devices?
- ----------------------------------------------------------------------------------------------------------------
b. Can it be Done Safely?
- ----------------------------------------------------------------------------------------------------------------
c. Does Something Have to be Done Before it's Safe?
- ----------------------------------------------------------------------------------------------------------------
d. Lighting During Job Hours? Job Conditions?
- ----------------------------------------------------------------------------------------------------------------
e. Public Safety? Fellow Worker's Safety?
- ----------------------------------------------------------------------------------------------------------------
IV. TOOLS
- ----------------------------------------------------------------------------------------------------------------
a. Proper Tools for Job?
- ----------------------------------------------------------------------------------------------------------------
b. Tools in Proper Working Condition?
- ----------------------------------------------------------------------------------------------------------------
c. All Tools Properly Guarded?
- ----------------------------------------------------------------------------------------------------------------
d. Electric Tools Guarded? GFI?
- ----------------------------------------------------------------------------------------------------------------
V. SCAFFOLDING/LADDERS
- ----------------------------------------------------------------------------------------------------------------
a. Scaffolding has Adequate Planking, Handrails, Toe Boards, and Access?
- ----------------------------------------------------------------------------------------------------------------
b. Proper Installation? Proper Use?
- ----------------------------------------------------------------------------------------------------------------
c. In Good Condition? Proper Maintenance?
- ----------------------------------------------------------------------------------------------------------------
VI. LOCKOUT/TAGOUT
- ----------------------------------------------------------------------------------------------------------------
a. Knowledge of All Energy Sources?
- ----------------------------------------------------------------------------------------------------------------
b. Knowledge of All Stored Energy Sources?
- ----------------------------------------------------------------------------------------------------------------
c. Knowledge of PTO Lockout/Tagout Procedure?
- ----------------------------------------------------------------------------------------------------------------
d. Knowledge of Your Company's Lockout/Tagout Procedure?
- ----------------------------------------------------------------------------------------------------------------
e. Other Equipment Affected? Does it Need Lockout/Tagout?
- ----------------------------------------------------------------------------------------------------------------
VII. OTHER RISKS
- ----------------------------------------------------------------------------------------------------------------
a. Hazardous Material?
- ----------------------------------------------------------------------------------------------------------------
b. Public Safety?
- ----------------------------------------------------------------------------------------------------------------
c. Will it Affect Tenants? Public?
- ----------------------------------------------------------------------------------------------------------------
d. Will it Affect Other Traders?
- ----------------------------------------------------------------------------------------------------------------
e. Surrounding Conditions?
- ----------------------------------------------------------------------------------------------------------------
f. Other Equipment Affected?
- ----------------------------------------------------------------------------------------------------------------
g. Time of Day?
- ----------------------------------------------------------------------------------------------------------------
h. Weather Conditions?
- ----------------------------------------------------------------------------------------------------------------
i. Employees Properly Trained?
- ----------------------------------------------------------------------------------------------------------------
Person Requesting Permit Signature________________________________________________________Date__________________
Person Authorized to Lockout/Tagout Signature_____________________________________________Date__________________
</TABLE>
<PAGE> 116
NER SUPPLIED MATERIALS I. (HISTORY) Project:________________
Material Requested:_________ Returned:_________
<TABLE>
<CAPTION>
Unit Total
Description Quantity Cost Value
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Doors & Hardware
- ----------------------------------------------------------------------------------------------------------------
3' X 9' Plain Sliced Red Oak Door $ 168.00
- ----------------------------------------------------------------------------------------------------------------
Pair Building Standard Butts $ 20.00
- ----------------------------------------------------------------------------------------------------------------
Schlage L9010 06A Passage Set $ 123.00
- ----------------------------------------------------------------------------------------------------------------
Schlage L9453 06A Locket $ 170.00
- ----------------------------------------------------------------------------------------------------------------
Best Cylinder (1E 7 4C265) $ 16.00
- ----------------------------------------------------------------------------------------------------------------
Door Closure with Cover $ 89.00
- ----------------------------------------------------------------------------------------------------------------
Manual Flush Bolt (set) $ 24.00
- ----------------------------------------------------------------------------------------------------------------
Automatic Flush Bolt (set) $ 90.00
- ----------------------------------------------------------------------------------------------------------------
Coordinator $ 55.00
- ----------------------------------------------------------------------------------------------------------------
Astragel $ 25.00
- ----------------------------------------------------------------------------------------------------------------
Magnetic Door Holder $ 83.00
- ----------------------------------------------------------------------------------------------------------------
Door Stop $ 4.00
- ----------------------------------------------------------------------------------------------------------------
Smoke Seal $ 15.00
- ----------------------------------------------------------------------------------------------------------------
....awall System
- ----------------------------------------------------------------------------------------------------------------
Basic Wall Material $ 39.00
- ----------------------------------------------------------------------------------------------------------------
Wall Start $ 31.00
- ----------------------------------------------------------------------------------------------------------------
Outside Corner $ 48.00
- ----------------------------------------------------------------------------------------------------------------
Door Frame $ 191.00
- ----------------------------------------------------------------------------------------------------------------
Carpet Tile $ 8.23
- ----------------------------------------------------------------------------------------------------------------
Tiling Material
- ----------------------------------------------------------------------------------------------------------------
2 X 5 Tile (100 s.f. per bundle) $ 0.53
- ----------------------------------------------------------------------------------------------------------------
2 X 3 Tile (60 s.f. per bundle) $ 0.68
- ----------------------------------------------------------------------------------------------------------------
Main Runner (12' - 240 L.F./Carton) $ 0.40
- ----------------------------------------------------------------------------------------------------------------
Tees: (2' - 140LF/Carton) $ 0.32
- ----------------------------------------------------------------------------------------------------------------
Tees: (3' - 120LF/Carton) $ 0.32
- ----------------------------------------------------------------------------------------------------------------
Tees: (18' - 105LF/Carton) $ 0.32
- ----------------------------------------------------------------------------------------------------------------
Tees: (5' - 200LF/Carton) $ 0.52
- ----------------------------------------------------------------------------------------------------------------
Tees: (4' - 160LF/Carton) $ 0.52
- ----------------------------------------------------------------------------------------------------------------
....AC
- ----------------------------------------------------------------------------------------------------------------
7" Spin-in $ 4.44
- ----------------------------------------------------------------------------------------------------------------
7" Flow (26' Box) $ 43.75
- ----------------------------------------------------------------------------------------------------------------
2 x 4 Supply Trouffer $ 145.00
- ----------------------------------------------------------------------------------------------------------------
2 x 2 Supply Trouffer $ 73.00
- ----------------------------------------------------------------------------------------------------------------
Electrical
- ----------------------------------------------------------------------------------------------------------------
2 x 4 Light Fixture w/ Whip & Parabolic $ 117.00
- ----------------------------------------------------------------------------------------------------------------
2 x 2 Light Fixture w/ Whip & Parabolic $ 83.00
- ----------------------------------------------------------------------------------------------------------------
Parabolic Lenses $ 29.00
- ----------------------------------------------------------------------------------------------------------------
Track Lights $ 87.00
- ----------------------------------------------------------------------------------------------------------------
Section of Track for Lights $ 50.00
- ----------------------------------------------------------------------------------------------------------------
PT-120 D1PCO916 Duplex Drop $ 10.00
- ----------------------------------------------------------------------------------------------------------------
SA-277 EXP06 Switch Drop $ 11.00
- ----------------------------------------------------------------------------------------------------------------
MSC-277 Hardwire $ 10.00
- ----------------------------------------------------------------------------------------------------------------
MSC-277/E12H11 Fixture Whip $ 20.00
- ----------------------------------------------------------------------------------------------------------------
CE-277/EH09 Extender $ 16.00
- ----------------------------------------------------------------------------------------------------------------
CE-277 Hardwire $ 10.00
- ----------------------------------------------------------------------------------------------------------------
Exit Light $ 90.00
- ----------------------------------------------------------------------------------------------------------------
Other/Miscellaneous
- ----------------------------------------------------------------------------------------------------------------
Corridor Polomix $ 66.00
- ----------------------------------------------------------------------------------------------------------------
TOTAL $ 0.00
- ----------------------------------------------------------------------------------------------------------------
Approved by Project Manager___________________________________________________________Date______________________
Signed for by Building Engineer_______________________________________________________Date______________________
Check out by G.C. Representative______________________________________________________Date______________________
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 117
EXHIBIT L
CHEVRON SELF-ADMINISTERED CLAIMS ADJUSTMENT PROGRAM
[See Attached]
L - 1
<PAGE> 118
[CHEVRON CORPORATION LETTERHEAD]
April 12, 1995
Contract(s) between Echo Bay Management
Corp., and Huntington Beach Company, a
California corporation, (Landlord) by its
managing agent, Chevron Real Estate
Management Company, a division of
Chevron U.S.A. Inc.
- -----------------------------------------
Echo Bay Management
c/o John G. McGrath
Davis Graham and Stubbs
Suite 4700
370 Seventeenth Street
Denver, CO 80202
Gentlemen:
Chevron Corporation and its subsidiaries are covered for property and liability
exposures through major worldwide insurance programs with large deductibles.
Losses that fall within these deductible levels, including those for, which a
Chevron company is contractually liable, are paid through the financial
resources of the Company and are administered by Chevron Corporation under its
Self-Administered Claims Program, hereinafter referred to as the Program.
This is to advise you Chat the property/liability insurance requirements of the
subject contract(s) fall within the deductible levels of Chevron's insurance
programs. Therefore, losses for which Chevron is responsible under the contract
will be handled under the above-described Program. The scope of this program is
equal to the insurance requirement, of the subject contract.
We further advise you Chat Workers' Compensation insurance requirements for
Chevron companies are satisfied through insured/self-insured programs depending
upon the location of the employee's workplace. U.S. Longshore and Harbor
Workers' Act coverage is self-insured.
Unless cancelled earlier, this letter will remain in effect until the expiration
or earlier termination of the subject contract (or any renewal thereof), if this
program is cancelled or materially changed, we will provide you with 30 days'
written notice.
Yours truly,
/s/ [Signature Illegible]
<PAGE> 119
FIRST AMENDMENT TO PLAZA TOWER OFFICE LEASE
THIS FIRST AMENDMENT TO PLAZA TOWER ONE OFFICE LEASE is entered into and
becomes effective this 24th day of May, 1995, by and between HUNTINGTON BEACH
COMPANY, a California corporation, ("Landlord"), by its managing agent, Chevron
Real Estate Management Company a division of Chevron U.S.A. Inc., and ECHO BAY
MANAGEMENT CORP., a Delaware Corporation ("Tenant").
WHEREAS, Landlord and Tenant entered into an Office Lease agreement
dated April 21, 1995 (the "Lease") pursuant to which Landlord agreed to lease
and Tenant agreed to hire certain office space located in the Plaza Tower One
office building located in Arapahoe County, Colorado (the "Leased Premises");
and WHEREAS Landlord and Tenant wish to amend the Lease as set forth below.
NOW THEREFORE, in consideration of the foregoing premises, the terms and
conditions provided herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. LEASED PREMISES:
a. Paragraph B of Section 1. (Definitions) is hereby deleted and
the following is substituted therefor:
A. "Leased Premises" shall mean the interior space shown
outlined in red on the floor plan of the Tower portion of the Building
shown on Exhibit B, attached hereto, containing approximately 58,793
rentable square feet, amounting to approximately 54,684 BOMA usable
square feet (computed by measuring to the finished surface of the office
side of the corridor and other permanent walls, to the center of
partitions that separate the Leased Premises from adjoining usable
areas, and to the inside surface of the exterior Building glass, with no
deductions made for columns and projections necessary to the Building),
plus the appurtenant right to use, in common with others, and the
entries, sidewalks, curb areas, driveways, cafeterias, health club
facilities (subject to the execution by Tenant of the form release and
indemnity agreement used from time to time by Landlord regarding the
use of such health club facilities by Tenant's employees), risers,
conduit, and other public portions of the Improved Area (the "Common
Areas").
b. Exhibit B of the Lease is hereby deleted and Exhibit B of this
Amendment is substituted therefor.
Page 1 of 7
<PAGE> 120
c. Paragraph M of Section 1. (Definitions) is hereby deleted and
the following is substituted therefor:
M. "Tenant's Total Square Footage" shall mean 58,793 square
feet which amount is equal to the sum of the square footage in the
Leased Premises, an allocated portion of Common Area square footage on
the floors on which the Leased Premises are located, and an allocated
portion of the square footage of trio remaining Common Areas in the
Tower.
d. Paragraph O of Section 1. (Definitions) is hereby deleted and
the following is substituted therefor:
O. "Tenant's Pro Rata Share" shall mean 13.0671% calculated
by dividing Tenant's Total Square Footage by the Total Square Footage of
the Tower.
2. Base Rent: Paragraph L of Section 1. (Definitions) is hereby deleted and
the following is substituted therefor:
B. "Base Rent" shall mean the following for the period indicated:
<TABLE>
<CAPTION>
Period $/Sq.Ft./year: $/month
------ ----------------------
<S> <C>
Years one through five: per rentable sq.ft. per year
per month
00 per year
Years six through ten: per rentable sq.ft. per year
per month
per year
</TABLE>
3. Parking: Section 18 is hereby deleted and the following is substituted
therefor:
Landlord shall provide to Tenant non-exclusive parking within the
Parking Garage contiguous to the Building at a ratio of one space for each 330
rentable square feet contained from time to time within the Leased Premises
(including any additional space taken by Tenant pursuant to Paragraph 45 or
Paragraph 46 hereof) (the "Regular Spaces"), and an additional 81 short term
parking spaces in Close proximity to the elevators, which shall be available for
use by Tenant's visitors at no cost for up to two hours. The Regular Spaces
(which, as of the Commencement Date, shall be 178 spaces) will be provided by
Landlord for use by the Tenant at a charge of ________ per space per month
during the first sixty (60) months of the Lease Term and ________ per space per
month during months 61 through 120. Subject to Landlord's
Page 2 of 7
<PAGE> 121
rules and regulations adopted from time to time pursuant to Paragraph 17
Tenant's employees, invitees and licensees shall be entitled to reasonable use
of such parking spaces.
4. The last sentence of the last paragraph of Section 6.1 of Exhibit C,
Work Agreement is hereby deleted in its entirety and all Relinquishments (as
described in Section 6.1 of Exhibit C, Work Agreement) have been obtained and
completed in a form that is mutually satisfactory to both Landlord and Tenant
under the Lease. Neither Landlord nor Tenant shall have a right to terminate the
Lease pursuant to Section 6.1 of Exhibit C to the Lease, Work Agreement.
5. The following is added to Section 3.1 of Exhibit C, Work Agreement:
Notwithstanding anything herein to the contrary, that portion of the
Leased Premises shown on Exhibit B as "The US West Space" shall not be delivered
to Tenant until vacated by the occupying tenant. Furthermore, the Leased
Premises, as that term is defined in this Amendment, shall not include the US
West Space until such delivery to Tenant occurs and that portion of Rent
attributable to the US West Space shall be abated accordingly until such
delivery.
6. No Further Modifications. Except as otherwise set forth in this
Amendment, the terms and conditions of the Lease and the Work Agreement remain
unchanged and in full force and effect.
Page 3 of 7
<PAGE> 122
Landlord and Tenant have executed this Amendment as of the data first
written above.
LANDLORD: HUNTINGTON BEACH COMPANY, a California
Corporation, by its agent Chevron Real Estate
Management Company, a division of Chevron U.S.A.
Inc., a Delaware Corporation
By: /s/ [Signature Illegible]
---------------------------------------------
Its: Vice Presdent
--------------------------------------------
TENANT: ECHO BAY MANAGEMENT CORP.,
a Delaware Corporation
By: /s/ [Signature Illegible]
---------------------------------------------
Its: Controller
--------------------------------------------
By: /s/ [Signature Illegible]
---------------------------------------------
Its: Senior Vice President, Finance
--------------------------------------------
Page 4 of 7
<PAGE> 123
LEASED PREMISES
(TENTH (10TH) FLOOR)
[LEASED PREMISES TENTH (10TH) FLOOR DIAGRAM]
Page 5 of 7
<PAGE> 124
LEASED PREMISES
(NINTH (9TH) FLOOR)
[LEASED PREMISES NINTH (9TH) FLOOR DIAGRAM]
Page 6 of 7
<PAGE> 125
EXHIBIT B
LEASED PREMISES
(FIFTH (5TH) FLOOR)
[LEASED PREMISES FIFTH (5TH) FLOOR DIAGRAM]
Page 7 of 7
<PAGE> 126
EXHIBIT A
SECOND AMENDMENT TO PLAZA TOWER OFFICE LEASE
THIS SECOND AMENDMENT TO PLAZA TOWER ONE OFFICE LEASE is entered into
and becomes effective on the later of the Delivery Date, as such term is defined
below, and the 15th day of December, 1995, by and between HUNTINGTON BEACH
COMPANY, a California corporation, ("Landlord"), by its managing agent, Chevron
Real Estate Management Company a division of Chevron U.S.A. Inc., and ECHO BAY
MANAGEMENT CORP., a Delaware Corporation ("Tenant").
WHEREAS, Landlord and Tenant entered into an Office Lease agreement
dated April 21, 1995 (the "Lease") and then amended said lease for purposes of
an expansion on May 24, 1995 pursuant to which Landlord agreed to lease and
Tenant agreed to hire certain office space located in the Plaza Tower One
office building located in Arapahoe County, Colorado (the "Leased Premises");
and WHEREAS Landlord and Tenant wish to amend the Lease as set forth below.
NOW, THEREFORE, in consideration of the foregoing premises, the terms
and conditions provided herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. Leased Premises:
a. Paragraph B of Section 1. (Definitions) is hereby defaced and
the following is substituted therefor:
A. "Leased Premises" shall mean the interior Space shown
outlined in red on the floor plan of the Tower portion of the Building
shown on Exhibit B attached hereto, containing approximately 64,473
rentable square feet, amounting to approximately 60,696 BOMA usable
square feet (computed by measuring to the finished surface of the office
side of the corridor and other permanent walls, to the center of
partitions that separate the Leased Premises from adjoining usable
areas, and to the inside surface of the exterior Building glass, with no
deductions made for columns and projections necessary to the Building),
plus the appurtenant right to use, in common with others, the entries,
sidewalks, curb areas, driveways, cafeterias, health club facilities
(subject to the execution by Tenant of the form release and indemnity
agreement used from time to time by Landlord regarding the use of such
health club facilities by Tenant's employees), risers, conduit, and
other public potions of the Improved Area (the "Common Areas").
b. Exhibit B of the Lease is hereby deleted and Exhibit B of this
Amendment
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<PAGE> 127
is substituted therefor.
c. Paragraph M of Section 1. (Definitions) is hereby deleted and
the following is substituted therefor:
M. "Tenant's Total Square Footage" shall mean 64,473 square
feet, which amount is equal to the sum of the square footage in the
Leased Premises, an allocated portion of Common Area square footage on
the floors on which the Leased Premises are located, and an allocated
portion of the square footage of the remaining Common Areas in the
Tower.
d. Paragraph O of Section 1. (Definitions) is hereby deleted and
the following is substituted therefor:
O. "Tenant's Pro Rata Share" shell mean 14.3296% calculated
by dividing Tenant's Total Square Footage by the Total Square Footage of
the Tower.
2. Base Rent: Paragraph L of Section 1. (Definitions) is hereby deleted and
the following is substituted therefor:
B. "Base Rent" shell mean the following for the periods indicated:
<TABLE>
<CAPTION>
Period $/Sq. Ft./year: $/month
------ -----------------------
<S> <C>
Years one through five: per rentable sq. ft. per year
per month
per year
Years six through ten: per rentable sq. ft. per year
per month
per year
</TABLE>
3. Parking: Section 18 is hereby deleted and the following is substituted
therefor:
Landlord shall provide to Tenant non-exclusive parking within the
Parking Garage contiguous to the Building at a ratio of one space for each 330
rentable square feet contained from time to time within the Leased Premises
(including any additional space taken by Tenant pursuant to Paragraph 45 or
Paragraph 46 hereof) (the "Regular Spaces"), and an additional 81 short-term
parking spaces in close proximity to the elevators, which shall be available for
use by Tenant's visitors at no cost for up to two hours. The Regular Spaces
(which, as of the Commencement Date, shall be 195 spaces) will be provided by
Landlord for use by the Tenant at a charge of
Page 2 of 9
<PAGE> 128
________ per space per month during the first sixty (60) months of the Lease
Term and ________ per space per month during months 61 through 120. Subject to
Landlord's rules and regulations adopted from time to time pursuant to Paragraph
17 Tenant's employees, invitees and licensees shall be entitled to reasonable
use of such parking spaces.
4. Section 6.1 of the Work Agreement, Exhibit C, is hereby deleted and the
following is substituted therefor:
6.1 Relocation and Relinquishments. In order for the Leased Premises
to be ready for Tenant's use and occupancy at the times contemplated herein, it
will be necessary to take the following actions:
(A) Chrysler Financial Corporation will be relocated from
the space which it currently occupies on the 9th Floor
of the Tower to other space containing 5,904 rentable
square feet on the 16th Floor of the Tower (the
"Chrysler Relocation").
(B) Budget Rent-A-Car will relinquish all expansion and any
other rights and options which it currently has on the
5th Floor of the Tower (the 'Budget Relinquishment').
(C) Sybase will relinquish all expansion and any other
rights and options which it currently has on the 5th
Floor of the Tower, except for a right of first refusal
on the space on the 5th Floor of the Tower
(containing approximately 5,680 rentable square feet)
which will continue to be leased to Thompson Pipe &
Steel after the Thompson Contraction described in
Paragraph 6.1(D) below (the "Sybase Relinquishment").
(D) Thompson Pipe & Steel will contract the space it leases
on the 5th Floor of the Tower to a total of
approximately 5,680 rentable square feet, and will
relinquish all other rights and options which it
currently has on the 5th Floor of the Tower (the
"Thompson Contraction").
(E) Missing Link will cancel all rights and options to lease
space on the 5th Floor of the Tower (the "Missing Link
Cancellation").
(F) The Thompson Pipe & Steel Lease of approximately 5,680
rentable square feet on the 5th Floor of the Tower will
be terminated not later than December 15, 1995.
5. Section 6.3 of the Work Agreement, Exhibit C, is hereby deleted and the
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<PAGE> 129
following is substituted therefor:
Payments by Tenant. Tenant shall reimburse Landlord for the following
costs incurred in connection with the Chrysler Relocation, the Budget
Relinquishment, the Sybase Relinquishment, the Thompson Contraction, the
Thompson Termination and the Missing Link Cancellation:
(1) In connection with the Chrysler Relocation, Tenant shall
reimburse Landlord for all Relocation Costs paid by
Landlord in connection the Chrysler Relocation; provided
that in no event shall Tenant be obligated hereby to pay
any amount greater than $159,400 for such Relocation
Costs. As used herein, the "Relocation Costs" shall mean
all of the actual out-of-pocket costs incurred by
Landlord in connection with the Chrysler Relocation,
including, without limitation, all such costs incurred
by Landlord for: the preliminary space planning; final
space planning; construction documents; mechanical
engineering design and documentation; electrical design
and documentation; demolition; construction management
costs including fees; special consultants costs
(structural, acoustical, vibration, etc.), direct costs
of construction; all required permits and fees; the cost
to move personal effects and furniture; the reprinting
of stationary and related materials; the rewiring and
relocation of telecommunications equipment; and any
other reasonable expenses incurred by Landlord in
connection with such relocation.
(2) In connection with the Budget Relinquishment, Tenant
shall reimburse Landlord for all relinquishment fees and
other costs paid by Landlord for such relinquishment up
to a total of $50,000.
(3) In connection with the Sybase Relinquishment, Tenant
shall reimburse Landlord for all relinquishment fees and
other costs paid by Landlord for such relinquishment up
to a total of $9,750.
(4) Tenant shall have no obligation to pay or reimburse
Landlord for any costs incurred in connection with the
Thompson Contraction or the Missing Link Cancellation.
(5) Tenant shall pay to Landlord the unamortized amount of
Landlord's cost in connection with the Thompson Pipe and
Steel lease, First Amendment and Second Amendment
covering Suite 580 in the Tower which Tenant is adding
to the Leased Premises by way of this Amendment. Such
costs shall consist of, but not be limited to, all
tenant improvement construction, costs for
Page 4 of 9
<PAGE> 130
architectural and engineering fees and leasing
commissions of $214,911.68 for a total payment of such
unamortized portion calculated as of December 15, 1995
of $ 154,348.68.
All costs payable by Tenant hereunder shall be paid by Tenant to Landlord within
ten (10) business days after Tenant's receipt of evidence of the payment of such
costs by Landlord. In connection with the Thompson Termination, payment Shall be
due on December 15, 1995.
6. The following is added to Section 3.1 of Exhibit C, Work Agreement:
Notwithstanding anything herein to the contrary, that portion of the
Leased Premises outlined in blue and shown on Exhibit B as "The Thompson Space"
(Approximately 5,680 Square Feet) shall not be delivered to Tenant until vacated
by the occupying tenant. Furthermore, the Leased Premises, as that term is
defined in this Amendment, shall not include The Thompson Space until such
delivery to Tenant occurs ("The Delivery Date") and that portion of Rent
attributable to the Thompson Space shall be abated accordingly until the
Delivery Data.
7. No Further Modifications. Except as otherwise set forth in this
Amendment, the term and conditions of the Lease and the Work Agreement remain
unchanged and in full force and effect.
Page 5 of 9
<PAGE> 131
Landlord and Tenant have executed this Amendment as of the date first
written above.
LANDLORD: HUNTINGTON BEACH COMPANY, a, California
Corporation, by its agent, Chevron Real Estate
Management Company, a division of Chevron U.S.A.
Inc., a Delaware Corporation
By:
---------------------------------------------
Its:
--------------------------------------------
TENANT: ECHO BAY MANAGEMENT CORP.
a Delaware Corporation
By:
---------------------------------------------
Its:
--------------------------------------------
By:
---------------------------------------------
Its:
--------------------------------------------
Page 6 of 9
<PAGE> 132
EXHIBIT B
LEASED PREMISES
(NINTH (9TH) FLOOR)
[NINTH (9TH) FLOOR FLOOR PLAN]
Page 8 of 9
<PAGE> 133
EXHIBIT B
TO
SUBLEASE
[Floor Plan]
SEE THE ATTACHED
B - 1
<PAGE> 134
[ECHO BAY MINES FLOOR PLAN]
<PAGE> 135
EXHIBIT C
TO
SUBLEASE
[List of Furnishings]
1. Eight office workstations.
2. Round conference table with eight chairs.
3. One secretarial work station.
C - 1
<PAGE> 136
EXHIBIT A
CONSENT TO SUBLEASE
THIS CONSENT TO SUBLEASE is entered into as of the 15 day of June, 1998,
by and among PROPERTY COLORADO OBJLW ONE CORPORATION, an Oregon corporation
("Landlord"), ECHO BAY MANAGEMENT CORP., a Delaware corporation ("Sublessor"),
and MPOWER SOLUTIONS, INC., a Delaware corporation ("Sublessee").
WITNESSETH:
WHEREAS, Landlord's predecessor-in-interest, Huntington Beach Company,
entered rate a written lease agreement with Sublessor, dated April 21, 1995, as
amended by that certain First Amendment to Plaza Tower Office Lease dated May
24, 1995, and that certain Second Amendment to Plaza Tower Office Lease dated
December 15, 1995 (collectively, the "Master Lease"), whereby Landlord leased to
Sublessor certain premises in the building known as Plaza Tower One (the
"Building"), consisting of approximately 64,473 rentable square feet (the
"Premises"); and
WHEREAS, Landlord is the owner of the Building and has succeeded to all
of the rights of Huntington Beach Company under the Master Lease; and
WHEREAS, Sublessor desires to sublet a portion of the Premises
containing approximately 3,667 rentable square feet located on the fifth (5th)
floor of the Building (the "Subleased Premises") to Sublessee and Sublessee
desires to lease the Subleased Premises from Sublessor; and,
WHEREAS, the terms of the Master Lease require the consent of Landlord
to any such subletting and Landlord has agreed to grant such consent pursuant
to the terms of this agreement.
NOW, THEREFORE, Landlord hereby consents to the sublease of the
Subleased Premises between Sublessor and Sublessee dated as of May 11, 1998 (the
"Sublease"), a copy of which Sublease is attached hereto and made a part hereof
as Exhibit "A", subject to the following terms and conditions:
1. The Sublease shall be subject and subordinate at all times to
all of the covenants, agreements, terms, provisions and conditions of the Master
Lease and of this Consent. Neither Sublessor nor Sublessee shall do or permit
anything to be done in connection with the Sublease or Sublessee's occupancy of
the Subleased Premises as defined in the Sublease which will violate the Master
Lease or this Consent. Notwithstanding anything in the Sublease to the contrary,
the Sublease shall terminate not later than August 31, 2005, upon expiration of
the Master Lease.
2. Sublessee will not, without prior written consent of Landlord in
each instance, assign the Sublease or sublet the Subleased Premises or any part
thereof.
1 - CONSENT TO SUBLEASE
<PAGE> 137
3. Sublessee agrees that no alterations, additions or physical
changes will be made in the Subleased Premises or any part thereof without
Landlord's prior written consent in each instance.
4. This Consent by Landlord shall not be deemed in any way or
manner a release of Sublessor from any and all obligations to be performed by
Sublessor as the Tenant under the Master Lease. The parties hereto agree that
Landlord may, after a default by Sublessor under the Master Lease, collect all
rents due and owing from Sublessee, and such collection thereof shall not be
deemed a waiver of any rights and remedies of Landlord against Sublessor as the
Tenant under the Master Lease.
5. Notwithstanding anything to the contrary contained in the
Sublease, nothing therein, or contained in this Consent, shall enlarge or
increase Landlord's obligations or liability under the Master Lease or
otherwise, and in the event of a default in the Master Lease which results in a
termination thereof, the Sublease and Sublessee's rights in the Subleased
Premises shall also be terminated.
6. Upon the effective date of the Sublease, Sublessee agrees to
comply with all applicable terms and conditions of the Master Lease. This
Consent by Landlord shall not act to bind Landlord to perform any of the
obligations of Sublessor as may be provided in the Sublease.
7. Landlord hereby certifies that, to the best of its actual
knowledge, as of the date of this Consent, Sublessor is not in default under any
of the terms of the Master Lease, nor is there any condition which, with notice
or the passage of time or both, would constitute a default by Sublessor under
the Master Lease.
8. Pursuant to Section 12.C. of the Master Lease, Sublessor shall
pay to Landlord one-half of the total consideration received by Sublessor from
Sublessee during the Sublease term (including revenue derived from any subleased
parking spaces), less the gross rents paid by Sublessor to Landlord during the
period of the Sublease term ("Excess Rents"), after first deducting the
following costs and expenses associated with the subletting of the Subleased
Premises from the consideration received from Sublessee, which costs shall be
reasonable: (i) any improvement allowance or other economic concession paid by
Sublessor to Sublessee; (ii) broker's commissions paid by Sublessor with regard
to the subletting; (iii) attorneys' fees; (iv) lease takeover payments; (v)
costs of advertising the Premises for sublease; and (vi) the unamortized cost of
initial and subsequent improvements to the Premises made by Sublessor.
9. This Consent to Sublease constitutes the entire and complete
agreement of the parties with respect to the subject matter hereof, and
supersedes all prior or contemporaneous agreements, statements, promises,
understandings, arrangements, and commitments, all of which, whether oral or
written, are merged herein.
10. Each party represents that the person executing this Consent for
such party is acting on behalf of such party and is duly authorized to execute
this Consent for such party.
2 - CONSENT TO SUBLEASE
<PAGE> 138
11. This Consent may be executed in counterparts, each of which
shall be deemed an original, and all of which when executed and delivered shall
together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Consent to
Sublease to be duly executed as of the day and year first above written.
LANDLORD: PROPERTY COLORADO OBJLW ONE CORPORATION
an Oregon corporation
By: Clarion Partners, LLC,
a New York limited liability company
Its Authorized Agent
By: Clarion Partners, Inc.,
a New York corporation
Its Managing Member
By: /s/ BRUCE G. MORRISON
-------------------------------------
Bruce G. Morrison
Its Senior Vice President
SUBLESSOR: ECHO BAY MANAGEMENT CORP.,
a Delaware corporation
By: /s/ L. BRODRICK
------------------------------------
Name: Lois-Ann L. Brodrick
Title: Secretary
SUBLESSEE: MPOWER SOLUTIONS, INC.,
By: /s/ OSWALDO H. LEON
------------------------------------
Name: Oswaldo H. Leon
Title: Sr. Vice President
3 - CONSENT TO SUBLEASE
<PAGE> 139
EXHIBIT "A"
SUBLEASE AGREEMENT
[See attached]
4 - CONSENT TO SUBLEASE
<PAGE> 1
EXHIBIT 10.24
SUB-SUBLEASE AGREEMENT
This Sub-sublease Agreement (the "Sub-sublease Agreement made as of the
18th day of December, 1998, by and between Project Discovery, Inc., having an
office at 6400 Fiddlers Green Circle, Suite 650, Englewood, Colorado 80111
(sometimes hereinafter referred to as "Sub-sublessor"), and MPOWER Solutions,
Inc. (hereinafter referred to as "Sub-sublessee");
W I T N E S S E T H :
WHEREAS, by that certain Lease Agreement dated as of the 21st day of
April, 1995, as amended (hereinafter referred to as the "Prime Lease", which is
attached hereto as "Exhibit A" and is by this reference incorporated herein and
made a part hereof), Property Colorado OBJLW One Corporation's predecessor in
interest Huntington Beach Company (hereinafter referred to as the "Landlord"),
leased to Echo Bay Management Corp. (hereinafter referred to as "Sublessor") as
lessee under the Prime Lease, approximately 64,473 square feet of rentable area,
which rentable area included the entire fifth (5th) floor of the building known
as Plaza Tower One and which is located at 6400 Fiddlers Green Circle, Englewood
Colorado 8011 (hereinafter referred to as the "Building"), at the rent and upon
and subject to the terms and conditions set forth in the Prime Lease; and
WHEREAS, by Sublease Agreement dated as of the 17th day of June, 1997,
as amended (hereinafter referred to as the "Sublease", which is attached hereto
as "Exhibit B" and is by this reference incorporated herein and made a part
hereof), Sublessor leased to Your Choice TV, L.L.C., as sublessee under the
Sublease, approximately 4,154 square feet of rentable area on the fifth (5th)
floor and 8,346 square feet of rentable area on the sixth (6th) floor of the
Building, at the rent and upon and subject to the terms and conditions set forth
in the Sublease; and
WHEREAS, Sub-sublessor acquired all of the right, title and interest of
Your Choice TV, L.L.C. in and to the Sublease by the Assignment of Sublease and
Assumption Agreement dated September 18, 1998 (attached hereto as "Exhibit C");
and
WHEREAS, Sublessor consented to the Assignment of Sublease and
Assumption Agreement between Your Choice TV, L.L.C. and Sub-sublessor by signing
the Consent to Assignment dated September 29, 1998 (attached hereto as "Exhibit
D"); and
WHEREAS, Sub-sublessee desires to sublet from Sub-sublessor
approximately 4,154 rentable square feet on said fifth (5th) floor;
NOW, THEREFORE, the parties hereto, for themselves, their successors
and assigns, mutually covenant and agree as follows:
1. Demised Premises. Sub-sublessor does hereby sublease to
Sub-sublessee, and Sub-sublessee does hereby sublease from Sub-sublessor, for
the term and upon the
<PAGE> 2
conditions hereinafter provided, an area of approximately 4,154 square feet of
rentable area on the fifth (5th) floor of the Building (such area being
hereinafter referred to as the "Demised Premises"). The Demised Premises has
been assigned Suite # 520, and is outlined in red on the floor plan attached
hereto and made a part hereof as Exhibit E.
2. As-Is Condition. Sub-sublessor hereby subleases to Sub-sublessee,
and Sub-sublessee hereby hires from Sub-sublessor, the Demised Premises, upon
and subject to the terms and conditions herein set forth, in its "as is"
condition existing on the date possession is delivered to Sub-sublessee, without
requiring any alterations, improvements, repairs or decorations to be made by
Sub-sublessor, or at Sub-sublessor's expense, either at the time possession is
given to Sub-sublessee or during the entire term of this Sub-sublease Agreement,
or any extension thereof. In connection therewith, Sub-sublessee represents that
it has thoroughly examined the Building and the Demised Premises to the extent
it has been deemed appropriate.
3. Term. Subject to obtaining the prior written consent of Landlord and
Sublessor, the term of this Sub-sublease Agreement shall commence as of the 1st
day of January, 1999, and shall end on the 16th day of December, 2002, or on
such earlier date upon which said term may expire or be terminated pursuant to
any of the conditions or limitations or other provisions of this Sub-sublease
Agreement or pursuant to law. In the event that either Sublessor's or Landlord's
consent has not been obtained by January 31, 1999, or such later date as
Sub-sublessor and Sub-sublessee may agree to in writing, this Sub-sublease
Agreement shall be and become null and void and of no further force or effect.
4. Monthly Base Rent. The monthly base rent which Sub-sublessee hereby
agrees to pay to Sub-sublessor in advance, and Sub-sublessor hereby agrees to
accept, shall be the sum of Eight Thousand Three Hundred Eight and No/100
Dollars ($8,308.00), commencing at the beginning of the term of this
Sub-sublease Agreement and continuing thereafter on the first day of each and
every calendar month during the term of this Sub-sublease Agreement. If the
obligation of Sub-sublessee to pay rent hereunder begins on a day other than on
the first day of a calendar month, rent from such date until the first day of
the following calendar month shall be prorated at the rate of one-thirtieth
(1/30th) of the monthly installment for each day payable in advance. The monthly
base rent, additional rent and any other charges herein reserved or payable
shall be paid to Sub-sublessor at its offices at 7700 Wisconsin Avenue,
Bethesda, ME) 20814, Attention: Director of Administration, or at such other
place as Sub-sublessor may designate in writing, in lawful money of the United
States of America without demand therefor and without any deduction, setoff or
abatement whatever, except as expressly provided in this Sub-sublease Agreement.
5. Additional Rent. Sub-sublessee agrees to pay to Sub-sublessor, as
additional rent under this Sub-sublease Agreement, thirty-three percent (33%)
(such percentage representing Sub-sublessee's pro rata share of the total square
feet of rentable area in the Building leased by Sub-sublessor), of the amount of
any additional rent payable by Sub-sublessor under the Sublease on account of
rent escalations pursuant to the section of the Sublease entitled "Additional
Rent." Any additional rent which may be payable to Sub-sublessor shall be
apportioned during the year in which the term of this Sub-sublease
- -3-
<PAGE> 3
Agreement commences and during the year in which such term shall end, such that
Sub-sublessee shall be obligated to pay a proportionate share of such
additional rental which is attributable to the number of days of the term hereof
which are included in the period for which such additional rental is payable by
Sub-sublessor under the Sublease. Sub-sublessor shall give Sub-sublessee copies
of all relevant statements and bills received by Sub-sublessor pursuant to the
applicable provisions of the Sublease, together with a statement of the amount
of additional rent, if any, which Sub-sublessee is required to pay under this
paragraph. Sub-sublessee shall pay additional rent within thirty (30) days of
receipt of this statement. Sub-sublessee shall also pay to Sub-sublessor, as
additional rent under this Sub-sublease Agreement, One Hundred percent (100%)
of the amount of any additional rent payable by Sub-sublessor under the Sublease
on account of charges, fees, and expenses incurred due to Sub-sublessee's use of
the Demised Premises pursuant to the section of the Sublease entitled
"Additional Fees and Expenses." Sub-sublessee's obligation to pay additional
rent shall survive the termination of this Sub-sublease Agreement.
6. Deposit. Simultaneously with the execution of this Sub-sublease
Agreement, Sub-sublessee shall deposit with Sub-sublessor the sum of Eight
Thousand Three Hundred Eight and No/100 Dollars ($8,308.00), and provided there
are then no uncured defaults by Sub-sublessee under the terms of this
Sub-sublease Agreement, said deposit shall be a deposit for and applied as a
credit toward the last payment of monthly base rent due hereunder. The deposit
provided herein shall be considered as security for the payment and performance
by Sub-sublessee of all Sub-sublessee's obligations, covenants, conditions and
agreements under this Sub-sublease Agreement, until such time as said deposit
may be applied as monthly base rent as hereinabove required. In the event of any
default by Sub-sublessee hereunder, Sub-sublessor shall have the fight, but
shall not be obligated, to apply all or any portion of the deposit to cure such
default, in which event Sub-sublessee shall be obligated to promptly deposit
with Sub-sublessor that portion of the deposit used to cure such default. In the
event Sub-sublessee fails to perform its obligations and to take possession of
the Demised Premises on the appropriate commencement date provided herein, said
deposit shall not be deemed liquidated damages shall not preclude Sub-sublessor
from recovering additional damages incurred by Sub-sublessor.
7. Use. Sub-sublessee will use and occupy the Demised Premises solely
for general office purposes and in accordance with the use permitted under the
applicable zoning regulations. Without the prior written consent of Landlord,
Sublessor and Sub-sublessor, the Demised Premises will not be used for any
other purposes.
8. Parking. Sub-sublessee shall have the right to sublease from
Sub-sublessor a total of up to fifteen (15) parking spaces in the Parking Garage
located in the Improved Area (as such terms "Parking Garage" and "Improved Area"
are defined in Paragraph 1 of the Prime Lease) at a rental rate of Twenty-Five
and No/100 Dollars ($25.00) per space per month. Such allocation of fifteen (15)
parking spaces represents Sub-sublessee's pro rata share of parking spaces
allocated under the Sublease to Sub-sublessor, which allocation is one (1)
parking space per 277.778 rentable square feet leased by Sub-sublessor from
Sublessor. Other than those parking spaces which Sub-sublessee leases from
Landlord, Sublessor, or any third party at the time of execution of this
Sub-sublease Agreement under a presently-existing lease, sublease, or other
agreement, Sub-sublessee shall not lease any parking spaces directly from
Landlord, Sublessor, or any third party, unless and until all 15
- -4-
<PAGE> 4
parking spaces in this "Parking" provision are leased by Sub-sublessee from
Sub-sublessor. Sub-sublessee's use of the Parking Garage shall be subject to all
of the rules, regulations, and limitations established from time to time by the
Landlord.
9. Alterations. Sub-sublessee shall not make any alteration,
improvement, decoration, or installation (hereinafter called "Alterations") in
or to the Demised Premises, without in each instance obtaining the prior written
consent of Landlord, Sublessor and Sub-sublessor. If any Alterations are made
without consent, Landlord, Sublessor or Sub-sublessor may remove the same, and
may correct, repair and restore the Demised Premises and any damage arising from
such removal, and Sub-sublessee shall be liable for any and all costs and
expenses incurred by Landlord, Sublessor or Sub-sublessor in the performance of
this work.
Sub-sublessee may have any Alterations performed by contractors of its
own choice, at its expense, provided that Sub-sublessee has obtained written
approval of the contractor by Landlord, Sublessor and Sub-sublessor, which
approval of Sub-sublessor will be based upon the contractor's being properly
licensed and his financial posture, experience and past job performance, as well
as any other criteria set forth in the Prime Lease. The design of all
Alterations undertaken by Sub-sublessee shall be subject to prior written
approval of Landlord, Sublessor and Sub-sublessor and shall not be commenced
until such approval is obtained. With reasonable notice to Sub-sublessee,
Landlord, Sublessor and Sub-sublessor shall at all times have the right to
inspect the work performed by any contractor selected by Sub-sublessee during
normal business hours.
Sub-sublessee shall, upon request of Landlord, Sublessor or
Sub-sublessor, remove said Alterations, repair all damage resulting from such
removal and restore the Demised Premises to the condition as of the date
possession was delivered to Sub-sublessee. If Sub-sublessee fails or refuses to
remove such Alterations, or fails to correct, repair and restore the Demised
Premises, Landlord, Sublessor or Sub-sublessor may cause the same to be removed,
and repairs and restoration to be made, in which event Sub-sublessee shall
reimburse to the party who caused-said Alterations to be removed and repairs
made, the cost of such removal, repairs and restoration, together with any and
all damages which Landlord, Sublessor or Sub-sublessor may suffer and sustain by
reason of Sub-sublessee's failure or refusal to remove said Alterations.
10. Sub-sublessee's Personal Property. All of Sub-sublessee's personal
property in the Demised Premises shall be at the sole risk of Sublessee. Upon
the expiration or earlier termination of this Sub-sublease Agreement,
Sub-sublessee shall remove all of its furniture, furnishings and equipment,
shall repair all damage resulting from such removal or its use of the Demised
Premises, and shall surrender the Demised Premises, as so required, in good
condition, subject only to reasonable wear and tear and to damage, if any, by
fire or other casualty. The obligations of Sub-sublessee as herein provided
shall survive the termination of this Sub-sublease Agreement.
Sub-sublessor and Sub-sublessee are executing on the same date hereof a
bill of sale (attached as Exhibit F hereto) for the sale from Sub-sublessor to
Sub-sublessor of certain personal property located in the Demised Premises.
- -5-
<PAGE> 5
11. Terms of Prime Lease and Sublease. All of the terms, provisions,
covenants and conditions of both the Prime Lease and Sublease are incorporated
herein by reference and hereby made a part of and are superior to this
Sub-sublease Agreement, except as herein otherwise expressly provided.
Sub-sublessee shall be obligated, however, to pay only the rent and
additional rent provided for in this Sub-sublease Agreement and not the amounts
of rent and rental escalations provided under the Sublease to be paid by
Sub-sublessor as sublessee. As between the Sub-sublessor and Sub-sublessee
hereto, Sub-sublessee hereby assumes all of the obligations of the
Sub-sublessor, as the sublessee under the Sublease, but only to the extent they
are applicable to the Demised Premises. Sub-sublessee shall obtain and maintain
all insurance types and coverages as specified in the Prime Lease and Sublease
to be obtained and maintained by Sub-sublessor, as sublessee, in amounts not
less than those specified in the Prime Lease and Sublease. All politics of
insurance obtained by Sub-sublessee shall name Landlord, its property manager
and asset manager, Sublessor and Sub-sublessor as additional insureds thereon in
accordance with the Prime Lease and Sublease. Sub-sublessee's insurance shall
be primary over Landlord's, Sublessor's, and Sub-sublessor's insurance.
Sub-sublessee will upon the commencement of the term hereof and on each
anniversary date thereafter deliver to Sub-sublessor certificates reflecting
that Sub-sublessee has obtained and is maintaining the required insurance
coverages in the appropriate amounts.
Notwithstanding anything in this Sub-sublease Agreement to the
contrary, Sub-sublessee agrees that Sub-sublessor shall not be obligated to
furnish for Sub-sublessee any services of any nature whatsoever, including,
without limitation, the furnishing of heat, electrical energy, air conditioning,
elevator service, cleaning, window washing, security or rubbish removal
services. Sub-sublessor, however, shall be obligated to send to Sublessor copies
of any notices or requests for services required as permitted under the Sublease
which Sub-sublessee has provided to Sub-sublessor.
The following provisions of the Sublease are not incorporated herein
Sections 1.5, 2.3, 3.2, Article 5, and Article 6.
Sub-sublessor shall have all of the rights of Sublessor under the
Sublease as against Sub-sublessee but, except as otherwise expressly provided
herein, Sub-sublessor shall have no obligation hereunder except with respect to
warranting Sub-sublessee's quiet enjoyment of the Demised Premises for so long
as Sub-sublessee is not in default hereunder beyond applicable cure periods.
Sub-sublessee acknowledges (i) that it has received a true copy of the
Prime Lease and Sublease, (ii) that it has reviewed the Prime Lease and
Sublease, and (iii) that it is familiar with the contents thereof.
12. Sub-sublessee's Covenants, Sub-sublessee covenants and agrees that
Sub-sublessee will not do or omit to do anything which would constitute a
default under the Prime Lease, Sublease, or this Sub-sublease Agreement.
- -6-
<PAGE> 6
13. Indemnification. Sub-sublessee shall and hereby does indemnify and
hold Landlord, Sublessor, and Sub-sublessor harmless from and against any and
all actions, claims, demands, damages, liabilities and expenses (including,
without Limitation, reasonable attorneys' fees) asserted against, imposed upon
or incurred by Landlord, Sublessor, or Sub-sublessor by reason of (a) any
violation caused, suffered or permitted by Sub-sublessee, its agents, servants,
employees or invitees, of any of the terms, covenants or conditions of the
Sublease or Sub-sublease Agreement and (b) any damage or injury to persons or
property occurring upon or in connection with the use or occupancy of the
Demised Premises, except as a result of the gross negligence of Sub-sublessor,
or its agents, employees or invitees.
14. Assignment and Sub-sublease Agreement. Sub-sublessee agrees not to
assign, mortgage, pledge or otherwise encumber this Sub-sublease Agreement, nor
to sublet the Demised Premises or any part thereof, without in each instance
obtaining the prior written consent of Landlord, Sublessor, and Sub-sublessor,
which consent of Sub-sublessor shall not be unreasonably withheld or delayed.
15. Brokers. Sub-sublessee hereby represents and warrants that it has
not dealt with any broker in connection with this Sub-sublease Agreement for the
Demised Premises, except for Cushman & Wakefield of Colorado, Inc.
16. Entire Agreement. This Sub-sublease Agreement contains all of the
covenants, agreements, terms, provisions, conditions, warranties and
understandings relating to the leasing of the Demised Premises and
Sub-sublessor's obligations in connection therewith, and neither Sub-sublessor
nor any agent or representative of Sub-sublessor has made or is making, and
Sub-sublessee in executing and delivering this Sub-sublease Agreement is not
relying upon, any warranties, representations, promises or statements
whatsoever, except to the extent expressly set forth in this Sub-sublease
Agreement. All understandings and agreements, if any, heretofore had between the
parties are merged in this Sub-sublease Agreement, which alone fully and
completely expresses the agreement of the parties. The failure of Sub-sublessor
to insist in any instance upon the strict keeping, observance or performance of
any covenant, agreement, term, provision or condition of this Sub-sublease
Agreement or to exercise any election herein contained shall not be construed as
a waiver or relinquishment for the future of such covenant, agreement, term,
provision, condition or election, but the same shall continue and remain in full
force and effect. No waiver or modification of any covenant, agreement, term,
provision or condition of this Sub-sublease Agreement shall be deemed to have
been made unless expressed in writing and signed by Landlord, Sublessor and
Sub-sublessor. No surrender of possession of the Demised Premises or of any part
thereof or of any remainder of the term of this Sub-sublease Agreement shall
release Sub-sublessee from any of its obligations hereunder unless accepted by
Sub-sublessor in writing. The receipt and retention by Sub-sublessor of monthly
base rent or additional rent from anyone other than Sub-sublessee shall not be
deemed a waiver of the breach by Sub-sublessee of any covenant, agreement, term
or provision of this Sub-sublease Agreement, or as the acceptance of such other
person as a tenant, or as a. release of Sub-sublessee from the further keeping,
observance or performance by Sub-sublessee of the covenants, agreements, terms,
provisions and conditions herein contained. The receipt and retention by
Sub-sublessor of monthly base rent or additional rent with knowledge of the
breach of any covenant, agreement, term, provision or condition herein contained
shall not be deemed a waiver of such breach.
- -7-
<PAGE> 7
17. Successors and Assigns. The obligations of tiffs Sub-sublease
Agreement shall bind and benefit the successors and permitted assigns of the
parties with the same effect as if mentioned in each instance where a party
hereto is named or referred to.
18. Notices. Any and all communications delivered hereunder shall be
sent by first-class mail:
if to Sub-sublessor:
Project Discovery, Inc.
6400 S. Fiddlers Green Circle
Suite 650
Englewood, CO 80111
Attn.: John C. Forbes
with a copy to:
Patton Boggs LLP
2550 M. Street, N.W.
Washington, D.C. 20037
Attn.: Ross E. Eichberg, Esq.
and if to Sub-sublessee:
MPOWER Solutions, Inc.
6400 S. Fiddlers Green Circle
Suite 540
Englewood, CO 80111
Attn.: Julianne W. Desmond
with a copy to:
or to such other address and attention as any of the above shall notify the
others in writing.
19. Landlord's and Sublessor's Consent. This Sub-sublease Agreement
shall be effective upon obtaining the written consent of both the Landlord and
Sublessor (or of their respective duly authorized agents), and it is hereby
acknowledged by Sub-sublessor and Sub-sublessee that Landlord's and Sublessor's
consent to this Sub-sublease Agreement shall not make either Landlord or
Sublessor (or their respective duly authorized agents) a party to tiffs
Sub-sublease Agreement, shall not create any contractual liability or duty on
the part of either Landlord or Sublessor (or their respective duly authorized
agents) to the Sub-sublessee, and shall not in any manner increase, decrease or
otherwise affect the rights and obligations of landlord, Sublessor and
Sub-sublessor under the Prime Lease, Sublease, or this Sub-sublease Agreement in
respect of the Demised Premises.
[SIGNATURE PAGE FOLLOWS]
- -8-
<PAGE> 8
IN WITNESS WHEREOF, Sub-sublessor and Sub-sublessee have duly executed
this Sub-sublease Agreement as of the day and year first above written.
SUB-SUBLESSEE:
MPOWER SOLUTIONS, INC.
By: [SIGNATURE ILLEGIBLE]
Its: [TITLE ILLEGIBLE]
SUB-SUBLESSOR:
PROJECT DISCOVERY, INC.
By:
Its:
This Sub-sublease Agreement is consented to by the Sublessor by and
through its duly authorized agent upon the terms acknowledged by Sub-sublessor
and Sub-sublessee in the paragraph of this Sub-sublease Agreement entitled
"Landlord's and Sublessor's Consent".
SUBLESSOR:
By: [SIGNATURE ILLEGIBLE]
------------------------------------
Its: [TITLE ILLEGIBLE]
------------------------------------
- -9-
<PAGE> 1
EXHIBIT 10.25
OFFICE LEASE
between
MPOWER SOLUTIONS INC., a New Mexico Corporation,
Tenant
and
MBL Life Assurance Corporation, Landlord
Date: May 2, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
Article 1 Basic Lease Information
1.1 Basic Lease Information
1.2 Definitions
1.3 Exhibits
Article 2 Agreement
Article 3 Term, Delivery, and Acceptance of Premises
3.1 Deliver of Possession
3.2 Early Entry
Article 4 Monthly Rent
Article 5 Increases In Taxes and Operating Expenses
5.1 General
5.2 Definitions
5.3 Share of Taxes
5.4 Final Determination
5.5 Operating Expenses
5.6 Disputes
5.7 Audit
5.8 Survival After Termination
5.9 Other Taxes
Article 6 Insurance
6.1 Landlord's Insurance
6.2 Tenant's Insurance
6.3 Forms of Policies
6.4 Waiver of Subrogation
6.5 Adequacy of Coverage
Article 7 Use
Article 8 Requirements of Law; Fire Insurance
8.1 General
8.2 Hazardous Materials
8.3 Certain Insurance Risks
Article 9 Assignment and Subletting
9.1 General
9.2 Submission of Information
9.3 Payments to Landlord
9.4 Prohibited Transfers
9.5 Landlord's Options
9.6 Permitted Transfer
Article 10 Rules and Regulations
Article 11 Common Areas
Article 12 Landlord's Services
12.1 Landlord's Repair and Maintenance
12.2 Landlord's Other Services
12.3 Tenant's Costs
12.4 Limitation on Liability
Article 13 Tenant's Care of the Premises
Article 14 Alterations
14.1 General
14.2 Free-Standing Partitions
14.3 Removal
Article 15 Mechanics Liens
Article 16 End of Term
Article 17 Eminent Domain
Article 18 Damage and Destruction
Article 19 Subordination
19.1 General
19.2 Attornment
Article 20 Entry by Landlord
Article 21 Indemnification, Waiver, and Release
21.1 Indemnification
21.2 Waiver and Release
Article 22 Security Deposit
Article 23 Quiet Enjoyment
Article 24 Effect of Sale
Article 25 Default
2.5.l Events of Default
25.2 Landlord's Remedies
25.3 Certain Damages
25.4 Continuing Liability After Termination
25.5 Cumulative Remedies
25.6 Waiver of Redemption
Article 26 Parking
Article 27 Miscellaneous
27.1 No Offer
27.2 Joint and Several Liability
27.3 No Construction Against Drafting Party
27.4 Time of the Essence
27.5 No Recordation
27.6 No Waiver
27.7 Limitation on Recourse
27.8 Estoppel Certificates
27.9 Attorneys Fees
27.10 No Merger
27.11 Holding Over
27.12 Notices
27.13 Severability
27.14 Written Amendment Required
27.15 Entire Agreement
27.16 Captions
27.17 Notice of Landlord's Default
27.18 Authority
27.19 Brokers
27.20 Governing Law
27.21 Late Payments
27.22 No Easements for Air or Light
27.23 Tax Credits
27.24 Relocation of the Premises
27.25 Financial Reports
27.26 Landlord's Fees
27.27 Binding Effect
27.28 Terms
27.29 Definition of Landlord
27.30 Rights Cumulative
27.31 Change of Building Name
27.32 Force Majeure
27.33 Third Party Beneficiary
27.34 No Joint Venture
27.35 Remedies
27.36 WAIVER OF JURY TRIAL
Addenda and Exhibits
</TABLE>
<PAGE> 3
OFFICE LEASE
THIS OFFICE LEASE ("Lease") is entered into by Landlord and Tenant as described
in the following basic lease information on the date that is set forth for
reference only in the following basic lease information, Landlord and Tenant
agree:
ARTICLE I BASIC LEASE INFORMATION
1.1 Basic Lease Information. In addition to the terms that are defined
elsewhere in this Lease, these terms are used in this Lease:
(a) LEASE DATE: May 2, 1997
(b) LANDLORD: MBL Life Assurance Corporation
(c) LANDLORD'S ADDRESS:
c/o Income Property Services Brokerage, Inc.
--------------------------------------------
7801 Academy, NE
--------------------------------------------
North Towne Two, Suite #204
--------------------------------------------
Albuquerque, NM 87109
--------------------------------------------
--------------------------------------------
with a copy at the same time to: MBL Life Assurance Corporation, Vice
President - Real Estate Investment Division, 520 Broad Street, Newark,
NJ 07102-3184
(d) TENANT: MPower Solutions, Inc.
--------------------------------------
--------------------------------------
(e) TENANT'S ADDRESS: The Premises as defined this Lease with a copy
at the same time to:
2305 Renard Place, SE
--------------------------------------------
Albuquerque, NM 87106
--------------------------------------------
--------------------------------------------
--------------------------------------------
(f) BUILDING ADDRESS: 2300 Buena Vista. SE
----------------------------
Suite #128
----------------------------
Albuquerque, NM 87106
----------------------------
(g) PREMISES: The premises shown on Exhibit A to this Lease, known
as Suite #128.
(h) RENTABLE AREA OF THE PREMISES: For purposes of this Lease the
rentable square footage of the Premises shall be deemed to be
6,800 square feet.
(i) RENTABLE AREA OF THE BUILDING: For purposes of this Lease the
rentable square footage of the Building shall be deemed to be
37,000 square feet.
(j) TERM: 32 months, beginning on the Commencement Date and expiring
on the Expiration Date.
(k) COMMENCEMENT DATE: June 25, 1997 or as extended pursuant to the
Workletter.
(l) EXPIRATION DATE: Jan 31, 2000 or as extended pursuant to the
Workletter.
(m) SECURITY DEPOSIT: $6,500
(n) MONTHLY RENT:
<TABLE>
<CAPTION>
Amount Per Month: Commencing On: Ending On:
----------------- -------------- ----------
<S> <C> <C>
$1,086.11 June 25, 1997* June 30, 1997
$6,516.67 July 1, 1997 January 31, 2000
</TABLE>
* Expected date of TI completion - 6/24/97
(o) BASE: Taxes - .33 psf; Insurance - .19 psf; and BOC's -
$3.48 psf
(p) TENANT'S SHARE: 100% of expenses attributable solely to the
Premises, and 18.38% of expenses attributable to the building,
percent (determined by dividing the Rentable Area of the
Premises by the Rentable Area of the Building, multiplying the
resulting quotient by 100, and rounding to the 3rd decimal
place).
Page 1
<PAGE> 4
(q) PARKING SPACES: Unreserved, in common with the other tenants in
accordance with Article 26.
(r) PARKING CHARGE: $N/A per parking space per month, subject to
adjustments specified in Article 26.
(s) BROKER: Dan Newman
---------------------------------
The Newman Agency
---------------------------------
121 Tijeras, NE, Suite #3400
---------------------------------
Albuquerque, NM 87102
---------------------------------
(t) BUSINESS HOURS: 6 a.m. to 7 p.m. on Monday through Friday.
(u) USE: General Business Offices
1.2 DEFINITIONS.
(a) ADDITIONAL RENT: Any amounts that this Lease requires Tenant to
pay in addition to Monthly Rent.
(b) BUILDING: The building located on the Land and of which the
Premises are a part.
(c) LAND: The land on which the Project is located and which is
described on Exhibit B.
(d) PRIME RATE: The rate of interest from time to time announced by
The Wall Street Journal as the, "prime rate," If The Wall Street
Journal or any reasonable successor to it ceases to announce the
prime rate, the prime Rate will be a comparable interest rate
designated by Landlord to replace, the Prime Rate.
(e) PROJECT: The development consisting of the Land and all
improvements its built on the Land, including without limitation
the Building, parking lot, parking structure, if any, walkways,
driveways, fences, and landscaping.
(f) RENT: The Monthly Rent and Additional Rent.
(g) WORKLETTER: The workletter attached to this Lease as Exhibit C
(if any).
If any other provision of this Lease contradicts any definition of this Article
1, the other provision will prevail.
1.3 Exhibits. The following exhibits and addenda are attached to this Lease
and are made part of this Lease:
EXHIBIT A --The Premises
EXHIBIT B --Legal Description of the Land
EXHIBIT C --Workletter
BXHIB1T D --Rules and Regulations
EXHIBIT E --Commencement Date and Estoppel Certificate
EXHIBIT H --Option to Extend
ADDENDUM:
*****[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]*****
Page 2
<PAGE> 5
ARTICLE 2 AGREEMENT
In consideration for the Rent and other covenants and agreements made by Tenant,
Landlord leases the Premises to Tenant, and Tenant leases the Premises from
Landlord, according to this Lease. The duration of this Lease will be the Term.
The Term will commence on the Commencement Date and will expire on the
Expiration Date unless terminated earlier pursuant to the terms of this Lease.
ARTICLE 3 TERM, DELIVERY, AND ACCEPTANCE OF PREMISES
3.1 DELIVERY OF POSSESSION. Landlord will be deemed to have delivered
possession of the Premises to Tenant on the Commencement Date, as it may
be adjusted pursuant to the Workletter. Landlord will construct or
install in the Premises the improvements as defined in the Workletter to
be constructed or installed by Landlord according to the Workletter.
Except as expressly set forth in the Workletter, Landlord shall deliver
to Tenant possession of the Premises AS IS in its present condition on
the Commencement Date. Tenant acknowledges that neither Landlord nor its
agents or employees have made any representations or warranties as to
the suitability or fitness of the Premises for the conduct of Tenant's
business or for any other purpose, nor has Landlord or its agents or
employees agreed to undertake any alterations or construct any Tenant
improvements to the Premises except as expressly provided in this Lease
and the Workletter. If for any reason Landlord cannot deliver possession
of the Premises to Tenant on the Commencement Date, this Lease will not
be void or voidable, and Landlord will not be liable to Tenant for any
resultant loss or damage. Tenant will execute and deliver to Landlord
the Commencement Date and Estoppel Certificate attached to this Lease as
Exhibit E within 3 days of Landlord's request.
3.2 EARLY ENTRY. If Tenant is permitted entry to the Premises prior to the
Commencement Date for the purpose of installing fixtures or any other
purpose permitted by Landlord, the early entry will be at Tenant's sole
risk and subject to all the terms and provisions of this Lease as though
the Commencement Date had occurred, except for the payment of Rent,
which will commence on the Commencement Date. Tenant, its agents, or
employees will not interfere with or delay Landlord's completion of
construction of the improvements. Tenant hereby agrees to indemnify
Landlord against any injury, and loss or damage which may occur to any
person or to any of the Tenant's work or installations made in such
Premises, Building or Project, or to any personal property placed
therein, the same being at Tenant's sole risk, and, prior to any early
entry by Tenant, provide Landlord with proof of insurance coverages
described in this Lease. Landlord has the right to impose additional
conditions on Tenant's early entry that Landlord, in its reasonable
discretion, deems appropriate and Landlord will further have the right
to require that Tenant execute an early entry agreement containing those
conditions prior to Tenant's early entry.
ARTICLE 4 MONTHLY RENT
Throughout the Term of this Lease, Tenant will pay Monthly Rent to Landlord as
rent for the Premises. Monthly Rent will be paid in advance on or before the
first day of each calendar month of the Term. If the Term commences on a day
other than the first day of a calendar month or ends on a day other than the
last day of a calendar month, then Monthly Rent will be appropriately prorated
by Landlord based on the actual number of calendar days in such month. If the
Term commences on a day other than the first day of a calendar month, then the
prorated Monthly Rent for such month will be paid on or before the first day of
the Term. Monthly Rent will be paid to Landlord, without written notice or
demand, and without deduction or offset, in lawful money of the United States of
America at Landlord's address, or to such other address as Landlord may from
time to time designate in writing.
ARTICLE 5 INCREASES IN TAXES AND OPERATING EXPENSES
5.1 GENERAL. During each calendar year of the original and any additional
term hereof (pro-rated for any period less than a year) tenant shall pay
to Landlord as additional rent, "Tenant's Share of Taxes" (as
hereinafter defined) and "Tenant's Share of Operating Expenses" (as
hereinafter defined) for each such calendar year which is in excess of
Tenant's Share of Taxes or Tenant's Share of Operating Expenses (either
or both, as the case may be) for the Base Year as more fully described
in this Article 5.
5.2 DEFINITIONS. As used in this Article 5, or elsewhere in this Lease, the
following terms shall be defined as hereinafter set forth:
(a) "TAXES" shall mean all real estate taxes and assessments,
general or special, ordinary or extraordinary, foreseen or
unforeseen, imposed upon the Project, and any existing or future
improvements of whatever kind thereto or thereon. Taxes shall
include, without limitation, any assessment imposed by any
public or private entity by reason of the Project being located
in a special services district or similar designation. If, due
to a future change in the method of taxation, any franchise,
income, profit or other tax, however designated, shall be levied
or imposed in substitution, in whole or in part, for (or in lieu
of) any tax which would otherwise be included within the
definition of Taxes, such other tax shall be deemed to be
included within Taxes as defined herein.
Page 3 -
<PAGE> 6
operation, maintenance and management of the Project (after
deducting any reimbursement, discount, credit, Insurance
proceeds, reduction or other allowance received by Landlord)
and shall include, without limitation: (A) service, repair,
replacement and other maintenance to the Building and components
thereof; (B) wages and salaries (and taxes and other charges
imposed upon employers with respect to such wages and salaries)
and fringe benefits paid to persons employed by Landlord for
rendering service in the operation, maintenance and repair of
the Building and related facilities and amenities; (C) costs of
independent contractors hired for the operation, maintenance and
repair of the Building and related facilities and amenities; (D)
costs of electricity, steam, water, fuel, heating, lighting, air
conditioning, newer and other utilities chargeable to the
operation and maintenance of the Building; (E) cost of insurance
for and relating to the Project, including fire and extended
coverage (or such greater coverages as Landlord may elect to
carry) boiler, water damage, public liability and property
damage, plate glass, and rent protection, but excluding any
charge for increased premiums due to acts or omissions of other
occupants of the Building because of extra risk which are
reimbursed to Landlord by such other occupants (or if Landlord
self insures the Project or any part thereof, a sum in lieu
thereof which is not in excess of the then prevailing rates for
such insurance for comparable projects); (F) costs of supplies;
(G) coals of window cleaning, janitorial services, security
services, landscaping, snow and ice removal and painting; (H)
sales or use taxes on supplies and services; (I) consulting,
accounting fees, legal, tax appeal, engineering and other
professional fees and expenses; (J) management fees, or if no
managing agent is employed by Landlord a sum in lieu thereof
which is not in excess of the then prevailing rates for
management fees for comparable projects; (K) alterations and
improvements to the Project which are not capital in nature made
by reason of any requirement of any insurance underwriters or
any federal, state, or local statutes, regulations, ordinances,
or other any duly constituted public authorities having
jurisdiction over the Premises (hereinafter a Governmental
Requirement); and (L) without limiting any of the foregoing, any
other expense or charge which, in accordance with sound
accounting and management principles generally accepted, would
be construed as an operating expense. The term "Operating
Expenses" shall not include: (A) The cost of redecorating or
repairing, or special cleaning or other services, not provided
on a regular basis to office tenants of the Building; (B) wages,
salaries or fees paid to executive personnel of Landlord; (C)
the cost of any replacement item which, by standard accounting
practice, should be capitalized (except as otherwise provided in
subsection (3) below: (D) any charge for depreciation or
interest paid or incurred by Landlord; (E) any charge for
Landlord's income tax, excess profit taxes, franchise taxes or
similar taxes on Landlord's business; (F) leasing commissions;
(G) real estate taxes; or (H) legal fees for the negotiation or
enforcement of leases. If Landlord is not furnishing any
particular work or service (the cost of which, if performed by
Landlord, would constitute an Operating Expense) to a tenant who
has undertaken to perform such work or service in lieu of
performance by Landlord, Operating Expenses shall nevertheless
be deemed to include the amount Landlord would reasonably have
incurred if Landlord had in fact performed the work or service
at its expense.
(2) Tenant's Expense Share is a fixed percentage and does not vary with
changing occupancy levels of the Building. Operating Expenses are
computed for the Building as a whole.* Accordingly, in order to
stabilize the calculation of increase in Operating Expenses on a square
foot basis for the Demised Premises, a further adjustment is to be made
as follows: In determining Operating Expenses for any year, if the
Building was less than 95% occupied during such entire year, or was not
in operation during such entire year, then Operating Expenses shall be
annualized by Landlord (taking into account seasonal variations) and
adjusted to reflect the amount that such expenses would normally be
expected to have been, in the reasonable estimate of Landlord, had the
Building been 95% occupied and operational throughout such year, except
that in no event shall such adjustment result in an amount less than the
actual Operating Expenses.
(3) In the event Landlord shall make a capital expenditure for an "Essential
Capital Improvement", as hereinafter defined in this subsection (3),
during any year, the annual amortization of such expenditure (determined
by dividing the amount of the expenditure by the useful life of the
improvement, as determined by the Landlord), together with interest at
the greater of the Prime Rate prevailing plus 2% or Landlord's actual
borrowing rate for such Essential Capital Improvement, shall be deemed
an Operating Expense for each year of such useful life. As used herein,
an "Essential Capital Improvement" means any of the following:
(A) a labor saving device, energy saving device or other
installation, improvement or replacement which reduces Operating
Expenses as referred to above, whether or not voluntary or
required by governmental mandate; or
(B) an installation, change, improvement, addition, alteration or
removal of any architectural barriers, whether or not the
foregoing are structural in nature, made by reason of any
Governmental Requirements whether or not such Governmental
Requirement existed on the date of execution of this Lease if
such Governmental Requirement is or will be applicable generally
to similar office buildings; or
- --------------
* See page 4a.
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<PAGE> 7
MBL Office Lease for Mpower Solutions, Inc.
Para 5.2(b)(2) added: * except for certain expenses solely attributable to the
demised premises.
Page 4a
<PAGE> 8
(C) an installation or improvement which directly enhances the
health or safety of tenants in the Building generally, whether
or not voluntary or required by governmental mandate (as, for
example, but without limitation, for fire safety or security).
5.3 SHARE OF TAXES
(a) Increases in Taxes. For and with respect to each calendar year
within which the term of this Lease (and any renewal or
extension thereof) falls, there shall accrue, as additional
rent, the amount, if any, by which Tenant's Share of Taxes for
such calendar year (annualized for any partial year) exceeds the
Tenant's Share of Taxes for the Base Year. Such additional rent
shall be prorated on a per-diem basis for any partial calendar
year included within the term. Such additional rent for any
calendar year is hereinafter referred to as an "Increase in
Taxes", and one-twelfth (1/12) of such amount is hereinafter
referred to as a "Monthly Tax Increase",
(b) Payment of Increase In Taxes. At Landlord's option, each
Increase in Taxes shall be paid with respect to each calendar
year in either or both of the following manners:
(l) Within thirty (30) days after receipt from Landlord of a
Statement of Taxes (defined below) containing the amount
due from Tenant on account of the Increase in Taxes, but
in any event at least thirty (30) days prior to the last
date the tax in question is payable by Landlord to the
taxing authority with discount; or
(2) At any time during the term of this Lease, or any
extension or renewal hereof, Landlord may decide that in
lieu of a one time payment of the Increase in Taxes
provided in Subparagraph (5.3)(1) above, Landlord may
require Tenant to pay any Increase in Taxes in
accordance with Subparagraph (5.3)(d) below.
(c) Statement of Tax Increases. On or before sixty (60) days after
Landlord receives any statement of Taxes due from the applicable
governmental agency (or as soon thereafter as practicable),
Landlord shall furnish to Tenant a "Statement of Taxes" setting
forth, in reasonable detail:
(1) The Amount of Taxes for the calendar Year for which
Taxes are payable to the taxing authority;
(2) The Increase in Taxes for such calendar Year;
(3) The amount, if any, previously paid by Tenant to
Landlord on account of any Increase in Taxes for such
calendar year;
(4) The amount due from Tenant on account of any Increase in
Taxes; and
(5) If applicable, the Monthly Tax Increase payable during
the calendar year.
(d) Payment of Increase in Taxes on a Monthly Basis. At Landlord's
option, payment of additional rent due on account of an Increase
in Taxes for any given calendar year shall be made in advance as
follows:
(1) On the first day of the first month following either
receipt by Tenant of the Statement of Taxes or, if
later, notice of Landlord's election to have an Increase
in Taxes paid on a monthly basis, Tenant shall pay to
Landlord an amount equal to the Monthly Tax Increase
multiplied by the number of months fully or partially
elapsed in the calendar year (including the month in
which the payment is made); and
(2) Commencing on the first day of the second month
following either receipt by Tenant of the Statement of
Taxes or, if later, notice of Landlord's election, and
continuing until the receipt by Tenant of the next
Statement of Taxes, the minimum monthly installments of
rent due hereunder shall be increased by an amount equal
to the Monthly Tax Increase, subject to the provisions
set forth in Subparagraph 5.3(e) below; and
(3) Any overpayment by Tenant of additional rent due on
account of the Increase in Taxes shall be adjusted by a
credit to Tenant given contemporaneously with the
furnishing of the next Statement of Taxes.
(e) Optional Billing for Taxes. At Landlord's option, exercisable
with respect to any one or more calendar years during the term
of this Lease, Landlord may include, within the Statement of
Taxes furnished to Tenant pursuant to Subparagraphs 5.3(c) and
5.3(d) above, Landlord's good faith estimate of Taxes for the
following calendar year, and the estimated annual Increase in
Taxes based thereon. In such case, the "Monthly Tax Increase" as
used in Subparagraph 5.3(d) above, for the computation of
Tenant's payments to Landlord during the calendar year on
account of the Increase in Taxes payable to the taxing authority
for the following calendar year shall be equal to one-twelfth
(1/12) of the aforesaid estimated Increase in Taxes.
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<PAGE> 9
5.4 FINAL DETERMINATIONS. For purposes of Section 5.3 above, any assessment
upon which Tenant's Share of Taxes is based shall be deemed to be the
amount initially assessed until such time as an abatement, refund,
rebate or increase, if any (retroactive or otherwise), shall be finally
determined to be due, and upon such final determination, Landlord shall
promptly notify Tenant of the amount if any due to Tenant or Landlord,
as the case may be, as a result of the adjustment, and appropriate
payment to Landlord or Tenant, as the case may be, shall thereafter be
promptly made. Landlord shall have no duty to Tenant to contest, appeal
or otherwise challenge any Taxes. In the event of any reduction in Taxes
by reason of legal or other action taken by Landlord in contest of same,
there shall be added to and be deemed a part of the Taxes in question
the amount of Landlord's legal and other costs and expenses in obtaining
the reduction (but not an amount in excess of the tax savings).
5.5 OPERATING EXPENSES.
(a) Share of Operating Expenses. For and with respect to each
calendar year of the term of this Lease (and any renewals or
extensions thereof) there shall accrue, as additional rent, the
amount, if any, by which Tenant's Share of Operating Expenses
for such calendar year exceeds Tenant's Share of Operating
Expenses for the Base Year. Such additional rent shall be
prorated on a per-diem basis for any partial calendar year. Such
additional rent for any calendar year is hereinafter referred to
as the "Operating Expense Increase," and one-twelfth of such
amount is hereinafter referred to as the "Monthly Increase."
(b) Comparative Statements: Payments. On or before April 30 (or as
soon thereafter as practicable) of each calendar year during the
term hereof, and any renewals and extensions thereof, Landlord
shall furnish to Tenant a statement of Operating Expenses
prepared by Landlord setting forth, in reasonable detail: (1)
Operating Expenses for the preceding calendar year, (2) the
Operating Expense Increase for the preceding calendar year, (3)
the amount, if any paid by Tenant to Landlord during, the
preceding calendar year on account of said Operating Expense
Increase, (4) the amount due by Tenant on account of the
Operating Expense Increase, and (5) the Monthly Increase.
Payment of the additional rent due on account of the Operating
Expense Increase for the preceding calendar year shall be made
by Tenant within fifteen (15) days after receipt by Tenant of
such statement. Tenant shall also make payments to Landlord, on
account of the Operating Expense Increase for the then current
calendar year, as follows:
(1) On the first day of the first month following receipt by
Tenant of the annual statement, Tenant shall pay to
Landlord an amount equal to the Monthly Increase
multiplied by the number of months fully or partially
elapsed in the current calendar year (including the
month in which the payment is made), less any payments
which may have been made for such elapsed months
pursuant to Subparagraph 5.5(c) below;
(2) Commencing on the first day of the second month
following receipt by Tenant of the annual comparative
statement, and continuing until the receipt by Tenant of
the next annual statement, the minimum monthly
installments of rent due hereunder shall be increased by
an amount equal to the Monthly Increase, subject to the
provisions set forth in Subparagraph 5.5(c) below. Any
overpayment by Tenant of additional rent due on account
of the Operating Expense Increase shall be adjusted by a
credit to Tenant given contemporaneously with the
furnishing of the next comparative statement.
(c) Optional Billing for Operating Expenses. At Landlord's option,
exercisable with respect to any one or more calendar years
during the term of this Lease, Landlord may include, within the
comparative statement furnished to Tenant pursuant to
Subparagraph 5.5(b) above, Landlord's good faith estimate of
Operating Expenses for the then current calendar year, and the
estimated annual Operating Expense Increase based thereon. In
such case, the "Monthly Increase" as used in Subparagraph 5.5(b)
above for the computation of Tenant's payments on account of the
Operating Expense Increase for the current year, shall be equal
to one-twelfth of the aforesaid estimated Operating Expense
Increase.
5.6 DISPUTES. The information set forth on each Comparative Statement of
Operating Expenses and on each Statement of Taxes furnished to Tenant as
provided hereinabove shall be deemed approved by Tenant unless, within
thirty (30) days after submission to Tenant, Tenant shall notify
Landlord that it disputes the correctness thereof, specifying in detail
the basis for such assertion. Pending the resolution of any dispute,
however, Tenant shall continue to make payments in accordance with the
information contained in the comparative statement. Landlord agrees to
promptly provide to Tenant, upon request, extracts from Landlord's books
and records which are relevant to any items in dispute.
5.7 AUDIT. In the event Tenant elects to audit Landlord's Comparative
Statement of Operating Expenses or Statement of Taxes in accordance with
this clause, such audit must be (i) conducted by an independent
nationally recognized accounting firm that is not being compensated by
Tenant on a contingency fee basis, and (ii) completed within sixty (60)
days following Tenant's notice disputing the correctness of the
Comparative Statement of Operating Expenses pursuant to section 5.6
above. Furthermore, all of the information obtained through the Tenant's
audit with respect to financial matters (including, without limitation,
costs, expenses, income) and any other matters pertaining to the
Landlord and/or the Project as well as any compromise, settlement, or
adjustment reached between Landlord and Tenant relative to the results
of the audit shall be held in strict confidence by the Tenant and its
officers, agents, and
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<PAGE> 10
employees; and Tenant shall cause its auditor and any of its officers,
agents, and employees to be similarly bound. As a condition precedent to
Tenant's exercise of its right to audit, Tenant must deliver to Landlord
a signed confidentiality agreement from the auditor (in form acceptable
to Landlord) acknowledging that all of the results of such audit as well
as any compromise, settlement, or adjustment reached between Landlord
and Tenant shall be held in strict confidence and shall not be revealed
in any manner to any person except upon the prior written consent of the
Landlord. Tenant understands and agrees that this provision is of
material importance to the Landlord and that any violation of the terms
of this provision shall result in immediate and irreparable harm to the
Landlord. Landlord shall have all rights allowed by law or equity if
Tenant, its officers, agents, or employees and/or the auditor violate
the terms of this provision, including, without limitation, the right to
terminate this Lease or the right to terminate Tenant's right to audit.
5.8 SURVIVAL AFTER TERMINATION. If, upon termination of this Lease for any
cause, the amount of any additional rent due pursuant to Article 5 has
not yet been determined, an appropriate payment from Tenant to Landlord,
or refund from Landlord to Tenant, shall be made within thirty (30) days
after Tenant's receipt of such determination from Landlord.
5.9 OTHER TAXES
(a) Tenant will reimburse Landlord upon demand for any and all taxes
payable by Landlord (other than as set forth in sub-paragraph
(b) below), whether or not now customary or within the
contemplation of Landlord and Tenant:
(1) upon or measured by rent, including without limitation,
any gross or revenue tax, sales tax, use tax, excise
tax, or value added tax levied by the federal government
or any other governmental body with respect to the
receipt of rent; and
(2) upon this transaction or any document to which Tenant is
a party creating or transferring an interest or an
estate in the Premises.
(b) Tenant will not be obligated to pay any inheritance tax, gift
tax, transfer tax, franchise tax, income tax (based on net
income), profit tax, or capital levy imposed upon Landlord.
(c) Tenant will pay promptly when due all personal property taxes on
Tenant's personal property in the Premises and any other taxes
payable by Tenant that if not paid might give rise to a lien on
the Premises or Tenant's interest in the Premises.
ARTICLE 6 INSURANCE
6.1 LANDLORD'S INSURANCE. At all times during the Term, Landlord will carry
and maintain:
(a) Fire and extended coverage insurance covering the Project, its
equipment, common area furnishings, and leasehold improvements
in the Premises to the extent of the Tenant Finish Allowance (as
that term is defined in the Workletter);
(b) Bodily injury and property damage liability insurance; and
(c) Such other insurance as Landlord reasonably determines from time
to time.
The insurance coverages and amounts in this Section 6.1 will be
reasonably determined by Landlord.
6.2 TENANT'S INSURANCE. At all times during the Term, Tenant will carry and
maintain, at Tenant's expense, the following insurance, in the amounts
specified below or such other amounts as Landlord may from time to time
reasonably request, with insurance companies and on forms satisfactory
to Landlord:
(a) Bodily injury and property damage liability insurance, with a
combined single occurrence limit of not less than $3,000,000 per
occurrence. All such insurance will be equivalent to coverage
offered by a commercial comprehensive general liability form,
including without limitation personal injury, products and
completed operations, broad form property damage, and
contractual liability coverage for the performance by Tenant of
the indemnity agreements set forth in Article 21 of this Lease;
(b) Insurance covering all of Tenant's furniture and fixtures,
machinery, equipment, stock, and any other personal property
owned and used in Tenant's business and found in, on, or about
the Project, and any leasehold improvements to the Premises
other than those provided by Landlord at the beginning of the
Term, if any, provided pursuant to the Workletter in an amount
not less than the full replacement cost. Property forms will
provide coverage on a broad form basis insuring against "all
risks of direct physical loss," All policy proceeds will be used
for the repair or replacement of the property damaged or
destroyed; however, if this Lease ceases under the provisions of
Article 18, Tenant will be entitled to any proceeds resulting
from damage to Tenant's furniture and fixtures, machinery,
equipment, stock, and any other personal property;
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<PAGE> 11
(c) Worker's compensation insurance insuring against and
satisfying Tenant's obligations and liabilities under the
worker's compensation laws of the state in which the Project is
located, including employer's liability insurance in the limits
required by file laws of the state in which the Project is
located; and
(d) Owned, hired, or nonowned comprehensive automobile liability at
a limit of liability not less than $3,000,000 combined bodily
injury and property damage per occurrence.
If Tenant fails to obtain or maintain any insurance required hereunder,
Landlord shall have the option, without assuming any obligation in
connection therewith, to effect such insurance at the sole cost of the
Tenant and all outlays by Landlord shall be reimbursed by Tenant to
Landlord as Additional Rent.
6.3 FORMS OF POLICIES. Certificates of insurance, together with copies of
the endorsements, when applicable, naming Landlord and any others
specified by Landlord as additional insurers, will be delivered to
Landlord prior to Tenant's occupancy of the Premises and from time to
time at least 10 days prior to the expiration of the term of each such
policy. All commercial general liability or comparable policies
maintained by Tenant will name Landlord and such other persons or firms
as Landlord specifies from time to time as additional insurers,
entitling them to recover under such policies for any loss sustained by
them, their agents, and employees, including those losses sustained as a
result of the negligent acts or omissions of Tenant. All such policies
maintained by Tenant will provide that they may not be terminated nor
may coverage be reduced except after 30 days' prior written notice to
Landlord. All commercial general liability, automobile, and property
policies maintained by Tenant will be written as primary policies, not
contributing with and not supplemental to the coverage that Landlord may
carry.
6.4 WAIVER OF SUBROGATION. Landlord and tenant each waive any and all rights
to recover against the other or against any other tenant or occupant of
the Project, or against the officers, directors, shareholders, partners,
joint venturers, employees, agents, customers, invitees, or business
visitors of such other party or of such other tenant or occupant of the
Project, for any loss or damage to such waiving party arising from any
cause covered by any property insurance required to be carried by such
party pursuant to this Article 6 or any other property insurance
actually carried by such party to the extent of the limits of such
policy. Landlord and Tenant from time to time will cause their
respective insurers to issue appropriate waiver of subrogation rights
endorsements to all property insurance policies carried in connection
with the Project or the Premises or the contents of the Project or the
Premises. Tenant agrees to cause all other occupants of the Premises
claiming by, under, or through Tenant to execute and deliver to Landlord
such a waiver of claims and to obtain such waiver of subrogation rights
endorsements.
6.5 ADEQUACY OF COVERAGE. Landlord, its agents and employees make no
representation that the limits of liability specified to be carried by
Tenant pursuant to this Article 6 are adequate to protect Tenant. If
Tenant believes that any of such insurance coverage is inadequate,
Tenant shall obtain such additional insurance coverage as Tenant deems
adequate, at Tenant's sole expense.
ARTICLE 7 USE
Tenant covenants that the Premises will be used only for general business office
purposes and purposes incidental to that use, and for no other purpose. Tenant
will use the Premises in a careful, safe, and proper manner. Tenant will not use
or permit the Premises to be used or occupied for any purpose or in any manner
prohibited by any applicable laws. Tenant will not commit waste or suffer or
permit waste to be committed in, on, or about the Premises. Tenant will conduct
its business and control its employees, agents, and invitees in such a manner as
not to create any nuisance or interfere with, annoy, or disturb any other Tenant
or occupant of the Project or Landlord in its operation of the Project. Tenant
agrees to take possession of and occupy the entire Premises no later than 60
days after the Commencement Date, and Tenant further agrees to continue to
occupy the Premises throughout the remainder of the Term of this Lease until 90
days prior to the Expiration Date.
ARTICLE 8 REQUIREMENTS OF LAW; FIRE INSURANCE
8.1 GENERAL. At its sole cost and expense, Tenant will promptly comply with
all laws, statutes, ordinances, codes, and governmental rules,
regulations, or requirements of federal, state, county, and local
governmental authorities now in force or in force at any given time
after the Lease Date, with the requirements of any board of fire
underwriters or other similar body constituted now or after the Lease
Date, with any direction or occupancy certificate issued pursuant to any
law by any public officer or officers, as well as with the provisions of
all recorded documents affecting the Premises, insofar as they relate to
the condition, use, or occupancy of the Premises, excluding requirements
of structural changes to the Building, unless required by the unique
nature of Tenant's use or occupancy of the Premises.
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8.2 HAZARDOUS MATERIALS.
(a) For purposes of this Lease, "hazardous materials" means any
explosives, radioactive materials, hazardous wastes, or
hazardous substances, including without limitation asbestos
containing materials, PCB's, CFC's, or substances defined as
"hazardous substances" in the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended,
42 U.S.C. Sections 9601-9657; the Hazardous Materials
Transportation Act of 1975, 49 U.S.C. Sections 1801-1812; the
Resource Conservation and Recovery Act of 1976, 42 U.S.C,
Sections 6901-6987; or any other federal, state, or local
statute, law, ordinance, code, rule, regulation, order, or
decree regulating, relating to, or imposing liability or
standards of conduct concerning hazardous materials, waste, or
substances now or at any time hereafter in effect (collectively,
"hazardous materials laws").
(b) Tenant will not cause or permit the storage, use, generation,
release, or disposition of any hazardous materials in, on, or
about the Premises or the Project by Tenant, its agents,
employees, or contractors. Tenant will not permit the Premises
to be used or operated in a manner that may cause the Premises
or the Project to be contaminated by any hazardous materials in
violation of any hazardous materials laws, Tenant will
immediately advise Landlord in writing of (1) any and all
enforcement, cleanup, remedial, removal, or other governmental
or regulatory actions instituted, completed, or threatened
pursuant to any hazardous materials laws relating to any
hazardous materials affecting the Premises; and (2) all claims
made or threatened by any third party against Tenant, Landlord,
the Premises or the Project relating to damage, contribution,
cost recovery, compensation, loss, or injury resulting from any
hazardous materials on or about the Premises. Without
Landlord's prior written consent, Tenant will not take any
remedial action or enter into any agreements or settlements in
response to the presence of any hazardous materials in, on, or
about the Premises.
(c) Tenant will be solely responsible for and will defend, indemnify
and hold Landlord, its agents, and employees harmless from and
against all claims, costs, expenses, damages, and liabilities,
including attorneys' fees and costs, arising out of or in
connection with Tenant's breach of its obligations in this
Article 8. Tenant will be solely responsible for and will
defend, indemnify, and hold Landlord, its agents, and employees
harmless from and against any and all claims, costs, and
liabilities, including attorneys' fees and costs, arising out of
or in connection with the removal, cleanup, and restoration work
and materials necessary to return the Premises and any other
property of whatever nature located on the Project to their
condition existing prior to the appearance of Tenant's hazardous
materials on the Premises. Tenant's obligations under this
Article 8 will survive the expiration or other termination of
this Lease.
(d) Added. See Page 9a
8.3 CERTAIN INSURANCE RISKS. Tenant will not do or permit to be done any act
or thing upon the Premises or the Project which would (a) jeopardize or
be in conflict with fire insurance policies covering the Project and
fixtures and property in the Project; (b) increase the rate of fire
insurance applicable to the Project to an amount higher than it
otherwise would be for general office use of the Project; or (c) subject
Landlord to any liability or responsibility for injury to any person or
persons or to property by reason of any business or operation being
carried on upon the Premises. If the conduct of the Tenant, or any acts
or omissions of the Tenant shall cause or result in any increase in
premiums for insurance carried by the Landlord, whether or not Landlord
allows such act or omission to continue, Tenant shall pay any increase
in premium as Additional Rent.
ARTICLE 9 ASSIGNMENT AND SUBLETTING
9.1 GENERAL. Tenant, for itself, its heirs, distributors, executors,
administrators, legal representatives, successors, and assigns,
covenants and agrees that it will not assign, mortgage, or encumber this
Lease, or sublease, nor otherwise permit the Premises or any part of
the Premises to be used or occupied by others, without the prior written
consent of Landlord in each instance, which consent may be withheld at
the Landlord's sole discretion. Landlord may condition its consent upon,
among other things, execution by the subtenant or assignee, as the case
may be, of an instrument confirming the restrictions on further
subleasing or assignment contained herein and joining in the waivers and
indemnities made by Tenant hereunder. Any assignment or sublease in
violation of this Article 9 will be void. If this Lease is assigned, or
if the Premises or any part of the Premises are subleased or occupied by
anyone other than Tenant, Landlord may, after any default by Tenant,
collect rent from the assignee, subtenant, or occupant, and apply the
net amount collected to Rent. No assignment, sublease, occupancy, or
collection will be deemed (a) a waiver of the provisions of this Section
9.1; (b) the acceptance of the assignee, subtenant, or occupant as
Tenant; or (c) a release of Tenant from the further performance by
Tenant of covenants on the part of Tenant contained in this Lease. The
consent by Landlord to an assignment or sublease will not be construed
to relieve Tenant from obtaining Landlord's prior written consent to any
further assignment or sublease. No permitted subtenant may assign or
encumber its sublease or further sublease all or any portion of its
subleased space, or otherwise permit the subleased space or any part of
its subleased space to be used or occupied by others, without Landlord's
prior written consent in each instance. Any assignee approved by
Landlord must assume all of the obligations and duties of Tenant under
this Lease pursuant to an assumption agreement satisfactory to Landlord
of which Landlord is the beneficiary. See page 9a.
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MBL Office Lease for MPower Solutions, Inc.
Para 8.2 (d) added: Landlord will not cause the unlawful storage, use,
generation, release or disposition of any hazardous materials in, on, or about
the Project by Landlord, its agents, employees or contractors. Landlord will be
solely responsible for and will defend, indemnify, and hold tenant, its agents,
and employees from and against all claims, costs, expenses, damages, and
liabilities, including attorneys' fees and costs, arising out of or in
connections with Landlord's breach of its obligations in this Section 8.2(d).
Landlord's obligation under this Article 8 will survive the expiration or other
termination of this lease.
Para 9.1 (added): Notwithstanding the provisions of 9.1 (c) above, the parties
agree that in the event MPower Solutions, Inc., assigns the Lease to an
un-related bona fide third party (the "1st Assignee") who then further assigns
the Lease to another un-related bona fide third party (the "2nd Assignee"),
MPower Solutions, Inc., shall, upon the effective date of the assignment from
the 1st Assignee to the 2nd Assignee (the "2nd Assignment"), be released from
further performance of the Tenant's covenants contained in this Lease in the
event Landlord consents to the 2nd Assignment but MPower Solutions, Inc., does
not consent to the 2nd Assignment.
Page 9a
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9.2 SUBMISSION OF INFORMATION. If Tenant requests Landlord's consent to a
specific assignment or subletting, Tenant will submit in writing to
Landlord (a) the name and address of the proposed assignee or subtenant;
(b) the business terms of the proposed assignment or sublease; (c)
reasonably satisfactory information as to the nature and character of
the business of the proposed assignee or subtenant, and as to the
nature of its proposed use of the space; (d) banking, financial, or
other credit information sufficient to enable Landlord to determine the
financial responsibility and character of the proposed assignee or
subtenant; (e) the proposed form of assignment (including lease
assumption provisions) or sublease for Landlord's approval; and (f) any
other information reasonably required by Landlord.
9.3 PAYMENTS TO LANDLORD. If Landlord consents to a proposed assignment or
sublease, then Landlord will have the right to require Tenant to pay to
Landlord a sum equal to (a) any rent or other consideration paid to
Tenant by any proposed transferee that (after deducting the costs of
Tenant, if any, in affecting the assignment or sublease, including
reasonable alterations costs, commissions and legal fees) is in excess
of the Rent allocable to the transferred space then being paid by Tenant
to Landlord pursuant to this Lease; and (b) any other profit or gain
(after deducting any necessary expenses incurred) realized by Tenant
from any such sublease or assignments. All such sums owed to Landlord
under 9.3(c), above, will be payable to Landlord at the time the next
payment of Monthly Rent is due.
9.4 PROHIBITED TRANSFERS. The transfer of a majority of the issued and
outstanding capital stock of any corporate Tenant or subtenant of this
Lease, or a majority of the total interest in any partnership Tenant or
subtenant, however accomplished, and whether in a single transaction or
in a series of related or unrelated transactions, will be deemed an
assignment of this lease or of such sublease requiring Landlord's
consent in each instance. For purposes of this Article 9, the transfer
of outstanding capital stock of any corporate Tenant will not include
any sale of such stock by persons other than those deemed "insiders"
within the meaning of the Securities Exchange Act of 1934, as amended,
effected through the "over-the-counter market" or through any recognized
stock exchange.
9.5 LANDLORD'S OPTIONS. In the event Tenant proposes to transfer this Lease
or all or any part of the Premises, Landlord in addition to any rights
contained herein, shall have the following options at its discretion:
(a) See Page 10a.
(b) to re-enter and take possession of the Premises or the part
thereof subject to such transfer, and to enforce all rights of
Tenant, in accordance with such sublet or assignment of the
Premises, or any part thereof, as if Landlord was the sublessor
or assignor, and to do whatever Tenant is permitted to do
pursuant to the terms of such sublease or assignment.
9.6 PERMITTED TRANSFER. Landlord consents to an assignment of this Lease or
sublease of all or part of the Premises to a wholly-owned subsidiary of
Tenant or the parent of Tenant or to any corporation into or with which
Tenant may be merged or consolidated; provided that (a) Tenant promptly
provides Landlord with a fully executed copy of such assignment or
sublease; (b) Tenant is not released from liability under the Lease and
(c) the assignee assumes in writing all of the obligations of Tenant
under this Lease.
ARTICLE 10 RULES AND REGULATIONS
Tenant and its employees, agents, licensees, and visitors will at all times
observe faithfully, and comply strictly with, the rules and regulations set
forth in Exhibit D. Landlord may from time to time reasonably amend, delete,
or modify existing rules and regulations, or adopt reasonable new rules and
regulations for the use, safety, cleanliness, and care of the Premises, the
Building, and the Project, and the comfort, quiet, and convenience of
occupants of the Project. Modifications or additions to the rules and
regulations will be effective upon 30 days' prior written notice to Tenant from
Landlord. In the event of any breach of any rules or regulations or any
amendments or additions to such rules and regulations, Landlord will have all
remedies that this Lease provides for default by Tenant, and will in addition
have any remedies available at law or in equity, including the right to
enjoin any breach of such rules and regulations. Landlord will not be liable to
Tenant for violation of such rules and regulations by any other tenant, its
employees, agents, visitors, or licensees or any other person. In the event of
any conflict between the provisions of this Lease and the rules and
regulations, the provisions of this Lease will govern.
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MBL. Office Lease for MPower Solutions, Inc.
Para 9.5 (a) added: to give Tenant written notice of Landlord's intention to
terminate this Lease as to all or any portion of the Premises subject to such
transfer on the date such notice is given or on any later date specified
therein, whereupon, on the date specified on such notice, Tenant's right to
possession of the Premises or such portion of the Premises shall cease and this
Lease and all obligations of Tenant hereunder shall thereupon be terminated, as
they relate to all or any portion of the Premises except as to any incompleted
obligations of date of Tenant; or
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ARTICLE 11 COMMON AREAS
As used in this Lease, the term "common areas" means, without limitation, the
hallways, entryways, stairs, driveways, roadways, parking areas, walkways,
terraces, docks, loading areas, trash facilities, and all other areas arid
facilities in the Project that are provided and designated from time to time by
Landlord for tile general nonexclusive use and convenience of Tenant with
Landlord and other tenants of the Project and their respective employees,
invitees, licensees, or other visitors. Landlord grants Tenant, its employees,
invitees, licensees, and other visitors a nonexclusive license for the Term to
use the common areas in common with others entitled to use the common areas,
subject to the terms and conditions of this Lease. Without advance written
notice to Tenant, except with respect to matters covered by subsection (a)
below, and without any liability to Tenant in any respect, Landlord will have
the right to:
(a) Close off any of the common areas to whatever extent required in
the opinion of Landlord and its counsel to prevent a dedication
of any of the common areas or the accrual of any rights by any
person or the public to the common areas;
(b) Temporarily close any of the common areas for maintenance,
alteration, or improvement purposes; and
(c) Change the size, use, shape, or nature of any such common
areas, including erecting additional buildings on the common
areas, expanding the existing Building or other buildings to
cover a portion of the common areas, converting common areas to
a portion of the Building or other buildings, or converting any
portion of the Building (excluding the Premises) or other
buildings to common areas. Upon erection of any additional
buildings or change in common areas, the portion of the Project
upon which buildings or structures bare been erected will no
longer be deemed to be a part of the common areas. In the event
of any such changes in the size or use of the Building or common
areas of the Building or Project, Landlord will make an
appropriate adjustment in the Rentable Area of the Building or
the Building's pro rata share of exterior common areas of the
Project, as appropriate, and a corresponding adjustment to
Tenant's Share of the operating expenses payable pursuant to
Article 5 of this Lease.
ARTICLE 12 LANDLORD'S SERVICES
12.1 LANDLORD'S REPAIR AND MAINTENANCE. Subject to the condemnation and
casualty provisions contained in this Lease and except as otherwise
expressly provided herein, Landlord will maintain and repair the common
areas and premises and premises of the Project, including but not
limited to, stairs, and restrooms, the windows in the Building, the
mechanical, plumbing and electrical equipment serving the Building, and,
the structure and the roof of the Building in reasonably good order and
condition.
12.2 LANDLORD'S OTHER SERVICES.
(a) Landlord will furnish the Premises with services, including
without limitation (1) electricity for lighting and the
operation of low-wattage office machines (such as desktop
micro-computers, desktop calculators, and typewriters) during
Business Hours, although Landlord will not be obligated to
furnish more power to the Premises than is proportionally
allocated to the Premises under the Building design; (2) beat
and air conditioning reasonably required for the comfortable
occupation of the Premises during Business Hours; (3) access (4)
lighting replacement during Business Hours (for building
standard lights, but not for any special Tenant lights, which
will be replaced at Tenant's sole cost and expense); (5)
restroom supplies; (6) window washing with reasonable frequency,
as determined by Landlord; and (7) daily cleaning service on
weekdays. Landlord may provide, but will not be obligated to
provide, daily such services (except access heating/cooling and
utilities on holidays or weekends.
(b) Tenant will have the right to purchase for use during Business
Hours and non-Business Hours the services described in clauses
(a)(l) and (2) in excess of the amounts Landlord has agreed to
furnish so long as (1) Tenant gives Landlord reasonable prior
written notice of its desire to do so; (2) the excess services
are reasonably available to Landlord and to the Premises; and
(3) Tenant pays as Additional Rent (at the time the next payment
of Monthly Rent is due) the cost of such excess service from
time to time charged by Landlord; subject to the procedures
established by Landlord from time to time for providing such
additional or excess services.
12.3 TENANT'S COSTS. Whenever equipment or lighting (other than building
standard lights) is used in the Premises by Tenant and such equipment
or lighting affects the temperature otherwise normally maintained by the
design of the Building's air conditioning system, Landlord will bare the
right, after prior written notice to Tenant, to install supplementary
air conditioning facilities in the Premises or otherwise modify the
ventilating slid air conditioning system serving the Premises; and the
cost of such facilities, modifications, and additional service will be
paid by Tenant as Additional Rent. If Landlord reasonably believes that
Tenant is using more power than Landlord furnishes pursuant to Section
12.2, Landlord may install separate meters of Tenant's power usage, and
Tenant will pay for the cost of such excess power as Additional Rent,
together with the cost of installing any risers, meters, or other
facilities that may be necessary to furnish or measure such excess
power to the Premises.
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12.4 LIMITATION ON LIABILITY. Landlord will not be in default under this
Lease or be liable to Tenant or any other person for direct or
consequential damage, or otherwise, for any failure to supply any heat,
air conditioning, elevator, cleaning, lighting, or security; for surges
or interruptions of electricity; or for interruptions to other services
Landlord has agreed to supply. Landlord will use reasonable efforts to
diligently remedy any interruption in the furnishing of such services.
Landlord reserves the right temporarily to discontinue such services at
such times as may be necessary by reason of accident; repairs,
alterations or improvements; strikes; lockouts; riots; acts of God;
governmental preemption in connection with a national or local
emergency; any rule, order, or regulation of any governmental agency;
conditions of supply and demand that make any product unavailable;
Landlord's compliance with any mandatory governmental energy
conservation or environmental protection program, or any voluntary
energy conservation program at the request of or with consent or
acquiescence of Tenant; or any other happening beyond the control of
Landlord. Landlord will not be liable to Tenant or any other person or
entity for direct or consequential damages resulting from the admission
to or exclusion from the Building or Project of any person. In the event
of invasion, mob, riot, public excitement, strikes, lockouts, or other
circumstances rendering such action advisable in Landlord's sole
opinion, Landlord will have the right to prevent access to the Building
or Project during the continuance of the same by such means as Landlord,
in its sole discretion, may deem appropriate, including without
limitation locking doors and closing parking areas and other common
areas. Landlord will not be liable for damages to person or property or
for injury to, or interruption of, business for any discontinuance
permitted under this Article 12, nor will such discontinuance in any way
be construed as an eviction of Tenant or cause an abatement of Rent or
operate to release Tenant from any of Tenant's obligations under this
Lease.
ARTICLE 13 TENANT'S CARE OF THE PREMISES
ARTICLE 14 ALTERATIONS
14.1 GENERAL.
(a) Tenant will not make or allow to be made any alterations,
additions, or improvements to or of the Premises or any part of
the Premises, or attach any fixtures or equipment to the
Premises, without first obtaining Landlord's written consent. In
no event shall the work of Tenant affect or impair the
structure, the elevators, or utility systems of the Building.
Landlord's approval of the plans, specifications, and working
drawings for Tenant's alterations shall create no responsibility
or liability on the part of the Landlord for their completeness,
design sufficiency, or compliance with all laws, ordinances,
rules, requirements, and regulations of governmental agencies or
authorities, or the use and occupancy permit for the Building.
All such alterations, additions, and improvements consented to
by Landlord, and capital improvements that are required to be
made to the Project as a result of the nature of Tenant's use of
the Premises:
(1) Will be performed by contractors approved by Landlord
and subject to conditions specified by Landlord (which
may include requiring the posting of performance and
payment bonds);
(2) At Landlord's option, will be made by Landlord for
Tenant's account, and Tenant will reimburse Landlord for
their cost (including 15% for Landlord's overhead)
within 10 days after receipt of a statement of such
cost;
(3) Will be done in a good and workmanlike manner and shall
be completed promptly;
(4) Shall not cause a loss or diminution of electric power
or other utilities or services to other tenants of the
Building;
(5) Will be performed according to plans, specifications,
and working drawings approved by Landlord; and
(6) Will be in accordance with all applicable federal,
state, county and local laws, rules, regulations,
ordinances and codes.
At all times between the start and completion of the work, in addition
to the other policies of insurance required by this Lease, Tenant shall
maintain a policy of "All Risk" Builder's Risk Insurance covering the
full replacement value of all work done and fixtures and equipment
installed or to be installed at the Premises pursuant to this Article
14. Tenant herewith agrees to be responsible for all damages to persons
or property, including loss of life, as a result of occurrences
connected with activities undertaken by
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ARTICLE 13 TENANTS CARE OF THE PREMISES (ADDED)
Tenant will not act or fail to act in a manner causing damage to the Premises
(including Tenant's equipment, personal property, and trade fixtures located in
the Premises) in their condition at the time they were delivered to Tenant,
reasonable wear and tear excluded. Tenant will immediately advise Landlord of
any damage to the Premises or Project. All damage or injury to the Premises, the
Project or the fixtures, appurtenances, and equipment in the Premises or the
Project that is caused by Tenant, its agents, employees, or invitees and not
covered by insurance may be repaired, restored, or replaced by Landlord, at the
expense of Tenant. Such expense (plus 5% of such expense for Landlord's
overhead) will be collectible as Additional Rent and will be paid by Tenant
within 10 days after delivery of a statement for such expense.
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<PAGE> 19
Tenant, its agents, contractors, and employees pursuant hereto, and hereby
indemnifies Landlord and shall defend and hold Landlord harmless from and
against any and all loss, cost or expense in connection with its
responsibilities hereunder.
(b) Subject to Tenant's rights in Article 16, all alterations,
additions, fixtures, and improvements, whether temporary or
permanent in character, made in or upon the Premises either by
Tenant or Landlord, will immediately become Landlord's property
and at the end of the Term will remain on the Premises without
compensation to Tenant, unless Landlord at the time of approval
of same advises Tenant in writing that such alterations,
additions, fixtures, or improvements must be removed at the
expiration or other termination of this Lease.
14.2 FREE-STANDING PARTITIONS. Tenant will have the right to install
free-standing work station partitions, without Landlord's prior written
consent, so long as no building or other governmental permit is required
for their installation or relocation; however, if a permit is required,
Landlord will not unreasonably withhold its consent to such relocation
or installation. The free-standing work station partitions for which
Tenant pays will be part of Tenant's trade fixtures for all purposes
under this Lease. All other partitions installed in the Premises are
and will be Landlord's property for all purposes under this Lease.
14.3 REMOVAL. If Landlord has required Tenant to remove any or all
alterations, additions, fixtures, and improvements that are made in or
upon the Premises pursuant to this Article 14 prior to the Expiration
Date, Tenant will remove such alterations, additions, fixtures, and
improvements at Tenant's sole cost and will restore the Premises to the
condition in which they were before such alterations, additions,
fixtures, improvements, and additions were made.
ARTICLE 15 MECHANICS' LIENS
Tenant will pay or cause to be paid all costs and charges for work (a) done by
Tenant or caused to be done by Tenant, in or to the Premises, and (b) for all
materials furnished for or in connection with such work. Tenant will indemnify
Landlord against and defend and hold Landlord, the Premises, and the Project
free, clear, and harmless of and from all mechanics' liens and claims of liens,
and all other liabilities, liens, claims, and demands on account of such work by
or on behalf of Tenant, other than work performed by Landlord pursuant to the
Workletter. If any such lien, at any time, is filed against the Premises or any
part of the Project, Tenant will cause such lien to be discharged of record
within 10 days after the filing of such lien, except that if Tenant desires to
contest such lien, it will furnish Landlord, within such 10-day period, security
reasonably satisfactory to Landlord of at least 150% of the amount of the claim,
plus estimated costs and interest, or comply with such statutory procedures as
may be available to release the lien. If a final judgement establishing the
validity or existence of a lien for any amount is entered, Tenant will pay and
satisfy the same at once. If Tenant fails to pay any charge for which a
mechanics' lien has been filed, and has not given Landlord security as described
above, or has not complied with such statutory procedures as may be available to
release the lien, Landlord may, at its option, pay such charge and related costs
and interest, and the amount so paid, together with reasonable attorneys' fees
incurred in connection with such lien, will be immediately due from Tenant to
Landlord as Additional Rent. Nothing contained in this Lease will be deemed the
consent or agreement of Landlord to subject Landlord's interest in the Project
to liability under any mechanics' or other lien law. If Tenant receives written
notice that a lien has been or is about to be filed against the Premises or the
Project, or that any action affecting title to the Project has been commenced on
account of work done by or for or materials furnished to or for Tenant, it will
immediately give Landlord written notice of such notice. At least 15 days prior
to the commencement of any work (including but not limited to any maintenance,
repairs, alterations, additions, improvements, or installations) in or to the
Premises, by or for Tenant, Tenant will give Landlord written notice of the
proposed work and the names and addresses of the persons supplying labor and
materials for the proposed work. Landlord will have the right to post notices of
nonresponsibility or similar written notices on the Premises in order to protect
the Premises against any such liens.
ARTICLE 16 END OF TERM
At the end of this Lease, Tenant will promptly quit and surrender the Premises
broom-clean, in good order and repair, ordinary wear and tear excepted and
deliver all keys to the Premises and the Building to Landlord. If Tenant is not
then in default, Tenant may remove from the Premises any trade fixtures,
equipment, and movable furniture placed in the Premises by Tenant, whether or
not such trade fixtures or equipment are fastened to the Building; Tenant will
not remove any trade fixtures or equipment without Landlord's prior written
consent if such fixtures or equipment are used in the operation of the Building,
or if the removal of such fixtures or equipment will result in impairing the
structural strength of the Building. Whether or not Tenant is in default, Tenant
will remove such alterations, additions, improvements, trade fixtures,
equipment, and furniture as Landlord has requested in accordance with Article
14. Tenant will fully repair any damage occasioned by the removal of any trade
fixtures, equipment, furniture, alterations, additions, and improvements. All
trade fixtures, equipment, furniture, inventory, effects, alterations,
additions, and improvements on the Premises after the end of the Term will be
deemed conclusively to have been abandoned and may be appropriated, sold,
stored, destroyed, or otherwise disposed of by Landlord without notice to Tenant
or any other person and without obligation to account for them. Tenant will pay
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Landlord for all expenses incurred in connection with the removal of such
property, including but not limited to the cost of storage, and the cost of
repairing any damage to the Building or Premises caused by the removal of such
property. Tenant's obligation to observe and perform this covenant will survive
the expiration or other termination of this Lease.
ARTICLE 17 EMINENT DOMAIN
If all of the Premises are taken by exercise of the power of eminent domain (or
conveyed by Landlord in lieu of such exercise) this Lease will terminate on a
date (the "termination date") which is the earlier of the date upon which the
condemning authority takes possession of the Premises or the date on which title
to the Premises is vested in the condemning authority. If more than 25% of the
Rentable Area of the Premises is so taken, Tenant will have the right to cancel
this Lease by written notice to Landlord given within 20 days after the
termination date. If less than 25% of the Rentable Area of the Premises is so
taken, or if the Tenant does not cancel this Lease according to the preceding
sentence, the Monthly Rent will be abated in the proportion of the Rentable Area
of the Premises so taken to the Rentable Area of the Premises immediately before
such taking, and Tenant's Share will be appropriately recalculated. If 25% or
more of the Building or the Project is so taken, Landlord may cancel this Lease
by written notice to Tenant given within 30 days after the termination date. In
the event of any such taking, the entire award will be paid to Landlord, and
Tenant will have no right or claim to any part of such award; however, Tenant
will have the right to assert a claim against the condemning authority in a
separate action, so long as Landlord's award is not reduced as a consequence of
such claim, for Tenant's costs including but not limited to moving expenses and
trade fixtures owned by Tenant.
ARTICLE 18 DAMAGE AND DESTRUCTION
(a) If the Premises or the Building is damaged by fire or other
insured casualty, Landlord will give Tenant written notice of
the time which will be needed to repair such damage, as
determined by Landlord in its reasonable discretion, and the
election (if any) which Landlord has made according to this
Article l8. Such notice will be given before the 30th day (the
"notice date,") after the fire, or other insured casualty.
(b) If the Premises or the Building is damaged by fire or other
insured casualty to an extent which may be repaired within 180
days after the notice date, as reasonably determined by
Landlord, Landlord will promptly begin to repair the damage
after the notice date and will diligently pursue the completion
of such repair. In that event this Lease will continue in full
force and effect except that Monthly Rent will be abated on a
pro rata basis from the date of the damage until the date of the
completion of such repairs (the "repair period") based on the
proportion of the Rentable Area of the Premises Tenant is unable
to use during the repair period.
(c) If the Premises or the Building is damaged by fire or other
insured casualty to an extent that may not be repaired within
180 days after the notice date, as reasonably determined by
Landlord, then (1) Landlord may cancel this Lease as of the date
of such damage by written notice given to Tenant on or before
the notice date or (2) Tenant may cancel this Lease as of the
date of such damage by written notice given to Landlord within
10 days after landlord's delivery of a written notice that the
repairs cannot be made within such 180 day period. If neither
Landlord nor Tenant so elects to cancel this Lease, Landlord
will diligently proceed to repair the Building and Premises and
Monthly Rent will abated on a pro rata basis during the repair
period based on the proportion of the Rentable Area of the
Premises Tenant is unable to use during the repair period.
(d) Notwithstanding the provisions of subparagraphs (a), (b), and
(c) above, if the Premises or the Building or the Project are
damaged by uninsured casualty, or if the proceeds of insurance
are insufficient to pay for the repair of any damage to the
Premises or the Building or the Project, Landlord will have the
option to repair such damage or cancel this Lease as of the date
of such casualty by written notice to Tenant on or before the
notice date.
(e) If any such damage by fire or other casualty is the result of
the willful conduct or negligence or failure to act of Tenant,
its agents, contractors, employees, or invitees, there will be
no abatement of Monthly Rent as otherwise provided for in this
Article 18. Tenant will have no rights to terminate this Lease
on account of any damage to the Premises, the Building, or the
Project, except as set forth in this Lease.
(f) For purposes of this Article 18 and subject to subsections (a)
thru (e) hereof, Landlord shall repair or restore any portion of
the alterations, additions or improvements in the Premises or
the decorations thereto to the extent that such alterations,
additions, improvements and decorations were provided by
Landlord at the beginning of the Term. Landlord shall have no
further obligations pursuant to this Lease to repair or restore
any alterations, additions or improvements in the Premises or
the decorations thereto. If Tenant desires any other or
additional repairs or restoration and if Landlord consents
thereto, the same shall be done at Tenant's sole cost and
expense. Tenant acknowledges that Landlord shall be entitled to
the full proceeds of any insurance coverage, carried by Landlord
to the extent of damage to alterations, additions, improvement
or decorations.
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ARTICLE 19 SUBORDINATION
19.1 GENERAL. This Lease and Tenant's rights under this Lease are subject and
subordinate to any ground or underlying lease, mortgage, indenture, deed
of trust, or other lien encumbrance (each a "superior lien"), together
with any renewals, extensions, modifications, consolidations, and
replacements of such superior lien, now or in the future affecting or
placed, charged, or enforced against the Land, the Building, or all or
any portion of the Project or any interest of Landlord in them or
Landlord's interest in this Lease and the leasehold estate created by
this Lease (except to the extent any such instrument expressly provides
that this Lease is superior to such instrument). Notwithstanding the
foregoing, Tenant will execute, acknowledge, and deliver to Landlord,
within 20 days after written demand by Landlord, such documents as may
be reasonably requested by Landlord or the holder of any superior lien
to confirm or effect any such subordination or superiority, as
applicable, see page 15a.
19.2 ATTORNMENT. Tenant agrees that in the event that any holder of a
superior lien succeeds to Landlord's interest in the Premises, Tenant
will pay to such holder all Rent subsequently payable under this Lease.
Further, Tenant agrees that in the event of the enforcement by the
holder of a superior lien of the remedies provided for by law or by such
superior lien, Tenant will, upon request of any person or party
succeeding to the interest of Landlord as a result of such enforcement,
automatically become the Tenant of and attorn to such successor in
interest without change in the terms or provisions of this Lease. Such
successor in interest will not be bound by:
(a) Any payment of Rent for more than one month in advance, except
prepayments in the nature of security for the performance by
Tenant of its obligations under this Lease that are actually
received by such successor in interest;
(b) Any amendment or modification of this Lease made without the
written consent of such successor in interest (if such consent
was required under the terms of such superior lien);
(c) Any claim against Landlord arising prior to the date on which
such successor in interest succeeded to Landlord's interest; or
(d) Any claim or offset of Rent against the Landlord.
Upon request by such successor in interest and without cost to Landlord
or such successor in interest, Tenant will, within 20 days after written
demand, execute, acknowledge, and deliver an instrument or instruments
confirming the attornment.
ARTICLE 20 ENTRY BY LANDLORD
Landlord, its agents, employees, and contractors may enter the Premises at any
time in response to an emergency and at any other reasonable time to:
(a) Inspect the Premises;
(b) Exhibit the Premises to prospective purchasers, lenders, or
tenants;
(c) Determine whether Tenant is complying with all its obligations
in this Lease;
(d) Supply cleaning service and any other service to be provided by
Landlord to Tenant according to this Lease;
(e) Post written notices of nonresponsibility or similar notices; or
(f) Make repairs required of Landlord under the terms of this Lease
or make repairs to any adjoining space or utility services or
make repairs, alterations, or improvements to any other portion
of the Building.
Tenant, by this Article 20, waives any claim against Landlord, its agents,
employees, or contractors for damages for any injury or inconvenience to or
interference with Tenant's business, any loss of occupancy or quiet enjoyment of
the Premises, or any other loss occasioned by any entry in accordance with this
Article 20. Landlord will at all times have and retain a key with which to
unlock all of the doors in, on, or about the Premises (excluding Tenant's
vaults, safes, and similar areas designated in writing by Tenant in advance).
Landlord will have the right to use any and all means Landlord may deem proper
to open doors in and to the Premises in an emergency in order to obtain entry to
the Premises, provided that Landlord will promptly
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PHONE NO. : 505 8212500
MBL Office Lease for MPower Solutions, Inc.
Article 19.1: the following is added: so long as the Owner and holder of such
superior lien agrees not to disturb Tenant's right to possession, so long as
Tenant is not in default, after applicable notice and period of cure, provided
Landlord and/or the Holder of the superior lien (as the case may be) agrees not
to disturb Tenant's right to possession as long as Tenant is not in default of
any Tenant obligation under the Lease
Page 15a
<PAGE> 23
repair any damages caused by any forced carry, Any carry to the Premises by
Landlord in accordance with this Article 20 will not be construed or deemed to
be a forcible or unlawful entry into or a detainer of the Premises or an
eviction, actual or constructive, of Tenant from the Premises or any portion of
the Premises, nor will any such entry entitle Tenant to damages or an abatement
of Monthly Rent, Additional Rent, or other charges that this Lease requires
Tenant to pay.
ARTICLE 21 INDEMNIFICATION, WAIVER, AND RELEASE
21.1 INDEMNIFICATION. To the extent not prohibited by law, Landlord, its
employees and agents shall not be liable for damage to person, property
or business or resulting from the loss of use thereof sustained by
Tenant or other persons due to the Building or any part thereof becoming
out of repair or due to an accident or due to any act or neglect of any
tenant, occupant or other person.* Tenant further agrees that all
personal property upon the Premises, loading dock, holding areas, and
freight elevators shall be at the sole risk of Tenant. *unless as a
result of Landlord's intentional act or omission Tenant will neither
hold nor attempt to hold Landlord, its employees, or agents liable for,
and Tenant will indemnify and defend and hold harmless Landlord, its
employees, and agents from and against, any and all demands, claims,
causes of action, fines, penalties, damages (including consequential
damages), liabilities, judgments, and expenses (including without
limitation reasonable attorneys' fees) incurred in connection with or
arising from:
(a) the use or occupancy or manner of use or occupancy of the
Premises or any common areas by Tenant or any person claiming
under Tenant;
(b) any activity, work, or thing done or permitted by Tenant in or
about the Premises, the Building, or the Project;
(c) any breach by Tenant or its employees, agents, contractors, or
invitees of this Lease; and
(d) any injury or damage to the person, property, or business of
Tenant, its employees, agents, contractors, or invitees entering
upon the Premises under the express or implied invitation of
Tenant.
If any action or proceeding is brought against Landlord, its employees,
or agents by reason of any such claim for which Tenant has indemnified
Landlord, Tenant, upon written notice from Landlord, will defend the
same at Tenant's expense, with counsel reasonably satisfactory to
Landlord.
21.2 WAIVER AND RELEASE. Tenant, as a material part of the consideration to
Landlord for this Lease, by this Section 21.2 waives and releases all
claims against Landlord, its employees, and agents with respect to all
matters for which Landlord has disclaimed liability pursuant to the
provisions of this Lease.
ARTICLE 22 SECURITY DEPOSIT
Upon execution of this Lease, Tenant shall deposit the security deposit with
Landlord as security for the full, faithful, and timely performance of every
provision of this Lease to be performed by Tenant. If Tenant defaults with
respect to any provision of this Lease, including but not limited to the
provisions relating to the payment of Rent, Landlord may use, apply, or retain
all or any part of the security deposit for the payment of any Rent, or any
other sum in default, or for the payment of any other amount Landlord may spend
or become obligated to spend by reason of Tenant's default, or to compensate
Landlord for any other loss or damage Landlord may suffer by reason of Tenant's
default. If any portion of the security deposit is so used, applied, or
retained, Tenant will within 5 days after written demand deposit cash with
Landlord in an amount sufficient to restore the security deposit to its original
amount. Landlord will not be required to keep the security deposit separate from
its general funds, and Tenant will not be entitled to interest on the security
deposit. The security deposit will not be deemed a limitation on Landlord's
damages or a payment of liquidated damages or a payment of the Monthly Rent due
for the last month of the Term. If Tenant fully, faithfully, and timely performs
every provision of this Lease to be performed by it, the security deposit or any
balance of the security deposit will be returned to Tenant within 60 days after
the expiration of the Term. Landlord may deliver the balance of the security
deposit then held by Landlord to the purchaser of the Building in the event the
Building is sold or to any transferee or assignee from Landlord, and after such
time Landlord will have no further liability to Tenant with respect to the
security deposit.
ARTICLE 23 QUIET ENJOYMENT
Landlord covenants and agrees with Tenant that so long as Tenant pays the Rent
and observes and performs all the terms, covenants, and conditions of this
Lease on Tenant's part to be observed and performed, Tenant may peaceably and
quietly enjoy the Premises subject, nevertheless, to the terms and conditions of
this Lease, and Tenant's possession will not be disturbed by anyone claiming by,
through, or under Landlord.
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ARTICLE 24 EFFECT OF SALE
A sale, conveyance, or assignment of the Building or the Project will operate to
release Landlord from liability from and after the effective date of such sale,
conveyance, or assignment upon all of the covenants, terms, and conditions of
this Lease, express or implied, except those liabilities that arose prior to
such effective date, and, after the effective date of such sale, conveyance, or
assignment, Tenant will look solely to Landlord's successor in interest in and
to this Lease. This Lease will not be affected by any such sale, conveyance, or
assignment, and Tenant will attorn to Landlord's successor in interest to this
Lease from and after such effective date.
ARTICLE 25 DEFAULT
25.1 EVENTS OF DEFAULT. The following events are referred to, collectively,
as "events of default" or, individually, as an "event of default":
(a) Tenant fails to pay any Rent or other monetary obligation when
due, and such failure continues for 5 days after written notice
from Landlord; however, Tenant will not be entitled to more
than 1 written notice for monetary defaults during any 12-month
period, and if after such written notice any Rent is not paid
when due, an event of default will be considered to have
occurred without further notice;
(b) Tenant vacates or abandons the Premises;
(c) This Lease or the Premises or any part of the Premises is taken
upon execution or by other process of law directed against
Tenant, or is taken upon or subject to any attachment by any
creditor of Tenant or claimant against Tenant, and said
attachment is not discharged or disposed of within 15 days after
its levy;
(d) Tenant or any guarantor of Tenant's obligations under this Lease
("Guarantor") files a petition in bankruptcy or insolvency or
for reorganization or arrangement under the bankruptcy laws of
the United States or under any insolvency act of any state, or
admits the material allegations of any such petition by answer
or otherwise, or admits in writing its inability to meet its
debts as they mature, or is dissolved or makes an assignment for
the benefit of creditors;
(e) Involuntary proceedings under any such bankruptcy law or
insolvency act or for the dissolution of Tenant or any Guarantor
are instituted against Tenant or any Guarantor, or a receiver or
trustee is appointed for all or substantially all of the
property of Tenant or any Guarantor, and such proceeding is not
dismissed or such receivership or trusteeship vacated within 60
days after such institution or appointment;
(f) Tenant fails to take possession of the Premises on the
Commencement Date of the Term;
(g) Tenant violates the terms of Article 9 "Assignment and
Subletting";
(h) Tenant breaches any of the agreements, terms, covenants, or
conditions of this Lease and such breach involves a hazardous
condition and is not cured immediately upon written notice to
Tenant;
(i) Tenant breaches any of the other agreements, terms, covenants,
or conditions that this Lease requires Tenant to perform, and
such breach continues for a period of 30 days after written
notice from Landlord to Tenant or, if such breach cannot be
cured reasonably within such 30-day period, if Tenant fails to
diligently commence to cure such breach within 30 days after
written notice from Landlord and to complete such cure within a
reasonable time thereafter; or
25.2 LANDLORD'S REMEDIES. If any one or more events of default set forth in
Section 25.1 occurs then Landlord has the right, at its election:
(a) To give Tenant written notice of Landlord's intention to
terminate this Lease on the earliest date permitted by law or on
any later date specified in such notice, in which case Tenant's
right to possession of the Premises will cease and this Lease
will be terminated, except as to Tenant's liability, as if the
expiration of the term fixed in such notice were the end of the
Term;
(b) Without further demand or notice, and without terminating this
Lease, to reenter and take possession of the Premises or any
part of the Premises, repossess the same, expel Tenant and those
claiming through or under Tenant, and remove the effects of both
or either, using such force for such purposes as may be
necessary, without being liable for prosecution, without being
deemed guilty of any manner of trespass, and without prejudice
to any remedies for arrears of Monthly Rent or other amounts
payable under this Lease or as a result of any preceding breach
of covenants or conditions; or
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(c) Without further demand or notice to cure any event of default
and to charge Tenant for the cost of effecting such cure,
including without limitation reasonable attorneys' fees and
interest on the amount so advanced at the rate set forth in
Section 27.21, provided that Landlord will have no obligation to
cure any such event of default of Tenant.
Should Landlord elect to reenter as provided in subsection (b), or
should Landlord take possession pursuant to legal proceedings or
pursuant to any notice provided by law, Landlord may, from time to time,
without terminating this Lease, relet the Premises or any part of the
Premises in Landlord's or Tenant's name, but for the account of Tenant,
for such term or terms (which may be greater or less than the period
which would otherwise have constituted the balance of the Term) and on
such conditions and upon such other terms (which may include concessions
of free rent and alteration and repair of the Premises) as Landlord, in
its reasonable discretion, may determine, and Landlord may collect and
receive the rents from such reletting. Landlord will in no way be
responsible or liable for any failure to relet the Premises, or any part
of the Premises, or for any failure to collect any rent due upon such
reletting. No such reentry or taking possession of the Premises by
Landlord will be construed as an election on Landlord's part to
terminate this Lease unless a written notice of such intention is given
to Tenant. No written notice from Landlord under this Section or under a
forcible or unlawful entry and detainer statute or similar law will
constitute an election by Landlord to terminate this Lease unless such
notice specifically so states. Landlord reserves the right following any
such reentry or reletting to exercise its right to terminate this Lease
by giving Tenant such written notice, in which event this Lease will
terminate as specified in such notice.
25.3 CERTAIN DAMAGES. In the event that Landlord does not elect to terminate
this Lease as permitted in Section 25.2(a), but on the contrary elects
to take possession as provided in Section 25.2(b), Tenant will pay to
Landlord Monthly Rent and other sums as provided in this Lease that
would be payable under this Lease if such repossession had not occurred,
less the net proceeds, if any, of any reletting of the Premises after
deducting all of Landlord's reasonable expenses in connection with such
reletting, including without limitation all repossession costs,
brokerage commissions, attorneys' fees, expenses of employees,
alteration and repair costs, and expenses of preparation for such
reletting. Tenant will pay such Rent and other sums to Landlord monthly
on the day on which the Monthly Rent would have been payable under this
Lease if possession had not been retaken, and Landlord will be entitled
to receive such Rent and other sums from Tenant on each such day.
25.4 CONTINUING LIABILITY AFTER TERMINATION. If this Lease is terminated on
account of the occurrence of an event of default, Tenant will remain
liable to Landlord for damages in an amount equal to the Rent and other
amounts that would have been owing by Tenant for the balance of the
Term, had this Lease not been terminated, less the net proceeds, if any,
of any reletting of the Premises by Landlord subsequent to such
termination, after deducting all of Landlord's expenses in connection
with such reletting, including without limitation the expenses
enumerated in Section 25.3. Landlord will be entitled to collect such
damages from Tenant monthly on the day on which Monthly Rent and other
amounts would have been payable under this Lease if this Lease had not
been terminated, and Landlord will be entitled to receive such Monthly
Rent and other amounts from Tenant on each such day. Alternatively, at
the option of Landlord, in the event this Lease is so terminated,
Landlord will be entitled to recover against Tenant as damages for loss
of the bargain and not as a penalty:
(a) The worth at the time of award of the unpaid Rent that had been
earned at the time of termination;
(b) The worth at the time of award of the amount by which the unpaid
Rent that would have been earned after termination until the
time of award exceeds the amount of such rental loss that Tenant
proves could have been reasonably avoided;
(c) The worth at the time of award of the amount by which the unpaid
Rent for the balance of the Term of this Lease (had the same not
been so terminated by Landlord) after the time of award exceeds
the amount of such rental loss that Tenant proves could be
reasonably avoided;
(d) Any other amount necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure to perform its
obligations under this Lease or which in the ordinary course of
things would be likely to result therefrom.
The "worth at the time of award" of the amounts referred to in clauses
(a) and (b) above is computed by adding interest at the per annum
interest rate described in Section 27.21 on the date on which this Lease
is terminated from the date of termination until the time of the award.
The "worth at the time of award" of the amount referred to in clause (c)
above is computed by discounting such amount at the discount rate of the
Federal Reserve Bank of New York, New York, at the time of award plus
1%.
25.5 CUMULATIVE REMEDIES. Any suit or suits for the recovery of the amounts
and damages set forth in Sections 25.3 and 25.4 may be brought by
Landlord, from time to time, at Landlord's election, and nothing in this
Lease will be deemed to require Landlord to await the date upon which
this Lease or the Term would have expired had there occurred no event of
default. Each right and remedy provided for in this Lease is cumulative
and is in addition to every other right or remedy provided for in this
Lease or now or after the Lease Date existing at law or in equity or by
statute or otherwise, and the exercise
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<PAGE> 26
or beginning of the exercise by Landlord of any one or more at the
rights or remedies provided for in this Lease or now or after the Lease
Date existing at law or in equity or by statute or otherwise will not
preclude the simultaneous or later exercise by Landlord of any or all
other rights or remedies provided for in this Lease or now or after the
Lease Date existing at law or in equity or by statute or otherwise. All
costs incurred by Landlord in collecting any amounts and damages owing
by Tenant pursuant to the provisions of this Lease or to enforce any
provision of this Lease, including reasonable attorneys' fees from the
date any such matter is turned over to an attorney, whether or not one
or more actions are commenced by Landlord, will also be recoverable by
Landlord from Tenant. *See Page 19a.
25.6 WAIVER OF REDEMPTION. Tenant waives any right of redemption arising as a
result of Landlord's exercise of its remedies under this Article 25.
ARTICLE 26 PARKING
Tenant will be entitled to use only the parking spaces set forth in Section
1.1(q) during the Term subject to the rules and regulations set forth in Exhibit
D, and any amendments or additions to them. Tenant's parking spaces will be
unassigned, nonreserved, and nondesignated.
Neither Landlord nor any operator of the parking areas within the Project, as
the same are designated and modified by Landlord, in its sole discretion, from
time to time (the "parking areas") will be liable for loss of or damage to any
vehicle or any contents of such vehicle or accessories to any such vehicle, or
any property left in any of the parking areas, resulting from fire, theft,
vandalism, accident, conduct of other users of the parking areas and other
persons, or any other casualty or cause. Further, Tenant understands and agrees
that: (a) Landlord will not be obligated to provide any traffic control,
security protection or operator for the parking areas; (b) Tenant uses the
parking areas at its own risk; and (c) Landlord will not be liable for personal
injury or death, or theft, loss of, or damage to property. Tenant waives and
releases Landlord from any and all liability arising out of the use of the
parking areas by Tenant, its employees, agents, invitees and visitors, whether
brought by any of such persons or any other person.
Tenant's right to use the parking areas will be in common with other tenants of
the Project and with other parties permitted by Landlord to use the parking
areas. Landlord reserves the right to assign and reassign, from time to time,
particular parking spaces for use by persons selected by Landlord, provided that
Tenant's rights under the Lease are preserved. Landlord will not be liable to
Tenant for any unavailability of Tenant's designated spaces, if any, nor will
any unavailability entitle Tenant to any refund, deduction, or allowance. Tenant
will not park in any numbered space or any space designated as: RESERVED,
HANDICAPPED, VISITORS ONLY, or LIMITED TIME PARKING (or similar designation).
If the parking areas are damaged or destroyed, or if the use of the parking
areas is limited or prohibited by any governmental authority, or the use or
operation of the parking areas is limited or prevented by strikes or other labor
difficulties or other causes beyond Landlord's control and parking is restored
within a reasonable period of time Tenant's inability to use the parking spaces
will not subject Landlord or any operator of the parking areas to any liability
to Tenant and will not relieve Tenant of any of its obligations under the Lease
and the Lease will remain in full force and effect.
Tenant has no right to assign or sublicense any of its rights in the parking
spaces, except as part of a permitted assignment or sublease of the Lease.
ARTICLE 27 MISCELLANEOUS
27.1 NO OFFER. Submission of the Lease to Tenant is for examination and shall
not bind Landlord in any manner. No lease or obligations of Landlord
shall arise until this instrument is signed by both Landlord and Tenant
and delivery is made to each; provided, however, the execution and
delivery by Tenant of this Lease to Landlord or Landlord's agent shall
constitute an irrevocable offer by Tenant to lease the Premises on the
terms and conditions herein contained, which offer may not be withdrawn
or revoked for 15 days after such execution and delivery.
27.2 JOINT AND SEVERAL LIABILITY. If Tenant is composed of more than one
signatory to this Lease, each signatory will be jointly and severally
liable with each other signatory for payment and performance according
to this Lease. The act of, written notice to, written notice from,
refund to, or signature of any signatory to this Lease (including
without limitation modifications of this Lease made by fewer than all
such signatories) will bind every other signatory as though every other
signatory had so acted, or received or given the written notice or
refund, or signed.
27.3 NO CONSTRUCTION AGAINST DRAFTING PARTY. Landlord and Tenant acknowledge
that each of them and their counsel have had an opportunity to review
this Lease and that this Lease will not be construed against Landlord
merely because Landlord has prepared it.
27.4 TIME OF THE ESSENCE. Time is of the essence of each and every provision
of this Lease.
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MBL Office Lease for MPower Solutions, Inc.
Para 25.5 added: Notwithstanding the foregoing, Landlord waives any right,
whether statutory or otherwise, to a lien against Tenant's personal property.
Page 19a
<PAGE> 28
27.5 NO RECORDATION. Tenant's recordation of lifts Lease or any memorandum or
short form of it will be void and an event of default under this Lease.
Tenant shall, at the request of Landlord, execute a short-form lease and
have it properly acknowledged for the purpose of recording. The cost of
recording such short-form lease shall be borne by Landlord.
27.6 NO WAIVER. No waiver by Landlord of any agreement, condition or
provision contained in this Lease will be valid or binding unless
expressed in writing and signed by Landlord. The waiver by Landlord of
any agreement, condition, or provision contained in this Lease will not
be deemed to be a waiver of any subsequent breach of the same or any
other agreement, condition, or provision contained in this Lease, nor
will any custom or practice that may grow up between the parties in the
administration of the terms of this Lease be construed to waive or to
lessen the right of Landlord to insist upon the performance by Tenant in
strict accordance with the terms of this Lease. The subsequent
acceptance of Rent by Landlord will not be deemed to be a waiver of any
preceding breach by Tenant of any agreement, condition, or provision of
this Lease, other than the failure of Tenant to pay the particular Rent
so accepted, regardless of Landlord's knowledge of such preceding breach
at the time of acceptance of such Rent.
27.7 LIMITATION ON RECOURSE. Tenant specifically agrees to look solely to
Landlord's interest in the Project for the recovery of any judgments
from Landlord. It is agreed that Landlord (and its agents, shareholders,
venturers, and partners, and their shareholders, venturers, and partners
and all of their officers, directors, and employees) will not be
personally liable for any such judgments.
27.8 ESTOPPEL CERTIFICATES. At any time and from time to time but with 15
days after prior written request by Landlord, Tenant will execute,
acknowledge, and deliver to Landlord or such other person as Landlord
shall direct, promptly upon request, a certificate* certifying (a) that
this Lease is unmodified and in full force and effect or, if there have
been modifications, that this Lease is in full force and effect, as
modified, and stating the date and nature of each modification; (b) the
date, if any, to which Rent and other sums payable under this Lease
have been paid; (c) that no written notice of any default has been
delivered to Landlord which default has not been cured, except as to
defaults specified in said certificate; (d) that the Tenant has no
knowledge of and that there is no event of default under this Lease or
an event which, with notice or the passage of time, or both, would
result in an event of default under this Lease, except for defaults
specified in said certificate; and (e) such other matters as may be
reasonably requested by Landlord. Any such certificate may be relied
upon by any prospective purchaser or existing or prospective mortgagee
or beneficiary under any deed of trust of the Building or any part of
the Project. Tenant's failure to deliver such a certificate within such
time will be conclusive evidence of the matters set forth in it, and
such failure shall be an event of default. *See Page 20a.
27.9 ATTORNEYS' FEES. If Landlord and Tenant litigate any provision of this
Lease or the subject matter of this Lease, the unsuccessful litigant
will pay to the successful litigant all costs and expenses, including
reasonable attorneys' fees and court costs, incurred by the successful
litigant at trial and on any appeal. If, without fault, either Landlord
or Tenant is made a party to any litigation instituted by or against the
other, the other will indemnify the faultless one against all loss,
liability, and expense, including reasonable attorneys' fees and court
costs, incurred by it in connection with such litigation.
27.10 NO MERGER. The voluntary or other surrender of this Lease by Tenant or
the cancellation of this Lease by mutual agreement of Tenant and
Landlord or the termination of this Lease on account of Tenant's default
will not work a merger, and will, at Landlord's option, (a) terminate
all or any subleases and subtenancies or (b) operate as an assignment to
Landlord of all or any subleases or subtenancies. Landlord's option
under this Section 27.10 will be exercised by written notice to Tenant
and all known subleases or subtenants in the Premises or any part of the
Premises.
27.11 HOLDING OVER. Tenant will have no right to remain in possession of all
or any part of the Premises after the expiration of the Term* and
Landlord may, at its option, re-enter and take possession of the
Premises, reserving its rights to collect damages sustained by reason of
Tenant's unlawful retention of possession of the Premises or any part
thereof. If Tenant remains in possession of all or any part of the
Premises after the expiration of the Term, with the express written
consent of Landlord: (a) such tenancy will be deemed to be a periodic
tenancy from month-to-month only; (b) such tenancy will not constitute
a renewal or extension of this Lease for any further term; and (c) such
tenancy may be terminated by Landlord upon the earlier of 30 days' prior
written notice or the earliest date permitted by law. In such event,
Monthly Rent will be increased to an amount equal to 140% of the Monthly
Rent payable during the last month of the Term, and any other sums due
under this Lease will be payable in the amount and at the times
specified in this Lease. During such month-to-month tenancy, Tenant will
observe every other term, condition, and covenant contained in this
Lease. *See Page 20a
27.12 NOTICES. Any notice, request, demand, consent, approval, or other
communication required or permitted under this Lease must be in writing
and will be deemed to have been given when personally delivered, sent by
facsimile with delivery acknowledged by the sending machine, deposited
with any nationally recognized overnight carrier that routinely issues
receipts, or deposited in any depository regularly maintained by the
United States Postal Service, postage prepaid certified mail, return
receipt
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Para 27.8 added: *in a form substantially similar to Exhibit E.
Para 27.11 added: *and the Renewal Term, if Tenant renews the Lease as provided
herein.
Page 20a
<PAGE> 30
requested, addressed to the party for whom It is Intended at its
address(es) set forth in Section 1.1. Either Landlord or Tenant may add
additional addresses or change its address for purposes of receipt of
any such communication by giving 10 days' prior written notice of such
change to the other party in the manner prescribed in this Section
27.12.
27.13 SEVERABILITY. If any provision of this Lease proves to be illegal,
invalid, or unenforceable, the remainder of this Lease will not be
affected by such finding, and in lieu of each provision of this Lease
that is illegal, invalid, or unenforceable a provision shall be deemed
added as a part of this Lease as similar in terms to such illegal,
invalid, or unenforceable provision as may be possible and be legal,
valid, and enforceable.
27.14 WRITTEN AMENDMENT REQUIRED. No amendment, alteration, modification of,
or addition to the Lease will be valid or binding unless expressed in
writing and signed by Landlord and Tenant. Tenant agrees to make any
modifications of the terms and provisions of this Lease required or
requested by any lending institution providing financing for the
Building, or Project, as the case may be, provided that no such
modifications will materially adversely affect Tenant's rights and
obligations under this Lease.
27.15 ENTIRE AGREEMENT. This Lease, the exhibits and addenda, if any, contain
the entire agreement between Landlord and Tenant. No promises or
representations, except as contained in this Lease, have been made to
Tenant respecting the condition or the manner of operating the Premises,
the Building, or the Project.
27.16 CAPTIONS. The captions of the various articles and sections of this
Lease are for convenience only and do not necessarily define, limit,
describe, or construe the contents of such articles or sections.
27.17 NOTICE OF LANDLORD'S DEFAULT. In the event of any alleged default in the
obligation of Landlord under this Lease, Tenant will deliver to Landlord
written notice listing the reasons for Landlord's default and Landlord
will have 30 days following receipt of such notice to cure such alleged
default or, in the event the alleged default cannot reasonably be cured
within a 30-day period, to commence action and proceed diligently to
cure such alleged default. A copy of such notice to Landlord will be
sent to any holder of a mortgage or other encumbrance on the Building or
Project of which Tenant has been notified in writing, and any such
holder will also have an additional like period to cure such alleged
default.
27.18 AUTHORITY. Tenant and the party executing this Lease on behalf of Tenant
represent to Landlord that such party is authorized to do so by
requisite action of the board of directors or partners, as the case may
be, and agree upon request to deliver to Landlord a resolution or
similar document to that effect.
27.19 BROKERS. See page 21a.
27.20 GOVERNING LAW. This Lease will be governed by and construed pursuant to
the laws of the state in which the Project is located.
27.21 LATE PAYMENTS. Any Rent or other monetary obligation due Landlord that
is not paid within 10 days when due will accrue interest at a rate of
the Prime Rate plus 5% per annum (but in no event in an amount in excess
of the maximum rate allowed by applicable law) from the date on which it
was due until the date on which it is paid in full with accrued
interest. In addition to the foregoing, Tenant shall pay to Landlord a
late charge of 5% of the amount due.
27.22 NO EASEMENTS FOR AIR OR LIGHT. Any diminution or shutting off of light,
air, or view by any structure that may be erected on lands adjacent to
the Building will in no way affect this Lease or impose any liability
on Landlord.
27.23 TAX CREDITS. Landlord is entitled to claim all tax credits and
depreciation attributable to leasehold improvements in the Premises.
Promptly after Landlord's demand, Landlord and Tenant will prepare a
detailed list of the leasehold improvements and fixtures and their
respective costs for which Landlord or Tenant has paid. Landlord will be
entitled to all credits and depreciation for those items for which
Landlord has paid by means of any Tenant finish allowance or otherwise.
Tenant will be entitled to any tax credits and depreciation for all
items for which Tenant has paid with funds not provided by Landlord.
Page 21
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MBL Office Lease for MPower Solutions, Inc.
Para 27.19 added: BROKERS. Landlord and Tenant represent and warrant that they
have not consulted or negotiated with any broker, finder, or agent with regard
to the Premises except the brokers named in Section 1.1. Each agrees to hold the
other harmless and indemnify the other against all costs, expenses, attorney's
fees, or other liability for commissions or other compensation or charges
claimed by any broker, finder, or agent claiming the same by, through or under
it and such indemnity shall survive the expiration or earlier termination of
this lease.
Page 21a
<PAGE> 32
27.25 FINANCIAL REPORTS. Within 15 days after Landlord's request, Tenant will
furnish Tenant's most recent audited financial statements (including any
notes to them) to Landlord, or, if no such audited statements have been
prepared, such other financial statements (and notes to them) as may
have been prepared by an independent certified public accountant or,
failing those, Tenant's internally prepared financial statements. Tenant
will discuss its financial statements with Landlord and will give
Landlord access to Tenant's books and records in order to enable
Landlord to verify the financial statements. Landlord will not disclose
any aspect of Tenant's financial statements that Tenant designates to
Landlord as confidential except (a) to Landlord's lenders or prospective
purchasers of the Project, (b) in litigation between Landlord and
Tenant, and (c) if required by court order or subpoena.
27.26 LANDLORD'S FEES. Whenever Tenant requests Landlord to take any action or
give any consent required or permitted under this Lease, Tenant will
reimburse Landlord for all of Landlord's reasonable costs incurred in
reviewing the proposed action or consent, including without limitation
reasonable attorneys', engineers' or architects' fees, within 10 days
after Landlord's delivery to Tenant of a statement of such costs. Tenant
will be obligated to make such reimbursement without regard to whether
Landlord consents to any such proposed action.
27.27 BINDING EFFECT. The covenants, conditions, and agreements contained in
this Lease will bind and inure to the benefit of Landlord and Tenant and
their respective heirs, distributees, executors, administrators,
successors, and, except as otherwise provided in this Lease, their
assigns.
27.28 TERMS. The necessary grammatical changes required to make the provisions
hereof apply either to corporations, partnerships, or individuals, men
or women, as the case may be, shall in all cases be assumed as though in
each case fully expressed.
27.29 DEFINITION OF LANDLORD. All indemnities, covenants and agreements of
Tenant contained herein which inure to the benefit of Landlord shall be
construed to also inure to the benefit of Landlord's beneficiaries and
their partners, agents and employees and employees of their agents.
27.30 RIGHTS CUMULATIVE. All rights and remedies of Landlord under this Lease
shall be cumulative and none shall exclude any other rights and remedies
allowed by law.
27.31 CHANGE OF BUILDING NAME. Landlord reserves the right at any time and
without liability to any tenant to change the name by which the Building
or Project is designated.
27.32 FORCE MAJEURE. When a period of time is herein prescribed for any action
to be taken by Landlord, Landlord shall not be liable or responsible
for, and there shall be excluded from the computation for any such
period of time, any delays due to strikes, riots, acts of God, shortages
of labor or materials, war, regulations or restrictions or any other
causes of any kind whatsoever which are beyond the control of Landlord.
27.33 THIRD PARTY BENEFICIARY. It is specifically understood and agreed that
no person shall be a third party beneficiary hereunder, and that none of
the provisions of this Lease shall be for the benefit of or be
enforceable by anyone other than the parties hereto, and that only the
parties hereto and their permitted assignees shall have rights
hereunder.
27.34 NO JOINT VENTURE. Landlord and Tenant are not and shall not be deemed to
be, for any purpose, partners or joint venturers with each other.
27.35 REMEDIES. If Tenant believes that Landlord has unreasonably withheld its
consent in any instance in connection with this Lease, Tenant's sole
remedy will be to seek a declaratory judgment that Landlord has
unreasonably withheld its consent or an order of specific performance or
mandatory injunction in connection with Landlord's agreement to give its
consent, and Tenant shall not be entitled to make claim for, and hereby
expressly waives, any claim for damages by reason of Landlord
withholding its consent.
Page 22
<PAGE> 33
27.36 WAIVER OF JURY TRIAL. LANDLORD AND TENANT BY THIS SECTION 27.36 WAIVE
TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY
EITHER OF THE PARTIES TO THIS LEASE AGAINST THE OTHER ON ANY MATTERS
WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS LEASE, THE
RELATIONSHIP OF LANDLORD AND TENANT, TENANT'S USE OR OCCUPANCY OF THE
PREMISES, OR ANY OTHER CLAIMS (EXCEPT CLAIMS FOR PERSONAL INJURY OR
PROPERTY DAMAGE), AND ANY EMERGENCY STATUTORY OR ANY OTHER STATUTORY
REMEDY.
Landlord and Tenant have executed this Lease as of the day and year first above
written.
Tenant: MPower Solutions, Inc. Landlord: MBL Life Assurance Corporation
------------------------------- -------------------------------
By: /s/ WILLIAM F.X. O'NEIL By: /s/ [Signature Illegible]
----------------------------------- -----------------------------------
Name: William F.X. O'Neil Name:
---------------------------------- -----------------------------------
Title: EVP, COO Title:
-------------------------------- ----------------------------------
[affix corporate seal]
*****[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]*****
Page 23
<PAGE> 34
EXHIBIT A
THE PREMISES
[FLOOR PLAN OF
BUSINESS CENTER PHASE III
NEWPORT BUSINESS PARK
BUILDING NO. 2]
<PAGE> 35
EXHIBIT B
LEGAL DESCRIPTION OF THE LAND
TRACT 3-A of Corrected Plat of TRACT L & 2 Newport Industrial ParkWest Unit 1 &
TRACT 3 Newport Industrial.
1
<PAGE> 36
EXHIBIT C
WORKLETTER
This workletter is date May 2, 1997 between MBL Life Assurance Corporation
("Landlord") and MPower Solutions, Inc. ("Tenant").
RECITALS
This Workletter is attached to and forms a part of that certain Lease dated May
2, 1997 ("Lease"), pursuant to which the Landlord has leased Tenant space in the
Building.
1. Improvements. Tenant shall perform and contract with and pay contractors
for all Tenant Improvements. Landlord will reimburse Tenant a total of
$34,000 for Tenant Improvements. In addition, Landlord will provide a
Buildout Allowance of up to an additional $34,000 which Tenant shall
repay as Monthly Rent amortized over 32 months at 9.5% interest.
Provided Tenant is not in default, Tenant Improvement Allowance ??
($34,000) and Buildout Allowance (not to exceed $34,000) to be payable
to Tenant upon presentation of certified pay requests from contractor
and invoices from consultants. A 20% retainage shall be held by Landlord
until receipt of lien releases from all workmen and Landlord's
satisfaction that all Tenant Improvements are completed in a workmanlike
manner.
If Landlord does not reimburse Tenant within 60 days of date of Tenant
Invoice, Tenant will have the right to set-off rent, and unpaid balance
will bear interest at rate of 8.5% per annum from invoice date.
2. Landlord agrees to repair east door to facility to prevent water from
entering Premises in addition to improvements indicated in Article 1
above.
3. The following fixtures installed by Tenant shall remain property of the
Tenant at the end of the Lease, and Tenant will be allowed to remove
them:
Sconces
Shelving in Bathrooms
Retractable Screens
Alarm System
Suspended Lights
Mirror behind receptionist area
Dry Erase Boards
Office Furniture
Track Lighting
Window coverings installed by Tenant
in addition to building standard mini blinds
currently in place which shall remain with
the Premises.
<PAGE> 37
EXHIBIT D
RULES AND REGULATIONS
1. Landlord may from time to time adopt appropriate systems and
procedures for the security or safety of the Building, any persons occupying,
using, or entering the Building, or any equipment, finishings, or contents of
the Building, and Tenant will comply with Landlord's reasonable requirements
relative to such systems and procedures.
2. The sidewalks, passages, exits, entrances, and stairways of the
Building will not be obstructed by any tenants or used by any of them for any
purpose other than for ingress to and egress from their respective Premises. No
tenant and no employee or invitee of any tenant will go upon the roof of the
Building except to perform required repairs or maintenance, and then only after
Tenant has obtained Landlord's consent. No tenant will be permitted to place or
install any object (including without limitation radio and television antennas,
loudspeakers, sound amplifiers, microwave dishes, solar devices, or similar
devices) on the exterior of the Building or on the roof of the Building.
3. No sign, placard, picture, name, advertisement, exterior light,
decoration, balloon, flag, pennant, banner or written notice visible from the
exterior of Tenant's Premises will be inscribed, painted, affixed, or otherwise
displayed by Tenant on any part of the Building or the Premises without the
prior written consent of Landlord. Landlord will adopt and furnish to Tenant
general guidelines relating to exterior signs and to signs inside the Building
but visible from outside the Premises. Tenant agrees to conform to such
guidelines. All approved signs or lettering on doors will be printed, painted,
affixed, or inscribed at the expense of the Tenant by a person approved by
Landlord. Tenant shall repair, paint, and/or replace the building fucia surface
to which its signs are attached upon vacation of the Premises, or the removal or
alteration of its signage. Tenant shall not make any changes to the exterior of
the Premises except as approved in writing by Landlord. In the event of the
violation of this rule by Tenant, Landlord may remove the violating items
without any liability, and may charge the expense incurred by such removal to
the tenant or tenants violating this rule.
4. No cooking will be done or permitted by any tenant on the
Premises, except in areas of the Premises which are specially constructed for
cooking and except that use by the tenant of microwave ovens and Underwriters'
Laboratory approved equipment for brewing coffee, tea, hot chocolate, and
similar beverages will be permitted, provided that such use is in accordance
with all applicable federal, state, and city laws, codes, ordinances, rules and
regulations.
5. No tenant will employ any person or persons other than a
cleaning service approved by Landlord for the purpose of cleaning the Premises,
unless otherwise agreed to by Landlord in writing. Except with the written
consent of Landlord, no person or persons other than those approved by Landlord
will be permitted to enter the Building for the purpose of cleaning it. No
tenant will cause any unnecessary labor by reason of such tenant's carelessness
or indifference in the preservation of good order and cleanliness. Should
Tenant's actions result in any increased expense for any required cleaning,
Landlord reserves the right to assess Tenant for such expenses.
6. The toilet rooms, toilets, urinals, wash bowls and other
plumbing fixtures will not be used for any purposes other than those for which
they were constructed, and no sweepings, rubbish, rags, or other foreign
substances will be thrown in such plumbing fixtures. All damages resulting from
any misuse of the fixtures will be borne by the tenant who, or whose servants,
employees, agents, visitors, or licensees, caused the same.
7. No tenant or tenant's invitees or licensees, will in any way
deface any part of the Premises or the Building of which they form a part. In
those portions of the Premises where carpet has been provided directly or
indirectly by Landlord, Tenant will at its own expense install and maintain pads
to protect the carpet under all furniture having casters and other than carpet
casters.
8. No tenant will alter, change, replace, or rekey any lock or
install a new lock or a knocker on any door of the Premises. Landlord, its
agents, or employees will retain a pass (master) key to all door locks on the
Premises. Any new door locks required by Tenant or any change in keying of
existing locks will be installed or changed by Landlord following tenant's
written request to Landlord and will be at Tenant's expense. All new locks and
rekeyed locks will remain operable by Landlord's pass (master) key. Landlord
will furnish each tenant, free of charge, with two (2) keys to each suite entry
door lock on the Premises. Landlord will have the right to collect a reasonable
charge for additional keys and cards requested by any tenant. Each tenant, upon
termination of its tenancy, will deliver to Landlord all keys and access cards
for the Premises and Building that have been furnished to such tenant.
<PAGE> 38
The moving company must be a locally recognized professional mover, whose
primary business is the performing of relocation services, and must be bonded
and fully insured. A certificate or other verification of such insurance must be
received and approved by Landlord prior to the start of any moving operations.
Insurance must be sufficient, in Landlord's sole opinion, to cover all personal
liability, theft or damage to the Project, including but not limited to floor
coverings, doors, walls, stairs, foliage, and landscaping. Special care must be
taken to prevent damage to foliage and landscaping during adverse weather. All
moving operations will be conducted at such times and in such a manner as
Landlord will direct, and all moving will take place during non-business hours
unless Landlord agrees in writing otherwise. Tenant will be responsible for the
provision of building security during all moving operations, and will be liable
for all losses and damages sustained by any party as a result of the failure to
supply adequate security. Landlord will have the right to prescribe the weight,
size, and position of all equipment, materials, furniture, or other property
brought into the Building. Heavy objects will, if considered necessary by
Landlord, stand on wood strips of such thickness as is necessary to properly
distribute the weight. Landlord will not be responsible for loss of or damage to
any such property from any cause, and all damage done to the Building by moving
or maintaining such property will be repaired at the expense of Tenant. Landlord
reserves the right to inspect all such property to be brought into the Building
and to exclude from the Building all such property which violates any of these
rules and regulations or the Lease of which these rules and regulations are a
part. Supplies, goods, materials, packages, furniture, and all other items of
every kind delivered to or taken from the Premises will be delivered or removed
through the entrance and route designated by Landlord, and Landlord will not be
responsible for the loss or damage of any such property.
10. No tenant will use or keep in the Premises or the Building any
kerosene, gasoline, or inflammable or combustible or explosive fluid or material
or chemical substance other than limited quantities of such materials or
substances reasonably necessary for the operation or maintenance of office
equipment of limited quantities of cleaning fluids and solvents required in
tenant's normal operations in the Premises, which shall be stored in accordance
with applicable law. No storage outside the Premises is permitted. Without
Landlord's prior written approval, no tenant will use any method of heating or
air conditioning other than that supplied by Landlord. No tenant will use or
keep or permit to be used or kept any foul or noxious gas or substance in the
Premises.
11. Tenants shall not, prior to or during the Term, either directly
or indirectly, employ or permit the employment of any contractor, mover,
mechanic or laborer, or permit any materials in the Premises. If the use of such
contractor, mover, mechanic or laborer or such materials would, in Landlord's
opinion, create any difficulty, strike or jurisdictional dispute with other
contractors, movers, mechanics or laborers engaged by Landlord, tenants, or
others, or would in any way disturb the construction, maintenance, cleaning,
repair, management, security or operation of the Building, Project or any part
thereof. Any tenant, upon demand by Landlord, shall cause all contractors,
movers, mechanics, laborers or materials causing such interference, difficulty
or conflict to leave or be removed from the Project immediately.
12. Landlord will have the right to prohibit any advertising by
Tenant mentioning the Building that, in Landlord's reasonable opinion, tends to
impair the reputation or desirability of the Building, and upon written notice
from Landlord, Tenant will refrain from or discontinue such advertising.
13. Tenant will not bring any animals (except "Seeing Eye" dogs) or
birds into the Building, and will not permit bicycles or other vehicles inside
or on the sidewalks outside the Building except in areas designated from time to
time by Landlord for such purposes.
15. Each tenant will store all its trash and garbage within its
Premises. No material will be placed in the trash boxes or receptacles if such
material is of such nature that it may not be disposed of in the ordinary and
customary manner of removing and disposing of trash and garbage without being in
violation of any law or ordinance governing such disposal. All garbage and
refuse disposal will be made only through entryways and elevators provided for
such purposes and at such times as Landlord designates. Removal of any furniture
or furnishings, large equipment, packing crates, packing materials, and boxes
will be the responsibility of each tenant and such items may not be disposed of
in the Building trash receptacles nor will they be removed by the Building's
janitorial service, except at Landlord's sole option and at the tenant's
expense. No furniture, appliances, equipment, or flammable products of any type
may be disposed of in the Building trash receptacles.
16. Canvassing, peddling, soliciting, and distributing handbills or
any other written materials in the Building are prohibited, and each tenant will
cooperate to prevent the same.
17. The requirements of the tenants will be attended to only upon
application by written, personal, or telephone notice to the Landlord's
management company for the Building. Employees of Landlord or Landlord's agent
will not perform any work or do anything outside of their regular duties unless
under special instructions from Landlord.
<PAGE> 39
18. A directory of the Building may be, but is not required to be,
provided for the display of the name and location of tenants only. All entries
on any Building directory display will confirm to standards and style set by
Landlord in its sole discretion. Space on any exterior signage will be provided
in Landlord's sole discretion. No tenant will have any right to the use of any
exterior sign.
19. Tenant will see that the doors of the Premises are closed and
locked and that all water faucets, water apparatus, and utilities are shut off
before Tenant or Tenant's employees leave the Premises, so as to prevent waste
or damage, and for any failure to comply or carelessness in this regard Tenant
will make good all injuries sustained by the other tenants or occupants of the
Building or Landlord.
20. Tenant will not conduct itself in any manner that is
inconsistent with the character of the Building as a first quality building or
that will impair the comfort and convenience of other tenants in the Building.
21. Tenant (including tenant's employees, agents, invitees, and
visitors) will use the parking spaces solely for the purpose of parking
passenger model cars, small vans, and small trucks and will comply in all
respects with any rules and regulations that may be promulgated by Landlord from
time to time with respect to the parking areas. The parking areas will not be
used by Tenant, its agents, or employees, for overnight parking of vehicles,
except with Landlord's prior consent. Tenant will ensure that any vehicle parked
in any of the parking spaces will be kept in proper repair and will not leak
oil, grease, gasoline, or any other fluids. If any of the parking spaces are at
any time used (a) for any purpose other than parking as provided above; (b) in
any way or manner reasonably objectionable to Landlord; or (c) by Tenant after
default by Tenant under the Lease, Landlord, in addition to any other rights
otherwise available to Landlord, may consider such default an event of default
under the Lease.
22. No act or thing done or omitted to be done by Landlord or
Landlord's agent during the term of the Lease in connection with the enforcement
of these rules and regulations will constitute an eviction by Landlord of any
tenant nor will it be deemed an acceptance of surrender of the Premises by any
tenant, and no agreement to accept such termination or surrender will be valid
unless in a writing signed by Landlord. The delivery of keys to any employee or
agent of Landlord will not operate as a termination of the Lease or a surrender
of the Premises unless such delivery of keys is done in connection with a
written instrument executed by Landlord approving the termination or surrender.
23. In these rules and regulations, the term "tenant" includes the
employees, agents, invitees, and licensees of Tenant and others permitted by
Tenant to use or occupy the Premises.
24. Landlord may waive any one or more of these rules and
regulations for the benefit of any particular tenant or tenants, but no such
waiver by Landlord will be construed as a waiver of such rules and regulations
in favor of any other tenant or tenants, nor prevent Landlord from enforcing any
such rules and regulations against any or all of the tenants of the Building
after such waiver.
25. These rules and regulations are in addition to, and will not be
construed to modify or amend, in whole or in part, the terms, covenants,
agreements, and conditions of the Lease.
<PAGE> 40
EXHIBIT E
COMMENCEMENT DATE AND ESTOPPEL CERTIFICATE
This Commencement Date and Estoppel Certificate is entered into by Landlord and
Tenant pursuant to Section 3.1 of the Lease.
1. DEFINITIONS. In this certificate the following terms have the meanings
given to them:
(a) Landlord: MBL Life Assurance Corporation
(b) Tenant: MPower Solutions Inc.
(c) Lease: Office lease dated April 17th, 1997 between Landlord and
Tenant.
(d) Premises: Suite 128.
(e) Building Address: 2300 Buena Vista, SE
--------------------------
Albuquerque, NM 87106
--------------------------
--------------------------
--------------------------
2. Landlord and Tenant confirm that the Commencement Date of the Lease is
______________________ and the Expiration Date is ______________________
and that Sections 1.l(k) and (l) are accordingly amended.
3. The Rentable Area of the Premises is deemed to be 6,800 square feet.
4. The Rentable Area of the Building is deemed to be 37,000 square feet.
5. Tenant's Share is 18.38 percent.
6. Tenant has accepted possession of the Premises as provided in the Lease.
7. The Improvements required to be furnished by the Landlord in accordance
with the Workletter (if any) have been furnished to the satisfaction of
Tenant (subject to any corrective work or punch-list items submitted
previously to Landlord).
8. All terms and conditions to be performed by Landlord under the Lease
have been satisfied and on this date there are no existing defenses or
offsets which Tenant has against the full enforcement of the Lease by
Landlord.
9. The Lease is in full force and effect and has not been modified,
altered, or amended, except as follows:
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
10. There are no setoffs or credits against Rent, and no Security Deposit or
prepaid Rent has been paid except as provided by the Lease.
Landlord and Tenant have executed this Commencement Date and Estoppel
Certificate as of the dates set forth below.
Tenant: MPower Solutions, Inc. Landlord: MBL Life Assurance Corporation
----------------------------- -------------------------------
-----------------------------
By: By:
---------------------------------- -------------------------------------
Name: Name:
------------------------------- -----------------------------------
Title: Title:
------------------------------- -----------------------------------
Date: Date:
------------------------------- -----------------------------------
Page 13
<PAGE> 41
EXHIBIT H
OPTION TO EXTEND
Tenant may extend this Lease for a period of 12 months (the "Extension Term")
beginning the day after the Lease Expiration Date, upon the same terms and
conditions of the Lease, except that:
1. the Term is modified to include the Extension Term;
2. the Monthly Rent for the Extension Term shall be $6,800.00; and
3. the Option to Extend shall be deleted and shall not be available
to Tenant at the end of the Extension Term.
To exercise this Option to Extend, Tenant must:
1. not be in default of the Lease;
2. give Notice to Landlord that Tenant is exercising its Option to
Extend at least 180 days, but not more than 240 days before the
Lease Expiration Date ("Tenant's Notice to Extend Term").
3. provide such financial reports and statements evidencing to the
Landlord's satisfaction the Tenant's ability to meet its
obligations during the Extension Term; and
4. execute the extension agreement to be provided by Landlord and
return it to Landlord within 10 days of receipt.
Failure of Tenant to observe or comply with the terms of this Option to Extend
shall render the option null and void. Landlord shall not be required to extend
the Term of this Lease if, in its reasonable judgment, Tenant's financial
condition may impair its ability to meet its obligations during the Extended
Term. This option is personal to the Tenant named herein and shall be void upon
any transfer as per Article 9 of this Lease.
Page H-1
<PAGE> 42
EXHIBIT E
COMMENCEMENT DATE AND ESTOPPEL CERTIFICATE
This Commencement Date and Estoppel Certificate is entered into by Landlord and
Tenant pursuant to Section 3.1 of the Lease.
1. DEFINITIONS. In this certificate the following terms have the meanings
given to them:
(a) Landlord: MBL Life Assurance Corporation
(b) Tenant: Reilly Dike Dosher Corporation
(c) Lease: Office lease dated September 29, 1995 between Landlord
and Tenant.
(d) Premises: Suite entire building
(e) Building Address: 2305 Renard Place SE
--------------------------
Albuquerque, NM 87106
--------------------------
--------------------------
--------------------------
2. Landlord and Tenant confirm that the Commencement Date of the Lease is
February 1, 1996 and the Expiration Date is January 31, 2000 and that
Sections 1.1(k) and (l) are accordingly amended.
3. The Rentable Area of the Premises is 25,050 square feet.
4. The Rentable Area of the Building is 25,050 square feet.
5. Tenant's Share is 100 percent.
6. Tenant has accepted possession of the Premises as provided in the Lease.
7. The Improvements required to be furnished by the Landlord in accordance
with the Workletter (if any) have been furnished to the satisfaction of
Tenant (subject to any corrective work or punch-list items submitted
previously to Landlord).
8. All terms and conditions to be performed by Landlord under the Lease
have been satisfied and on this date there are no existing defenses or
offsets which Tenant has against the full enforcement of the Lease by
Landlord.
9. The Lease is in full force and effect and has not been modified,
altered, or amended, except as follows:
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
10. There are no setoffs or credits against Rent, and no Security Deposit or
prepaid Rent has been paid except as provided by the Lease.
Landlord and Tenant have executed this Commencement Date and Estoppel
Certificate as of the dates set forth below.
Tenant: Reilly Dike Dosher Corporation Landlord: MBL Life Assurance Corporation
------------------------------- -------------------------------
------------------------------- By:
-------------------------------------
By: /s/ WILLIAM S. REILLY
---------------------------------- Name:
-----------------------------------
Name: William S. Reilly
------------------------------- Title:
-----------------------------------
Title: President
------------------------------- Date:
-----------------------------------
Date:
-------------------------------
<PAGE> 1
EXHIBIT 10.26
OFFICE LEASE
between
Reilly Dike Dosher Corporation
- ------------------------------------------------------------------------------
Tenant
and
MBL Life Assurance Corporation, Landlord
Date: September 29, 1995
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
Article 1 Basic Lease Information Article 20 Entry by Landlord
1.1 Basic Lease Information Article 21 Identification, Waiver, and Release
1.2 Definitions 21.1 Indemnification
1.3 Exhibits 21.2 Waiver and Release
Article 2 Agreement Article 22 Security Deposit
Article 3 Term, Delivery, and Acceptance of Premises Article 23 Quiet Enjoyment
3.1 Delivery of Possession Article 24 Effect of Sale
3.2 Early Entry Article 25 Default
Article 4 Monthly Rent 25.1 Events of Default
Article 5 Operating Expenses 25.2 Landlord's Remedies
5.1 General 25.3 Certain Damages
5.2 Estimated Payments 25.4 Continue Liability After Termination
5.3 Annual Settlement 25.5 Cumulative Remedies
5.4 Final Proration 25.6 Waiver of Redemption
5.5 Other Taxes Article 26 Parking
5.6 Additional Rent Article 27 Miscellaneous
Article 6 Insurance 27.1 No Offer
6.1 Landlord's Insurance 27.2 Joint and Several Liability
6.2 Tenant's Insurance 27.3 No Construction Against Drafting Party
6.3 Forms of Policies 27.4 Time of the Essence
6.4 Waiver of Subrogation 27.5 No Recordation
6.5 Adequacy of Coverage 27.6 No Waiver
Article 7 Use 27.7 Limitation on Recourse
Article 8 Requirements of Law; Fire Insurance 27.8 Estoppel Certificates
8.1 General 27.9 Attorneys' Fees
8.2 Hazardous Materials 27.10 No Merger
8.3 Certain Insurance Risks 27.11 Holding Over
Article 9 Assignment and Subletting 27.12 Notice
9.1 General 27.13 Severability
9.2 Submission of Information 27.14 Written Amendment Required
9.3 Payments to Landlord 27.15 Entire Agreement
9.4 Prohibited Transfers 27.16 Captions
9.5 Landlord's Options 27.17 Notice of Landlord's Default
9.6 Permitted Transfer 27.18 Authority
Article 10 Rules and Regulations 27.19 Brokers
Article 11 Common Areas 27.20 Governing Law
Article 12 Landlord's Services 27.21 Late Payments
12.1 Landlord's Repair and Maintenance 27.22 No Easements for Air or Light
12.2 Landlord's Other Services 27.23 Tax Credits
12.3 Tenant's Costs 27.24 Relocation of the Premises
12.4 Limitation on Liability 27.25 Financial Reports
Article 13 Tenant's Care of the Premises 27.26 Landlord's Fees
Article 14 Alterations 27.27 Binding Effect
14.1 General 27.28 Terms
14.2 Free-Standing Partitions 27.29 Definition of Landlord
14.3 Removal 27.30 Rights Cumulative
Article 15 Mechanics' Liens 27.31 Change of Building Name
Article 16 End of Term 27.32 Force Majeure
Article 17 Eminent Domain 27.33 Third Party Beneficiary
Article 18 Damage and Destruction 27.34 No Joint Venture
Article 19 Subordination 27.35 Remedies
19.1 General 27.36 WAIVER OF JURY TRIAL
19.2 Attornment Addenda and Exhibits
</TABLE>
<PAGE> 3
OFFICE LEASE
THIS OFFICE LEASE ("Lease") is entered into by Landlord and Tenant as described
in the following basic lease information on the date that is set forth for
reference only in the following basic lease information. Landlord and Tenant
agree:
ARTICLE 1 BASIC LEASE INFORMATION
1.1 BASIC LEASE INFORMATION. In addition to the terms that are defined
elsewhere in this Lease, these terms are used in this Lease:
(a) LEASE DATE: September
(b) LANDLORD: MBL Life Assurance Corporation
(c) LANDLORD'S ADDRESS:
c/o Income Property Services
707 Broadway, NE
Suite #105
Albuquerque, NM 87102
with a copy at the same time to: MBL Life Assurance Corporation, Real
Estate Investment Division, 520 Broad Street, Newark, NJ 07102-3184
(d) TENANT: Reilly Dike Dosher Corporation
(e) TENANT'S ADDRESS: The Premises as defined in this Lease with a copy at the
same time to:
2305 Renard Place, SE
c/o Brad Stamets, VP-Finance
Albuquerque, NM 87106
(f) BUILDING ADDRESS: 2305 Renard Place, SE
Albuquerque, NM 87106
(g) PREMISES: The premises shown on Exhibit A to this Lease, known as the
entire Building
(h) RENTABLE AREA OF THE PREMISES: Approx. 25,050 square feet.
(i) RENTABLE AREA OF THE BUILDING: Approx. 25,050 square feet.
(j) TERM: forty-eight (48) months, beginning on the Commencement Date and
expiring on the Expiration Date.
(k) COMMENCEMENT DATE: November 15, 1995, or as extended pursuant to the
Workletter.
(l) EXPIRATION DATE: November 15, 1999, or as extended pursuant to the
Workletter.
(m) SECURITY DEPOSIT: $ -0-
(n) MONTHLY RENT:
<TABLE>
<CAPTION>
Amount Per Month: Commencement On: Ending On:
- ----------------- ---------------- ----------
<S> <C> <C>
$25,050.00 November 15, 1995 November 14, 1998
$25,571.88 November 15, 1998 November 14, 1999
</TABLE>
(o) OPERATING EXPENSE BASE: $_______ per square foot of Rentable Area of the
Building per annum.
(p) TENANT'S SHARE: 100% percent (determined by dividing the Rentable Area of
the Premises by the Rentable Area of the Building, multiplying the
resulting quotient by 100, and rounding the 3rd to equal calendar year
1996 actual expenditures. Landlord will limit escalation of controllable
operating costs to 5% per year. Non-controllable operating costs are
insurance, taxes & utility costs.
Page 1
<PAGE> 4
decimal place).
(q)
(r) PARKING CHARGE: $ -0- per parking space per month, subject to adjustments
specified in Article 26.
(s) BROKER: Dan Newman
------------------------------------------
Newman-Newsom, Inc. - for Tenant
------------------------------------------
Income Property Services - for Landlord
------------------------------------------
(t) Tenant shall use its best efforts to control utility expenses.
1.2 DEFINITIONS.
(a) ADDITIONAL RENT: Any amounts that this Lease requires Tenant to pay in
addition to Monthly Rent.
(b) BUILDING: The building located on the Land and of which the Premises are a
part.
(c) LAND: The land on which the Project is located and which is described on
Exhibit B.
(d) PRIME RATE: The rate of interest from time to time announced by The Wall
Street Journal as the "prime rate." If the Wall Street Journal or any
reasonable successor to it ceases to announce the prime rate, the Prime
Rate will be a comparable interest rate designated by Landlord to replace
the Prime Rate.
(e) PROJECT: The development consisting of the Land and all improvements built
on the Land, including without limitation the Building, parking lot,
parking structure, if any, walkways, driveways, fences, and landscaping.
(f) RENT: The Monthly Rent and Additional Rent.
(g) WORKLETTER: The workletter attached to this Lease as Exhibit C (if any).
If any other provision of this Lease contradicts any definition of this Article
1, the other provision will prevail.
1.3 EXHIBITS. The following exhibits and addenda are attached to this Lease
and are made part of this Lease:
EXHIBIT A -- The Premises
EXHIBIT B -- Legal Description of the Land
EXHIBIT C -- Workletter
EXHIBIT D -- Rules and Regulations
EXHIBIT E -- Commencement Date and Estoppel Certificate
EXHIBIT H -- Option to Extend
EXHIBIT J -- Satellite Dish
ADDENDUM:
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In consideration for the Rent and other covenants and agreements made by
Tenant, Landlord leases the Premises to Tenant, and Tenant leases the Premises
from Landlord, according to this Lease. The duration of this Lease will be the
Term. The Term will commence on the Commencement Date and will expire on the
Expiration Date unless terminated earlier pursuant to the terms of this Lease.
ARTICLE 3 TERM, DELIVERY, AND ACCEPTANCE OF PREMISES
3.1 DELIVERY OF POSSESSION. Landlord will be deemed to have delivered
possession of the Premises to Tenant on the Commencement Date, as it may be
adjusted pursuant to the Workletter. Landlord will construct or install in
the Premises the Improvements as defined in the Workletter to be
constructed or installed by Landlord according to the Workletter. If no
Workletter is attached to this Lease, it will be deemed that Landlord
delivered to Tenant possession of the Premises AS IS in its present
condition on the Commencement Date. Tenant acknowledges that neither
Landlord nor its agents or employees have made any representations or
warranties as to the suitability or fitness of the Premises for the conduct
of Tenant's business or for any other purpose, nor has Landlord or its
agents or employees agreed to undertake any alterations or construct any
Tenant Improvements to the Premises except as expressly provided in this
Lease and the Workletter.* Tenant will execute and deliver to Landlord the
Commencement Date and Estoppel Certificate attached to this Lease as
Exhibit E within 3 days of Landlord's request.
3.2 EARLY ENTRY. Tenant shall be permitted entry to the Premises prior to the
Commencement Date for the purpose of installing fixtures or any other
purpose permitted by Landlord. The early entry will be at Tenant's sole
risk and subject to all the terms and provisions of this Lease as though
the Commencement Date had occurred, except for the payment of Rent, which
will commence on the Commencement Date. Tenant, its agents, or employees
will not interfere with or delay Landlord's completion of construction of
the improvements. Tenant hereby agrees to indemnify Landlord against any
injury, and loss or damage which may occur to any person or to any of the
Tenant's work or installations made in such Premises, Building or Project,
or to any personal property placed therein, the same being at Tenant's sole
risk, and, prior to any early entry by Tenant, provide Landlord with proof
of insurance coverages described in this Lease. Landlord has the right to
impose additional conditions on Tenant's early entry that Landlord, in its
reasonable discretion, deems appropriate and Landlord will further have the
right to require that Tenant execute an early entry agreement containing
those conditions prior to Tenant's early entry.
ARTICLE 4 MONTHLY RENT
Throughout the Term of this Lease, Tenant will pay Monthly Rent to Landlord as
rent for the Premises. Monthly Rent will be paid in advance on or before the
first day of each calendar month of the Term. If the Term commences on a day
other than the first day of a calendar month or ends on a day other than the
last day of a calendar month, then Monthly Rent will be appropriately prorated
by Landlord based on the actual number of calendar days in such month. If the
Term commences on a day other than the first day of a calendar month, then the
prorated Monthly Rent for such month will be paid on or before the first day of
the Term. Monthly Rent will be paid to Landlord, without written notice or
demand, and without deduction or offset, in lawful money of the United States
of America at Landlord's address, or to such other address as Landlord may from
time to time designate in writing.
ARTICLE 5 OPERATING EXPENSES
5.1 GENERAL.
(a) In addition to Monthly Rent, beginning on the Commencement Date Tenant will
pay Tenant's Share of the amount by which the operating expenses paid,
payable, or incurred by Landlord in each calendar year or partial calendar
year during the Term exceeds the product of the Operating Expense Base
times the Rentable Area of the Building. If operating expenses are
calculated for a partial calendar year, the Operating Expense Base will be
appropriately prorated.
(b) As used in this Lease, the term "operating expenses" means:
(1) All costs of ownership, management, operation, repair and maintenance
of the Project, including without limitation real and personal
property taxes and assessments (and any tax levied in whole or in part
in lieu of or in addition to real property taxes); wages, salaries,
compensation and benefits of employees; consulting, accounting, legal,
tax appeal, engineering and other professional fees and expenses;
janitorial, maintenance, guard, and other services; management fees
and costs (charged by Landlord, any affiliate of Landlord, or any
other entity managing the Project and determined at a rate consistent
with prevailing market rates for comparable services and projects);
reasonable reserves for operating expenses; that part of office rent
or rental value of space in the Project used or furnished by Landlord
to enhance, manage,
* If for any reason except for Force Majeure as provided in Section 27.32 or
Tenant's actions or inactions, Landlord cannot deliver possession of the
Premises to Tenant within 60 days after November 15, 1995, Tenant may cancel
this Lease and Landlord will not be liable to Tenant for any resultant loss or
damage.
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operate, and maintain the Project; power, water, waste disposal, and
other utilities; snow, ice, and debris removal; electrical costs;
materials and supplies; maintenance and repairs including elevator
maintenance and repairs; service and maintenance contracts; insurance
obtained with respect to the Project; depreciation on personal
property and equipment, except as set forth in (c) below or which is
or should be capitalized on the books of Landlord; and any other
costs, charges, and expenses that under generally accepted accounting
principles would be regarded as management, maintenance, and operating
expenses; and
(2) The cost (amortized over such period as Landlord will reasonably
determine) together with interest at the greater of the Prime Rate
prevailing plus 2% or Landlord's borrowing rate for such capital
improvements plus 2% on the unamortized balance of the cost of any
capital improvements and the installation thereof that are made to the
Project by Landlord (i) for the purpose of safety, saving energy or
reducing operating expenses, or (ii) by requirement of any
governmental law or regulation that was not applicable to the Project
at the time it was constructed and not as a result of special
requirements for any tenant's use of the Building.
(c) The operating expenses will not include:
(1) depreciation on the Project (other than depreciation on personal
property, equipment, window coverings on exterior windows provided by
Landlord and carpeting in public corridors and common areas);
(2) costs of alterations of space or other improvements made for tenants
of the Project;
(3) finders' fees and real estate brokers' commissions;
(4) mortgage principal, or interest;
(5) capital items other than those referred to in clause (b)(2) above;
(6) costs of replacements to personal property and equipment for which
depreciation costs are included as an operating expense;
(7) costs of excess or additional services provided to any tenant in the
Building that are directly billed to such tenants;
(8) the cost of repairs due to casualty or condemnation that are
reimbursed by third parties;
(9) any cost due to Landlord's breach of this Lease;
(10) any income, estate, inheritance, or other transfer tax and any excess
profit, franchise, or similar taxes on Landlord's business;
(11) all costs, including legal fees, relating to activities for the
solicitation and execution of leases of space in the Building; and
(12) any legal fees incurred by Landlord in enforcing its rights under
other leases for premises in the Building.
(d) The operating expenses that vary with occupancy and that are
attributable to any part of the Term in which less than 95% of the
Rentable Area of the Building is occupied by tenants will be adjusted by
Landlord to the amount that Landlord reasonably believes they would have
been if 95% of the Rentable Area of the Building had been so occupied.
5.2 ESTIMATED PAYMENTS. At Landlord's request, during each calendar year or
partial calendar year in the Term, in addition to Monthly Rent, Tenant
will pay to Landlord on the first day of each month an amount equal to
1/12 of the product of Tenant's Share multiplied by the "estimated
operating expenses" (defined below) for such calendar year. "Estimated
operating expenses" for any calendar year means Landlord's reasonable
estimate of operating expenses for such calendar year, less the product
of the Operating Expense Base, multiplied by the Rentable Area of the
Building and will be subject to revision according to the further
provisions of this Section 5.2 and Section 5.3. During any partial
calendar year during the Term, estimated operating expenses will be
estimated on a full-year basis. During each December during the Term, or
as soon after each December as practicable, Landlord will give Tenant
written notice of estimated operating expenses for the ensuing calendar
year. On or before the first day of each month during the ensuing
calendar year (or each month of the Term, if a partial calendar year),
Tenant will pay to Landlord 1/12 of the product of Tenant's Share
multiplied by the estimated operating expenses for such calendar year;
however, if such
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written notice is not given in December, Tenant will continue to make
monthly payments on the basis of the prior year's estimated operating
expenses until the month after such written notice is given, at which time
Tenant will commence making monthly payments based upon the revised
estimated operating expenses. In the month Tenant first makes a payment
based upon the revised estimated operating expenses, Tenant will pay to
Landlord for each month which has elapsed since December the difference
between the amount payable based upon the revised estimated operating
expenses and the amount payable based upon the prior year's estimated
operating expenses. If at any time or times it reasonably appears to
Landlord that the actual operating expenses for any calendar year will vary
from the estimated operating expenses for such calendar year, Landlord may,
by written notice to Tenant, revise the estimated operating expenses for
such calendar year, and subsequent payments by Tenant in such calendar year
will be based upon such revised estimated operating expenses.
5.3 ANNUAL SETTLEMENT. Within 120 days after the end of each calendar year or
as soon after such 120-day period as practicable, Landlord will deliver to
Tenant a statement of amounts payable under Section 5.1 for such calendar
year prepared and certified by Landlord. Such certified statement will be
final and binding upon Landlord and Tenant unless Tenant objects to it in
writing to Landlord within 30 days after it is given to Tenant. If such
statement shows an amount owing by Tenant that is less than the estimated
payments, if any, previously made by Tenant for such calendar year, the
excess will be held by Landlord and credited against the next payment of
Rent; however, if the Term has ended and Tenant was not in default at its
end, Landlord will refund the excess to Tenant. If such statement shows an
amount owing by Tenant that is more than the estimated payments, if any,
previously made by Tenant for such calendar year, Tenant will pay the
deficiency without deduction or setoff to Landlord within 30 days after
the delivery of such statement.
Tenant shall have the right at its own expense and at a reasonable time
(after written notice to Landlord) within 30 days after receipt of the
statement to review Landlord's record of operating expenses relevant to
this Article. In the event Tenant does not review Landlord's records and
deliver the results thereof to Landlord within said 30 day period, the
terms and amounts set forth in the statement shall be deemed conclusive
and final and Tenant shall have no further right to adjustment. In the
event Tenant's examination reveals an error has been made, and Landlord
disagrees with the results thereof, Landlord shall have 30 days to obtain
an audit from an accountant of its choice. In the event Landlord's
accountant and Tenant's accountant are unable to reconcile their results,
both accountants shall mutually agree on a third accountant, whose
determination shall be conclusive.
5.4 FINAL PRORATION. If this Lease ends on a day other than the last day of a
calendar year, the amount of increase (if any) in the operating expenses
payable by Tenant applicable to the calendar year in which this Lease ends
will be calculated on the basis of the number of days of the Term falling
within such calendar year, and Tenant's obligation to pay any increase or
Landlord's obligation to refund any overage will survive the expiration or
other termination of this Lease.
5.5 OTHER TAXES.
(a) Tenant will reimburse Landlord upon demand for any and all taxes payable
by Landlord (other than as set forth in sub-paragraph (b) below), whether
or not now customary or within the contemplation of Landlord and Tenant:
(1) upon or measured by rent, including without limitation, any gross
revenue tax, sales tax, use tax, excise tax, or value added tax levied
by the federal government or any other governmental body with respect
to the receipt of rent; and
(2) upon this transaction or any document to which Tenant is a party
creating or transferring an interest or an estate in the Premises.
(b) Tenant will not be obligated to pay any inheritance tax, gift tax,
transfer tax, franchise tax, income tax (based on net income), profit tax,
or capital levy imposed upon Landlord.
(c) Tenant will pay promptly when due all personal property taxes on Tenant's
personal property in the Premises and any other taxes payable by Tenant
that if not paid might give rise to a lien on the Premises or Tenant's
interest in the Premises.
5.6 ADDITIONAL RENT. Amounts payable by Tenant according to this Article 5
will be payable as Rent, without deduction or offset. If Tenant fails to
pay any amounts due according to this Article 5, Landlord will have all
the rights and remedies available to it on account of Tenant's failure to
pay Rent.
ARTICLE 6 INSURANCE
6.1 LANDLORD'S INSURANCE. At all times during the Term, Landlord will carry and
maintain:
(a) Fire and extended coverage insurance covering the Project, its equipment,
common area furnishings, and
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leasehold improvements in the Premises to the extent of the Tenant Finish
Allowance (as that term is defined in the Workletter);
(b) Bodily injury and property damage liability insurance; and
(c) Such other insurance as Landlord reasonably determines from time to time.
The insurance coverages and amounts in this Section 6.1 will be reasonably
determined by Landlord.
6.2 TENANT'S INSURANCE. At all times during the Term, Tenant will carry and
maintain, at Tenant's expense, the following insurance, in the amounts
specified below or such other amounts as Landlord may from time to time
reasonably request, with insurance companies and on forms satisfactory to
Landlord;
(a) Bodily injury and property damage liability insurance, with a combined
single occurrence limit of not less than $3,000,000 per occurrence. All
such insurance will be equivalent to coverage offered by a commercial
comprehensive general liability form, including without limitation
personal injury, products and completed operations, broad form property
damage, and contractual liability coverage for the performance by Tenant of
the indemnity agreements set forth in Article 21 of this Lease;
(b) Insurance covering all of Tenant's furniture and fixtures, machinery,
equipment, stock, and any other personal property owned and used in
Tenant's business and found in, on, or about the Project, and any
leasehold improvements to the Premises in excess of the Tenant Finish
Allowance, if any, provided pursuant to the Workletter in an amount not
less than the full replacement cost. Property forms will provide coverage
on a broad form basis insuring against "all risks of direct physical
loss." All policy proceeds will be used for the repair or replacement of
the property damaged or destroyed; however, if this Lease ceases under the
provisions of Article 18, Tenant will be entitled to any proceeds
resulting from damage to Tenant's furniture and fixtures, machinery,
equipment, stock, and any other personal property;
(c) Worker's compensation insurance insuring against and satisfying Tenant's
obligations and liabilities under the worker's compensation laws of the
state in which the Premises are located, including employer's liability
insurance in the limits required by the laws of the state in which the
Project is located; and
(d) Owned, hired, or nonowned comprehensive automobile liability at a limit of
liability not less than $3,000,000 combined bodily injury and property
damage per occurrence.
If Tenant fails to obtain or maintain any insurance required hereunder,
Landlord shall have the option, without assuming any obligation in connection
therewith, to effect such insurance at the sole cost of the Tenant and all
outlays by Landlord shall be reimbursed by Tenant to landlord as Additional
Rent.
6.3 FORMS OF POLICIES. Certificates of insurance, together with copies of the
endorsements, when applicable, naming Landlord and any others specified by
Landlord as additional insureds, will be delivered to Landlord prior to
Tenant's occupancy of the Premises and from time to time at least 10 days
prior to the expiration of the term of each such policy. All commercial
general liability or comparable policies maintained by Tenant will name
Landlord and such other persons or firms as Landlord specifies from time
to time as additional insureds, entitling them to recover under such
policies for any loss sustained by them, their agents, and employees,
including those losses sustained as a result of the negligent acts or
omissions of Tenant. All such policies maintained by Tenant will provide
that they may not be terminated nor may coverage be reduced except after
30 days' prior written notice to Landlord. All commercial general
liability, automobile, and property policies maintained by Tenant will be
written as primary policies, not contributing with and not supplemental to
the coverage that Landlord may carry.
6.4 WAIVER OF SUBROGATION. Landlord and Tenant each waive any and all rights
to recover against the other or against any other Tenant or occupant of
the Project, or against the officers, directors, shareholders, partners,
joint venturers, employees, agents, customers, invitees, or business
visitors of such other party or of such other Tenant or occupant of the
Project, for any loss or damage to such waiving party arising from any
cause covered by any property insurance required to be carried by such
party pursuant to this Article 6 or any other property insurance actually
carried by such party to the extent of the limits of such policy. Landlord
and Tenant from time to time will cause their respective insurers to
issue appropriate waiver of subrogation rights endorsements to all
property insurance policies carried in connection with the Project or the
Premises or the contents of the Project or the Premises. Tenant agrees to
cause all other occupants of the Premises claiming by, under, or through
Tenant to execute and deliver to Landlord such a waiver of claims and to
obtain such waiver of subrogation rights endorsements.
6.5 ADEQUACY OF COVERAGE. Landlord, its agents and employees make no
representation that the limits of liability specified to be carried by
Tenant pursuant to this Article 6 are adequate to protect Tenant. If
Tenant believes that any of such insurance coverage is inadequate, Tenant
shall obtain such additional insurance coverage as Tenant deems adequate,
at Tenant's sole expense.
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Tenant covenants that the Premises will be used only for general business office
purposes and purposes incidental to that use, and for no other purpose. Tenant
will use the Premises in a careful, safe, and proper manner. Tenant will not use
or permit the Premises to be used or occupied for any purpose or in any manner
prohibited by any applicable laws. Tenant will not commit waste or suffer or
permit waste to be committed in, on, or about the Premises. Tenant will conduct
its business and control its employees, agents, and invitees in such a manner as
not to create any nuisance or interfere with, annoy, or disturb any other Tenant
or occupant of the Project or Landlord in its operation of the Project. Tenant
agrees to take possession of and occupy the entire Premises no later than 60
days after the Commencement Date, and Tenant further agrees to continue to
occupy the Premises throughout the remainder of the Term of this Lease until 90
days prior to the Expiration Date.
ARTICLE 8 REQUIREMENTS OF LAW; FIRE INSURANCE
8.1 GENERAL. At its sole cost and expense, Tenant will promptly comply with all
laws, statutes, ordinances, codes, and governmental rules, regulations, or
requirements of federal, state, county, and local governmental authorities
now in force or in force at any given time after the Lease Date, with the
requirements of any board of fire underwriters or other similar body
constituted now or after the Lease Date, with any direction or occupancy
certificate issued pursuant to any law by any public officer or officers,
as well as with the provisions of all recorded documents affecting the
Premises, insofar as they relate to the use or occupancy of the Premises,
excluding requirements of structural changes to the Building, unless
required by the unique nature of Tenant's use or occupancy of the Premises.
8.2 HAZARDOUS MATERIALS.
(a) For purposes of this Lease, "hazardous materials" means any explosives,
radioactive materials, hazardous wastes, or hazardous substances, including
without limitation asbestos containing materials, PCB's, CFC's, or
substances defined as "hazardous substances" in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended,
42 U.S.C. Sections 9601-9657; the Hazardous Materials Transportation Act of
1975, 49 U.S.C. Sections 1801-1812; the Resource Conservation and Recovery
Act of 1976, 42 U.S.C. Sections 6901-6987; or any other federal, state, or
local statute, law, ordinance, code, rule, regulation, order, or decree
regulating, relating to, or imposing liability or standards of conduct
concerning hazardous materials, waste, or substances now or at any time
hereafter in effect (collectively, "hazardous materials laws").
(b) Tenant will not cause or permit the storage, use, generation, release, or
disposition of any hazardous materials in, on, or about the Premises or the
Project by Tenant, its agents, employees, or contractors. Tenant will not
permit the Premises to be used or operated in a manner that may cause the
Premises or the Project to be contaminated by any hazardous materials in
violation of any hazardous materials laws. Tenant will immediately advise
Landlord in writing of (1) any and all enforcement, cleanup, remedial,
removal, or other governmental or regulatory actions instituted, completed,
or threatened pursuant to any hazardous materials laws relating to any
hazardous materials affecting the Premises; and (2) all claims made or
threatened by any third party against Tenant, Landlord, the Premises or the
Project relating to damage, contribution, cost recovery, compensation,
loss, or injury resulting from any hazardous materials on or about the
Premises. Without Landlord's prior written consent, Tenant will not take
any remedial action or enter into any agreements or settlements in response
to the presence of any hazardous materials in, on, or about the Premises.
(c) Tenant will be solely responsible for and will defend, indemnify and hold
Landlord, its agents, and employees harmless from and against all claims,
costs, expenses, damages, and liabilities, including attorneys' fees and
costs, arising out of or in connection with Tenant's breach of its
obligations in this Article 8. Tenant will be solely responsible for and
will defend, indemnify, and hold Landlord, its agents, and employees
harmless from and against any and all claims, costs, and liabilities,
including attorneys' fees and costs, arising out of or in connection with
the removal, cleanup, and restoration work and materials necessary to
return the Premises and any other property of whatever nature located on
the Project to their condition existing prior to the appearance of Tenant's
hazardous materials on the Premises. Tenant's obligations under this
Article 8 will survive the expiration or other termination of this Lease.
(d) Landlord will not cause the unlawful storage, use, generation, release or
disposition of any hazardous materials in, on, or about the Project by
Landlord, its agents, employees or contractors. Landlord will be solely
responsible for and will defend, indemnify and hold Tenant, its agents, and
employees from and against all claims, costs, expenses, damages, and
liabilities, including attorneys' fees and costs, arising out of or in
connection with Landlord's breach of its obligations in this Section
8.2(d). Landlord's obligations under this Page 7 Article 8 will survive the
expiration or other termination of this Lease.
8.3 CERTAIN INSURANCE RISKS. Tenant will not do or permit to be done any act or
thing upon the Premises or the Project which would (a) jeopardize or be in
conflict with fire insurance policies covering the Project and fixtures and
property in the Project; (b) increase the rate of fire insurance applicable
to the Project to an amount higher than it otherwise would be for general
office use of the Project; or (c) subject Landlord to any liability or
responsibility for injury to any person or persons or to property by reason
of any business or operation being carried on upon the Premises. If the
conduct of the Tenant, or any acts or omissions of the Tenant shall cause
or result in any increase in premiums for insurance carried by the
Landlord, whether or not Landlord allows such act or omission to continue,
Tenant shall pay any increase in premium as Additional Rent.
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ARTICLE 9 ASSIGNMENT AND SUBLETTING
9.1 GENERAL. Tenant, for itself, its heirs, distributees, executors,
administrators, legal representatives, successors, and assigns, covenants
and agrees that it will not assign, mortgage, or encumber this Lease, or
sublease, nor or otherwise permit the Premises or any part of the Premises
to be used or occupied by others, without the prior written consent of
Landlord in each instance, which consent will not be unreasonably
withheld. Landlord may condition its consent upon execution by the
subtenant or assignee, as the case may be, of an instrument confirming
the restrictions on further subleasing or assignment contained herein and
joining in the waivers and indemnities made by Tenant hereunder. Any
assignment or sublease in violation of this Article 9 will be void. If
this Lease is assigned, or if the Premises or any part of the Premises are
subleased or occupied by anyone other than Tenant, Landlord may, after any
default by Tenant, collect rent from the assignee, subtenant, or occupant,
and apply the net amount collected to Rent. No assignment, sublease,
occupancy, or collection will be deemed (a) a waiver of the provisions of
this Section 9.1; (b) the acceptance of the assignee, subtenant, or
occupant as Tenant; or (c) a release of Tenant from the further
performance by Tenant of covenants on the part of Tenant contained in this
Lease. The consent by Landlord to an assignment or sublease will not be
construed to relieve Tenant from obtaining Landlord's prior written
consent in writing to any further assignment or sublease. No permitted
subtenant may assign or encumber its sublease or further sublease all or
any portion of its subleased space, or otherwise permit the subleased
space or any part of its subleased space to be used or occupied by others,
without Landlord's prior written consent in each instance. Any assignee
approved by Landlord must assume all of the obligations and duties of
Tenant under this Lease pursuant to an assumption agreement satisfactory
to Landlord of which Landlord is the beneficiary.
9.2 SUBMISSION OF INFORMATION. If Tenant requests Landlord's consent to a
specific assignment or subletting, Tenant will submit in writing to
Landlord (a) the name and address of the proposed assignee or subtenant;
(b) the business terms of the proposed assignment or sublease; (c)
reasonably satisfactory information as to the nature and character of the
business of the proposed assignee or subtenant, and as to the nature of
its proposed use of the space; (d) banking, financial, or other credit
information reasonably sufficient to enable Landlord to determine the
financial responsibility and character of the proposed assignee or
subtenant; (e) the proposed form of assignment (including lease assumption
provisions) or sublease for Landlord's reasonable approval; and (f) any
other information reasonably required by Landlord.
9.3 PAYMENTS TO LANDLORD. If Landlord consents to a proposed assignment or
sublease, then Landlord will have the right to require Tenant to pay to
Landlord a sum equal to (a) any rent or other consideration paid to Tenant
by any proposed transferee that (after deducting the costs of Tenant, if
any, in effecting the assignment or sublease, including reasonable
alterations costs, commissions and legal fees) is in excess of the Rent
allocable to the transferred space then being paid by Tenant to Landlord
pursuant to this Lease; and (b) any other profit or gain (after deducting
any necessary expenses incurred) realized by Tenant from any such sublease
or assignment. All such sums owed to Landlord under 9.3(c), above will be
payable to Landlord at the time the next payment of Monthly Rent is due.
9.4 PROHIBITED TRANSFERS. The transfer of a majority of the issued and
outstanding capital stock of any corporate Tenant or subtenant of this
Lease, or a majority of the total interest in any partnership Tenant or
subtenant, however accomplished, and whether in a single transaction or in
a series of related or unrelated transactions, will be deemed an
assignment of this lease or of such sublease requiring Landlord's consent
in each instance. For purposes of this Article 9, the transfer of
outstanding capital stock of any corporate Tenant will not include any
sale of such stock by persons other than those deemed "insiders" within
the meaning of the Securities Exchange Act of 1934, as amended, effected
through the "over-the-counter market" or through any recognized stock
exchange.
9.5 LANDLORD'S OPTIONS. In the event of a transfer of this Lease or of all or
any part of the Premises by Tenant, Landlord in addition to any rights
contained herein, shall have the following options at its discretion:
(a) to give Tenant written notice of Landlord's intention to terminate
this Lease as to all or any portion of the Premises subject to such
transfer on the date such notice is given or on any later date
specified therein, whereupon, on the date specified in such notice and
all obligations of Tenant hereunder, Tenant's right to possession of
the Premises or such portion of the Premises shall cease and this
Lease shall thereupon be terminated as they relate to all of any
portion of the Premises, except as to any incompleted obligations to
date of tenant; or
(b) to re-enter and take possession of the Premises or the part thereof
subject to such transfer, and to enforce all rights of Tenant, in
accordance with such sublet or assignment of the Premises, or any part
thereof, as if Landlord was the sublessor or assignor, and to do
whatever Tenant is permitted to do pursuant to the terms of such
sublease or assignment. In such event Tenant's obligations hereunder
shall terminate regarding all or such part of the Premises.
9.6 PERMITTED TRANSFER. Landlord consents to an assignment of this Lease or
sublease of all or part of the Premises to a wholly-owned subsidiary of
Tenant or the parent of Tenant or to any corporation into or with which
Tenant may be merged or consolidated; provided that (a) Tenant promptly
provides Landlord with a fully executed copy of such assignment or
sublease; (b) Tenant is not released from liability under this Lease
* Lessor's consent to subsequent subletting & assignments of a sublease or
any amendments or modifications thereto without Tenant's consent, which
shall not be unreasonably withheld, shall relieve Tenant from this lease
or such sublease.
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and (c) the assignee assumes in writing all of the obligations of Tenant under
this Lease.
ARTICLE 10 RULES AND REGULATIONS
Tenant and its employees, agents, licensees, and visitors will at all times
observe faithfully, and comply strictly with, the rules and regulations set
forth in Exhibit D. Landlord may from time to time reasonably amend, delete, or
modify existing rules and regulations, or adopt reasonable new rules and
regulations for the use, safety, cleanliness, and care of the Premises, the
Building, and the Project, and the comfort, quiet, and convenience of occupants
of the Project. Modifications or additions to the rules and regulations will be
effective upon 30 days' prior written notice to Tenant from Landlord. In
the event of any breach of any rules or regulations or any amendments or
additions to such rules and regulations, Landlord will have all remedies that
this Lease provides for default by Tenant, and will in addition have any
remedies available at law or in equity, including the right to enjoin any
breach of such rules and regulations. Landlord will not be liable to Tenant for
violation of such rules and regulations by any other tenant, its employees,
agents, visitors, or licensees or any other person. In the event of any conflict
between the provisions of this Lease and the rules and regulations, the
provisions of this Lease will govern.
ARTICLE 11 COMMON AREAS
As used in this Lease, the term "common areas" means, without limitation, the
entryways, stairs, driveways, roadways, parking areas, walkways, terraces,
docks, loading areas, restrooms, trash facilities, and all other areas and
facilities in the Project that are provided and designated from time to time by
Landlord for the general nonexclusive use and convenience of Tenant with
Landlord and other tenants of the Project and their respective employees,
invitees, licensees, or other visitors. Landlord grants Tenant, its employees,
invitees, licensees, and other visitors a nonexclusive license for the Term to
use the common areas in common with others entitled to use the common areas,
subject to the terms and conditions of this Lease. Without advance written
notice to Tenant, except with respect to matters covered by subsection (a)
below, and without any liability to Tenant in any respect, Landlord will have
the right to:
(a) Close off any of the common areas to whatever extent required in the
opinion of Landlord and its counsel to prevent a dedication of any of the
common areas or the accrual of any rights by any person or the public to
the common areas:
(b) Temporarily close any of the common areas for maintenance, alteration, or
improvement purposes; and
(c) Change the size, use, shape, or nature of any such common areas, including
erecting additional buildings on the common areas, expanding the existing
Building or other buildings to cover a portion of the common areas,
converting common areas to a portion of the Building (excluding the
Premises) or other buildings to common areas. Upon erection of any
additional buildings or change in common areas, the portion of the Project
upon which buildings or other structures have been erected will no longer
be deemed to be a part of the common areas. In the event of any such
changes in the size or use of the Building or common areas of the Building
or Project, Landlord will make an appropriate adjustment in the Rentable
Area of the Building or the Building's pro rata share of exterior common
areas of the Project, as appropriate, and a corresponding adjustment to
Tenant's Share of the operating expenses payable pursuant to Article 5 of
this Lease.
ARTICLE 12 LANDLORD'S SERVICES
12.1 Landlord's Repair and Maintenance. Subject to the condemnation and
casualty provisions contained in this Lease and except as otherwise
expressly provided herein, Landlord will maintain and repair the Premises
and common areas of the Project, including but not limited to lobbies,
stairs, corridors, and restrooms, the windows in the Building, the
mechanical, plumbing and electrical equipment serving the Building, and
the structure of the Building in reasonably good order and condition.
12.2 Landlord's Other Services
(a) Landlord will use a professional property manager, as selected by
Landlord, to manage the Premises and will furnish the Premises with
services, including without limitation (1) electricity for lighting and
the operation of low-wattage office machines (such as desktop
micro-computers, desktop calculators, and typewriters) during Business
Hours, although Landlord will not be obligated to furnish more power to
the Premises than is proportionally allocated to the Premises under the
Building design; (2) heat and air conditioning reasonably required for the
comfortable occupation of the Premises during Business Hours; (3) access
and elevator service; (4) lighting replacement during Business Hours (for
standard lights, but not for any special Tenant lights, which will be
replaced at Tenant's sole cost and expense); (5) restroom supplies; (6)
window washing with reasonable frequency, as determined by Landlord; and
(7) daily cleaning service on weekdays. Landlord will provide any such
services (except items 4-7) on holidays and weekends.
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(b) Tenant will have the right to purchase for use during Business Hours and
non-Business Hours the service described in clauses (a)(1)and (2) in
excess of the amounts Landlord has agreed to furnish so long as Tenant
gives Landlord reasonable prior written notice of its desire to do so;
(2) the excess services are reasonably available to Landlord and to the
Premises; and (3) Tenant pays as Additional Rent (at the time the next
payment of Monthly Rent is due) the cost of such excess service from
time to time charged by Landlord; subject to the procedures established
by Landlord from time to time for providing such additional or excess
services.
12.3 TENANT'S COSTS. Whenever equipment or lighting (other than building
standard lights) is used in the Premises by Tenant and such equipment or
lighting affects the temperature otherwise normally maintained by the
design of the Building's air conditioning system. Landlord will have the
right, after prior written notice to Tenant, to install supplementary air
conditioning facilities in the Premises or otherwise modify the
ventilating and air conditioning system serving the Premises; and the
cost of such facilities, modifications, and additional service will be
paid by Tenant as Additional Rent. If Landlord reasonably believes that
Tenant is using more power than Landlord furnishes pursuant to Section
12.2, Landlord may install separate meters of Tenant's power usage, and
Tenant will pay for the cost of excess power as Additional Rent, together
with the cost of installing any risers, meters, or other facilities that
may be necessary to furnish or measure such excess power to the Premises.
Tenant's computer space will be submetered for electrical consumption.
Submetering installation costs will be debited against Tenant's
allowance. Tenant shall pay for excess power in this area as additional
rent.
12.4 LIMITATION ON LIABILITY. Landlord will not be in default under this Lease
or be liable to Tenant or any other person for direct or consequential
damage, or otherwise, for any failure to supply any heat, air
conditioning, elevator, cleaning, lighting, or security; for surges or
interruptions of electricity; or for interruptions to other services
Landlord has agreed to supply. Landlord will use reasonable efforts to
diligently remedy any interruption in the furnishing of such services.
Landlord reserves the right temporarily to discontinue such services at
such times as may be necessary by reason of accident; repairs,
alterations or improvements; strikes; lockouts; riots; acts of God;
governmental preemption in connection with a national or local emergency;
any rule, order, or regulation of any governmental agency; conditions of
supply and demand that make any product unavailable; Landlord's
compliance with any mandatory governmental energy conservation or
environmental protection program, or any voluntary energy conservation
program at the request of or with consent or acquiescence of Tenant; or
any other happening beyond the control of Landlord. Landlord will not be
liable to Tenant or any other person or entity for direct or
consequential damages resulting from the admission to or exclusion from
the Building or Project of any person. In the event of invasion, mob,
riot, public excitement, strikes, lockouts, or other circumstances
rendering such action advisable in Landlord's sole opinion, Landlord will
have the right to prevent access to the Building or Project during the
continuance of the same by such means as Landlord, in its sole
discretion, may deem appropriate, including without limitation locking
doors and closing parking areas and other common areas. Landlord will not
be liable for damages to person or property or for injury to, or
interruption of, business for any discontinuance permitted under this
Article 12, nor will such discontinuance in any way be construed as an
eviction of Tenant or cause an abatement of Rent or operate to release
Tenant from any of Tenant's obligations under this Lease.
ARTICLE 13 TENANT'S CARE OF THE PREMISES
Tenant will not act or fail to act in a manner causing damage to the Premises
(including Tenant's equipment, personal property, and trade fixtures located in
the Premises) in their condition at the time they were delivered to Tenant,
reasonable wear and tear excluded. Tenant will immediately advise Landlord of
any damage to the Premises or the Project. All damage or injury to the Premises,
the Project, or the fixtures and appurtenances and equipment in the Premises or
the Project that is caused by Tenant, its agents, employees, or invitees and not
covered by insurance may be repaired, restored, or replaced by Landlord at the
expense of Tenant. Such expense (plus 5% of such expense for Landlord's
overhead) will be collectible as Additional Rent and will be paid by Tenant
within 10 days after delivery of a statement for such expense.
ARTICLE 14 ALTERATIONS
14.1 GENERAL.
(a) Tenant will not make or allow to be made any alterations,
additions, or improvements to or of the Premises or any part of
the Premises, or attach any fixtures or equipment to the
Premises, without first obtaining Landlord's written consent. In
no event shall the work of Tenant affect or impair the structure,
the elevators, or utility systems of the Building. Landlord's
approval of the plans, specifications, and working drawings for
Tenant's alterations shall create no responsibility or liability
on the part of the Landlord for their completeness, design
sufficiency, or compliance with all laws, ordinances, rules,
requirements, and regulations of governmental agencies or
authorities, or the use and occupancy permit for the Building. All
such alterations, additions, and improvements consented to by
Landlord, and capital improvements that are required to be made to
the Project as a result of the nature of Tenant's use of the
Premises:
(1) Will be performed by contractors approved by Landlord and subject
to conditions specified by Landlord (which may include requiring
the posting of performance and payment bonds);
(2) At Landlord's option, will be made by Landlord for Tenant's
account, and Tenant will reimburse
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Landlord for their costs (including 5% for Landlord's overhead) within
10 days after receipt of statement of such cost;
(3) Will be done in good and workmanlike manner and shall be completed
promptly.
(4) Shall not cause a loss or diminution of electric power or other
utilities or services to other tenants of Building;
(5) Will be performed according to plans, specifications, and working
drawings approved by Landlord.
(6) Will be in accordance with all applicable federal, state, county and
local laws, rules, regulations, ordinances and codes.
At all times between the start and completion of the work, in addition to
the other policies of insurance required by this Lease, Tenant shall
maintain a policy of "All Risk" Builder's Risk Insurance covering the
replacement value of all work done and fixtures and equipment installed or
to be installed at the Premises pursuant to this Article 14. Tenant
herewith agrees to be responsible for all damages to persons or property
including loss of life, as a result of occurrences connected with
activities undertaken by Tenant, its agents, contractors, and employees
pursuant hereto, and hereby indemnifies Landlord and shall defend and hold
Landlord harmless from and against any and all loss, cost or expense in
connection with its responsibilities hereunder.
(b) Subject to Tenant's rights in Article 16, all alterations, additions,
fixtures and improvements, whether temporary or permanent in
character, made in or upon the Premises either by Tenant or Landlord,
will immediately become Landlord's property and at the end of the Term
will remain on the Premises without compensation to Tenant, unless
Landlord at the time of approval of same advises Tenant in writing
that such alterations, additions, fixtures, or improvements must be
removed at the expiration or other termination of this Lease.
14.2 FREE STANDING PARTITIONS. Tenant will have the right to install
free-standing work station partitions, without Landlord's prior written
consent, so long as no building or other governmental permit is required
for the installation or relocation; however, if a permit is required,
Landlord will not unreasonably withhold its consent to such relocation or
installation. The free-standing work station partitions for which Tenant
pays will be part of Tenant's trade fixtures for all purposes under this
Lease. All other partitions installed in the Premises are and will be
Landlord's property for all purposes under this Lease.
14.3 REMOVAL. If Landlord has required Tenant to remove any or all alterations,
additions, fixtures, and improvements that are made in or upon the Premises
pursuant to this Article 14 prior to the Expiration Date, Tenant will
remove such alterations, additions, fixtures, and improvements at Tenant's
sole cost and will restore the Premises to the condition in which they were
before such alterations, additions, fixtures, improvements, and additions
were made.
ARTICLE 15 MECHANICS' LIENS
Tenant will pay or cause to be paid all costs and charges for work (a) done by
Tenant or caused to be done by Tenant, in or to the Premises, and (b) for all
materials furnished for or in connection with such work. Tenant will indemnify
Landlord against and defend and hold Landlord, the Premises and the Project
free, clear, and harmless of and from all mechanics' liens and claims of liens,
and all other liabilities, liens, claims and demands on account of such work by
or on behalf of Tenant, other than work performed by Landlord pursuant to the
Workletter. If any such lien, at any time, is filed against the Premises or any
part of the Project, Tenant will cause such lien to be discharged of record
within 10 days after the filing of such lien, except that if Tenant desires to
contest such lien, it will furnish Landlord, within such 10-day period, security
reasonably satisfactory to Landlord of at least 150% of the amount of the claim,
plus estimated costs and interest, or comply with such statutory procedures as
may be available to release the lien. If a final judgment establishing the
validity or existence of a lien for any amount is entered, Tenant will pay and
satisfy the same at once. If Tenant fails to pay any charge for which a
mechanics' lien has been filed, and has not given Landlord security as described
above, or has not complied with such statutory procedures as may be available to
release the lien, Landlord may, at its option, pay such charge and related costs
and interest, and the amount so paid, together with reasonable attorneys' fees
incurred in connection with such lien, will be immediately due from Tenant to
Landlord as Additional Rent. Nothing contained in this Lease will be deemed the
consent or agreement of Landlord to subject Landlord's interest in the Project
to liability under any mechanics' or other lien law. If Tenant receives written
notice that a lien has been or is about to be filed against the Premises or the
Project, or that any action affecting title to the Project has been commenced on
account of work done by or for or materials furnished to or for Tenant, it will
immediately give Landlord written notice of such notice. At least 15 days prior
to the commencement of any work (including but not limited to any maintenance,
repairs, alterations, additions, improvements, or installations) in or to the
Premises, by or for Tenant, Tenant will give Landlord written notice of the
proposed work and the names and addresses of the persons supplying labor and
materials for the proposed work. Landlord will have the right to post notices of
nonresponsibility or similar written notices on the Premises in order to protect
the Premises against any such liens.
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ARTICLE 16 END OF TERM
At the end of this Lease, Tenant will promptly quit and surrender the Premises
broom-clean, in good order and repair, ordinary wear and tear excepted and
deliver all keys to the Premises and the Building to Landlord. Tenant is not
then in default, Tenant may remove from the Premises any trade fixtures,
equipment, and movable furniture placed in the Premises by Tenant, whether or
not such trade fixtures or equipment are fastened to the Building; Tenant will
not remove any trade fixtures or equipment without Landlord's prior written
consent if such fixtures or equipment are used in the operation of the
Building, or if the removal of such fixtures or equipment will result in
impairing the structural strength of the Building. Whether or not Tenant is in
default, Tenant will remove such alterations, additions, improvements, trade
fixtures, equipment, and furniture as Landlord has requested in accordance with
Article 14. Tenant will fully repair any damage occasioned by the removal of
any trade fixtures, equipment, furniture, alterations, additions, and
improvements. All trade fixtures, equipment, furniture, inventory, effects,
alterations, additions, and improvements on the Premises after the end of the
Term will be deemed conclusively to have been abandoned and may be
appropriated, sold, stored, destroyed, or otherwise disposed of by Landlord
without notice to Tenant or any other person and without obligation to account
for them. Tenant will pay Landlord for all expenses incurred in connection with
the removal of such property including but not limited to the cost of storage,
and the cost of repairing any damage to the Building or Premises caused by the
removal of such property. Tenant's obligation to observe and perform this
covenant will survive the expiration or other termination of this Lease.
ARTICLE 17 EMINENT DOMAIN
If all of the Premises are taken by exercise of the power of eminent domain (or
conveyed by Landlord in lieu of such exercise) this Lease will terminate on a
date (the "termination date") which is the earlier of the date upon which the
condemning authority takes possession of the Premises or the date on which
title to the Premises is vested in the condemning authority. If more than 25%
of the Rentable Area of the Premises is so taken, Tenant will have the right to
cancel this Lease by written notice to Landlord given within 20 days after the
termination date. If less than 25% of the Rentable Area of the Premises is so
taken, or if the Tenant does not cancel this Lease according to the preceding
sentence, the Monthly Rent will be abated in the proportion of the Rentable
Area of the Premises so taken to the Rentable Area of the Premises immediately
before such taking, and Tenant's Share will be appropriately recalculated. If
25% or more of the Building or the Project is so taken, Landlord may cancel
this Lease by written notice to Tenant given within 30 days after the
termination date. In the event of any such taking, the entire award will be
paid to Landlord, and Tenant will have no right or claim to any part of such
award; however, Tenant will have the right to assert a claim against the
condemning authority in a such or separate action, so long as Landlord's award
is not reduced as a consequence of such claim, for Tenant's costs including but
not limited to relocating expenses and trade fixtures owned by Tenant.
ARTICLE 18 DAMAGE AND DESTRUCTION
(a) If the Premises or the Building is damaged by fire or other insured
casualty, Landlord will give Tenant written notice of the time which will
be needed to repair such damage, as determined by Landlord in its
reasonable discretion, and the election (if any) which Landlord has made
according to this Article 18. Such notice will be given before the 30th day
(the "notice date") after the fire or other insured casualty.
(b) If the Premises or the Building is damaged by fire or other insured
casualty to an extent which may be repaired within 180 days after the
notice date, as reasonably determined by Landlord, Landlord will promptly
begin to repair the damage after the notice date and will diligently pursue
the completion of such repair. In that event this Lease will continue in
full force and effect except that Monthly Rent will be abated on a pro rata
basis from the date of the damage until the date of the completion of such
repairs (the "repair period") based on the proportion of the Rentable Area
of the Premises Tenant is unable to use during the repair period.
(c) If the Premises or the Building is damaged by fire or other insured
casualty to an extent that may not be repaired within 180 days after the
notice date, as reasonably determined by Landlord, then (1) Landlord may
cancel this Lease as of the date of such damage by written notice given to
Tenant on or before the notice date or (2) Tenant may cancel this Lease as
of the date of such damage by written notice given to Landlord within 10
days after Landlord's delivery of a written notice that the repairs cannot
be made within such 180 day period. If neither Landlord nor Tenant so
elects to cancel this Lease, Landlord will diligently proceed to repair the
Building and Premises and Monthly Rent will be abated on a pro rata basis
during the repair period based on the proportion of the Rentable Area of
the Premises Tenant is unable to use during the repair period.
(d) Notwithstanding the provisions of subparagraphs (a), (b), and (c) above, if
the Premises or the Building or the Project are damaged by uninsured
casualty, or if the proceeds of insurance are insufficient to pay for the
repair of any damage to the Premises or the Building or the Project,
Landlord will have the option to repair such damage or cancel this Lease as
of the date of such casualty by written notice to Tenant on or before the
notice date.
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(e) If any such damage by fire or other casualty is the result of the
willful conduct or negligence or failure or act of Tenant, its agents,
contractors, employees, or invitees, there will be no abatement of
Monthly Rent as otherwise provided for in this Article 18. Tenant will
have no rights to terminate this Lease on account of any damage to the
Premises, the Building, or the Project, except as set forth in this
Lease.
(f) For purposes of this Article 18 and subject to subsections (a) thru
(e) hereof, Landlord shall repair or restore any portion of the
alterations, additions or improvements in the Premises or the
decorations thereto to the extent that such alterations, additions,
improvements and decorations were provided by Landlord at the
beginning of the Term. Landlord shall have no further obligations
pursuant to this Lease to repair or restore any alterations, additions
or improvements in the Premises or the decorations thereto. If Tenant
desires any other or additional repairs or restoration and if Landlord
consents thereto, the same shall be done at Tenant's sole cost and
expense. Tenant acknowledges that Landlord shall be entitled to the
full proceeds of any insurance coverage, whether carried by Landlord
or Tenant, to the extent of damage to alterations, additions,
improvements or decorations.
ARTICLE 19 SUBORDINATION
19.1 GENERAL. This Lease and Tenant's rights under this Lease are subject and
subordinate to any ground or underlying lease, mortgage, indenture, deed of
trust, or other lien encumbrance (each a "superior lien"), together with
any renewals, extensions, modifications, consolidations, and replacements
of such superior lien, now or in the future affecting or placed, charged,
or enforced against the Land, the Building, or all or any portion of the
Project or any interest of Landlord in them or Landlord's interest in this
Lease and the leasehold estate created by this Lease (except to the
extent any such instrument expressly provides that this Lease is superior
to such instrument). Notwithstanding the foregoing, Tenant will execute,
acknowledge, and deliver to Landlord, within 20 days after written demand
by Landlord, such documents as may be reasonably requested by Landlord or
the holder of any superior lien to confirm or effect any such subordination
or superiority, as applicable.*
19.2 ATTORNMENT. Tenant agrees that in the event that any holder of a superior
lien succeeds to Landlord's interest in the Premises, Tenant will pay to
such holder all Rent subsequently payable under this Lease. Further, Tenant
agrees that in the event of the enforcement by the holder of a superior
lien of the remedies provided for by law or by such superior lien, Tenant
will, upon request of any person or party succeeding to the interest of
Landlord as a result of such enforcement, automatically become the Tenant
of and attorn to such successor in interest without change in the terms or
provisions of this Lease. Such successor in interest will not be bound by;
(a) Any payment of Rent for more than one month in advance, except prepayments
in the nature of security for the performance by Tenant of its obligations
under this Lease that are actually received by such successor in interest;
(b) Any amendment or modification of this Lease made without the written
consent of such successor in interest (if such consent was required under
the terms of such superior lien);
(c) Any claim against Landlord arising prior to the date on which such
successor in interest succeeded to Landlord's interest; or
(d) Any claim or offset of Rent against the Landlord.
Upon request by such successor in interest, Tenant will, within 20 days
after written demand, execute, acknowledge, and deliver an instrument or
instruments confirming the attornment.
ARTICLE 20 ENTRY BY LANDLORD
Landlord, its agents, employees, and contractors may enter the Premises at any
time in response to an emergency and at any other reasonable time to:
(a) Inspect the Premises;
(b) Exhibit the Premises to prospective purchasers, lenders, or tenants;
(c) Determine whether Tenant is complying with all its obligations in this
Lease;
* So long as the Owner & holder of such superior lien agrees not
to disturb Tenant's right to possession, so long as Tenant is not in
default, after applicable notice and period for cure.
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(d) Supply cleaning service and any other service to be provided by
Landlord to Tenant according to the Lease;
(e) Post written notices of nonresponsibility or similar notices; or
(f) Make repairs required of Landlord under the terms of this Lease or
make repairs to any adjoining space or utility services or make
repairs, alterations, or improvements to any other portion of the
Building.
Tenant, by this Article 20, waives any claim against Landlord, its agents,
employees, or contractors for damage for any injury or inconvenience to or
interference with Tenant's business, any loss of occupancy or quiet enjoyment
of the Premises, or any other loss occasioned by any entry in accordance with
this Article 20. Landlord will at all times have and retain a key with which to
unlock all of the doors in, on, or about the Premises (excluding Tenant's
vaults, safes, and similar areas designated in writing by Tenant in advance).
Landlord will have the right to use any and all means Landlord may deem proper
to open doors in and to the Premises in an emergency in order to obtain entry
to the Premises, provided that Landlord will promptly repair any damages caused
by any forced entry. Any entry to the Premises by Landlord in accordance with
this Article 20 will not be construed or deemed to be a forcible or unlawful
entry into or a detainer of the Premises or an eviction, actual or
constructive, of Tenant from the Premises or any portion of the Premises, nor
will any such entry entitle Tenant to damages or an abatement of Monthly Rent,
Additional Rent, or other charges that this Lease requires Tenant to pay.
ARTICLE 21 INDEMNIFICATION, WAIVER, AND RELEASE
21.1 INDEMNIFICATION. To the extent not prohibited by law, Landlord, its
employees and agents shall not be liable for damage to person, property or
business or resulting from the loss of use thereof sustained by Tenant or
other persons due to the Building or any part thereof becoming out of
repair or due to an accident or due to any act or neglect of any tenant,
occupant or other person.* Tenant further agrees that all personal property
upon the Premises, loading dock, holding areas, and freight elevators shall
be at the sole risk of Tenant. Tenant will neither hold nor attempt to hold
Landlord, its employees, or agents liable for, and Tenant will indemnify
and defend and hold harmless Landlord, its employees, and agents from and
against, any and all demands, claims, causes of action, fines, penalties,
damages (including consequential damages), liabilities, judgments, and
expenses (including without limitation reasonable attorneys' fees) incurred
in connection with or arising from:* unless as a result of Landlord's
intentional act or omissions.
(a) the use or occupancy or manner of use or occupancy of the Premises or
any common areas by Tenant or any person claiming under Tenant;
(b) any activity, work, or thing done or permitted by Tenant in or about
the Premises, the Building, or the Project;
(c) any breach by Tenant or its employees, agents, contractors, or
invitees of this Lease; and
(d) any injury or damage to the person, property, or business of Tenant,
its employees, agents, contractors, or invitees entering upon the
Premises under the express or implied invitation of Tenant.
If any action or proceeding is brought against Landlord, its employees, or
agents by reason of any such claim for which Tenant has indemnified
Landlord, Tenant, upon written notice from Landlord, will defend the same
at Tenant's expense, with counsel reasonably satisfactory to Landlord.
21.2 WAIVER AND RELEASE. Tenant, as a material part of the consideration to
Landlord for this Lease, by this Section 21.2 waives and releases all
claims against Landlord, its employees, and agents with respect to all
matters for which Landlord has disclaimed liability pursuant to the
provisions of this Lease.
ARTICLE 22 SECURITY DEPOSIT There will be no security deposit
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ARTICLE 23 QUIET ENJOYMENT
Landlord covenants and agrees with Tenant (that so long as Tenant pays the Rent
and observes and performs all the terms, covenants and conditions of this Lease
on Tenant's part to be observed and performed, Tenant may peaceably and quietly
enjoy the Premises subject, nevertheless, to the terms and conditions of this
Lease, and Tenant's possession will not be disturbed by anyone claiming by,
through, or under Landlord.
ARTICLE 24 EFFECT OF SALE
A sale, conveyance, or assignment of the Building or the Project will operate to
release Landlord from liability from and after the effective date of such sale,
conveyance, or assignment upon all of the covenants, terms, and conditions of
this Lease, express or implied, except those liabilities that arose prior to
such effective date, and after the effective date of such sale, conveyance, or
assignment. Tenant will look solely to Landlord's successor in interest in and
to this Lease. This Lease will not be affected by any such sale, conveyance or
assignment and Tenant will attorn to Landlord's successor in interest to this
Lease from and after such effective date.
ARTICLE 25 DEFAULT
25.1 EVENTS OF DEFAULT. The following events are referred to, collectively, as
"events of default" or, individually as an "event of default":
(a) Tenant fails to pay any Rent or other monetary obligation when due,
and such failure continues for 5 days after written notice from
Landlord; however, Tenant will not be entitled to more than 1 written
notice for monetary defaults during any 12-month period, and if after
such written notice any Rent is not paid when due, an event of
default will be considered to have occurred without further notice;
(b) Tenant vacates or abandons the Premises;
(c) This Lease or the Premises or any part of the Premises is taken upon
execution or by other process of law directed against Tenant, or is
taken upon or subject to any attachment by any creditor of Tenant or
claimant against Tenant and said attachment is not discharged or
disposed of within 15 days after its levy;
(d) Tenant or any guarantor of Tenant's obligations under this Lease
("Guarantor") files a petition in bankruptcy or insolvency or for
reorganization or arrangement under the bankruptcy laws of the United
States or under any insolvency act of any state, or admits the
material allegations of any such petition by answer or otherwise, or
admits in writing its inability to meet its debts as they mature, or
is dissolved or makes an assignment for the benefit of creditors;
(e) Involuntary proceedings under any such bankruptcy law or insolvency
act or for the dissolution of Tenant or any Guarantor are instituted
against Tenant or Guarantor, or a receiver or trustee is appointed
for all or substantially all of the property of Tenant or any
Guarantor, and such proceeding is not dismissed or such receivership
or trusteeship vacated within 60 days after such institution or
appointment;
(f) Tenant fails to take possession of the Premises on the Commencement
Date of the Term;
(g) Tenant violates the terms of Article 9 "Assignment and Subletting";
(h) Tenant breaches any of the agreements, terms, covenants, or
conditions of this Lease and such breach involves a hazardous
condition and is not cured immediately upon written notice to Tenant;
(i) Tenant breaches any of the other agreements, terms, covenants, or
conditions that this Lease requires Tenant to perform, and such
breach continues for a period of 30 days after written notice from
Landlord to Tenant or, if such breach cannot be cured reasonably
within such 30-day period, if Tenant fails to diligently commence to
cure such breach within 30 days after written notice from Landlord
and to complete such cure within a reasonable time thereafter; or
25.2 LANDLORD REMEDIES. If any one or more events of default set forth in
Section 25.1 occurs then Landlord has the right, at its election:
(a) To give Tenant written notice of Landlord's intention to terminate
this Lease on the earliest date permitted by law or on any later date
specified in such notice, in which case Tenant's right to possession
of the Premises will cease and this Lease will be terminated, except
as to Tenant's liability, as if the expiration
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of the term fixed in such notice were the end of the Term;
(b) Without further demand or notice, and without terminating this
Lease, to reenter and take possession of the Premises or any part of
the Premises, repossess the same, expel Tenant and those claiming
through under Tenant, and remove the effects of both or either,
using such force for such purposes as may be necessary, without
being liable for prosecution, without being deemed guilty of any
manner of trespass and without prejudice to any remedies for arrears
of Monthly Rent or other amounts payable under the Lease or as a
result of any preceding breach of covenants or conditions; or
(c) Without further demand or notice to cure any event of default and to
charge Tenant for the cost of effecting such cure, including without
limitation reasonable attorneys' fees and interest on the amount so
advanced at the rate set forth in Section 27.21, provided that
Landlord will have no obligation to cure any such event of default
of Tenant.
Should Landlord elect to reenter as provided in subsection (b), or should
Landlord take possession pursuant to legal proceedings or pursuant to any
notice provided by law, Landlord may, from time to time, without
terminating this Lease, relet the Premises or any part of the Premises in
Landlord's or Tenant's name, but for the account of Tenant, for such
term or terms (which may be greater or less than the period which would
otherwise have constituted the balance of the Term) and on such
conditions and upon such other terms (which may include concessions of
free rent and alteration and repair of the Premises) as Landlord, in its
reasonable discretion, may determine, and Landlord may collect and
receive the rents from such reletting. Landlord will in no way be
responsible or liable for any failure to relet the Premises, or any part
of the Premises, or for any failure to collect any rent due upon such
reletting. No such reentry or taking possession of the Premises by
Landlord will be construed as an election on Landlord's part to terminate
this Lease unless a written notice of such intention is given to Tenant.
No written notice from Landlord under this Section or under a forcible or
unlawful entry and detainer statute or similar law will constitute an
election by Landlord to terminate this Lease unless such notice
specifically so states. Landlord reserves the right following any such
reentry or reletting to exercise its right to terminate this Lease by
giving Tenant such written notice, in which event this Lease will
terminate as specified in such notice.
25.3 CERTAIN DAMAGES. In the event that Landlord does not elect to terminate
this Lease as permitted in Section 25.2(a), but on the contrary elects to
take possession as provided in Section 25.2(b), Tenant will pay to
Landlord Monthly Rent and other sums as provided in this Lease that would
be payable under this Lease if such repossession had not occurred, less
the net proceeds, if any, of any reletting of the Premises after
deducting all of Landlord's reasonable expenses in connection with such
reletting, including without limitation all repossession costs, brokerage
commissions, attorneys' fees, expenses of employees, alteration and
repair costs, and expenses of preparation for such reletting. Tenant will
pay such Rent and other sums to Landlord monthly on the day on which the
Monthly Rent would have been payable under this Lease if possession had
not been retaken, and Landlord will be entitled to receive such Rent and
other sums from Tenant on each such day.
25.4 CONTINUING LIABILITY AFTER TERMINATION. If this Lease is terminated on
account of the occurrence of an event of default, Tenant will remain
liable to Landlord for damages in an amount equal to the Rent and other
amounts that would have been owing by Tenant for the balance of the Term,
had this Lease not been terminated, less the net proceeds, if any, of any
reletting of the Premises by Landlord subsequent to such termination,
after deducting all of Landlord's expenses in connection with such
reletting, including without limitation the expenses enumerated in
Section 25.3. Landlord will be entitled to collect such damages from
Tenant monthly on the day on which Monthly Rent and other amounts would
have been payable under this Lease if this Lease had not been terminated,
and Landlord will be entitled to receive such Monthly Rent and other
amounts from Tenant on each such day. Alternatively, at the option of
Landlord, in the event this Lease is so terminated, Landlord will be
entitled to recover against Tenant as damages for loss of the bargain and
not as a penalty:
(a) The worth at the time of award of the unpaid Rent that had been
earned at the time of termination;
(b) The worth at the time of award of the amount by which the unpaid
Rent that would have been earned after termination until the time
of award exceeds the amount of such rental loss that Tenant proves
could have been reasonably avoided;
(c) The worth at the time of award of the amount by which the unpaid
Rent for the balance of the Term of this Lease (had the same not
been so terminated by Landlord) after the time of award exceeds the
amount of such rental loss that Tenant proves could be reasonably
avoided;
(d) Any other amount necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure to perform its
obligation under this Lease or which in the ordinary course of
things would be likely to result therefrom.
The "worth at the time of award" of the amounts referred to in clauses
(a) and (b) above is computed by
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adding interest at the per annum interest rate described in Section 27.21
on the date on which this Lease terminated from the date of termination
until the time of the award. The "worth at the time of award" of the amount
referred to in clause (c) above is computed by discounting such amount at
the discount rate of the Federal Reserve Bank of New York, New York, at the
time of award plus 1%.
25.5 CUMULATIVE REMEDIES. Any suit or suits for the recovery of the amounts and
damages set forth in Sections 25.3 and 25.4 may be brought by Landlord,
from time to time, at Landlord's election, and nothing in the Lease will
be deemed to require Landlord to await the date upon which this Lease or
the Term would have expired had there occurred no event of default. Each
right and remedy provided for in this Lease is cumulative and is in
addition to every other right or remedy provided for in this Lease or now
or after the Lease Date existing at law or in equity or by statute or
otherwise, and the exercise or beginning of the exercise by Landlord of any
one or more of the rights or remedies provided for in this Lease or now or
after the Lease Date existing at law or in equity or by statute or
otherwise will not preclude the simultaneous or later exercise by Landlord
of any or all other rights or remedies provided for in this Lease or now or
after the Lease Date existing at law or in equity or by statute or
otherwise. All costs incurred by Landlord in collecting any amounts and
damages owing by Tenant pursuant to the provisions of this Lease or to
enforce any provisions of this Lease, including reasonable attorneys' fees
from the date any such matter is turned over to any attorney, whether or
not one or more actions are commenced by Landlord, will also be recoverable
by Landlord from Tenant. Notwithstanding the foregoing, Landlord waives any
right, whether statutory or otherwise, to a lien against Tenant's personal
property.
25.6 WAIVER OF REDEMPTION. Tenant waives any right of redemption arising as a
result of Landlord's exercise of its remedies under this Article 25.
ARTICLE 26 PARKING
Tenant will be entitled to use the parking spaces at the Premises and at 2309
Renard Place, SE and The Hampton Inn site during the Term subject to the rules
and regulations set forth in Exhibit D, and any amendments or additions to
them.
Neither Landlord nor any operator of the parking areas within the Project, as
the same are designated and modified by Landlord, in its sole discretion, from
time to time (the "parking areas") will be liable for loss of or damage to any
vehicle or any contents of such vehicle or accessories to any such vehicle, or
any property left in any of the parking areas, resulting from fire, theft,
vandalism, accident, conduct or other users of the parking areas and other
persons, or any other casualty or cause. Further, Tenant understands and agrees
that: (a) Landlord will not be obligated to provide any traffic control,
security protection or operator for the parking areas; (b) Tenant uses the
parking areas at its own risk; and (c) Landlord will not be liable for personal
injury or death, or theft, loss of, or damage to property. Tenant waives and
releases Landlord from any and all liability arising out of the use of the
parking areas by Tenant, its employees, agents, invitees, and visitors, whether
brought by any of such persons or any other person.
Tenant's right to use the parking areas will be in common with other tenants of
the Project and 2309 Renard, The Hampton Inn with other parties permitted by
Landlord to use the parking areas. Landlord has granted Brown & Root the right
to park up to 12 vehicles at the far East section of the parking lot. Landlord
will designate five (5) visitors spaces directly in front of the building entry
at 2309 Renard Place, SE. Landlord will not be liable to Tenant for any
unavailability of Tenant's designated spaces, if any, nor will any
unavailability entitle Tenant to any refund, deduction, or allowance. Tenant
will not park in any numbered space or any space designated as: HANDICAPPED,
VISITORS ONLY, LIMITED TIME PARKING (or similar designation). If the parking
areas are damaged or destroyed, or if the use of the parking areas is limited or
prohibited by any governmental authority, or the use or operation of the parking
areas is limited or prevented by strikes or other labor difficulties or other
causes beyond Landlord's control, Tenant's inability to use the parking spaces
will not subject Landlord or any operator of the parking areas to any liability
to Tenant and will not relieve Tenant of any of its obligations under the Lease
and the Lease will remain in full force and effect.
Tenant has no right to assign or sublicense any of its rights in the parking
spaces, except at part of a permitted assignment or sublease of the Lease.
ARTICLE 27 MISCELLANEOUS
27.1 NO OFFER. Submission of the Lease to Tenant is for examination and shall
not bind Landlord in any manner. No lease or obligations of Landlord shall
arise until this instrument is signed by both Landlord and Tenant and
delivery is made to each; provided, however, the execution and delivery by
Tenant of this Lease to Landlord or Landlord's agent shall constitute an
irrevocable offer by Tenant to lease the Premises on the terms and
conditions herein contained, which offer may not be withdrawn or revoked
for 15 days after such execution and delivery.
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27.2 JOINT AND SEVERAL LIABILITY. If Tenant is composed of more than one
signatory in this Lease, each signatory will be jointly and severally
liable with each other signatory for payment and performance according to
this Lease. The act of, written notice to, written notice from, refund to,
or signature of a signatory to this Lease (including without limitation
modifications of this Lease made by fewer than all such signatories) will
bind every other signatory as though every other signatory had so acted,
or received or given the written notice or refund, or signed.
27.3 NO CONSTRUCTION AGAINST DRAFTING PARTY. Landlord and Tenant acknowledge
that each of them and the counsel have had an opportunity to review this
Lease and that this Lease will not be construed against Landlord merely
because Landlord has prepared it.
27.4 TIME OF THE ESSENCE. Time is of the essence of each and every provision of
this Lease.
27.5 NO RECORDATION. Tenant's recordation of this Lease or any memorandum or
short form of it will be void and an event of default under this Lease.
Tenant shall, at the request of Landlord, execute a short-form lease and
have it properly acknowledged for the purpose of recording. The cost of
recording such short form lease shall be borne by Landlord.
27.6 NO WAIVER. No waiver by Landlord of any agreement, condition or provision
contained in this Lease will be valid or binding unless expressed in
writing and signed by Landlord. The waiver by Landlord of any agreement,
condition, or provision contained in this Lease will not be deemed to be a
waiver of any subsequent breach of the same or any other agreement,
condition, or provision contained in this Lease, nor will any custom or
practice that may grow up between the parties in the administration of the
terms of this Lease be construed to waive or to lessen the right of
Landlord to insist upon the performance by Tenant in strict accordance
with the terms of this Lease. The subsequent acceptance of Rent by
Landlord will not be deemed to be a waiver of any preceding breach by
Tenant of any agreement, condition, or provision of this Lease, other than
the failure of Tenant to pay the particular Rent so accepted, regardless
of Landlord's knowledge of such preceding breach at the time of acceptance
of such Rent.
27.7 LIMITATION ON RECOURSE. Tenant specifically agrees to look solely to
Landlord's interest in the Project for the recovery of any judgments from
Landlord. It is agreed that Landlord (and its agents, shareholders,
venturers, and partners, and their shareholders, venturers, and partners
and all of their officers, directors, and employees) will not be
personally liable for any such judgments.
27.8 ESTOPPEL CERTIFICATES. At any time and from time to time but within 15
days after prior written request by Landlord, Tenant will execute,
acknowledge, and deliver to Landlord or such other person as Landlord
shall direct, promptly upon request, a certificate in a form
substantially similar to a form provided by Landlord certifying (a) that
this Lease is unmodified and in full force and effect or, if there have
been modifications, that this Lease is in full force and effect, as
modified, and stating the date and nature of each modification; (b) the
date, if any, to which Rent and other sums payable under this Lease have
been paid; (c) that no written notice of any default has been delivered to
Landlord which default has not been cured, except as to defaults specified
in said certificate; (d) that the Tenant has no knowledge of and that
there is no event of default under this Lease or any event which, with
notice or the passage of time, or both, would result in an event of
default under this Lease, except for defaults specified in said
certificate; and (e) such other matters as may be reasonably requested by
Landlord. Any such certificate may be relied upon by any prospective
purchaser or existing or prospective mortgagee or beneficiary under any
deed of trust of the Building or any part of the project. Tenant's failure
to deliver such a certificate within such time will be conclusive
evidence of the matters set forth in it, and such failure shall be an
event of default.
27.9 ATTORNEYS' FEES. If Landlord and Tenant litigate any provision of this
Lease or the subject matter of this Lease, the unsuccessful litigant will
pay to the successful litigant all costs and expenses, including
reasonable attorneys' fees and court costs, incurred by the successful
litigant at trial and on any appeal. If, without fault, either Landlord or
Tenant is made a party to any litigation instituted by or against the
other, the other will indemnify the faultless one against all loss,
liability, and expense, including reasonable attorneys' fees and court
costs, incurred in connection with such litigation.
27.10 NO MERGER. The voluntary or other surrender of this Lease by Tenant or
the cancellation of this Lease by mutual agreement of Tenant and Landlord
or the termination of this Lease on account of Tenant's default will not
work a merger, and will, at Landlord's option, (a) terminate all or any
sublease and subtenancies or (b) operate as an assignment to Landlord of
all or any subleases or subtenancies. Landlord's option under this Section
27.10 will be exercised by written notice to Tenant and all known
sublessees or subtenants in the Premises or any part of the Premises.
27.11 HOLDING OVER. Tenant will have no right to remain in possession of all or
any part of the Premises after the expiration of the Terms and the Renewal
Term, if Tenant renews the Lease as provided herein and Landlord may, at
its option, re-enter and take possession of the Premises, reserving its
rights to collect damages sustained by reason of Tenant's unlawful
retention of possession of the Premises or any part thereof. If Tenant
remains in possession of all or any part of the Premises after the
expiration of the Term, with the express written consent of Landlord: (a)
such tenancy will be deemed
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to be a periodic tenancy from month-to-month only; (b) such tenancy
will not constitute a renewal extension of this Lease for any further
term; and (c) such tenancy may be terminated by Landlord upon the
earlier of 30 days' prior written notice or the earliest date
permitted by law. In such event, Monthly Rent will be increased to an
amount equal to 140% of the Monthly Rent payable during the last month
of the Term, and any other sums due under this Lease will be payable
in the amount and at the time specified in this Lease. During such
month-to-month tenancy, Tenant will observe every other term,
condition, and covenant contained in this Lease.
27.12 NOTICES. Any notice, request, demand, consent, approval, or other
communication required or permitted under this Lease must be in
writing and will be deemed to have been given when personally
delivered, sent by facsimile with delivery acknowledged by the sending
machine, deposited with any nationally recognized overnight carrier
that routinely issues receipts, or deposited in any depository
regularly maintained by the United States Postal Service, postage
prepaid, certified mail, return receipt requested, addressed to the
party for whom it is intended at its address(es) set forth in Section
1.1. Either Landlord or Tenant may add additional addresses or change
its address for purposes of receipt of any such communication by
giving [illegible] days' prior written notice of such change to the
other party in the manner prescribed in this Section 27.12.
27.13 SEVERABILITY. If any provision of this Lease proves to be illegal,
invalid, or unenforceable, the remainder of this Lease will not be
affected by such finding, and in lieu of each provision of this Lease
that is illegal, invalid, or unenforceable a provision shall be deemed
added as a part of this Lease as similar in terms to such
illegal, invalid, or unenforceable provision as may be possible and be
legal, valid, and enforceable.
27.14 WRITTEN AMENDMENT REQUIRED. No amendment, alteration, modification of,
or addition to the Lease will be valid or binding unless expressed in
writing and signed by Landlord and Tenant. Tenant agrees to make any
modifications of the terms and provisions of this Lease required or
requested by any lending institution providing financing for the
Building, or Project, as the case may be, provided that no such
modifications will materially adversely affect Tenant's rights and
obligations under this Lease.
27.15 ENTIRE AGREEMENT. This Lease, the exhibits and addenda, if any,
contain the entire agreement between Landlord and Tenant. No promises
or representations, except as contained in this Lease, have been made
to Tenant respecting the condition or the manner of operating the
Premises, the Building, or the Project.
27.16 CAPTIONS. The captions of the various articles and sections of this
Lease are for convenience only and do not necessarily define, limit,
describe, or construe the contents of such articles or sections.
27.17 NOTICE OF LANDLORD'S DEFAULT. In the event of any alleged default in
the obligation of Landlord under this Lease, Tenant will deliver to
Landlord written notice listing the reasons for Landlord's default and
Landlord will have 30 days following receipt of such notice to cure
such alleged default or, in the event the alleged default cannot
reasonably be cured within a 30-day period, to commence action and
proceed diligently to cure such alleged default. A copy of such notice
to Landlord will be sent to any holder of a mortgage or other
encumbrance on the Building or Project of which Tenant has been
notified in writing, and any such holder will also have an additional
like period to cure such alleged default.
27.18 AUTHORITY. Tenant and the party executing this Lease on behalf of
Tenant represent to Landlord that such party is authorized to do so by
requisite action of the board of directors or partners, as the case
may be, and agree upon request to deliver to Landlord a resolution or
similar document to that effect.
27.19 BROKERS. Landlord and Tenant represent and warrant that they have not
consulted or negotiated with any broker, finder or agent with regard
to the Premises except the broker(s) named in Section 1.1. Each agrees
to hold the other harmless and indemnify the other against all costs,
expenses, attorney's fees, or other liability for commissions or other
compensation or charges claimed by any broker, finder or agent
claiming the same by, through or under it and such indemnity shall
survive the expiration or earlier termination of this Lease.
27.20 GOVERNING LAW. This Lease will be governed by and construed pursuant
to the laws of the state in which the Project is located.
27.21 LATE PAYMENTS. Any Rent or other monetary obligation due Landlord that
is not paid within 10 days when due will accrue interest at a rate of
the Prime Rate plus 5% per annum (but in no event in an amount in
excess of the maximum rate allowed by applicable law) from the date on
which it was due until the date on which it is paid in full with
accrued interest. In addition to the foregoing, Tenant shall pay to
Landlord a late charge of 5% of the amount due.
27.22 NO EASEMENTS FOR AIR OR LIGHT. Any diminution or shutting off of
light, air, or view by any structure that may be erected on lands
adjacent to the Building will in no way affect this Lease or impose
any liability on Landlord.
27.23 TAX CREDITS. Landlord is entitled to claim all tax credits and
depreciation attributable to leasehold
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improvements in the Premises. Promptly after Landlord's demand, Landlord
and Tenant will prepare a detailed list of the leasehold improvements and
fixtures and their respective costs for which Landlord Tenant has paid.
Landlord will be entitled to all credits and depreciation for those items
for which Landlord has paid by means of any Tenant finish allowances or
otherwise. Tenant will be entitled to any tax credit and depreciation for
all items for which Tenant has paid with funds not provided by Landlord.
27.24
27.25 FINANCIAL REPORTS. Within 15 days after Landlord's request, Tenant will
furnish Tenant's most recent audited financial statements (including any
notes to them) to Landlord, or, if no such audited statements have been
prepared, such other financial statements (and notes to them) as may have
been prepared by an independent certified public accountant or, failing
those, Tenant's internally prepared financial statements. Tenant will
discuss its financial statements with Landlord and will give Landlord
access to Tenant's books and records in order to enable Landlord to
verify the financial statements. Landlord will not disclose any aspect of
Tenant's financial statements that Tenant designates to Landlord as
confidential except (a) to Landlord's lenders or prospective purchasers
of the Project, (b) in litigation between Landlord and Tenant and (c) if
required by court order or subpoena.
27.26 LANDLORD'S FEES. Whenever Tenant requests Landlord to take any action or
give any consent required or permitted under this Lease, Tenant will
reimburse Landlord for all of Landlord's reasonable costs incurred in
reviewing the proposed action or consent, including without limitation
engineers' or architects' fees, within 10 days after Landlord's delivery
to Tenant of a statement of such costs. Tenant will be obligated to make
such reimbursement without regard to whether Landlord consents to any
such proposed action.
27.27 BINDING EFFECT. The covenants, conditions, and agreements contained in
this Lease will bind and inure to the benefit of Landlord and Tenant and
their respective heirs, distributees, executors, administrators,
successors, and, except as otherwise provided in this Lease, their
assigns.
27.28 TERMS. The necessary grammatical changes required to make the provisions
hereof apply either to corporations, partnerships, or individuals, men or
women, as the case may be, shall in all cases be assumed as though in
each case fully expressed.
27.29 DEFINITION OF LANDLORD. All indemnities, covenants and agreements of
Tenant contained herein which inure to the benefit of Landlord shall be
construed to also inure to the benefit of Landlord's beneficiaries and
their partners, agents and employees and employees of their agents.
27.30 RIGHTS CUMULATIVE. All rights and remedies of Landlord under this Lease
shall be cumulative and none shall exclude any other rights and remedies
allowed by law.
27.31 CHANGE OF BUILDING NAME. Landlord shall not name the Building after a
competitor of RDD
27.32 FORCE MAJEURE. When a period of time is herein prescribed for any action
to be taken by Landlord, Landlord shall not be liable or responsible for,
and there shall be excluded from the computation for any such period of
time, any delays due to strikes, riots, acts of God, shortages of labor
or materials, war, regulations or restrictions or any other causes of any
kind whatsoever which are beyond the control of Landlord.
27.33 THIRD PARTY BENEFICIARY. It is specifically understood and agreed that no
person shall be a third party beneficiary hereunder, and that none of the
provisions of this Lease shall be for the benefit of or be enforceable by
anyone other than the parties hereto, and that only the parties hereto
and their permitted assignees shall have rights hereunder.
27.34 NO JOINT VENTURE. Landlord and Tenant are not and shall not be deemed to
be, for any purpose, partners or joint venturers with each other.
27.35 REMEDIES. If Tenant believes that Landlord has unreasonably withheld its
consent in any instance in connection with this Lease, Tenant's sole
remedy will be to seek a declaratory judgment that Landlord has
unreasonably withheld its consent or any order of specific performance or
mandatory injunction in
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connection with Landlord's agreement to give its consent, and Tenant
shall not be entitled to make xxxxxxx for, and hereby expressly waives,
any claim for damages by reason of Landlord withholding its conxxxxx
27.36 WAIVER OF JURY TRIAL. LANDLORD AND TENANT BY THIS SECTION 27.36 WAIVE
TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY
EITHER OF THE PARTIES TO THIS LEASE AGAINST THE OTHER ON ANY MATTERS
WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS LEASE, THE
RELATIONSHIP LANDLORD AND TENANT, TENANT'S USE OR OCCUPANCY OF THE
PREMISES, OR ANY OTHER CLAIMS (EXCEPT CLAIMS FOR PERSONAL INJURY OR
PROPERTY DAMAGE), AND ANY EMERGENCY STATUTORY OR ANY OTHER STATUTORY
REMEDY.
Landlord and Tenant have executed this Lease as of the day and year first above
written.
Tenant: REILLY DIKE DOSHER CORPORATION Landlord: MBL LIFE ASSURANCE CORPORATION
------------------------------ ------------------------------
------------------------------
By: /s/ LAWRENCE S. DIKE By: [SIGNATURE ILLEGIBLE]
---------------------------------- ------------------------------------
Name: Lawrence S. Dike Name: [ILLEGIBLE]
-------------------------------- ----------------------------------
Title: Vice-President, Secretary Title: VP
------------------------------- ---------------------------------
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THE PREMISES
[DIAGRAM]
FIRST FLOOR PLAN
NEWPORT OFFICE BUILDING 6
A-4
[DIAGRAM]
SECOND FLOOR PLAN
NEWPORT OFFICE BUILDING 6
A-5
<PAGE> 25
EXHIBIT B
LEGAL DESCRIPTION OF THE LAND
Tract 1-A-2, a replat of Tract 1-A, Newport Industrial Park West, Unit 2,
containing 1.6747 acres M/L
<PAGE> 26
WORKLETTER
This Workletter is dated September 6, 1995, between MBL Life Assurance
Corporation ("Landlord") and Reilly Dike Dosher Corporation ("Tenant").
RECITALS
This Workletter is attached to and forms a part of that certain office lease
dated September 29, 1995 ("Lease"), pursuant to which Landlord has leased to
Tenant office space in the Building.
Tenant requests and Landlord agrees to make certain improvements to the
Premises, prior to occupancy, upon the terms and conditions contained in this
Workletter.
1. DEFINITIONS. In this Workletter, some defined terms are used. They are:
(a) TENANT'S REPRESENTATIVE: Brad Stamets
(b) LANDLORD'S REPRESENTATIVE: Trudy E. Jones
(c) TENANT'S FINISH ALLOWANCE: Not to exceed $10.00 per rentable square
foot (non-cash), which equals $250,500.00 and is to be applied by
Landlord to the cost of the improvements.
(d) PROGRAMMING INFORMATION: Information provided by Tenant, including the
nature of the Tenant's business, manner of operation, number and types
of rooms, special equipment and functional requirements, anticipated
growth, interactions among groups, and any other programming
requirements the Tenant may have.
(e) PROGRAMMING INFORMATION SUBMISSION DATE: September 29, 1995, the date
Tenant will submit to Landlord the Programming Information necessary
for the preparation of the space plan.
(f) FINAL SPACE PLAN: A drawing of the Premises clearly showing the layout
and relationship of all departments and offices, depicting partitions,
door locations, types of electrical/data/telephone outlets, and
delineation of furniture and equipment as approved by Tenant.
(g) ESTIMATED CONSTRUCTION COST: A preliminary estimate of the costs of
the improvements that are depleted on the Final Space Plan, including
all architectural, engineering, contractor, and any other costs as can
be determined from the Final Space Plan.
(h) WORKING DRAWINGS: Construction documents detailing the improvements,
complete in form and content and containing sufficient information and
detail to allow for competitive bidding or negotiated pricing by
contractor(s) selected and engaged by Landlord.
(i) CONSTRUCTION SCHEDULE: A schedule depicting the relative time frames
for various activities related to the construction of the improvements
in the Premises.
(j) TENANT COST PROPOSAL: A final estimate of costs of the improvements
that are depicted on the Working Drawings, including all
architectural, engineering, contractor, and any other costs, and
clearly indicating the dollar amount, if any, that is to be paid by
Tenant pursuant to paragraph 7.
(k) MAXIMUM APPROVED COST: The sum of the Tenant Finish Allowance and any
additional amount that Tenant has agreed to pay for the Improvements
to the Premises.
(l) IMPROVEMENTS: The work is inclusive of the following:
(1) The development of space plans and working drawings, including
supporting engineering studies (i.e., structural design or
analysis, lighting or acoustical evaluations, or other as
determined by Landlord's architect);
(2) All construction work necessary to augment the Base Building,
creating the details and partitioning as shown on the Final Space
Plan. The work will create finished ceilings, walls, and floor
surfaces, as well as complete HVAC, lighting, electrical, and
fire protection systems, including any upgrade of the building's
electrical capacity, if necessary to support Tenant's computer
facility.
The Improvements will NOT include personal property items, such as
decorator items or services, artwork, plants, furniture, equipment, or
other fixtures not permanently affixed to the Premises.
(m) COST OF THE IMPROVEMENTS: The cost includes but is not limited to the
following:
<PAGE> 27
(1) All architectural and engineering fees and expenses;
(2) All contractor and construction manager costs and fees:
(3) All permits and taxes;
(n) CHANGE ORDER: Any change, modification, or addition to the Final Space
Plan or Working Drawings after Tenant has approved the same.
(o) BASE BUILDING: Those elements of the core and shell construction that
are completed in preparation for the Improvements to the Premises.
This includes Building structure, envelope, and systems as indicated
on Schedule 1. "Base Building Definition," attached hereto. This
defines the existing conditions to which Improvements are added.
(p) BUILDING STANDARD: Component elements utilized in the design and
construction of the Improvements that have been pre-selected by the
Landlord to ensure uniformity of quality, function, and appearance
throughout the Building. These elements include but are not limited to
ceiling systems, doors, hardware, walls, floor coverings, finishes,
window coverings, light fixtures, and HVAC components. A list of
Building Standard elements is attached hereto as Schedule 2.
(q) Other capitalized terms not defined herein shall have the same meaning
as defined in the Lease.
2. REPRESENTATIVES. Landlord appoints Landlord's Representative to act for
Landlord in all matters associated with this Workletter. Tenant appoints
Tenant's Representative to act for Tenant in all matters associated with
this Workletter. All inquiries, requests, instructions, authorizations, and
other communications with respect to the matters covered by this Workletter
will be made to Landlord's Representative or Tenant's Representative, as
the case may be. Tenant will not make any inquiries of or requests to, and
will not give any instructions or authorizations to, any employee or agent
of Landlord, including, without limitation, Landlord's architect,
engineers, and contractors or any of their agents of employees, with regard
to matters associated with this Workletter. Either party may change its
representative under this Workletter at any time by providing 3 days prior
written notice to the other party.
3. PROJECT DESIGN AND CONSTRUCTION. All work will be performed by designers
and contractors selected and engaged by Landlord, except as set forth in
Addendum to Lease.
4. COST RESPONSIBILITIES.
(a) LANDLORD: Landlord will pay up to the amount of the Tenant Finish
Allowance for the cost of the Improvements.
(b) TENANT: Tenant will pay for:
(1) Tenant-initiated changes to the Final Space Plan or Working Drawings
after Tenant's approval in the amount and to the extent such changes
result in costs exceeding the Tenant finish allowance.
(2) Tenant-initiated Change Orders, modifications, or additions to the
Improvements after Tenant's approval of the Working Drawings; in the
amount and to the extent such changes result in costs exceeding the
Tenant finish allowance.
(3) All costs in excess of the Tenant Finish Allowance that are not
included in (1) or (2) immediately above.
(5) Tenant will not be entitled to any credit for any portion of the
Tenant Finish Allowance which is not used.
Landlord's Approval. Landlord, in its sole discretion, may withhold its
approval of any space plan, Working Drawings, or Change Order that:
(a) Exceeds or adversely affects the structural integrity of the Building,
or any part of the heating, ventilating, air conditioning, plumbing,
mechanical, electrical, communication, or other systems of the
Building;
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(g) Does not conform to applicable building code or is not approved by any
governmental, quasi-governmental, or utility authority with
jurisdiction over the Premises; or
6. SCHEDULE OF IMPROVEMENT ACTIVITIES.
(a) On or before the Programming Information Submission Date, Tenant will
cooperate with and submit to Landlord the Programming Information
necessary for Landlord's architect to prepare the proposed space plan.
(b) Landlord's architect will expeditiously prepare a space plan and
forward it to Tenant. Tenant will give Landlord written notice whether
or not Tenant approves the proposed space plan within 5 days after its
receipt. If Tenant's notice objects to the proposed space plan, the
notice will set forth how the proposed space plan is inconsistent with
the Programming Information and how the proposed space plan must be
changed in order to overcome Tenant's objections. Landlord will
resubmit a revised space plan to Tenant and it will be treated as
though it was the first proposed space plan prepared pursuant to this
paragraph.
(c) After Tenant approval of the Final Space Plan, Landlord will promptly
cause to be prepared, a preliminary estimate of the cost of the
Improvements as set forth in the final space plan (the "Estimated
Construction Cost"). If the Estimated Construction Cost is less than
the Tenant Finish Allowance, the Estimated Construction Cost will be
deemed approved without a required response from the Tenant. If the
Estimated Construction Cost is more than the Tenant Finish Allowance,
Landlord will so notify Tenant in writing and Tenant will establish
the Maximum Approved Cost by either:
(1) Agreeing in writing to pay the amount by which the Estimated
Construction Cost exceeds the Tenant Finish Allowance; or
(2) Agreeing to have the Final Space Plan revised by Landlord's
architect in order to assure that the Estimated Construction
Cost is either:
(A) No more than the Tenant Finish Allowance; or
(B) Exceeds the Tenant Finish Allowance by an amount which
Tenant agrees to pay pursuant to clause (1) immediately
above.
Tenant shall give immediate attention to establishing the Maximum
Approved Cost by responding to Landlord within 2 business days. Upon
Tenant's timely fulfillment of its obligations in either clause (1)
or clause (2) immediately above, the Maximum Approved Cost will be
established.
(d) Upon establishment of the Maximum Approved Cost, Landlord will cause
to be prepared and delivered to Tenant the Working Drawings, the
Construction Schedule, and the Tenant Cost Proposal for the
improvements in accordance with the Final Space Plan. If the Tenant
Cost Proposal is less than the Maximum Approved Cost, Landlord will
take steps necessary to commence construction of the Improvements to
the Premises.
If the Tenant Cost Proposal is more than the Maximum Approved Cost,
Landlord will so notify Tenant in writing and Tenant will either (1)
agree in writing to pay the amount by which the Tenant Cost Proposal
exceeds the Maximum Approved Cost or (2) request Landlord to revise
the Working Drawings in order to assure that the Tenant Cost Proposal
is no more than the Maximum Approved Cost.
Tenant shall give immediate attention to the cost proposal approval
process and to respond to Landlord within 3 business days.
(e) Following approval of the Working Drawings and the Tenant Cost
Proposal, Landlord will cause application to be made to the
appropriate governmental authorities for necessary approvals and
building permits. Upon receipt of the necessary approvals and
permits, Landlord will begin construction of the Improvements.
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<PAGE> 29
8. CHANGE ORDERS. Tenant may request changes to the Improvements during
construction only by written instructions to Landlord's Representative on
a form approved by Landlord. All such changes will be subject to
Landlord's prior written approval in accordance with paragraph 5. Prior to
commencing any change, Landlord will prepare and deliver to Tenant, for
Tenant's approval, a Change Order setting forth the total cost of such
change, which will include associated architectural, engineering,
construction contractor's costs and fees, Construction Schedule changes,
and the cost of Landlord's overhead. If Tenant fails to approve such
change order within 5 business days after delivery by Landlord, Tenant
will be deemed to have withdrawn the proposed change and Landlord will not
proceed to perform the change. Upon Landlord's receipt of Tenant's
approval, Landlord will proceed with the change.
9. EARLY ENTRY. Landlord shall permit Tenant and Tenant's employees and
agents to enter the Premises prior to the Commencement Date so that Tenant
may do such other work as may be required to make the Premises ready for
Tenant's use and occupancy. Such entry prior to the Commencement Date
will be upon the condition that Tenant and its employees, agents,
contractors and suppliers shall work in harmony with Landlord and its
employees, agents, contractors and suppliers and will not interfere with
the performance of the work by Landlord or with the work of any other
tenants or occupants in the Building. If at any time such entry shall
cause or threaten to cause such disharmony or interference, Landlord shall
have the right to withdraw such license upon 24 hours written notice to
Tenant. Tenant agrees that any such entry or occupation of the Premises
shall be governed by all of the terms, covenants, conditions and
provisions of the Lease, except the covenant for the payment of Rent, and
further agrees that Landlord shall not be liable in any way for injury,
loss or damage which may occur to any of the Tenant's work or
installations made in such Premises, Building or Project, or to any
personal property placed therein, the same being at Tenant's sole risk.
10. COMPLETION AND COMMENCEMENT DATE. Tenant's obligation for payment of Rent
pursuant to the Lease will commence on the Commencement Date, which shall
be November 15, 1995; however, the Commencement Date and the date for the
payment of Rent may be delayed on a day-by-day basis for each day the
substantial completion of the Improvements* is delayed by Landlord or its
contractors or agents. The payment of Rent will not be delayed by a delay
of substantial completion due to Tenant. The following are some examples
of delays which will not affect the Commencement Date and the date Rent is
to commence under the Lease:
(a) Late submissions of Programming Information;
(b) Change Orders requested by Tenant;
(c) Delays in obtaining non-Building Standard construction materials
requested by Tenant;
(d) Tenant's failure to approve timely any item requiring Tenant's
approval; and
(e) Delays by Tenant according to paragraph 6.
In the event that substantial completion of the Improvements is delayed by
Landlord, its contractors, or agents, the Commencement Date will be the
date of substantial completion of the improvements, subject only to the
completion of Landlord's punch-list items (that is, those items that do
not materially interfere with Tenant's use and enjoyment of the Premises).
Landlord and Tenant will confirm the Commencement Date in accordance with
Section 3.1 of the Lease.
11. CONDITION OF THE PREMISES.
(a) Prior to the Commencement Date, Landlord will arrange to have Tenant
conduct a walk-through inspection of the Premises with Landlord and
prepare a punch-list of items needing additional work by Landlord.
Other than the items specified in the punch-list and "latent defects"
(as defined below), by taking possession of the Premises Tenant will
be deemed to have accepted the Premises in their condition on the date
of delivery of possession and to have acknowledged that Landlord has
installed the Improvements as required by this Workletter and that
there are no items needing additional work or repair. The punch-list
will not include any damage to the Premises caused by Tenant's move-in
or early access, if permitted. Damage caused by Tenant will be
repaired or corrected by Landlord at Tenant's expense. Tenant
acknowledges that neither Landlord nor its agents or employees have
made any representations or warranties as to the suitability or
fitness of the Premises for the conduct of Tenant's business or for
any other purpose, nor has Landlord or its agents or employees agreed
to undertake any alterations or construct any Tenant improvements to
the Premises except as expressly provided in this Lease and this
Workletter. If Tenant fails to submit a punch-list to Landlord within
5 days after the Commencement Date, it will be deemed that there are
no items needing additional work or repair. Landlord's contractor will
complete all reasonable punch-list items within 15 days after the
walk-through inspection or as soon as practicable after such walk-
through.
(b) A "latent defect" is a defect in the condition of the Premises caused
by Landlord's failure to construct the
* As conclusively established by the issuance of a Certificate of Substantial
Completion by Landlord's Architect and delivery of possession to the
Premises.
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<PAGE> 30
improvements in a good and workmanlike manner and in accordance with
the working drawings, which defect would not ordinarily be observed
during a walk-through inspection. If Tenant notifies Landlord of a
latent defect within one year following the Commencement Date, then
Landlord, at its expense, will repair such latent defect as soon as
practicable. Except as set forth in this paragraph 11, Landlord will
have no obligation or liability to Tenant for latent defects.
12. NO LIABILITY. Preparation of the Final Space Plan and Working Drawings by
or on behalf of Landlord shall create no responsibility or liability on the
part of the Landlord for their completeness, design sufficiency, or
compliance with all laws, ordinances, rules, regulations of governmental
agencies or authorities, or the use and occupancy permit for the Building.
13. ADJUSTMENTS UPON COMPLETION. As soon as practicable, upon completion of the
Improvements in accordance with this Workletter, Landlord will notify
Tenant of the Rentable Area of the Premises, the Rentable Area of the
Building, Monthly Rent, and Tenant's Share, if such information was not
previously determinable by Landlord, Tenant, within 10 days of Landlord's
written request, will execute a certificate confirming such information.
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Page C-5
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EXHIBIT D
RULES AND REGULATIONS
1. Landlord may from time to time adopt appropriate systems and
procedures for the security or safety of the Building, any persons occupying,
using, or entering the Building, or any equipment, finishings, or contents of
the Building, and Tenant will comply with Landlord's reasonable requirements
relative to such systems and procedures.
2. The sidewalks, halls, passages, exits, entrances, elevators, and
stairways of the Building will not be obstructed by any tenants or used by any
of them for any purpose other than for ingress to and egress from their
respective Premises. The halls, passages, exits, entrances, elevators,
escalators, and stairways are not for the general public, and Landlord will in
all cases retain the right to control and prevent access to such halls,
passages, exits, entrances, elevators, and stairways of all persons whose
presence in the judgment of Landlord would be prejudicial to the safety,
character, reputation, and interests of the Building and its tenants, provided
that nothing contained in these rules and regulations will be construed to
prevent such access to persons with whom any tenant normally deals in the
ordinary course of its business, unless such persons are engaged in illegal
activities. No tenant and no employee or agent of any tenant will go upon the
roof of the Building except to install, service and maintain such equipment,
systems and signs as Landlord shall allow Tenant to have on the roof, including
but not limited to Tenant's computer, air conditioning and satellite dishes.
3. No sign, placard, picture, name, advertisement, or written notice
visible from the exterior of Tenant's Premises will be inscribed, painted,
affixed, or otherwise displayed by Tenant on any part of the Building or the
Premises without the prior written consent of Landlord. Landlord will adopt and
furnish to Tenant general guidelines relating to signs inside the Building on
the office floors. Tenant agrees to conform to such guidelines. All approved
signs or lettering on doors will be printed, painted, affixed, or inscribed at
the expense of the Tenant by a person approved by Landlord. Other than
draperies expressly permitted by Landlord and building standard window
treatments, material visible from outside the Building will not be permitted.
In the event of the violation of this rule by Tenant, Landlord may remove the
violating items without any liability, and may charge the expense incurred by
such removal to the tenant or tenants violating this rule.
4. No cooking will be done or permitted by any tenant on the Premises,
except in areas of the Premises which are specially constructed for cooking and
except that use by the tenant of microwave ovens and Underwriters' Laboratory
approved equipment for brewing coffee, tea, hot chocolate, and similar
beverages will be permitted, provided that such use is in accordance with all
applicable federal, state, and city laws, codes, ordinances, rules, and
regulations.
5. No tenant will employ any person or persons other than the cleaning
service of Landlord for the purpose of cleaning the Premises, unless otherwise
agreed to by Landlord in writing. Except with the written consent of Landlord,
no person or persons other than those approved by Landlord will be permitted to
enter the Building for the purpose of cleaning it. No tenant will cause any
unnecessary labor by reason of such tenant's carelessness or indifference in
the preservation of good order and cleanliness. Should Tenant's actions result
in any increased expense for any required cleaning, Landlord reserves the right
to assess Tenant for such expenses.
6. The toilet rooms, toilets, urinals, wash bowls and other plumbing
fixtures will not be used for any purposes other than those for which they were
constructed, and no sweepings, rubbish, rags, or other foreign substances will
be thrown in such plumbing fixtures. All damages resulting from any misuse of
the fixtures will be borne by the tenant who, or whose servants, employees,
agents, visitors, or licensees, caused the same.
7. No tenant, or tenant's invitees or licensees, will in any way deface
any part of the Premises or the Building of which they form a part. In those
portions of the Premises where carpet has been provided directly or indirectly
by Landlord, Tenant will at its own expense install and maintain pads to
protect the carpet under all furniture having casters other than carpet casters.
8. No tenant will alter, change, replace, or rekey any lock or install
a new lock or a knocker on any door of the Premises. Landlord, its agents, or
employees will retain a pass (master) key to all door locks on the Premises.
Any new door locks required by Tenant or any change in keying of existing locks
will be installed or changed by Landlord following tenant's written request to
Landlord and will be at Tenant's expense. All new locks and rekeyed locks will
remain operable by Landlord's pass (master) key. Landlord will furnish each
tenant, free of charge, with two (2) keys to each suite entry door lock on the
Premises. Landlord will have the right to collect a reasonable charge for
additional keys and cards requested by any tenant. Each tenant, upon
termination of its tenancy, will deliver to Landlord all keys and access cards
for the Premises and Building that have been furnished to such tenant.
9. The elevator designated for freight by Landlord will be available
for use by all tenants in the Building during the hours and pursuant to such
procedures as Landlord may determine from time to time. The persons
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<PAGE> 32
employed to move Tenant's equipment, material, furniture, or other property in
or out of the Building must be acceptable to Landlord. The moving company must
be a locally recognized professional mover, whose primary business is the
performing of relocation services, and must be bonded and fully insured. A
certificate or other verification of such insurance must be received and
approved by Landlord prior to the start of any moving operations. Insurance
must be sufficient, in Landlord's sole opinion, to cover all personal
liability, theft or damage to the Project, including but not limited to floor
coverings, doors, walls, elevators, stairs, foliage, and landscaping. Special
care must be taken to prevent damage to foliage and landscaping during adverse
weather. All moving operations will be conducted at such times and in such a
manner as Landlord will direct, and all moving will take place during
non-Business Hours unless Landlord agrees in writing otherwise. Tenant will be
responsible for the provision of building security during all moving
operations, and will be liable for all losses and damages sustained by any
party as a result of the failure to supply adequate security. Landlord will
have the right to prescribe the weight, size, and position of all equipment,
materials, furniture, or other property brought into the Building. Heavy
objects will, if considered necessary by Landlord, stand on wood strips of such
thickness as is necessary to properly distribute the weight. Landlord will not
be responsible for loss of or damage to any such property from any cause, and
all damage done to the Building by moving or maintaining such property will be
repaired at the expense of Tenant. Landlord reserves the right to inspect all
such property to be brought into the Building and to exclude from the Building
all such property which violates any of these rules and regulations or the
Lease of which these rules and regulations are a part. Supplies, goods,
materials, packages, furniture, and all other items of every kind delivered to
or taken from the Premises will be delivered or removed through the entrance
and route designated by Landlord, and Landlord will not be responsible for the
loss or damage of any such property.
10. No tenant will use or keep in the Premises or the Building any
kerosene, gasoline, or inflammable or combustible or explosive fluid or
material or chemical substance other than limited quantities of such materials
or substances reasonably necessary for the operation or maintenance of office
equipment or limited quantities of cleaning fluids and solvents required in
tenant's normal operations in the Premises, which shall be stored in accordance
with applicable law. Without Landlord's prior written approval, no tenant will
use any method of heating or air conditioning other than that supplied by
Landlord. No tenant will use or keep or permit to be used or kept any foul or
noxious gas or substance in the Premises.
11. Tenants shall not, prior to or during the Term, either directly or
indirectly, employ or permit the employment of any contractor, mover, mechanic
or laborer, or permit any materials in the Premises. If the use of such
contractor, mover, mechanic or laborer, or such materials would, in Landlord's
opinion, create any difficulty, strike or jurisdictional dispute with other
contractors, movers, mechanics or laborers engaged by Landlord, tenants, or
others, or would in any way disturb the construction, maintenance, cleaning,
repair, management, security or operation of the Building, Project or any part
thereof. Any tenant, upon demand by Landlord, shall cause all contractors,
movers, mechanics, laborers or materials causing such interference, difficulty
or conflict to leave or be removed from the Project immediately.
12. Landlord will have the right to prohibit any advertising by Tenant
mentioning the Building that, in Landlord's reasonable opinion, tends to impair
the reputation of the Building or its desirability as a building for offices,
and upon written notice from Landlord, tenant will refrain from or discontinue
such advertising.
13. Tenant will not bring any animals (except "Seeing Eye" dogs) or
birds into the Building, and will not permit bicycles or other vehicles inside
or on the sidewalks outside the Building except in areas designated from time
to time by Landlord for such purposes.
14. All persons entering or leaving the Building between the hours of 6
p.m. and 7 a.m. Monday through Friday, and at all hours on Saturdays, Sundays,
and holidays will comply with such off-hour regulations as Landlord may
establish and modify from time to time. Landlord reserves the right to limit
reasonably or restrict access to the Building during such time periods.
15. Each tenant will store all its trash and garbage within its Premises.
No material will be placed in the trash boxes or receptacles if such material
is of such nature that it may not be disposed of in the ordinary and customary
manner of removing and disposing of trash and garbage without being in
violation of any law or ordinance governing such disposal. All garbage and
refuse disposal will be made only through entryways and elevators provided for
such purposes and at such times as Landlord designates. Removal of any
furniture or furnishings, large equipment, packing crates, packing materials,
and boxes will be the responsibility of each tenant and such items may not be
disposed of in the Building trash receptacles nor will they be removed by the
Building's janitorial service, except at Landlord's sole option and at the
tenant's expense. No furniture, appliances, equipment, or flammable products of
any type may be disposed of in the Building trash receptacles.
16. Canvassing, peddling, soliciting, and distributing handbills or any
other written materials in the Building are prohibited, and each tenant will
cooperate to prevent the same.
17. The requirements of the tenants will be attended to only upon
application by written, personal, or telephone notice at the office of the
Building. Employees of Landlord or Landlord's agent will not perform any work
or do anything outside of their regular duties unless under special
instructions from Landlord.
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<PAGE> 33
18. A directory of the Building will be provided for the display of the
name and location of tenants only. All entries on the Building directory
display will conform to standards and style set by Landlord in its sole
discretion.
19. Tenant will see that the doors of the Premises are closed and locked
and that all water faucets, water apparatus, and utilities are shut off before
Tenant or Tenant's employees leave the Premises, so as to prevent waste or
damage, and for any failure to comply or carelessness in this regard Tenant
will make good all injuries sustained by other tenants or occupants of the
Building or Landlord. On multiple-tenancy floors, all tenants will keep the
doors to the Building corridors closed at all times except for ingress and
egress.
20. Tenant will not conduct itself in any manner that is inconsistent
with the character of the Building as a first quality building or that will
impair the comfort and convenience of other tenants in the Building.
21. Tenant (including tenant's employees, agents, invitees, and visitors)
will use the parking spaces solely for the purpose of parking passenger model
cars, small vans, and small trucks and will comply in all respects with any
rules and regulations that may be promulgated by Landlord from time to time
with respect to the parking areas. The parking areas will not be used by
Tenant, its agents, or employees, for overnight parking of vehicles, except
with Landlord's prior consent. Tenant will ensure that any vehicle parked in
any of the parking spaces will be kept in proper repair and will not leak oil,
grease, gasoline, or any other fluids. If any of the parking spaces are at any
time used (a) for any purpose other than parking as provided above; (b) in any
way or manner reasonably objectionable to Landlord; or (c) by Tenant after
default by Tenant under the Lease. Landlord, in addition to any other rights
otherwise available to Landlord, may consider such default an event of default
under the Lease.
22. No act or thing done or omitted to be done by Landlord or Landlord's
agent during the term of the Lease in connection with the enforcement of these
rules and regulations will constitute an eviction by Landlord of any tenant nor
will it be deemed an acceptance of surrender of the Premises by any tenant, and
no agreement to accept such termination or surrender will be valid unless in a
writing signed by Landlord. The delivery of keys to any employee or agent of
Landlord will not operate as a termination of the Lease or a surrender of the
Premises unless such delivery of keys is done in connection with a written
instrument executed by Landlord approving the termination or surrender.
23. In these rules and regulations, the term "tenant" includes the
employees, agents, invitees, and licensees of Tenant and others permitted by
Tenant to use or occupy the Premises.
24. Landlord may waive any one or more of these rules and regulations
for the benefit of any particular tenant or tenants, but no such waiver by
Landlord will be construed as a waiver of such rules and regulations in favor
of any other tenant or tenants, nor prevent Landlord from enforcing any such
rules and regulations against any or all of the tenants of the Building after
such waiver.
25. These rules and regulations are in addition to, and will not be
construed to modify or amend, in whole or in part, the terms, covenants,
agreements, and conditions of the Lease.
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<PAGE> 34
COMMENCEMENT DATE AND ESTOPPEL CERTIFICATE
This Commencement Date and Estoppel Certificate is entered into by Landlord and
Tenant pursuant to Section 3.1 of Lease.
1. DEFINITIONS. In this certificate the following terms have the meanings
given to them:
(a) Landlord: MBL Life Assurance Corporation
(b) Tenant: _____________________________________________________________
(c) Lease: Office lease dated ______________ between Landlord and Tenant.
(d) Premises: Suite ______.
(e) Building Address: _____________________________________
_____________________________________
_____________________________________
_____________________________________
2. Landlord and Tenant confirm that the Commencement Date of the Lease is
________________ and the Expiration Date is ______________________ and
that Sections 1.1(k) and (i) are accordingly amended.
3. The Rentable Area of the Premises is _______________ square feet.
4. The Rentable Area of the Building is _______________ square feet.
5. Tenant's Shares is _____________ percent.
6. Tenant has accepted possession of the Premises as provided in the Lease.
7. The improvements required to be furnished by the Landlord in accordance
with the Workletter (if any) have been furnished to the satisfaction of
Tenant (subject to any corrective work or punch-list items submitted
previously to Landlord).
8. All terms and conditions to be performed by Landlord under the Lease have
been satisfied and on this date there are no existing defenses or offsets
which Tenant has against the full enforcement of the Lease by Landlord.
9. The Lease is in full force and effect and has not been modified, altered,
or amended, except as follows:
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
10. There are no setoffs or credits against Rent, and no Security Deposit or
prepaid Rent has been paid except as provided by the Lease.
Landlord and Tenant have executed this Commencement Date and Estoppel
Certificate as of the dates set forth below.
Tenant: ___________________________ Landlord: MBL LIFE ASSURANCE CORPORATION
By: ___________________________ By: _________________________________
Name: ___________________________ Name: _________________________________
Title: ___________________________ Title: _________________________________
Date: ___________________________ Date: _________________________________
<PAGE> 35
EXHIBIT H
OPTION TO EXTEND
Tenant may extend this Lease for a period of twelve (12) months (the "Extension
Term" beginning the day after the Lease Expiration Date, upon the same terms
and conditions of the Lease, except that:
1. the Term is modified to include the Extension Term;
2. The Monthly Rent for the Extension Term shall be $26,093.75;
3. the Option to Extend shall be deleted and shall not be available to
Tenant at the end of the Extension Term.
To exercise this Option to Extend, Tenant must:
1. Not be in default of the Lease; and
2. given notice to Landlord that Tenant is exercising its Option to
Extend at least 180 days, but not more than 240 days before the Lease
Expiration Date (Tenant's Notice to Extend Term;
3. provide such financial reports and statements evidencing to the
Landlord's satisfaction the Tenant's ability to meet its obligations
during the Extension Term;
4. execute the extension agreement to be provided by Landlord and return
it to Landlord within 10 days of receipt.
Failure of Tenant to observe or comply with terms of this Option to Extend
shall render the option null and void. Landlord shall not be required to extend
the Term of this Lease if, in its reasonable judgment, Tenant's financial
condition may impair its ability to meet its obligations during the Extended
Term. This option is personal to the Tenant named herein and shall be void upon
any transfer as per Article 9 of this Lease.
<PAGE> 36
ADDENDUM
TENANT IMPROVEMENTS: During the period or thereafter Landlord is completing
the Landlord improvements, below, Tenant has Landlord's
permission to install its telephone system, to complete
its computer room, including but not limited to,
adding an additional air conditioning system and
back-up generator to serve the computer room and to
install a satellite dish on the roof. All or part of
the costs for such improvements/installations shall be
paid out of the Tenant Finish Allowance, if said Tenant
Finish Allowance is sufficient to cover the same;
otherwise they will be at Tenant's cost.
LANDLORD IMPROVEMENTS: (a) Landlord will clean windows of mineral buildup
from landscape irrigation system;
(b) Landlord will install code/card building access
system;
(c) Landlord will remodel/improve restrooms on the
first floor of the building to comply with the
Americans with Disabilities Act.
Items a, b, c, shall be paid for solely by Landlord,
in addition to Tenant Finish Allowance.
SIGNAGE: Tenant shall be permitted to mount signs on two
elevations of the building, at Tenant's expense. Sign
design shall be submitted for Landlord's approval,
which shall not be unreasonably withheld, and shall
comply with City of Albuquerque zoning code.
<PAGE> 37
EXHIBIT E
COMMENCEMENT DATE AND ESTOPPEL CERTIFICATE
This Commencement Date and Estoppel Certificate is entered into by Landlord and
Tenant pursuant to Section 3.1 of the Lease.
1. DEFINITIONS. In this certificate the following terms have meanings
given to them:
(a) Landlord; MBL Life Assurance Corporation
(b) Tenant: Reilly Dike Dosher Corporation
(c) Lease: Office lease dated September 29, 1995 between Landlord
and Tenant.
(d) Premises: entire building
(e) Building Address: 2305 Renard Place SE
Albuquerque, NM 87106
2. Landlord and Tenant confirm that the Commencement Date of the Lease is
February 1, 1996 and the Expiration Date is January 31, 2000 and that
Sections 1.1(k) and (i) are accordingly amended.
3. The Rentable Area of the Premises is 25,050 square feet.
4. The Rentable Area of the Building is 25,050 square feet.
5. Tenant's Share is 100 percent.
6. Tenant has accepted possession of the Premises as provided in the
Lease.
7. The Improvements required to be furnished by the Landlord in
accordance with the Workletter (if any) have been furnished to the
satisfaction of Tenant (subject to any corrective work or punch-list
items submitted previously to Landlord).
8. All terms and conditions to be performed by Landlord under the Lease
have been satisfied and on this date there are no existing defenses
or offsets which Tenant has against the full enforcement of the Lease
by Landlord.
9. The Lease is in full force and effect and has not been modified,
altered, or amended, except as follows:
----------------------------------------------------------------------
----------------------------------------------------------------------
10. There are no setoffs or credits against Rent, and no Security Deposit
or prepaid Rent has been paid except as provided by the Lease.
Landlord and Tenant have executed this Commencement Date and Estoppel
Certificate as of the dates set forth below.
Tenant: Reilly Dike Dosher Corporation Landlord: MBL Life Assurance
Corporation
--------------------------------
By: /s/ William S. Reilly By: ------------------------------
--------------------------------
Name: William S. Reilly Name: -----------------------------
--------------------------------
Title: President Title: ----------------------------
--------------------------------
Date: -------------------------------- Date: ----------------------------
<PAGE> 1
EXHIBIT 10.27
CONSULTING AGREEMENT
This Agreement is entered into as of this 10th day of June, 1998, between ADIS
International Ltd ("ADIS"), a New Zealand corporation, with offices located at
41 Centorian Drive, Mairangi Bay Auckland New Zealand and MPOWER Solutions
Incorporated, Suite 540, 8400 South Fiddlers Green, Englewood, CO. 80111.
("Consultant").
1. Independent Consultant. Subject to the terms and conditions of this
Agreement ADIS hereby engages Consultant as an independent consultant to perform
the services set forth herein, and Consultant hereby accepts such engagement.
2. Duties, Term, and Compensation. The duties, term of engagement, and
compensation of Consultant are as described in Exhibit A hereof, which may be
amended in writing from time to time, and which is hereby incorporated by
reference.
3. Written Reports. The full results of Consultant's services shall be
submitted to ADIS in a confidential written report at such time and in such
form, setting forth such information and data as is reasonably requested by
ADIS.
4. Inventions. Any and all inventions, discoveries, development
improvements, and innovations including the programming code conceived by
Consultant during this engagement relative to the duties under this Agreement
shall be the exclusive property of ADIS; and Consultant hereby assigns all
right, title, and interest in the same to ADIS. Any and all inventions,
discoveries, developments, and innovations conceived by the Consultant prior to
the term of this Agreement and utilized by the Consultant in rendering
Consultant's duties to ADIS are hereby licensed to ADIS for use in its
operations and for a perpetual duration. This license is nonexclusive, and may
be assigned by ADIS only to a wholly-owned subsidiary of ADIS.
5. Confidentiality. Consultant acknowledges that during Consultant's
engagement Consultant shall have access to and become acquainted with various
trade secrets, inventions, innovations, processes, compilations of information,
records, and specifications owned or licensed by ADIS and/or used by ADIS in
connection with the operation of its business including, without limitation,
ADIS's business and product processes, methods, customer lists, accounts,
procedures, and source material. Consultant agrees not to disclose any of the
aforesaid, directly or indirectly, or use any of them in any manner, either
during the term of this Agreement or at any time thereafter, except as required
in the course of his/her engagement with ADIS. All files, records, documents,
specifications, information, letters, notes, notebooks, and similar items
relating to the business of ADIS whether prepared by Consultant or otherwise
coming into Consultant's possession shall remain the exclusive property of ADIS.
Consultant shall not make or retain any copies of the foregoing. Upon the
expiration or earlier termination of this Agreement, or whenever requested by
ADIS, Consultant shall immediately deliver to ADIS all such files, records,
documents, specifications, information, and other items in Consultant's
possession or under Consultant's control. Consultant further agrees not to
disclose Consultant's retention as an independent consultant or the terms of
this Agreement to any person without the prior written consent of ADIS and shall
at all times preserve the confidential nature of Consultant's relationship to
ADIS and of Consultant's service hereunder.
ADIS acknowledges that during Consultant's engagement ADIS may have
access to and become acquainted with various trade secrets, inventions,
processes, and innovations owned or licensed by Consultant. Subject to the
following conditions having been met, ADIS agrees not to disclose any of the
aforesaid, directly or indirectly, or use them in any manner, either during the
term of this Agreement or at any time thereafter, except for purposes of
carrying out the provisions of this Agreement:
<PAGE> 2
1. Consultant shall identify in a reasonably detailed writing the
nature of the confidential information proposed to be disclosed to ADIS;
and
2. ADIS shall also mutually agree in writing that any proposed
confidential information shall be treated as confidential, which
agreement shah not be unreasonably denied; and
3. Any disclosure of Consultant's confidential information shall
not be construed as to place any restriction or limitation whatsoever on
ADIS's use of the deliverables as are specified within Exhibit A,
attached hereto.
Neither party shall have any obligation with respect to any item of
confidential information: (1) known prior to the receipt from the disclosing
party as evidenced by written records; (2) which is or becomes known publicly
through no fault of the receiving party and without breach of this agreement;
(3) which is independently developed by either party; or (4) which otherwise
becomes available to the receiving party through legal sources. The receiving
party may produce or disclose the disclosing party's confidential information
pursuant to, and to the extent required by applicable law, regulation or court
order, provided that the receiving party has notified the disclosing party prior
to such required disclosure and has given the disclosing party an opportunity to
contest such required disclosure and to obtain a protective order.
6. Conflict of Interest. Consultant represents that Consultant is free to
enter into this Agreement, and that this engagement does not violate the terms
of any agreement between Consultant and any third party. Further, Consultant, in
rendering duties, shah not utilize any invention, discovery, development,
improvement, innovation, or trade secret in which Consultant does not have a
proprietary interest.
During the term of this Agreement, Consultant shall devote as much time,
energy and abilities to the performance of the duties hereunder as is necessary
to perform such duties in a timely and productive manner.
For a period of eighteen months following any termination, Consultant
shah not, directly or indirectly, hire, solicit, or encourage to leave the
employment of ADIS, any employee or consultant of ADIS or hire any such employee
or consultant who has left ADIS's employment or consultation within one year of
such employment or consultation.
7. Right to Injunction. The parties hereto acknowledge that the services to
be rendered by Consultant under this Agreement and the rights and privileges
granted to ADIS under this Agreement are of a special, unique, unusual,
extraordinary, and intellectual character which gives them a peculiar value, the
loss of which cannot be reasonably or adequately compensated by damages in any
action at law, and the breach by Consultant of any of the provisions of this
Agreement will cause ADIS irreparable injury and damage. Consultant expressly
agrees that ADIS shall be entitled to injunctive and other equitable relief in
the event of, or to prevent, a breach of any provision of this Agreement by
Consultant. Resort to such equitable relief, however, shall not be construed to
be a waiver of any other rights or remedies which ADIS may have for damages or
otherwise. The various rights and remedies of ADIS under this Agreement or
otherwise shall be construed to be cumulative, and no one of them shall be
exclusive of any other or of any right or remedy allowed by law.
8. Merger. This Agreement shall not be terminated by the merger or
consolidation of ADIS into or with any other entity.
9. Termination. ADIS may terminate this Agreement at anytime by 30 days
written notice to Consultant. In addition, if Consultant is convicted of any
crime or offense, fails or refuses to comply with the written policies or
reasonable directive of ADIS, is guilty of serious misconduct in
Page 2
<PAGE> 3
connection with performance hereunder, or materially breaches provisions of the
Agreement, ADIS at any time may terminate this Agreement upon prior written
notice to Consultant.
10. Independent Contractor. This Agreement shall not constitute Consultant
as employee, partner, agent of, or joint venturer with ADIS for any purpose.
Consultant is and will remain, as far as the relationship with ADIS is
concerned, an independent contractor. ADIS shall not be responsible for
withholding taxes with respect to Consultant's compensation hereunder.
Consultant shall have no claim against ADIS hereunder or otherwise for vacation
pay, sick leave, retirement, benefits, social security, workmen's compensation,
disability, or unemployment insurance benefits or employee benefits of any kind.
11. Successors and Assigns. All of the provisions of this Agreement shah be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, if any, successors, and assigns.
12. Choice of Law. The laws of the State of Colorado shall govern the
validity of this Agreement, the construction of its terms and the interpretation
of the rights and duties of the parties hereto.
13. Arbitration. Any controversies arising out of the terms of this
Agreement or its interpretation shall be settled by arbitration in Chicago in
accordance with the rules of the American Arbitration Association, and the
judgment upon award may be entered in any court having jurisdiction thereof.
14. Headings. Section headings are not to be considered a part of this
Agreement and are not intended to be a full and accurate description of the
contents hereof.
15. Waiver. Waiver by one party hereto of breach of any provision of this
Agreement by the other shall not operate or be construed as a continuing waiver.
16. Assignment. Consultant shall not assign any of the rights under this
Agreement, or delegate the performance of any of the duties hereunder, without
the prior written consent of ADIS.
17. Notices. Any and all notices, demands, or other communications required
or desired to be given hereunder by any party shall be in writing an shah be
validly given or made to another party if personally served, or if deposited in
the United States mail, certified or registered, postage prepaid, return receipt
requested. If such notice or demand is served personally, notice shall be deemed
constructively made at the time of such personal service. If such notice, demand
or other communication is given by mail, such notice shall be conclusively
deemed given five days after deposit thereof in the United States mail addressed
to the party to whom such notice, demand or other communication is to be given
as follows:
If to Consultant: MPOWER Solutions Inc
Suite 540
6400 South Fiddlers Green
Englewood
CO. 80111
Attn: Lorine Sweeney
If to ADIS: ADIS Incorporated
41 Centorian Drive
Mairangi Bay
Auckland
New Zealand
Attn: John Henderson, Director
Healthcare Information Systems
Page 3
<PAGE> 4
Any party hereto may change its address for purposes of this paragraph
by written notice given in the manner provided above.
18. Modification or Amendment. No amendment, change, or modification of this
Agreement shall be valid unless in writing signed by the parties hereto.
19. Entire Understanding. This document and the Exhibit attached constitute
the entire understanding and agreement of the parties, and any and all prior
agreements, understandings and representations are hereby terminated and
canceled in their entirety and are of no further force and effect.
20. Unenforceability of Provisions. If any provision of this Agreement, or
any portion thereof, is held to be invalid and unenforceable, then the remainder
of this Agreement shall nevertheless remain in full force and effect.
IN WITNESS WHEREOF the undersigned have executed this Agreement as of the day
and year first written above.
ADIS International Ltd. MPOWER Solutions Inc.
By: /s/ JOHN HENDERSON By: /s/ LORINE SWEENEY
-------------------------------- -------------------------------------
John Henderson Lorine Sweeney
Title: Director Healthcare Title: President
Information Systems
dated: 10th June 1998 dated: 6-10-98
----------------------------- ----------------------------------
Page 4
<PAGE> 5
EXHIBIT A
TOPIC MAPS DEVELOPMENT PHASE 1
SCOPE: Limited to exploration of application of Topic Maps, prototyping of a
tool and infrastructure issues relating to the knowledge domains in ADIS and
other Welters Kluwer companies.
ASSUMPTIONS:
CONCEPT SCOPING: It is assumed that the key to this project overall, and
to this first phase, is the initial concept discussions between MPower,
Adis, Michel Biezunski of High Text, and Dianne Kennedy of SGML Resource
Center. This is scheduled to be held in the second week of [*].
This exercise will set out in detail the tasks for phase 1. At this
stage it is assumed that the Adis thesaurus will be used as the
knowledge domain.
VERSION 1.0 PROTOTYPE: Software
The deliverables for this prototype would consist of a WEB-based
editorial tool for data entry, maintenance and display of
Thesaurus/Topic Map terms. This may include the tools from High Text
depending on the state of those tools. An object-server logical
application design would also be delivered illustrating how the
Thesaurus could be programmatically integrated into both text retrieval
and other software application programs. The actual programming
interfaces for the object-server would not be produced at this time.
VERSION 1.0 PROTOTYPE: Content
The approach toward content development is focused on the total amount
of terms that are included in the prototype. It is estimated that
approximately 7000 terms will need to be normalized into Topic Map term
format. Key synonyms would also be included up to 1000 terms.
The data structures for the prototype would be limited to the ADIS
Thesaurus.
A more complex initial model such as linking a logical sub-set (e.g.
cardiology) of the ADIS Thesaurus to ICD-9 terms will also be explored.
A broad drug hierarchy (therapeutic classes) design would also be
included focused on generic and trade names up to 5000 terms. A sub-set
of which could be inked to another terminology set (e.g. ACNs to NDCs
for a sub-set population). Depending on what we decide, there may be
some additional cost in licensing other terminologies if ADIS does not
already have access to them.
A rough cut on a conceptual database design which would include such
possibilities as multiple industry and international standard
vocabularies, and XML/SGML tagging.
* Confidential Treatment Requested
<PAGE> 6
PEOPLE
MPower will provide a Product Manager, highly experienced in Topic Map
and vocabulary issues to lead the content elements together with a
Programming Manager and other support programmers as appropriate
together with overall Project Management and direction from Lorine
Sweeney.
Adis will provide key technical and editorial personnel for the initial
scoping stage and meet the costs associated with the external
consultants from High Text and SGML Resource Center.
Adis would further provide 1 technical person and 1 editorial person for
a period of up to 2 months from the beginning of the project to be based
in Denver.
TECHNOLOGY TOOLS AND ARCHITECTURE FOR PROOF OF CONCEPT
The technology to be utilized for the prototype can be flexible however
our preference would be the following.
The database configuration for the final tool could be Oracle or SQL
Server depending on the preference of ADIS. We would also consider
developing the final business rules in C++ if that is ADIS's preference.
The use of Visual Basic at the presentation layer will provide the
ability to run either Windows or Net based clients.
2
<PAGE> 7
[BROWSER DIAGRAM]
EDITORIAL TOOL PROTOTYPE
MULTI-TIERED CLIENT SERVER ARCHITECTURE
PROJECT COSTS, PAYMENT AND ACCOUNTING
The project as initially scoped and costed on a hourly charge basis according to
the attached spread sheets is $US [*]. This is subject to review following
the initial concept meeting and may increase or decrease accordingly. However
the adjusted price will be based on a pro-rata basis depending on the hours
estimated following the concept meeting.
Adis will pay in stage payments each of one third, in advance, to be accounted
for against timesheets for the MPower staff.
OTHER ASSUMPTIONS
- Operational QA only for prototype
- Data must be received from ADIS within 2 weeks of project start
- Additional costs: Purchase of Clinical Texts - $[*]
- Out of Pocket Travel expenses for attendance at meetings are to
be extra
- Project completion is expected to be within [*]
* Confidential Treatment Requested
3
<PAGE> 1
CONSULTING AGREEMENT
EXHIBIT 10.28
This Agreement is entered into as of this 16th day of September, 1998, between
ADIS International Ltd ("ADIS"), a New Zealand corporation, with offices located
at 41 Centorian Drive, Mairangi Bay Auckland New Zealand and MPOWER Solutions
Incorporated, Suite 540, 6400 South Fiddlers Green, Englewood, CO. 80111.
("Consultant").
1. Independent Consultant. Subject to the terms and conditions of this
Agreement ADIS hereby engages Consultant as an independent consultant to
perform the services set forth herein, and Consultant hereby accepts such
engagement.
2. Duties, Term, and Compensation. The duties, term of engagement, and
compensation of Consultant are described in Exhibit A hereof, which may be
amended in writing from time to time, and which is hereby incorporated by
reference.
3. Written Reports. The full results of Consultant's services shall be
submitted to ADIS in a confidential written report at such time and in such
form, setting forth such information and data as is reasonably requested by
ADIS.
4. Inventions. Any and all inventions, discoveries, development improvements,
and innovations including the programming code conceived by Consultant during
this engagement relative to the duties under this Agreement shall be the
exclusive property of ADIS; and Consultant hereby assigns all right, title, and
interest in the same to ADIS. Any and all inventions, discoveries,
developments, and innovations conceived by the Consultant prior to the term of
this Agreement and utilized by the Consultant in rendering Consultant's duties
to ADIS are hereby licensed to ADIS for use in its operations and for a
perpetual duration. This license is nonexclusive, and may be assigned by ADIS
only to a wholly-owned subsidiary of ADIS.
5. Confidentiality. Consultant acknowledges that during Consultant's
engagement Consultant shall have access to and become acquainted with various
trade secrets, inventions, innovations, processes, compilations of information,
records, and specifications owned or licensed by ADIS and/or used by ADIS in
connection with the operation of its business including, without limitation,
ADIS's business and product processes, methods, customer lists, accounts,
procedures, and source material. Consultant agrees not to disclose any of the
aforesaid, directly or indirectly, or use any of them in any manner, either
during the term of this Agreement or at any time thereafter, except as required
in the course of his/her engagement with ADIS. All files, records, documents,
specifications, information, letters, notes, notebooks, and similar items
relating to the business of ADIS whether prepared by Consultant or otherwise
coming into Consultant's possession shall remain the exclusive property of ADIS.
Consultant shall not make or retain any copies of the foregoing. Upon the
expiration or earlier termination of this Agreement, or whenever requested by
ADIS, Consultant shall immediately deliver to ADIS all such files, records,
documents, specifications, information, and other items in Consultant's
possession or under Consultant's control. Consultant further agrees not to
disclose Consultant's retention as an independent consultant or the terms of
this Agreement to any person without the prior written consent of ADIS and shall
at all times preserve the confidential nature of Consultant's relationship to
ADIS and of Consultant's service hereunder.
ADIS acknowledges that during Consultant's engagement ADIS may have access
to and become acquainted with various trade secrets, inventions, processes, and
innovations owned or licensed by Consultant. Subject to the following conditions
having been met, ADIS agrees not to disclose any of the aforesaid, directly or
indirectly, or use them in any manner, either during the term of this Agreement
or at any time thereafter, except for purposes of carrying out the provisions of
this Agreement:
<PAGE> 2
1. Consultant shall identify in a reasonably detailed writing the nature
of the confidential information proposed to be disclosed to ADIS; and
2. ADIS shall also mutually agree in writing that any proposed
confidential information shall be treated as confidential, which agreement
shall not be unreasonably denied; and
3. Any disclosure of Consultant's confidential information shall not be
construed as to place any restriction or limitation whatsoever on ADIS's
use of the deliverables as are specified within Exhibit A, attached hereto.
Neither party shall have any obligation with respect to any item of
confidential information: (1) known prior to the receipt from the disclosing
party as evidenced by written records; (2) which is or becomes known publicly
through no fault of the receiving party and without breach of this agreement;
(3) which is independently developed by either party; or (4) which otherwise
becomes available to the receiving party through legal sources. The receiving
party may produce or disclose the disclosing party's confidential information
pursuant to, and to the extent required by applicable law, regulation or court
order, provided that the receiving party has notified the disclosing party
prior to such required disclosure and has given the disclosing party an
opportunity to contest such required disclosure and to obtain a protective
order.
6. Conflict of Interest. Consultant represents that Consultant is free to
enter into this Agreement, and that this engagement does not violate the terms
of any agreement between Consultant and any third party. Further, Consultant,
in rendering duties, shall not utilize any invention, discovery, development,
improvement, innovation, or trade secret in which Consultant does not have a
proprietary interest.
During the term of this Agreement, Consultant shall devote as much time,
energy and abilities to the performance of the duties hereunder as is necessary
to perform such duties in a timely and productive manner.
For a period of eighteen months following any termination, Consultant
shall not, directly or indirectly, hire, solicit, or encourage to leave the
employment of ADIS, any employee or consultant of ADIS or hire any such
employee or consultant who has left ADIS's employment or consultation within
six months of such employment or consultation.
7. Right to Injunction. The parties hereto acknowledge that the services to
be rendered by Consultant under this Agreement and the rights and privileges
granted to ADIS under this Agreement are of a special, unique, unusual,
extraordinary, and intellectual character which gives them a peculiar value,
the loss of which cannot be reasonably or adequately compensated by damages in
any action at law, and the breach by Consultant of any of the provisions of
this Agreement will cause ADIS irreparable injury and damage. Consultant
expressly agrees that ADIS shall be entitled to injunctive and other equitable
relief in the event of, or to prevent, a breach of any provision of this
Agreement by Consultant. Resort to such equitable relief, however, shall not be
construed to be a waiver of any other rights or remedies which ADIS may have
for damages or otherwise. The various rights and remedies of ADIS under this
Agreement or otherwise shall be construed to be cumulative, and no one of them
shall be exclusive of any other or of any right or remedy allowed by law.
8. Merger. This Agreement shall not be terminated by the merger or
consolidation of ADIS into or with any other entity.
9. Termination. ADIS may terminate this Agreement at anytime by 30 days
written notice to Consultant. In addition, if Consultant is convicted of any
crime or offense, fails or refuses to comply with the written policies or
reasonable directive of ADIS, is guilty of serious misconduct in
Page 2
<PAGE> 3
connection with performance hereunder, or materially breaches provisions of the
Agreement, ADIS at any time may terminate this Agreement upon prior written
notice to Consultant.
10. Independent Contractor. This Agreement shall not constitute Consultant
as employee, partner, agent of, or joint venturer with ADIS for any purpose.
Consultant is and will remain, as far as the relationship with ADIS is
concerned, an independent contractor. ADIS shall not be responsible for
withholding taxes with respect to Consultant's compensation hereunder.
Consultant shall have no claim against ADIS hereunder or otherwise for vacation
pay, sick leave, retirement, benefits, social security, workmen's compensation,
disability, or unemployment insurance benefits or employee benefits of any kind.
11. Successors and Assigns. All of the provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective heirs, if any, successors, and assigns.
12. Choice of Law. The laws of the State of Colorado shall govern the
validity of this Agreement, the construction of its terms and the
interpretation of the rights and duties of the parties hereto.
13. Arbitration. Any controversies arising out of the terms of this
Agreement or its interpretation shall be settled by arbitration in Chicago in
accordance with the rules of the American Arbitration Association, and the
judgment upon award may be entered in any court having jurisdiction thereof.
14. Headings. Section headings are not to be considered a part of this
Agreement and are not intended to be a full and accurate description of the
contents hereof.
15. Waiver. Waiver by one party hereto of breach of any provision of this
Agreement by the other shall not operate or be construed as a continuing waiver.
16. Assignment. Consultant shall not assign any of the rights under this
Agreement, or delegate the performance of any of the duties hereunder, without
the prior written consent of ADIS.
17. Notices. Any and all notices, demands, or other communications required
or desired to be given hereunder by any party shall be in writing and shall be
validly given or made to another party if personally served, or if deposited in
the United States mail, certified or registered, postage prepaid, return
receipt requested. If such notice or demand is served personally, notice shall
be deemed constructively made at the time of such personal service. If such
notice, demand or other communication is given by mail, such notice shall be
conclusively deemed given five days after deposit thereof in the United States
mail addressed to the party to whom such notice, demand or other communication
is to be given as follows:
If to Consultant: MPOWER Solutions Inc.
Suite 540
6400 South Fiddlers Green
Englewood
CO. 80111
Attn: Lorine Sweeney
If to ADIS: ADIS Incorporated
41 Centorian Drive
Mairangi Bay
Auckland
New Zealand
Attn: John Henderson,
Director Healthcare Information Systems
Page 3
<PAGE> 4
Any party hereto may change its address for purposes of this paragraph by
written notice given in the manner provided above.
18. Modification or Amendment. No amendment, change, or modification of this
Agreement shall be valid unless in writing signed by the parties hereto.
19. Entire Understanding. This document and the Exhibit attached constitute
the entire understanding and agreement of the parties, and any and all prior
agreements, understandings and representations are hereby terminated and
canceled in their entirety and are of no further force and effect.
20. Unenforceability of Provisions. If any provision of this Agreement, or any
portion thereof, is held to be invalid and unenforceable, then the remainder of
the Agreement shall nevertheless remain in full force and effect.
IN WITNESS WHEREOF the undersigned have executed this Agreement as of the day
and year first written above.
ADIS International Ltd. MPOWER Solutions Inc.
By: /s/ JOHN HENDERSON By: /s/ LORINE SWEENEY
-------------------------------- ------------------------------------
John Henderson Lorine Sweeney
Title: Director Healthcare Title: President
Information Systems
dated: 16th Sept. 1998 dated: 9/16/98
---------------------------- ---------------------------------
Page 4
<PAGE> 5
EXHIBIT A
CLINASSIST MARKET RESEARCH AND MARKET DEVELOPMENT PROJECT
SCOPE: To identify and recruit appropriate healthcare professionals, develop
structured discussion plan and conduct and report on, 2 focus groups to
validate the content, delivery and commercial assumptions of the ClinASSIST
Project as described in the attached New Product Development Proposal.
ASSUMPTIONS:
TARGET HEALTHCARE PROFESSIONALS
The target healthcare professionals for this project are as follows:
Clinicians: Hospital ward based junior staff, Hospital based ward nursing
staff, ambulatory care physicians.
Commercial: Hospital administrators, COOs, CFOs, CIOs, GPOs and government
purchasers.
CLINASSIST CONTENT: It is assumed that a focus group of target clinicians
will be shown the demonstration versions of ClinASSIST and then lead
through a structured discussion to yield the following information:
- Appropriateness and value of the core knowledge concept of providing drug
and disease information which has been made specific to some
pre-identified patient characteristics.
- Appropriateness of the core assumption that this resource would provide
80% of the information which non-super-specialist practising clinicians
require.
- The appropriateness of the broad disease subject headings i.e. does the
product provide the right type of information on diseases?
- The appropriateness of the broad drug subject headings i.e. does the
product provide the right type of information on drugs?
- The appropriateness and value of the pre-defined patient characteristics
for both diseases and drugs.
- Within each demonstrated disease or drug topic area the following:
- The relevance of the data to non-super specialist practising
clinicians.
- The style of presentation i.e. is it succinct enough?, does it
convey the information quickly enough?
- The extent of the data, is it too short, too long?
<PAGE> 6
o Agreement with the actual data? Does it appear valid, are there
disagreements with the data.
o The amount of 'drill-down' data provided. Is it enough should
there be more and if so what and how much.
CLINASSIST DELIVERY AND FORMAT CONCEPT: It is assumed that;
1. A focus group of target clinicians will be shown the demonstration
versions of ClinASSIST and then lead through a structured discussion to
yield the following information;
o The overall reaction to the product in terms of physical presentation
such as layout, type sizes, colours,
o The appropriateness of the navigation design from the initial screen
offering disease or drug information, the understanding of where
within the product the users is, clarity of understanding the context
of the data provided, i.e. patient characteristics that are applying.
o Speed and ease of use
2. A focus group of target hospital administrators/IS or IT personnel will
be shown the demonstration versions of ClinASSIST and then lead through a
structured discussion to yield the following information;
o The appropriateness of the overall Intranet concept, the use of IE 4
or Netscape 4 as browser
o The practicality of delivery to all workstations within an institution
ClinASSIST COMMERCIAL CONCEPT: It is assumed that a group of hospital
administrators/CFO/COOs, government purchasers would be shown the product
demonstration and sales plan and through structured discussion yield the
following information;
o The overall perceived value to the institution of providing the
product to all clinicians within the institution
o Degree of identification with the problems of inappropriate drug
utilisation, drug missadventure, and quality (HEDIS) reminders/actions
o The perceived differences with existing drug and disease information
resources
o The existence or otherwise of budgets for resources targeted to
clinicians as opposed to pharmacy departments
o The positioning of the product as a $[*] per institution unlimited
user resource
* Confidential Treatment Requested
2
<PAGE> 7
MARKETING PLAN: It is assumed that the marketing plan development phase would
closely review the assumption in the attached New Product Development Proposal
and correct, adjust and supplement this document.
DELIVERABLES: The deliverables are in order;
o Recruitment plan and participant lists
o Structured discussion guide for each element
o Meeting planning and logistics
o Moderation of the discussion and recording
o Focus group report
o Marketing plan
Adis will review approve and provide comments on the deliverables
PEOPLE
MPower will provide Clinical and Marketing Specialists (Mark Rangell, Patrice
Light and Bill Doutre) to develop and direct and manage the project plus
marketing and administration support from Julianne Desmond and Jennifer
Engelhardt.
Adis will provide key editorial personnel to attend the focus groups as
observers and for discussion with the participants following the structured
discussion.
PROJECT COSTS, PAYMENT AND ACCOUNTING
The project has been scoped and costed on an hourly charge basis according to
the attached spread sheets.
Adis will pay in stage payments each of one third, at commencement of the
project, at the time of the focus meetings and on receipt of the report and
marketing plan.
Adis would provide payment in advance for the third party 'out of pocket'
expenses for the meetings, this payment to be accounted for by invoices.
OTHER ASSUMPTIONS
o Project completion is expected to be [*].
* Confidential Treatment Requested
<PAGE> 8
<TABLE>
<CAPTION>
<S> <C> <C>
ClinAssist Market Research/Launch Plan
Budget Detail
Direct Research
Target Group
Size
------------
Functional/Clinical Validation Focus Group 1: Senior Clinical Decision Makers 5-7
Nursing Dept Heads, Case Mgmt Directors
Medical Directors (inpatient/ambulatory)
Focus Group 2: Functional Clinical Providers 5-7
Hospital ward-based junior staff, nursing staff
Ambulatory care physicians
Cost/Benefit Validation Focus Group 3: Commercial 5
Hospital Administrators/CFOs/COOs, GPOs
Medical Group Mgrs, Govt Purchasers
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
$ Per $ Per
Attendee # Attendees Attendee
-------- ----------- --------
Group 1 Airfare $ [*]
Lodging (1 night) $ [*]
Transportation $ [*]
Dinner (night before) $ [*]
Breakfast $ [*]
Materials/Misc. $ [*]
Stipend $ [*]
------
Subtotal $ [*] 6 $ [*]
Group 2 - All locally based Airfare $ [*]
Lodging (1 night) $ [*]
Transportation $ [*]
Lunch $ [*]
Materials/Misc. $ [*]
Stipend $ [*]
------
Subtotal $ [*] 6 $ [*]
Group 3 Airfare $ [*]
Lodging (1 night) $ [*]
Transportation $ [*]
Dinner (night before) $ [*]
Breakfast $ [*]
Materials/Misc. $ [*]
Stipend $ [*]
------
Subtotal $ [*] 5 $ [*]
Total Group Related Expenses $ [*]
Other Expenses Conf Center Rental (2 days) $ [*] 2 $ [*]
Subtotal Direct Cost $ [*]
Management Fees* $ [*]
Subtotal Direct Research $ [*]
Marketing Plan Development
Management Fees* $ [*]
Subtotal Marketing Plan Dev. $ [*]
Total $ [*]
</TABLE>
*See detail in following worksheet (Hours and Rates)
*Confidential Treatment Requested
9/22/98 Page 1
<PAGE> 9
<TABLE>
<CAPTION>
CLINICAL
PROJECT KEY MILESTONES EST. START EST. HOURS EXEC MGMT(2) DIR(2) MKTG MGR ADMIN
------- -------------- ---------- ---------- ------------ -------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Direct Research
(Focus Groups)
Functional/Clinical
Validation Identity/Recruit Panel [*] [*] [*] [*] [*]
Develop Research Scope
Pre-test
Meeting/Logistics Planning
Conduct Session
Prepare/Deliver Recap Document
Subtotal
Cost/Benefit
Validation Identify/Recruit Panel
Develop Research Scope
Pre-test
Meeting/Logistics Planning
Conduct Session
Prepare/Deliver Recap Document
Subtotal
Marketing Plan
Development Market Analysis
Competitive Review
Pricing Plan
Product Development Timetable
Marketing/Sales/Distribution Plan
Budgets/Financials
Final Document Preparation
Subtotal
Total Hours
Avg Hourly Rates
Subtotal - Direct
Research
Subtotal - Marketing
Plan Dev.
Total
</TABLE>
* Confidential Treatment Requested
Page 1
<PAGE> 1
EXHIBIT 16.1
November 2, 1999
Securities and Exchange Commission
Washington, D.C. 20549
Ladies and Gentlemen:
We were previously principal accountants for XCare.net (formerly MPOWER
Solutions Inc.) and, under the date of May 1, 1998, we reported on the financial
statements of MPOWER Solutions Inc. as of and for the years ended December 31,
1997 and 1996. We have not audited or reported on any of the financial
statements or information included in the registration statement referred to
below. On August 25, 1999, our appointment as principal accountants was
terminated. We have read XCare.net's statement included under the heading
"Change in Independent Accountants" of its Form S-1 dated November 2, 1999, and
we agree with such statements, except that we are not in a position to agree or
disagree with XCare.net's statement that the change was approved by its board of
directors and that we are not in a position to agree or disagree with
XCare.net's statement that PricewaterhouseCoopers LLP was not consulted
regarding items that involved accounting principles or the form of audit opinion
that might be rendered on XCare.net's financial statements.
Very truly yours,
(signed) KPMG LLP
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of our
report dated October 22, 1999 relating to the financial statements of XCare.net,
which appear in such Registration Statement. We also consent to the references
to us under the headings "Experts" in such Registration Statement.
PricewaterhouseCoopers LLP
Broomfield, Colorado
November 1, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 JUN-30-1999
<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 JUN-30-1999
<CASH> 198 6,518
<SECURITIES> 0 0
<RECEIVABLES> 753 524
<ALLOWANCES> 50 50
<INVENTORY> 0 0
<CURRENT-ASSETS> 979 7,076
<PP&E> 1,993 2,014
<DEPRECIATION> (1,302) (1,528)
<TOTAL-ASSETS> 2,805 8,270
<CURRENT-LIABILITIES> 6,314 2,396
<BONDS> 3,781 697
533 506
6,827 17,384
<COMMON> 0 0
<OTHER-SE> (11,153) (12,087)
<TOTAL-LIABILITY-AND-EQUITY> 2,805 8,270
<SALES> 0 0
<TOTAL-REVENUES> 2,270 1,841
<CGS> 0 0
<TOTAL-COSTS> 2,086 1,637
<OTHER-EXPENSES> 3,829 880
<LOSS-PROVISION> (50) 0
<INTEREST-EXPENSE> (437) (258)
<INCOME-PRETAX> (4,082) (934)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (4,082) (934)
<EPS-BASIC> (1.06) (0.24)
<EPS-DILUTED> (1.06) (0.24)
</TABLE>
