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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED,
EFFECTIVE OCTOBER 7, 1996)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM ________TO ________
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COMMISSION FILE NUMBER 0-22162
SIMIONE CENTRAL HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)
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DELAWARE 22-3209241
(State or other jurisdiction of incorporation (I.R.S. Employer Identification No.)
or organization)
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6600 POWERS FERRY ROAD, ATLANTA, GEORGIA 30339
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770) 644-6500
Securities registered pursuant to Section 12(b) of the Act:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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NONE NONE
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Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.001 PAR VALUE
(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No__
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Aggregate market value of the voting stock held by non-affiliates of the
Registrant, computed using the closing bid price as quoted on OTC Bulletin Board
for the Registrant's common stock, $.001 par value (the "Common Stock"), on
March 7, 1997: $21,364,837.
There were 12,009,166 shares of Common Stock outstanding at March 7, 1997.
Documents incorporated by reference in this Form 10-K: None.
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TABLE OF CONTENTS
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PAGE
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PART I
Item 1. Business.................................................... 1
Item 2. Properties.................................................. 11
Item 3. Legal Proceedings........................................... 11
Item 4. Submission of Matters to a Vote of Security Holders......... 11
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters......................................... 12
Item 6. Selected Financial Data..................................... 12
Item 7. Management's Discussion and Analysis of Financial Condition
and
Results of Operations....................................... 13
Item 8. Financial Statements and Supplementary Data................. 21
Item 9. Changes in and Disagreements with Accountants on Accounting
and
Financial Disclosure........................................ 21
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 22
Item 11. Executive Compensation...................................... 24
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 32
Item 13. Certain Relationships and Related Transactions.............. 33
PART IV
Item 14. Exhibits, Financial Statements, Financial Statement
Schedules and
Reports on Form 8-K......................................... 35
Index to Consolidated Financial Statements.................. F-1
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PART I
ITEM 1. BUSINESS
HISTORY
Central Health Management Services, Inc. ("CHMS") was incorporated in
September 1991 as a wholly-owned subsidiary of Central Health Holding Company,
Inc. ("CHHC"), a home health care provider, to provide information and
management support services to home health care providers. Central Health
Services, Inc. ("CHS"), also a wholly-owned subsidiary of CHHC, provided similar
services to home health care agencies owned by CHHC. On January 1, 1996, CHHC
transferred to CHMS at book value the assets and employees related to CHS's
information and certain clinical and financial support services. Accordingly,
the consolidated financial statements contained herein give effect to the
reorganization of these entities under common control and reflect the combined
operating results of CHMS and the transferred CHS operations. On January 17,
1996, CHHC completed a pro-rata distribution of the outstanding common stock of
CHMS to the shareholders of CHHC. On January 18, 1996, CHMS amended its articles
of incorporation to change its name to Simione Central Holding, Inc. For
purposes hereof, Simione Central Holding, Inc. will continue to be referred to
herein as CHMS.
Subsequent to the distribution, CHMS began to actively pursue a strategy
designed to enhance and expand the business solutions it could offer to home
health care providers. In January 1996, CHMS acquired the home health care
consulting division of Simione & Simione, CPAs ("Simione & Simione"), a provider
of consulting services to the home health care industry with significant
expertise in strategic planning, Medicare compliance and operational
re-engineering. On October 8, 1996, CHMS and InfoMed Holdings, Inc. ("IMHI"), a
publicly traded provider of information solutions for home health care
providers, merged in a transaction that was accounted for as a reverse
acquisition for financial reporting purposes. In connection with the merger,
IMHI issued approximately 7.9 million shares of its common stock in exchange for
all the outstanding common stock of CHMS, and the former shareholders of CHMS
thereby acquired control of IMHI. As a result, CHMS is considered the acquiring
company, and the historical financial statements of CHMS became the historical
financial statements of IMHI and include the results of operations of IMHI only
from the effective date of the merger. However, under the rules and regulations
of the Securities and Exchange Commission (the "Commission"), IMHI is deemed to
continue as the registrant for purposes of filing periodic reports with the
Commission.
Prior to the merger, shares of IMHI common stock traded on the OTC Bulletin
Board, a service provided by Nasdaq, under the symbol "IMHI." Effective December
19, 1996, IMHI changed its name to Simione Central Holdings, Inc. (the
"Company") and changed its stock symbol to "SCHI" effective December 24, 1996.
OVERVIEW
The Company is a leading provider of integrated systems and services
designed to enable home health care providers to more effectively operate their
businesses and compete in a managed care environment. The Company has developed
two systems which provide a core platform of software applications and can also
incorporate selected modules to allow customers to generate and utilize
comprehensive financial, operational and clinical information. The Company's
Shared Resource Solution offers an outsourcing opportunity which incorporates
the Company's proprietary NAHC IS system software. Under this arrangement, the
Company operates a data center which stores customer data and allows customers
real-time, secure access through a wide area communications network. The
Company's In-House Solution, STAT 2, offers similar functionality, but is
licensed to customers for use on their own computer system. In addition to these
two systems solutions, the Company's home health care consulting services assist
providers in addressing the challenges of reducing the cost of delivering care,
maintaining quality of care, streamlining operations and re-engineering
organizational structures. The Company also provides comprehensive agency
support services which include administrative, billing and collections,
training, reimbursement and financial management services, among others.
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The Company has recently introduced the following four new products: (i)
MAPPScan, a point-of-care product for its Shared Resource Solution, which uses
scanning technology to collect outcomes data by encounter and over an entire
episode of care using a consistent methodology; (ii) STAT 2 Medical Records, a
point-of-care product for its In-House Solution, which is designed to improve
productivity by using handheld units to process patient information from the
point-of-care; (iii) STATScan, a Windows-based imaging system, which scans and
stores paper forms into a customer's STAT 2 system; and (iv) TELTime, an
interactive voice response system, which records visit, mileage, payroll and
billing data from field staff using telephones in place of computers.
As of March 1, 1997, the Company had several hundred customers nationwide,
including hospital-based companies, large and small free-standing home health
care providers, alternate site care organizations and integrated delivery
systems. Major customers include Columbia/HCA Healthcare Corporation
("Columbia/HCA"), Tenet Healthcare Corporation ("Tenet"), Home Health First, a
Texas not-for-profit corporation whose members include Baylor Health Care
System, Presbyterian Healthcare Home Health Services and The Visiting Nurse
Association of Texas ("Home Health First"), Mercy Health Services, a Michigan
not-for-profit corporation ("Mercy"), and Advocate Health System ("Advocate").
INDUSTRY OVERVIEW
Home health care is one of the fastest growing segments of the health care
industry, with total estimated expenditures having increased to approximately
$35 billion in 1995, from approximately $13 billion in 1990. The increasing
importance of home health care has principally been a result of significant
economic pressures within the health care industry. In recent years, U.S. health
care expenditures have increased rapidly and exceeded $1 trillion in 1995. In
response to these escalating expenditures, payors, such as Medicare and managed
care organizations, have applied increasing pressure on physicians, hospitals
and other providers to contain costs. This pressure has led to the growth of
lower cost alternate site care, such as home health care, and to reduced
hospital admissions and lengths of stay. In addition, home health care has grown
rapidly as a result of advances in medical technology, which have facilitated
the delivery of services in alternate sites, demographic trends, such as an
aging population, and preferences among patients to receive health care in their
homes.
Home health care consists of many elements, including skilled nursing,
durable medical equipment ("DME"), intravenous and infusion therapy ("IV
Therapy") and hospice. Historically, this industry has been highly fragmented
and characterized by small, local providers offering a limited range of
services. With the advent of managed care and integrated delivery systems, home
health care providers have had to expand their geographic scope and range of
product and service offerings in order to obtain referrals. In addition, the
overall growth in the home health care industry has allowed providers to grow
and realize increased operating efficiencies. As a result of these developments,
the home health care industry has entered into a period of rapid consolidation.
Medicare currently reimburses a majority of home health care services at
amounts that cannot exceed the costs of services provided, resulting in a direct
relationship between the number of home health care visits and reimbursements.
As home health care expenditures have increased, the Health Care Financing
Administration ("HCFA"), which administers Medicare reimbursement for home
health care, has been attempting to contain these costs by a number of methods,
including a Prospective Payment System ("PPS"), which would limit reimbursement
to a fixed amount for all services rendered per episode of care. In addition to
the potential impact of PPS, the growth in the number of Medicare members
enrolling in managed care plans, which have also begun to take measures to
contain costs, will have a significant impact on how providers may operate
profitably.
As a result of consolidation and measures to address ongoing cost
pressures, home health care providers will increasingly require standardized
financial, operational and clinical information in order to compete. The Company
believes that many existing home health care information systems are inadequate
to address these needs. Generally, these systems were originally designed to
generate patient billing information and cost reports for Medicare
reimbursement, and, as a result, may be unable to provide the detailed
information required for meaningful business analyses. In addition, home health
care providers are increasingly requiring
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management expertise and specialized industry and clinical knowledge to make
informed management decisions and effectively operate their businesses.
THE SIMIONE CENTRAL SOLUTIONS
The Company offers a comprehensive set of solutions to address the changing
needs of home health care providers which include information systems and
support, consulting services and agency support services. The Company's systems
and services are designed to enable home health care providers to generate and
utilize comprehensive financial, operational and clinical information and
address organizational issues in order to make informed decisions, more
effectively operate their businesses and compete in a managed care and PPS
environment. These solutions can be packaged and customized to serve the
individual needs of customers.
[Graphic illustration listing in pyramid form the services and solutions offered
by the Company.]
STRATEGY
The Company's objective is to enhance its position as a leading provider of
solutions to the home health care industry. Principal elements of the Company's
strategy include:
- Leverage Existing Customer Base. The Company currently has a base of
several hundred customers nationwide. The Company believes that a
significant opportunity exists to cross-sell its existing systems and
services as well as introduce new systems and enhancements.
- Generate Recurring Revenue. The Company generates recurring revenue
through a combination of annually renewable maintenance agreements and
multi-year service contracts. These sources of revenue collectively
accounted for 28.5% of the Company's net revenues in 1996. The Company
also attempts to maximize recurring revenue opportunities through a
combination of periodic system enhancements and comprehensive customer
service.
- Capitalize on Changing Industry Dynamics. As the home health care
industry consolidates, the Company believes it is well positioned to
increase its market share by leveraging its existing relationships
with large providers such as Columbia/HCA and Tenet. The Company also
believes its comprehensive solutions will become increasingly
important to home health care providers as they address the challenges
presented by health care reform and as integrated delivery systems
become more prevalent.
- Expand Through Acquisitions and Strategic Alliances. Through
selective strategic acquisitions, the Company intends to continue to
expand its system and service offerings, expand its customer base and
increase its market share. The Company also intends to selectively
establish strategic alliances to expand its system and service
offerings and grow its distribution capabilities. For example, the
Company has recently entered into a marketing agreement with
International Business Machines Corporation ("IBM") to leverage IBM's
presence in the hospital and integrated delivery system marketplace.
- Broaden System and Service Lines. The Company has recently released a
Windows-based imaging system for medical records, an interactive voice
response system and two automated
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clinical point-of-care products. The Company intends to continue to develop and
enhance its systems and services, and is developing several new products and
enhancements, including a mobile data collection clinical product, currently
scheduled to be released in the third quarter of 1997.
SYSTEMS AND SERVICES
The Company provides a comprehensive set of solutions for home health care
providers through a broad range of systems and services, including: (i) two
information systems, consisting of its Shared Resource Solution and its In-House
Solution; (ii) software support services; (iii) comprehensive agency support
services; and (iv) consulting services. These systems and services are designed
to address the evolving operational, clinical, financial and strategic needs of
home health care providers as illustrated below:
[Graphic illustration enumerating the various strategic, operational, financial
and clinical needs of home health care providers.]
INFORMATION SYSTEMS
The Company offers two comprehensive and flexible software solutions to
meet various customer's needs. Each of these solutions offers similar
functionality and incorporates applications that address core requirements of
home health care providers, including: patient intake; scheduling; human
resources; accounts receivable; accounts payable; inventory management;
point-of-care; and treatment plan modules, among others. These applications are
designed to provide real-time reporting capabilities, speed information
processing, reduce redundant data entry, improve efficiencies and assist
management with making informed decisions. In addition to the core elements
common to both solutions, the Shared Resource Solution provides
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occurrence tracking, purchase management, human resources and fixed asset
management modules, while the In-House Solution provides hospice, IV Therapy,
DME, imaging, telephony and cost report modules.
[Graphic illustration of the various applications of the Shared Resource
Solution and the In-House Solution and functionality migration of the
solutions.]
Shared Resource Solution. The Company's Shared Resource Solution offers an
outsourcing opportunity which incorporates the Company's proprietary NAHC IS
system software. Under this arrangement, the Company operates a data center
which stores customer data and allows customers real-time, secure access through
a wide area communications network. The services provided by the Company include
processing access to computer and communication hardware, disaster recovery
services, new technology and capacity upgrades and software support. NAHC IS
host systems, which are maintained by Integrated Systems Solutions Corporation,
a subsidiary of IBM ("IBM Global Services"), can be accessed by customers using
their own workstations or LAN-based PCs over secure network connections, which
allow customers to input, modify, access and analyze data on a real-time basis.
The Shared Resource Solution allows customers to reduce up-front capital
costs and minimize the need for in-house technical personnel. Moreover,
customers obtain immediate expansion capabilities and automatic system upgrades
and enhancements. The Company believes that the Shared Resource Solution is
well-suited for the needs of a consolidating industry since it allows customers
to avoid having to deploy and maintain extensive networks. The Company prices
its Shared Resource Solution under two different pricing models which result in
recurring monthly user fees based on either the number of users accessing the
system or the number of billed home health care visits. Revenues derived from
contracts for these services typically range from several hundred thousand
dollars to several million dollars per year.
In-House Solution. For customers who have already made, or are planning to
make, a significant investment in a data center, wide area communications
network and information systems personnel, the Company offers its In-House
Solution, STAT 2. STAT 2 is licensed to customers for use on their own computer
system and allows them to manage their financial, operational and clinical data.
Similar to the NAHC IS system, the STAT 2 system allows a customer to exchange
clinical and financial information with external systems in either a real-time
or batch mode through interface engine technology or customized interfaces.
Customers obtain non-exclusive licenses of STAT 2 system software modules for a
license fee and contract for annual maintenance and support services. The STAT 2
system can be loaded on a customer's existing customer hardware or on new
hardware ordered by the Company on behalf of the customer for installed
delivery. License fees are determined by the number of software modules licensed
and by the number of users accessing the system and can range from thirty
thousand dollars to a few million dollars.
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Functionality Migration. The Company currently has efforts underway to
migrate the functionality of certain unique applications for accessibility under
either solution. These efforts include migration of (i) MAPP and occurrence
tracking capabilities to the STAT 2 system and (ii) hospice, IV Therapy, DME,
imaging and telephony capabilities to the NAHC IS system.
NEW PRODUCTS
MAPP. The Company has recently introduced initial versions of its Managed
Avenues of Patient Progress ("MAPP") point-of-care products. These products are
separately licensed from the NAHC IS system and provide a means of documentation
of services. MAPP collects outcomes data by encounter and over an entire episode
of care using a consistent methodology for data collection. MAPP incorporates
HCFA data elements and utilizes pre-defined pathways, which may be customized by
the user and guide patient care delivery. The Company has developed a functional
level of care model and over 80 clinical pathways related to specific medical
diagnoses. MAPP also generates cost data associated with clinical care, tracks
outcomes variances and records patient satisfaction. MAPP's clinical
functionality is based on home health care specific clinical knowledgeware
developed through years of practical application and clinical research.
The currently available version of MAPP is MAPPScan, which uses scanning
technology to input clinical data. The Company has also released a beta version
of MAPP Plus, which utilizes fully-automated front-end data collection via a
mobile, pen-based computer and has enhanced data analysis capabilities. The
Company is currently developing a version of MAPP which would integrate directly
with NAHC IS system software modules and provide users with a seamless
interface. Also under development is a palmtop version of MAPP, which would
significantly lower a customer's hardware costs.
STAT 2 Medical Records. STAT 2 Medical Records is designed to help
In-House Solution customers improve patient care while reducing costs through
improved productivity. STAT 2 Medical Records allows field staff, using handheld
point-of-care units, to enter, update and transmit patient information from
remote locations to the home office via modem connection, updating the central
STAT 2 system on a real-time basis. Customers can use STAT 2 Medical Records to
measure outcomes, establish or import clinical pathways and report on variances
to a care plan. STAT 2 Medical Records is comprised of modules which are
integrated with other clinical, financial and operational STAT 2 system software
modules for collaborative reporting and analysis.
STATScan. STATScan is a Windows-based imaging system which scans and
stores paper forms into a customer's STAT 2 system. Documents are scanned,
digitized, stored on optical disks, indexed according to user defined fields and
recalled for instant use. STATScan also provides an automated workflow
application which allows the user to define the flow of image information to
various groups within the organization. STATScan also provides increased
security and control of information, faster information retrieval and an
enhanced ability to share information in a real-time environment.
TELTime. TELTime is an interactive voice response system which records
visit, mileage, payroll and billing data from field staff using telephones in
place of computers. This data can be automatically exported into the STAT 2
system payroll and billing modules. TELTime is designed to provide users with a
more cost effective way to record data and produce records, and can accelerate a
customer's billing activities.
SERVICE SOLUTIONS
Software Support Services. The Company believes that providing
comprehensive software support services to customers is critical to its success
in the home health care industry. The Company employs 85 professionals dedicated
to this effort who provide the following services:
Implementation: Implementation services include an assessment of
existing customer business processes, project
planning, system training, business process re-
engineering and data conversion assistance.
Training: Training services are offered on a continuing basis
to existing customers either at the customer's site
or at a Company location.
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Software Support: The Company offers on-call telephone software
support seven days a week and provides maintenance
releases on a periodic basis. Releases of new STAT
2 system software enhancements are generally made
available to customers annually. NAHC IS system
software enhancements are made available to
customers as they are released.
Technical Consulting: The Company provides software customization and
integration, technical audits of the customer's
information systems, integration and network
planning, and strategic and tactical information
systems planning.
Under the In-House Solution, software support services represent a source
of recurring revenue, as these services are provided through annual renewable
service contracts. Support services for the Shared Resource Solution, however,
are included as part of the service fee paid by the customer. Other services are
generally charged on a time and materials usage basis. The Company's technical
personnel also provide on-site and on-call hardware support in conjunction with
its STAT 2 system.
Agency Support Services. For home health care providers seeking to address
the challenges posed by changing industry dynamics, the Company provides
comprehensive agency support services to supplement their core competencies. The
Company's agency support services provide day-to-day personnel outsourcing for
certain critical customer operational functions. For new customers, the Company
will initially analyze and re-engineer, as appropriate, all aspects of a
customer's home health care operation. These services are provided by over 50
home health care specialists. This combination of services is designed to enable
customers to create an efficient organizational structure that seeks to provide
both cost-effective results and promotes the delivery of high quality patient
care. Components of these services include:
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Management Oversight Clinical Program Development Compliance & Ethics Audits
Training & Development Fiscal Intermediary Relations Community Awareness Programs
Human Resources Operations/Systems Management Accounting Support
Reimbursement Planning Billing/Collection Budget Preparation/Analysis
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The Company provides agency support services under multi-year contracts.
Fees for these services are billed monthly. The Company believes the delivery of
agency support services provides another valuable opportunity to introduce its
information systems and services to an additional customer base.
Consulting Services. The Company's home health care consulting services
assist providers in addressing the challenges of a managed care and PPS
environment, such as reducing the cost of delivering care while maintaining or
improving quality of care, streamlining operational structures and
re-engineering organizational structures. The Company's consulting operations,
which were acquired in January 1996, have been providing consulting advice to
the home health care industry since 1963. The consulting staff is comprised of
25 professionals with home health care industry specific experience. Consulting
engagements generally focus on:
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Strategic Planning Marketing Studies Acquisition Due Diligence
Operational Reviews Business Valuations Quality Assurance Reviews
Reimbursement Consultation Organizational Reviews Operational Re-engineering
Medicare Compliance Medical Records Cost Report Preparation
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The Company provides consulting services on a time and materials usage
basis. The Company believes that its consulting services group effectively
complements its information systems and services, provides a valuable outlook on
the changing home health care industry and is a source of innovative ideas for
the Company's information systems enhancements. Furthermore, consulting services
are designed to build new customer relationships and provide opportunities for
the sale of additional information systems and services.
CUSTOMERS
As of March 1, 1997, the Company had several hundred customers nationwide,
including hospital-based companies, large and small free-standing home health
care providers, alternate site care organizations and integrated delivery
systems. Major customers include Columbia/HCA, Tenet, Home Health First, Mercy
and Advocate. The Company presently anticipates that Columbia/HCA will account
for a substantial portion of the Company's consolidated net revenues for the
current fiscal year. Most of the Columbia/HCA contracts
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provide that the pricing terms are subject to renegotiation in certain events if
HCFA replaces the current cost-based Medicare reimbursement system for home
health care with PPS. In addition, the Columbia/HCA contracts provide for a
reduction in the payments to the Company in the event that such payments are
determined not to be a reimbursable cost under Medicare. Although the Company
believes that such payments are reimbursable, certain components of such
reimbursements have been subject to increasing scrutiny and there can be no
assurance that payments under the Columbia/HCA contracts will not be subject to
challenge. Except for Columbia/HCA, no other customer account is expected to
account for 10% or more of the Company's consolidated net revenues during the
year ending December 31, 1997.
SALES AND MARKETING
The Company markets its systems and services through a direct sales force
which consists of two national sales managers and 11 sales representatives
located throughout the United States. The Company also employs a marketing and
sales support staff of 13 people to assist its sales force. Recognizing the
importance of maintaining good communication and obtaining valuable input from
its customers, the Company sponsors national user group meetings. Regional user
groups have also been established to discuss customer comments, suggestions,
industry trends and related system issues.
Strategic Relationships. The Company has entered into a cooperative
marketing agreement with IBM, whereby IBM health care marketing representatives
will market and receive commissions related to the sales of the Company's
systems. The Company believes that this relationship should provide additional
opportunities focused primarily on the hospital and integrated delivery system
marketplace. In addition, the Company's NAHC IS system has been exclusively
endorsed by NAHC Plus, Inc., a wholly-owned for-profit subsidiary of the
National Association for Home Care and Hospice ("NAHC"). The Company believes
that this endorsement and the Company's relationship with NAHC Plus, Inc. should
be beneficial to the Company in its marketing efforts as it provides a direct
link to the home health care industry's main trade association and its members.
The Company is also exploring other strategic alliances to broaden its sales and
marketing activities.
BACKLOG
The Company had backlog associated with its In-House Solution of $4.9
million at December 31, 1996. Backlog consists of the unrecognized portion of
contractually committed software license fees, hardware, estimated installation
fees and professional services. The length of time required to complete an
implementation depends on many factors outside the control of the Company,
including the state of the customer's existing information systems and the
customer's ability to commit the personnel and other resources necessary to
complete the implementation process. As a result, the Company may be unable to
predict accurately the amount of revenue it will recognize in any period and,
therefore, can make no assurances that the amounts in backlog will be recognized
in the next twelve months.
TECHNOLOGY
The NAHC IS host systems, built around IBM AS/400 RISC technology, are
located in a secure and commercially hardened IBM Global Services data center
site. Access to these host systems is provided via a secure, fully-managed,
multi-protocol wide area network, which is also maintained by IBM Global
Services. Customers can interface with the NAHC IS system through a wide range
of deployable site/desktop technologies. The NAHC IS system also incorporates
certain financial applications provided by Infinium Software, Inc. (formerly
known as Software 2000, Inc.).
The STAT 2 system operates on multiple operating systems and is designed
for use on microcomputers, LAN-based PCs, IBM RS/6000 and DEC Alpha hardware.
The STAT 2 system can be implemented on client/server or host/dumb terminal
architecture and offers SQL-compliant databases in both configurations. The
system allows any Windows SQL report writer to access the STAT 2 system database
and to merge data with other customer SQL-compliant databases. Similar to the
NAHC IS system, the STAT 2 system allows a customer to exchange clinical and
financial information with external systems in either a real-time or batch mode
through interface engine technology or customized interfaces.
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The Company's systems are dependent upon many third-party software and
hardware products and related services, including Infinium Software, Inc. and
IBM Global Services. There can be no assurance that financial or other
difficulties experienced by such third-party vendors will not have an adverse
effect on the Company's abilities to provide its systems or that the Company
will be able to replace such third-party products and services if they become
unavailable.
RESEARCH AND DEVELOPMENT
The Company maintains a staff of approximately 70 programmers, systems
analysts, quality assurance analysts and documentation specialists who monitor
developments in the computer software and health care industries and who
continuously work to enhance the Company's systems. The Company's research and
development expenses were approximately $5.7, $2.9 and $2.2 million for the
years ended 1996, 1995 and 1994, respectively. In addition, the Company incurred
approximately $12.6 million of purchased in-process research and development
expense in 1996 related to the merger with IMHI.
NAHC IS system research and development plans include integration of the
MAPP handheld technology, introduction of standards-based database technology,
integration compatibility with other systems, incorporation of fifth generation
design methodologies and implementation of open architecture. STAT 2 system
research and development plans include upgrading key modules to a graphical user
interface. Additionally, STATScan is being enhanced with data capture
capabilities which are expected to enable customers to eliminate time card and
billing data entry, thereby reducing staff costs.
Under joint development for both the NAHC IS and STAT 2 systems are two new
features. The first is a mobile client, based on Lotus Notes, which could become
web-enabled and operate as a laptop or portable device that supports Windows CE.
The second feature would allow a customer's staff to scan medical records into
the host application to reduce redundant data entry, providing a cost-effective
approach for customers whose business model does not support full deployment of
handheld technology.
The Company recognizes the need to respond to the rapid technological
change that is occurring in the software and health care industries. There can
be no assurance, however, that the Company will be able to develop products on a
timely basis or that its future products will fully address the needs of its
current or prospective customers.
COMPETITION
Competition in the market for home health care information systems and
services is intense and is expected to increase. The Company believes that the
primary factors affecting competition are system performance and reliability,
customer support, service, system flexibility and ease of use, pricing,
potential for providing enhancements, reputation and financial stability. The
Company's competitors include other providers of home health care information
systems and services, management companies and home health care consulting
firms. Furthermore, other major health care information companies not presently
offering home health care information systems, or major information system
companies not currently in the health care industry, could develop the
technology and enter the Company's markets. The Company believes its most
significant competitors are Delta Health Systems (owned partially by Shared
Medical Systems), Springfield Products Group (formerly known as Management
Software, Inc. and owned by HBO & Company), Patient Care Technologies, Inc.
(partially owned by Meditec), Home Care Information Systems, Inc. (recently
acquired by Medic Computer Systems, Inc.), and the home health care management
division of Olsten Corp. Increased competition could result in price reductions,
reduced gross margins and loss of market share, any of which could materially
adversely affect the Company's business, financial condition and results of
operations. In addition, many of the Company's competitors and potential
competitors have significantly greater financial, technical, product
development, marketing and other resources and market recognition than the
Company. Many of the Company's competitors also currently have, or may develop
or acquire, substantial installed customer bases in the home health care
industry. As a result of these factors, the Company's competitors may be able to
respond more quickly to new or emerging technologies and changes in customer
requirements or to devote greater resources to the development, promotion and
sale of their systems and services than the Company. There can be no assurance
that the Company will be able to compete successfully against current
9
<PAGE> 12
and future competitors or that competitive pressures faced by the Company will
not materially adversely affect its business, financial condition and results of
operations.
PROPRIETARY RIGHTS AND PRODUCT PROTECTION
The Company has registered the service mark "InfoMed" and owns the
copyrights on its STAT 2 system. The Company also has pending applications to
register trademarks related to its MAPP product. The Company depends upon a
combination of trade secret, copyright and trademark laws, license agreements,
nondisclosure and other contractual provisions and various security measures to
protect its proprietary rights. There can be no assurance that the legal
protections afforded to the Company or the precautions taken by the Company will
be adequate to prevent misappropriation of the Company's technology. In
addition, these protections do not prevent independent third-party development
of functionally equivalent or superior technologies, systems or services, or the
obtaining of a patent with respect to the Company's technology by third parties.
Any infringement or misappropriation of the Company's proprietary software could
have a material adverse effect on the Company. As the number of home health care
software information systems increases and the functionality of these systems
further overlap, health care information systems may increasingly become subject
to infringement claims. There can be no assurance that third parties will not
assert infringement claims against the Company in the future with respect to
current or future systems. There has been substantial litigation regarding
copyright, patent and other intellectual property rights involving computer
software companies. Any claims or litigation, with or without merit, could be
costly and could result in a diversion of management's attention which could
have a material adverse effect on the Company's business, financial condition
and results of operations. Adverse determinations in such claims or litigation
may require the Company to obtain a license and/or pay damages, which could also
have a material adverse effect on the Company's business, financial condition
and results of operations.
GOVERNMENT REGULATION AND HEALTH CARE REFORM
The health care industry is subject to changing political, economic and
regulatory influences that may affect the procurement practices and operation of
home health care organizations. During the past several years, the United States
health care industry has been subject to an increase in governmental regulation
of, among other things, reimbursement rates, and certain proposals to reform
various aspects of the United States health care system have periodically been
considered by Congress. These proposals may result in increased government
involvement in home health care and otherwise change the operating environment
for the Company's customers. Home health care organizations may react to these
proposals and the uncertainty surrounding such proposals by curtailing or
deferring investments in the Company's systems and services. The Company cannot
predict what impact, if any, such factors might have on its business, financial
condition or results of operations.
The confidentiality of patient records and the circumstances under which
such records may be released for inclusion in the Company's databases is subject
to substantial regulation by state governments and certain federal legislation
governing specialized medical information and records. Although compliance with
these laws and regulations is principally the responsibility of the hospital,
physician or other home health care provider with access to the Company's
information systems, regulations governing patient confidentiality rights are
evolving rapidly. For example, the Health Insurance Portability and
Accountability Act of 1996 includes provisions directing the Secretary of the
Department of Health and Human Services to adopt standards governing the
electronic transmission of data in connection with a number of transactions
involving health information, including submission of health claims. These
standards are to cover security measures and safeguards with respect to health
information, as well as standardization of data, assignment of identifiers and
authentication of electronic signatures. 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 additional security measures that may be of substantial cost to the
Company. There can be no assurance that changes to state or federal laws will
not materially restrict the ability of home health care providers to submit
information from patient records to the Company's systems.
10
<PAGE> 13
The United States Food and Drug Administration (the "FDA") is responsible
for assuring the safety and effectiveness of medical devices under the Federal
Food, Drug and Cosmetic Act. Computer products are subject to regulation when
they are used or are 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. Although the
Company believes that its systems are not subject to FDA regulation, the FDA
could determine in the future that predictive applications of the Company's
systems could make them clinical decision tools subject to FDA regulation.
Compliance with FDA regulations could be burdensome, time consuming and
expensive. The Company also could become subject to future legislation and
regulations concerning the manufacture and marketing of medical devices and
health care software systems. These could increase the costs and time necessary
to market new systems and could affect the Company in other respects not
presently foreseeable. The Company cannot predict the effect of possible future
legislation and regulation.
EMPLOYEES
As of March 1, 1997, the Company employed approximately 315 employees. The
Company believes that its future success depends in large part upon recruiting,
motivating and retaining highly skilled and qualified employees in all aspects
of the Company's business. None of the Company's employees is represented by a
labor union. The Company believes that its employee relations are good.
ITEM 2. PROPERTIES
The Company's principal executive offices are located at 6600 Powers Ferry
Road, Atlanta, Georgia 30339. The principal executive offices consist of
approximately 61,940 square feet under two separate subleases that expire on
December 31, 1997 and December 31, 2002.
The Company also leases approximately 20,291 square feet of office space in
Pompano Beach, Florida pursuant to a lease that expires on December 31, 2000,
and approximately 6,500 square feet of office space in Hamden, Connecticut
pursuant to a month-to-month lease. The landlords of both of these offices are
companies comprised of certain directors and related parties of the Company. See
"Item 13. Certain Relationships and Related Transactions." In addition, the
Company leases small offices in Framingham, Massachusetts and Pennington, New
Jersey.
The Company believes that its present facilities are adequate to meet the
Company's current and foreseeable needs.
ITEM 3. LEGAL PROCEEDINGS
While the Company is periodically involved in litigation incidental to its
business, there are no material legal proceedings to which the Company or any of
its subsidiaries is a party that would have a material adverse effect on the
business, financial condition and results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
11
<PAGE> 14
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Common Stock of the Company has been traded on the OTC Bulletin Board,
a service provided by Nasdaq, under the symbol SCHI since December 24, 1996, and
prior thereto traded on the OTC Bulletin Board under the symbol IMHI from
December 21, 1995 to December 24, 1996. Prior to December 21, 1995, the Common
Stock traded on the Nasdaq SmallCap Market under the symbol IMHI. As of March 7,
1997, the Common Stock was held by approximately 120 holders of record. The
table below sets forth the reported quarterly high and low sales prices for the
Common Stock on the Nasdaq SmallCap Market for the period January 1, 1995 to
December 20, 1995, and the quarterly high and low bid prices for the Common
Stock on the OTC Bulletin Board for the period December 21, 1995 to December 31,
1996, and also takes into account the change from the Nasdaq SmallCap Market to
the OTC Bulletin Board. In addition, over-the-counter prices reflect
inter-dealer prices, without retail mark-up, mark-down or commission, and may
not necessarily represent actual transactions.
<TABLE>
<CAPTION>
1995 1996
---------------- ---------------
HIGH LOW HIGH LOW
------ ----- ----- -----
<S> <C> <C> <C> <C>
First Quarter............................................ $2 5/8 $2 $1 3/4 3/4
Second Quarter........................................... 2 5/8 1 1/2 3 1/4 7/8
Third Quarter............................................ 2 1/4 7/8 5 3/8 1 7/8
Fourth Quarter........................................... 1 5/16 1 6 5/8 4
</TABLE>
The Company has never declared or paid any cash dividends on its Common
Stock. The Company currently intends to retain future earnings, if any, for
future growth and does not anticipate paying any cash dividends in the
foreseeable future.
On October 8, 1996, CHMS and IMHI merged in a transaction that was
accounted for as a reverse acquisition for financial reporting purposes. In
connection with the merger, IMHI issued approximately 7.9 million shares of its
common stock in exchange for all the outstanding common stock of CHMS, and the
former shareholders of CHMS thereby acquired control of IMHI. The IMHI common
stock issued in connection with the merger was not registered with the
Commission upon reliance on Section 4(2) under the Securities Act of 1933, as
amended (the "Securities Act"). Accordingly, the IMHI common stock received in
connection with the merger is restricted stock and subject to Rule 144 under the
Securities Act. IMHI shareholder approval was not required or obtained in
connection with the merger.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial data of the
Company. The selected consolidated financial data in the table as of and for the
years ended December 31, 1993, 1994, 1995 and 1996 are derived from the audited
consolidated financial statements of the Company. The selected consolidated
financial data as of and for the year ended December 31, 1992 are derived from
unaudited financial statements. The selected consolidated financial data as of
and for the year ended December 31, 1996 includes the operating results of
Simione & Simione acquired effective January 1, 1996 and IMHI for the period
October 8, 1996 (the effective date of the merger) to December 31, 1996. As of
and for the years ended December 31, 1992, 1993, 1994 and 1995, the Company was
a subsidiary of CHHC. The data should be read
12
<PAGE> 15
in conjunction with "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Consolidated Financial Statements
and related Notes included herein.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------
1992 1993 1994 1995 1996
------ ------ ------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues:
Information services........................ $ 721 $1,891 $ 4,875 $ 5,387 $ 14,849
Systems..................................... -- -- -- -- 459
Support and consulting services............. 1,704 3,317 7,235 7,835 10,687
------ ------ ------- ------- --------
Total net revenues.................. 2,425 5,208 12,110 13,222 25,995
Costs and expenses:
Costs of information services............... 596 1,343 2,492 2,630 8,258
Costs of systems............................ -- -- -- -- 346
Costs of support and consulting services.... 1,366 2,985 5,202 5,524 6,094
Selling, general and administrative......... 262 810 2,959 3,095 7,037
Research and development.................... 125 276 2,165 2,929 5,677
Amortization and depreciation............... -- -- -- -- 785
Purchased in-process research and
development.............................. -- -- -- -- 12,574
Severance and other restructuring charges... -- -- -- -- 1,215
------ ------ ------- ------- --------
Total costs and expenses............ 2,349 5,414 12,818 14,178 41,986
------ ------ ------- ------- --------
Income (loss) from operations................. 76 (206) (708) (956) (15,991)
Other income (expense):
Interest expense............................ -- -- -- -- (115)
Interest and other income................... -- -- -- -- 207
------ ------ ------- ------- --------
Net income (loss)................... $ 76 $ (206) $ (708) $ (956) $(15,899)
====== ====== ======= ======= ========
Net income (loss) per share(1)...... $ 0.01 $(0.03) $ (0.12) $ (0.16) $ (1.85)
====== ====== ======= ======= ========
Weighted average common shares(1)............. 5,990 5,990 5,990 5,990 8,576
====== ====== ======= ======= ========
DECEMBER 31,
----------------------------------------------
1992 1993 1994 1995 1996
------ ------ ------- ------- --------
(IN THOUSANDS)
BALANCE SHEET DATA:
Cash and cash equivalents................... $1,243 $2,620 $ 463 $ 323 $ 3,385
Working capital (deficit)................... 77 (130) (837) 189 (1,203)
Total assets................................ 1,568 2,907 1,340 1,828 18,776
Long-term obligations....................... -- -- -- -- 2,986
Shareholders' equity (deficit).............. 77 (130) (837) 650 4,680
</TABLE>
- ---------------
(1) The number of shares used to compute the net income or loss per share
reflects the 5,989,712 shares issued in the reorganization of the Company on
January 17, 1996. See Notes 1 and 12 of the Notes to Consolidated Financial
Statements.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Certain statements set forth in Management's Discussion and Analysis of
Financial Condition and Results of Operations constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act and Section
21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
are subject to the safe harbor created by such sections. When used in this
report, the words "believe," "anticipate," "estimate," "expect," and similar
expressions are intended to identify forward-looking statements. Although the
Company believes that the expectations reflected in such forward-looking
statements are
13
<PAGE> 16
reasonable, it can give no assurance that such expectations will prove to be
correct. The Company's actual results may differ significantly from the results
discussed in such forward-looking statements. When appropriate, certain factors
that could cause results to differ materially from those projected in the
forward looking statements are enumerated. This Management's Discussion and
Analysis of Financial Condition and Results of Operations should be read in
conjunction with the Company's consolidated financial statements and the notes
thereto.
HISTORY
Central Health Management Services, Inc. ("CHMS") was incorporated in
September 1991 as a wholly-owned subsidiary of Central Health Holding Company,
Inc. ("CHHC"), a home health care provider, to provide information and
management support services to home health care providers. Central Health
Services, Inc. ("CHS"), also a wholly-owned subsidiary of CHHC, provided similar
services to home health care agencies owned by CHHC. On January 1, 1996, CHHC
transferred to CHMS at book value the assets and employees related to CHS's
information and certain clinical and financial support services. Accordingly,
the consolidated financial statements contained herein give effect to the
reorganization of these entities under common control and reflect the combined
operating results of CHMS and the transferred CHS operations. On January 17,
1996, CHHC completed a pro-rata distribution of the outstanding common stock of
CHMS to the shareholders of CHHC. On January 18, 1996, CHMS amended its articles
of incorporation to change its name to Simione Central Holding, Inc. For
purposes hereof, Simione Central Holding, Inc. will continue to be referred to
herein as CHMS.
In January 1996, CHMS acquired all of the assets of the home health care
consulting division of Simione & Simione, CPAs ("Simione & Simione") for $2
million in cash. The entire purchase price was allocated to goodwill and is
being amortized over a ten year period. Simione & Simione provides consulting
services to the home health care industry with significant expertise in
strategic planning, Medicare compliance and operational re-engineering.
On October 8, 1996, CHMS and InfoMed Holdings, Inc. ("IMHI"), a publicly
traded provider of information solutions for home health care providers, merged
in a transaction that was accounted for as a reverse acquisition for financial
reporting purposes. In connection with the merger, IMHI issued approximately 7.9
million shares of its common stock in exchange for all the outstanding common
stock of CHMS and the former shareholders of CHMS thereby acquired control of
IMHI. As a result, CHMS is considered the acquiring company, and the historical
financial statements of CHMS became the historical financial statements of IMHI
and include the results of operations of IMHI only from the effective date of
the acquisition. On December 19, 1996, IMHI changed its name to Simione Central
Holdings, Inc. (the "Company"). The Company accounted for the acquisition using
the purchase method. Accordingly, the $16.8 million purchase price was allocated
to the assets acquired and liabilities assumed based upon their estimated fair
values, with approximately $12.6 million allocated to purchased in-process
research and development, which was written off as of the date of the
acquisition. In addition, approximately $4.2 million of the purchase price was
allocated to certain identifiable intangible assets and will be amortized over
the related assets' useful lives which range from 4 to 11 years.
As a result of the change in focus of the Company's business from providing
services to affiliates of CHHC, the Company incurred severance and certain other
restructuring costs totalling approximately $1.2 million in the fourth quarter
of 1996. These expenses primarily relate to the severance of several key
employees and costs incurred in a buyout of an equipment lease no longer useful
to the Company.
OVERVIEW
The Company is a leading provider of integrated systems and services
designed to enable home health care providers to more effectively operate their
businesses and compete in an environment that is increasingly characterized by
managed care and cost containment initiatives. The Company has developed two
systems which provide a core platform of software applications and incorporate
selected modules to allow customers to generate and utilize comprehensive
financial, operational and clinical information. The Company's Shared
14
<PAGE> 17
Resource Solution offers an outsourcing opportunity which incorporates the
Company's proprietary NAHC IS software applications. Under this arrangement, the
Company operates a data center which stores customer data and allows customers
real-time, secure access through a wide area communications network. The
Company's In-House Solution, STAT 2, offers similar functionality, but is
licensed to customers for use on their own computer system. In addition to these
two system solutions, the Company's home health care consulting services assist
providers in addressing the challenges of reducing the cost of delivering care,
maintaining quality of care, streamlining operations and re-engineering
organizational structures. The Company also provides comprehensive agency
support services which include administrative, billing and collections,
training, reimbursement and financial management services, among others.
As of March 1, 1997, the Company had several hundred customers nationwide.
The Company enters into multi-year contracts (generally 3 to 5 years) with
its customers in connection with its Shared Resource Solution and its provision
of agency support services. In general, these contracts provide for the payment
of monthly fees based on the number of billed home care visits made by the
customer. Revenues derived under these contracts typically range from several
hundred thousand dollars to several million dollars per year. As a result, the
loss of any of these contracts could have a material adverse impact on the
Company's business, financial condition and results of operations.
The Company sells its In-House Solution, STAT 2, pursuant to non-exclusive
license agreements which provide for the payment of a one-time license fee. In
accordance with SOP 91-1, these revenues are recognized when products are
delivered and the collectibility of fees is probable, provided that no
significant obligations remain under the contract. Revenues derived from the
sale of software products requiring significant modification or customization
are recognized based upon the percentage of completion method. The price of the
Company's In-House Solution varies depending on the number of software modules
licensed and the number of users accessing the system and can range from thirty
thousand dollars to a few million dollars. The Company generally requires
payment of a deposit upon the signing of a customer order as well as certain
additional payments prior to delivery. As a result, the Company's balance sheet
reflects significant customer deposits.
Third party software and computer hardware revenues are recognized when the
related products are shipped. Software support agreements are generally
renewable for one year periods, and revenue derived from such agreements is
recognized ratably over the period of the agreements. The Company has
historically maintained high renewal rates with respect to its software support
agreements. The Company charges for software implementation, training and
technical consulting services as well as management consulting services on an
hourly or daily basis. The price of such services vary depending on the level
and expertise of the related professionals. These revenues are recognized as the
related services are performed.
The Company typically experiences long sales cycles for information systems
and agency support services, which may extend up to one year. In addition, the
implementation period related to its information systems can range from three
months to one year.
The Company defines recurring revenues as revenues derived under multi-year
contracts in addition to annual software support agreements. Such revenues were
approximately $5.8 million, or 58.0%, of total net revenues for the three months
ended December 31, 1996 and $7.4 million, or 28.5%, for the year ended December
31, 1996. The Company anticipates that recurring revenues may represent a
greater portion of its total net revenues in the foreseeable future.
For the years ended December 31, 1994 and 1995, and for the ten months
ended October 31, 1996, 70.8%, 68.6% and 62.8%, respectively, of the Company's
total net revenues were derived from contracts with home health care agencies
wholly-owned by CHHC. These contracts were terminated October 31, 1996, in
connection with the sale of CHHC to Columbia/HCA. Revenues derived from these
contracts were recorded in an amount equal to the costs of the services
provided, and, as a result, the Company recognized no operating profit under
these contracts. Subsequent to the sale of CHHC to Columbia/HCA, affiliates of
Columbia/HCA entered into multi-year contracts with the Company to provide its
Shared Resource Solution as well as agency support services to certain of the
home health care agencies formerly owned by CHHC. The
15
<PAGE> 18
Company believes that its current contracts with the Columbia/HCA affiliates
were negotiated on an arms-length basis. The historical results of operations
attributable to the terminated CHHC contracts may not therefore be indicative of
future results of operations. For the three months ended December 31, 1996, the
Company derived 38.6% of its total net revenues from contracts with affiliates
of Columbia/HCA which were entered into on November 1, 1996. The loss of any of
the Columbia/HCA contracts could have a material adverse impact on the Company's
business, financial position and results of operations.
The Company believes that continued development and enhancement of its
software systems is critical to its future success, and anticipates that the
total amount of research and development expense will continue to increase, but
should decrease as a percentage of total net revenues as the Company grows its
revenues. Costs incurred to establish the technological feasibility of computer
software products are expensed as incurred. The Company's policy is to
capitalize costs incurred between the point of establishing technological
feasibility and general release only when such costs are material. As of
December 31, 1996, the Company had no capitalized computer software development
costs.
BACKLOG
The Company had backlog associated with its In-House Solution of $4.9
million on December 31, 1996. Backlog consists of the unrecognized portion of
contractually committed software license fees, hardware, estimated installation
fees, and professional services. The length of time required to complete an
implementation depends on many factors outside the control of the Company,
including the state of the customers existing information systems and the
customers ability to commit the personnel and other resources necessary to
complete the implementation process. As a result, the Company may be unable to
predict accurately the amount of revenue it will recognize in any period and
therefore can make no assurances that the amounts in backlog will be recognized
in the next twelve months.
RESULTS OF OPERATIONS
The following table sets forth, for the years indicated, certain items from
the consolidated statements of operations expressed as a percentage of net total
revenues. The Company's historical operating results are not necessarily
indicative of the results for any future period.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Net revenues:
Information services...................................... 40.3% 40.7% 57.1%
Systems................................................... -- -- 1.8
Support and consulting services........................... 59.7 59.3 41.1
----- ----- -----
Total net revenues................................ 100.0 100.0 100.0
Costs and expenses:
Costs of information services............................. 20.5 19.9 31.8
Costs of systems.......................................... -- -- 1.3
Costs of support and consulting services.................. 43.0 41.8 23.4
Selling, general and administrative....................... 24.4 23.4 27.1
Research and development.................................. 17.9 22.1 21.8
Amortization and depreciation............................. -- -- 3.0
Purchased in-process research and development............. -- -- 48.4
Severance and other restructuring charges................. -- -- 4.7
----- ----- -----
Total costs and expenses.......................... 105.8 107.2 161.5
----- ----- -----
Loss from operations........................................ (5.8) (7.2) (61.5)
Other income (expense):
Interest expense.......................................... -- -- (0.5)
Interest and other income................................. -- -- 0.8
----- ----- -----
Net loss.......................................... (5.8)% (7.2)% (61.2)%
===== ===== =====
</TABLE>
16
<PAGE> 19
YEARS ENDED DECEMBER 31, 1996 AND 1995
Net Revenues
Total net revenues increased $12.8 million, or 97.0%, to $26.0 million in
1996 from $13.2 million in 1995. This increase in total net revenues includes
$3.3 million attributable to the business acquired in the Simione & Simione
acquisition completed in January 1996, $2.4 million attributable to the business
acquired in the IMHI acquisition completed in October 1996, a net increase of
$3.0 million in revenues from contracts with affiliates of CHHC, and the
remaining increase principally attributable to revenues from new customers.
Net revenues from information services include revenues from the Company's
Shared Resource Solution, software support, implementation, training and
technical consulting services. These revenues increased $9.4 million, or 174.1%,
to $14.8 million in 1996 from $5.4 million in 1995. This increase includes $1.9
million attributable to the business acquired in the IMHI acquisition, $5.3
million from contracts with affiliates of CHHC, and the remaining increase
primarily attributable to revenues from new customers.
Net revenues from system sales include revenues from software licenses and
computer hardware sales. Net revenues from system sales were $500,000 in 1996
and were attributable entirely to the business acquired in the IMHI acquisition.
Net revenues from support and consulting services include revenues from
management consulting and agency support services. These revenues increased $2.9
million, or 37.2%, to $10.7 million in 1996 from $7.8 million in 1995. This
increase includes $3.8 million in revenues from new and existing customers and
$3.3 million attributable to the business acquired in the Simione & Simione
acquisition, offset by decreases of $2.3 million from agency support revenues
from affiliates of CHHC, and $1.9 million in agency support revenues from
Healthfield, Inc. (See Note 14 to consolidated financial statements).
Cost of Revenues
Total cost of revenues increased $6.5 million, or 79.3%, to $14.7 million
in 1996 from $8.2 million in 1995. As a percentage of total net revenues, total
cost of revenues decreased to 56.5% in 1996 from 61.7% in 1995. This dollar
increase includes $2.8 million in costs attributable to the business acquired in
the Simione & Simione acquisition, $800,000 in costs attributable to the
business acquired in the IMHI acquisition and the remaining increase primarily
resulting from the increased cost of computer and communication technology.
Cost of information services increased $5.7 million, or 219.2%, to $8.3
million in 1996 from $2.6 million in 1995. As a percentage of information
services revenue, these costs increased to 55.7% in 1996 from 48.1% in 1995. The
increase relates principally to a $4.0 million increase in data center and
communications network costs as the Company continued to maintain its own data
center and communications network while simultaneously converting to a data
center and communications network provided by IBM Global Services. As a result
of the phase-out of its data center and communications network, the Company
anticipates that the fixed cost component of these expenses should decrease as a
percentage of related revenues in the future. This $4.0 million increase
includes a one-time transition and conversion charge of $900,000 associated with
the IBM Global Services contract. Additionally, the increase in the cost of
information services includes $500,000 in costs attributable to the business
acquired in the IMHI acquisition.
The cost of system sales was $300,000 in 1996 and was attributable entirely
to the business acquired in the IMHI acquisition.
Cost of support and consulting services increased $600,000, or 10.9%, to
$6.1 million in 1996 from $5.5 million in 1995. As a percentage of support and
consulting services revenues, these costs decreased to 57.0% in 1996 from 70.5%
in 1995. The dollar increase in these costs includes $2.8 million associated
with the business acquired in the Simione & Simione acquisition, offset by a
$1.8 million cost reduction resulting from the termination of the agency support
contract with Healthfield, Inc. The reduction as a percentage of support and
consulting services revenues results from the reduction in revenues from
contracts with CHHC and Healthfield, Inc. which were priced at the cost of
services provided.
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<PAGE> 20
Selling, General and Administrative
Selling, general and administrative expenses increased $3.9 million to $7.0
million in 1996 from $3.1 million in 1995. As a percentage of total net
revenues, selling, general, and administrative expenses were 27.1% in 1996
compared with 23.4% in 1995. These increases were attributable principally to
$1.1 million in cost related to the business acquired in the IMHI acquisition
and a $1.2 million increase in sales and marketing costs primarily associated
with the marketing rollout of the Company's Shared Resource Solution. The
remaining increase relates to additional salary and benefit costs as well as
administrative infrastructure costs associated with establishing the Company as
a separate business entity from CHHC. As the Company continues to expand its
sales and administrative infrastructure, the Company believes that selling,
general and administrative expenses should continue to increase in aggregate
dollars.
Research and Development
Research and development expenses increased $2.8 million to $5.7 million in
1996 from $2.9 million in 1995. As a percentage of total net revenues, research
and development expenses remained constant at 21.8% in 1996 and 22.1% in 1995.
The dollar increase was attributable principally to $1.7 million in increased
salary and benefit costs associated with the Company's software enhancement
efforts and $400,000 related to the business acquired in the IMHI acquisition.
The Company anticipates that the total dollar amount of research and development
expense will continue to increase although such expenses should not increase as
a percentage of total net revenues assuming that the Company's revenues continue
to increase in the future.
Purchased In-Process Research and Development
In connection with the acquisition of IMHI, the purchase price of $16.8
million was allocated based on relative fair value of the assets acquired and
liabilities assumed. Pursuant to a study conducted by an independent third party
valuation firm, $12.6 million of the purchase price was allocated to purchased
in-process research and development and, in accordance with generally accepted
accounting principles, was charged to operations as it was not deemed to have
reached technological feasibility and had no alternative future use. Subsequent
to the acquisition of IMHI, the Company completed the development of certain in-
process versions of software products and has scheduled further enhancements to
each of these products. Additionally, the Company has a two year development
plan to enhance many of its software modules of the Company's STAT 2 system. It
is anticipated that the Company will incur a significant amount of research and
development expense in connection with the completion of its development plans.
Severance and Other Restructuring Charges
As a result of the change in focus of the Company's business from providing
services to affiliates of CHHC, the Company incurred severance and certain other
restructuring costs totalling $1.2 million in the fourth quarter of 1996. These
expenses primarily relate to the severance of several key employees and costs to
buyout a lease of equipment no longer useful to the Company.
Amortization and Depreciation
Amortization and depreciation for 1996 includes $200,000 attributable to
the Simione & Simione acquisition in January 1996, $200,000, representing three
months' amortization, attributable to the IMHI acquisition in October 1996, and
$400,000 associated with the depreciation and amortization of purchased
software, furniture, and equipment.
Other Income (Expense)
Interest expense in 1996 of $100,000 resulted from borrowings under the
Company's line of credit agreements and capital lease obligations. Interest
income of $200,000 in 1996 resulted from interest earned on stock subscription
receivables and cash balances.
18
<PAGE> 21
Income Taxes
The Company has not incurred or paid any income taxes since its inception.
At December 31, 1996, the Company had net operating loss ("NOL") carryforwards
for federal and state income tax purposes of approximately $6.0 million, which
will expire at various dates through 2011, if not utilized. The Company also has
research and development and alternative minimum tax credits ("tax credits") of
approximately $96,000 available to reduce future income tax liabilities. The Tax
Reform Act of 1986, as amended, contains provisions that limit the NOL and tax
credit carryforwards available to be used in any given year when certain events
occur, including additional sales of equity securities and other changes in
ownership. As a result, certain of the NOL and tax credit carryforwards may be
limited as to their utilization in any year. The Company has concluded that it
is more likely than not that these NOL and tax credit carryforwards will not be
realized based on a weighing of available evidence at December 31, 1996, and as
a result a 100% deferred tax valuation allowance has been recorded against these
assets. Of the $2.0 million deferred tax asset at December 31, 1996, $500,000
relates to the IMHI acquisition and, if and when realized, will result in a
credit to intangible assets recorded in the acquisition.
YEARS ENDED DECEMBER 31, 1995 AND 1994
Net Revenues
Total net revenues increased $1.1 million, or 9.1%, to $13.2 million in
1995 from $12.1 million in 1994. This increase was principally attributable to
revenues from new customers.
Net revenues from information services increased $500,000, or 10.2%, to
$5.4 million in 1995 from $4.9 million in 1994. Net revenues from support and
consulting services increased $600,000, or 8.3%, to $7.8 million in 1995 from
$7.2 million in 1994.
Cost of Revenues
Total cost of revenues increased $500,000, or 6.5%, to $8.2 million in 1995
from $7.7 million in 1994. As a percentage of total net revenues, total cost of
revenues decreased to 61.7% in 1995 from 63.5% in 1994. The dollar increase
relates principally to increases in salary and benefits expenses.
Selling, General and Administrative
Selling, general and administrative expenses increased $100,000 to $3.1
million in 1995 from $3.0 million in 1994. As a percentage of total net
revenues, selling, general, and administrative expenses were 23.4% in 1995
compared with 24.4% in 1994.
Research and Development
Research and development expenses increased $700,000 to $2.9 million in
1995 from $2.2 million in 1994. As a percentage of total net revenues, research
and development expenses were 22.1% in 1995 and 17.9% in 1994. The dollar
increase is attributable principally to increased salary, benefit and contract
programmer costs associated with the Company's software enhancement efforts.
SELECTED QUARTERLY FINANCIAL RESULTS
The Company's quarterly operating results have been and will likely
continue to be subject to significant fluctuations. The Company believes that
the acquisitions of Simione & Simione and IMHI may cause a seasonal pattern in
its operating results in the future. Additionally, revenues can also be expected
to vary significantly as a result of acceleration or delay of system
implementations due to customer requirements or other factors beyond the
Company's control, fluctuations in demand for existing systems and services and
the Company's ability to manage successfully any future growth. The sales cycles
related to its systems offerings and agency support contracts can be long and
difficult to predict, resulting in variability of revenues. The unpredictability
of revenues could in any quarter result in a shortfall relative to quarterly
expectations. Many other factors may contribute to fluctuations in the Company's
operating results. Accordingly, the Company
19
<PAGE> 22
believes that period-to-period comparisons of results of operations are not
necessarily meaningful and should not be relied upon as any indication of future
performance.
The following table sets forth certain unaudited consolidated quarterly
financial data for each of the eight quarters for the period ended December 31,
1996. This information is unaudited, but, in the opinion of the Company's
management, includes all adjustments, consisting only of normal recurring
adjustments, necessary for fair presentation of the information in accordance
with generally accepted accounting principles. These quarter results of
operations are not necessarily indicative of future operating results.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1995 1995 1995 1995 1996 1996
--------- -------- ------------- ------------ --------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues:
Information services....... $1,302 $1,198 $1,327 $1,560 $3,361 $3,303
Systems.................... -- -- -- -- -- --
Support and consulting
services................. 1,894 1,742 1,931 2,268 1,804 2,045
------ ------ ------ ------ ------ ------
Total net revenues... 3,196 2,940 3,258 3,828 5,165 5,348
Costs and expenses:
Costs of information
services................. 589 556 637 847 1,812 1,793
Cost of systems............ -- -- -- -- -- --
Costs of support and
consulting services...... 1,236 1,168 1,338 1,782 1,407 1,421
Selling, general and
administrative........... 693 654 750 999 1,138 1,164
Research and development... 656 619 709 945 1,114 1,233
Amortization and
depreciation............. -- -- -- -- 105 127
Purchased in-process
research and
development.............. -- -- -- -- -- --
Severance and other
restructuring charges.... -- -- -- -- -- --
------ ------ ------ ------ ------ ------
Total costs and
expenses........... 3,174 2,997 3,434 4,573 5,576 5,738
------ ------ ------ ------ ------ ------
Income (loss) from
operations................. 22 (57) (176) (745) (411) (390)
Other income (expense):
Interest expense........... -- -- -- -- (6) (20)
Interest and other
income................... -- -- -- -- 19 68
------ ------ ------ ------ ------ ------
Net income (loss)............ $ 22 $ (57) $ (176) $ (745) $ (398) $ (342)
====== ====== ====== ====== ====== ======
Net income (loss) per
share...................... $ -- $(0.01) $(0.03) $(0.12) $(0.06) $(0.04)
====== ====== ====== ====== ====== ======
Weighted average common
shares..................... 5,990 5,990 5,990 5,990 6,568 7,919
====== ====== ====== ====== ====== ======
<CAPTION>
THREE MONTHS ENDED
----------------------------
SEPTEMBER 30, DECEMBER 31,
1996 1996
------------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues:
Information services....... $3,680 $ 4,505
Systems.................... -- 459
Support and consulting
services................. 1,839 4,999
------ --------
Total net revenues... 5,519 9,963
Costs and expenses:
Costs of information
services................. 1,954 2,700
Cost of systems............ -- 346
Costs of support and
consulting services...... 1,300 1,966
Selling, general and
administrative........... 1,354 3,381
Research and development... 1,333 1,996
Amortization and
depreciation............. 130 423
Purchased in-process
research and
development.............. -- 12,574
Severance and other
restructuring charges.... -- 1,215
------ --------
Total costs and
expenses........... 6,071 24,601
------ --------
Income (loss) from
operations................. (552) (14,638)
Other income (expense):
Interest expense........... (27) (63)
Interest and other
income................... 59 62
------ --------
Net income (loss)............ $ (520) $(14,639)
====== ========
Net income (loss) per
share...................... $(0.07) $ (1.24)
====== ========
Weighted average common
shares..................... 7,919 11,852
====== ========
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
From its inception, the Company principally funded its operations through
borrowings of $3.5 million from CHS. In November 1995, CHHC made a capital
contribution of $2.4 million to the Company which was used to repay indebtedness
to CHS. During 1996, the Company repaid the remaining $1.1 million in borrowings
from CHS.
In January 1996, CHHC made a $4.0 million cash capital contribution to the
Company. Additionally, in March 1996, the Company issued common stock in the
amount of $3.1 million of which $2.2 million had been collected as of December
31, 1996.
In January 1996, the Company established line of credit agreements which
provided for aggregate borrowing of $2.5 million which had been fully drawn as
of December 31, 1996. The cumulative proceeds from
20
<PAGE> 23
the Company's equity infusions and debt financings have provided sufficient
funds to support the Company's operating activities. As of December 31, 1996,
the Company had cash and cash equivalents of $3.4 million.
The Company made capital expenditures (including capital leases) totaling
$400,000 and $1.3 million during 1995 and 1996, respectively. In January 1996,
the Company completed the acquisition of Simione & Simione for $2.0 million in
cash. In October 1996, the Company completed the acquisition of IMHI in a stock
transaction resulting in an increased cash balance of $700,000.
As of December 31, 1996, the Company had a working capital deficit of $1.2
million. The Company's current liabilities as of December 31, 1996 include
customer deposits of $1.7 million and unearned revenues of $2.0 million which
will not require the use of cash by the Company in the future.
The Company believes that its available cash, cash equivalents and cash to
be generated from its future results of operations will be sufficient to meet
the Company's operating requirements, assuming no change in the operation of the
Company's business, for the foreseeable future, but at least for the next twelve
months. While the Company continually evaluates potential acquisitions, the
Company has no present agreements or commitments with respect to any
acquisitions, nor are negotiations regarding any acquisitions currently ongoing.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Consolidated Financial Statements on Page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Effective January 23, 1997, the Company appointed Ernst & Young LLP as the
Company's independent accountants for the fiscal year ended December 31, 1996
and replaced Arthur Andersen LLP. The decision to change accountants was
approved by the Audit Committee of the Board of Directors of the Company acting
pursuant to authority granted by the Board of Directors.
Arthur Andersen LLP's reports on IMHI's Financial Statements during the
three most recent years contained no adverse opinion or a disclaimer of opinion,
and were not qualified or modified as to uncertainty, audit scope or accounting
principles.
During the last three fiscal years and in the subsequent interim period to
the date hereof, there were no disagreements between IMHI and Arthur Andersen
LLP on any matters of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements, if not resolved
to the satisfaction of Arthur Andersen LLP, would have caused it to make a
reference to the subject matter of the disagreements in connection with its
reports.
None of the "reportable events" described in Item 304(a)(1)(v) of
Regulation S-K occurred with respect to IMHI during the last three fiscal years
or in the subsequent interim period to the date hereof.
21
<PAGE> 24
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- ---- --------
<S> <C> <C>
Gary M. Bremer.............. 57 Chairman of the Board and Chief Executive Officer
James R. Henderson.......... 51 President and Director
William J. Simione, Jr...... 55 Vice Chairman of the Board and Executive Vice President
Gary W. Rasmussen........... 42 Chief Operating Officer
Lori Nadler Siegel.......... 33 Chief Financial Officer and Treasurer
James A. Tramonte........... 46 General Counsel and Secretary
Murali Anantharaman(1)...... 39 Director
Richard D. Jackson(2)....... 59 Director
Barrett C. 43 Director
O'Donnell(1)(2)...........
</TABLE>
- ---------------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
GARY M. BREMER has served as Chairman of the Board and Chief Executive
Officer of the Company and CHMS since October 8, 1996 and September 1991,
respectively, and has 22 years of experience in the home health care industry.
From 1978 until October 1996, Mr. Bremer served as President and Chief Executive
Officer of CHHC and CHS. Mr. Bremer has also served as a director of NAHC since
1987.
JAMES R. HENDERSON has served as President of the Company and CHMS since
October 8, 1996 and September 1996, respectively, and has 29 years of experience
in the information services industry. Mr. Henderson has also served as a
director of the Company and CHMS since October 8, 1996 and December 1996,
respectively. From July 1992 to November 1995, Mr. Henderson served as Executive
Vice President for National Data Corporation, an information services company.
From February 1991 to June 1992, he served as Executive Vice President,
Worldwide Sales, Marketing and Operations, of QMS, Inc., a computer hardware
company. From 1987 to January 1992, he served as Executive Vice President of Dun
and Bradstreet Software Services, Inc., a client server software solutions
company.
WILLIAM J. SIMIONE, JR. is a certified public accountant who has served as
Vice Chairman of the Board and Executive Vice President of the Company since
October 8, 1996, and has 31 years of experience in the home health care
industry. From January 1996 until October 1996, Mr. Simione served as the
President of Simione Central, Inc., a wholly-owned subsidiary of CHMS ("SCI").
From January 1975 until December 1995, Mr. Simione was Managing Partner of the
Home Health Care Consulting Division of Simione & Simione. Since September 1995,
Mr. Simione has also served as a director and an audit committee member of
Personnel Group of America, Inc., a leading provider of personnel staffing and
home health services.
GARY W. RASMUSSEN is a certified public accountant who has served as Chief
Operating Officer of the Company and CHMS since October 8, 1996 and June 1996,
respectively. From June 1996 to October 1996, Mr. Rasmussen served as Chief
Operating Officer of CHHC. He also served as Chief Financial Officer of CHHC
from January 1996 to May 1996, and as Chief Financial Officer of CHS from
October 1994 to December 1995. Mr. Rasmussen served as Chief Financial Officer
of Surgical Health Corporation, an outpatient surgery center company, from May
1992 until September 1994, and was an Audit Partner with Ernst & Young LLP from
October 1987 to May 1992.
LORI NADLER SIEGEL is a certified public accountant who has served as the
Chief Financial Officer and Treasurer of the Company and CHMS since October 8,
1996 and June 1996, respectively. From June 1996 to October 1996, Ms. Siegel
served as Chief Financial Officer of CHHC. From January 1995 until May 1996, Ms.
Siegel served as Assistant Vice President of Finance for CHS after holding
various accounting and finance positions at CHS from July 1991 until December
1994.
22
<PAGE> 25
JAMES A. TRAMONTE is a certified public accountant who has served as
General Counsel and Secretary of the Company since October 8, 1996 and as
General Counsel of CHMS since October 1995. Mr. Tramonte has also served as
Secretary of CHMS since September 1996. He previously served as General Counsel
of CHHC from January 1996 to October 1996 and was Deputy General Counsel of CHS
from April 1993 through December 1995. He served in the capacity of Counsel with
the Atlanta law firm of Glass, McCullough, Sherrill & Harrold from January 1993
to March 1993, and from 1988 through December 1992, Mr. Tramonte was a Partner
with the Atlanta law firm of Hurt, Richardson, Garner, Todd & Cadenhead.
MURALI ANANTHARAMAN has served as a director of the Company since October
8, 1996. From January 1996 to October 8, 1996, Mr. Anantharaman was a director
of IMHI. Mr. Anantharaman has been a partner at EGL Holdings, Inc. ("EGL"), a
venture capital firm, since 1987.
RICHARD D. JACKSON has served as a director of the Company since December
1996. Mr. Jackson served as Vice Chairman of First Financial Management Corp., a
financial services company, from January 1995 to August 1996 and as Chief
Operating Officer and Senior Executive Vice President from June 1993 to December
1995. From 1990 through May 1993, he served as Vice Chairman and Chief Executive
Officer of Georgia Federal Bank, Atlanta, Georgia. Mr. Jackson is currently a
director of AnaComp, Inc., a service provider to and manufacturer of
micrographic machines and equipment, and of Schweitzer Maudait International,
Inc., a manufacturer of tobacco papers and wrappers.
BARRETT C. O'DONNELL has served as a director of the Company since October
8, 1996. Mr. O'Donnell served as Chairman of the Board of IMHI from October 1992
to October 8, 1996 and as Chief Executive Officer from November 1994 to October
8, 1996. From 1978 to present, Mr. O'Donnell has been Chairman of the Board,
President and Chief Executive Officer of O'Donnell Davis, Inc. ("ODD"), a
consulting and investment advisory services company.
BOARD COMMITTEES
The Board of Directors has established an Audit Committee and a
Compensation Committee. The Audit Committee reviews the Company's accounting
practices and financial results and consults with and reviews the services
provided by the Company's independent accountants. The current members of the
Audit Committee are Messrs. Anantharaman and O'Donnell. The Compensation
Committee reviews and recommends to the Board of Directors the compensation and
benefits of all the executive officers of the Company, administers the Company's
compensation and benefit plans, and reviews general policies relating to
compensation and benefits of employees of the Company. The current members of
the Compensation Committee are Messrs. Jackson and O'Donnell.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act, requires the Company's directors,
executive officers and persons who beneficially own more than 10% of the Common
Stock to file with the Commission initial reports of beneficial ownership and
reports of changes in beneficial ownership of such Common Stock. Directors,
executive officers and greater than 10% beneficial owners are required by
Commission rules to furnish the Company with copies of all such reports. To the
Company's knowledge, based solely upon a review of the copies of such reports
furnished to the Company and written representations from the Company's
directors and executive officers that no other reports were required, all
Section 16(a) filing requirements applicable to the Company's directors and
executive officers were complied with during the year ended December 31, 1996,
except that Mr. Richard D. Jackson, a director of the Company, inadvertently
failed to timely file an initial statement of beneficial ownership of securities
upon being elected to the Board of Directors in December 1996.
23
<PAGE> 26
ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION SUMMARY
The following table sets forth all compensation paid by IMHI and the
Company for the years ended December 31, 1996, 1995 and 1994 to the Chief
Executive Officers and to each of the other four most highly compensated
executive officers (together, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION --------------------
--------------------------- NUMBER OF SECURITIES ALL OTHER
NAME AND PRINCIPAL SALARY BONUS UNDERLYING OPTION COMPENSATION
POSITION YEAR ($) ($) GRANTS(#) ($)
------------------ ---- -------- -------- -------------------- ------------
<S> <C> <C> <C> <C> <C>
Gary M. Bremer...................... 1996 $375,000(1) $ -- 366,649 $ --
Chairman of the Board and 1995 -- -- -- --
Chief Executive Officer 1994 -- -- -- --
Barrett C. O'Donnell................ 1996 -- -- 183,962 186,533(3)
Former Chairman of the 1995 -- -- 90,000 111,103(3)
Board and Chief 1994 -- -- -- 120,170(3)
Executive officer(2)
James R. Henderson.................. 1996 225,000(1) -- 405,052 --
President 1995 -- -- -- --
1994 -- -- -- --
William J. Simione, Jr.............. 1996 300,000(1) -- 121,115 --
Vice Chairman of the Board and 1995 -- -- -- --
Executive Vice President 1994 -- -- -- --
Gary W. Rasmussen................... 1996 200,000(1) -- 49,547 --
Chief Operating Officer 1995 -- -- -- --
1994 -- -- -- --
James A. Tramonte................... 1996 150,000(1) -- 49,547 --
General Counsel and 1995 -- -- -- --
Secretary 1994 -- -- -- --
Jay Shevins......................... 1996 173,891 -- -- 2,900(5)
Former Senior 1995 193,193 1,275 -- --
Vice President(4) 1994 189,303 250 11,500 6,842(5)
</TABLE>
- ---------------
(1) Represents the annualized salary the executive officer would have received
had he joined the Company on January 1, 1996. Messrs. Bremer, Henderson,
Simione, Rasmussen and Tramonte joined the Company on October 8, 1996.
(2) Mr. O'Donnell served as Chairman of the Board and Chief Executive Officer of
IMHI until October 8, 1996.
(3) Represents amounts paid to ODD by IMHI and the Company for consulting and
investment advisory services. Mr. O'Donnell is the Chairman of the Board,
President and Chief Executive Officer and a 75% shareholder of ODD. See
"-- Director Compensation."
(4) Mr. Shevins served as Senior Vice President of IMHI until October 8, 1996.
Mr. Shevins continues to serve as Senior Vice President of InfoMed, Inc., a
subsidiary of the Company.
(5) Represents reimbursements for certain medical expenses.
24
<PAGE> 27
GRANTS OF STOCK OPTIONS
The following table sets forth certain information with respect to
individual grants of stock options by IMHI and the Company to the Named
Executive Officers during the year ended December 31, 1996.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT
INDIVIDUAL GRANTS ASSUMED
-------------------------------------------------- ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR OPTION
UNDERLYING GRANTED TO EXERCISE TERM(1)(2)
OPTIONS EMPLOYEE IN PRICE EXPIRATION -----------------------
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ---- ----------- ------------ -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Gary M. Bremer................ 330,315 18.09% $ 1.58 1/18/06 $ 328,219 $ 831,771
36,334 1.99 2.50 9/04/06 57,126 144,768
Barrett C. O'Donnell.......... 50,000 2.74 3.50 8/28/06 110,057 278,905
133,962 7.34 3.125 9/23/06 263,275 667,190
James R. Henderson............ 55,052 3.02 2.50 9/04/06 86,555 219,349
350,000 19.17 5.25 10/08/06 1,155,594 2,928,502
William J. Simione, Jr........ 77,073 4.22 1.58 1/18/06 76,583 194,079
44,042 2.41 2.50 9/04/06 69,244 175,479
Gary W. Rasmussen............. 5,505 .30 1.58 1/18/06 5,470 13,862
44,042 2.41 2.50 9/04/06 69,244 175,479
James A. Tramonte............. 5,505 .30 1.58 1/18/06 5,470 13,862
44,042 2.41 2.50 9/04/06 69,244 175,479
Jay Shevins................... -- -- -- -- -- --
</TABLE>
- ---------------
(1) The dollar amounts under these columns represent the potential realizable
value of each grant of option assuming that the market price of the Common
Stock appreciates in value from the date of grant at the 5% and 10% annual
rates prescribed by the Commission and therefore are not intended to
forecast possible future appreciation, if any, of the price of the Common
Stock.
(2) The actual value, if any, that an executive officer may ultimately realize
will depend on the excess of the stock price over the exercise price on the
date the stock option is exercised. Therefore, there can be no assurance
that the value realized by an executive officer upon actual exercise of the
stock options granted in 1996 will be at or near the Potential Realizable
Value indicated in the table.
25
<PAGE> 28
STOCK OPTION EXERCISES AND FISCAL YEAR END STOCK OPTION VALUE
The following table sets forth information concerning the exercise of stock
options and the value of unexercised stock options held at the end of the fiscal
year ended December 31, 1996 by each Named Executive Officer.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
OPTION VALUES AT DECEMBER 31, 1996
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES VALUE DECEMBER 31, 1996(#) DECEMBER 31, 1996($)(1)
ACQUIRED ON REALIZED --------------------------- ---------------------------
NAME EXERCISE(#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gary M. Bremer................ $ -- $ -- 330,315 36,334 $ 902,586 $ 65,855
Barrett C. O'Donnell.......... -- -- 505,162 -- 1,347,996 --
James R. Henderson............ -- -- -- 405,052 -- 99,782
William J. Simione, Jr........ -- -- 77,073 44,042 210,602 79,826
Gary W. Rasmussen............. -- -- 5,505 44,042 15,042 79,826
James A. Tramonte............. -- -- 5,505 44,042 15,042 79,826
Jay Shevins................... -- -- 14,220 -- 25,087 --
</TABLE>
- ---------------
(1) Dollar values were calculated by determining the difference between the fair
market value of the underlying securities at year-end ($4.3125 per share)
and the exercise price of the options.
EMPLOYMENT AGREEMENTS
The Company has an employment agreement with Mr. Gary M. Bremer, its
Chairman of the Board and Chief Executive Officer. The agreement provides for a
base salary of $329,000 and a bonus of $70,000 if the Company achieves certain
financial results. In addition, Mr. Bremer receives up to $46,000 per year for
certain car, membership and insurance allowances. The agreement was signed on
December 10, 1996 and has an initial three year term which will renew for
additional one year terms unless terminated by either party. The agreement
further provides that if Mr. Bremer is terminated for any reason other than for
cause (as defined in the agreement), or if Mr. Bremer terminates the agreement
with cause (as defined in the agreement), he shall be entitled to the
compensation remaining under the current term of the agreement. The agreement
contains non-compete provisions restricting Mr. Bremer during the term of the
agreement and for one year thereafter.
SCI has an employment agreement with Mr. William J. Simione, Jr., Vice
Chairman of the Board and an Executive Vice President of the Company. The
agreement provides for a base salary of $300,000 plus certain benefits and a
potential bonus to be paid at the discretion of the Board of Directors. The
agreement was signed on January 1, 1996 and has an initial five year term that
can be renewed for additional one year terms unless terminated by either party.
The agreement provides for different severance payments if there is a change in
control of the Company based upon the circumstances and timing of Mr. Simione's
termination of employment with respect to the change in control. The agreement
also contains a non-compete provision restricting Mr. Simione during the term of
the agreement and for one year thereafter.
DIRECTOR COMPENSATION
Directors who are officers of the Company receive no additional
compensation for serving on the Board of Directors. Directors who are not
officers of the Company, except Messrs. Anantharaman and O'Donnell, receive fees
of $1,000, $500 and $250 for each Board, Committee, and telephone meeting,
respectively, attended. All directors receive reimbursement for certain expenses
in connection with attendance at Board and Committee meetings. Further, upon
election to the Board of Directors, each outside director will be entitled to
receive an option for 10,000 shares of Common Stock with the exercise price
equal to the fair market value of the Common Stock on the date of the grant and
vesting in three equal annual installments.
26
<PAGE> 29
The Company has a verbal consulting arrangement with ODD, a consulting and
investment advisory services company, whereby ODD provides consulting services
on general business operations and corporate investments and assistance with
respect to merger or acquisition opportunities. Mr. Barrett C. O'Donnell, a
director of the Company, is the Chairman of the Board, President and Chief
Executive Officer and a 75% shareholder of ODD. Currently, ODD is paid $12,000
per month plus expenses for such services. The fees were determined by
negotiation between the parties. The amount paid to ODD by IMHI and the Company
for consulting services totaled $200,813, including expenses, in the year ended
December 31, 1996.
The Company has a consulting agreement with EGL, a venture capital firm,
whereby EGL provides consulting services on general business operations and
corporate investments including financial analysis, review of industry trends
and assistance with respect to merger or acquisition opportunities. Mr. Murali
Anantharaman, a director of the Company, is a partner of EGL. The consulting
agreement expires on June 30, 1999 and provides for a monthly consulting fee of
$5,000 plus expenses. The fees were determined by negotiation between the
parties. The amount paid to EGL by IMHI and the Company under the consulting
agreement totaled $64,346, including expenses, in the year ended December 31,
1996.
For a description of certain options granted to certain directors of the
Company, see "-- Grant of Stock Options." In addition to the option grants
described in such section, options for an aggregate of 166,038 shares of Common
Stock were granted to EGL by IMHI at an exercise price of $3.125 per share on
September 23, 1996. Mr. Anantharaman, a director of the Company, is a partner of
EGL. Additional options for 50,000 shares of Common Stock and 133,962 shares of
Common Stock were granted to ODD by IMHI at an exercise price of $3.50 per share
on August 28, 1996, and $3.125 per share on September 23, 1996, respectively.
STOCK OPTION PLANS
1996 Stock Option Plan
The Company maintains the 1996 Stock Option Plan (the "Stock Option Plan").
The Stock Option Plan provides the Company with increased flexibility to grant
incentive stock options and non-qualified stock options to key employees,
officers, directors, consultants and affiliates of the Company. The Board of
Directors has reserved 1,057,008 shares of Common Stock for issuance pursuant to
awards that may be made under the Stock Option Plan, subject to adjustment as
provided therein. The number of shares of Common Stock associated with any
forfeited option are added back to the number of shares that can be issued under
the Stock Option Plan.
Awards under the Stock Option Plan will be determined by the Compensation
Committee of the Board of Directors. The Stock Option Plan permits the
Compensation Committee to make awards of options (the "Options") to purchase
shares of Common Stock.
The number of shares of Common Stock as to which an Option is granted and
to whom any Option is granted will be determined by the Compensation Committee,
subject to the provisions of the Stock Option Plan. The Stock Option Plan allows
for the grant of incentive stock options and non-qualified stock options. The
Compensation Committee will determine whether an Option is an incentive stock
option or a non-qualified stock option at the time the Option is granted.
The exercise price of an Option is established by the Compensation
Committee. The exercise price of an incentive stock option may not be less than
the fair market value of the Common Stock on the date of the grant (or less than
110% of the fair market value if the participant controls more than 10% of the
voting power of the Company or a subsidiary). Nonqualified stock options may be
made exercisable at a price equal to, less than or more than the fair market
value of the Common Stock on the date that the Option is awarded. The
Compensation Committee may permit an Option exercise price to be paid in any
form permitted in the agreement, including but not limited to cash or delivery
of shares.
The term of an Option shall be specified in the applicable option
agreement; provided that, the Option is only exercisable to the extent the
Option is vested pursuant to a written vesting formula in the option agreement.
The term of an incentive stock option may not exceed ten years from the date of
grant; however, any incentive stock option granted to a participant who controls
more than 10% of the voting power of the
27
<PAGE> 30
Company or a subsidiary will not be exercisable after the expiration of five
years after the date the Option is granted. Subject to any further limitations
in an option agreement, in the event of a participant's termination of
employment, an incentive stock option will become unexercisable no later than
three months after the date of such termination of employment; provided,
however, that if such termination of employment is due to death or disability,
one year shall be substituted for the three-month period.
The Stock Option Plan was effective on January 12, 1996 and will continue
to be effective until ten (10) years after the earlier of the effective date of
the Stock Option Plan or the date the stockholders approved the Stock Option
Plan, unless sooner terminated by the Board of Directors.
If the number of shares of Common Stock are increased or reduced by a
recapitalization, merger, consolidation, or similar capital adjustment, an
appropriate adjustment will be made by the Compensation Committee to the number
of shares under the Stock Option Plan and subject to outstanding Options. In the
event of a sale of substantially all of the shares of Common Stock or property
of the Company or a merger, consolidation, dissolution, or liquidation of the
Company, the Compensation Committee has the right to terminate the Options
granted under the Stock Option Plan, to the extent provided in the applicable
option agreement.
The Stock Option Plan may be amended, terminated, or suspended by the Board
of Directors. However, the Board of Directors cannot, except as provided in the
preceding paragraph, alter the number of shares that may be issued under the
Stock Option Plan or the exercise price of Options issued under the Stock Option
Plan. No such action by the Board of Directors may adversely affect the rights
of a holder of an Option without the holder's consent. As of March 28, 1997,
1,056,441 shares of Common Stock have been issued under the Stock Option Plan.
1994 Plan
The Company maintains the 1994 Incentive Stock Option and Nonqualified
Option Plan (the "1994 Plan"). The 1994 Plan authorizes the grant of options
(the "Options") for up to 200,000 shares of Common Stock of the Company. The
Company has registered the shares with the Commission on a Registration
Statement on Form S-8. The number of shares of Common Stock associated with any
forfeited Option are added back to the number of shares that can be issued under
the 1994 Plan. Awards under the 1994 Plan are determined by the Compensation
Committee. Key employees of the Company, its subsidiaries and affiliates are
eligible to be granted options under the 1994 Plan.
The 1994 Plan permits the Compensation Committee, in its discretion, to
determine which employees of the Company will be granted an Option, the number
of shares to be covered by each of the Options, and the time or times at which
the Options will be granted. However, no employee may receive an Option to
purchase more than 50,000 shares of Common Stock in a year. The 1994 Plan
permits the Compensation Committee to grant incentive stock options and
nonqualified stock options. The exercise price of an Option under the 1994 Plan
will not be less than 100% of the fair market value of the Common Stock at the
time of the grant of the Option. The exercise price of an incentive stock option
for a participant who owns more than 10% of the combined voting power of all
classes of stock of the Company or a subsidiary may not be less than 110% of the
fair market value at the time the incentive stock option is granted.
Under the 1994 Plan, an Option may be exercised as determined by the
Compensation Committee at the time of the grant. However, an Option may not be
exercised as to less than 100 shares at any one time (or the remaining shares
then purchasable under the Option if less than 100 shares). Also, an Option
generally may not be exercisable before the expiration of twelve months
following the date on which the Option was granted. Notwithstanding any
provision of the 1994 Plan, the Compensation Committee may accelerate the
exercisability of any Option upon such circumstance or events as it deems
appropriate.
Options must be exercised by the end of the earlier of ten years from the
date of grant, or three months after the participant ceases to be an employee,
or such certain date provided under the terms of the Option. However, any
incentive stock option granted to a person who immediately after such Option is
granted controls more than 10% of the total combined voting power of all classes
of shares of stock of the Company or
28
<PAGE> 31
a subsidiary must be exercised no later than five years from the date of the
grant. In the event that the participant's employment is terminated, the Option
may, in the discretion of the Compensation Committee, immediately terminate. If
a participant who held an Option under the 1994 Plan dies while employed by the
Company, the Option may be exercised within six months after his death. If a
participant becomes disabled or retires, any Option held by the participant may
be exercised by the participant for a period of one year from the date of such
disability or retirement or until the expiration of the term stated on the
Option, whichever period is shorter. However, if the participant dies during the
one year period, any unexercised Option held by the participant shall be
exercisable for a period of six months from the date of death or until
expiration of the stated term of the Option, whichever term is shorter.
In the event of changes in the outstanding shares of Common Stock by reason
of share dividends, split-ups, recapitalization, mergers, consolidations,
combination or exchange of shares, separations, reorganizations, or
liquidations, the number and class of shares available under the 1994 Plan, in
any plan year and the maximum number of shares as to which Options may be
granted to any participant will be correspondingly adjusted by the Compensation
Committee. Notwithstanding any other provisions in the 1994 Plan, no adjustment
will be made in the minimum number of shares which may be purchased at any one
time under the 1994 Plan.
The 1994 Plan will terminate and an Option will not be granted under the
1994 Plan after the day that is ten years from the date the 1994 Plan was
adopted. The Compensation Committee at any time may terminate, modify or amend
the 1994 Plan; provided, however, that any amendment which changes: (i) maximum
number of shares to which Options may be granted under the 1994 Plan, (ii) the
Option price other than to change the manner of determining the fair market
value of the Common Stock, (iii) the provisions relating to the determination of
employees whom options will be granted, and (iv) the number of shares covered by
such options, or the provisions relating to adjustments to be made upon changes
in capitalization will be subject to stockholder approval. As of March 28, 1997,
198,800 options under the 1994 Plan have been granted.
Profit Sharing Plan
The Simione Central Holdings, Inc. Profit Sharing Plan (the "Profit Sharing
Plan") is a frozen plan and currently covers only those employees of the Company
who were participating in the Profit Sharing Plan as of November 1, 1996 and
former employees of CHHC with balances under the Profit Sharing Plan. No other
individuals are expected eligible to become participants in the Profit Sharing
Plan after November 1, 1996. The Company has no current plans to make further
contributions to the Profit Sharing Plan.
If the participant's employment is terminated and the participant's account
balance is $3,500 or less, payment of benefits will be made in a lump sum as
soon as administratively practicable after the close of the plan year in which
the termination occurs. A participant may elect to receive benefit payments in
either cash or Common Stock. In general, the Profit Sharing Plan provides that
participants may elect to receive distributions (i) in cash paid in installments
over five years, (ii) commencing at the end of the sixth year following
termination, in a cash lump sum or cash installments over less than five years,
or (iii) in Common Stock. CHHC employees participating in the Profit Sharing
Plan as of the effective date of the acquisition of CHHC are entitled to
distributions from the Profit Sharing Plan as if they terminated employment. The
Profit Sharing Plan holds 4,248,017 shares of Common Stock.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors (the "Compensation
Committee") is currently comprised of Messrs. Jackson and O'Donnell. Mr.
O'Donnell served as Chairman of the Board and Chief Executive Officer of IMHI
from November 1994 to October 8, 1996. Mr. Jackson did not serve as an officer
or employee of the Company or any of its subsidiaries during the year ended
December 31, 1996. Except as set forth under "-- Director Compensation" and
"Item 13. Certain Relationships and Related Transactions," there were no
material transactions between the Company and any of the members of the
Compensation Committee during the year ended December 31, 1996.
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<PAGE> 32
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee consists entirely of non-employee directors and
determines the compensation paid to the Chief Executive Officer. The Committee
also determines, along with the Chief Executive Officer, all compensation paid
to the other executive officers of the Company. The Compensation Committee
believes that for the Company to be successful long-term and for it to increase
stockholder value it must be able to hire, retain, adequately compensate and
financially motivate talented and ambitious executives. The Compensation
Committee attempts to reward executives for both individual achievement and
overall Company success.
Executive compensation is made up of three components:
i. Base Salary: An executive's base salary is initially determined by
considering the executive's level of responsibility, prior experience and
compensation history. Published salaries of executives in similar positions
at other companies of comparable size (sales and/or number of employees) is
also considered in establishing base salary.
ii. Cash Bonus: The Company maintains an incentive bonus plan to
provide annual cash bonuses to certain executives. Such bonuses are based,
in part, on the Company's financial performance during the previous fiscal
year including data in connection with earnings per share and profitability
and performance as compared to the Company's approved profit plan. In
addition, objective individual measures of performance compared to the
individual's business unit profit performance are considered. A subjective
rating of the executive's personal performance is also considered.
iii. Stock Options: The Compensation Committee believes that the
granting of stock options is directly linked to increased executive
commitment and motivation and to the long-term success of the Company. The
Compensation Committee thus awards stock options to certain executives. The
Compensation Committee uses both subjective appraisals of the executive's
performance and the Company's performance and financial success during the
previous year to determine option grants.
Mr. Gary M. Bremer, the Company's Chairman of the Board and Chief Executive
Officer, is paid a base salary of $329,000 pursuant to an employment agreement.
See "-- Employment Agreements." The Compensation Committee also considers an
annual bonus of $70,000 and stock option grants that can be awarded to Mr.
Bremer. Additional compensation is based on a subjective analysis of the
Company's performance and Mr. Bremer's role in generating such performance.
Compensation of the chief executive officers of the Company's competitors is
also considered in determining Mr. Bremer's compensation.
It should also be noted that: (i) exceptions to the general principles
stated above are made when the Compensation Committee deems them appropriate to
stockholder interest; (ii) the Compensation Committee regularly considers other
forms of compensation and modifications of its present policies, and will make
changes as it deems appropriate; and (iii) the competitive opportunities to
which the Company's executives are exposed frequently come from private
companies or divisions of large companies, for which published compensation data
is often unavailable, with the result that the Compensation Committee's
information about such opportunities is often anecdotal.
Section 162(m) of the Internal Revenue Code establishes a limit on the
deductibility of annual compensation for certain executive officers that exceeds
$1,000,000 per year unless certain requirements are met. The Company does not
anticipate that any employee will exceed such $1,000,000 cap in the near future
but will make any necessary adjustments if and when this occurs.
Compensation Committee
Richard D. Jackson
Barrett C. O'Donnell
30
<PAGE> 33
STOCKHOLDER RETURN PERFORMANCE GRAPH
The following graph shows a comparison, since the Common Stock began
trading on September 3, 1993 of cumulative total returns for the Common Stock,
the Standard & Poor's SmallCap 600 Index and the Standard & Poor's Computer
(Software and Services) -- Mid-Cap Index. The comparisons in this table are
required by the Commission and, therefore, are not intended to forecast or be
indicative of possible future performance of the Common Stock.
CHART
<TABLE>
<CAPTION>
INDEXED RETURNS
Years Ending
Base
Period
Company/Index 3Sep93 Dec93 Dec94 Dec95 Dec96
- ------------- ------ ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
SIMIONE CENTRAL HOLDINGS INC 100 62.50 68.75 40.63 107.80
COMPUTER (SOFTWARE&SVC)-MID 100 100.68 110.57 193.46 196.20
S&P SMALLCAP 600 INDEX 100 104.04 99.07 128.76 156.21
</TABLE>
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<PAGE> 34
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table provides information at March 7, 1997 with respect to
(i) any person known to the Company to be the beneficial owner of more than five
percent of the Common Stock, (ii) all directors of the Company, (iii) all Named
Executive Officers, and (iv) all directors and executive officers as a group.
Except as otherwise indicated, the stockholders listed below have sole voting
and investment power with respect to the shares of Common Stock.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
NAME AND ADDRESS -----------------------------
OF BENEFICIAL OWNER NUMBER(1) PERCENT(2)
------------------- --------- ----------
<S> <C> <C>
Simione Central Holdings, Inc............................... 4,248,017 35.4%
Profit Sharing Plan Trust
c/o Trust Company of Knoxville, Inc.
620 Market Street, Suite 300
Knoxville, TN 37902
Gary M. Bremer.............................................. 1,755,804(3) 14.3
6600 Powers Ferry Road
Atlanta, GA 30339
O'Donnell Davis, Inc. ...................................... 2,248,946(4) 17.6
P.O. Box 7395
Princeton, NJ 08543
Barrett C. O'Donnell........................................ 2,248,946(5) 17.6
P.O. Box 7395
Princeton, NJ 08543
Rowan Nominees Limited...................................... 1,769,749(6) 14.0
33 King William Street
London, EC4R 9AS
Murali Anantharaman......................................... 1,915,281(7) 15.0
2830 Shurburne Drive
Alpharetta, GA 30301
Howard B. Krone............................................. 881,244 7.4
3633 Tuxedo Road
Atlanta, GA 30305
James R. Henderson.......................................... 31,548 *
William J. Simione, Jr. .................................... 234,817(8) 1.9
Gary W. Rasmussen........................................... 70,273(9) *
James A. Tramonte........................................... 40,738(10) *
Richard D. Jackson.......................................... -- --
Jay Shevins................................................. 64,260(11) *
All directors and executive officers as a group (9
persons).................................................. 6,304,817 52.6
</TABLE>
- ---------------
* Less than 1%
(1) Pursuant to Rule 13d-3 under the Exchange Act, ownership ownership of a
security consists of sole or shared voting power (including the power to
vote or direct the vote) and/or otherwise. The sole or shared investment
power (including the power to dispose or direct the disposition) with
respect to a security through any contract, arrangement, understanding,
relationship or the number of shares of Common Stock includes the number of
shares of Common Stock which are subject to the exercise of options or
warrants within 60 days.
(2) Percentages were calculated based on the ratio of the number of shares of
Common Stock beneficially owned by such beneficial owner as of the date of
this Report to the sum of (a) the total number of
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<PAGE> 35
outstanding shares of Common Stock as of the date of this Report and (b)
the number of shares of Common Stock issuable upon exercise of options or
warrants held by the applicable beneficial owner exercisable within 60 days
of the date of this Report.
(3) Includes 330,315 shares issuable upon exercise of options.
(4) Includes 270,000 shares issuable upon exercise of warrants and 505,162
shares issuable upon exercise of options.
(5) Mr. O'Donnell is a stockholder, director and officer of ODD. Accordingly,
pursuant to Rule 13d-3 under the Exchange Act, he is deemed to be an
indirect beneficial owner of the Company's securities beneficially owned by
ODD.
(6) Includes 619,667 shares issuable upon exercise of warrants and 61,887
shares issuable upon exercise of options.
(7) Includes 5,928 shares as to which Mr. Anantharaman has sole voting power,
39,604 shares issuable upon exercise of options, 1,088,195 shares related
to Rowan Nominees Limited ("Rowan"), 100,000 shares issuable upon exercise
of warrants related to EGL, 619,667 shares issuable upon exercise of
warrants related to Rowan, and 61,887 shares issuable upon exercise of
options related to Rowan.
(8) Includes 77,073 shares issuable upon exercise of options.
(9) Includes 5,505 shares issuable upon the exercise of options.
(10) Includes 5,505 shares issuable upon the exercise of options.
(11) Includes 14,220 shares issuable upon exercise of options.
For a description of a voting agreement among the Company, ODD, EGL, Mr.
Anantharaman and certain of their affiliates, see "Item 13. Certain
Relationships and Related Transactions."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On February 28, 1995, IMHI entered into a settlement agreement with
Frederick Neufeld, whereby Mr. Neufeld resigned as an employee, officer and
director of IMHI. Pursuant to the terms of the agreement, IMHI agreed to pay Mr.
Neufeld a total of $225,000 in 25 equal monthly installments of $9,000
commencing in March 1995, and to provide certain additional benefits through
February 1996, and Mr. Neufeld agreed to release and surrender options to
purchase 68,000 shares of the IMHI common stock. The agreement also prohibited
Mr. Neufeld from competing in any business of IMHI (as such phrase is defined in
the agreement) until September 1, 1996.
On January 1, 1996, IMHI entered into a lease agreement with Gateway LLC
with respect to the Company's Pompano Beach office. ODD owns 70% of Gateway LLC
and more than 5% of the Company's Common Stock. In addition, Mr. Barrett C.
O'Donnell, a director of the Company, is the Chairman of the Board, President
and Chief Executive Officer of ODD. Pursuant to the lease agreement, Gateway LLC
leases approximately 20,291 square feet to the Company for a term of five years
that commenced on January 1, 1996. The Company has an option to renew the lease
for an additional five year term. Rental payments from IMHI and the Company for
the year ended December 31, 1996 totaled $272,869. The scheduled annual rental
payments for the remaining term are $223,201 during year two, $233,347 during
year three, $243,492 during year four and $253,638 during year five. The lease
payments were determined by negotiation between the parties. The Company
believes that the terms of the lease agreement are at least as favorable as
could have been obtained elsewhere for similar facilities from unaffiliated
third parties.
During 1996, the Company entered into various capital lease agreements with
National Leasing, Inc. Mr. Gary M. Bremer, Chairman of the Board and Chief
Executive Officer of the Company, Mr. William J. Simione, Jr., Vice Chairman of
the Board and Executive Vice President of the Company, and Mr. Gary W.
Rasmussen, Chief Operating Officer of the Company, each respectively owns a
33.33% interest in National Leasing, Inc. Each lease is for a three year term
and provides for an interest rate of 14%. Interest expense related to such
capital leases totaled $22,215 during the year ended December 31, 1996. The
terms of the various lease agreements were determined by negotiation between the
parties. The Company believes that the terms of the lease agreements are at
least as favorable as could have been obtained for similar assets from
unaffiliated third parties.
33
<PAGE> 36
On January 17, 1996, the Company entered into a lease agreement with S&S
Realty with respect to the Company's Hamden, Connecticut office. Mr. Simione
owns 45% of S&S Realty. Pursuant to the lease agreement, S&S Realty leases
approximately 6,500 square feet to the Company on a month-to-month basis. Rental
payments for the year ended December 31, 1996 totaled $112,539. The scheduled
annual rental payments for the remaining term are $10,833 per month. The lease
payments were determined by negotiation between the parties.
The Named Executive Officers listed below entered into promissory notes in
the amounts listed below in connection with money borrowed from the Company for
the purchase of Common Stock. Each promissory note was dated March 5, 1996 with
all principal and interest (5.05% per annum) due on December 5, 1996. Each such
promissory note was paid in full except for the promissory note of Mr. Bremer,
which has a current outstanding principal balance of $850,000 and has been
extended until such time as Mr. Bremer no longer personally guarantees $1.5
million of the Company's $2.5 million credit facility.
<TABLE>
<S> <C>
Gary M. Bremer.............................................. $900,000
William J. Simione, Jr...................................... $225,000
Gary W. Rasmussen........................................... $ 90,000
</TABLE>
On October 7, 1996 and as a condition to the consummation of the merger
between IMHI and CHMS, EGL, ODD, Mr. Anantharaman and certain other holders of
shares of IMHI Class A Convertible Preferred Stock (the "Convertible Preferred
Stock") entered into an agreement with IMHI (the "Convertible Preferred Stock
Agreement"). Pursuant to the Convertible Preferred Stock Agreement, such holders
agreed to exchange all of their respective shares of Convertible Preferred Stock
for Common Stock based on a conversion price of $2.00 per share. In addition,
such holders received shares of Company Common Stock in lieu of cash dividends
that were payable on their respective shares of Convertible Preferred Stock. Mr.
Anantharaman is a partner in EGL. EGL is an affiliate of Rowan, who is a more
than five percent beneficial owner of the Common Stock. Mr. O'Donnell is a
director and officer of ODD. ODD is also a more than five percent beneficial
owner of the Common Stock. In connection with the Convertible Preferred Stock
Agreement (i) Rowan received approximately 967,100 shares of Common Stock, (ii)
ODD received approximately 530,700 shares of Common Stock, and (iii) Mr.
Anantharaman received approximately 2,000 shares of Common Stock.
In addition, pursuant to the Convertible Preferred Stock Agreement, as long
as EGL and ODD and their respective affiliates own five percent or more of the
Common Stock, EGL and ODD are each entitled to designate one person reasonably
acceptable to the Company's Board of Directors to serve as a director of the
Company, and the Company shall use all reasonable efforts to cause the election
of such designees. Furthermore, EGL and ODD and their respective affiliates
agreed to be present, in person or by proxy, at every stockholder meeting and to
vote in favor of all nominees to the Company's Board of Directors as approved by
such Board, provided EGL's and ODD's designees are included with such nominees.
On November 1, 1996, SCI entered into various information, support and
management services agreements (the "Columbia Agreements") with certain
affiliates of Columbia/HCA. As part of the negotiation of the Columbia
Agreements, Columbia/HCA required that SCI guarantee certain obligations of the
former stockholders of CHHC, including Mr. Bremer, (the "Guaranty") as they
relate to the administration of and potential liabilities to the Central Health
Holding Company Employee Stock Ownership Plan Trust (the "Plan") or its
participants. The Plan was converted into the Profit Sharing Plan and
sponsorship of the Plan was transferred from CHHC to the Company. Under the
terms of the Guaranty, SCI guarantees Columbia/HCA against losses arising from:
(i) Plan losses arising from a fiduciary breach, prohibited transaction or other
violation of law relating to the Plan; or (ii) liabilities related to the Plan
which are not paid by the former stockholders of CHHC other than the Plan, but
only to the extent any such losses would not be recovered by Columbia/HCA, but
only to the extent such liabilities are not recovered by Columbia/HCA through
other indemnity provisions of the stock purchase agreement. Columbia/HCA's other
sources of potential recovery include CHHC's insurance policies and escrow
accounts established for the benefit of Columbia/HCA by the former stockholders
of CHHC. SCI's maximum liability under the Guaranty is limited to $20,000,000
for obligations arising before November 1, 1997, $17,500,000 for
34
<PAGE> 37
obligations arising before November 1, 1998, $15,000,000 for obligations arising
before November 1, 1999, $15,000,000 for obligations arising before November 1,
2000 and $0 thereafter. At no time during the term of the Guaranty shall SCI's
liability exceed $20,000,000 in the aggregate. Pursuant to the Guaranty, SCI
agreed that on each date that a guaranteed obligation is required to be paid to
Columbia/HCA, SCI shall grant Columbia/HCA a security interest equal to the
amount of the guaranteed obligation in all SCI's accounts receivable. SCI also
granted to Columbia/HCA and the parties to the Columbia Agreements the right to
offset any liability arising under the Guaranty against any obligation of such
parties to SCI. The Department of Labor has an open investigation relating to
the Plan. The Internal Revenue Service is also auditing certain issues related
to the Plan. At December 31, 1996, no claims had been made under the Guaranty
and currently the Company does not anticipate incurring any losses associated
with the Guaranty.
G. Blake Bremer, the son of Mr. Bremer, is currently serving as an
Assistant Vice President of the Company. As compensation for his services, Mr.
Blake Bremer is expected to be paid approximately $100,000 in 1997. In addition,
Lori Yawn Ferrero, the Company's Director of Human Resources, and Martha
Elizabeth Cavaiani, the Director of Marketing of the Company, are the
sisters-in-law of Mr. Gary M. Bremer. Ms. Ferrero and Ms. Cavaiani are each
expected to be paid approximately $92,000 and $83,000, respectively, in 1997 for
their services.
Jay Shevins served as a Senior Vice President of IMHI until October 8, 1996
and is presently serving as the Senior Vice President of InfoMed, Inc. On
September 9, 1994, Mr. Shevins entered into a severance agreement with IMHI
pursuant to which he will receive the equivalent of one years' salary if his
employment is terminated for any reason other than gross negligence or a breach
of fiduciary duty.
For a description of consulting agreements between the Company and certain
directors, see "Item 11. Executive Compensation -- Director Compensation."
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Report:
1. Financial Statements. See Index to Consolidated Financial
Statements on Page F-1 hereof.
2. Financial Statement Schedules.
Schedule II -- Valuation and Qualifying Accounts
3. Exhibits Incorporated by Reference or Filed with this Report.
The following exhibits are filed as part of this Report. Where such filing
is made by incorporation by reference to a previously filed statement or report,
such statement or report is identified in parentheses.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C> <C>
3.1 -- Certificate of Incorporation of the Company (Incorporated by
reference to Exhibit 3.1 to the Company's Registration
Statement on Form S-4 (Registration Number 33-57150) as
filed with the Securities and Exchange Commission).
3.2 -- Amendment to the Certificate of Incorporation of the Company
(Incorporated by reference to Exhibit 3.2 to the Company's
Registration Statement on Form S-4 (Registration Number
33-57150) as filed with the Securities and Exchange
Commission).
3.3 -- Bylaws of the Company (Incorporated by reference to Exhibit
3.3 to the Company's Registration Statement on Form S-4
(Registration Number 33-57150) as filed with the Securities
and Exchange Commission).
3.4 -- Amendment to the Bylaws of the Company.
</TABLE>
35
<PAGE> 38
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C> <C>
3.5 -- Certificate of Ownership Merging Simione Central Holdings,
Inc. into InfoMed Holdings, Inc.
4.1 -- See Exhibits 3.1, 3.2, 3.3, 3.4 and 3.5 for provisions of
the Company's Certificate of Incorporation and Bylaws
governing the rights of holders of securities of the
Company.
4.2 -- Registration Rights Agreement dated October 7, 1996 by and
among InfoMed Holdings, Inc., those shareholders of Simione
Central Holding, Inc. appearing as signatories to the
Registration Rights Agreement, and those shareholders of
InfoMed Holdings, Inc. appearing as signatories to the
Registration Rights Agreement (Incorporated by reference to
Exhibit 10.1 of the Company's Current Report on Form 8-K
dated October 8, 1996 as filed with the Securities and
Exchange Commission).
9.1 -- Form of Simione Central Holding, Inc., Shareholders Voting
Agreement and Irrevocable Proxy dated March 5, 1996 by and
among Howard B. Krone, William J. Simione, Jr., Gary
Rasmussen, G. Blake Bremer, Katherine L. Wetherbee, A.
Curtis Eade, James A. Tramonte, John Isett, Cindy Lumpkin,
Douglas E. Caddell, Robert J. Simione, Kenneth L. Wall,
Allen K. Seibert, III, Jerry Sevy, Larry Clark and Lori N.
Siegel, Gary M. Bremer, Richard A. Parlontieri, and James R.
Henderson.
9.2 -- Agreement dated as of October 7, 1996 by and among InfoMed
Holdings, Inc., EGL Holdings, Inc., Mercury Asset Management
plc, O'Donnell Davis, Inc., Barrett O'Donnell and certain
other holders of the Class A Convertible Preferred Stock of
InfoMed Holdings, Inc. (Incorporated by reference to Exhibit
10.2 of the Company's Current Report on Form 8-K dated
October 8, 1996 as filed with the Securities and Exchange
Commission).
10.1 -- Amended and Restated Agreement and Plan of Merger dated as
of September 5, 1996 by and among InfoMed Holdings, Inc.,
Simione Central Holding, Inc. and InfoSub, Inc.
(Incorporated by reference to Exhibit 2.1 of the Company's
Current Report on Form 8-K dated September 5, 1996 as filed
with the Securities and Exchange Commission).
10.2 -- InfoMed Holdings, Inc. Amended and Restated Share Warrant
for the Purchase of Common Stock of InfoMed Holdings, Inc.
dated October 5, 1996 between InfoMed Holdings, Inc. and
O'Donnell Davis, Inc., Rowan Nominees Ltd., David O. Ellis,
Richard V. Lawry, Salvatore A. Massaro, Murali Anantharaman,
Kathleen E.J. Ellis, Jeremy Ellis, Karen Ellis, Gemma Ellis,
Thomas M. Rogers, Jr., and Arnold Schumacher (Incorporated
by reference to Exhibit 4.1 of the Company's Current Report
on Form 8-K dated October 8, 1996 as filed with the
Securities and Exchange Commission).
10.3 -- Warrant to Purchase 100,000 shares of Class A Common Stock
of Simione Central Holding, Inc., dated April 12, 1996
between Simione Central Holding, Inc. and Home Health First,
a Texas Not-for-Profit corporation.
10.4 -- Common Stock Warrant of InfoMed Holdings, Inc. dated October
8, 1996 between Jefferies & Company, Inc. and InfoMed
Holdings, Inc.
10.5 -- Settlement Agreement, dated February 28, 1995, between
InfoMed Holdings, Inc. and Frederick Neufeld (Incorporated
by reference to Exhibit 5.5 of the Company's Current Report
on Form 8-K dated March 7, 1995 as filed with the Securities
and Exchange Commission).
10.6 -- Form of Simione Central Holding, Inc. 1996 Incentive Stock
Option Agreement dated September 4, 1996 by and between
Simione Central Holding, Inc. and each of James R.
Henderson, William J. Simione, Jr., Robert Simione,
Katherine Wetherbee, Sheldon Berman, Betty Gordon, William
J. Simione, III, J. Blake Bremer, Craig Luigart, Kenneth L.
Wald, Marty Cavaiani, Lori Ferrero, Douglas E. Caddell, Andy
Anello and A. Curtis Eade.
10.7 -- Form of 1996 Non Qualified Stock Option Agreement dated
September 4, 1996 between Simione Central Holding, Inc. and
each of Gary M. Bremer, James A. Tramonte, Gary W.
Rasmussen, Don VanderBeke and Lori N. Siegel.
</TABLE>
36
<PAGE> 39
<TABLE>
<S> <C> <C>
10.8 -- Form of Stock Option Agreement dated October 7, 1996 between InfoMed Holdings, Inc., and Reid
Horovitz, Zola Horovitz, O'Donnell Davis, Inc., EGL Holdings, Inc., David O. Ellis, Erin Dosdourian,
Rodger Johnson, Richard V. Lawry, Salvatore A. Massaro and Murali Anantharaman.
10.9 -- 1994 Incentive Stock Option and Non-Qualified Stock Option Plan (Incorporated by reference to the
Company's Form 10-K for the fiscal year ended June 30, 1994 as filed with the Securities and Exchange
Commission).
10.10 -- Simione Central Holdings, Inc. Profit Sharing Plan dated October 31, 1996, as amended.
10.11 -- Simione Central Holdings, Inc. Section 125 Plan effective date January 1, 1997 sponsored by the
Company.
10.12 -- Headquarters at Gateway Lake Lease Agreement dated January 1, 1996 by and between Gateway LLC and
InfoMed Holdings, Inc. (Incorporated by reference to the Company's Form 10-K for the fiscal year
ended June 30, 1996 as filed with the Securities and Exchange Commission).
10.13 -- Sublease dated November 22, 1996 between Environmental Design International, Ltd. and Simione
Central, Inc.
10.14 -- Consent and Estoppel Certificate and Assignment dated October 29, 1996 between Resurgens Plaza South
Associates, L.P., Simione Central, Inc. and Central Health Services, Inc.
10.15 -- Executive Employment Agreement dated December 10, 1996 between InfoMed Holdings, Inc. and Gary M.
Bremer.
10.16 -- Executive Employment Agreement dated January 1, 1996 between Simione Central, Inc. and William J.
Simione, Jr.
10.17 -- Agreement dated October 4, 1996 by and between InfoMed Holdings, Inc., and EGL Holdings, Inc.
10.18 -- Information Systems Management Agreement dated January 4, 1996 between Integrated Systems Solutions
Corporation and Central Health Management Services, Inc.
10.19 -- Micronetics Design Corporation Value Added Reseller Agreement Renewal dated July 10, 1996 between
Micronetics Design Corporation and the Company.
10.20 -- Master Software License Agreement Number 96-2283 dated October 31, 1996 by and between Software 2000,
Inc. and Simione Central Holding, Inc.
10.21 -- Guaranty Agreement dated October 31, 1996 by Simione Central, Inc. in favor of HCA, Inc.
10.22 -- Lease Agreement dated March 18, 1996 between National Leasing, Inc. and Simione Central, Inc.
10.23 -- IBM Vendor Marketing Programs Cooperative Services Marketing Agreement dated December 16, 1996
between IBM Corporation and Simione Central Holding, Inc.
11.1 -- Statement re: computation of per share earnings.
16.1 -- Letter re change in Certifying Accountant (Incorporated by reference to Exhibit 4.1 of the Company's
Current Report on Form 8-K dated January 27, 1997 filed with the Securities and Exchange Commission).
21.1 -- Subsidiaries of the Company.
23.1 -- Consent of Ernst & Young LLP.
27.1 -- Financial Data Schedule (for SEC use only).
</TABLE>
(b) Reports on Form 8-K.
The Company filed a Current Report on Form 8-K dated October 8, 1996
announcing the merger (the "Merger") of InfoMed Holdings, Inc. with Simione
Central Holding, Inc. (the "October 8, 1996 8-K").
37
<PAGE> 40
The Company filed a Current Report on Form 8-K/A dated December 23, 1996
amending the October 8, 1996 8-K by providing certain required financial
information in connection with the Merger.
The Company filed a Current Report on Form 8-K dated January 27, 1997
announcing that it appointed Ernst & Young LLP as the Company's independent
accountants for the fiscal year ended December 31, 1996 and replaced Arthur
Andersen LLP.
38
<PAGE> 41
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SIMIONE CENTRAL HOLDINGS, INC.
Date: March 31, 1997 By: /s/ GARY M. BREMER
------------------------------------
Gary M. Bremer
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
/s/ GARY M. BREMER Chairman of the Board and Chief March 31, 1997
- ----------------------------------------------------- Executive Officer (principal
Gary M. Bremer executive officer)
/s/ LORI NADLER SIEGEL Chief Financial Officer and March 31, 1997
- ----------------------------------------------------- Treasurer (principal
Lori Nadler Siegel financial and accounting
officer)
/s/ JAMES R. HENDERSON President and Director March 31, 1997
- -----------------------------------------------------
James R. Henderson
/s/ WILLIAM J. SIMIONE Vice Chairman of the Board and March 31, 1997
- ----------------------------------------------------- Executive Vice President
William J. Simione, Jr.
/s/ MURALI ANANTHARAMAN Director March 31, 1997
- -----------------------------------------------------
Murali Anantharaman
/s/ RICHARD D. JACKSON Director March 31, 1997
- -----------------------------------------------------
Richard D. Jackson
/s/ BARRETT C. O'DONNELL Director March 31, 1997
- -----------------------------------------------------
Barrett C. O'Donnell
</TABLE>
39
<PAGE> 42
SIMIONE CENTRAL HOLDINGS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors.............................. F-2
Consolidated Financial Statements
Consolidated Balance Sheets -- December 31, 1995 and
1996................................................... F-3
Consolidated Statements of Operations for the three years
ended December 31, 1996................................ F-4
Consolidated Statements of Shareholders' Equity (Deficit)
for the three years ended December 31, 1996............ F-5
Consolidated Statements of Cash Flows for the three years
ended December 31, 1996................................ F-6
Notes to Consolidated Financial Statements................ F-7
</TABLE>
F-1
<PAGE> 43
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders
of Simione Central Holdings, Inc.:
We have audited the accompanying consolidated balance sheets of Simione
Central Holdings, Inc. as of December 31, 1995 and 1996 and the related
consolidated statements of operations, shareholders' equity (deficit) and cash
flows for each of the three years in the period ended December 31, 1996. Our
audits also include the financial statement schedule listed in the Index at Item
14(a). These financial statements and schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Simione Central Holdings, Inc. as of December 31, 1995 and 1996 and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
ERNST & YOUNG LLP
Atlanta, Georgia
March 21, 1997, except for Note 16 as
to which the date is
March 26, 1997
F-2
<PAGE> 44
SIMIONE CENTRAL HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1995 1996
----------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 323,023 $ 3,384,728
Accounts receivable, net of allowance for doubtful
accounts of $13,600 and $1,063,014, respectively....... 761,557 5,651,415
Note receivable from officer.............................. 252,075 --
Prepaid expenses and other current assets................. 30,360 870,729
----------- ------------
Total current assets.............................. 1,367,015 9,906,872
Purchased software, furniture and equipment, net............ 424,000 1,867,996
Intangible assets, net...................................... 36,831 5,922,755
Restricted cash and other assets............................ -- 1,078,056
----------- ------------
Total assets...................................... $ 1,827,846 $ 18,775,679
=========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 60,491 $ 3,199,353
Accrued compensation expense.............................. 40,894 666,650
Due to former parent company.............................. 1,076,855 --
Accrued liabilities....................................... -- 3,251,636
Customer deposits......................................... -- 1,679,565
Unearned revenues......................................... -- 2,006,044
Current portion of capital lease obligations.............. -- 306,466
----------- ------------
Total current liabilities......................... 1,178,240 11,109,714
Notes payable and capital lease obligations, less current
portion................................................... -- 2,986,267
Commitments and contingencies
Shareholders' equity:
Preferred stock, $.001 par value; 10,000,000 shares
authorized at December 31, 1996; none issued or
outstanding............................................ -- --
Common stock, 100 no par shares and 20,000,000 $.001 par
shares authorized at December 31, 1995 and 1996,
respectively; 22 and 11,904,333 shares issued and
outstanding at December 31, 1995 and 1996,
respectively........................................... 2,443,013 11,904
Additional paid-in capital................................ -- 23,210,098
Stock subscription receivable............................. -- (850,000)
Accumulated deficit....................................... (1,793,407) (17,692,304)
----------- ------------
Total shareholders' equity........................ 649,606 4,679,698
----------- ------------
Total liabilities and shareholders' equity........ $ 1,827,846 $ 18,775,679
=========== ============
</TABLE>
See notes to consolidated financial statements
F-3
<PAGE> 45
SIMIONE CENTRAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1994 1995 1996
----------- ----------- ------------
<S> <C> <C> <C>
Net revenues:
Information services................................. $ 4,875,012 $ 5,387,044 $ 14,848,861
Systems.............................................. -- -- 459,045
Support and consulting services...................... 7,235,332 7,834,999 10,686,735
----------- ----------- ------------
Total net revenues........................... 12,110,344 13,222,043 25,994,641
Costs and expenses:
Cost of information services......................... 2,492,261 2,630,208 8,258,458
Cost of systems...................................... -- -- 345,748
Cost of support and consulting services.............. 5,202,109 5,523,706 6,093,971
Selling, general and administrative.................. 2,958,371 3,095,293 7,037,446
Research and development............................. 2,165,217 2,928,961 5,676,898
Amortization and depreciation........................ -- -- 784,502
Purchased in-process research and development........ -- -- 12,573,931
Severance and other restructuring charges............ -- -- 1,214,669
----------- ----------- ------------
Total costs and expenses..................... 12,817,958 14,178,168 41,985,623
----------- ----------- ------------
Loss from operations................................... (707,614) (956,125) (15,990,982)
Other income (expense):
Interest expense..................................... -- -- (114,817)
Interest and other income............................ -- -- 206,902
----------- ----------- ------------
Net loss............................................... $ (707,614) $ (956,125) $(15,898,897)
=========== =========== ============
Net loss per share..................................... $ (0.12) $ (0.16) $ (1.85)
=========== =========== ============
Weighted average common shares......................... 5,989,712 5,989,712 8,575,912
=========== =========== ============
</TABLE>
See notes to consolidated financial statements
F-4
<PAGE> 46
SIMIONE CENTRAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
FOR THE THREE YEARS ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
ADDITIONAL STOCK
COMMON PAID-IN SUBSCRIPTION ACCUMULATED
SHARES STOCK CAPITAL RECEIVABLE DEFICIT
---------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance at December 31,
1993....................... 22 $ -- $ -- $ -- $ (129,668)
Net loss................... -- -- -- -- (707,614)
---------- ----------- ----------- --------- ------------
Balance at December 31,
1994....................... 22 -- -- -- (837,282)
Capital contribution from
former parent company... -- 2,443,013 -- -- --
Net loss................... -- -- -- -- (956,125)
---------- ----------- ----------- --------- ------------
Balance at December 31,
1995....................... 22 2,443,013 -- -- (1,793,407)
Capital contribution from
former parent company... -- 4,000,000 -- -- --
Distribution of 5,989,712
shares of no par common
stock and cancellation
of 22 shares of common
stock held by CHHC...... 5,989,690 -- -- -- --
Issuance of 1,928,836
shares of no par Class A
common stock............ 1,928,836 3,051,369 -- (850,000) --
Purchase and cancellation
of 1,836 shares of no
par Class A common stock
not exchanged in reverse
acquisition............. (1,836) (9,866) -- -- --
Exchange of 7,916,712
shares of no par Class A
and B common stock for
7,916,712 shares of IMHI
$.001 par value common
stock................... -- (9,476,599) 9,476,599 -- --
Issuance of 3,898,539
shares of IMHI $.001 par
value common stock for
purchase of IMHI in
reverse acquisition..... 3,898,539 3,898 13,512,339 -- --
Issuance of 89,082 shares
of $.001 par value
common stock as
compensation and from
exercise of stock
options and warrants.... 89,082 89 221,160 -- --
Net loss................... -- -- -- -- (15,898,897)
---------- ----------- ----------- --------- ------------
Balance at December 31,
1996....................... 11,904,333 $ 11,904 $23,210,098 $(850,000) $(17,692,304)
========== =========== =========== ========= ============
</TABLE>
See notes to consolidated financial statements
F-5
<PAGE> 47
SIMIONE CENTRAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1994 1995 1996
----------- ---------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................ $ (707,614) $ (956,125) $(15,898,897)
Adjustments to reconcile net loss to net cash used in
operating activities:
Purchased in-process research and development......... -- -- 12,573,931
Provision for doubtful accounts....................... -- -- 395,046
Amortization and depreciation......................... -- -- 784,502
Value assigned to stock purchase warrant.............. -- -- 100,000
Stock compensation expense............................ -- -- 58,500
Loss on sale of assets................................ -- -- 3,636
Changes in assets and liabilities:
Accounts receivable................................... (598,843) 95,360 (3,305,003)
Prepaid expenses and other current assets............. 8,397 (47,017) (553,630)
Other assets.......................................... -- -- (26,925)
Accounts payable...................................... 26,528 (11,414) 2,264,539
Accrued compensation expense.......................... (17,148) 23,158 142,867
Accrued liabilities................................... (13,902) (7,771) 768,284
Customer deposits..................................... -- -- 272,724
Unearned revenues..................................... -- -- 616,518
----------- ---------- ------------
Net cash used in operating activities......... (1,302,582) (903,809) (1,803,908)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of consulting division of Simione & Simione.... -- -- (2,000,000)
Cash received in reverse acquisition of IMHI............ -- -- 750,202
Purchase of software, furniture and equipment........... -- (424,000) (635,997)
Increase in restricted cash............................. -- -- (1,000,000)
Purchase of intangible assets........................... -- -- (64,123)
----------- ---------- ------------
Net cash used in investing activities......... -- (424,000) (2,949,918)
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contribution from former parent company......... -- -- 4,000,000
Proceeds from notes payable............................. -- -- 2,499,800
Issuance of common stock, net of cash expenses.......... -- -- 2,191,503
Advances from (payments to) former parent company....... (854,704) 1,440,309 (1,076,855)
Repayment (issuance) of note receivable from officer.... -- (252,075) 252,075
Principal payments on capital lease obligations......... -- -- (45,741)
Payments of related party notes......................... -- -- (68,000)
Proceeds from exercise of stock options and warrants.... -- -- 62,749
----------- ---------- ------------
Net cash provided by (used in) financing
activities.................................. (854,704) 1,188,234 7,815,531
----------- ---------- ------------
Net (decrease) increase in cash and cash
equivalents................................. (2,157,286) (139,575) 3,061,705
Cash and cash equivalents, beginning of year............ 2,619,884 462,598 323,023
----------- ---------- ------------
Cash and cash equivalents, end of year.................. $ 462,598 $ 323,023 $ 3,384,728
=========== ========== ============
Supplemental disclosure of non-cash investing and
financing activities:
Capital contribution from former parent company....... $ -- $2,443,013 $ --
Software, furniture and equipment obtained through
capital leases..................................... -- -- 690,490
</TABLE>
See notes to consolidated financial statements
F-6
<PAGE> 48
SIMIONE CENTRAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Background: Incorporated in September 1991, as a wholly-owned subsidiary
of Central Health Holding Company, Inc. ("CHHC"), Central Health Management
Services, Inc. ("CHMS") provided information and management support services to
home health care providers. Central Health Services, Inc. ("CHS"), also a
wholly-owned subsidiary of CHHC, provided similar services to home health care
agencies owned by CHHC. On January 1, 1996, CHHC transferred at book value the
assets and employees related to CHS's information services and certain clinical
and financial support services to CHMS. Accordingly, the consolidated financial
statements give effect to the reorganization of these entities under common
control and reflect the combined operating results of CHMS and the transferred
CHS operations. On January 17, 1996, CHHC completed a pro-rata distribution of
the outstanding common stock of CHMS to its shareholders.
On October 8, 1996, InfoMed Holdings, Inc. ("IMHI") and CHMS merged in a
transaction accounted for as a reverse acquisition for financial reporting
purposes. In connection with the merger, IMHI issued 7,916,712 shares of its
common stock in exchange for all the outstanding common stock of CHMS, and
thereby, the former shareholders of CHMS acquired control of IMHI. As a result,
CHMS is considered the acquiring company; hence, the historical financial
statements of CHMS became the historical financial statements of IMHI and
include the results of operations of IMHI only from the effective acquisition
date. On December 19, 1996, IMHI changed its name to Simione Central Holdings,
Inc. (the "Company").
Overview: The Company is a leading provider of integrated systems and
services designed to enable home health care providers to generate and utilize
comprehensive financial, operational and clinical information and address
organizational issues in order to make informed decisions, more effectively
operate their businesses and compete in a managed care and PPS environment. The
Company has developed two systems which provide a core platform of software
applications which incorporate selected modules based on customer needs. The
Company's Shared Resource Solution offers an outsourcing opportunity for home
health care providers and incorporates the Company's proprietary NAHC IS system
software. Under this arrangement, the Company operates a data center which
stores customer data and allows customers real-time, secure access through a
wide area communications network. The Company's In-House Solution, STAT 2, is
licensed to customers for use on their own computer system. In addition to these
two system solutions, the Company's home health care consulting services assist
providers in addressing the challenges of reducing the cost of delivering care,
maintaining quality of care, streamlining operations and re-engineering
organizational structures. The Company also provides comprehensive agency
support services which include administrative, billing and collections,
training, reimbursement, and financial management services, among others.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany accounts and transactions
have been eliminated.
MANAGEMENT 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 revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-7
<PAGE> 49
SIMIONE CENTRAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
REVENUE RECOGNITION
Revenues are derived from shared resource information management services,
agency support services, the licensing and sub-licensing of software, the sale
of computer hardware, professional and technical consulting services,
implementation and training services, software maintenance and support services,
as well as home health care management consulting services. Shared resource
information management and agency support services are provided under
contractual arrangement with terms typically ranging from three to five years.
Revenues from these contracts are recognized monthly as the related services are
rendered. Application software licenses, computer hardware and third-party
software revenues are recognized when the related products are delivered and
collectibility of fees is determined to be probable, provided that no
significant obligation remains under the contract. Revenues derived from the
sale of software licenses requiring significant modification or customization
are recorded based upon percentage of completion using labor hours or contract
milestones. Software support revenues are recognized ratably over the term of
the related agreement. All other service revenues are recognized as the related
services are performed.
CONCENTRATIONS AND MAJOR CUSTOMERS
The Company sells its systems and services to various companies in the
health care industry. The Company performs ongoing credit evaluations of its
customers' financial condition and, generally, requires no collateral from its
customers. Current operations are charged with an allowance for doubtful
accounts based upon experience and any unusual circumstances which affect the
collectibility of receivables. Amounts deemed uncollectible are charged against
this allowance.
During 1994, 1995 and through October 1996, the Company derived the
majority of its revenue from services provided to its former parent company, see
Note 13. In addition, the Company had other major customers which comprised the
following percentages of total net revenue:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Customer A.................................................. 19% 14% --
Customer B.................................................. -- -- 22%
</TABLE>
The Company is dependent upon certain third party software licenses as well
as certain contractual arrangements for provision of certain of its services,
see Note 15.
CASH EQUIVALENTS
All highly liquid investments purchased with an original maturity of three
months or less are considered to be cash equivalents.
RESTRICTED CASH
The Company's restricted cash of $1,000,000 is invested in a certificate of
deposit and secures $1,000,000 of borrowings outstanding under the Company's
lines of credit agreements, see Note 6.
PURCHASED SOFTWARE, FURNITURE AND EQUIPMENT
Purchased software, furniture and equipment is stated at cost. Depreciation
is calculated for financial reporting purposes using the straight-line method
over the estimated useful lives (ranging from 1 to 10 years) of the assets or
lease term, whichever is shorter.
F-8
<PAGE> 50
SIMIONE CENTRAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
SOFTWARE DEVELOPMENT COSTS
Costs incurred to establish the technological feasibility of computer
software products are research and development expense and are charged to
expense as incurred. The Company capitalizes costs incurred between the point of
establishing technological feasibility and general release when such costs are
material. As of December 31, 1996, the Company has no capitalized computer
software development costs.
INTANGIBLE ASSETS
Intangible assets arising principally from the accounting for acquired
businesses are amortized using the straightline method over the estimated useful
lives of the related assets which range from 4 to 11 years. The Company reviews
its long-lived and intangible assets for impairment whenever events or changes
in circumstances indicate that the carrying amount may not be recoverable. The
measurement of possible impairment is based upon determining whether projected
undiscounted future cash flow from the use of the asset is less than the
carrying amount of the asset. As of December 31, 1996, in the opinion of
management, there has been no such impairment.
INCOME TAXES
The Company accounts for income taxes using the liability method which
requires recognition of deferred tax liabilities and assets for the expected
future tax consequences of temporary differences between the financial statement
carrying amount and the tax bases of assets and liabilities.
NET LOSS PER SHARE
Net loss per share is computed on the basis of the weighted average number
of common shares outstanding during the period. The 5,989,712 shares of Class A
common stock issued in the reorganization of the Company on January 16, 1996
(see Note 12) have been treated as outstanding for all periods presented. Fully
diluted loss per share does not differ significantly from the primary loss per
share. Common stock equivalents relate to shares potentially issuable under
outstanding options and warrant agreements and are included in the loss per
share calculation if dilutive.
STOCK BASED COMPENSATION
Stock options are accounted for under Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" and related interpretations.
The Company has included the pro forma equivalent disclosure information
required by SFAS No. 123, see Note 12.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash and cash equivalents and restricted cash: The carrying amounts
reported in the balance sheet for cash and cash equivalents and restricted cash
approximate their fair value.
Notes payable: The carrying amounts of the Company's notes payable
approximate their fair value.
RECENTLY ADOPTED ACCOUNTING STANDARDS
In 1996 the Company adopted SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of". SFAS No. 121
requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows
F-9
<PAGE> 51
SIMIONE CENTRAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
estimated to be generated by those assets are less than the assets carrying
amount. SFAS No. 121 also addresses the accounting for long-lived assets that
are expected to be disposed of. The adoption of SFAS No. 121 did not have an
impact on the Company's financial statements.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the 1996
financial statement presentation.
2. ACQUISITIONS
On October 8, 1996, IMHI merged with CHMS. IMHI provided a comprehensive
package of software applications for home health care providers marketed under
the name STAT 2. In connection with the acquisition, each issued and outstanding
share of CHMS common stock was converted into and exchanged for the right to
receive .22021 shares of IMHI common stock as of the effective date. As a
result, IMHI issued 7,916,712 shares of common stock to CHMS's shareholders. In
addition, each of the outstanding shares of IMHI Class A Convertible Preferred
Stock was converted into and exchanged for shares of IMHI common stock and all
outstanding options and warrants to purchase CHMS common stock as of the
effective date were converted into the right to purchase shares of IMHI common
stock, provided that the number of shares to be so purchased and the respective
exercise prices thereof have been adjusted by the exchange ratio. The merger was
accounted for as a reverse acquisition under the purchase method of accounting.
As a result, for accounting purposes CHMS was considered as having acquired
IMHI. The historical financial statements of CHMS became the historical
financial statements of IMHI and include the results of operations of both
companies from the effective date. All share amounts have been retroactively
restated giving effect to the .22021 exchange ratio of CHMS shares for IMHI
shares. CHMS had been on a December 31 fiscal year end, and, therefore, the
fiscal year end of IMHI was changed to December 31. Effective December 19, 1996,
IMHI changed its name to Simione Central Holdings, Inc. (the "Company").
The purchase price of approximately $16,797,000 (including $760,000 of
acquisition costs and net liabilities assumed of $2,521,000) was allocated based
on the relative fair values of the assets acquired and liabilities assumed.
Approximately $12,574,000 of the purchase price was allocated to purchased
in-process research and development. This in-process research and development
had not reached technological feasibility and had no alternative future use, and
therefore, was charged to operations as of the acquisition date. In addition,
$4,223,000 of the purchase price was allocated to certain identifiable
intangible assets and will be amortized over the related assets estimated useful
life, see Note 5. The purchase price was determined based on the estimated value
of the outstanding 3,898,539 shares of IMHI common stock and options and
warrants to purchase IMHI common stock outstanding at the merger date.
Effective January 1, 1996, the Company purchased the assets of Simione &
Simione, CPA's -- Consulting Division (a division of Simione & Simione, CPAs, a
Partnership) ("Simione & Simione") for $2,000,000 in cash. Simione & Simione
provided a wide range of home health care consulting services. This acquisition
was accounted for using the purchase method. The entire purchase price was
allocated to goodwill and is being amortized over 10 years.
F-10
<PAGE> 52
SIMIONE CENTRAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. ACQUISITIONS -- CONTINUED
Pro forma information giving effect to the acquisitions as if they took
place on January 1, 1995, is as follows (unaudited):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1995 1996
------------ -----------
<S> <C> <C>
Net revenues............................................... $ 29,222,668 $34,774,875
Net loss................................................... (18,803,490) (3,266,402)
Net loss per share......................................... (1.90) (0.28)
</TABLE>
The 1995 pro forma net loss includes the $12,574,000 charge to operations
for the in-process research and development purchased. This pro forma
information does not purport to be indicative of the results that actually would
have occurred if the acquisitions had been effective on the dates indicated or
which may be obtained in the future.
3. LEASE RECEIVABLES
The Company provides lease financing to certain customers related to sales
of software licenses and computer hardware. Lease terms are generally five
years. Future minimum lease payments under these sales-type leases as of
December 31, 1996, of which the current portion is classified in accounts
receivable, are as follows:
<TABLE>
<S> <C>
1997........................................................ $105,432
1998........................................................ 28,212
--------
133,644
Interest portion............................................ (13,616)
--------
$120,028
========
</TABLE>
4. PURCHASED SOFTWARE, FURNITURE AND EQUIPMENT
Purchased software, furniture and equipment consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1996
-------- ----------
<S> <C> <C>
Equipment................................................... $ -- $ 855,428
Purchased software.......................................... 424,000 840,064
Furniture................................................... -- 491,666
Leasehold improvements...................................... -- 58,388
-------- ----------
424,000 2,245,546
Accumulated depreciation.................................... -- (377,550)
-------- ----------
$424,000 $1,867,996
======== ==========
</TABLE>
F-11
<PAGE> 53
SIMIONE CENTRAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. INTANGIBLE ASSETS
Intangible assets consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- AMORTIZATION
1995 1996 PERIOD
------- ---------- ------------
<S> <C> <C> <C>
Developed technology................................. $ -- $2,054,000 4 years
Goodwill............................................. -- 2,000,000 10 years
Trade name........................................... -- 1,142,000 11 years
Other................................................ 36,831 1,128,025 6-10 years
------- ----------
36,831 6,324,025
Accumulated amortization............................. -- (401,270)
------- ----------
$36,831 $5,922,755
======= ==========
</TABLE>
6. NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS
During 1996, a wholly-owned subsidiary of the Company entered into line of
credit agreements with a bank which provide for aggregate borrowing of
$2,500,000 and, as renewed, expire on January 17, 1998. Borrowings of $1,000,000
under these agreements bear interest at 8.72% and borrowings of $1,500,000 bear
interest at the bank's prime rate. Borrowings under these agreements aggregated
$2,499,800 at December 31, 1996, and are secured by a certificate of deposit of
$1,000,000, the subsidiary's accounts receivable, and certain other assets.
Additionally, borrowings under these agreements aggregating $1,500,000 are
personally guaranteed by a major shareholder and executive officer of the
Company.
The Company has entered into lease agreements with a related party (see
Note 14) for certain office and computer equipment and furniture with
approximate aggregate cost and net book value of $690,000 and $624,000,
respectively, at December 31, 1996. Additionally, the Company has other
equipment under capital leases with approximate aggregate cost and net book
value of $139,000 and $121,000, respectively, at December 31, 1996. Amortization
of these assets is included in the Company's depreciation expense and amounted
to approximately $84,000 for 1996.
Aggregate annual rental commitments under these capital leases as of
December 31, 1996 are as follows:
<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31,
- -------------------------
<S> <C>
1997........................................................ $ 373,197
1998........................................................ 341,752
1999........................................................ 222,513
---------
Total minimum payments............................ 937,462
Amount representing interest................................ (144,529)
---------
Present value of future minimum lease payments.............. $ 792,933
=========
</TABLE>
7. OPERATING LEASES
The Company leases its office facilities and certain furniture and
equipment under various operating lease agreements, some of which are with
related parties (see Note 14). These leases require the Company to pay taxes,
insurance and maintenance expenses, and provide for renewal options at the then
fair market rental value of the property. Amounts expensed under operating
leases were approximately $1,569,000, $1,554,000 and $3,699,000 for the years
ended December 31, 1994, 1995, 1996, respectively.
F-12
<PAGE> 54
SIMIONE CENTRAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. OPERATING LEASES -- CONTINUED
Future aggregate annual rental payments for operating leases with
noncancelable lease terms in excess of one year are as follows:
<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31,
- -------------------------
<S> <C>
1997........................................................ $1,819,000
1998........................................................ 1,580,000
1999........................................................ 1,243,000
2000........................................................ 1,249,000
2001........................................................ 995,000
Thereafter.................................................. 994,000
----------
Total............................................. $7,880,000
==========
</TABLE>
8. COMMITMENTS AND CONTINGENCIES
On November 1, 1996, a wholly-owned subsidiary of the Company entered into
a series of five year contracts to provide shared resource information
management and agency support services to several affiliates of Columbia/HCA
Health Care Corporation ("Columbia/HCA"). As part of the negotiation of these
contracts, Columbia/HCA required that this subsidiary guarantee certain
obligations of the former shareholders of CHHC, as it related to the
administration and potential liabilities to the Central Health Holding Company,
Inc. Employee Stock Ownership Plan ( the "Plan") or its participants. Under the
terms of this guaranty agreement (the "Guaranty"), this subsidiary agreed to
guarantee Columbia/HCA against losses arising from the following: (i)
liabilities relating to the Plan for losses resulting from a fiduciary breach,
prohibited transaction or other violation of law relating to the Plan and (ii)
liabilities relating to the Plan which are not paid by the former stockholders
of CHHC other than the Plan, but only to the extent such losses are not
recovered by Columbia/HCA through other indemnity provisions of its agreement
with the former shareholders of CHHC. These indemnity provisions include any
potential recovery from CHHC's insurance policies as well as recoveries from
escrow accounts established for the benefit of Columbia/HCA by CHHC's former
shareholders. This subsidiary's maximum liability under the Guaranty is
$20,000,000 for claims of loss arising before November 1, 1997, $17,500,000 for
claims arising before November 1, 1998, and $15,000,000 for claims arising
before November 1, 2000. There is no liability for any claims arising after
November 1, 2000. However, the aggregate maximum liability under the Guaranty is
$20,000,000. Pursuant to the Guaranty, the subsidiary agreed that on each date
that a guaranteed obligation is required to be paid to Columbia/HCA, the
subsidiary shall grant to Columbia/HCA a security interest equal to the amount
of the guaranteed obligation in all the subsidiary's accounts receivable. This
subsidiary also granted to Columbia/HCA the right to offset any liability
arising under the Guaranty against any obligation of Columbia/HCA or its
affiliates to the subsidiary. The Department of Labor has an open investigation
relating to the Plan, and the Internal Revenue Service is also auditing certain
issues related to the Plan. At December 31, 1996, no claims had been made under
the Guaranty and the Company does not currently anticipate incurring any loss
associated with the Guaranty.
The Company is engaged in various legal and regulatory proceedings arising
in the normal course of business which management believes will not have a
material adverse effect on its financial position or results of operations.
9. SEVERANCE AND OTHER RESTRUCTURING CHARGES
As a result of the change in focus of the Company's business from providing
services to affiliates of CHHC, the Company incurred severance and certain other
restructuring costs totaling $1,215,000 in the fourth quarter of 1996. These
costs primarily relate to severance of seven terminated key employees and costs
F-13
<PAGE> 55
SIMIONE CENTRAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. SEVERANCE AND OTHER RESTRUCTURING CHARGES -- CONTINUED
to buyout a lease of equipment no longer useful to the Company. As of December
31, 1996, payments of $347,000 had been made against the accrued severance and
other restructuring charges.
10. INCOME TAXES
The Company has not incurred or paid any income taxes since its inception.
Deferred income taxes reflect the net effect of temporary differences
between the financial reporting carrying amounts of assets and liabilities and
income tax carrying amounts of assets and liabilities. The components of the
Company's deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1995 1996
--------- -----------
<S> <C> <C>
Deferred tax assets:
Net operating loss..................................... $ 237,880 $ 2,270,669
Accrued liabilities.................................... -- 547,259
Allowance for doubtful accounts........................ -- 409,119
Unearned revenues...................................... -- 304,934
Tax credit carryforward................................ -- 95,830
Other.................................................. 46,121 62,356
--------- -----------
Total deferred tax assets................................ 284,001 3,690,167
Deferred tax liabilities:
Purchased intangible assets............................ -- (1,532,009)
Depreciation........................................... -- (159,087)
--------- -----------
Total deferred tax liabilities........................... -- (1,691,096)
--------- -----------
Net deferred tax assets.................................. 284,001 1,999,071
Valuation allowance...................................... (284,001) (1,999,071)
--------- -----------
$ -- $ --
========= ===========
</TABLE>
The Company has approximately $5,975,000 of net operating losses for income
tax purposes available to offset future taxable income. Such losses expire
$3,159,000 in 2010 and $2,816,000 in 2011 and may be subject to certain
limitations for changes in ownership. Additionally, the Company has research and
development and alternative minimum tax credits of approximately $96,000 which
expire in years 2009 through 2011. A valuation allowance reducing net deferred
tax assets recognized to zero has been recorded based on management's assessment
that it is not "more likely than not" that the assets are realizable as of
December 31, 1996.
Approximately $500,000 of the net deferred tax assets related to the IMHI
acquisition will result in a credit to intangible assets if and when recognized.
Actual income tax expense differs from the "expected" amount (computed by
applying the U.S. Federal corporate income tax rate of 34% to income or loss
before income taxes) as follows for 1996:
<TABLE>
<S> <C>
Tax benefit computed at statutory rates..................... $(5,405,624)
State income taxes, net of Federal effect................... (635,956)
Non-deductible purchased in-process research and
development............................................... 4,778,094
Other, net.................................................. 14,264
Change in valuation allowance............................... 1,249,222
-----------
Income tax........................................ $ --
===========
</TABLE>
F-14
<PAGE> 56
SIMIONE CENTRAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. INCOME TAXES -- (CONTINUED)
Prior to 1996, the Company's taxable loss was included in the consolidated
tax return of the former parent company. The former parent company utilized net
operating losses generated by the Company and did not allocate any benefit from
use of the net operating losses to the Company.
11. EMPLOYEE BENEFIT PLANS
CHHC sponsored the Central Health Holding Company, Inc. Employee Stock
Ownership Plan (the "Plan"), which covered substantially all full-time employees
of CHHC and its wholly-owned subsidiaries and was funded by cash contributions
from CHHC and its wholly-owned subsidiaries. The major asset of the Plan was
shares of CHHC common stock acquired by the Plan. In connection with the pro
rata distribution of the common stock of CHMS (see Note 1), the Plan received
shares of the Company's common stock. All of the Plan's assets are allocated to
each eligible employee's account and are held in trust until the employee's
termination, retirement, total disability or death. In connection with the sale
of CHHC to Columbia/HCA, the Plan was converted from an employee stock ownership
plan to a profit sharing plan and the sponsorship of the Plan was transferred
from CHHC to the Company.
The consolidated financial statements include the Company's share of
employee benefit expense related to the Plan for the CHMS employees and also the
CHS employees (see Note 1). This expense was approximately $474,000 and $439,000
in 1994 and 1995, respectively.
The Company has adopted 401(k) plans that cover substantially all
employees. The Company contributes to the plans based upon the dollar amount of
each participant's contribution. The Company made contributions to these plans
of approximately $54,000 in 1996.
12. SHAREHOLDERS' EQUITY
In November 1995, CHHC made a capital contribution of $2,443,013 to the
Company, which used the proceeds to repay indebtedness of $2,443,013 to CHS.
CHMS was a separate legal entity and a wholly-owned subsidiary of CHHC as
of December 31, 1995. On January 6, 1996, CHMS formed CHMS Transitory Corp.
("Transitory Corp."). Transitory Corp. issued 5,989,712 shares of Class A Common
Stock and one share of Class B Common Stock, all of which were held by CHMS. On
January 16, 1996, CHMS and Transitory Corp. merged with Transitory Corp. as the
survivor. The 22 shares of CHMS Common Stock held by CHHC were canceled and CHHC
received the Class A and Class B Common Stock of Transitory Corp. Immediately
subsequent to the merger, Transitory Corp. amended it articles of incorporation
and changed its name to Central Health Management Services, Inc. On January 17,
1996, CHHC completed a pro-rata distribution to its shareholders of all the
outstanding capital stock of CHMS. The distribution was accomplished through the
issuance of 3.411 Class A shares of CHMS common stock for each share of CHHC's
common stock held by the respective shareholder.
On January 17, 1996, CHHC made a $4,000,000 cash capital contribution to
CHMS. On March 5 and 22, 1996, employees of CHMS purchased 1,928,836 shares of
Class A Common Stock for aggregate consideration of $3,051,369. These shares
were purchased under the terms of a stock subscription agreement whereby 10% was
due at the date of purchase and the remainder was due on December 5, 1996. Stock
subscription receivable of $850,000 reported as a reduction to common stock
represents the amount not yet collected as of December 31, 1996. This amount is
due from a major shareholder and executive officer of the Company who has
personally guaranteed $1,500,000 of the Company's borrowings under its line of
credit agreements. The Company has agreed to defer payment of this receivable
until this individual is relieved from his personal guarantee of the Company's
indebtedness.
F-15
<PAGE> 57
SIMIONE CENTRAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. SHAREHOLDERS' EQUITY -- (CONTINUED)
Holders of approximately 9,543,000 shares of common stock and warrants and
options to purchase 3,811,549 shares of common stock have certain demand or
piggyback registration rights, subject to certain conditions and limitations,
which entitle the holders to require the Company to register all or part of
their shares for public resale.
As of December 31, 1996, the Company has reserved 4,134,113 shares of
common stock for future issuance upon exercise of warrants and options to
purchase common stock. See Note 16.
STOCK OPTIONS
The Company has established two stock option plans, the 1994 Incentive
Stock Option and Non-Qualified Stock Option Plan (the "1994 Plan") and the 1996
Stock Option Plan (the "1996 Plan"), under which the Company is authorized to
grant options to purchase an aggregate of 1,257,008 shares of common stock.
Options granted under these plans must have an exercise price not less than the
fair market value at the date of grant. In addition to options granted under the
1994 Plan and 1996 Plan, the Company has granted non-plan options to certain
related parties. Such non-plan options were granted with exercise prices equal
to fair market value on the date of grant.
The Company had no stock option activity prior to 1996. A summary of the
Company's stock option activity for 1996 follows:
<TABLE>
<CAPTION>
WEIGHTED
NUMBER AVERAGE
OF EXERCISE
OPTIONS PRICE
--------- --------
<S> <C> <C>
Granted..................................................... 1,502,540 $3.04
Assumed in IMHI purchase.................................... 1,444,363 1.45
Exercised................................................... (53,496) 0.52
Forfeited................................................... (80,099) 2.50
---------
Outstanding at December 31, 1996............................ 2,813,308 $2.29
=========
</TABLE>
The following table summarizes information about options outstanding at
December 31, 1996:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
--------------------------------------- OPTIONS EXERCISABLE
WEIGHTED ----------------------
AVERAGE WEIGHTED WEIGHTED
RANGE OF REMAINING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING LIFE IN YEARS PRICE EXERCISABLE PRICE
- -------- ----------- -------------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$0.37 -- $1.13............................. 834,067 5.4 $0.67 834,067 $0.67
1.50 -- 2.63............................. 1,139,241 9.5 1.95 721,950 1.63
3.13 -- 5.25............................. 840,000 9.9 4.36 365,000 3.21
--------- ---------
2,813,308 8.4 $2.29 1,921,017 $1.51
========= =========
</TABLE>
Pro forma information regarding net loss and net loss per share is required
by SFAS No. 123 as if the Company had accounted for employee stock option grants
under the fair value method of SFAS No. 123. The fair value for options was
estimated at the date of grant using a Black-Scholes option pricing model with
the following weighted-average assumptions for 1996: risk-free interest rates of
6%; no dividends; a volatility factor of the expected market price of the
Company's common stock of 0.6; and a weighted-average expected life of the
options of 3.5 years. In addition, options assumed in the purchase of IMHI have
been included in the fair value estimates as if the options assumed were granted
by the Company on the purchase date and using an
F-16
<PAGE> 58
SIMIONE CENTRAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. SHAREHOLDERS' EQUITY -- (CONTINUED)
assumed exercise price of the value of IMHI shares issued in the acquisition.
The weighted average fair value of options granted during 1996 was $0.90.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
For the purposes of pro forma disclosures, the estimated fair value of the
stock options is amortized to expense over the options' vesting periods. The
Company's pro forma net loss and net loss per share for 1996 were $(17,492,350)
and $(2.04), respectively.
STOCK PURCHASE WARRANTS
At December 31, 1996, the Company had outstanding warrants to purchase
shares of the Company's common stock as follows:
<TABLE>
<CAPTION>
COMMON EXERCISE EXPIRATION
SHARES PRICE DATE
- --------- -------- -----------------
<C> <C> <S>
1,000,000 $0.50 February 24, 2005
155,038 3.11 October 8, 1999
20,000 5.63 --
- ---------
1,175,038
=========
</TABLE>
All outstanding warrants are exercisable except for a warrant to purchase
155,038 shares, for which the number of exercisable shares may be reduced
depending on the Company's closing stock price preceding April 9, 1997.
During 1996, the Company issued, and the holder exercised, a warrant for
the purchase of 22,021 shares of common stock at $1.58 per share.
13. TRANSACTIONS WITH FORMER PARENT COMPANY
The Company derived revenue from charges for the services provided to the
home health care agencies owned by CHHC. The charges were recorded, for purposes
of these consolidated financial statements, in an amount equal to the cost of
the services being provided and therefore generated no operating profit.
Revenues of $8,575,000, $9,077,000 and $12,051,000 were recognized in 1994,
1995, and 1996, respectively. In addition, CHHC charged the Company a management
fee for services provided to the Company. These services include facilities
management, legal, accounting, administrative, executive and office support
during 1994 and 1995. During 1996, the services provided were limited to legal
and executive. CHHC's charges are based on the allocated direct cost of the
various services being provided. Management fees in the amount of $3,164,000,
$3,594,000 and $432,000 were incurred in 1994, 1995, and 1996, respectively.
These arrangements terminated effective October 31, 1996.
Prior to 1996, the Company was charged by CHHC for its share of
self-insured medical and dental claims. The Company's share of expenses for this
program was $146,000 in both 1994 and 1995.
F-17
<PAGE> 59
SIMIONE CENTRAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. RELATED PARTY TRANSACTIONS
The note receivable from officer outstanding at December 31, 1995 was
payable on demand, bearing interest at the monthly federal short-term rate. The
Company received full payment of the note in 1996.
Gateway LLC, a company owned in part by a director of the Company, leases
an office facility to the Company under the terms of an agreement, which expires
January 1, 2001. Rent expense and related operating expenses paid to Gateway LLC
by the Company were $82,000 in 1996. Future annual rental payments under this
lease are $223,000 in 1997, $233,000 in 1998, $243,000 in 1999, and $254,000 in
2000.
A major shareholder and executive officer of the Company, along with
certain other shareholders, are shareholders of Healthfield, Inc.
("Healthfield"). The Company entered into a management services agreement with
Healthfield in February 1994. Healthfield paid the Company approximately
$2,287,000 and $1,913,000 in management fees during 1994 and 1995, respectively,
for certain administrative and financial services rendered to Healthfield in
accordance with the agreement. The management services agreement with
Healthfield was terminated in December 1995.
A major shareholder and executive officer along with certain other
executive officers of the Company are shareholders of National Leasing, Inc.
("National"). During 1996, the Company entered into various three-year capital
leases with National. Monthly payments to National under these lease agreements
are $23,600 and totaled $70,000 in 1996.
A shareholder of the Company owns a Company which leased computer equipment
to the Company during 1996 under an operating lease which expired in December
1996. Total payments in 1996 related to this lease were approximately $497,000.
A shareholder and executive officer of the Company is a partner in an
entity that leases an office facility to the Company on a month-to-month basis
for $10,800 per month. Rent expense and related operating expenses paid to this
entity were $112,000 in 1996.
The Company has consulting agreements with two entities in which certain
directors of the Company have ownership interests. Aggregate monthly consulting
fees paid to these two entities approximate $20,000 and totaled $59,000 in 1996.
15. LICENSE AGREEMENTS
Certain software applications of the Company's Shared Resource Solution
incorporate software licensed from third parties. Under this license agreement,
the Company is obligated to pay royalties based on the volume of transactions
processed by the Company. Certain other agreements obligate the Company to pay
royalties based on a fixed percentage of net collected revenues from sales of
covered systems. In January 1996, the Company entered into an agreement with IBM
Global Services ("IBM") under which the Company obtains data processing and
network communication services. The agreement with IBM is for a ten year period
expiring December 31, 2005, and requires the Company to pay fees based on the
volume of transactions processed. The agreement requires minimum annual payments
and is cancelable by the Company for a stated termination charge.
16. SUBSEQUENT EVENTS
On March 26, 1997, the Company's Board of Directors approved the Simione
Central Holdings, Inc. Omnibus Equity-Based Incentive Plan (the "Incentive
Plan") and the Simione Central Holdings, Inc. Non-Qualified Formula Stock Option
Plan (the "Director Plan"), both of which are subject to shareholder approval.
The Company has reserved 500,000 and 50,000 shares of common stock for future
issuance under the Incentive Plan and Director Plan, respectively.
F-18
<PAGE> 60
SIMIONE CENTRAL HOLDINGS, INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
CHARGED ADDITIONS
BALANCE AT TO DUE TO BALANCE AT
BEGINNING COSTS AND PURCHASE OF END OF
OF PERIOD EXPENSES INFOMED DEDUCTIONS(1) PERIOD
---------- ---------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1996
Allowance for Doubtful Accounts....... $13,600 $395,046 $780,701 $126,333 $1,063,014
======= ======== ======== ======== ==========
Year ended December 31, 1995
Allowance for Doubtful Accounts....... $ -- $ 13,600 $ -- $ -- $ 13,600
======= ======== ======== ======== ==========
Year ended December 31, 1994
Allowance for Doubtful Accounts....... $ -- $ -- $ -- $ -- $ --
======= ======== ======== ======== ==========
</TABLE>
- ---------------
(1) Write-offs of uncollectible accounts.
<PAGE> 61
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C> <C> <C>
3.1 -- Certificate of Incorporation of the Company (Incorporated by
reference to Exhibit 3.1 to the Company's Registration
Statement on Form S-4 (Registration Number 33-57150) as
filed with the Securities and Exchange Commission)..........
3.2 -- Amendment to the Certificate of Incorporation of the Company
(Incorporated by reference to Exhibit 3.2 to the Company's
Registration Statement on Statement S-4 (Registration Number
33-57150) as filed with the Securities and Exchange
Commission).................................................
3.3 -- Bylaws of the Company (Incorporated by reference to Exhibit
3.3 to the Company's Registration Statement on Form S-4
(Registration Number 33-57150) as filed with the Securities
and Exchange Commission). ..................................
3.4 -- Amendment to the Bylaws of the Company......................
3.5 -- Certificate of Ownership Merging Simione Central Holdings,
Inc. into InfoMed Holdings, Inc.............................
4.1 -- See Exhibits 3.1, 3.2, 3.3, 3.4 and 3.5 for provisions of
the Company's Certificate of Incorporation and Bylaws
governing the rights of holders of securities of the
Company.....................................................
4.2 -- Registration Rights Agreement dated October 7, 1996 by and
among InfoMed Holdings, Inc., those shareholders of Simione
Central Holding, Inc. appearing as signatories to the
Registration Rights Agreement, and those shareholders of
InfoMed Holdings, Inc. appearing as signatories to the
Registration Rights Agreement (Incorporated by reference to
Exhibit 10.1 of the Company's Current Report on Form 8-K
dated October 8, 1996 filed with the Securities and Exchange
Commission).................................................
9.1 -- Form of Simione Central Holding, Inc., Shareholders Voting
Agreement and Irrevocable Proxy dated March 5, 1996 by and
among Howard B. Krone, William J. Simione, Jr., Gary
Rasmussen, G. Blake Bremer, Katherine L. Wetherbee, A.
Curtis Eade, James A. Tramonte, John Isett, Cindy Lumpkin,
Douglas E. Caddell, Robert J. Simione, Kenneth L. Wall,
Allen K. Seibert, III, Jerry Sevy, Larry Clark and Lori N.
Siegel, Gary M. Bremer, Richard Parlontieri, and James R.
Henderson...................................................
9.2 -- Agreement dated as of October 7, 1996 by and among InfoMed
Holdings, Inc., EGL Holdings, Inc., Mercury Asset Management
plc, O'Donnell Davis, Inc., Barrett O'Donnell and certain
other holders of the Class A Convertible Preferred Stock of
InfoMed Holdings, Inc. (Incorporated by reference to Exhibit
10.2 of the Company's Current Report on Form 8-K dated
October 8, 1996 as filed with the Securities and Exchange
Commission).................................................
10.1 -- Amended and Restated Agreement and Plan of Merger dated as
of September 5, 1996 by and among InfoMed Holdings, Inc.,
Simione Central Holding, Inc. and InfoSub, Inc.
(Incorporated by reference to Exhibit 2.1 of the Company's
Current Report on Form 8-K dated September 5, 1996 as filed
with the Securities and Exchange Commission)................
10.2 -- InfoMed Holdings, Inc. Amended and Restated Share Warrant
for the Purchase of Common Stock of InfoMed Holdings, Inc.
dated October 5, 1996 between InfoMed Holdings, Inc. and
O'Donnell Davis, Inc., Rowan Nominees Ltd., David O. Ellis,
Richard V. Lawry, Salvatore A. Massaro, Murali Anantharaman,
Kathleen E.J. Ellis, Jeremy Ellis, Karen Ellis, Gemma Ellis,
Thomas M. Rogers, Jr., and Arnold Schumacher (Incorporated
by reference to Exhibit 4.1 of the Company's Current Report
on Form 8-K dated October 8, 1996 as filed with the
Securities and Exchange Commission).........................
</TABLE>
<PAGE> 62
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C> <C> <C>
10.3 -- Warrant to Purchase 100,000 shares of Class A Common Stock
of Simione Central Holding, Inc., dated April 12, 1996
between Simione Central Holding, Inc. and Home Health First,
a Texas Not-for-Profit corporation..........................
10.4 -- Common Stock Warrant of InfoMed Holdings, Inc. dated October
8, 1996 between Jefferies & Company, Inc. and InfoMed
Holdings, Inc...............................................
10.5 -- Settlement Agreement, dated February 28, 1995, between
InfoMed Holdings, Inc. and Frederick Neufeld (Incorporated
by reference to Exhibit 5.5 of the Company's Current Report
on Form 8-K dated March 7, 1995 as filed with the Securities
and Exchange Commission)....................................
10.6 -- Form of Simione Central Holding, Inc. 1996 Incentive Stock
Option Agreement dated September 4, 1996 by and between
Simione Central Holding, Inc. and each of James R.
Henderson, William J. Simione, Jr., Robert Simione,
Katherine Wetherbee, Sheldon Berman, Betty Gordon, William
J. Simione, III, J. Blake Bremer, Craig Luigart, Kenneth L.
Wald, Marty Cavaiani, Lori Ferrero, Douglas E. Caddell, Andy
Anello and A. Curtis Eade...................................
10.7 -- Form of 1996 Non Qualified Stock Option Agreement dated
September 4, 1996 between Simione Central Holding, Inc. and
each of Gary M. Bremer, James A. Tramonte, Gary W.
Rasmussen, Don VanderBeke and Lori N. Siegel................
10.8 -- Form of Stock Option Agreement dated October 7, 1996 between
InfoMed Holdings, Inc., and Reid Horovitz, Zola Horovitz,
O'Donnell Davis, Inc., EGL Holdings, Inc., David O. Ellis,
Erin Dosdourian, Rodger Johnson, Richard V. Lawry, Salvatore
A. Massaro and Murali Anantharaman..........................
10.9 -- 1994 Incentive Stock Option and Non-Qualified Stock Option
Plan (Incorporated by reference to the Company's Form 10-K
for the fiscal year ended June 30, 1994 as filed with the
Securities and Exchange Commission).........................
10.10 -- Simione Central Holdings, Inc. Profit Sharing Plan dated
October 31, 1996, as amended................................
10.11 -- Simione Central Holdings, Inc. Section 125 Plan effective
date January 1, 1997 sponsored by the Company...............
10.12 -- Headquarters at Gateway Lake Lease Agreement dated January
1, 1996 by and between Gateway LLC and InfoMed Holdings,
Inc. (Incorporated by reference to the Company's Form 10-K
for the fiscal year ended June 30, 1996 as filed with the
Securities and Exchange Commission).........................
10.13 -- Sublease dated November 22, 1996 between Environmental
Design International, Ltd. and Simione Central, Inc.........
10.14 -- Consent and Estoppel Certificate and Assignment dated
October 29, 1996 between Resurgens Plaza South Associates,
L.P., Simione Central, Inc. and Central Health Services,
Inc.........................................................
10.15 -- Executive Employment Agreement dated December 10, 1996
between InfoMed Holdings, Inc. and Gary M. Bremer...........
10.16 -- Executive Employment Agreement dated January 1, 1996 between
Simione Central, Inc. and William J. Simione, Jr............
10.17 -- Agreement dated October 4, 1996 by and between InfoMed
Holdings, Inc. and EGL Holdings, Inc........................
10.18 -- Information Systems Management Agreement dated January 4,
1996 between Integrated Systems Solutions Corporation and
Central Health Management Services, Inc.....................
</TABLE>
<PAGE> 63
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C> <C> <C>
10.19 -- Micronetics Design Corporation Value Added Reseller
Agreement Renewal dated July 10, 1996 between Micronetics
Design Corporation and the Company. ........................
10.20 -- Master Software License Agreement Number 96-2283 dated
October 31, 1996 by and between Software 2000, Inc. and
Simione Central Holding, Inc................................
10.21 -- Guaranty Agreement dated October 31, 1996 by Simione
Central, Inc. in favor of HCA, Inc..........................
10.22 -- Lease Agreement dated March 18, 1996 between National
Leasing, Inc. and Simione Central, Inc......................
10.23 -- IBM Vendor Marketing Programs Cooperative Services Marketing
Agreement dated December 16, 1996 between IBM Corporation
and Simione Central Holding, Inc. ..........................
11.1 -- Statement re: computation of per share earnings.............
16.1 -- Letter re change in Certifying Accountant (Incorporated by
reference to Exhibit 4.1 of the Company's Current Report on
Form 8-K dated January 27, 1997 filed with the Securities
and Exchange Commission)....................................
21.1 -- Subsidiaries of the Company.................................
23.1 -- Consent of Ernst & Young LLP................................
27.1 -- Financial Data Schedule (for SEC use only)..................
</TABLE>
<PAGE> 1
EXHIBIT 3.4
CERTIFICATE AS TO AMENDMENT OF BYLAWS
OF
INFOMED HOLDINGS, INC.
I, Barrett C. O'Donnell, as President of InfoMed Holdings, Inc., a Delaware
corporation (the "Corporation"), do hereby certify that attached hereto is a
true and correct copy of the resolution of the Board of Directors of the
Corporation, dated as of October 4, 1996, amending the Bylaws of the Corporation
as set forth therein, and that the amendment has not been modified, amended or
rescinded, but remains in full force and effect on the date hereof.
IN WITNESS WHEREOF, I have executed and delivered this Certificate this 4th
day of October, 1996.
By: /s/ BARRETT C. O'DONNELL
------------------------------------
Barrett C. O'Donnell
President
3
<PAGE> 2
INFORMED HOLDINGS, INC.
BOARD OF DIRECTORS RESOLUTIONS
ADOPTED: OCTOBER 4, 1996
RESOLVED, that the Bylaws shall be amended by deleting Article IV in its
entirety and substituting in lieu of Article IV the following:
"ARTICLE IV
Officers
Section 4.1 Generally. The officers of the Corporation shall
be a Chairman, one or more Vice Chairmen, a Chief Executive Officer, a Chief
Operating Officer, a Chief Financial Officer, a President, one or more Vice
Presidents, a Secretary and a Treasurer, and such additional officers, if any,
as shall be elected by the Board of Directors pursuant to the provisions of
Section 4.11 of this Article IV. The Chairman, one or more Vice Chairmen, the
Chief Executive Officer, the Chief Operating Officer, the President, one or
more Vice Presidents, the Secretary and the Treasurer, shall be elected by the
Board of Directors at its first meeting after each annual meeting of the
shareholders. The failure to hold such election shall not of itself terminate
the term of office of any officer. Any number of offices may be held
simultaneously by the same person except that the person serving as Chief
Financial Officer may not serve simultaneously as the Chief Executive Officer.
The Chairman and any Vice Chairman shall be Directors of the Corporation. All
other officers may, but need not, the Directors. Any officer may resign at any
time upon written notice to the Corporation.
Any officers, agents and employees shall be subject to removal, with or
without cause, at any time by the Board of Directors. The removal of an officer
without cause shall be without prejudice to his contract rights, if any. The
election or appointment of an officer shall not of itself create contract
rights. All agents and employees other than officers elected by the Board of
Directors shall also be subject to removal, with or without cause, at any time
by the officers appointing them.
Any vacancy caused by the death of any officer, his resignation, his
removal, or otherwise, may be filled by the Board of Directors, and any officer
so elected shall hold office at the pleasure of the Board of Directors.
In addition to the powers and duties of the officers of the Corporation
as set forth in these Bylaws, the officers shall have such authority and shall
perform such duties as from time to time may be determined by the Board of
Directors.
<PAGE> 3
Section 4.2 Powers and Duties of the Chairman. The Chairman shall
preside at all meetings of the shareholders and of the Board of Directors at
which he shall be present and shall have such other duties as may from time to
time be assigned by these Bylaws or by the Board of Directors.
Section 4.3 Powers and Duties of the Vice Chairman. The Vice Chairman
or Chairman shall have such powers and perform such duties as may from time to
time be assigned by the Board of Directors or the Chairman. In the absence of
the Chairman, the Vice Chairman (or if more than one, one of the Vice Chairmen
as designated by the Board of Directors) shall preside at all meetings of the
shareholders and the Board of Directors at which he shall be present.
Section 4.4 Powers and Duties of the Chief Executive Officer. The
Chief Executive Officer shall be the chief executive officer of the Corporation
and, subject to the control of the Board of Directors, shall have general
charge and control of all its business and affairs and shall perform all
duties incident to the office of the Chief Executive Officer; he may sign and
execute, in the name of the Corporation, all authorized deeds, mortgages,
bonds, notes and other evidence of indebtedness, contracts or other
instruments, except in cases in which the signing and execution thereof shall
have been expressly excluded from the Chief Executive Officer and delegated to
some other officer or agent of the Corporation by the Board of Directors. In
the absence or disability of the Chairman and all Vice-Chairmen, the Chief
Executive Officer shall preside at all meetings of the shareholders and shall
have such other powers and perform such other duties as may from time to time
be assigned by him by these Bylaws or by the Board of Directors.
Section 4.5. Powers and Duties of the Chief Operating Officer. The
Chief Operating Officer shall be the principal operating officer of the
Corporation with authority as such, and at the request of the Chief Executive
Officer or in his absence or disability to act, shall perform the duties and
exercise the functions of the Chief Executive Officer, and when so acting shall
have such other powers and perform such other duties as may from time to time
be assigned to him by the Board of Directors or Chief Executive Officer.
Section 4.6 Powers and Duties of the Chief Financial Officer. The Chief
Financial Officer shall be the chief accounting officer of the Corporation, he
shall see that the books of account and other accounting records of the
Corporation are kept in proper form and accurately; and, in general, he shall
perform all the duties incident to the office of Chief Financial Officer of the
Corporation and such other duties as may be from time to time assigned to him
by the Board of Directors or the Chief Executive Officer.
Section 4.7 Powers and Duties of the President. The President shall
act as a general executive officer of the Corporation and shall have such other
powers
<PAGE> 4
and perform such other duties as may from time to time be assigned to him by
these bylaws or by the Board of Directors or by the Chief Executive Officer.
Section 4.8 Powers and Duties of the Vice President. Each Vice
President shall perform all duties incident to the office of Vice President and
shall have such other powers and perform such other duties as may from time to
time be assigned to him by these Bylaws or by the Board of Directors or the
Chief Executive Officer.
Section 4.9 Powers and Duties of the Secretary. The Secretary shall
keep the minutes of any meetings of the Board of Directors and the minutes of
all meetings of the shareholders in books provided for that purpose; he shall
attend to the giving or serving of all notices of the Corporation; he shall
have custody of the corporate seal of the Corporation and shall affix the same
to such documents and other papers as the Board of Directors or the Chief
Executive Officer shall authorize and direct; he shall have charge of the stock
certificate books, transfer books and stock ledgers and such other books and
papers as the Board of Directors or the Chief Executive Officer shall direct,
all of which shall at all reasonable times be open to the examination of any
Director, upon application, at the office of the Corporation during business
hours; he shall be the custodian of the general books and records of the
Corporation maintained in the ordinary course of business or otherwise; and he
shall perform all duties incident to the office of Secretary and shall also
have such other powers and shall perform such other duties as may from time to
time be assigned to him by these Bylaws or the Board of Directors or the Chief
Executive Officer.
Section 4.10 Powers and Duties of the Treasurer. The Treasurer shall
have custody of, and when proper shall pay out, disburse or otherwise dispose
of, all funds and securities of the Corporation which may have come into his
hands; he may endorse on behalf of the Corporation for collection checks, notes
and other obligations and shall deposit the same to the credit of the
Corporation in such bank or depository or depositories as the Board of
Directors may designate; he shall sign all receipts and vouchers for payments
made to the Corporation kept for the purpose full and accurate accounts of all
moneys received or paid or otherwise disposed of by him and whenever required
by the Board of Directors or the Chief Executive Officer shall render
statements of such accounts; and he shall perform all duties incident to the
office of Treasurer and shall also have such other powers and shall perform
such other duties as may from time to time be assigned to him by these Bylaws
or by the Board of Directors or the Chief Executive Officer.
Section 4.11 Additional Officers. The Board of Directors may from time
to time elect such other officers (who may but need not be Directors),
including Controllers, Assistant Treasurers, Assistant Secretaries and
Assistant Financial Officers, as the Board may deem advisable and such officers
shall have such authority and shall perform such duties as may from time to
time be assigned to them
<PAGE> 5
by the Board of Directors or the Chief Executive Officer.
The Board of Directors may from time to time by resolution delegate to
any Assistant Treasurer or Assistant Treasurers any of the powers or duties
herein assigned to the Treasurer; and may similarly delegate to any Assistant
Secretary or Assistant Secretaries any of the powers or duties herein assigned
to the Secretary.
Section 4.12 Giving of Bond by Officers. All officers of the
Corporation, if required to do so by the Board of Directors, shall furnish
bonds to the Corporation for the faithful performance of their duties, in such
amounts and with such conditions and security as the Board shall require.
Section 4.13 Voting Upon Stocks. Unless otherwise ordered by the Board
of Directors, the Chief Executive Officer, the Chief Operating Officer,
the Chief Financial Officer, the President or any Vice President shall have full
power and authority on behalf of the Corporation to attend and to act and to
vote, or in the name of the Corporation to execute proxies to vote, at any
meetings of shareholders of any corporation in which the Corporation may hold
stock, and at any such meetings shall possess and may exercise, in person or by
proxy, any and all rights, powers and privileges incident to the ownership of
such stock. The Board of Directors may from time to time, by resolution, confer
like powers upon any other person or persons.
Section 4.14 Compensation of Officers. The officers of the
Corporation shall be entitled to receive such compensation for their services
as shall from time to time be determined by the Board of Directors."
<PAGE> 1
EXHIBIT 3.5
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF
DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT
COPY OF THE CERTIFICATE OF OWNERSHIP, WHICH MERGES:
"SIMIONE CENTRAL HOLDINGS, INC.", A DELAWARE CORPORATION,
WITH AND INTO "INFOMED HOLDINGS, INC." UNDER THE NAME OF
"SIMIONE CENTRAL HOLDINGS, INC.", A CORPORATION ORGANIZED AND
EXISTING UNDER THE LAWS OF THE STATE OF DELAWARE, AS RECEIVED
AND FILED IN THIS OFFICE THE NINETEENTH DAY OF DECEMBER, A.D.
1996, AT 2 O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO
THE NEW CASTLE COUNTY RECORDER OF DEEDS FOR RECORDING.
/s/ Edward J. Freel
(SEAL) -----------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 8251017
DATE: 12-19-96
<PAGE> 2
CERTIFICATE OF OWNERSHIP
MERGING
SIMIONE CENTRAL HOLDINGS, INC.
INTO
INFOMED HOLDINGS, INC.
Pursuant to Section 253 of the General Corporation Law of Delaware:
Infomed Holdings, Inc., a corporation incorporated on the 28th day of
October, 1992, pursuant to the provisions of the General Corporation Law of the
State of Delaware;
DOES HEREBY CERTIFY that this corporation, owns 100% of the capital
stock of Simione Central Holdings, Inc., a corporation incorporated on the 13th
day of December, 1996, pursuant to the provisions of the General Corporation
Law of the State of Delaware, and that this corporation, by a resolution of its
Board of Directors duly adopted at a meeting held on the 10th day of December,
1996, determined to merge into itself said Simione Central Holdings, Inc.,
which resolution is in the following words to wit:
WHEREAS this corporation shall, upon the incorporation of
Simione Central Holdings, Inc., lawfully own 100% of the outstanding
stock of Simione Central Holdings, Inc., a corporation to be organized
under the laws of the State of Delaware; and
WHEREAS this corporation desires to merge into itself and
Simione Central Holdings, Inc., and to be possessed of all the estate,
property, rights, privileges and franchises of said corporation.
NOW THEREFORE, BE IT RESOLVED, that this corporation shall,
upon the incorporation of Simione Central Holdings, Inc., merge into
itself said Simione Central Holdings, Inc. (the "Merger") and assume
all of its liabilities and obligations; and
FURTHER RESOLVED, that an authorized officer of this
corporation be and he is hereby directed to make and execute a
certificate of ownership setting forth a copy of the resolution to
merge said Simione Central Holdings, Inc. and assume its liabilities
and obligations, and the date of adoption thereof, and to file the
same in the office of the Secretary of State of Delaware, and a
certified copy thereof in the office of the Recorder of Deeds of Kent
County; and
<PAGE> 3
FURTHER RESOLVED, that, upon the Merger, Infomed Holdings, Inc.
shall relinquish its corporate name and assume in place thereof the
name Simione Central Holdings, Inc.; and
FURTHER RESOLVED, that the officers of this corporation be and
they hereby are authorized and directed to do all acts and things
whatsoever, whether within or without the State of Delaware; which may
be in any way necessary or proper to affect said Merger.
IN WITNESS WHEREOF, said InfoMed Holdings, Inc. has caused its
corporate seal to be affixed and this certificate to be signed by Gary
M. Bremer, an authorized officer this 19 day of December, 1996.
INFOMED HOLDINGS, INC.
By:/s/ Gary M. Bremer
------------------------------------
Gary M. Bremer
Chairman and Chief Executive Officer
<PAGE> 1
EXHIBIT 9.1
SIMIONE CENTRAL HOLDING, INC.
SHAREHOLDERS VOTING AGREEMENT AND IRREVOCABLE PROXY
THIS SIMIONE CENTRAL HOLDING, INC. SHAREHOLDERS VOTING
AGREEMENT AND IRREVOCABLE PROXY (this "Agreement") is made and entered into as
of this 5th day of March, 1996 by and among Howard B. Krone, William J.
Simione, Jr., Gary Rasmussen, G. Blake Bremer, Katherine L. Wetherbee, A.
Curtis Eade, James A. Tramonte, John Isett, Cindy Lumpkin, Robert J. Simione,
Douglas E. Caddell, Kenneth L. Wall, Allen K. Seibert, III, Jerry Sevy, Larry
Clark and Lori N. Siegel (collectively, the "Holders"), and Gary M. Bremer
("Bremer").
INTRODUCTION:
Each of the Holders have acquired shares of Class A common
stock ("Common Stock") of Simione Central Holding, Inc. (the "Company")
pursuant to a certain Stock Subscription Agreement, and has agreed to give
Bremer an irrevocable proxy coupled with an interest to vote their shares of
Common Stock acquired pursuant thereto for the period set forth in this
Agreement.
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which hereby are acknowledged, each of the Holders
and Bremer hereby agree as follows:
1. REPRESENTATIONS BY BREMER. Bremer hereby represents
and warrants to each of the Holders that (a) he has the full power and capacity
necessary to enter into and perform his obligations under this Agreement; (b)
he has read all provisions of this Agreement, understands each of such
provisions, and voluntarily agrees to be bound thereby; (c) he has duly
executed and delivered this Agreement, and this Agreement is his valid and
binding obligation enforceable in accordance with its terms; and (d) the
execution and delivery of this Agreement by Bremer and the consummation by him
of the transactions contemplated for him hereby do not require the consent,
waiver, approval, license or authorization of or any filing with any person or
public authority, and will not violate, result in a breach of or the
acceleration of any obligation under, or constitute a default (or an event
which with notice or lapse of time or both would become a default), or give
rise to rights of termination, amendment or cancellation of, or result in the
creation of a lien or encumbrance on any of the property or assets of such
person under, any provision of any charter or by-law, indenture, mortgage,
lien, lease, agreement, contract, instrument, order, judgment, ordinance,
regulation or decree or restriction by which he or any of his properties or
assets is bound.
2. REPRESENTATIONS BY EACH HOLDER. Each Holder hereby
represents and warrants to the other Holders and Bremer that (a) he has the
full power and capacity necessary to enter into and perform his obligations
under this Agreement; (b) he has read all provisions of this
<PAGE> 2
Agreement, understands each of such provisions, and voluntarily agrees to be
bound thereby; (c) he has duly executed and delivered this Agreement, and this
Agreement is his valid and binding obligation enforceable in accordance with
its terms; (d) the execution and delivery of this Agreement by such person and
the consummation by it of the transactions contemplated for it hereby do not
require the consent, waiver, approval, license or authorization of or any
filing with any person or public authority, and will not violate, result in a
breach of, or the acceleration of any obligation under, or constitute a default
(or an event which with notice or lapse of time or both would become a
default), or give rise to rights of termination, amendment or cancellation of,
or result in the creation of a lien or encumbrance on any of the property or
assets of such person under, any provision of any charter or by-law, indenture,
mortgage, lien, lease, agreement, contract, instrument, order, judgment,
ordinance, regulation or decree or restriction by which such person or any of
their respective properties or assets is bound; (e) such person is the
beneficial owner of, and acquired pursuant to the Simione Central Holding, Inc.
Stock Subscription Agreement as of the date first set forth above, the number
of shares of Common Stock set forth opposite his/her name on Annex A hereto
(the "Shares"), free and clear of all liens, charges, claims, encumbrances and
security interests of any nature whatsoever; except for the security interest
in the Shares given to the Company pursuant to the Security Agreement as of
even date herewith between the Holder and the Company; and (f) except with
respect to this Agreement, such person has not granted, and no affiliate of
such person has granted, any proxy or interest in or with respect to any
Shares, deposited any Shares into any voting trust or entered into any voting
agreement or other arrangement with respect to any Shares.
3. IRREVOCABLE PROXIES.
(a) Each Holder hereby designates, constitutes and
appoints Bremer during the term of this Agreement as such
Holder's true and lawful proxy and attorney-in-fact, with full
power of substitution, to vote, and execute shareholder
consents pursuant to O.C.G.A. Section 14-2-704 with respect
to, his/her Shares for and in the name, place and stead of
such Holder, with respect to all matters for which Holder
would otherwise be permitted to vote the Shares pursuant to
the Articles of Incorporation and Bylaws of the Company and
Georgia law. ALL POWER AND AUTHORITY HEREBY CONFERRED
PURSUANT TO THE FOREGOING PROXY RELATING TO SUCH HOLDER'S
SHARES OF COMMON STOCK ARE COUPLED WITH AN INTEREST AND ARE
IRREVOCABLE.
(b) Each Irrevocable Proxy granted in this
Section is specifically granted in consideration of the
execution and delivery of this Agreement pursuant to O.C.G.A.
Section 14-2-731. Each Holder agrees that such Holder's
proxy is coupled with an interest sufficient in law to support
an irrevocable power and shall not be terminated by any act of
such Holder, by lack of appropriate authority or by the
occurrence of any other event or events other than pursuant to
Section 3(c) hereof.
(c) The Irrevocable Proxies granted in this
Section shall terminate upon the earliest of:
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<PAGE> 3
(i) March 22, 2001 (unless extended by
mutual agreement of the parties hereto);
(ii) the death or disability of Bremer.
For purposes of this paragraph (ii), Bremer shall be
deemed subject to a "disability" if any of the
following three events occurs: (A) Bremer is
determined to be totally disabled under, and for
purposes of, a contract of employment with or any
health or disability plan of the Company or another
corporation controlling, controlled by, or under
common control with the Company (an "Affiliate")
under which Bremer is employed or which covers
Bremer; (B) Bremer is found to be entitled to "total
disability" benefits under any disability income
insurance policy; (C) Bremer is found to be entitled
to Social Security disability benefits;
(iii) upon termination, for any reason, of
Bremer's employment with the Company (and all of its
Affiliates) such that Bremer is no longer employed on
a full-time basis by any of Simione Central Holding,
Inc. or its Affiliates; or
(iv) the first day on which equity
securities of the same class as the Common Stock
covered by a registration statement filed in
accordance with the Securities Act of 1933, as
amended, may lawfully be offered and sold pursuant to
such registration statement.
4. COVENANTS OF EACH HOLDER.
(a) Each Holder hereby covenants and agrees that
until this Agreement is terminated in accordance with the
terms hereof, such person will not grant any proxy or interest
in or with respect to any Shares, or deposit any Shares into a
voting trust or enter into a voting agreement or arrangement
with respect to any Shares. If a Holder transfers any Shares,
all Shares so transferred shall remain subject to the terms
and provisions of this Agreement, including without limitation
the provisions of Section 3 hereof granting Irrevocable
Proxies and the covenants and agreements under this Section
4). Upon any transfer any of Shares the transferor agrees to
cause the transferee promptly to execute and deliver a signed
writing acknowledging that the shares so transferred remain
subject to this Agreement as aforesaid.
(b) Each of Bremer and the Holders shall not
engage in any action or omit to take any action which action
or omission would have the effect of preventing or disabling
such person or any other party hereto from performing its
obligations under this Agreement.
(c) Each Holder understands and agrees that the
certificate representing his/her Shares may bear an
appropriate legend indicating that the Shares are subject to
this Agreement.
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<PAGE> 4
(d) Bremer agrees that until this Agreement is
terminated in accordance with the terms hereof he will vote
all of his Shares in the same manner as the Shares of the
other Holders are voted.
5. SPECIFIC PERFORMANCE. Each of Bremer and the Holders
acknowledge that there would be no adequate remedy at law and that irreparable
injury would occur if such person or any other party hereto fails to perform
any of its obligations under this Agreement or if the proxy relating to any of
Shares is revoked or terminated in contravention of this Agreement. In such
event, each such person agrees that each other party hereto shall have the
right, in addition to any other rights it may have at law or in equity, to
specific performance of this Agreement and that it will not take any action to
impede the efforts to enforce such right of specific performance.
6. ADDITIONAL SHARES. In the event that during the term
of this Agreement:
(a) Any stock dividend, stock split,
reclassification, readjustment, or other change is declared or
made in the capital structure of the Company all new,
substituted, and additional shares, or other securities,
issued with respect to the Shares, by reason of any such
change and received by each Holder shall constitute Shares
subject to the terms of this Agreement; and
(b) Subscriptions, warrants or any other rights
or options are issued in connection with the Shares, all new
stock or other securities acquired through such subscription,
warrants, rights or options by each Holder shall constitute
Shares subject to the terms of this Agreement.
7. BINDING AGREEMENT. The provisions of this Agreement
shall be construed and interpreted, and all rights and obligations of the
parties hereto determined, in accordance with the laws of the State of Georgia.
This Agreement, constitutes the entire Agreement among the parties with respect
to the matters addressed herein and may not be modified except by a writing
executed by all of the parties. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original but all of which, taken
together, shall constitute one and the same instrument.
8. SEVERABILITY. If any paragraph or part thereof shall
for any reason be held or adjudged to be invalid, illegal or unenforceable by
any court of competent jurisdiction, such paragraph or part thereof so
adjudicated invalid, illegal or unenforceable shall be deemed separate,
distinct and independent, and the remainder of this Agreement shall remain in
full force and effect and shall not be affected by such holding or
adjudication.
9. TERMINATION. This Agreement shall terminate upon the
termination of the Irrevocable Proxy as set forth in Section 3(c) hereof.
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<PAGE> 5
IN WITNESS WHEREOF, Holders and Bremer have duly executed and
delivered this Agreement as of the day and year first written above.
"Holders"
----------------------------------------
"Bremer"
----------------------------------------
Gary M. Bremer
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<PAGE> 1
EXHIBIT 10.3
RESTRICTION ON TRANSFER
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF
HAVE BEEN ISSUED AND SOLD WITHOUT REGISTRATION IN RELIANCE UPON EXEMPTIONS FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933 (THE "1933 ACT") AND SECTION
10-5-9(13) OF THE OFFICIAL CODE OF GEORGIA ANNOTATED (THE "GEORGIA CODE"). SUCH
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD OR TRANSFERRED OTHER THAN (i)
PURSUANT TO AN EFFECTIVE REGISTRATION OR AN EXEMPTION THEREFROM UNDER THE 1933
ACT AND THE GEORGIA CODE AND (ii) UPON RECEIPT BY THE ISSUER OF EVIDENCE
SATISFACTORY TO IT OF COMPLIANCE WITH THE 1993 ACT, THE GEORGIA CODE AND THE
APPLICABLE SECURITIES LAWS OF ANY OTHER JURISDICTION. THE ISSUER SHALL BE
ENTITLED TO REQUIRE AN OPINION OF COUNSEL SATISFACTORY TO IT WITH RESPECT TO
COMPLIANCE WITH THE ABOVE LAWS.
WARRANT
TO PURCHASE 100,000 SHARES OF CLASS A COMMON STOCK OF
SIMIONE CENTRAL HOLDING, INC.
1. Warrant.
A. Grant of Warrant. This is to certify that, for value received,
Home Health First, a Texas Not-for-Profit Corporation, (the "Holder") is
entitled to purchase, subject to the provisions of this Warrant, from Simione
Central Holding, Inc. ("SCHI"), an aggregate of 100,000 shares of Class A common
stock of SCHI with no par value (the "Common Stock") at a purchase price per
share equal to $0.349 (the "Exercise Price"). The number of shares of Common
Stock that may be received upon exercise of this Warrant and the Exercise Price
are subject to adjustment from time to time as hereinafter set forth.
B. Consideration for Warrant. This Warrant is issued in consideration
of services to be provided by the Holder to SCHI's wholly owned subsidiary
Simione Central, Inc. ("SCI"), including marketing assistance, consulting
services and acting as a model demonstration site for SCI to exhibit the SCI
information management services system in operation, as more fully set forth in
a Consulting Agreement between Holder and SCI of even date herewith.
2. Term. This Warrant may be exercised in whole or in part at any
time or from time to time during the period commencing six months after the date
set forth on the signature page hereof and ending on the tenth anniversary of
the date set forth of the signature page, subject to the provisions hereof.
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<PAGE> 2
3. Exercise Procedures.
A. Exercise Notice. In order to exercise this Warrant, the
Holder shall surrender this Warrant and send a written notice of exercise to
SCHI on any business day at SCHI's principal office, addressed to the attention
of the Chief Executive Officer of SCHI (with a copy to the General Counsel),
which notice shall specify that the Warrant is being exercised, and shall be
accompanied by payment in full of the Exercise Price. Any attempt to exercise
the Warrant granted hereunder other than as set forth in this Section 3 shall be
invalid and of no force and effect.
B. Payment. Payment of the Exercise Price for the shares of
Common Stock purchased pursuant to the exercise of the Warrant shall be made
either in cash or in cash equivalent, by certified check or by wire transfer.
C. Delivery of Certificate. Promptly after exercise of the
Warrant as provided for above, SCHI shall deliver to Holder a certificate or
certificates (or copies thereof) for the shares of Common Stock being purchased.
All shares of Common Stock issued upon exercise of this Warrant shall be duly
authorized and validly issued, fully paid and nonassessable. The stock
certificates that will evidence the Common Stock may be imprinted, to the extent
then appropriate, with a conspicuous legend in substantially the following form:
The securities represented by this certificate have not been registered
under either the Securities Act of 1933 (the "Act") or applicable state
securities laws (the "State Acts") and shall not be sold, pledged,
hypothecated, donated or otherwise transferred (whether or not for
consideration) by the holder except upon the issuance to the Company of a
favorable opinion of its counsel or submission to the Company of such
other evidence as may be satisfactory to counsel to the Company, in each
such case, to the effect that any such transfer shall not be in violation
of the Act and the State Acts. The securities represented by this
certificate are subject to forfeiture and restrictions on transfer
pursuant to a Warrant issued to Home Health First dated April 12, 1996.
D. Partial Exercise. In the event this Warrant is exercised in
part only, SCHI shall, upon surrender of this Warrant for cancellation, execute
and deliver to the Holder a new Warrant of like tenor evidencing the right of
the Holder to purchase the balance of the shares of Common Stock subject to
purchase hereunder.
E. Fractional Shares. No fractional shares of Common Stock
shall be issued in connection with any exercise hereunder. In lieu of fractional
shares, SCHI shall make a cash payment therefor based on the fair market value
per share of Common Stock as of the date
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<PAGE> 3
of exercise.
4. Adjustments. The number and kind of securities issuable upon the
exercise of this Warrant and the Exercise Price shall be subject to adjustment
from time to time upon the occurrence of certain events as follows:
A. Reorganization, Consolidation or Merger. In the case of any
reorganization, consolidation or merger of SCHI with or into another corporation
and in which SCHI is not the surviving entity, or the dissolution or liquidation
of SCHI, then SCHI or such successor entity, as the case may be, shall either
(i) execute a new warrant providing that the Holder shall have the right to
exercise such new warrant and to receive, in lieu of each share of Common Stock
issuable upon exercise of this Warrant, the number and kind of shares of stock,
other securities, money or property receivable upon such reorganization,
consolidation, merger, dissolution or liquidation by a holder of the number of
shares then purchasable with this Warrant, or (ii) issue to Holder the number
and kind of shares of stock, other securities, money or property receivable upon
such reorganization, consolidation, merger, dissolution or liquidation by a
holder of a number of shares then purchasable with this Warrant. Any new warrant
shall contain provisions relating to the rights and obligations of the Holder
and SCHI after such reorganization, consolidation or merger that shall have, as
nearly as possible after appropriate adjustment, the same effect as the
provisions of this Warrant, including the provisions of this Warrant. The
adjustment shall be made without change to the total price applicable to the
Warrant and with a corresponding adjustment in the Exercise Price.
B. Stock Dividends; or Split, Subdivision, Combination of
Shares. In case SCHI shall: (i) pay a dividend with respect to shares of its
Class A common stock, (ii) subdivide its outstanding shares of Class A common
stock into a greater number of shares, (iii) combine its outstanding shares of
Class A common stock into a smaller number of shares, or (iv) issue, by
reclassification, exchange, or substitution of its shares of Class A common
stock, any shares of its capital stock, the amount of Common Stock purchasable
upon the exercise of this Warrant immediately prior thereto shall be adjusted so
that the Holder shall be entitled to receive upon exercise of this Warrant that
amount of Common Stock which such Holder would have owned or would have been
entitled to receive after the happening of such event had such Holder exercised
this Warrant immediately prior to the record date, in the case of any such
dividend, or the effective date, in the case of any such subdivision,
combination or reclassification. An adjustment made pursuant to this subsection
shall be made whenever any of such events shall occur, but shall become
effective retroactively after such record date or such effective date, as the
case may be, as to any portion of this Warrant exercised between such record
date or effective date and the date of happening of any such event. The
adjustment shall be made without change to the total price applicable to the
Warrant and with a corresponding adjustment in the Exercise Price.
C. Notice of Adjustments. Whenever the number or kind of
shares or the Exercise Price shall be adjusted pursuant to Section 4 hereof,
SCHI shall mail to the Holder
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<PAGE> 4
a notice setting forth in reasonable detail the event requiring the adjustment,
and after any such adjustment, SCHI shall issue a certificate signed by its
Chief Financial Officer setting forth in reasonable detail the amount of the
adjustment, the method by which such adjustment was calculated, and the change
in the number or kind of shares or the Exercise Price after giving effect to
such adjustment.
D. Board of Directors' Determination. Adjustments specified in
this Section 4 relating to stock or securities of SCHI shall be made by the
Board of Directors of SCHI, whose determination in that respect shall be final,
binding and conclusive.
5. Reservation of Stock: Compliance. SCHI shall at all times reserve
for issuance and/or delivery upon exercise of this Warrant, free from preemptive
rights, such number of shares of authorized but unissued or treasury shares of
Common Stock as shall be required for issuance or delivery upon exercise of this
Warrant. SCHI further agrees that it shall (i) not by amendment to its
certificate of incorporation or bylaws or through any other action avoid or seek
to avoid the observance or performance of any of the covenants or conditions to
be observed or performed hereunder by SCHI, and (ii) promptly take all action as
may from time to time be required in order to permit the Holder to exercise this
Warrant and SCHI to issue shares of Common Stock duly and effectively hereunder.
6. General Restriction.
A. Registration Requirements. SCHI shall not be required to
issue any shares of Common Stock under the Warrant if the issuance of such
shares would constitute a violation by SCHI of any provision of any law or
regulation of any governmental authority, including without limitation, the
registration or qualification requirement of applicable federal and state
securities laws or regulations. If at any time SCHI shall determine, based upon
a written opinion of legal counsel, that the registration or qualification of
any shares subject to the Warrant under any applicable state or federal law is
necessary as a condition of or in connection with the issuance of shares, the
Warrant may not be exercised in whole or in part unless such registration or
qualification shall have been effected or obtained free of any conditions not
reasonably acceptable to SCHI, and any delay caused thereby shall in no way
affect the date of termination of the Warrant. Specifically in connection with
the Securities Act of 1933 (as now in effect or as hereafter amended) (the
"Securities Act") and applicable state securities laws ("State Acts"), unless a
registration statement under the Securities Act and State Acts is in effect with
respect to the shares of Common Stock covered by the Warrant, SCHI shall not be
required to issue such shares unless the Board of Directors of SCHI has received
evidence reasonable satisfactory to it that the Holder may acquire such shares
pursuant to an exemption from registration under the Securities Act and State
Acts. SCHI shall not be obligated to take any affirmative action in order to
cause the exercise of the Warrant or the issuance of shares pursuant thereto to
comply with any law or regulation of any governmental authority. As to any
jurisdiction that expressly imposes the requirement that the Warrant shall not
be exercisable unless and until the shares of Common Stock covered by the
Warrant are registered or are subject to an available exemption from
registration, the exercise of the Warrant (under circumstances in which the laws
of such
4
<PAGE> 5
jurisdiction apply) shall be deemed conditioned upon the effectiveness of such
registration or the availability of such an exemption.
B. No Hypothecation. This Warrant may not be sold, transferred
or hypothecated by the Holder and cannot be exercised by anyone other than the
Holder. Any such disposition shall be null and void.
C. No Shareholder Rights. The Holder of this Warrant as such,
shall not be entitled to vote or receive dividends or to be deemed the holder of
shares for any purpose, nor shall anything contained in this Warrant be
construed to confer upon the Holder, any of the rights of a shareholder of SCHI
including but not limited to any right to vote, give or withhold consent to any
action by SCHI, whether upon any recapitalization, issue of stock,
reclassification of stock, merger, share exchange, conveyance or otherwise,
receive notice of meetings or other action affecting shareholders (except for
the notices provided for herein), receive dividends, receive subscription
rights, or any other right, until this Warrant shall have been exercised, the
Exercise Price paid, and the Common Stock purchasable upon the exercise hereof
shall have become deliverable as provided herein; provided, however, that any
such exercise on any date when the stock transfer books of SCHI shall be closed
shall constitute the person or persons in whose name or names the certificate or
certificates for those Shares are to be issued as the record holder or holders
thereof for all purposes at the opening of business on the next succeeding day
on which such stock transfer books are open, and the Warrant surrendered shall
not be deemed to have been exercised, in whole or in part as the case may be,
until the next succeeding day on which stock transfer books are open for the
purpose of determining entitlement to dividends on SCHI's common stock.
7. Applicable Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of Georgia, without respect to conflicts
of law provisions, except to the extent federal law may be applicable.
8. Registration Rights.
A. Piggyback Registration.
i. In the event that, at any time while this Warrant is
outstanding, SCHI proposes to register any shares of common stock under the
Securities Act, other than for an offering primarily or exclusively to employees
or in connection with the acquisition of the assets or shares of or merger or
consolidation with another corporation, and the form of registration statement
to be used may also be used for the registration of shares of Common Stock the
Holder would receive upon conversion of the Warrant (a "Piggyback
Registration"), SCHI shall notify the Holder prior to the filing of any such
registration statement with the Securities and Exchange Commission ("SEC"), and
will use its best efforts to include in such registration all shares which the
Holder would receive upon exercise of this Warrant and with respect to which
SCHI has received written request for inclusion within ten (10) days after
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<PAGE> 6
such notice. Each such request shall contain an undertaking from the Holder to
(i) provide all such information and material and to take all such actions as
may be required by SCHI in order to permit SCHI to comply with all applicable
federal and state securities laws, and (ii) comply with all obligations of the
Holder pursuant to this Section 12.
ii. The right of the Holder to have the Common Stock it
would receive upon exercise of the Warrant included in the foregoing
registration shall expire upon termination of the right to exercise the Warrant
pursuant to Section 2 hereof.
B. Expenses. Holder shall pay all expenses incident to SCHI's
performance of or compliance with the provisions of Section 8A including without
limitation, all registration and filing fees, fees and expenses of compliance
with the Securities Act and State Acts, printing expenses, messenger and
delivery expenses, fees and disbursements of counsel for SCHI (but not the legal
fees of any Holder) and all independent public accountants and other persons
retained by SCHI, but excluding brokerage fees, underwriting commissions and
discounts.
C. Indemnification. The Holder agrees to cooperate fully with
SCHI in effecting registration and qualifications of the Common Stock into which
this Warrant has been converted, and shall indemnify and hold harmless SCHI and
each person who may control SCHI within the meaning of Section 15 of the
Securities Act, each director of SCHI, and each officer who signed any
registration statement, from and against all losses, claims, damages, expenses,
and liabilities (including reasonable attorney's fees) caused by any untrue
statement of a material fact contained in any such registration statement, or
contained in a prospectus furnished thereunder, or any amendment or supplement
thereto, or caused by any omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, to the extent that
such untrue statement or omission was made in reliance upon information
furnished to SCHI by the Holder for inclusion therein.
D. Termination of Registration Provisions. This Section 8
shall irrevocably terminate upon the occurrence of an acquisition, consolidation
or merger involving SCHI and a corporation which is a publicly traded company in
which SCHI is not the surviving corporation (or SCHI is the surviving
corporation as a result of a reverse triangular merger in which the stockholders
of SCHI become stockholders of a publicly traded company). For purposes of this
paragraph, a "publicly traded company" shall mean a company listed on a national
securities exchange or quoted on the "National Market System" or "National List"
published by the National Association of Securities Dealers Automated Quotations
System or any successor list.
E. Necessary Action. In connection with this Section 8, each
of SCHI and the Holder agrees to take or cause to be taken such further actions,
to execute, deliver and file or cause to be executed, delivered and filed such
further statements, assignments, agreements, proxies and other instruments, and
to use best efforts to obtain such consents, as may be
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<PAGE> 7
necessary or as may be reasonably requested in order to fully effectuate the
purposes, terms and conditions of this Agreement.
9. Limitations.
A. Right of First Refusal. If, prior to the effective date of
an offering for sale by SCHI of securities of SCHI of the same class as the
Common Stock, pursuant to a registration statement filed in accordance with the
Securities Act of 1933 as amended, or any comparable law then in effect, the
Holder (or, if the Common Stock is owned or held by a transferee, such
transferee) shall receive a bona fide offer from a third party to purchase any
Common Stock acquired upon exercise of the Warrant, which offer the Holder or
such transferee intends to accept, the Holder or such transferee, as the case
may be, before consummating the sale to such third party, shall notify SCHI in
writing of such offer, which notice shall state the number of shares of Common
Stock subject to such offer and the price and terms of payment offered by such
third party. SCHI shall have thirty (30) days after receipt of such notice
within which to notify the Holder or such transferee, as the case may be, in
writing, of its election to purchase all the Common Stock which is the subject
of such third party offer at the same price and upon the same terms and
conditions as are contained in such third party offer. Failure by SCHI to give
such written notice within such thirty (30) day period shall constitute a
rejection of such offer by SCHI. If SCHI shall reject such offer or fail timely
to accept such offer, or if after timely accepting such offer SCHI shall fail
timely to consummate the purchase of the Common Stock which is the subject of
that offer, then the Holder or such transferee, as the case may be, shall be
free to sell the Common Stock which is the subject of such third party offer to
the third party at the price and upon the same terms and conditions as are set
forth in the third party offer; provided, however, if the Holder or such
transferee, as the case may be, does not consummate such sale to the third party
within sixty (60) days after rejection by SCHI of such offer or, if such offer
is timely accepted by SCHI, after failure of SCHI timely to consummate such
purchase, the Common Stock which was the subject of such third party offer or
agreement shall once again become subject to the provisions of this Section 9,
and any subsequent disposition of such Common Stock shall be made only after
compliance with the terms of this Section 9. If SCHI timely accepts such offer,
SCHI shall give written notice to the Holder or transferee, as the case may be,
of the time and date of the closing of the repurchase, which shall be no later
than thirty (30) days following the date SCHI gives written notice of its
acceptance of such offer and shall be held at the principal office of SCHI. At
closing, SCHI shall deliver the sale price, and the Holder or the transferee, as
the case may be, shall deliver the Common Stock to be repurchased duly endorsed
for transfer and with all required revenue stamps attached, and the title to the
Common Stock shall be transferred to SCHI free and clear of all liens, claims
and encumbrances, however described, except for restrictions imposed by
applicable securities laws. The price for Common Stock repurchased shall be
payable at the election of the Company or its designee as follows: ( 1 ) upon
the terms of payment as are contained in the third party offer, or, all in
cash at the closing.
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<PAGE> 8
B. Termination. This Warrant shall terminate, expire and
become immediately null and void upon any termination for cause by SCHI's wholly
owned subsidiary Simione Central, Inc. ("SCI") of the Information Management
Services Agreement between SCI and Holder dated April 12, 1996, in accordance
with Section 12.1 thereof.
C. Forfeiture. In the event that Holder exercises this Warrant
in whole or in part, and all or any part of the Common Stock issuable under this
Warrant is issued and/or delivered to Holder, such Common Stock shall be
forfeited and transferred back to SCHI immediately upon any termination for
cause by SCHI's wholly owned subsidiary SCI of the Information Management
Services Agreement between SCI and Holder dated April 12, 1996, in accordance
with Section 12.1 thereof. In event of such forfeiture, Holder shall be entitled
to payment by SCHI of the lesser of (i) the aggregate Exercise Price paid for
such Common Stock, or (ii) the fair market value of such Common Stock, subject
to Section 10 hereof.
10. Cancellation Provision. If the Holder fails to deliver the Common
Stock certificates properly assigned when requested or required to do so
pursuant to this Agreement, SCHI shall cancel the Common Stock certificates of
the Holder and shall deposit any payment required pursuant to this Agreement
which was to be made to the Holder in exchange for the certificates to the
credit or account of the Holder in escrow with any clearinghouse bank in the
City of Atlanta, Georgia, at the expense and risk of the Holder, or its
successors or assigns, whereupon SCHI shall treat the Common Stock represented
thereby as having been forfeited to or repurchased by SCHI or its designees.
11. Notices. All notices, demands, requests, or other communications
which may be or are required to be given, served, or sent under this Warrant
shall be in writing and shall be mailed by first-class, registered or certified
main, return receipt requested, postage prepaid, or transmitted by hand
delivery, overnight or express mail, or telegram, addressed as follows:
(i) If to SCHI:
Chief Executive Officer
Simione Central Holding, Inc.
6650 Powers Ferry Road
Suite 200
Atlanta, GA 30339
with a copy (which shall not constitute notice) to:
General Counsel
Simione Central Holding, Inc.
6650 Powers Ferry Road
Atlanta, GA 30339
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<PAGE> 9
(ii) If to Holder, to its most recent address reflected in the official
records of SCHI.
Either SCHI or the Holder may designate by notice in writing a new address to
which any notice, or communication may thereafter be so given, served or sent.
Each notice, or communication which shall be mailed, delivered or transmitted in
the manner described above shall be deemed sufficiently given, sent and received
for all purposes at such time as it is delivered to the addressee (with the
return receipt or the affidavit of messenger being deemed conclusive evidence of
such delivery) or at such time as delivery is refused by the addressee upon
presentation.
IN WITNESS WHEREOF, SCHI has caused this Warrant to be duly executed as
of the day and year set forth below.
DATED: April 12, 1996
[SEAL] SIMIONE CENTRAL HOLDING, INC.
ATTEST:
/s/ By:/s/ Gary M. Bremer
- -------------------- ---------------------
Gary M. Bremer,
Chief Executive Officer
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<PAGE> 1
EXHIBIT 10.4
THE SECURITIES EVIDENCED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE
COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT STATING THAT
SUCH SALE, TRANSFER OR ASSIGNMENT IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT.
COMMON STOCK WARRANT
of
INFOMED HOLDINGS, INC.
THIS CERTIFIES THAT, for value received, Jefferies & Company, Inc.
(the "Warrantholder") is entitled to subscribe for and purchase from InfoMed
Holdings, Inc., a Delaware corporation (the "Company"), 155,038 fully paid and
nonassessable shares of common stock, $.001 par value per share (the "Common
Stock") of the Company (the "Shares"), subject to such restrictions set forth
in Section 1 hereof, at a price equal to $3.113 per share (the "Warrant
Price"), payable in cash or check, such price and such number of Shares being
subject to adjustment upon the occurrence of the contingencies set forth in
this Warrant. This Warrant is being issued to the Warrantholder pursuant to an
agreement dated September 20, 1996 for services rendered by Warrantholder in
connection with the merger of Simione Central Holding, Inc. with a wholly-owned
subsidiary of the Company on October 8, 1996.
Upon delivery of this Warrant, together with payment of the Warrant
Price of the Shares thereby purchased, at the principal office of the Company
or at such other office or agency as the Company may designate by notice in
writing to the holder hereof, the holder of this Warrant shall be entitled to
receive a certificate or certificates for the Shares so purchased. All Shares
which may be issued upon the exercise of this Warrant will, upon issuance, be
fully paid and nonassessable and free from all taxes, liens and charges with
respect thereto.
This Warrant is subject to the following terms and conditions:
1. Exercise of Warrant.
(a) This Warrant may be exercised in whole or in part, at
any time on or before October 8, 1999 (the "Expiration Date"), by the surrender
of this Warrant and the Notice of Exercise attached hereto as Exhibit A (duly
completed and executed) at the principal office of the Company and by the
payment to the Company, by cash or check, of the Warrant Price for the Shares
purchased. The Company shall, within ten (10) days after such delivery,
prepare a certificate for the Shares purchased in the name of the holder of
this Warrant, or as such holder may direct (subject to the restrictions upon
transfer contained herein and upon payment by such holder hereof of any
applicable transfer taxes). A new Warrant representing the number of shares of
Common Stock, if any, with respect to which
<PAGE> 2
this Warrant shall not then have been exercised shall also be delivered to the
Warrantholder within such time.
(b) The Warrantholder shall have the right, from time to
time, prior to the Expiration Date, to require the Company to convert this
Warrant, in whole or in part (the "Conversion Right"), into shares of Common
Stock. Upon exercise of the Conversion Right, the Company shall deliver to the
Warrantholder (without payment by the Warrantholder of any Warrant Price) that
number of shares of Common Stock equal to the quotient obtained by dividing (x)
the value of this Warrant at the time the Conversion Right is exercised
(determined by subtracting the aggregate Warrant Price in effect immediately
prior to the exercise of the Conversion Right from the aggregate fair market
value of the shares of the Company's Common Stock issuable upon exercise of
this Warrant immediately prior to the exercise of the Conversion Right) by (y)
the fair market value of one share of Common Stock immediately prior to the
exercise of the Conversion Right.
The Conversion Right may be exercised by the
Warrantholder by the surrender of this Warrant at the principal office of the
Company together with the Notice of Exercise annexed hereto and a written
statement specifying that the Warrantholder thereby intends to exercise the
Conversion Right. The Conversion Right shall be effective upon the date of
receipt by the Company of the foregoing documents, or at such later date as may
be specified in Warrantholder's request. Upon receipt of the required
deliveries, the Company shall deliver the certificates for the shares of Common
Stock and, on partial conversion of this Warrant, a new Warrant for the
unconverted portion of this Warrant as promptly as practicable but in any event
within ten (10) business days thereafter.
For purposes of this Section 1(b), "fair market
value" of the Common Stock as of a particular date (the "Determination Date")
shall mean the average closing price of the Company's Common Stock for the ten
(10) business days immediately preceding the Determination Date as calculated
pursuant to Section 4(a).
(c) No fractional shares or scrip representing fractional
shares shall be issued upon the exercise of this Warrant. In lieu of any
fractional share to which such holder would otherwise be entitled, such holder
shall receive cash in the amount of such fraction multiplied by the fair market
value of a share of Common Stock on the date of the conversion.
2. Transfer of Warrant. This Warrant and all rights hereunder
may be transferred, in whole or in part, to an employee of Warrantholder or to
a partnership comprised solely of employees of Warrantholder provided the
transfer contemplated in this Section 2 is in accordance with the rules and
regulations of the National Association of Securities Dealers, Inc., as well as
the Act, the Securities Exchange Act of 1934, as amended, and the respective
rules and regulations promulgated thereunder; provided further, however, that
the transferee shall not transfer transferee's respective Warrant and rights
thereunder, and any partnership transferee shall not admit any partners who are
not otherwise employees of Warrantholder, without the prior written consent of
the Company. In connection with a transfer as contemplated in this Section 2,
Warrantholder shall deliver the Assignment Form attached hereto as Exhibit B
properly endorsed, and transferee shall have executed the Investment
Representative Statement in the form attached hereto as Exhibit C.
-2-
<PAGE> 3
3. Condition of Transfer or Exercise of Warrant. Without
limiting the generality of Section 2 above, it shall be a condition to any
transfer or exercise of this Warrant that the Company shall have received, at
the time of such transfer or exercise, a representation in writing that this
Warrant (or portion hereof transferred) or the Shares being issued upon such
exercise, as the case may be, are being acquired for investment and not with a
view to any sale or distribution thereof, and a statement of the pertinent
facts covering any proposed distribution thereof. It shall be a further
condition to any transfer of this Warrant or of any or all of the Shares issued
upon exercise of this Warrant, other than a transfer registered under the Act,
that the Company shall have received a legal opinion, in form and substance
reasonably satisfactory to the Company and its counsel, reciting the pertinent
circumstances surrounding the proposed transfer and stating that such transfer
is exempt from the prospectus and the registration requirements of the Act.
Each certificate evidencing the Shares issued upon exercise of this Warrant, or
upon any Act or any subsequent transfer of shares so registered shall, at the
option of the Company, contain a legend, in form and substance reasonably
satisfactory to the Company and its counsel, restricting the transfer of such
shares to sales or other dispositions exempt from the requirements of the Act,
unless the aforementioned opinion of counsel for the Warrantholder shall
conclude, and the Company and its counsel shall agree, that such legend is not
required in order to ensure compliance with the Act.
It shall be a further condition to each such transfer that the
transferee shall receive and accept a Warrant, of like tenor and date, executed
by the Company.
4. Adjustments of Warrant Price and Number of Shares Purchasable
Hereunder. The Warrant Price and the number of shares purchasable hereunder
shall be subject to adjustment from time to time in accordance with the
following provisions:
(a) In the event the average closing price of the
Company's Common Stock for the ten (10) business days immediately preceding
April 9, 1997 is less than $8.00 (the "Six Month Price"), then the number of
shares issuable upon exercise of this Warrant on or after April 9, 1997 shall
equal the number of shares of Common Stock issuable immediately upon exercise
of this Warrant prior thereto, multiplied by a fraction as indicated below (and
rounded to the nearest whole share); provided, that the ranges of the Six Month
Price set forth below shall be subject to adjustments in the same manner as
provided in the remainder of this Section 4.
<TABLE>
<CAPTION>
Six Month Price Fraction
--------------- --------
<S> <C>
Less than $4.00 0
$4.00 to $5.99 1/3
$6.00 to $7.99 2/3
</TABLE>
For purposes of calculating the Six Month Price, or "fair market value"
pursuant to Section 1(b), the "closing price" shall mean:
(i) If the Common Stock is listed or admitted to
unlisted trading privileges on any national securities exchange or is
not so listed or admitted but transactions in the Common Stock are
reported on The Nasdaq Stock Market, Inc., the last sale price of the
-3-
<PAGE> 4
Common Stock on such exchange or reported by The Nasdaq Stock Market,
Inc. as of such date (or, if no shares were traded on such day, as of
the next preceding day on which there was such a trade); or
(ii) If the Common Stock is not listed or admitted
to unlisted trading privileges or reported on The Nasdaq Stock Market,
Inc., and bid and asked prices therefor in the over-the-counter market
are reported by Nasdaq or the National Quotation Bureau, Inc. (or any
comparable reporting service), the average of the closing bid and
asked prices as of such date, as so reported by Nasdaq or, if not so
reported thereon, as reported by the National Quotation Bureau, Inc.
(or such comparable reporting service); or
(iii) If the Common Stock is not so listed or
admitted to unlisted trading privileges, or reported on The Nasdaq
Stock Market, Inc., and such bid and asked prices are not so reported,
such price as the Warrantholder and the Company shall determine in
good faith by agreement as of a date that is within fifteen (15) days
of the date as of which the determination is to be made.
(b) In case the Company shall at any time subdivide the
outstanding Shares, the Warrant Price in effect immediately prior to such
subdivision shall be proportionately decreased, and in case the Company shall
at any time combine the outstanding Shares, the Warrant Price in effect
immediately prior to such combination shall be proportionately increased,
effective at the close of business on the date of such subdivision or
combination, as the case may be.
(c) Upon each adjustment pursuant to subdivision (b) of
this Section 4, the registered holder of this Warrant shall thereafter (until
another such adjustment) be entitled to purchase, at the adjusted Warrant
Price, the number of Shares, calculated to the nearest full share, obtained by
multiplying the number of Shares purchasable hereunder immediately prior to
such adjustment by the Warrant price in effect prior to such adjustment and
dividing the product so obtained by the adjusted Warrant Price.
(d) In case of any reclassification, change or conversion
of securities of the class issuable upon exercise of this Warrant (other than a
change in par value, or from par value to no par value, or from no par value to
par value, or as a result of a subdivision or combination), or in case of any
merger of the Company with or into another corporation (other than a merger
with another corporation in which the Company is the acquiring and the
surviving corporation and which does not result in any reclassification or
change of outstanding securities issuable upon exercise of this Warrant), or in
case of any sale of all or substantially all of the assets of the Company, the
Company, or such successor or purchasing corporation, as the case may be, shall
duly execute and deliver to the Warrantholder a new Warrant (in form and
substance satisfactory to the Warrantholder), so that the Warrantholder shall
have the right to receive, at a total purchase price not to exceed that payable
upon the exercise of the unexercised portion of this Warrant, and in lieu of
the Shares theretofore issuable upon exercise of this Warrant, the kind and
amount of shares of stock, other securities, money and property receivable upon
such reclassification, change or merger by a holder of the number of Shares
then purchasable under this Warrant. Such new Warrant shall provide for
adjustments that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 4. The
-4-
<PAGE> 5
provisions of this subsection (d) shall similarly apply to successive
reclassifications, changes, conversions, mergers, consolidations, sales and
transfers.
(e) If the Company at any time while this Warrant is
outstanding and unexpired shall pay a dividend with respect to its Common Stock
payable in, or make any other distribution with respect to its Common Stock of,
shares of Common Stock, then the Warrant Price shall be adjusted, from and
after the date of determination of the stockholders entitled to receive such
dividend or distribution, to that price determined by multiplying the Warrant
Price in effect immediately prior to such date of determination by a fraction
(i) the numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to such dividend or distribution and (ii) the
denominator of which shall be the total number of shares of the Common Stock
outstanding immediately after such dividend or distribution.
5. Notices. Upon (i) any adjustment of the Warrant Price,
(ii) any increase or decrease in the number of Shares purchasable upon the
exercise of this Warrant, or (iii) any payment by the Company of a dividend
other than a cash dividend or dividend payable in Common Stock, then, and in
each such case, the Company, within thirty (30) days thereafter, shall give
written notice thereof to the registered holder of this Warrant at the address
of such holder as shown on the books of the Company which notice shall state,
if applicable, the Warrant Price as adjusted and the increased or decreased
number of shares purchasable upon the exercise of this Warrant, setting forth
in reasonable detail the method of calculation of each.
6. Representations of Warrantholder. Concurrently with the
exercise of this Warrant, the Warrantholder shall have executed the Investment
Representation Statement in the form attached hereto as Exhibit C.
7. Piggy-Back Registration Rights.
(a) If the Company proposes to register any securities of
the Company under the Act, and the registration form to be used may be used for
the registration of the Registrable Securities (as defined below), then not
less than thirty (30) days prior to such registration, the Company shall give
to the holder of this Warrant and the holder of shares of Common Stock issued
under this Warrant (the "Issued Common Stock") written notice of such proposal
which shall describe in reasonable detail the proposed registration and
distribution and, upon the written request of the holder of this Warrant or a
holder of shares of Issued Common Stock furnished within ten (10) days after
the date of any such notice, and upon exercise of the Warrant under the terms
hereof for any shares remaining to be issued under the Warrant (the "Issuable
Common Stock") (the Issuable Common Stock together with the Issued Common
Stock, the "Registrable Securities"), proceed to include in such registration
such Registrable Securities as have been requested by any such holder to be
included in such registration. The Company will in each instance use its best
efforts to cause all such Registrable Securities to be registered under the Act
and qualified under the securities or blue sky laws of any jurisdiction
requested by a prospective seller, all to the extent necessary to permit the
sale or other disposition thereof (in the manner stated in such request) by a
prospective seller of the securities so registered.
-5-
<PAGE> 6
If the managing underwriter, who shall be selected by the
Company, advises the Company in writing that, in its opinion, the inclusion of
the Registrable Securities with the securities being registered by the Company
and other prospective sellers would materially adversely affect the
distribution of all such securities, then the Company shall be required to
include only that number of Registrable Securities as the managing underwriter
believes may be sold without resulting in a material adverse effect on such
distribution.
A holder who has requested Registrable Securities to be
included in a registration pursuant to this Section 7, by acceptance hereof or
thereof, agrees to (i) the selection by the Company of the underwriter to
manage such registration and offering and (ii) execute an underwriting
agreement with such managing underwriter that is reasonably satisfactory to
such holder and in customary form and also complete and execute all
questionnaires, powers of attorney and such other documents required by the
terms of such underwriting agreement.
(b) The holder of this Warrant shall cooperate with the
Company in supplying such information as may be necessary or appropriate to
complete and file any information reporting forms presently or hereafter
required by the managing underwriter, the Securities and Exchange Commission or
any commissioner or other authority administering the blue sky or securities
laws of any jurisdiction where shares of Common Stock are proposed to be sold.
(c) If any registration pursuant to this Section 7 is in
connection with an underwritten public offering, the holder of this Warrant and
the Issued Common Stock agrees, if so required by the managing underwriter, not
to effect any public sale or distribution of such shares (other than as part of
such underwritten public offering) during the period beginning seven (7) days
prior to the effective date of such registration statement and ending one
hundred and eighty (180) days after the effective date of such registration
statement.
(d) If the Company is required by the provisions of this
Section 7 to effect the registration or qualification under the Act or any
state securities or blue sky laws of any of the Registrable Securities, the
Company shall pay all expenses and all registration fees in connection
therewith. Any expenses incurred by the holders of Registrable Securities
(including, without limitation, underwriting commissions, legal fees, costs and
expenses) shall be borne by such holders.
8. Miscellaneous.
(a) The Company covenants that it will at all times
reserve and keep available, solely for the purpose of issue upon the exercise
hereof, a sufficient number of Shares to permit the exercise hereof in full.
Such shares when issued in compliance with the provisions of this Warrant and
the Certificate of Incorporation of the Company will be duly authorized,
validly issued, fully paid and nonassessable.
(b) The terms of this Warrant shall be binding upon and
shall inure to the benefit of any successors or assigns of the Company and of
the holder or holders hereof and of the Shares issued or issuable upon the
exercise hereof.
-6-
<PAGE> 7
(c) No holder of this Warrant, as such, shall be entitled
to vote or receive dividends or be deemed to be a shareholder of the Company
for any purpose, nor shall anything contained in this Warrant be construed to
confer upon the holder of this Warrant, as such, any rights of a shareholder of
the Company or any right to vote, give or withhold consent to any corporate
action, receive notice of meetings, receive dividends or subscription rights,
or otherwise. Notwithstanding the foregoing, at the request of the
Warrantholder, the Company will continually transmit to the Warrantholder such
information, documents and reports as are generally distributed to the holders
of securities of the Company which are of the same class as the Shares.
(d) Receipt of this Warrant by the holder hereof shall
constitute acceptance of and agreement to the foregoing terms and conditions.
(e) The Company will not, by amendment of its Certificate
of Incorporation or through any other means, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to
protect the rights of the holder of this Warrant against impairment.
(f) Upon receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction or mutilation of this Warrant and,
in the case of any such loss, theft or destruction, upon delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of any such mutilation, upon surrender and cancellation of such
Warrant, the Company at its expense will execute and deliver, in lieu thereof,
a new Warrant of like date and tenor.
(g) This Warrant shall be governed by the internal laws
of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
by its duly authorized officer.
Dated: October 8, 1996
INFOMED HOLDINGS, INC.
By: /s/ Gary M. Bremer
-------------------------------------
Gary M. Bremer
Chairman and CEO
-7-
<PAGE> 8
Exhibit A
NOTICE OF EXERCISE
To: InfoMed Holdings, Inc.
1. The undersigned hereby elects to purchase ____________________
shares of common stock, $.001 par value per share (the "Stock"), of InfoMed
Holdings, Inc. (the "Company") pursuant to the terms of the attached Warrant,
and tenders herewith payment of the purchase price and any transfer taxes
payable pursuant to the terms of the Warrant, together with an Investment
Representation Statement in the form attached to the Warrant as Exhibit B.
2. The shares of Stock to be received by the undersigned upon
exercise of the Warrant are being acquired for its own account, not as a
nominee or agent, and not with a view to resale or distribution of any part
thereof, and the undersigned has no present intention of selling, granting any
participation in, or otherwise distributing the same. The undersigned further
represents that it does not have a contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participation to such
person or to any third person, with respect to the Stock. The undersigned
believes it has received all the information it considers necessary or
appropriate for deciding whether to purchase the Stock.
3. The undersigned understands that the shares of Stock are
characterized as "restricted securities" under the federal securities laws
inasmuch as they are being acquired from the Company in transactions not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the Securities Act of
1933, as amended (the "Act"), only in certain limited circumstances. In this
connection, the undersigned represents that it is familiar with Rule 144
promulgated under the Act, as presently in effect, and understands the resale
limitations imposed thereby and by the Act.
4. The undersigned understands the instruments evidencing the
Stock may bear one or all of the following legends:
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED."
(b) Any legend required by applicable state law.
<PAGE> 9
5. Please issue a certificate or certificates representing said
shares of Stock in the name as set forth below.
----------------------------------------
[Please type or print name]
6. Please issue a new Warrant for the unexercised portion of the
attached Warrant in the name set forth below.
----------------------------------------
[Please type or print name]
By:
----------------------------------
Its:
----------------------------------
Date:
----------------------------------
-2-
<PAGE> 10
Exhibit B
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this form and supply
required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to
- --------------------------------------------------------------------------------
[Please type or print name.]
whose address is
----------------------------------------
[Please type or print name.]
----------------------------------------
----------------------------------------
By:
-------------------------------------------
Its:
-------------------------------------------
Holder's Address:
-------------------------------------------
-------------------------------------------
-------------------------------------------
Signature Guaranteed:
---------------------------------
NOTE: The signature to this Assignment Form must correspond with the name as
it appears on the face of the Warrant, without alteration or enlargement or any
change whatever, and must be guaranteed by a bank or trust company. Officers
of corporation and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.
<PAGE> 11
Exhibit C
INVESTMENT REPRESENTATION STATEMENT
PURCHASER:
COMPANY : InfoMed Holdings, Inc.
SECURITY : Common Stock
AMOUNT :
DATE :
In connection with the purchase of the above-listed Securities, I, the
Purchaser, represent to the Company the following:
(a) I am aware of the Company's business affairs and financial
condition, and have acquired sufficient information about the Company to reach
an informed and knowledgeable decision to acquire the Securities. I am
purchasing these Securities for my own account for investment purposes only and
not with a view to, or for the resale in connection with, any "distribution"
thereof for purposes of the Securities Act of 1933 ("Securities Act").
(b) I understand that the Securities 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 my
investment intent as expressed herein. In this connection, I understand that,
in the view of the Securities and Exchange Commission ("SEC"), the statutory
basis for such exemption may be unavailable if my representation was predicated
solely upon a present intention to hold these Securities 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.
(c) I further understand that the Securities must be held
indefinitely unless subsequently registered under the Securities Act or unless
an exemption from registration is otherwise available. Moreover, I understand
that the Company is under no obligation to register the Securities except as
set forth in the above-referenced Warrant. In addition, I understand 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 for the Company.
(d) I am familiar with the provisions of Rule 144, promulgated
under the Securities Act which, in substance, permits limited public resales of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof (or from an affiliate of such issuer), in a nonpublic offering subject
<PAGE> 12
to the satisfaction of certain conditions, including, among other things: (1)
the availability of certain public information about the Company; (2) the
resale occurring not less than two years after the party has purchased, and
made full payment for, within the meaning of Rule 144, the securities to be
sold and, in the case of affiliates, or of a non-affiliate who has held the
securities less than three years, the sale 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
the amount of securities being sold during any three month period not exceeding
the specified limitations stated therein, if applicable.
(e) I further understand that at the time I wish to sell the
Securities there may be no public market upon which to make such a sale, and
that, even if such a public market then exists, the Company may not be
satisfying the current public information requirements of Rule 144, and that,
in such event, I would be precluded from selling the Securities under Rule 144
even if the two-year minimum holding period had been satisfied.
(f) I further understand that in the event all of the applicable
requirements of Rule 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 Rule 144 is not exclusive,
the Staff of the SEC has expressed its opinion that persons proposing to sell
private placement securities other than in a registered offering and otherwise
than pursuant to Rule 144 will have a substantial burden of proof in
establishing than 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.
Signature of Purchaser:
By:
------------------------------------
Name:
------------------------------
Title:
-----------------------------
Date: , 19
---------------- ---
-2-
<PAGE> 1
EXHIBIT 10.6
SIMIONE CENTRAL HOLDING, INC.
1996 INCENTIVE STOCK OPTION AGREEMENT
THIS AGREEMENT is made as of the Date of Grant, by SIMIONE CENTRAL
HOLDING, INC. (the "Company"), and Douglas E. Caddell (the "Optionee").
Upon and subject to the Additional Terms and Conditions attached
hereto and incorporated herein by reference as part of this Agreement, the
Company hereby awards as of the Date of Grant to Optionee an option (the
"Option") under the Simione Central Holding, Inc. 1996 Stock Incentive Plan
(the "Plan"), as described below, to purchase the Option Shares. Capitalized
terms not defined or described herein have the meanings set forth in the
Additional Terms and Conditions.
A. Date of Grant: September 4, 1996
B. Exercise Price: $0.55 per share
C. Option Shares: All or any part of 50,000 shares of
the Company's Class A common stock ("Common Stock")
D. Vesting Schedule: The Option Shares shall vest one third on
September 3, 1997, an additional one third on September 3,
1998, and the final one third on September 3, 1999, provided
Optionee is continuously an Employee as defined herein through
the respective dates on which the applicable Option Shares
vest, and provided further the Option Shares shall vest in
full immediately upon the occurrence of any Change in Control
as defined herein while Optionee is an Employee.
E. Exercise Period: Subject to such shorter period as is
provided in the Additional Terms and Conditions, the Options
may be exercised as to the percentage of vested Option Shares
determined according to the Vesting Schedule during the
Exercise Period which commences on the Date of Grant and ends
at the close of business on the tenth anniversary of the Date
of Grant.
IN WITNESS WHEREOF, the Company has executed and sealed this Agreement
as of the Date of Grant set forth above.
SIMIONE CENTRAL HOLDING, INC.
By:/S/ Gary M. Bremer
-------------------------------------
Title:CEO
----------------------------------
ATTEST:
/S/ James A. Tramonte
- ---------------------------------
Title: Secretary OPTIONEE:
---------------------------
[CORPORATE SEAL]
----------------------------------------
Douglas E. Caddell
Page 1 of 13
<PAGE> 2
ADDITIONAL TERMS AND CONDITIONS
OF SIMIONE CENTRAL HOLDING, INC.
1996 INCENTIVE STOCK OPTION AGREEMENT
1. Definitions
(a) "Affiliate" means (1) any corporation (other than the
Company) in an unbroken chain of corporations ending with the Company if, at
the time of granting of the Option, each of the corporations (other than the
Company) owns stock possessing 50% or more of the total combined voting power
of all classes of stock in one of the other corporations in such chain, or (2)
any corporation (other than the Company) in an unbroken chain of corporations
beginning with the Company if, at the time of granting of the Option, each of
the corporations other than the last corporation in the unbroken chain owns
stock possessing 50% or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
(b) "Applicable Period" means the period of Optionee's
employment with the Company or an Affiliate after the Date of Grant and for one
(1) year after termination of his employment; provided, that such one (1) year
period shall not apply if, within six (6) months before or two (2) years after
a Change in Control, Optionee terminates his employment for Good Reason or the
Company or an Affiliate terminates his employment without Cause.
(c) "Business of the Company" means any business that
involves the marketing, sale or performance of administrative or management
services to home healthcare agencies, except that the Business of the Company
shall not include the performance of such services for a business that owns and
operates, on its own behalf, home health agencies.
(d) "Area" means the area within a fifty (50) mile radius
of each location where the Optionee performed services for the Company or an
Affiliate, as set forth in Exhibit A attached hereto, which may be updated from
time to time by the Company without the Optionee's consent.
(e) "Cause" means, in connection with a termination of
Optionee's employment by the Company or an Affiliate, termination for cause,
within the meaning of the employment agreement of the Optionee, if any. If the
Optionee does not have an employment agreement, "Cause" means, in connection
with a termination of Optionee's employment by the Company or an Affiliate, a
termination due to any of the following reasons: (1) willful and continued
failure (other than any such failure resulting from his incapacity during
physical or mental illness) to substantially perform his duties with the
Company or an Affiliate; (2) any material act of fraud, misappropriation, or
embezzlement which has, or is determined in good faith by the Committee to
have, an adverse effect on the Company or an Affiliate; (3) conviction of
Optionee for a felony or any other crime involving moral turpitude; or (4) the
habitual and disabling use of alcohol or drugs.
(f) "Change in Control" means the consummation of (i) a
merger, consolidation, share exchange, combination, reorganization, or like
transaction involving the Company in which the shareholders of the Company
immediately prior to such transaction do not own at least fifty percent
Page 2 of 13
<PAGE> 3
(50%) of the value or voting power of the issued and outstanding capital stock
of the Company or its successor immediately after such transaction, (ii) the
sale or transfer (other than as security for the Company's obligations) of more
than fifty percent (50%) of the assets of the Company in any transaction, a
series of related transactions, or a series of transactions occurring within a
one (1) year period, in which the Company, any corporation controlled by the
Company, or the shareholders of the Company immediately prior to the
transaction do now own at least fifty percent (50%) of the value or voting
power of the issued and outstanding equity securities of the acquiror
immediately after the transaction, (iii) except as a result of a Public
Offering, the sale or transfer of fifty percent (50%) or more of the value or
voting power of the issue and outstanding capital stock of the Company by the
holders thereof in a single transaction, a series of related transactions, or a
series of transactions occurring within a one (1) year period, in which the
Company and any corporation controlled by the Company, or the shareholders of
the Company immediately prior to such transaction do not own at least fifty
percent (50%) of the value or voting power of the issued and outstanding equity
securities of the acquiror immediately after the transaction, (iv) the
dissolution or liquidation of the Company, (v) the acquisition by any
individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"))(a
"Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of voting securities of the Company where such
acquisition causes such person to own 25% or more of the combined voting power
of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this subsection (v) the
following shall not be deemed to result in a Change in Control: (A) any
acquisition directly from the Company, (B) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company, (C) any acquisition by merger,
consolidation, share exchange, combination, reorganization, sale, or transfer
or like transaction not described in Paragraph (i) or (iii) above and in which
no Person (other than an employee benefit plan or related trust sponsored or
maintained by the Company, any corporation controlled by the Company, or
company resulting from such business combination) becomes the beneficial owner
of 25% or more of the combined voting power of the then outstanding voting
securities of such company as a result of the transaction, or (D) the
acquisition of beneficial ownership of voting securities of the Company by a
Person who beneficially owns 25% of the voting power of the outstanding voting
securities of the Company as of the date hereof; and provided, further, that if
any Person's beneficial ownership of the Outstanding Company Voting Securities
reaches or exceeds 25% as a result of a transaction described in clause (A)
above, and such Person subsequently acquires beneficial ownership of additional
voting securities of the Company other than as a result of a transaction in
clause (A) above, such subsequent acquisition shall be treated as an
acquisition that causes such Person to own 25% or more of the Outstanding
Company Voting Securities; or (vi) either individuals who as of the date hereof
or individuals who as of the date of consummation of the proposed transactions
contemplated by an Agreement and Plan of Merger by and among InfoMed Holdings,
Inc., InfoSub, Inc. and the Company (the "InfoMed Merger") constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least two-thirds of the
directors then comprising the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board, but excluding, for this
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<PAGE> 4
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies
or consents by or on behalf of a Person other than the Board. Notwithstanding
the foregoing, the consummation of the proposed transactions contemplated by
the InfoMed Merger shall not result in a Change in Control for purposes of this
Agreement.
(g) "Committee" means the Committee appointed by the
Company's Board of Directors to administer the Plan.
(h) "Competing Business" means any person, firm,
corporation, joint venture or other business entity which is engaged in the
Business of the Company within the Area.
(i) "Confidential Information" means data and information
relating to the business of the Company (which does not rise to the status of a
Trade Secret) which is or has been disclosed to Optionee or of which Optionee
became aware as a consequence of or through its relationship to the Company and
which has value to the Company and is not generally known to its competitors.
Confidential Information shall not include any data or information that has
been voluntarily disclosed to the public by the Company (except where such
public disclosure has been made by Optionee without authorization) or that has
been independently developed and disclosed by others, or that otherwise enters
the public domain through lawful means. The provisions in this Agreement
restricting the use of Confidential Information shall survive for a period of
two (2) years following termination of this Agreement.
(j) "Disability" means a disability of Optionee within the
meaning of section 72(m)(7) of the Internal Revenue Code; that is, Optionee is
unable to engage in any substantial gainful activity with the Company or any
other employer, by reason of any medically determinable physical or mental
impairment which can be expected to result in death or to be of long continued
and indefinite duration. If Optionee claims to have a Disability, he shall
submit to the Committee a written request for Disability status together with
medical evidence from a licensed physician identifying the existence of a
Disability within the meaning of this definition. The Committee may then elect
to have Optionee submit to an examination by a licensed physician selected by
the Committee. The determination as to whether Optionee is subject to a
Disability shall be made at the sole discretion of the Committee based on
medical evidence submitted by either or both of the physicians.
(k) "Employee" means any person who is employed by the
Company or an Affiliate for purposes of the Federal Insurance Contributions
Act.
(l) "Fair Market Value" refers to the adequacy of the
consideration for which Common Stock may be acquired or sold and means, as
applicable:
(1) The closing price of the Common Stock on the
principal securities exchange on which it is traded on the day immediately
preceding the date as of which Fair Market Value is being determined or, if no
Common Stock was traded on the immediately preceding day, on the next preceding
trading date.
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<PAGE> 5
(2) If Common Stock is not traded on a securities
exchange, but is reported by the National Association of Securities Dealers,
Inc. Automated Quotation System and market information is published on a
regular basis in The New York Times or in The Wall Street Journal, the average
of the published high and low sales price or the published daily bid and asked
prices, as so published, on the day immediately preceding the date as of which
Fair Market Value is being determined or on the next preceding date on which
such prices were published.
(3) If such market information is not published
on a regular basis, the average of the high bid and low asked prices of Common
Stock in the over-the-counter market on the date immediately preceding the date
as of which Fair Market Value is being determined or on the next preceding date
on which such high bid and low asked prices were recorded, as reported by the
National Association of Securities Dealers Automated Quotation System, or, if
not so reported, by a generally accepted reporting service.
(4) If Common Stock is not publicly traded, Fair
Market Value shall be the value determined in good faith by the Committee with
due consideration begin given to: (a) the most recent independent appraisal of
the Company, if such appraisal is not more than twelve (12) months old; and (b)
the valuation methodology used in any such appraisal.
(m) "Good Reason" means, in connection with a termination
by Optionee of his employment with the Company or an Affiliate, such
termination for good reason within the meaning of the employment agreement of
the Optionee, if any. If the Optionee does not have an employment agreement,
"Good Reason" means, in connection with a termination by Optionee of his
employment with the Company or an Affiliate, a termination due to any of the
following reasons: (1) the nature of the Optionee's duties or the scope of his
responsibilities are materially modified without the Optionee's written
consent, or (2) the Company or an Affiliate changes the location of Optionee's
place of employment to more than 30 miles from its present location.
(n) "Public Offering" means the offering for sale by the
Company of equity securities pursuant to a registration statement filed in
accordance with the Securities Act of 1933, as amended, or any comparable law
then in effect, and the effective date of any such Public Offering shall be the
first day on which the securities covered thereby may lawfully be offered and
sold pursuant to such registration statement.
(o) "Trade Secrets" means information including, but not
limited to, technical or nontechnical data, formulas, patterns, compilations,
programs, devices, methods, techniques, drawings, processes, financial data,
financial plans, product plans or lists of actual or potential customers or
suppliers which (1) derives economic value, actual or potential, 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 (2)
is the subject of efforts that are reasonable under the circumstances to
maintain its secrecy. The provisions in this Agreement restricting the use of
Trade Secrets shall survive termination of this Agreement for so long as is
permitted by the Georgia Trade Secrets Act of 1990, O.C.G.A. Section Section
10-1-760-10-1-767.
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<PAGE> 6
2. Term and Exercise of Option
(a) Except as otherwise provided in this Agreement,
Optionee shall have the right to exercise the Option from time to time during
the Exercise Period with respect to the percentage of the vested Option Shares
as set forth on the Vesting Schedule.
(b) As a condition to exercising this Option, Optionee
must deliver to the President of the Company on any business day (A) written
notice, signed by the person exercising the Option, specifying the number of
Option Shares being exercised and, if required, making the representations and
covenants in substantially the same form as provided in the Notice of Exercise,
attached as Exhibit B hereto; and (B) payment in cash of the Purchase Price
(defined in Section 3) or in shares of Common Stock that have been held by the
Optionee for at least six (6) months.
Upon receipt of such notice and payment in full of the Purchase Price,
the Company shall cause to be issued a certificate representing the shares of
Common Stock purchased.
(c) Except as otherwise provided in this Agreement, the
Option shall terminate on the occurrence of the earliest of the following
events: (1) the expiration of the Exercise Period; (2) the Committee exercises
its right pursuant to Section 14 to terminate the Option; (3) the Optionee
ceases to be an Employee where such termination is by the Company or an
Affiliate with Cause; (4) the expiration of one (1) year after Optionee ceases
to be an Employee if such termination is due to Disability or death; or (5) the
provisions of Sections 10, 11, or 12 hereof apply.
3. Purchase Price. Optionee must pay to the Company the Exercise
Price in cash or in shares of Common Stock which have been held by Optionee for
at least six (6) months (subject to adjustment pursuant to Section 14)
multiplied by the number of the Option Shares being acquired through the
exercise of this Option (the "Purchase Price"). Shares of Common Stock
tendered by the Optionee in satisfaction of the Purchase Price shall be
credited at their then Fair Market Value.
4. Non-Transferability of Option. Except for any transfer of the
Option by bequest or inheritance, the Optionee shall not have the right to make
or permit to exist any transfer or hypothecation, whether outright or as
security, with or without consideration, voluntary or involuntary, of all or
any part of any right, title or interest in the Option. Any such disposition
not made in accordance with this Agreement shall be deemed null and void. The
Option shall be exercisable during the lifetime of Optionee only by Optionee,
and after his death by a legatee or legatees under Optionee's last will and
testament or by his personal representative or representatives, who shall be
bound by the same terms of this Agreement as apply to the Optionee.
5. Restrictions on Transfer of Option Shares. Except as provided
in this Agreement or for any transfer of Option Shares by gift, bequest, or
inheritance to the Optionee's or a subsequent shareholder's family member,
estate, trust, heirs, or legatees or for any transfer on or after the effective
date of a Public Offering, the Optionee shall not have the right to make or
permit to exist any transfer or hypothecation, whether outright or as security,
with or without consideration, voluntary or involuntary, of all or any part of
any right, title or interest in or to any Option Shares. Any such
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<PAGE> 7
disposition not made in accordance with this Agreement shall be deemed null and
void. Any permitted transferee under this Section shall be bound by the same
terms of this Agreement as apply to the Optionee.
6. No Rights as Shareholder. Optionee, or his permitted
transferee under Section 4, shall have no rights as a stockholder with respect
to any Option Shares until the issuance of a stock certificate to him for such
shares. No adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property) or distributions or other rights
on or with respect to Option Shares purchased pursuant to this Option for which
the record date is prior to the date of exercise hereof, except as provided in
Section 14 below.
7. Repurchase Rights.
(a) If Optionee ceases to be an Employee for any reason,
the Company or its designee (the "Purchaser") shall have the right (1) prior to
the effective date of a Public Offering of securities of the same class as the
Option Shares, or (2) until ninety days after the close of the Applicable
Period if Optionee has entered into any activity described in Section 10 or 11
during the Applicable Period or Section 12 during the applicable restrictive
period to repurchase from the Optionee all Option Shares. For this purpose, a
notice of exercise given by the Purchaser to the Optionee pursuant to this
Section 7 shall be effective to perfect the Purchaser's right of repurchase,
subject to the remaining provisions of this Section 7.
(b) (1) The Purchaser, upon exercising this right of
repurchase, shall give written notice to the Optionee of the number of Option
Shares to be repurchased, of the repurchase price, which shall be determined
pursuant to Section 7(c) hereof, and of the time and date of the closing of the
repurchase of the Option Shares, which shall be no later than sixty (60) days
from the date of the notice and shall be held at the principal office of the
Purchaser. At closing, the Purchaser shall deliver the repurchase price and
the Optionee shall deliver the Option Shares to be repurchased duly endorsed
for transfer and with all required revenue stamps attached, and the title to
the Option Shares shall be transferred to the Purchaser free and clear of all
liens, claims, and encumbrances, however described, except for restrictions
imposed by applicable securities laws.
(2) The price for Option Shares repurchased by
the Purchaser shall be payable at the election of the Purchaser as follows:
(A) All in cash at the closing, or
(B) If the purchase price equals or
exceeds $10,000, the Purchaser may pay the purchase price in substantially
equal installments over a period designated by the Purchaser, which shall not
be greater than five years from the date of purchase. Interest on the unpaid
balance shall be at the applicable federal rate (as defined in Section 1274(d)
of the Internal Revenue Code of 1986, as amended), in effect on the first
business day preceding the date of repurchase. If the Purchaser elects to pay
the purchase price in installments, the Purchaser shall have the right to
prepay all or any portion of the purchase price at any time during the
installment period.
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<PAGE> 8
(c) The repurchase price for each Option Share shall be an
amount equal to (1) for repurchases pursuant to Section 7(a)(1), the Fair
Market Value as of the date of the repurchase or (2) for repurchases pursuant
to Section 7(a)(2), the lower of the Exercise Price paid by the Optionee or the
Fair Market Value as of the date of repurchase. Notwithstanding the foregoing,
if the Purchaser exercises repurchase rights under Section 7(a)(2), and prior
to ninety days after the close of the Applicable Period, the Company becomes
aware, and notifies the Optionee, that the Optionee has entered into any
activity described in Section 10 or 11 during the Applicable Period or Section
12 during the applicable restricted period, the Optionee shall be liable to the
Purchaser for the excess of the amount he received upon repurchase over the
aggregate Exercise Price paid by the Optionee for such Option Shares. If, as
of such date, the Optionee is receiving installment payments pursuant to
section 7(b)(2)(B), the subsequent installments shall be reduced or cancelled
to reflect the purchase price adjustment provided for herein.
8. Right of First Refusal.
(a) If, prior to the effective date of a Public Offering
of securities of the same class of the Option Shares, the Optionee (or, if the
Option Shares are owned or held by a transferee, such transferee) shall receive
a bona fide offer from a third party to purchase any Option Shares acquired
upon exercise of the Option, which offer the Optionee or such transferee
intends to accept, the Optionee or such transferee, as the case may be, before
consummating the sale to such third party, shall notify the Company in writing
of such offer, which notice shall state the number of Option Shares subject to
such offer and the price and terms of payment offered by such third party. The
provisions of Section 7 shall apply and not this Section, unless Optionee gives
the written notice required under this Section prior to the date the Purchaser
gives the notice required in Section 7(a). The Purchaser (as defined in
Section 7) shall have thirty (30) days after receipt by the Company of such
notice within which to notify the Optionee or such transferee, as the case may
be, in writing, of its election to purchase all the Option Shares which are the
subject of such third party offer at the same price and upon the same terms and
conditions as are contained in such third party offer. Failure by the
Purchaser to give such written notice within such thirty (30) day period shall
constitute a rejection of such offer by the Purchaser. If the Purchaser shall
reject such offer or fail timely to accept such offer, or if after timely
accepting such offer the Purchaser shall fail timely to consummate the purchase
of the Option Shares which are the subject of that offer, then the Optionee or
such transferee, as the case may be, shall be free to sell the Option Shares
which are the subject of such third party offer to the third party at the price
and upon the same terms and conditions as are set forth in the third party
offer; provided, however, if the Optionee or such transferee, as the case may
be, does not consummate such sale to the third party within sixty (60) days
after rejection by the Purchaser of such offer or, if such offer is timely
accepted by the Purchaser, after failure of the Purchaser timely to consummate
such purchase, the Option Shares which were the subject of such third party
offer or agreement shall once again become subject to the provisions of this
Section 8, and any subsequent disposition of such Option Shares shall be made
only after compliance with the terms of this Section 8. If the Purchaser
timely accepts such offer, the Company or its designee shall give written
notice to the Optionee of the time and date of the closing of the repurchase,
which shall be no later than thirty (30) days following the date the Purchaser
gives written notice of its acceptance of such offer and shall be held at the
principal office of the Company. At closing, the Purchaser shall deliver the
sale price, and the Optionee shall
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<PAGE> 9
deliver the Option Shares to be repurchased duly endorsed for transfer and with
all required revenue stamps attached, and the title to the Option Shares shall
be transferred to the Purchaser free and clear of all liens, claims and
encumbrances, however described, except for restrictions imposed by applicable
securities laws.
Notwithstanding the foregoing, if the Purchaser exercises its
right of first refusal under this section, and prior to ninety days after the
close of the Applicable Period, the Company becomes aware, and notifies the
Optionee, that the Optionee has entered into any activity described in Section
10 or 11 during the Applicable Period or Section 12 during the applicable
restricted period, the Optionee shall be liable to the Company for the excess
of the amount he received upon repurchase over the exercise price paid by the
Optionee for such Option Shares. If, as of such date, the Optionee has not
received the cash purchase price or is receiving installment payments, the cash
purchase price or subsequent installments, as applicable, shall be reduced or
cancelled to reflect the purchase price adjustment provided for herein.
(b) The price for Option Shares repurchased shall be
payable at the election of the Company or its designee as follows:
(1) Upon the terms of payment as are
contained in the third party offer, or,
(2) All in cash at the closing.
9. Put Rights.
(a) If, within six months before or two years after a
Change in Control, Optionee ceases to be an Employee due to a termination by
the Company without Cause or due to a termination by Employee for Good Reason,
the Employee or his representative shall have the right to require the Company,
within sixty (60) days following termination of employment and prior to the
effective date of a Public Offering of securities of the same class as the
Option Shares, to require the Company to purchase all of Optionee's Option
Shares. For this purpose, a notice of exercise given by the Employee to the
Company pursuant to this Section 9 shall be effective to perfect Optionee's
right to sell, subject to the remaining provisions of this Section 9.
(b)(1) The Optionee, upon exercising this right to sell,
shall give written notice to the Company of the number of Option Shares to be
sold, and the Company shall thereupon give the Optionee notice of the time and
date of closing of the repurchase of the Option Shares, which shall be no later
than sixty (60) days from the date of the Optionee's notice and shall be held
at the principal office of the Company. At closing, the Company shall deliver
the sale price, and the Optionee shall deliver the Option Shares to be
repurchased duly endorsed for transfer and with all required revenue stamps
attached, and the title to the Option Shares shall be transferred to the
Company free and clear of all liens, claims and encumbrances, however
described, except for restrictions imposed by applicable securities laws.
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<PAGE> 10
(2) The price for Option Shares purchased by the Company
shall be payable all in cash at the closing.
(c) The repurchase price for each Option Share shall be an
amount equal to the Fair Market Value as of the date of the repurchase.
10. Forfeiture if Compete.
(a) The Option shall immediately terminate if Optionee,
commencing on the Date of Grant and continuing through the Applicable Period
(except on behalf of or with the prior written consent of the Company), within
the Area, either directly or indirectly, on Optionee's own behalf, or in the
service of or on behalf of others, engages in or provides managerial,
supervisory, buying, sales, marketing, financial, administrative or consulting
services or assistance to, or owns (other than ownership of less than five
percent of the outstanding voting securities of an entity whose voting
securities are traded on a national securities exchange or quoted on the
National Association of Securities Dealers, Inc. Automated Quotation System) a
beneficial interest in any Competing Business. For purposes of this Section
10, Optionee acknowledges and agrees that the Business of the Company is
conducted in the Area.
(b) The Option shall immediately terminate if Optionee,
commencing on the Date of Grant continuing through the Applicable Period
(except on behalf of or with the prior written consent of the Company), either
directly or indirectly, on the Optionee's own behalf or in the service of or on
behalf of others, solicits or diverts, or attempts to solicit or divert, for
the purpose of providing services related to the Business of the Company, any
individual or entity which was an actual or actively sought prospective client
or customer of the Company with whom the Optionee had direct or indirect
contact during the period commencing on the Date of Grant and continuing
through the Applicable Period. For purposes of this Section 10(b), the
Optionee acknowledges and agrees that he/she is engaged in performing services
related to actual and actively sought prospective clients or customers.
11. Forfeiture if Solicit Employees. The Option shall immediately
terminate if Optionee, commencing on the Date of Grant and continuing through
the Applicable Period (except on behalf of or with the prior written consent of
the Company), either directly or indirectly, on Optionee's own behalf or in the
service of or on behalf of others, solicits, diverts or hires, or attempts to
solicit, divert or hire, any person employed by the Company or an Affiliate,
whether or not such employee is a full-time employee or a temporary employee of
the Company or an Affiliate and whether or not such employment is pursuant to
written agreement and whether or not such employment is for a determined period
or is at will.
12. Forfeiture if Disclose Proprietary Information. The Option
shall immediately terminate if (except on behalf of or with the prior written
consent of the Company), except to the extent necessary to perform the duties
assigned to him by the Company or an Affiliate, Optionee uses, reproduces,
distributes, discloses or otherwise disseminates the Confidential Information
and Trade Secrets during the applicable restrictive period or any physical
embodiments thereof or takes any action
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<PAGE> 11
causing or fails to take the action necessary in order to prevent, any
Confidential Information and Trade Secrets disclosed to or developed by
Optionee to lose its character or cease to qualify as Confidential Information
or Trade Secrets during the applicable restrictive period.
13. Attorney-in-Fact. If the Optionee fails to deliver the Option
Share certificates properly assigned when requested or required to do so
pursuant to this Agreement, the Company shall cancel the Option Share
certificates of the Optionee and shall deposit any payment required pursuant to
this Agreement which was to be made to the Employee in exchange for the
certificates to the credit or account of the Optionee in escrow with any
clearinghouse bank in the City of Atlanta, Georgia, at the expense and risk of
the Optionee, or his successors or assigns, whereupon the Company shall treat
the Option Shares represented thereby as having been repurchased by the Company
or its designees. Optionee irrevocably appoints the Chief Financial Officer of
the Company as his true and lawful attorney-in-fact with full power of and
authority to execute any stock power or other instrument necessary to transfer
the Option Shares to the Company pursuant to this Agreement, in the name, place
and stead of the Optionee.
14. Change in Capitalization. The total number of Option Shares
to be received upon exercise of the Option (both as to the number of Option
Shares and the Purchase Price) shall be appropriately adjusted for any change
in par value, split-up, stock split, reverse stock split, reclassification,
merger, consolidation, distribution of stock dividends or similar capital
adjustments, to the end that the Optionee's proportionate interest in value
shall be maintained as before the occurrence of the event. The adjustment
shall be made without change in the total price applicable to the unexercised
portion of the Option and with a corresponding adjustment in the Exercise
Price.
The foregoing adjustments and the manner of application of the
foregoing provisions shall be determined by the Committee in its sole
discretion. Any adjustment may provide for the elimination of any fractional
Option Shares.
Notwithstanding any other provision of this Agreement, the Committee
reserves the right in the event of a sale of substantially all of the Common
Stock or property of the Company or the merger or consolidation of the Company,
or a dissolution or liquidation of the Company, to terminate the Option in
consideration of the payment to the Optionee of the difference between (a) and
(b) where (a) equals the Fair Market Value of the unexercised Option Shares
(whether vested or not) and (b) equals the Purchase Price of such unexercised
Option Shares.
15. Shareholders' Agreement. If, at the date of grant of the
Option, there is an effective agreement among the shareholders of the Company,
the Optionee shall, if requested by the Company, execute any such shareholders'
agreement as a condition of receiving any certificates for the Option Shares.
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<PAGE> 12
16. Governing Laws. This Agreement shall be construed,
administered and enforced according to the laws of the State of Georgia;
provided, however, the Option may not be exercised except, in the reasonable
judgment of the Board of Directors, in compliance with exemptions under
applicable state securities laws of the state in which Optionee resides, and/or
any other applicable securities laws.
17. Successors. This Agreement shall inure to the benefit of the
heirs, legal representatives, successors and permitted assigns of the Company
and Optionee.
18. Notice. Any notice which either party hereto may be required
or permitted to give to the other shall be in writing, and may be delivered
personally or by mail, postage prepaid, addressed as follows: to the President
of the Company, or to the Company (attention of the President), at 6650 Powers
Ferry Road, Suite 200, Atlanta, Georgia 30339, or at any other address as the
Company, by notice to Optionee, may designate in writing from time to time; to
Optionee, at Optionee's address as shown on the records of the Company, or at
any other address as Optionee, by notice to the Company, may designate in
writing from time to time.
19. Severability. In the event that any one or more of the
provisions or portion thereof contained in this Agreement shall for any reason
be held to be invalid, illegal or unenforceable in any respect, the same shall
not invalidate or otherwise affect any other provisions of this Agreement, and
this Agreement shall be construed as if the invalid, illegal or unenforceable
provision or portion thereof had never been contained herein.
20. Entire Agreement. Subject to the terms and conditions of the
Simione Central Holding, Inc. 1996 Stock Incentive Plan, which is incorporated
herein by reference, this Agreement expresses the entire understanding and
agreement of the parties hereto with respect to such terms, restrictions and
limitations.
21. Headings. Section headings used herein are for convenience of
reference only and shall not be considered in construing this Agreement.
22. Specific Performance. In the event of any actual or
threatened default in, or breach of, any of the terms, conditions and
provisions of this Agreement, the party or parties who are thereby aggrieved
shall have the right to specific performance and injunction in addition to any
and all other rights and remedies at law or in equity, and all such rights and
remedies shall be cumulative.
23. Resolution of Disputes. Any determination or interpretation
by the Committee shall be final, binding and conclusive on all persons affected
thereby.
24. Compliance with Securities Laws. Notwithstanding anything
contained herein to the contrary, no purported exercise of the Option shall be
effective without the written approval of the Company, which may be withheld to
the extent that its exercise, either individually or in the aggregate, together
with the exercise of other previously exercised stock options and/or offers and
sales pursuant to any prior or contemplated offering of securities, would, in
the sole and absolute judgment of the
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<PAGE> 13
Company, require the filing of a registration statement with the United States
Securities and Exchange Commission, or with the securities commission of any
state. The Company shall avail itself of any exemptions from registration
contained in applicable federal and state securities laws which, in its sole
and absolute discretion, it deems reasonable and not unduly burdensome or
costly. The Optionee shall deliver to the Company, prior to the exercise of
the Option, such information, representations and warranties as the Company may
request in order for the Company to be able to satisfy itself that the Common
Stock to be acquired pursuant to the exercise of the Option is being acquired
in accordance with the terms of an applicable exemption from the securities
registration requirements of applicable federal and state securities laws.
* * * * * * * *
Page 13 of 13
<PAGE> 14
EXHIBIT A
[FOR PURPOSES OF DEFINITION OF "AREA," EACH LOCATION WHERE OPTIONEE WORKED]
EXHIBIT A to Incentive Stock Option Agreement
<PAGE> 15
EXHIBIT B
NOTICE OF EXERCISE OF
STOCK OPTION TO PURCHASE
COMMON STOCK OF
SIMIONE CENTRAL HOLDING, INC.
Name
-------------------------------------
Address
----------------------------------
-----------------------------------------
Date
-------------------------------------
Simione Central Holding, Inc.
Attention: President
Suite 200
6650 Powers Ferry Road
Atlanta, Georgia 30339
Re: Exercise of Incentive Stock Option
Gentlemen:
Subject to acceptance hereof in writing by Simione Central Holding,
Inc. (the "Company") pursuant to the provisions of the Simione Central Holding,
Inc. 1996 Stock Incentive Plan (the "Plan"), I hereby give at least ten (10)
days but not more than thirty (30) days prior notice of my election to exercise
options granted to me to purchase ______________ shares of Common Stock of the
Company under the Simione Central Holding, Inc. 1996 Incentive Stock Option
Agreement granted on ____________________ (the "Agreement"). The purchase
shall take place as of __________, 19__ (the "Exercise Date").
On or before the Exercise Date, I will pay the applicable purchase
price as follows:
[ ] by delivery of a certified check for $____________ for the full
purchase price payable to the order of Simione Central Holding,
Inc.
[ ] by delivery of a certified check for $________ representing a
portion of the purchase price to the order of Simione Central
Holding, Inc. with the balance to consist of shares of Common
Stock that I have owned for at least six (6) months and that are
represented by a stock certificate I will surrender to the
Company with my endorsement. If the number of shares of Common
Stock represented by such stock certificate exceeds the number
to be applied against the purchase price, I understand that a
new stock certificate will be issued to me reflecting the excess
number of shares.
EXHIBIT B to Incentive Stock Option Agreement Page 1 of 3
<PAGE> 16
[ ] by delivery of a stock certificate representing shares of Common
Stock that I have owned for at least six (6) months which I will
surrender to the Company with my endorsement as payment of the
purchase price. If the number of shares of Common Stock
represented by such certificate exceeds the number to be applied
against the purchase price, I understand that a new certificate
will be issued to me reflecting the excess number of shares.
Covenants and Representations of Optionee. Optionee represents,
warrants, covenants, and agrees with the Company as follows as of the date of
exercising the Option:
A. The Option is being received for Optionee's own
account without the participation of any other person, with the intent of
holding the Option and the Option Shares issuable pursuant thereto for
investment and without the intent of participating, directly or indirectly, in
a distribution of the Option Shares and not with a view to, or for resale in
connection with, any distribution of the Option Shares or any portion thereof;
B. Optionee is not acquiring the Option based upon any
representation, oral or written, by any person with respect to the future value
of, or income from, the Option Shares subject to this Option, but rather upon
an independent examination and judgment as to the prospects of the Company;
C. Optionee has received a copy of the Plan, is familiar
with the business and affairs of the Company, and realizes that the receipt of
the Option Shares is a speculative investment and that any possible profit
therefrom is uncertain;
D. Optionee has had the opportunity to ask questions of
and receive answers from the Company and any person acting on its behalf and to
obtain all information available with respect to the Plan, the Company and its
affairs, and has received all information and data with respect to the Plan and
the Company that he has requested and which he has deemed relevant in
connection with his receipt of the Option and the Option Shares subject
thereto;
E. Optionee is able to bear the economic risk of the
investment, including the risk of a complete loss of his investment, and
Optionee acknowledges that he must continue to bear the economic risk of the
investment in the Option Shares received upon Option exercise for an indefinite
period;
F. Optionee understands and agrees that the Option Shares
subject to the Option may be issued and sold to Optionee without registration
under any state or federal law relating to the registration of securities for
sale, and in that event will be issued and sold in reliance on exemptions from
registration under appropriate state and federal laws;
G. The Option Shares issued to Optionee upon exercise of
the Option will not, subject to any other applicable restrictions set forth in
the Plan or the Agreement, be offered for sale, sold or transferred by Optionee
other than pursuant to:
(1) an effective registration under applicable
state securities laws or in a transaction which is otherwise in compliance with
those laws;
EXHIBIT B to Incentive Stock Option Agreement Page 2 of 3
<PAGE> 17
(2) an effective registration under the
Securities Act of 1933 (the "1933 Act"), or a transaction otherwise in
compliance with the 1933 Act; and
(3) evidence satisfactory to the Company of
compliance with the applicable securities laws.
The Company shall be entitled to rely upon an opinion of counsel satisfactory
to it with respect to compliance with the foregoing laws.
H. The Company will be under no obligation to register
the Option Shares issuable pursuant to the Option or to comply with any
exemption available for sale of the Option Shares by the Optionee without
registration, and the Company is under no obligation to act in any manner so as
to make Rule 144 promulgated under the 1933 Act available with respect to sale
of the Option Shares by the Optionee;
I. A legend indicating that the Option Shares issued
pursuant to the Option have not been registered under the applicable securities
laws and referring to any applicable restrictions on transferability and sale
of the Option Shares may be placed on the certificate or certificates delivered
to Optionee and any transfer agent of the Company may be instructed to require
compliance therewith;
As soon as the stock certificate is registered in my name, please
deliver it to me at the above address.
Very truly yours,
----------------------------------------
Legal Signature
AGREED TO AND ACCEPTED:
SIMIONE CENTRAL HOLDING, INC.
By:
-------------------------------
Title:
----------------------------
Number of Shares Exercised:
-------
Number of Shares Remaining:
-------
Date:
-------------------------
EXHIBIT B to Incentive Stock Option Agreement Page 3 of 3
<PAGE> 1
EXHIBIT 10.7
SIMIONE CENTRAL HOLDING, INC.
1996 NONQUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT is made as of the Date of Grant, by SIMIONE CENTRAL
HOLDING, INC. (the "Company"), and Gary M. Bremer (the "Optionee").
Upon and subject to the Additional Terms and Conditions attached
hereto and incorporated herein by reference as part of this Agreement, the
Company hereby awards as of the Date of Grant to Optionee an option (the
"Option") under the Simione Central Holding, Inc. 1996 Stock Incentive Plan
(the "Plan"), as described below, to purchase the Option Shares. Capitalized
terms not defined or described herein have the meanings set forth in the
Additional Terms and Conditions.
A. Date of Grant: September 4, 1996
B. Exercise Price: $0.55 per share
C. Option Shares: All or any part of 165,000 shares of
the Company's Class A common stock ("Common Stock")
D. Vesting Schedule: The Option Shares shall vest one third on
September 3, 1997, an additional one third on September 3,
1998, and the final one third on September 3, 1999, provided
Optionee is continuously an Employee as defined herein through
the respective dates on which the applicable Option Shares
vest, and provided further the Option Shares shall vest in
full immediately upon the occurrence of any Change in Control
as defined herein while Optionee is an Employee.
E. Exercise Period: Subject to such shorter period as is
provided in the Additional Terms and Conditions, the Options
may be exercised as to the percentage of vested Option Shares
determined according to the Vesting Schedule during the
Exercise Period which commences on the Date of Grant and ends
at the close of business on the tenth anniversary of the Date
of Grant.
IN WITNESS WHEREOF, the Company has executed and sealed this Agreement
as of the Date of Grant set forth above.
SIMIONE CENTRAL HOLDING, INC.
By:/s/ Gary W. Rasmussen
-------------------------------------
Title: COO
ATTEST: ----------------------------------
/s/ James A. Tramonte
- -------------------------------
Title: Secretary OPTIONEE:
-------------------------
[CORPORATE SEAL]
/s/
----------------------------------------
Gary M. Bremer
Page 1 of 12
<PAGE> 2
ADDITIONAL TERMS AND CONDITIONS
OF SIMIONE CENTRAL HOLDING, INC.
1996 NONQUALIFIED STOCK OPTION AGREEMENT
1. Definitions
(a) "Affiliate" means (1) any corporation (other than the
Company) in an unbroken chain of corporations ending with the Company if, at
the time of granting of the Option, each of the corporations (other than the
Company) owns stock possessing 50% or more of the total combined voting power
of all classes of stock in one of the other corporations in such chain, or (2)
any corporation (other than the Company) in an unbroken chain of corporations
beginning with the Company if, at the time of granting of the Option, each of
the corporations other than the last corporation in the unbroken chain owns
stock possessing 50% or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
(b) "Applicable Period" means the period of Optionee's
employment with the Company or an Affiliate after the Date of Grant and for one
(1) year after termination of his employment; provided, that such one (1) year
period shall not apply if, within six (6) months before or two (2) years after
a Change in Control, Optionee terminates his employment for Good Reason or the
Company or an Affiliate terminates his employment without Cause.
(c) "Business of the Company" means any business that
involves the marketing, sale or performance of administrative or management
services to home healthcare agencies, except that the Business of the Company
shall not include the performance of such services for a business that owns and
operates, on its own behalf, home health agencies.
(d) "Area" means the area within a fifty (50) mile radius
of each location where the Optionee performed services for the Company or an
Affiliate, as set forth in Exhibit A attached hereto, which may be updated from
time to time by the Company without the Optionee's consent.
(e) "Cause" means, in connection with a termination of
Optionee's employment by the Company or an Affiliate, termination for cause,
within the meaning of the employment agreement of the Optionee, if any. If the
Optionee does not have an employment agreement, "Cause" means, in connection
with a termination of Optionee's employment by the Company or an Affiliate, a
termination due to any of the following reasons: (1) willful and continued
failure (other than any such failure resulting from his incapacity during
physical or mental illness) to substantially perform his duties with the
Company or an Affiliate; (2) any material act of fraud, misappropriation, or
embezzlement which has, or is determined in good faith by the Committee to
have, an adverse effect on the Company or an Affiliate; (3) conviction of
Optionee for a felony or any other crime involving moral turpitude; or (4) the
habitual and disabling use of alcohol or drugs.
(f) "Change in Control" means the consummation of (i) a
merger, consolidation, share exchange, combination, reorganization, or like
transaction involving the Company in which the
Page 2 of 12
<PAGE> 3
shareholders of the Company immediately prior to such transaction do not own at
least fifty percent (50%) of the value or voting power of the issued and
outstanding capital stock of the Company or its successor immediately after
such transaction, (ii) the sale or transfer (other than as security for
the Company's obligations) of more than fifty percent (50%) of the assets of
the Company in any transaction, a series of related transactions, or a series
of transactions occurring within a one (1) year period, in which the Company,
any corporation controlled by the Company, or the shareholders of the Company
immediately prior to the transaction do now own at least fifty percent (50%) of
the value or voting power of the issued and outstanding equity securities of
the acquiror immediately after the transaction, (iii) except as a result of a
Public Offering, the sale or transfer of fifty percent (50%) or more of the
value or voting power of the issue and outstanding capital stock of the Company
by the holders thereof in a single transaction, a series of related
transactions, or a series of transactions occurring within a one (1) year
period, in which the Company and any corporation controlled by the Company, or
the shareholders of the Company immediately prior to such transaction do not
own at least fifty percent (50%) of the value or voting power of the issued and
outstanding equity securities of the acquiror immediately after the
transaction, (iv) the dissolution or liquidation of the Company, (v) the
acquisition by any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"))(a "Person") of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of voting securities of the
Company where such acquisition causes such person to own 25% or more of the
combined voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that for purposes of this
subsection (v) the following shall not be deemed to result in a Change in
Control: (A) any acquisition directly from the Company, (B) any acquisition by
any employee benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company, (C) any acquisition by
merger, consolidation, share exchange, combination, reorganization, sale, or
transfer or like transaction not described in Paragraph (i) or (iii) above and
in which no Person (other than an employee benefit plan or related trust
sponsored or maintained by the Company, any corporation controlled by the
Company, or company resulting from such business combination) becomes the
beneficial owner of 25% or more of the combined voting power of the then
outstanding voting securities of such company as a result of the transaction,
or (D) the acquisition of beneficial ownership of voting securities of the
Company by a Person who beneficially owns 25% of the voting power of the
outstanding voting securities of the Company as of the date hereof; and
provided, further, that if any Person's beneficial ownership of the Outstanding
Company Voting Securities reaches or exceeds 25% as a result of a transaction
described in clause (A) above, and such Person subsequently acquires beneficial
ownership of additional voting securities of the Company other than as a result
of a transaction in clause (A) above, such subsequent acquisition shall be
treated as an acquisition that causes such Person to own 25% or more of the
Outstanding Company Voting Securities; or (vi) either individuals who as of the
date hereof or individuals who as of the date of consummation of the proposed
transactions contemplated by an Agreement and Plan of Merger by and among
InfoMed Holdings, Inc., InfoSub, Inc. and the Company (the "InfoMed Merger")
constitute the Board (the "Incumbent Board") cease for any reason to constitute
at least a majority of the Board; provided, however, that any individual
becoming a director subsequent to the date hereof whose election, or nomination
for election by the Company's shareholders, was approved by a vote of at least
two-thirds of the directors then comprising the Incumbent Board shall be
Page 3 of 12
<PAGE> 4
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board. Notwithstanding the foregoing, the consummation of the proposed
transactions contemplated by the InfoMed Merger shall not result in a Change in
Control for purposes of this Agreement.
(g) "Committee" means the Committee appointed by the
Company's Board of Directors to administer the Plan.
(h) "Competing Business" means any person, firm,
corporation, joint venture or other business entity which is engaged in the
Business of the Company within the Area.
(i) "Confidential Information" means data and information
relating to the business of the Company (which does not rise to the status of a
Trade Secret) which is or has been disclosed to Optionee or of which Optionee
became aware as a consequence of or through its relationship to the Company and
which has value to the Company and is not generally known to its competitors.
Confidential Information shall not include any data or information that has
been voluntarily disclosed to the public by the Company (except where such
public disclosure has been made by Optionee without authorization) or that has
been independently developed and disclosed by others, or that otherwise enters
the public domain through lawful means. The provisions in this Agreement
restricting the use of Confidential Information shall survive for a period of
two (2) years following termination of this Agreement.
(j) "Disability" means a disability of Optionee within the
meaning of section 72(m)(7) of the Internal Revenue Code; that is, Optionee is
unable to engage in any substantial gainful activity with the Company or any
other employer, by reason of any medically determinable physical or mental
impairment which can be expected to result in death or to be of long continued
and indefinite duration. If Optionee claims to have a Disability, he shall
submit to the Committee a written request for Disability status together with
medical evidence from a licensed physician identifying the existence of a
Disability within the meaning of this definition. The Committee may then elect
to have Optionee submit to an examination by a licensed physician selected by
the Committee. The determination as to whether Optionee is subject to a
Disability shall be made at the sole discretion of the Committee based on
medical evidence submitted by either or both of the physicians.
(k) "Employee" means any person who is employed by the
Company or an Affiliate for purposes of the Federal Insurance Contributions
Act.
(l) "Fair Market Value" refers to the adequacy of the
consideration for which Common Stock may be acquired or sold and means, as
applicable:
Page 4 of 12
<PAGE> 5
(1) The closing price of the Common Stock on the
principal securities exchange on which it is traded on the day immediately
preceding the date as of which Fair Market Value is being determined or, if no
Common Stock was traded on the immediately preceding day, on the next preceding
trading date.
(2) If Common Stock is not traded on a securities
exchange, but is reported by the National Association of Securities Dealers,
Inc. Automated Quotation System and market information is published on a
regular basis in The New York Times or in The Wall Street Journal, the average
of the published high and low sales price or the published daily bid and asked
prices, as so published, on the day immediately preceding the date as of which
Fair Market Value is being determined or on the next preceding date on which
such prices were published.
(3) If such market information is not published
on a regular basis, the average of the high bid and low asked prices of Common
Stock in the over-the-counter market on the date immediately preceding the date
as of which Fair Market Value is being determined or on the next preceding date
on which such high bid and low asked prices were recorded, as reported by the
National Association of Securities Dealers Automated Quotation System, or, if
not so reported, by a generally accepted reporting service.
(4) If Common Stock is not publicly traded, Fair
Market Value shall be the value determined in good faith by the Committee with
due consideration begin given to: (a) the most recent independent appraisal of
the Company, if such appraisal is not more than twelve (12) months old; and (b)
the valuation methodology used in any such appraisal.
(m) "Good Reason" means, in connection with a termination
by Optionee of his employment with the Company or an Affiliate, such
termination for good reason within the meaning of the employment agreement of
the Optionee, if any. If the Optionee does not have an employment agreement,
"Good Reason" means, in connection with a termination by Optionee of his
employment with the Company or an Affiliate, a termination due to any of the
following reasons: (1) the nature of the Optionee's duties or the scope of his
responsibilities are materially modified without the Optionee's written
consent, or (2) the Company or an Affiliate changes the location of Optionee's
place of employment to more than 30 miles from its present location.
(n) "Public Offering" means the offering for sale by the
Company of equity securities pursuant to a registration statement filed in
accordance with the Securities Act of 1933, as amended, or any comparable law
then in effect, and the effective date of any such Public Offering shall be the
first day on which the securities covered thereby may lawfully be offered and
sold pursuant to such registration statement.
(o) "Trade Secrets" means information including, but not
limited to, technical or nontechnical data, formulas, patterns, compilations,
programs, devices, methods, techniques, drawings, processes, financial data,
financial plans, product plans or lists of actual or potential customers or
suppliers which (1) derives economic value, actual or potential, from not being
generally known to, and not being readily ascertainable by proper means by,
other persons who can obtain
Page 5 of 12
<PAGE> 6
economic value from its disclosure or use; and (2) is the subject of efforts
that are reasonable under the circumstances to maintain its secrecy. The
provisions in this Agreement restricting the use of Trade Secrets shall survive
termination of this Agreement for so long as is permitted by the Georgia Trade
Secrets Act of 1990, O.C.G.A. Section Section 10-1-760-10-1-767.
2. Term and Exercise of Option
(a) Except as otherwise provided in this Agreement,
Optionee shall have the right to exercise the Option from time to time during
the Exercise Period with respect to the percentage of the vested Option Shares
as set forth on the Vesting Schedule.
(b) As a condition to exercising this Option, Optionee
must deliver to the President of the Company on any business day (A) written
notice, signed by the person exercising the Option, specifying the number of
Option Shares being exercised and, if required, making the representations and
covenants in substantially the same form as provided in the Notice of Exercise,
attached as Exhibit B hereto; and (B) payment in cash of the Purchase Price
(defined in Section 3) or in shares of Common Stock that have been held by the
Optionee for at least six (6) months.
Upon receipt of such notice and payment in full of the Purchase Price,
the Company shall cause to be issued a certificate representing the shares of
Common Stock purchased.
(c) Except as otherwise provided in this Agreement, the
Option shall terminate on the occurrence of the earliest of the following
events: (1) the expiration of the Exercise Period; (2) the Committee exercises
its right pursuant to Section 14 to terminate the Option; (3) the Optionee
ceases to be an Employee where such termination is by the Company or an
Affiliate with Cause; (4) the expiration of one (1) year after Optionee ceases
to be an Employee if such termination is due to Disability or death; or (5) the
provisions of Sections 10, 11, or 12 hereof apply.
3. Purchase Price. Optionee must pay to the Company the Exercise
Price in cash or in shares of Common Stock which have been held by Optionee for
at least six (6) months (subject to adjustment pursuant to Section 14)
multiplied by the number of the Option Shares being acquired through the
exercise of this Option (the "Purchase Price"). Shares of Common Stock
tendered by the Optionee in satisfaction of the Purchase Price shall be
credited at their then Fair Market Value.
4. Non-Transferability of Option. Except for any transfer of the
Option by bequest or inheritance, the Optionee shall not have the right to make
or permit to exist any transfer or hypothecation, whether outright or as
security, with or without consideration, voluntary or involuntary, of all or
any part of any right, title or interest in the Option. Any such disposition
not made in accordance with this Agreement shall be deemed null and void. The
Option shall be exercisable during the lifetime of Optionee only by Optionee,
and after his death by a legatee or legatees under Optionee's last will and
testament or by his personal representative or representatives, who shall be
bound by the same terms of this Agreement as apply to the Optionee.
5. Restrictions on Transfer of Option Shares. Except as provided
in this Agreement or for any transfer of Option Shares by gift, bequest, or
inheritance to the Optionee's or a subsequent shareholder's family member,
estate, trust, heirs, or legatees or for any transfer on or after the effective
date of a Public Offering, the Optionee shall not have the right to make or
permit to exist any transfer or hypothecation, whether outright or as security,
with or without consideration, voluntary or involuntary, of all or any part of
any right, title or interest in or to any Option Shares. Any such disposition
not made in accordance with this Agreement shall be deemed null and void. Any
permitted transferee under this Section shall be bound by the same terms of
this Agreement as apply to the Optionee.
Page 6 of 12
<PAGE> 7
6. No Rights as Shareholder. Optionee, or his permitted
transferee under Section 4, shall have no rights as a stockholder with respect
to any Option Shares until the issuance of a stock certificate to him for such
shares. No adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property) or distributions or other rights
on or with respect to Option Shares purchased pursuant to this Option for which
the record date is prior to the date of exercise hereof, except as provided in
Section 14 below.
7. Repurchase Rights.
(a) If Optionee ceases to be an Employee for any reason,
the Company or its designee (the "Purchaser") shall have the right (1) prior to
the effective date of a Public Offering of securities of the same class as the
Option Shares, or (2) until ninety days after the close of the Applicable
Period if Optionee has entered into any activity described in Section 10 or 11
during the Applicable Period or Section 12 during the applicable restrictive
period to repurchase from the Optionee all Option Shares. For this purpose, a
notice of exercise given by the Purchaser to the Optionee pursuant to this
Section 7 shall be effective to perfect the Purchaser's right of repurchase,
subject to the remaining provisions of this Section 7.
(b) (1) The Purchaser, upon exercising this right of
repurchase, shall give written notice to the Optionee of the number of Option
Shares to be repurchased, of the repurchase price, which shall be determined
pursuant to Section 7(c) hereof, and of the time and date of the closing of the
repurchase of the Option Shares, which shall be no later than sixty (60) days
from the date of the notice and shall be held at the principal office of the
Purchaser. At closing, the Purchaser shall deliver the repurchase price and
the Optionee shall deliver the Option Shares to be repurchased duly endorsed
for transfer and with all required revenue stamps attached, and the title to
the Option Shares shall be transferred to the Purchaser free and clear of all
liens, claims, and encumbrances, however described, except for restrictions
imposed by applicable securities laws.
(2) The price for Option Shares repurchased by
the Purchaser shall be payable at the election of the Purchaser as follows:
(A) All in cash at the closing, or
(B) If the purchase price equals or
exceeds $10,000, the Purchaser may pay the purchase price in substantially
equal installments over a period designated by the Purchaser, which shall not
be greater than five years from the date of purchase. Interest on the unpaid
balance shall be at the applicable federal rate (as defined in Section 1274(d)
of the Internal Revenue Code of 1986, as amended), in effect on the first
business day preceding the date of repurchase. If the Purchaser elects to pay
the purchase price in installments, the Purchaser shall have the right to
prepay all or any portion of the purchase price at any time during the
installment period.
(c) The repurchase price for each Option Share shall be an
amount equal to (1) for repurchases pursuant to Section 7(a)(1), the Fair
Market Value as of the date of the repurchase or (2) for repurchases pursuant
to Section 7(a)(2), the lower of the Exercise Price paid by the Optionee or
Page 7 of 12
<PAGE> 8
the Fair Market Value as of the date of repurchase. Notwithstanding the
foregoing, if the Purchaser exercises repurchase rights under Section 7(a)(2),
and prior to ninety days after the close of the Applicable Period, the Company
becomes aware, and notifies the Optionee, that the Optionee has entered into
any activity described in Section 10 or 11 during the Applicable Period or
Section 12 during the applicable restricted period, the Optionee shall be
liable to the Purchaser for the excess of the amount he received upon
repurchase over the aggregate Exercise Price paid by the Optionee for such
Option Shares. If, as of such date, the Optionee is receiving installment
payments pursuant to section 7(b)(2)(B), the subsequent installments shall be
reduced or cancelled to reflect the purchase price adjustment provided for
herein.
8. Right of First Refusal.
(a) If, prior to the effective date of a Public Offering
of securities of the same class of the Option Shares, the Optionee (or, if the
Option Shares are owned or held by a transferee, such transferee) shall receive
a bona fide offer from a third party to purchase any Option Shares acquired
upon exercise of the Option, which offer the Optionee or such transferee
intends to accept, the Optionee or such transferee, as the case may be, before
consummating the sale to such third party, shall notify the Company in writing
of such offer, which notice shall state the number of Option Shares subject to
such offer and the price and terms of payment offered by such third party. The
provisions of Section 7 shall apply and not this Section, unless Optionee gives
the written notice required under this Section prior to the date the Purchaser
gives the notice required in Section 7(a). The Purchaser (as defined in
Section 7) shall have thirty (30) days after receipt by the Company of such
notice within which to notify the Optionee or such transferee, as the case may
be, in writing, of its election to purchase all the Option Shares which are the
subject of such third party offer at the same price and upon the same terms and
conditions as are contained in such third party offer. Failure by the
Purchaser to give such written notice within such thirty (30) day period shall
constitute a rejection of such offer by the Purchaser. If the Purchaser shall
reject such offer or fail timely to accept such offer, or if after timely
accepting such offer the Purchaser shall fail timely to consummate the purchase
of the Option Shares which are the subject of that offer, then the Optionee or
such transferee, as the case may be, shall be free to sell the Option Shares
which are the subject of such third party offer to the third party at the price
and upon the same terms and conditions as are set forth in the third party
offer; provided, however, if the Optionee or such transferee, as the case may
be, does not consummate such sale to the third party within sixty (60) days
after rejection by the Purchaser of such offer or, if such offer is timely
accepted by the Purchaser, after failure of the Purchaser timely to consummate
such purchase, the Option Shares which were the subject of such third party
offer or agreement shall once again become subject to the provisions of this
Section 8, and any subsequent disposition of such Option Shares shall be made
only after compliance with the terms of this Section 8. If the Purchaser
timely accepts such offer, the Company or its designee shall give written
notice to the Optionee of the time and date of the closing of the repurchase,
which shall be no later than thirty (30) days following the date the Purchaser
gives written notice of its acceptance of such offer and shall be held at the
principal office of the Company. At closing, the Purchaser shall deliver the
sale price, and the Optionee shall deliver the Option Shares to be repurchased
duly endorsed for transfer and with all required revenue stamps attached, and
the title to the Option Shares shall be transferred to the Purchaser free and
clear
Page 8 of 12
<PAGE> 9
of all liens, claims and encumbrances, however described, except for
restrictions imposed by applicable securities laws.
Notwithstanding the foregoing, if the Purchaser exercises its
right of first refusal under this section, and prior to ninety days after the
close of the Applicable Period, the Company becomes aware, and notifies the
Optionee, that the Optionee has entered into any activity described in Section
10 or 11 during the Applicable Period or Section 12 during the applicable
restricted period, the Optionee shall be liable to the Company for the excess
of the amount he received upon repurchase over the exercise price paid by the
Optionee for such Option Shares. If, as of such date, the Optionee has not
received the cash purchase price or is receiving installment payments, the cash
purchase price or subsequent installments, as applicable, shall be reduced or
cancelled to reflect the purchase price adjustment provided for herein.
(b) The price for Option Shares repurchased shall be
payable at the election of the Company or its designee as follows:
(1) Upon the terms of payment as are
contained in the third party offer, or,
(2) All in cash at the closing.
9. Put Rights.
(a) If, within six months before or two years after a
Change in Control, Optionee ceases to be an Employee due to a termination by
the Company without Cause or due to a termination by Employee for Good Reason,
the Employee or his representative shall have the right to require the Company,
within sixty (60) days following termination of employment and prior to the
effective date of a Public Offering of securities of the same class as the
Option Shares, to require the Company to purchase all of Optionee's Option
Shares. For this purpose, a notice of exercise given by the Employee to the
Company pursuant to this Section 9 shall be effective to perfect Optionee's
right to sell, subject to the remaining provisions of this Section 9.
(b)(1) The Optionee, upon exercising this right to sell,
shall give written notice to the Company of the number of Option Shares to be
sold, and the Company shall thereupon give the Optionee notice of the time and
date of closing of the repurchase of the Option Shares, which shall be no later
than sixty (60) days from the date of the Optionee's notice and shall be held
at the principal office of the Company. At closing, the Company shall deliver
the sale price, and the Optionee shall deliver the Option Shares to be
repurchased duly endorsed for transfer and with all required revenue stamps
attached, and the title to the Option Shares shall be transferred to the
Company free and clear of all liens, claims and encumbrances, however
described, except for restrictions imposed by applicable securities laws.
(2) The price for Option Shares purchased by the Company
shall be payable all in cash at the closing.
Page 9 of 12
<PAGE> 10
(c) The repurchase price for each Option Share shall be an
amount equal to the Fair Market Value as of the date of the repurchase.
10. Forfeiture if Compete.
(a) The Option shall immediately terminate if Optionee,
commencing on the Date of Grant and continuing through the Applicable Period
(except on behalf of or with the prior written consent of the Company), within
the Area, either directly or indirectly, on Optionee's own behalf, or in the
service of or on behalf of others, engages in or provides managerial,
supervisory, buying, sales, marketing, financial, administrative or consulting
services or assistance to, or owns (other than ownership of less than five
percent of the outstanding voting securities of an entity whose voting
securities are traded on a national securities exchange or quoted on the
National Association of Securities Dealers, Inc. Automated Quotation System) a
beneficial interest in any Competing Business. For purposes of this Section
10, Optionee acknowledges and agrees that the Business of the Company is
conducted in the Area.
(b) The Option shall immediately terminate if Optionee,
commencing on the Date of Grant continuing through the Applicable Period
(except on behalf of or with the prior written consent of the Company), either
directly or indirectly, on the Optionee's own behalf or in the service of or on
behalf of others, solicits or diverts, or attempts to solicit or divert, for
the purpose of providing services related to the Business of the Company, any
individual or entity which was an actual or actively sought prospective client
or customer of the Company with whom the Optionee had direct or indirect
contact during the period commencing on the Date of Grant and continuing
through the Applicable Period. For purposes of this Section 10(b), the
Optionee acknowledges and agrees that he/she is engaged in performing services
related to actual and actively sought prospective clients or customers.
11. Forfeiture if Solicit Employees. The Option shall immediately
terminate if Optionee, commencing on the Date of Grant and continuing through
the Applicable Period (except on behalf of or with the prior written consent of
the Company), either directly or indirectly, on Optionee's own behalf or in the
service of or on behalf of others, solicits, diverts or hires, or attempts to
solicit, divert or hire, any person employed by the Company or an Affiliate,
whether or not such employee is a full-time employee or a temporary employee of
the Company or an Affiliate and whether or not such employment is pursuant to
written agreement and whether or not such employment is for a determined period
or is at will.
12. Forfeiture if Disclose Proprietary Information. The Option
shall immediately terminate if (except on behalf of or with the prior written
consent of the Company), except to the extent necessary to perform the duties
assigned to him by the Company or an Affiliate, Optionee uses, reproduces,
distributes, discloses or otherwise disseminates the Confidential Information
and Trade Secrets during the applicable restrictive period or any physical
embodiments thereof or takes any action causing or fails to take the action
necessary in order to prevent, any Confidential Information and Trade Secrets
disclosed to or developed by Optionee to lose its character or cease to qualify
as Confidential Information or Trade Secrets during the applicable restrictive
period.
Page 10 of 12
<PAGE> 11
13. Attorney-in-Fact. If the Optionee fails to deliver the Option
Share certificates properly assigned when requested or required to do so
pursuant to this Agreement, the Company shall cancel the Option Share
certificates of the Optionee and shall deposit any payment required pursuant to
this Agreement which was to be made to the Employee in exchange for the
certificates to the credit or account of the Optionee in escrow with any
clearinghouse bank in the City of Atlanta, Georgia, at the expense and risk of
the Optionee, or his successors or assigns, whereupon the Company shall treat
the Option Shares represented thereby as having been repurchased by the Company
or its designees. Optionee irrevocably appoints the Chief Financial Officer of
the Company as his true and lawful attorney-in-fact with full power of and
authority to execute any stock power or other instrument necessary to transfer
the Option Shares to the Company pursuant to this Agreement, in the name, place
and stead of the Optionee.
14. Change in Capitalization. The total number of Option Shares
to be received upon exercise of the Option (both as to the number of Option
Shares and the Purchase Price) shall be appropriately adjusted for any change
in par value, split-up, stock split, reverse stock split, reclassification,
merger, consolidation, distribution of stock dividends or similar capital
adjustments, to the end that the Optionee's proportionate interest in value
shall be maintained as before the occurrence of the event. The adjustment
shall be made without change in the total price applicable to the unexercised
portion of the Option and with a corresponding adjustment in the Exercise
Price.
The foregoing adjustments and the manner of application of the
foregoing provisions shall be determined by the Committee in its sole
discretion. Any adjustment may provide for the elimination of any fractional
Option Shares.
Notwithstanding any other provision of this Agreement, the Committee
reserves the right in the event of a sale of substantially all of the Common
Stock or property of the Company or the merger or consolidation of the Company,
or a dissolution or liquidation of the Company, to terminate the Option in
consideration of the payment to the Optionee of the difference between (a) and
(b) where (a) equals the Fair Market Value of the unexercised Option Shares
(whether vested or not) and (b) equals the Purchase Price of such unexercised
Option Shares.
15. Shareholders' Agreement. If, at the date of grant of the
Option, there is an effective agreement among the shareholders of the Company,
the Optionee shall, if requested by the Company, execute any such shareholders'
agreement as a condition of receiving any certificates for the Option Shares.
16. Governing Laws. This Agreement shall be construed,
administered and enforced according to the laws of the State of Georgia;
provided, however, the Option may not be exercised except, in the reasonable
judgment of the Board of Directors, in compliance with exemptions under
applicable state securities laws of the state in which Optionee resides, and/or
any other applicable securities laws.
17. Successors. This Agreement shall inure to the benefit of the
heirs, legal representatives, successors and permitted assigns of the Company
and Optionee.
Page 11 of 12
<PAGE> 12
18. Notice. Any notice which either party hereto may be required
or permitted to give to the other shall be in writing, and may be delivered
personally or by mail, postage prepaid, addressed as follows: to the President
of the Company, or to the Company (attention of the President), at 6650 Powers
Ferry Road, Suite 200, Atlanta, Georgia 30339, or at any other address as the
Company, by notice to Optionee, may designate in writing from time to time; to
Optionee, at Optionee's address as shown on the records of the Company, or at
any other address as Optionee, by notice to the Company, may designate in
writing from time to time.
19. Severability. In the event that any one or more of the
provisions or portion thereof contained in this Agreement shall for any reason
be held to be invalid, illegal or unenforceable in any respect, the same shall
not invalidate or otherwise affect any other provisions of this Agreement, and
this Agreement shall be construed as if the invalid, illegal or unenforceable
provision or portion thereof had never been contained herein.
20. Entire Agreement. Subject to the terms and conditions of the
Simione Central Holding, Inc. 1996 Stock Incentive Plan, which is incorporated
herein by reference, this Agreement expresses the entire understanding and
agreement of the parties hereto with respect to such terms, restrictions and
limitations.
21. Headings. Section headings used herein are for convenience of
reference only and shall not be considered in construing this Agreement.
22. Specific Performance. In the event of any actual or
threatened default in, or breach of, any of the terms, conditions and
provisions of this Agreement, the party or parties who are thereby aggrieved
shall have the right to specific performance and injunction in addition to any
and all other rights and remedies at law or in equity, and all such rights and
remedies shall be cumulative.
23. Resolution of Disputes. Any determination or interpretation
by the Committee shall be final, binding and conclusive on all persons affected
thereby.
24. Compliance with Securities Laws. Notwithstanding anything
contained herein to the contrary, no purported exercise of the Option shall be
effective without the written approval of the Company, which may be withheld to
the extent that its exercise, either individually or in the aggregate, together
with the exercise of other previously exercised stock options and/or offers and
sales pursuant to any prior or contemplated offering of securities, would, in
the sole and absolute judgment of the Company, require the filing of a
registration statement with the United States Securities and Exchange
Commission, or with the securities commission of any state. The Company shall
avail itself of any exemptions from registration contained in applicable
federal and state securities laws which, in its sole and absolute discretion,
it deems reasonable and not unduly burdensome or costly. The Optionee shall
deliver to the Company, prior to the exercise of the Option, such information,
representations and warranties as the Company may request in order for the
Company to be able to satisfy itself that the Common Stock to be acquired
pursuant to the exercise of the Option is being acquired in accordance with the
terms of an applicable exemption from the securities registration requirements
of applicable federal and state securities laws.
* * * * * * * *
Page 12 of 12
<PAGE> 13
EXHIBIT A
[FOR PURPOSES OF DEFINITION OF "AREA," EACH LOCATION WHERE OPTIONEE WORKED]
EXHIBIT A to Incentive Stock Option Agreement
<PAGE> 14
EXHIBIT B
NOTICE OF EXERCISE OF
STOCK OPTION TO PURCHASE
COMMON STOCK OF
SIMIONE CENTRAL HOLDING, INC.
Name
------------------------------------
Address
---------------------------------
----------------------------------------
Date
------------------------------------
Simione Central Holding, Inc.
Attention: President
Suite 200
6650 Powers Ferry Road
Atlanta, Georgia 30339
Re: Exercise of Incentive Stock Option
Gentlemen:
Subject to acceptance hereof in writing by Simione Central Holding,
Inc. (the "Company") pursuant to the provisions of the Simione Central Holding,
Inc. 1996 Stock Incentive Plan (the "Plan"), I hereby give at least ten (10)
days but not more than thirty (30) days prior notice of my election to exercise
options granted to me to purchase ______________ shares of Common Stock of the
Company under the Simione Central Holding, Inc. 1996 Nonqualified Stock Option
Agreement granted on ____________________ (the "Agreement"). The purchase
shall take place as of __________, 19__ (the "Exercise Date").
On or before the Exercise Date, I will pay the applicable purchase
price as follows:
[ ] by delivery of a certified check for $____________ for the full
purchase price payable to the order of Simione Central Holding,
Inc.
[ ] by delivery of a certified check for $________ representing a
portion of the purchase price to the order of Simione Central
Holding, Inc. with the balance to consist of shares of Common
Stock that I have owned for at least six (6) months and that are
represented by a stock certificate I will surrender to the
Company with my endorsement. If the number of shares of Common
Stock represented by such stock certificate exceeds the number
to be applied against the purchase price, I understand that a
new stock certificate will be issued to me reflecting the excess
number of shares.
EXHIBIT B to Nonqualified Stock Option Agreement Page 1 of 3
<PAGE> 15
[ ] by delivery of a stock certificate representing shares of Common
Stock that I have owned for at least six (6) months which I will
surrender to the Company with my endorsement as payment of the
purchase price. If the number of shares of Common Stock
represented by such certificate exceeds the number to be applied
against the purchase price, I understand that a new certificate
will be issued to me reflecting the excess number of shares.
Covenants and Representations of Optionee. Optionee represents,
warrants, covenants, and agrees with the Company as follows as of the date of
exercising the Option:
A. The Option is being received for Optionee's own
account without the participation of any other person, with the intent of
holding the Option and the Option Shares issuable pursuant thereto for
investment and without the intent of participating, directly or indirectly, in
a distribution of the Option Shares and not with a view to, or for resale in
connection with, any distribution of the Option Shares or any portion thereof;
B. Optionee is not acquiring the Option based upon any
representation, oral or written, by any person with respect to the future value
of, or income from, the Option Shares subject to this Option, but rather upon
an independent examination and judgment as to the prospects of the Company;
C. Optionee has received a copy of the Plan, is familiar
with the business and affairs of the Company, and realizes that the receipt of
the Option Shares is a speculative investment and that any possible profit
therefrom is uncertain;
D. Optionee has had the opportunity to ask questions of
and receive answers from the Company and any person acting on its behalf and to
obtain all information available with respect to the Plan, the Company and its
affairs, and has received all information and data with respect to the Plan and
the Company that he has requested and which he has deemed relevant in
connection with his receipt of the Option and the Option Shares subject
thereto;
E. Optionee is able to bear the economic risk of the
investment, including the risk of a complete loss of his investment, and
Optionee acknowledges that he must continue to bear the economic risk of the
investment in the Option Shares received upon Option exercise for an indefinite
period;
F. Optionee understands and agrees that the Option Shares
subject to the Option may be issued and sold to Optionee without registration
under any state or federal law relating to the registration of securities for
sale, and in that event will be issued and sold in reliance on exemptions from
registration under appropriate state and federal laws;
G. The Option Shares issued to Optionee upon exercise of
the Option will not, subject to any other applicable restrictions set forth in
the Plan or the Agreement, be offered for sale, sold or transferred by Optionee
other than pursuant to:
(1) an effective registration under applicable
state securities laws or in a transaction which is otherwise in compliance with
those laws;
EXHIBIT B to Nonqualified Stock Option Agreement Page 2 of 3
<PAGE> 16
(2) an effective registration under the
Securities Act of 1933 (the "1933 Act"), or a transaction otherwise in
compliance with the 1933 Act; and
(3) evidence satisfactory to the Company of
compliance with the applicable securities laws.
The Company shall be entitled to rely upon an opinion of counsel satisfactory
to it with respect to compliance with the foregoing laws.
H. The Company will be under no obligation to register
the Option Shares issuable pursuant to the Option or to comply with any
exemption available for sale of the Option Shares by the Optionee without
registration, and the Company is under no obligation to act in any manner so as
to make Rule 144 promulgated under the 1933 Act available with respect to sale
of the Option Shares by the Optionee;
I. A legend indicating that the Option Shares issued
pursuant to the Option have not been registered under the applicable securities
laws and referring to any applicable restrictions on transferability and sale
of the Option Shares may be placed on the certificate or certificates delivered
to Optionee and any transfer agent of the Company may be instructed to require
compliance therewith;
As soon as the stock certificate is registered in my name, please
deliver it to me at the above address.
Very truly yours,
----------------------------------------
Legal Signature
AGREED TO AND ACCEPTED:
SIMIONE CENTRAL HOLDING, INC.
By:
--------------------------------
Title:
-----------------------------
Number of Shares Exercised:
--------
Number of Shares Remaining:
-------- Date:
----------------------
EXHIBIT B to Nonqualified Stock Option Agreement Page 3 of 3
<PAGE> 17
EXHIBIT C
NOTICE OF WITHHOLDING ELECTION
Name
--------------------------
Address
-----------------------
-------------------------------
Date
---------------------------
Social Security No.
------------
Simione Central Holding, Inc.
Attention: President
Suite 200
6650 Powers Ferry Road
Atlanta, Georgia 30339
This election relates to the Option defined in Paragraph 3 below. I
hereby certify that:
(1) My correct name and social security number and my current
address are set forth at the end of this document.
(2) I am (check one, whichever is applicable).
[ ] the original recipient of the Option.
[ ] the legal representative of the estate of the original
recipient of the Option.
[ ] a legatee of the original recipient of the Option.
[ ] the legal guardian of the original recipient of the Option.
(3) The Option pursuant to which this election is made is dated
_________________ and was issued under the Simione Central
Holding, Inc. 1996 Nonqualified Stock Option Agreement dated
the ____ day of _________, 19__ (the "Agreement") in the name
of ________________ for ________ Shares . This election
relates to _______________ Shares issuable upon whole or
partial exercise(s) of the Option (the "Option Shares");
provided that the numbers set forth above shall be deemed
changed as appropriate to reflect stock splits and other
adjustments contemplated by the applicable Agreement
provisions.
(4) In connection with any future exercise of the Option with
respect to the Option Shares, I hereby elect to have certain
of the Option Shares issuable pursuant to the exercise
withheld by the Company for the purpose of having the value of
the Option Shares applied to pay federal, state, and local, if
any, taxes arising from the exercise. The Option Shares to be
withheld shall have, as of the Tax Date applicable to the
exercise,
Page 1 of 2
EXHIBIT C to Nonqualified Stock Option Agreement
<PAGE> 18
a fair market value equal to the minimum statutory tax
withholding requirement under federal, state, and local law in
connection with the exercise.
(5) This Withholding Election is made prior to the Tax Date and is
otherwise made pursuant to Section 2 of the Agreement.
(6) I understand that this Withholding Election may not be
revised, amended or revoked by me but is subject to the
disapproval of the Committee.
(7) I further understand that, if this Withholding Election is not
disapproved by the Committee, the Company shall withhold from
the Option Shares a number of Option Shares having the value
specified in Paragraph 4 above.
(8) The Agreement has been made available to me by the Company, I
have read and understand the Agreements and I have no reason
to believe that any of the conditions therein to the making of
this Withholding Election have not been met. Capitalized terms
used in this Notice of Withholding Election without definition
shall have the meanings given to them in the Agreement.
Very truly yours,
-----------------
Legal Signature
AGREED TO AND ACCEPTED:
SIMIONE CENTRAL HOLDING, INC.
By:
----------------------------
Title:
-------------------------
Number of Shares Exercised:
---------------------
Number of Shares Remaining: Date:
---------------------- -------------
EXHIBIT C to Nonqualified Stock Option Agreement Page 2 of 2
<PAGE> 1
EXHIBIT 10.8
THE STOCK OPTION EVIDENCED BY THIS STOCK OPTION AGREEMENT, AND ANY SHARES
ACQUIRED UPON THE EXERCISE THEREOF, HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE,
IN RELIANCE ON CERTAIN EXEMPTIONS PROVIDED THEREUNDER.
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is made and entered into as
of October __, 1996 (the "Execution Date"), by and between INFOMED HOLDINGS,
INC., a Delaware corporation (the "Corporation"), and the person whose name
appears on the signature page hereof (the "Optionee").
W I T N E S S E T H:
WHEREAS, as of the original date of grant of the Option described herein,
the Optionee was an employee or director of the Corporation or one of its
subsidiaries; and
WHEREAS, on the date set forth opposite the name of the Optionee on the
signature page hereof (the "Effective Date"), the Optionee was granted stock
options by the Corporation, but such stock options were not previously evidenced
by any formal written agreement; and
WHEREAS, the Corporation and the Optionee desire to reflect the terms of
such stock options in this Agreement (it being agreed that the provisions of
this Agreement are not intended to constitute a modification of any material
economic terms of such stock options);
NOW, THEREFORE, in consideration of the premises and the mutual agreements
and covenants contained herein, and other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
1. GRANT OF OPTION. Subject to the terms and conditions of this Agreement,
the Corporation hereby grants, effective as of the Effective Date, to the
Optionee the right and option (the "Option") to purchase that number of shares
of the Corporation's $.001 par value common stock (the "Common Stock") set forth
in Schedule I to this Agreement (the "Option Shares").
2. EXERCISE PRICE. The purchase price (the "Exercise Price") for each
Option Share shall be the price per share set forth in Schedule I to this
Agreement, subject to adjustment from time to time as hereinafter provided.
3. EXERCISE OF OPTION.
(a) To the extent that the Option has become and remains exercisable it
may be exercised by the Optionee delivering to the Corporation a written notice
of exercise signed by the Optionee, in substantially the form attached hereto as
Exhibit A (a "Notice of Exercise"), together with a check payable to the
Corporation in the amount of the total Exercise Price for the Option Shares to
be purchased pursuant to the Notice of Exercise.
<PAGE> 2
(b) The Optionee may exercise the Option for less than the full number
of Option Shares with respect to which the Option is exercisable (the "Available
Option Shares"), but no fractional shares of Common Stock shall be issued.
Subject to the other restrictions on exercise set forth herein, the unexercised
portion of the exercisable Option may be exercised at a later date by the
Optionee.
(c) Within thirty (30) days after the exercise of the Option as herein
provided, the Corporation shall deliver to the Optionee a certificate or
certificates for the total Option Shares being purchased, in such names and
denominations as are requested by the Optionee.
(d) Neither the Option nor the Option Shares have been registered under
the Securities Act of 1933, as amended (the "Act"), or under the securities laws
of any state. Unless the issuance of shares of Common Stock are covered by an
effective registration statement at the time the Option is exercised, each
certificate representing Option Shares issued upon the exercise of the Option
shall bear the following legend:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE
TRANSFERRED UNTIL (i) A REGISTRATION STATEMENT UNDER THE ACT OR SUCH
APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD
THERETO, OR (ii) THE CORPORATION HAS RECEIVED AN OPINION OF COUNSEL
ACCEPTABLE TO THE CORPORATION THAT REGISTRATION UNDER THE ACT OR SUCH
APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH
PROPOSED SALE, PLEDGE OR TRANSFER.
The Optionee and the Corporation agree to execute such documents and instruments
as counsel for the Corporation reasonably deems necessary to ensure that the
granting of the Option and the issuance of any shares upon the exercise thereof
will be in compliance with applicable federal and state securities laws.
(e) The Corporation covenants and agrees that all Option Shares which
may be issued upon exercise of the Option shall, upon issuance and payment
therefor, be legally and validly issued and outstanding, fully paid and
nonassessable, and free from all liens, claims and encumbrances, except
restrictions imposed by applicable securities laws, the Corporation's Articles
of Incorporation and/or this Agreement. The Corporation shall at all times
reserve and keep available for issuance upon the exercise of the Option such
number of authorized but unissued shares of Common Stock as will be sufficient
to permit the exercise in full of the Option.
4. TERM OF OPTION.
(a) The term of the Option shall commence on the Effective Date set
forth in Schedule I to this Agreement, and shall continue in effect until the
first to occur of the following:
-2-
<PAGE> 3
(i) the date on which the Option has been fully exercised with respect to all of
the Option Shares; or (ii) the date specified as the expiration date of the
Option on Schedule I hereto (the "Expiration Date").
(b) In the event of the Optionee's death, the Option may be exercised
hereunder by the Optionee's personal representative, legatees or heirs at law,
as the case may be, and in the case of the Optionee's mental incompetence, by
his legal guardian, or if none has been appointed, by his duly authorized
attorney-in-fact.
5. NONTRANSFERABILITY. This Agreement, the Option and all rights hereunder
are nontransferable and nonassignable by the Optionee, other than by the last
will and testament of the Optionee or the laws of descent and distribution,
unless the Corporation consents thereto in writing. Any transfer or attempted
transfer except pursuant to the preceding sentence shall be null and void and of
no effect whatsoever.
6. ADJUSTMENTS.
(a) If, prior to the termination of the Option as provided in Section
4(a) hereof, the number of outstanding shares of Common Stock is increased by a
stock split, stock dividend, or other similar event, the Exercise Price in
effect immediately prior to such event shall be proportionately reduced, and
conversely, if the number of outstanding shares of Common Stock is decreased by
a combination or reclassification of shares, or other similar event, the
Exercise Price in effect immediately prior to such event shall be
proportionately increased. Upon each adjustment of the Exercise Price, the
Optionee shall thereafter be entitled to purchase, at the Exercise Price
resulting from such adjustment, the number of shares obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
shares purchasable pursuant hereto immediately prior to such adjustment and
dividing the product thereof by the Exercise Price resulting from such
adjustment, and rounding down to the nearest whole share.
(b) If, prior to the termination of the Option as provided in Section
4(a) hereof, the Corporation shall effect a merger, consolidation, exchange of
shares, recapitalization, reorganization or other similar event, or shall sell,
transfer or otherwise dispose of all or substantially all of its property,
assets or business, and, pursuant to the terms of such merger, consolidation,
exchange of shares, recapitalization, reorganization, or disposition of assets,
property or business, shares of Common Stock shall be changed into the same or a
different number of shares of the same or another class or classes of stock or
securities of the Corporation, successor or transferee or an affiliate thereof
or cash or other property or assets, then the Optionee shall thereafter have the
right to purchase and receive upon the basis and upon the terms and conditions
specified in this Agreement and in lieu of the Option Shares immediately
theretofore purchasable and receivable upon the exercise of the Option, such
shares of stock and/or securities, property or cash as may be issued or payable
with respect to or in exchange for the number of Option Shares immediately
theretofore purchasable and receivable upon the exercise of the Option had such
merger, consolidation, exchange of shares, recapitalization or reorganization
not taken place, and, in any such case, appropriate provisions shall be made
with respect to the rights and interests of the Optionee to the end that the
provisions hereof (including,
-3-
<PAGE> 4
without limitation, provisions for adjustment of the Exercise Price and of the
number of shares purchasable upon the exercise of the Option) shall thereafter
be applicable, as nearly as may be practicable in relation to any shares of
stock or securities, property or cash thereafter deliverable upon the exercise
hereof. The provisions of this paragraph shall similarly apply to successive
reorganizations, mergers, consolidations or dispositions of assets. Upon any
reorganization, consolidation, merger or transfer hereinabove referred to, this
Agreement and the Option shall continue in full force and effect and the terms
hereof shall be applicable to the shares of stock and other securities,
property, assets and cash receivable upon the exercise of the Option after the
consummation of such merger, consolidation, exchange of shares,
recapitalization, reorganization or transfer, as the case may be. The
Corporation shall not effect any such merger, consolidation, exchange of shares,
recapitalization, reorganization or transfer unless, prior to the consummation
thereof, the successor corporation (if other than the Corporation) resulting
therefrom or the corporation purchasing such assets shall, by written instrument
executed and mailed to the registered holder hereof at the last address of such
holder appearing on the books of the Company, (i) assume the obligation to
deliver to such holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such holder may be entitled to
purchase, and (ii) agree to be bound by all the terms of this Agreement.
7. INVESTMENT REPRESENTATION. Unless the issuance of shares of Common Stock
are covered by an effective registration statement at the time the Option is
exercised, as a condition to the issuance of Option Shares hereunder, the
Optionee shall represent to the Corporation that the Option Shares acquired
pursuant to such exercise are being purchased for his or her own account for
investment purposes only and not with a present view to resale or a distribution
thereof, unless the Corporation receives an opinion of counsel acceptable to the
Corporation that such a representation is not required under the Act or any
state securities laws. The Optionee acknowledges that he or she has no right to
require the Corporation or any other person or entity to (a) register under the
Act or any state securities law any shares of Common Stock issued upon exercise
of the Option, or (b) satisfy the conditions of Rule 144 of the Securities and
Exchange Commission or any other rule or provision with respect to the public
sale of such Common Stock.
8. NO EMPLOYMENT RIGHT. Neither this Agreement nor the Option shall give
rise to any entitlement to the Optionee to continue to be employed or to serve
as a director or be compensated for any services by the Corporation or any of
its subsidiaries.
9. NO RIGHTS AS A SHAREHOLDER. The Optionee shall not have any interest in
or shareholder rights with respect to any shares of Common Stock (or other
securities) which are (or may become) subject to the Option until such shares
(or other securities) have been issued and delivered to the Optionee in
accordance with this Agreement.
10. TAXES. As a condition to the issuance of Option Shares hereunder, the
Corporation may withhold, or require the Optionee to pay or reimburse the
Corporation for, any taxes which the Corporation determines are required to be
withheld under federal, state or local law in connection with the exercise of
the Option.
-4-
<PAGE> 5
11. HEIRS AND SUCCESSORS. This Agreement and all terms and conditions
hereof shall be binding upon the Corporation and its successors and assigns, and
upon the Optionee and his heirs, legatees and legal representatives.
12. GOVERNING LAW. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of Delaware.
13. NOTICES. All notices, requests and other communications required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given and received when delivered in person, when delivered by overnight
delivery service, or three (3) business days after being mailed by registered or
certified mail, postage prepaid, return receipt requested, to the following
addresses (or to such other address as one party may from time to time designate
in writing to the other party hereto):
If to the Corporation: InfoMed Holdings, Inc.
6650 Powers Ferry Road
Atlanta, Georgia 30339
Attn: General Counsel
If to the Optionee: At the address set forth in Schedule I
to this Agreement
14. SEVERABILITY. The provisions of this Agreement, and of each separate
section and subsection, are severable, and if any one or more provisions may be
determined to be illegal or otherwise enforceable, in whole or in part, the
remaining provisions, and any unenforceable provisions to the extent
enforceable, shall nevertheless be binding and enforceable.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first set forth above.
INFOMED HOLDINGS, INC.
By:
-----------------------------
Chief Executive Officer
OPTIONEE:
---------------------------------
Name:
----------------------------
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<PAGE> 6
EXHIBIT A
[DATE]
InfoMed, Inc.
-------------------------
-------------------------
Attention: President
Re: Exercise of Stock Option
Dear Sir:
The undersigned, __________________, pursuant to that certain Stock
Option Agreement dated as of __________, 199_, by and between InfoMed, Inc.
and the undersigned (the "Agreement"), hereby exercises the Option granted
under the Agreement for the following number of Option Shares, subject to
the terms and conditions of the Agreement:
Number of Option Shares Being Purchased:
-----------
Total Purchase Price and Amount Remitted:
----------
Very truly yours,
----------------------
[Name]
<PAGE> 7
EXHIBIT A
SCHEDULE I
Name of Optionee:
------------------------------
Number of Option Shares:
------------------------------
Exercise Price (as of Effective Date):
------------------------------
Effective Date of Option:
------------------------------
Expiration Date of Option:
------------------------------
I-1
<PAGE> 1
EXHIBIT 10.10
INFOMED HOLDINGS, INC.
PROFIT SHARING PLAN
Amended Effective
November 1, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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Section 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 "Account" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 "Affiliate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 "Annual Compensation" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 "Beneficiary" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.5 "Break in Service" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.6 "Code" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.7 "Company Stock" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.8 "Disability" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.9 "Employee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.10 "Employer" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.11 "ERISA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.12 "Escrowed Funds" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.13 "ESOP" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.14 "Fair Market Value" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.15 "Fiduciary" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.16 "Hour of Service" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.17 "Investment Committee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.18 "Investment Manager" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.19 "Member" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.20 "Named Fiduciary" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.21 "Normal Retirement Age" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.22 "Plan Administrator" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.23 "Plan Year" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.24 "Publicly Traded" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.25 "Put and First Refusal Rights" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.26 "Qualified Annuity Payment" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.27 "Retirement Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.28 "Trust" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.29 "Trustee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.30 "Valuation Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.31 "Vesting Service" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2. ELIGIBILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.1 Former Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.2 Former Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.3 New Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.4 Limitation of Rights of Membership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.5 Frozen Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
</TABLE>
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<TABLE>
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Section 3. CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.1 Employer Discretionary Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.2 Member Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4. ALLOCATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.1 Allocations of Employer Contributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.2 Allocations of Income or Loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5. DEATH BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.1 Death Before Termination of Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.2 Death After Termination of Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.3 Death of Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.4 Terms of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 6. PAYMENT OF BENEFITS ON RETIREMENT OR DEATH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.2 Distribution Forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.3 Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.4 Qualified Annuity Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.5 Death Before Annuity Payments Commence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.6 Consent to Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.7 Minimum Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.8 Direct Rollover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 7. PAYMENT OF BENEFITS ON TERMINATION OF EMPLOYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.1 Transfer Not Termination of Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.2 Termination Prior to Death or Retirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.3 Vested Portion of Member Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.4 Distribution Rules and Consent to Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.5 Forfeiture and Restoration of Nonvested Amounts. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.6 Rights Upon Change in Vesting Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 8. CONDITIONS OF DISTRIBUTION OF COMPANY STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.1 Stock Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.2 Member Compliance With Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.3 Put and First Refusal Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 9. ADMINISTRATION OF THE PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9.1 Trust Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9.2 Operation of the Plan Administrator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9.3 Fiduciary Responsibilities and Allocation of Duties. . . . . . . . . . . . . . . . . . . . . . . . . 20
9.4 Duties of the Plan Administrator. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.5 Investment Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.6 Investment Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.7 Action by the Company or an Employer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>
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<TABLE>
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9.8 Voting and Decisions Regarding Company Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 10. CLAIM REVIEW PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 11. LIMITATION OF ASSIGNMENT, PAYMENTS TO LEGALLY INCOMPETENT DISTRIBUTEE AND UNCLAIMED PAYMENTS . . . . 24
11.1 Anti-Alienation Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11.2 Payments to Legal Guardians . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11.3 Lost Members and Beneficiaries 25
Section 12. AMENDMENT TO OR TERMINATION OF THE PLAN AND THE TRUST . . . . . . . . . . . . . . . . . . . . . . . 25
12.1 Amendment and Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
12.2 Termination of Adoption by an Employer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
12.3 Effect of Plan Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
12.4 Qualification Determination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
12.5 Plan Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 13. ADOPTION OF THE PLAN BY AFFILIATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 14. QUALIFICATION AND RETURN OF CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
14.1 Contributions Conditioned on Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
14.2 Mistake of Fact and Nondeductibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
14.3 Amount to be Returned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 15. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 16. INSURANCE CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
16.1 Right to Hold Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
16.2 Incidental Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
16.3 Policy Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 17. INCORPORATION OF SPECIAL LIMITATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
APPENDIX A LIMITATION ON ALLOCATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
APPENDIX B TOP-HEAVY PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
</TABLE>
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<PAGE> 5
INFOMED HOLDINGS, INC.
PROFIT SHARING PLAN
THIS INDENTURE made on the _____ day of October ___, 1996, by CENTRAL
HEALTH HOLDING COMPANY, INC., a corporation organized and existing under the
laws of the State of Delaware (hereinafter called the "Company") and InfoMed
Holdings, Inc., a corporation organized and existing under the laws of the
State of Delaware;
INTRODUCTION:
Effective September 29, 1988, the Company sponsored an employee stock
ownership plan, within the meaning of section 4975(e)(7) of the Internal
Revenue Code of 1986 (the "Code"), that is known as the Central Health Holding
Company, Inc. Employee Stock Ownership Plan (the "Plan"), and has received a
letter of determination from the Internal Revenue Service that the Plan is
qualified under section 401(a) of the Code. The Company amended and restated
the Plan, generally effective January 1, 1989, under a plan document dated
February 26, 1993 and subsequently amended the Plan by amendments dated July
25, 1994, October 18, 1994 and December 23, 1995, and the Plan was again
amended and restated on January 17, 1996.
As of November __, 1996, (the "Acquisition Date"), substantially all
of the stock of the Company is to be acquired by HCA, Inc. (the "Acquisition").
In connection with the Acquisition, the Company now desires to amend and
restate the Plan as a profit sharing plan within the meaning of Treasury
Regulations Section 1.401-1(b)(1)(ii) and to provide that the Company and its
subsidiaries will no longer be a sponsor of the Plan and to provide that
InfoMed Holdings, Inc. and its electing affiliates will be sponsors of the
Plan.
NOW, THEREFORE, the Company and InfoMed Holdings,Inc. hereby amend and
restate the Plan, generally effective and conditioned upon the closing of the
Acquisition on November __, 1996 (the "Effective Time"), except as otherwise
noted, to read as follows:
SECTION 1.
DEFINITIONS
1.1 "Account" means the accounts maintained to reflect a Member's
interest in the Plan. The Plan Administrator shall maintain separate accounts,
subaccounts and suspense accounts for each Member (each of which shall be
adjusted pursuant to the Plan to reflect income, gains, losses and other
credits or charges attributable thereto), two of which shall be designated as
follows:
(a) Central Health Account. A Member's interest in the
account consisting as of the Effective Time of (i) the proceeds received from
HCA, Inc. in consideration for the Company Stock held in such Member's account
under the ESOP under the terms of the Plan immediately before the Acquisition
Date, other than the Escrowed Funds, (ii) the portion of the Escrowed Funds,
plus earnings, released from escrow to the Plan that are attributable to the
proceeds received from HCA, Inc. in consideration for the Company Stock held in
such Member's account under the ESOP under the terms of the Plan immediately
before the Acquisition Date, and (iii) any other assets held in a Member's
account under the ESOP under the terms of the Plan immediately before the
Acquisition Date.
<PAGE> 6
(b) InfoMed Account. A Member's interest in the account
consisting, as of the Effective Time, of the Company Stock held in the Profit
Sharing Stock Account under the terms of the Plan immediately before the
Acquisition Date plus a Member's interest in the account consisting, as of the
Effective Time, of the portion of the assets held by his "Profit Sharing Other
Investment Account" under the terms of the Plan immediately before the
Effective Time.
1.2 "Affiliate" means (i) any corporation which is a member of the
same controlled group of corporations (within the meaning of section 414(b) of
the Code) as is an Employer, (ii) any other trade or business (whether or not
incorporated) under common control (within the meaning of section 414(c) of the
Code) with an Employer, (iii) any other corporation, partnership or other
organization which is a member of an affiliated service group (within the
meaning of section 414(m) of the Code) with an Employer, and (iv) any other
entity required to be aggregated with an Employer pursuant section 414(o) of
the Code.
1.3 "Annual Compensation" means the amount paid to an Employee by
an Employer (and Affiliates during a Plan Year as wages within the meaning of
section 3401(a) of the Code for which an Employer is required to furnish its
Employees a written statement under sections 6041(d), 6051(a)(3) and 6052 of
the Code (currently reported on Form W-2 in the box entitled "wages, tips,
other compensation"). Annual Compensation shall be determined without regard to
any rules that limit the remuneration included in wages based on the nature or
location of the employment or the services performed. Annual Compensation shall
not exceed $150,000, as adjusted by the Secretary of the Treasury for the cost
of living. The cost of living adjustment in effect for a calendar year applies
to any period beginning in such calendar year which does not exceed 12 months
and over which the Plan Administrator determines Annual Compensation. If a
period over which the Plan Administrator determines Annual Compensation is
shorter than 12 months, the Annual Compensation limit, as adjusted, will be
multiplied by a fraction the numerator of which is the number of months in the
determination period, and the denominator of which is 12. Notwithstanding the
above, Annual Compensation shall be determined as follows:
(a) in determining contributions under Section 3 and
allocations under Section 4 with respect to each Employer, Annual Compensation
shall only include amounts received from that Employer for the portion of the
Plan Year during which the Employee was a Member;
(b) for purposes of applying the $150,000 limits, as
adjusted, with respect to Sections 3 and 4, the rules contained in Subsection
(b) of definition of the term "Highly Compensated Employee" in Appendix A shall
apply, except that in applying such rules, the term "family" shall include only
the spouse of the Member and any lineal descendants of the Member who have not
attained age 19 before the close of the Plan Year; and
(c) for all purposes under the Plan except Appendix A,
Annual Compensation shall include any amount contributed by an Employer on
behalf of an Employee pursuant to a salary reduction agreement which is not
includable in the gross income of the Employee under sections 125, 402(e)(3) or
402(h) of the Code.
-2-
<PAGE> 7
1.4 "Beneficiary" means the person or trust that a Member
designated most recently in writing to the Plan Administrator. If the Member
has failed to make a designation, no person designated is alive or if no trust
has been established, and no successor Beneficiary has been designated who is
alive or in existence, the term "Beneficiary" means (i) the Member's spouse, or
(ii) if no spouse is alive, the Member's surviving children, or (iii) if no
children are alive, the Member's grandchildren, or (iv) if no grandchildren are
alive, the Member's parent or parents, or (v) if no parent is alive, the legal
representative of the deceased Member's estate; provided, however, that the
spouse of a married Member shall be his Beneficiary unless that spouse has
consented in writing to the designation by the Member of some other person or
trust and the spouse's consent acknowledges the effect of the designation and
is witnessed by a notary public. A Member may change his designation at any
time. However, a Member may not change his designation without further consent
of his spouse under the terms of the preceding sentence unless the spouse's
consent permits designation of another person or trust without further spousal
consent and acknowledges that the spouse has the right to limit consent to a
specific beneficiary and that the spouse voluntarily relinquishes this right.
The spouse's consent shall not be required if the Member establishes to the
satisfaction of the Plan Administrator that the spouse cannot be located, if
the Member has a court order indicating that he is legally separated or has
been abandoned (within the meaning of local law) unless a "qualified domestic
relations order" (as defined in section 414(p) of the Code) provides otherwise,
or under circumstances as the Secretary of the Treasury prescribes. If the
spouse is legally incompetent to give consent, consent by the spouse's legal
guardian shall be deemed to be consent by the spouse.
1.5 "Break in Service" means the failure of an Employee, in
connection with a termination of employment other than by reason of death or
attainment of a Retirement Date, to complete more than 500 Hours of Service in
any Plan Year.
1.6 "Code" means the Internal Revenue Code of 1986, as amended.
1.7 "Company Stock" means an employer security issued by an
Employer or an Affiliate which is (i) stock, or (ii) a bond, debenture, note,
or certificate or other evidence of indebtedness which is described in section
407(e) of ERISA.
1.8 "Disability" means a disability of a Member within the meaning
of section 72(m)(7) of the Internal Revenue Code of 1986; that is, the Member
is unable to engage in any substantial gainful activity with the Employer or
any other employer, by reason of any medically determinable physical or mental
impairment which can be expected to result in death or to be of long-continued
and indefinite duration. For example, a home health aide who suffers a back
injury and who, in accordance with applicable law, can no longer physically
perform the duties of a home health aide, but who can physically perform the
duties of another position, such as a clerk with the Employer or any other
employer, regardless of whether the Member has the skills and qualifications to
be a clerk, and regardless of whether a clerk's position actually exists with
the Employer or any other employer, would not be considered as subject to a
Disability. A Member who claims to have a Disability shall submit to the Plan
Administrator a written request for Disability status together with medical
evidence from a licensed physician identifying the existence of a Disability
within the meaning of this definition. The Plan Administrator may then elect to
have the Member submit to an examination
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by a licensed physician selected by the Plan Administrator. The determination
as to whether a Member is subject to a Disability shall be made at the sole
discretion of the Plan Administrator based on medical evidence submitted by
either or both of the physicians.
1.9 "Employee" means an employee of an Employer other than an
employee who (i) is covered by a collective bargaining agreement between a
union and an Employer, provided that retirement benefits were the subject of
good faith bargaining, unless the collective bargaining agreement provides for
participation in the Plan, (ii) is a leased employee within the meaning of Code
Section 414(n)(2), (iii) is deemed to be an employee of an Employer pursuant to
regulations under Code Section 414(o), or (iv) is a nonresident alien who
receives no earned income within the meaning of Code Section 911(d)(2) from an
Employer which constitutes income from sources within the United States within
the meaning of Code Section 861(a)(3).
1.10 "Employer" means individually (i) the Company, (ii) Central
Health Services, Inc., Community Home Nursing Care, Inc., DeKalb Home Health
Services, Inc., Clinical Arts Home Care Services, Inc., North Georgia Home
Health Agency, Inc., Northwest Florida Home Health Agency, Inc., Healthfield
Services of Middle Georgia, Inc., Med-Care, Inc., Tugaloo Home Health Agency,
Inc. and Central Home Health Care of Chattanooga, Inc. (the "Subsidiaries"),
(iii) InfoMed Holdings, Inc. and S Consulting, Inc. and (iv) each Affiliate
which has adopted the Plan and Trust; provided however, that immediately
preceding the Effective Time each of the Company and the Subsidiaries shall
cease to be an Employer with respect to the Plan and InfoMed Holdings, Inc. and
its Affiliates that adopt the Plan shall be an Employer.
1.11 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
1.12 "Escrowed Funds" means amounts held in escrow with respect to
the ESOP in connection with the Acquisition.
1.13 "ESOP" means the employee stock ownership plan as defined in
Code Section 4975(e)(7) which was established under the terms of the Plan
immediately before the Effective Time.
1.14 "Fair Market Value" refers to the adequacy of the
consideration for which Company Stock may be acquired or sold and means, as
applicable:
(a) The closing price of the Company Stock on the
principal securities exchange on which it is traded on the day immediately
preceding the date as of which Fair Market Value is being determined or, if no
Company Stock was traded on the immediately preceding day, on the next
preceding trading date.
(b) If Company Stock is not traded on a securities
exchange, but is reported by the National Association of Securities Dealers,
Inc. Automated Quotation System and market information is published on a
regular basis in The New York Times or The Wall Street Journal, the average of
the published high and low sales price or the published daily bid and asked
prices, as so published, on the day immediately preceding the date as of which
Fair Market Value is being determined or on the next preceding date on which
such prices were published.
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<PAGE> 9
(c) If such market information is not published on a
regular basis, the average of the high bid and low asked prices of Company
Stock in the over-the-counter market on the date immediately preceding the date
as of which Fair Market Value is being determined or on the next preceding date
on which such high bid and low asked prices were recorded, as reported by the
National Association of Securities Dealers Automated Quotation System, or, if
not so reported, by a generally accepted reporting service.
(d) If Company Stock is not publicly traded, Fair Market
Value shall be the value determined in good faith by the Trustee.
1.15 "Fiduciary" means each Named Fiduciary and any other person
who exercises any discretionary authority or control regarding management of
the Plan, any person who has any discretionary authority or responsibility in
the administration of the Plan, any other person who renders investment advice
for a fee or has any authority or responsibility to do so with respect to any
assets of the Plan, or any other person who exercises any authority or control
respecting management or disposition of assets of the Plan.
1.16 "Hour of Service" means:
(a) Each hour for which an Employee is paid, or entitled
to payment, for the performance of duties for an Employer or any Affiliate
during the applicable computation period, and such hours shall be credited to
the computation period in which the duties are performed;
(b) Each hour for which an Employee is paid, or entitled
to payment, by an Employer or any Affiliate on account of a period of time
during which no duties are performed (irrespective of whether the employment
relationship has terminated) due to vacation, holiday, illness, incapacity
(including disability), layoff, jury duty, military duty or leave of absence;
(c) Each hour for which back pay, irrespective of
mitigation of damages, is either awarded or agreed to by an Employer or any
Affiliate, and such hours shall be credited to the computation period or
periods to which the award or agreement for back pay pertains rather than to
the computation period in which the award, agreement or payment is made;
provided, that the crediting of Hours of Service for back pay awarded or agreed
to with respect to periods described in Subsection (b) of this Section shall be
subject to the limitations set forth in Subsection (e);
(d) Solely for purposes of determining whether a Break in
Service has occurred, each hour during any period that the Employee is absent
from work (1) by reason of the pregnancy of the Employee, (2) by reason of the
birth of a child of the Employee, (3) by reason of the placement of a child
with the Employee in connection with the adoption of the child by the Employee,
or (4) for purposes of caring for such child for a period immediately following
its birth or placement. The hours described in this Subsection (d) shall be
credited (A) only in the computation period in which the absence from work
begins, if the Employee would be prevented from incurring a Break in Service in
that year solely because of that credit, or (B), in any other case, in the next
following computation period;
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<PAGE> 10
(e) In no event shall an Employee be credited with more
than 501 Hours of Service during any single continuous period during which he
performs no duties for the Employer or Affiliate;
(f) In the event that an Employer or an Affiliate
acquires substantially all of the assets of another corporation or entity, or a
controlling interest in the stock of another corporation, or merges with
another corporation or entity and is the surviving entity, then service of an
Employee who was employed by the prior corporation or entity and who is
employed by the Employer or an Affiliate at the time of the acquisition or
merger shall, with the consent of the Employer, be counted in the manner
provided in resolutions adopted by the Employer authorizing the counting of
such service and otherwise consistent with applicable Treasury Regulations;
(g) Hours of Service performed for an Employer or any of
its Affiliates prior to the Effective Time shall continue to be counted for all
purposes under the Plan as Hours of Service; and
(h) An Employee shall be credited with each Hour of
Service in accordance with the provisions of this Section, even if such
Employee is described in (i), (ii), (iii) or (iv) of the Section containing the
definition of Employee.
1.17 "Investment Committee" means a committee which may be
established to direct the Trustee with respect to investments of the Plan.
1.18 "Investment Manager" means a Fiduciary, other than the
Trustee, the Plan Administrator or an Employer, who may be appointed by the
Trustee:
(a) who has the power to manage, acquire or dispose of
the assets of the Plan or a portion thereof;
(b) who (i) is registered as an investment adviser under
the Investment Advisers Act of 1940, (ii) is a bank as defined in that Act, or
(iii) is an insurance company qualified to perform services described in
Subsection (a) above under the laws of more than one state; and
(c) who has acknowledged in writing that he is a
Fiduciary with respect to the Plan.
1.19 "Member" means any Employee or former Employee who has become
a participant in the Plan pursuant to Section 2 for so long as his vested
Account has not been fully distributed pursuant to the Plan.
1.20 "Named Fiduciary" means only the following:
(a) the Plan Administrator;
(b) the Trustee;
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<PAGE> 11
(c) the Investment Committee; and
(d) the Investment Manager.
1.21 "Normal Retirement Age" means the later of age 65 or the fifth
anniversary of membership in the Plan.
1.22 "Plan Administrator" means the organization or person
designated to administer the Plan.
1.23 "Plan Year" means the calendar year.
1.24 "Publicly Traded" means Company Stock that is listed on a
national securities exchange registered under section 6 of the Securities
Exchange Act of 1934 (15 U.S.C. Section 78f) or that is quoted on a system
sponsored by a national securities association registered under section 15A(b)
of the Securities Exchange Act (15 U.S.C. Section 780).
1.25 "Put and First Refusal Rights" means the rights of a Member or
Beneficiary described in Section 10.3.
1.26 "Qualified Annuity Payment" means an annuity, described below,
which shall be purchased from an insurance company designated by the Plan
Administrator in writing to the Trustee, and shall be distributed to the
Member, his spouse, or his Beneficiary as the case may be. The distribution
shall be in full satisfaction of the benefits to which the Member, his spouse
or his Beneficiary is entitled under the Plan. For purposes of this Section,
actuarial equivalence shall be determined based on factors employed by the
insurance company from which the annuity is purchased and any commissions or
other costs associated with the purchase.
(a) In the case of a Member who is not married on the
date payments to the Member are to commence under the terms of the Plan, a
single life annuity, payable in monthly installments for the life of the
Member, which is the actuarial equivalent of an immediate lump sum payment of
the Member's vested Account.
(b) In the case of a Member who is married on the date
payments are to commence under the terms of the Plan, a joint and survivor
annuity, payable in monthly installments, which is an immediate annuity for the
life of the Member with a survivor annuity for the life of his spouse which is
50%, 75% or 100% (at the election of the Member) of the amount of the annuity
payable during the joint lives of the Member and his spouse and which is the
actuarial equivalent of an immediate lump sum payment of the Member's vested
Account.
(c) In the case of a Member who dies while married before
payments are to commence under the terms of the Plan, an immediate single life
annuity, payable in monthly installments for the life of his spouse, which is
the actuarial equivalent of an immediate lump sum payment of the Member's
vested Account.
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1.27 "Retirement Date" means the date on which the Member retires
on or after (i) attaining Normal Retirement Age, (ii) the date which is ten
years prior to Normal Retirement Age, or (iii) becoming subject to a
Disability.
1.28 "Trust" means the trust established to hold the assets of the
Plan.
1.29 "Trustee" means the trustee or trustees named in the Trust
agreement.
1.30 "Valuation Date" means the last day of each Plan Year and any
other date the Plan Administrator determines.
1.31 "Vesting Service" means each year of Vesting Service through
December 31, 1995 as determined under the Plan prior to this amendment and
restatement and each Plan Year commencing on or after January 1, 1996, during
which an Employee has completed at least 1,000 Hours of Service. However,
Vesting Service shall not include:
(a) all service in Plan Years after an Employee incurs
five consecutive Breaks in Service, for purposes of determining the Member's
vested interest in Employer contributions made before such period;
(b) all service before a period of five consecutive
Breaks in Service, in the case of an Employee who has no vested right in
Employer contributions; and
(c) all service with an Employer accrued before the
Employer adopted the Plan under a plan that was not amended and restated into
this Plan, unless otherwise specified by the an Employer.
Notwithstanding the foregoing, in the event that a Plan Year of less than 12
months exists with respect to a Plan Sponsor, an Employee of that Plan Sponsor
will receive a year of Vesting Service for the short Plan Year if he performs
at least 1,000 Hours of Service during the twelve-consecutive month period
beginning with the first day of that short Plan Year and ending twelve months
after that date.
SECTION 2.
ELIGIBILITY
2.1 Former Members. Each former Member who is reemployed by an
Employer shall become a Member as of his reemployment as an Employee.
2.2 Former Employees. Each former Employee who terminates
employment with an Employer before becoming a Member shall become a Member as
of the latest of the date he (a) is reemployed (b) would have become a Member
if he had not terminated employment or (c) becomes an Employee.
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<PAGE> 13
2.3 New Employees. Each other Employee shall become a Member as of
the date on which he is employed by an Employer.
2.4 Limitation of Rights of Membership. Membership in the Plan
shall not give any Employee any right or claim except to the extent that such
right is specifically fixed under the terms of the Plan. The adoption of the
Plan and the Trust by any Employer shall not be construed to give any Employee
a right to continued employment with an Employer or as interfering with the
right of an Employer to terminate the employment of any Employee at any time.
2.5 Frozen Plan. Notwithstanding any other provision hereof, no
person who is not already a Member shall become a Member after the Effective
Time, except for a rehired Employee whose Account is restored pursuant to the
cash-out/buy-back provisions of Plan Section 7.
SECTION 3.
CONTRIBUTIONS
3.1 Employer Discretionary Contributions. For each Plan Year,
each Employer may make a contribution in the form of Company Stock, cash or
other property. The amount of the contribution will be determined by each
Employer. For Plan Years after December 31, 1996, forfeitures shall reduce
Employer contributions.
3.2 Member Contributions. No contributions are required or
permitted to be made by Members.
SECTION 4.
ALLOCATIONS
4.1 Allocations of Employer Contributions.
(a) As of the last day of each Plan Year ending after
December 31, 1994, Employer contributions to the Plan for that Plan Year and
any forfeitures shall be allocated to the InfoMed Account of each Member who
has been credited with one year of Vesting Service for the Plan Year and who
was employed by that Employer on the last day of the Plan Year, in the
proportion that the Member's Annual Compensation bears to the aggregate of the
Annual Compensation of all such Members.
(b) Notwithstanding anything to the contrary herein,
contributions of an Employer for the 1996 Plan Year shall be allocated to the
InfoMed Account of each Member who as of the Acquisition Date has been credited
with at least a number of Hours of Service in the 1996 Plan Year equal to 1000
multiplied by a fraction, the numerator of which is the number of days in the
Plan Year through the Acquisition Date and the denominator of which is 365 and
who is employed by that Employer on the Acquisition Date immediately prior to
the Effective Time, in the proportion that the Member's Annual Compensation as
of the Acquisition Date bears to the Annual Compensation as of the Acquisition
Date of all such Members.
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4.2 Allocations of Income or Loss.
(a) Except as otherwise provided in the Plan and Trust,
as of each Valuation Date, the Plan Administrator shall allocate to each
Account its share of the net income or net loss of the Trust (or each
individual fund, if any, established pursuant to the Trust) as set forth below.
(1) Any cash dividends paid or other cash income received
with respect to Company Stock allocated to a Member's Account, of a
Member as of the record date on which the cash dividend was declared
or the date the other cash income was accrued and any income
attributable to the cash dividend or other income shall be allocated
to the Member's Account.
(2) Any additional shares of Company Stock which are
issued with respect to Company Stock held in a Member's Account,
including, but not limited to, stock dividends, shall be allocated to
each such Account as of the Valuation Date coinciding with or next
following the date on which the additional shares of Company Stock are
delivered to the Trustee. The additional shares of Company Stock
shall be allocated to each such Account based upon the number of
shares of Company Stock in each such Account as of the record date.
(3) Except as otherwise provided in this Section 4, the
net income and loss of the Trust (or of each individual fund, if any
established pursuant to the Trust) shall be determined separately by
the Trustee as of each Valuation Date as follows:
(A) To the cash income since the last Valuation
Date there shall be added or subtracted any net increase or
decrease in the fair market value of the Trust assets, any
gain or loss on the sale or exchange of assets, accrued
interest with respect to any interest-bearing security, the
amount of any dividend declared but not paid on shares of
stock if the market quotation used in determining the value of
the shares is ex-dividend, and the amount of any other assets
determined by the Trustee to be income.
(B) From the sum in Paragraph (A) above there
shall be deducted all expenses and liabilities accrued since
the last Valuation Date which are proper under the provisions
of the Plan and Trust and which in the discretion of the
Trustee are properly chargeable against income for the period.
The net income or net loss so determined shall be allocated as of the
Valuation Date to each of those Accounts in the proportion that the
value of each (invested in that individual fund, if applicable) bears
to the total value of all such Accounts (invested in that individual
fund, if applicable) as of the preceding Valuation Date.
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SECTION 5.
DEATH BENEFITS
5.1 Death Before Termination of Employment. If a Member is an
Employee at the time of his death, his Beneficiary shall be entitled to the
full value of his Account.
5.2 Death After Termination of Employment. If a Member who is not
an Employee dies before the distribution of his vested Account, his Beneficiary
shall be entitled to such vested Account.
5.3 Death of Beneficiary. If, subsequent to the death of a Member,
his Beneficiary dies while entitled to receive benefits under the Plan, any
successor to the Beneficiary named under parts (i), (ii), or (iii) of the
Section defining the term Beneficiary shall generally be entitled to receive
the Member's unpaid vested Account. However, if the deceased Beneficiary was
the Member's spouse at the time of the Member's death, or if no successor
Beneficiary was designated by the Member and is alive and no Beneficiary listed
under parts (i), (ii) or (iii) of the Section defining the term Beneficiary is
alive, the Member's unpaid vested Account shall be paid to the personal
representative of the deceased Beneficiary's estate.
5.4 Terms of Distribution. Any benefit payable under this Section
5 shall be paid in accordance with and subject to the provisions of Section 6
or 7, whichever is applicable.
SECTION 6.
PAYMENT OF BENEFITS ON RETIREMENT OR DEATH
6.1 General. The benefit of a Member who has attained his
Retirement Date or died while an Employee shall be the full value of his
Account. The Member's benefit shall be determined as of the Valuation Date
coinciding with or immediately preceding the Member's Retirement Date or death,
adjusted for a pro rata share of any income, gains and losses attributable
thereto through the Valuation Date coinciding with or immediately preceding the
date the Member's Account is paid. Payment to a Member or his Beneficiary shall
commence as soon as administratively feasible but no later than 60 days after
the end of the Plan Year in which the Retirement Date or death occurs.
Notwithstanding the foregoing, a Member whose Retirement Date is attributable
to a Disability may elect to commence receiving a distribution as soon as
administratively feasible after his Retirement Date in an amount not to exceed
one half of his Account as of the Valuation Date preceding his Retirement Date.
6.2 Distribution Forms. Except as provided in Section 6.4, at the
election of the Member or Beneficiary, the payment of a Member's vested (i)
InfoMed Account shall be made in cash or Company Stock and (ii) Central Health
Account shall be made in cash (or to the extent consisting of Company Stock, in
kind). Cash payment of the portion of the Member's vested Account that is
invested in Company Stock shall be made at the Fair Market Value of Company
Stock and the remaining portion shall be made at the value determined by the
Trustee on the Valuation Date next preceding the date of payment. Payments
shall be made according to the schedule elected by the Member below:
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<PAGE> 16
(a) In a single sum.
(b) Installments paid at least annually over a period not
exceeding the joint life expectancies of the Member and his Beneficiary.
(c) A direct rollover, according to Section 6.8.
Notwithstanding the above, if the value of a Member's vested Account does not
exceed $3,500 or did not exceed $3,500 at the time of any prior payment,
payment shall be made in a single sum. Cash payment of any Escrowed Funds that
are released from escrow will be paid out to Members in accordance with the
Member's distribution election following the allocation of such amounts to the
Member's Accounts. If a Member has selected installment or annuity
distributions, any funds released from the Escrowed Funds will be added to the
distribution amount remaining to be paid under the Member's installment
election and will be paid out over the Member's remaining installment or
annuity period.
6.3 Fractional Shares. In order to distribute in cash the value
of any fractional share of Company Stock in a Member's Account, the Trustee may
exchange any fractional share for cash in the Accounts of all Members to the
extent that the required amount of cash is available. The fractional share
shall immediately be allocated to the Accounts of all Members.
6.4 Qualified Annuity Payment. If the value of the Member's
Account exceeds $3,500, or exceeded $3,500 at the time of any prior payment,
the payment of the cash portion of a Member's Account shall be made in the form
of a Qualified Annuity Payment unless the Member and his spouse make a written
election, during the applicable election period (as defined below), to receive
an alternate form of payment permitted under Section 6.4(b). The term
"applicable election period" means, with respect to a Qualified Annuity Payment
described in Subsection (a) or (b) of the Section containing the definition of
Qualified Annuity Payment, the 90-day period ending on the first day on which
the Member is entitled to payment from the Trust, and with respect to a
Qualified Annuity Payment described in Subsection (c) of the Section containing
the definition of Qualified Annuity Payment, the period which begins on the
first day of the Plan Year in which an Employee becomes a Member and which ends
on the date of his death. In the case of a married Member, an election shall
not be effective unless spousal consent is obtained in accordance with the
provisions of the Section defining the term Beneficiary.
(a) Any waiver of a Qualified Annuity Payment described
in Subsection (c) made before the first day of the Plan Year in which the
Member attains age 35 shall be invalid as of the first day of the Plan Year in
which the Member attains age 35, and the provisions of the Section containing
the definition of Beneficiary shall control unless a new waiver is obtained.
(b) If an election described in Subsection (a) above is
made, the Member shall select one of the alternate forms of payment described
in Section 6.2(a) or (b).
(c) The Plan Administrator shall furnish to the Member a
written explanation of:
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<PAGE> 17
(1) the terms and conditions of the Qualified Annuity
Payment including the material features of the alternate forms of
payment under the Plan,
(2) the Member's right to make, and the effect of, an
election not to receive the Qualified Annuity Payment,
(3) the rights of the Member's spouse described in this
Section, and
(4) the right to make, and the effect of, a revocation of
an election pursuant to this Section.
(d) In the case of a Qualified Annuity Payment described
under Subsection (a) or (b) of the Section containing the definition of
Qualified Annuity Payment, the written explanation shall be provided to the
Member not less than 30 days nor more than 90 days before the first date on
which he is entitled to payment from the Trust. In the case of a Qualified
Annuity Payment described under Subsection (c) of the Section containing the
definition of Qualified Annuity Payment, the written explanation shall be
provided to the Member in whichever of the following periods ends last:
(1) The period beginning with the first day of the Plan
Year in which the Member attains age 32 and ending on the last day of
the Plan Year preceding the Plan Year in which the Member attains age
35.
(2) The period beginning one year before and ending one
year after the Employee first becomes a Member.
(3) The period beginning one year before and ending one
year after the provisions of this Subsection (d) apply to the Member.
(4) In the case of a Member who separates from service
before attaining age 35, the written explanation shall be provided in
the period beginning one year before and ending one year after
separation from service.
(e) A Member may revoke any election not to receive
payment in the form of a Qualified Annuity Payment at any time before
commencement of payments, and may make a new election at any time prior to the
commencement of payments.
6.5 Death Before Annuity Payments Commence. If a Member elects a
Qualified Annuity Payment, and his spouse dies after the election but before
benefit payments have commenced, the election will be null and void.
6.6 Consent to Payment. If a Member's vested Account exceeds
$3,500, or exceeded $3,500 at the time of any prior payment, it shall not be
paid prior to his Normal Retirement Age without his consent or, if applicable,
without the consent of his spouse, except in the event applicable law requires
or authorizes a payment before his Normal Retirement Age. The Plan
Administrator
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<PAGE> 18
shall provide such Member with an explanation of the optional forms of payment
available under Section 6.2 of the Plan including the material features and
relative values of such forms. The Plan Administrator shall provide such
explanation no less than 30 days and no more than 90 days before the first day
of the first period for which a payment is to be made.
6.7 Minimum Distributions. The payments to be made to a Member
shall satisfy the incidental death benefit requirements under section
401(a)(9)(G) of the Code and the regulations thereunder. In addition:
(a) Prior to the death of a Member, all retirement
payments hereunder shall:
(1) be distributed to the Member not later than the
required beginning date (as defined below) or,
(2) be distributed, commencing not later than the
required beginning date (as defined below):
(A) in accordance with Treasury Regulations, over
a period not extending beyond the life of the Member or over
the lives of the Member and his designated individual
Beneficiary, or
(B) in accordance with Treasury Regulations, over
a period not extending beyond the life expectancy of the
Member or the joint life and last survivor expectancy of the
Member and his designated individual Beneficiary.
(b) (1) If:
(A) the distribution of a Member's retirement
payments have begun in accordance with Subsection (a)(2) of
this Section, and
(B) the Member dies before his entire vested
Account has been distributed to him,
then the remaining portion of his vested Account shall be distributed
at least as rapidly as under the method of distribution being used
under Subsection (a)(2) of this Section as of the date of his death.
(2) If a Member dies before retirement payments begin
hereunder, the entire interest of the Member shall be distributed
within five years of his death.
(3) If:
(A) any portion of a Member's vested Account is
payable to or for the benefit of the Member's designated
individual Beneficiary,
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(B) that portion is to be distributed, in
accordance with Treasury Regulations, over the life of the
designated individual Beneficiary or over a period not
extending beyond the life expectancy of the designated
individual Beneficiary, and
(C) the distributions begin not later than one
year after the Member's death, or such later date as the
Treasury Regulations may prescribe,
then, for purposes of Paragraph (2) of this Subsection (b), the
portion referred to in Subparagraph (A) of this Paragraph (3) shall be
treated as distributed on the date on which the distributions to the
designated individual Beneficiary begin.
(4) If the designated individual Beneficiary referred to
in Paragraph (3)(A) of this Subsection (b) is the surviving spouse of
the Member, then
(A) the date on which the distributions are
required to begin under Paragraph (3)(C) of this Subsection
(b) shall not be earlier than the date on which the Member
would have attained age 70 1/2, and
(B) if the surviving spouse dies before the
distributions to such spouse begin, this Subsection (b) shall
be applied as if the surviving spouse were the Member
(c) For purposes of this Section, the term "required
beginning date" means April 1 of the calendar year following the calendar year
in which the Member attains age 70 1/2. However, for a Member who is not
described in Section 1(b)(3) of Appendix B and who attained age 70 1/2 before
January 1, 1988, "required beginning date" means April 1 of the calendar year
following the calendar year in which the Member retires or otherwise terminates
employment.
6.8 Direct Rollover. A "Distributee" who is otherwise entitled to
a Plan payment may elect in writing to the Plan Administrator to have such
payment rolled over directly to (i) an individual retirement account described
in section 408(a) of the Code or an individual retirement annuity described in
section 408(b) of the Code, or (ii) a qualified defined contribution plan
described in section 401(a) of the Code, the terms of which permit the
acceptance of rollover distributions, or an annuity plan described in section
403(a) of the Code. A payment to a surviving spouse, however, may only be
rolled over directly into an individual retirement account or annuity described
in clause (i) of the preceding sentence. All elections must specify the
annuity, account or plan to which the direct rollover shall be made. The
Distributee may make such election with respect to payment of any portion of
his Account that is not:
(a) one of a series of substantially equal periodic
payments made at least annually for the life (or life expectancy) of the
Distributee or the joint lives (or joint life expectancies) of the Distributee
and his or her designated beneficiary or for a specified period of 10 years or
more,
(b) required under section 401(a)(9) of the Code and
Section 6.7,
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<PAGE> 20
(c) not includable in his gross income (determined
without regard to the exclusion for net unrealized appreciation with respect to
Company Stock), or
(d) less than $200 in a year.
An election under this Section with respect to a payment that is one of a
series of periodic payments shall apply to all subsequent payments in the
series. However, the Distributee may change his or her election with respect to
future periodic payments by making a new written election with the Plan
Administrator. For purposes of this Section, the term "Distributee" means a
Member, his surviving spouse, his former spouse, and his former spouse who is
the alternate payee under a qualified domestic relations order, as defined in
section 414(p) of the Code.
SECTION 7.
PAYMENT OF BENEFITS ON TERMINATION OF EMPLOYMENT
7.1 Transfer Not Termination of Employment. Transfer of a Member
from one Employer to another Employer or to an Affiliate shall not be deemed
under the Plan to be a termination of employment of the Member. Any person who
is an Employee of the Company or its subsidiaries on the Acquisition Date and
who is not an Employee of InfoMed Holdings, Inc. or any of its subsidiaries as
of the Effective Time shall, as of the Effective Time, cease to be an Employee,
and shall therefore have terminated employment, for purposes of the Plan, as of
the Effective Time.
7.2 Termination Prior to Death or Retirement. The benefit of a
Member who terminates employment for reasons other than death or attainment of
a Retirement Date shall be the vested portion of his Account, determined as of
the last day of the Plan Year in which such termination occurs, adjusted for a
pro rata share of any income, gains and losses attributable thereto through the
Valuation Date coinciding with or immediately preceding the date the Member's
Account is paid.
7.3 Vested Portion of Member Accounts. The vested portion of a
Member's Account shall be as follows.
<TABLE>
<CAPTION>
Full Years of Percentage
Vesting Service Vested
--------------- ----------
<S> <C>
Less than 1 0%
1 10%
2 20%
3 30%
4 40%
5 60%
6 80%
7 or more 100%
</TABLE>
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<PAGE> 21
Notwithstanding the foregoing, a Member who is employed as of the
Acquisition Date by the Company or InfoMed Holdings, Inc., or an Affiliate of
either, shall be 100% vested in such Member's Account.
7.4 Distribution Rules and Consent to Distributions. Payment of a
Member's vested Account is subject to the distribution and notice and consent
requirements of Section 6. If the Member's vested Account exceeds $3,500 or
exceeded $3,500 at the time of any prior payment, payment will not begin before
the Member's Normal Retirement Age without his consent, or in the event of his
death without the consent of his spouse. Payment of the Member's vested
Account will otherwise be made at the following times:
(a) If the Member's vested Account does not exceed $3,500
or did not exceed $3,500 at the time of any prior payment, payment will be made
as soon as administratively feasible after the end of the Plan Year in which
the Member terminates employment.
(b) Payment of the portion that is not invested in
Company Stock, and payment of the portion that is invested in Company Stock and
which the Member elects to receive in the form of a single sum of Company
Stock, Company Stock installments, or in cash installments over at least five
years, shall begin as soon as administratively feasible after the end of the
Plan Year in which the Member terminates employment.
(c) Payment of the portion that is invested in Company
Stock which the Member elects in cash payments in a single sum or cash
installments of less than five years shall begin at the end of the sixth Plan
Year following termination of employment.
(d) In no event shall payment begin more than 60 days
after the close of the Plan Year in which the Member dies, attains Normal
Retirement Age or becomes disabled.
7.5 Forfeiture and Restoration of Nonvested Amounts.
(a) If a Member terminates employment and any portion of
his vested Account is paid (including a deemed payment of $0) before he incurs
five consecutive Breaks in Service, the portion of the Member's Account in
which he is not vested shall be forfeited as of the Valuation Date following
his receipt of any payment.
(b) If an Employer or an Affiliate reemploys a Member before
he incurs five consecutive Breaks in Service and (i) if the Member was vested
in any portion of his Account and he repays the Trust the amount which he
received by the earlier of the fifth anniversary of his reemployment or the end
of five consecutive Breaks in Services following payment to the Member or (ii)
if the Member was not vested in any portion of his Account upon his termination
of employment, then any portion of his Account which was forfeited shall be
restored effective on the Valuation Date coinciding with or next following the
repayment or the Member's reemployment, respectively. Such restoration shall
be made first from forfeitures available for allocation on that Valuation Date,
second from any net income calculated as of that Valuation Date, and third from
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<PAGE> 22
Employer contributions. Only after restorations have been made shall the
remaining net income be available for allocation under Section 4.
(c) If a Member terminates employment, is vested in any
portion of his Account and does not receive a payment of any portion of such
vested Account before he incurs five consecutive Breaks in Service, then
forfeiture of the portion of his Account in which he is not vested shall not
occur until he incurs five consecutive Breaks in Service.
7.6 Rights Upon Change in Vesting Schedule. In the event that a
Plan amendment directly or indirectly changes the vesting schedule, the vested
percentage for each Member in his Account accumulated to the date when the
amendment is adopted shall not be reduced as a result of the amendment. In
addition, any Member with at least three years of Vesting Service may
irrevocably elect to remain under the pre-amendment vesting schedule with
respect to all of his benefits accrued both before and after the amendment.
SECTION 8.
CONDITIONS OF DISTRIBUTION OF COMPANY STOCK
8.1 Stock Legend. To the extent necessary to comply with federal
or state securities laws, each certificate for Company Stock distributed
pursuant to the Plan shall be marked "RESTRICTED" on its face and, to the
extent appropriate at the time, shall bear on its reverse side legends to the
following effect:
(a) That the securities evidenced by the certificate were
issued and distributed without registration under the federal Securities Act of
1933 (the "1933 Act") or under the applicable laws of any state or states
(collectively referred to as the "State Acts"), in reliance upon certain
exemptive provisions of the 1933 Act or any applicable State Acts;
(b) That the securities cannot be sold or transferred
unless, in the opinion of counsel reasonably acceptable to the Employer, the
sale or transfer would be:
(1) pursuant to an effective registration
statement under the 1933 Act or pursuant to an exemption from
registration; and
(2) a transaction which is exempt under any
applicable State Acts or pursuant to an effective registration
statement under or in a transaction which is otherwise in
compliance with the State Acts; and
(c) That the securities evidenced by the certificate were
issued and distributed in accordance with the provisions of the Plan and Trust
Agreement, are subject to the provisions thereof, and may not be sold or
transferred except in compliance with said provisions.
8.2 Member Compliance With Securities Laws. If necessary to
comply with the 1933 Act or any applicable State Acts, shares of Company Stock
distributable under the Plan must be acquired for investment and not with a
view to the public distribution. Accordingly, as a condition
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<PAGE> 23
of receiving Company Stock under the Plan, the distributee may be required to
execute an investment letter and any other documents that in the opinion of
counsel reasonably acceptable to the Employer are necessary to comply with the
1933 Act or any applicable State Acts or any other applicable laws regulating
the issuance or transfer of securities.
8.3 Put and First Refusal Rights. Each share of Company Stock
distributed to a Member or Beneficiary from his InfoMed Account which is
allocated to his Account as of the Acquisition Date or allocated thereafter
pursuant to the earnings allocation provisions of the Plan shall be subject to
Put and First Refusal Rights. The Put Rights grant to the distributee (or his
heirs or legatees) the right to require an Employer or its designee to purchase
any shares of Company Stock which have been distributed from the Plan provided
they are not Publicly Traded at the time (the "Put"). The Put shall be
exercisable by giving written notice to the Employer for a period of 60 days
following the date of distribution, and if the Put is not exercised within that
60-day period, for an additional period of 60 days which begins on the later of
(1) the first day of the Plan Year following the Plan Year of distribution, or
(2) the day following the expiration of the initial 60 day period. In the case
of Company Stock which is Publicly Traded without restriction when distributed
but ceases to be so traded during either of the 60 day periods, the Employer
must give notice to each distributee (or his heirs or legatees) in writing on
or before the tenth day after the date the Company Stock ceases to be so traded
informing each distributee (or his heirs or legatees) that for the remainder of
the period the Company Stock is subject to the Put and setting forth the terms
of the Put. The number of days between the tenth day and the date on which
notice is actually given, if later, must be added to the duration of the Put.
The period during which the Put is exercisable does not include the time when a
distributee (or his heirs or legatees) is unable to exercise it because the
Employer (or its designee) is prohibited from honoring it by applicable federal
or state law, and the Employer (or its designee) shall not be in breach of the
Put if it is prohibited from honoring it by applicable federal or state law.
Company Stock purchased pursuant to the Put shall, to the extent permitted by
state law, be purchased in cash at its Fair Market Value, in substantially
equal payments made over a period of five years commencing within 30 days after
the exercise of the Put. The Employer (or its designee) shall provide adequate
security and pay reasonable interest on any unpaid amounts. Payment under the
Put may not be restricted by the provisions of any loan or any other
arrangement, including the terms of the articles of incorporation of the
Employer (or its designee), unless required by applicable state law
If a Member or, if applicable, his Beneficiary elects an
installment distribution of his Account, Company Stock subject to this Section
which is purchased pursuant to the Put shall, to the extent permitted by state
law, be purchased in cash at their Fair Market Value not later than 30 days
after the exercise of the Put.
Prior to any sale of Company Stock subject to this Section
which is not Publicly Traded at that time, the distributee (or his heirs or
legatees) must first offer the Company Stock which he wishes to sell to an
Employer or its designee at the greater of (1) Fair Market Value, or (2) the
same purchase price and on the same terms as a bona fide offer made by a third
party within the preceding 14 days to whom the distributee (or his heirs or
legatees) desires to sell the Company Stock (the "First Refusal Rights"). If
the Employer or its designee is not willing or able to purchase the Company
Stock within 14 days after receipt by the Employer of written notification by
the
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<PAGE> 24
distributee of such purchase price and payment terms, then the distributee (or
his heirs or legatees) may proceed to sell the Company Stock to the third party
in accordance with the offer, within 28 days after receipt by the Employer of
the written notification. In no event may the Employer recognize any purchaser
or transferee as the owner of the Company Stock, unless the terms of the First
Refusal Rights, as specified above, have been followed.
SECTION 9.
ADMINISTRATION OF THE PLAN
9.1 Trust Agreement. InfoMed Holdings, Inc. shall establish a
Trust with the Trustee it designates for the management of the Trust. The Trust
shall form a part of the Plan and is incorporated herein by reference.
9.2 Operation of the Plan Administrator. InfoMed Holdings, Inc.
shall appoint a Plan Administrator or in the absence of an appointment, InfoMed
Holdings, Inc. shall be the Plan Administrator. If an organization is appointed
to serve as the Plan Administrator, then the Plan Administrator may designate
in writing a person who may act on behalf of the Plan Administrator. InfoMed
Holdings, Inc. shall have the right to remove the Plan Administrator at any
time by written notice. The Plan Administrator may resign at any time by
written notice of resignation to the Trustee and InfoMed Holdings, Inc.. Upon
removal or resignation, or in the event of the dissolution of the Plan
Administrator, InfoMed Holdings, Inc. shall appoint a successor.
9.3 Fiduciary Responsibilities and Allocation of Duties.
(a) Each Fiduciary's role shall be limited solely to the
exercise of its own authority and discretion, as defined under the terms of the
Plan and Trust or as allocated to it.
(b) The Plan Administrator may allocate its fiduciary
responsibilities among Fiduciaries other than the Trustee, designated in
writing by the Plan Administrator and may designate in writing other persons to
carry out its fiduciary responsibilities under the Plan. The Plan
Administrator may at any time remove any such person designated to carry out
its fiduciary responsibilities under the Plan by written notice to such person.
(c) The Trustee may allocate its fiduciary duties to an
Investment Manager or any other Fiduciary with respect to all or any portion of
the Trust. Unless otherwise provided for in the Trust Agreement, such
allocation shall be effective upon delivery of written notice by the Trustee to
all affected Fiduciaries.
(d) Each Fiduciary may employ persons to perform services
and to render advice with regard to any of the Fiduciary's responsibilities
under the Plan. Charges for all such services performed and advice rendered
may be directly paid by each Employer but until paid shall constitute a charge
against the Trust.
(e) Each Employer (other than the Company and the
Subsidiaries) shall indemnify and hold harmless each person constituting the
Plan Administrator or the Investment Committee from
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<PAGE> 25
and against all claims, losses, costs, expenses (including, without limitation,
attorney's fees and court costs), damages, actions or causes of action arising
from, on account of or in connection with the performance by such person of his
duties in such capacity, other than such of the foregoing arising from, on
account of or in connection with the willful neglect or willful misconduct of
such person so acting.
(f) Each Fiduciary shall discharge its duties solely in
the interest of the Members and Beneficiaries, and
(1) for the exclusive purpose of providing
benefits to Members and Beneficiaries and defraying reasonable
expenses of administration;
(2) with the care, skill, prudence and diligence,
under the circumstances then prevailing, that a prudent man
acting in a like capacity and familiar with such matters would
use in the conduct of an enterprise of like character and with
like aims;
(3) by diversifying the investments so as to
minimize the risk of large losses unless under the
circumstances it is clearly prudent not to do so; and
(4) in accordance with the Plan and Trust.
The diversification requirement set forth in Paragraph (3) above shall not
apply to the acquisition or holding of Company Stock and the prudence
requirement set forth in Paragraph (2) above, to the extent that it requires
diversification, shall not be applicable to the acquisition or holding of
Company Stock.
9.4 Duties of the Plan Administrator.
(a) The Plan Administrator shall advise the Trustee with
respect to all payments under the terms of the Plan and shall direct the
Trustee in writing to make such payments from the Trust. In no event shall the
Trustee be required to make such payments if the Trustee has knowledge that
such payments are contrary to the terms of the Plan and the Trust.
(b) The Plan Administrator shall establish rules, not
contrary to the Plan and the Trust, for the administration of the Plan and the
transaction of its business. All elections and designations under the Plan by
a Participant or Beneficiary shall be made on forms prescribed by the Plan
Administrator. The Plan Administrator shall have discretionary authority to
construe the terms of the Plan and shall determine all questions arising in the
administration, interpretation and application of the Plan, including, but not
limited to, those concerning eligibility for benefits. All determinations of
the Plan Administrator shall be conclusive and binding on all Employees,
Members, Beneficiaries and Fiduciaries.
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<PAGE> 26
(c) The statement of specific duties for a Plan
Administrator in this Section is not in derogation of any other duties which a
Plan Administrator has under the provisions of the Plan or the Trust.
9.5 Investment Manager. The Trustee may, by action in writing to
InfoMed Holdings, Inc., appoint an Investment Manager. The Trustee may remove
an Investment Manager in the same manner in which appointed. In the event of
any removal, the Investment Manager shall, as soon as possible, but in no event
more than 30 days after notice of removal, turn over all assets managed by it
to the Trustee or to any successor Investment Manager appointed, and shall make
a full accounting to the Trustee with respect to all assets managed by it since
its appointment as an Investment Manager.
9.6 Investment Committee. InfoMed Holdings, Inc. may, by action in
writing certified by notice to the Trustee, appoint an Investment Committee.
InfoMed Holdings, Inc. may remove any person on the Investment Committee at any
time by written notice to such person. A person on the Investment Committee
may resign at any time by written notice to InfoMed Holdings, Inc. Upon such
removal or resignation, InfoMed Holdings, Inc. may appoint a successor. Until a
successor has been appointed, the remaining persons on the Investment Committee
may continue to act as the Investment Committee.
9.7 Action by an Employer. Any action to be taken by an Employer
shall be taken by resolution or written direction duly adopted by its board of
directors, its governing body or authorized agent; provided, however, that by
such resolution or written direction, the board of directors or appropriate
governing body may delegate to any officer or other appropriate person the
authority to take any such actions as may be specified in such resolution or
written direction.
9.8 Voting and Decisions Regarding Company Stock.
(a) For so long as Members are not permitted to direct the
investment of any portion of their Accounts into or out of Company Stock
pursuant to the terms of the Trust:
(1) the Trustee shall vote shares of Company Stock held
in the Trust; and
(2) all decisions affecting Company Stock held in the
Trust which do not involve voting of such Company Stock, including, without
limitation, decisions to reject or consent to tender or exchange offers and
similar decisions, shall be made by the Trustee.
(b) At such time as Members are permitted to direct the investment
of any portion of their Accounts into or out of Company Stock pursuant to the
terms of the Trust:
(1) the Trustee shall vote shares of Company Stock
allocated to the Accounts of Members and Beneficiaries as follows:
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<PAGE> 27
(A) whole shares of Company Stock allocated to Accounts
for which it has received instructions from Members shall be
voted in accordance with those instructions. In the absence
of voting instruction by a Member, whole shares of Company
Stock held in a Member's Account shall be voted by the
Trustee.
(B) the combined fractional shares and fractional rights
to shares of Company Stock held in Accounts shall be voted to
the extent possible in the same proportion as whole shares of
Company Stock held in such Accounts are directed to be voted
by Members;
(2) all decisions affecting Company Stock which do not
involve voting of such Company Stock, including, without limitation, decisions
to reject or consent to tender or exchange offers and similar decisions, shall
be determined by the Trustee in the same manner as voting decisions as
described in Section (b)(1) above; and
(3) the Plan Administrator shall be responsible for
ensuring that information relating to the purchase, holding and sale of Company
Stock and the exercise of voting, tendering and similar rights with respect to
such Company Stock by Members and Beneficiaries, is maintained in accordance
with procedures which are designed to safeguard the confidentiality of such
information, except to the extent necessary to comply with Federal laws or
State laws not preempted by ERISA, that the procedures are sufficient to
safeguard the confidentiality of the information, that such procedures are
being followed, and that the independent fiduciary required herein is
appointed. The Plan Administrator shall appoint an independent fiduciary to
carry out activities relating to any situations which the Plan Administrator
determines involve a potential for undue employer influence upon Members and
Beneficiaries with regard to the direct or indirect exercise of shareholder
rights.
SECTION 10.
CLAIM REVIEW PROCEDURE
10.1 In the event that a Member or Beneficiary is denied a claim
for benefits under a Plan, the Plan Administrator shall provide to the claimant
written notice of the denial which shall set forth:
(a) the specific reasons for the denial;
(b) specific references to the pertinent provisions of
the Plan on which the denial is based;
(c) a description of any additional material or
information necessary for the claimant to perfect the claim and an explanation
of why the material or information is necessary; and
(d) an explanation of the Plan's claim review procedure.
10.2 After receiving written notice of the denial of a claim, a
claimant or his representative may:
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<PAGE> 28
(a) request a review of the denial by written application
to the Plan Administrator;
(b) review pertinent documents; and
(c) submit issues and comments in writing to the Plan
Administrator.
10.3 If the claimant wishes a review of the decision denying his
claim to benefits under the Plan, he must submit written application to the
Plan Administrator within 60 days after receiving written notice of the denial.
10.4 Upon receiving the written application for review, the Plan
Administrator may schedule a hearing for purposes of reviewing the claimant's
claim, which hearing shall take place not more than 30 days from the date on
which the Plan Administrator received the written application for review.
10.5 At least ten days prior to the scheduled hearing, the claimant
and any representative designated in writing by him shall receive written
notice of the date, time, and place of the scheduled hearing.
10.6 All claimants requesting a review of the decision denying
their claim for benefits may employ counsel for purposes of the hearing.
10.7 No later than 60 days following the receipt of the written
application for review, the Plan Administrator shall submit its decision on the
review in writing to the claimant involved and to his representative, if any;
provided, however, a decision on the written application for review may be
extended, in the event special circumstances such as the need to hold a hearing
require an extension of time, to a day no later than 120 days after the date of
receipt of the written application for review. The decision shall include
specific reasons for the decision and specific references to the pertinent
provisions of the Plan on which the decision is based.
SECTION 11.
LIMITATION OF ASSIGNMENT, PAYMENTS TO LEGALLY
INCOMPETENT DISTRIBUTEE AND UNCLAIMED PAYMENTS
11.1 Anti-Alienation Clause. No benefit payable under the Plan to
any person shall be subject to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or charge, and any attempt to anticipate,
alienate, sell, transfer, assign, pledge, encumber or charge the same shall be
void. No such benefit shall in any manner be liable for, or subject to, the
debts, contracts, liabilities, engagements or torts of any person, nor shall it
be subject to attachment or legal process for, or against, such person, except
as may be required by law. However, this Section shall not apply to a
"qualified domestic relations order," as defined in section 414(p) of the Code,
and benefits may be paid pursuant to the provisions of such an order.
11.2 Payments to Legal Guardians. Whenever any benefit which shall
be payable under the Plan is to be paid to or for the benefit of any person who
is then a minor or determined to be
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<PAGE> 29
incompetent by qualified medical advice, the Plan Administrator need not
require the appointment of a guardian or custodian, but shall be authorized to
cause the same to be paid over to the person having custody of such minor or
incompetent, or to cause the same to be paid to such minor or incompetent
without the intervention of a guardian or custodian, or to cause the same to be
paid to a legal guardian or custodian of such minor or incompetent if one has
been appointed or to cause the same to be used for the benefit of such minor or
incompetent.
11.3 Lost Members and Beneficiaries. If the Plan Administrator
cannot ascertain the whereabouts of any Member or Beneficiary to whom a payment
is due under the Plan, the Plan Administrator may direct that the payment and
all remaining payments otherwise due to the Member or Beneficiary be canceled
on the records of the Plan and the amount thereof applied as a forfeiture in
accordance with the Plan except that, if the Member or Beneficiary later
notifies the Plan Administrator of his whereabouts and requests the payments
due to him under the Plan, the Employer shall contribute to the Plan an amount
equal to the payment to be paid to him as soon as administratively feasible.
SECTION 12.
AMENDMENT TO OR TERMINATION OF THE
PLAN AND THE TRUST
12.1 Amendment and Termination. InfoMed Holdings, Inc. through its
board of directors at a meeting or by way of written consent may, at any time
amend or terminate the Plan or the Trust, in whole or in part; provided,
however, that the duties or liabilities of the Trustee shall not be increased
without its written consent. No Employer other than InfoMed Holdings, Inc.
shall have the right to so amend or terminate the Plan or the Trust. However,
each Employer may terminate its own participation in the Plan and Trust
pursuant to the Plan.
12.2 Termination of Adoption by an Employer. Effective immediately
prior to the Effective Time, each Employer shall have the right to terminate
its participation in the Plan and Trust by action of its board of directors,
other appropriate governing body or authorized agent, and by delivery of
written notice to InfoMed Holdings, Inc. and the Trustee, unless such
termination would result in the disqualification of the Plan or the exempt
status of the Trust or would so adversely affect the Plan or the Trust as to
any other Employer. If contributions by an Employer are completely terminated,
the Plan and Trust shall be deemed terminated as to such Employer. Any
termination by an Employer shall not be a termination as to any other Employer.
12.3 Effect of Plan Termination. If the Plan is terminated by
InfoMed Holdings, Inc., it shall be terminated as to all Employers, and the
Accounts of each affected Member shall be fully vested. If either
contributions to the Trust are permanently discontinued or the adoption of the
Plan is terminated by any Employer, then the Accounts of each affected Member
who is an Employee of such Employer shall be fully vested. After payment of
expenses and taxes, each Member's Account shall be distributed according to the
provisions of Section 6.
12.4 Qualification Determination. In the event of the termination
of the Plan or the Trust with respect to an Employer, the Accounts of the
Members employed by such Employer shall be held
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<PAGE> 30
subject to the instructions of the Plan Administrator; provided that the
Trustee shall not be required to make any distribution until it receives a copy
of an Internal Revenue Service determination letter to the effect that the
termination does not affect the qualified status of the Plan or the exempt
status of the Trust or, in the event that such a letter is not issued, until
the Trustee is reasonably satisfied that adequate provision has been made for
the payment of all taxes which may be due and owing by the Trust.
12.5 Plan Merger. In the case of any merger or consolidation of
the Plan with, or any transfer of the assets or liabilities of the Plan to, any
other plan qualified under section 401 of the Code, the terms of the merger,
consolidation or transfer shall be such that each Member would receive (in the
event of termination of the Plan or its successor immediately thereafter) a
benefit which is no less than the benefit which the Member would have received
in the event of termination of the Plan immediately before the merger,
consolidation or transfer.
SECTION 13.
ADOPTION OF THE PLAN BY AFFILIATES
Any Affiliate, if authorized to do so by InfoMed Holdings, Inc., may
adopt the Plan and Trust by action of the board of directors or other
appropriate governing body of such Affiliate. Any adoption shall be evidenced
by resolutions of the foregoing board of directors or appropriate writing of
the governing body indicating the adoption, and by the execution of or
contributions to the Trust by the adopting Affiliate. The resolution or other
appropriate writing shall state the effective date of the adoption of the Plan
by the Employer and the "limitation year" for purposes of section 415 of the
Code if such is not the calendar year. However, if the Plan and Trust as
adopted by an Affiliate under the foregoing provisions shall fail to receive
the initial approval of the Internal Revenue Service as qualified under
sections 401(a) and 501(a) of the Code, any contributions remaining after
payment of all expenses will be returned to such Affiliate free of any trust,
and the Plan and Trust shall terminate as to the adopting Affiliate.
SECTION 14.
QUALIFICATION AND RETURN OF CONTRIBUTIONS
14.1 Contributions Conditioned on Qualification. If the Plan and
Trust fail to receive the initial approval of the Internal Revenue Service as a
qualified plan and trust within one year after denial of qualification (i) the
contribution of an Employer after payment of all expenses will be returned to
an Employer free of the Plan and Trust, (ii) contributions made by a Member
shall be returned to the Member who made the contributions, and (iii) the Plan
and Trust shall thereupon terminate.
14.2 Mistake of Fact and Nondeductibility. If and to the extent
permitted by the Code and ERISA and other applicable laws and rulings, upon an
Employer's request, a contribution which was made by reason of a mistake of
fact or which was conditioned on the deductibility of the contribution under
section 404 of the Code, shall be returned to an Employer within one year after
the payment of the contribution, or the disallowance of the deduction (to the
extent disallowed), whichever is applicable.
-26-
<PAGE> 31
14.3 Amount to be Returned. In the event of a contribution which
was made by reason of a mistake of fact or which was conditioned on the
deductibility of the contribution, the amount to be returned to the Employer
shall be the excess of the contribution above the amount that would have been
contributed had the mistake of fact or loss of the deduction not occurred, less
any net loss attributable to the excess. Any net income attributable to the
excess shall not be returned to the Employer. No return of any portion of the
excess shall be made to the Employer if the return would cause the balance in a
Member's Account to be less than the balance would have been had the mistaken
contribution not been made.
SECTION 15.
GOVERNING LAW
To the extent not preempted by the laws of the United States, the laws
of the State of Georgia shall apply to the Plan.
SECTION 16.
INSURANCE CONTRACTS
16.1 Right to Hold Contracts. The Trustee may continue to hold
each life insurance contract (an "Insurance Contract") on the life of a Member
previously procured by the Trustee or by the trustee of any predecessor plan.
16.2 Incidental Benefits. The aggregate premiums paid for ordinary
or whole life and term insurance contracts on the life of a Member shall at all
times be less than 50% and 25%, respectively, of an Employer's contributions
and forfeitures allocated to the Member's Account at any particular time. If,
due to the foregoing limitations, the Trustee is unable to pay any part of any
premium due on an Insurance Contract on the life of a Member, the Trustee shall
have the power to borrow the required premium from the insurance company, using
the cash surrender value of the Insurance Contract as security; to convert the
Insurance Contract into a paid-up Insurance Contract; or to convert the
Insurance Contract into cash and to apply the proceeds therefrom to the amount
allocated to the Accounts of the Member.
16.3 Policy Ownership. Title to all Insurance Contracts shall be
vested in the Trustee. Upon the death of a Member prior to his retirement or
termination of employment, the Trustee shall pay the proceeds with respect to
any Insurance Contract to the Member's Beneficiary, to be distributed in
accordance with Section 6. In the event of a Member's retirement or termination
other than by death, the Trustee shall convert the entire value of any
Insurance Contract into cash and credit the amount to the Member's Other
Investment Account to be distributed in accordance with Section 6 or 7, as
applicable.
-27-
<PAGE> 32
SECTION 17
INCORPORATION OF SPECIAL LIMITATIONS
Appendices A and B to the Plan, attached hereto, are incorporated by
reference and apply notwithstanding anything to the contrary contained herein.
IN WITNESS WHEREOF, the Company and InfoMed Holdings, Inc. have caused
this indenture to be executed as of the date first above written.
CENTRAL HEALTH HOLDING COMPANY, INC.
By:/s/ Gary M. Bremer
--------------------------------------
Title:President & Chief Executive Officer
-----------------------------------
ATTEST:
/s/ Cindy Lumpkin
- ------------------------------
Title: Secretary
------------------------
[CORPORATE SEAL]
INFOMED HOLDINGS, INC.
By: /s/ Gary M. Bremer
------------------------------------
Title: Chief Executive Officer
---------------------------------
ATTEST:
/s/ James A. Tramonte
- ------------------------------
Title: Secretary
------------------------
[CORPORATE SEAL]
-28-
<PAGE> 33
APPENDIX A
LIMITATION ON ALLOCATIONS
SECTION 1.
The "annual addition" for any Member for any one limitation Year may
not exceed the lesser of:
(a) $30,000, which amount shall be adjusted for changes
in the cost of living as provided in regulations issued by the Secretary of the
Treasury; or
(b) 25% of the Member's Annual Compensation.
A "Highly Compensated Employee" includes: (a) An Employee who, during
the current Plan Year or the immediately preceding Plan Year or for Plan Years
after December 31, 1991, on a day during the current Plan Year which reasonably
represents the Employer's workforce and the Plan's coverage during such Plan
Year:
(1) was at any time an owner of more than 5% of the
Employer or Affiliate; or
(2) received Annual Compensation in excess of $75,000, as
adjusted by the Secretary of the Treasury; or
(3) received Annual Compensation in excess of $50,000, as
adjusted by the Secretary of the Treasury, and who was in the group
consisting of the most highly compensated 20 of the Employees; or
(4) was at any time an officer of the Employer or
Affiliate and had Annual Compensation greater than 50% of the amount
in effect under Code Section 415(b)(1)(A) for the calendar year in
which the Plan Year ends. However, no more than 50 employees or if
lesser (i) the greater of three or 10% of the employees shall be
treated as officers. If for any year no officer of the Employer meets
the requirements of this Paragraph (4), the highest paid officer of
the Employer for the Plan Year shall be considered an officer.
If during the immediately preceding Plan Year the Employee was not described
in Paragraph (2), (3) or (4) above (based upon the Annual Compensation
limit applicable to the immediately preceding Plan Year, but without regard to
this sentence), the Employee shall not be treated as being described therein
unless the Employee's Annual Compensation is such that the Employee is in the
group of the 100 Employees being paid the greatest amount of Annual
Compensation.
The Plan Administrator may elect to substitute $50,000 (as adjusted)
for $75,000 (as adjusted) in Paragraph (2) above provided that at all times
during the Plan Year the Employer and its Affiliates maintain significant
business activities and have Employees in at least two significantly separate
geographic areas and satisfy such other conditions as the Secretary of the
Treasury prescribes.
A-1
<PAGE> 34
For purposes of-Paragraphs (3) and (4) above, the following shall be
excluded when determining the number of Employees in the most highly
compensated 20` of the Employees and the number of officers:
(i) Employees who have not completed six months of service.
(ii) Employees who normally work less than 17 1/2 hours per
week,
(iii) Employees who normally work during not more than six
months during any Plan Year,
(iv) Employees who have not attained age 21,
(v) Employees who are included in a unit of employees covered
by an agreement which the Secretary of Labor finds to be a collective
bargaining agreement between employee representatives and the Employer
or its Affiliates, provided 90% or more of the Employees are covered
under collective bargaining agreements and the Plan only covers
Employees who are not covered under the collective bargaining
agreements, and
(vi) Employees who are non-resident aliens and who
received no earned income from the Employer or its Affiliates from
sources within the United States.
(c) If any Employee is a member of the family of a 5%
owner as defined in Paragraph (a)(l) or of a Highly Compensated Employee whose
Annual Compensation is among the ten Highly Compensated Employees receiving the
greatest amount of Annual Compensation during the Plan Year, then (1) the
Employee shall not be considered a separate Employee, and (2) any Annual
Compensation paid to the Employee, and any applicable contribution or benefit
on behalf of the Employee, shall be treated as if it were paid to, or on behalf
of, the 5% owner or the Employee who is among the ten Highly Compensated
Employees receiving the greatest amount of Annual Compensation during the Plan
Year. "Family" means the Employee's spouse and lineal descendants or ascendant
and the spouses of lineal descendants or ascendant.
(d) A former Employee shall be treated as a Highly
Compensated Employee if (1) the former Employee was a Highly Compensated
Employee at the time he separated from service with the Employer or Affiliate
or (2) the former Employee was a Highly Compensated Employee at any time after
he attained age 55.
(e) For purposes of this definition, Annual Compensation
shall include amounts paid by Affiliates and shall be determined without regard
to the $150,000 limitation. as adjusted.
SECTION 2.
For the purposes of this Appendix A, the term "annual addition" for
any Member means for any limitation year, the sum of certain Employer and
Member contributions, forfeitures, and other amounts as determined in section
415(c)(2) of the Code in effect for that limitation year.
A-2
<PAGE> 35
SECTION 3.
In the event that an Employer maintains a defined benefit plan under
which a Member also participates, the sum of the defined benefit plan fraction
and the defined contribution plan fraction for any limitation year for any
Member may not exceed 1.0.
(a) The defined benefit plan fraction for any limitation
year is a fraction:
(1) the numerator of which is the projected
annual benefit of the Member under the defined benefit plan
(determined as of the close of such year); and
(2) the denominator of which is the lesser of
(A) the product of 1.25, multiplied by
the maximum annual benefit allowable under section
415(b)(1)(A) of the Code, or
(B) the product of
(i) 1.4, multiplied by
(ii) the maximum amount which may be
taken into account under section 415(b) (1)
(B) of the Code with respect to the Member
under the defined benefit plan for the
limitation year (determined as of the close
of the limitation year).
(b) The defined contribution plan fraction for any
limitation year is a fraction:
(1) the numerator of which is the sum of a Member's
annual additions as of the close of the year; and
(2) the denominator of which is the sum of the lesser
of the following amounts determined for the year and for all
prior limitation years during which the Member was employed by
an Employer:
(A) the product of 1.25, multiplied by the dollar
limitation in effect under section 415(c)(1)(A) of the Code
for the limitation year (determined without regard to section
415(c)(6) of the Code); or
(B) the product of
(i) 1.4, multiplied by
(ii) the amount which may be taken into
account under section 415(c)(1)(B)(or section
415(c)(7), if applicable) of the Code with respect
to the Member for the limitation year.
A-3
<PAGE> 36
SECTION 4.
For purposes of this Appendix A, the term "limitation year" shall mean
a Plan Year unless an Employer elects, by adoption of a written resolution, to
use any other twelve-month period adopted in accordance with regulations issued
by the Secretary of the Treasury. For purposes of applying the limitations set
forth in this Appendix A, the term "Employer" shall mean an Employer and any
other corporations which are members of, the same controlled group of
corporations (as described in section 414(b) of the Code, as modified by
section 415(h) of the Code) as is an Employer, any other trades or businesses
(whether or not incorporated) under common control (as described in section
414(c) of the Code, as modified by section 415(h) of the Code) with an
Employer, any other corporations, partnerships, or other organizations which
are members of an affiliated service group (as described in section 414(m) of
the Code) with an Employer, and any other entity required to be aggregated with
an Employer pursuant to regulations under section 414(o) of the Code.
SECTION 5.
For purposes of applying the limitations of this Appendix A, all
defined contribution plans maintained or deemed to be maintained by an Employer
shall be treated as one defined contribution plan, and all defined benefit
plans now or previously maintained or deemed to be maintained by an Employer
shall be treated as one defined benefit plan.
SECTION 6.
In the event that as a result of either the allocation of forfeitures
to the Account of a Member or a reasonable error in estimating the Member's
Annual Compensation, the annual addition allocated to the Account of a Member
exceeds the limitations set forth in Section 1 of this Appendix or if the
aggregate contributions made on for a Member under both a defined benefit plan
and a defined contribution plan, subject to the reduction of allocations in
other defined contribution plans required by Section 5 of this Appendix, cause
the aggregate limitation fraction set forth in Section 3 of this Appendix to be
exceeded, the Plan Administrator will direct the Trustee to take such of the
following actions as the Plan Administrator deems appropriate, specifying in
each case the amount or amounts of contributions involved:
(a) Reduce forfeitures allocated under first the Central
Health Account and then the InfoMed Account to the Member and reallocate such
reductions to the Accounts under the Central Health Account or InfoMed Account,
as applicable, of Members who are not affected by the limitations in the same
proportion as the contributions of the Employer under the Central Health
Account and the InfoMed Account, respectively, for the year is allocated to the
Accounts under the Central Health Account or InfoMed Account, as applicable of
the Members.
(b) Reduce Employer contributions made under first the
Central Health Account and then the InfoMed Account for the Member. The amount
of such reduction shall be reallocated under first the Central Health Account
and the InfoMed Account, as applicable, to the Accounts of Members who are not
affected by the limitations in the same proportion as the contribution of the
Employer for the year is allocated to the Accounts of the Members.
A-4
<PAGE> 37
APPENDIX B
TOP-HEAVY PROVISIONS
SECTION 1.
As used in this Appendix, the following words shall have the following
meanings:
(a) "Determination Date" means, with respect to any Plan Year, the
last day of the preceding Plan Year, or, in the case of the first Plan Year,
means the last day of the first Plan Year.
(b) "Key Employee" means an Employee or former Employee (including
a Beneficiary of a Key Employee or former Key Employee) who at any time during
the Plan Year containing the Determination Date or any of the four preceding
Plan Years is:
(1) An officer of the Employer or of any Affiliate whose
Annual Compensation was greater than 50% of the amount in effect under
section 415(b)(1)(A) of the Code for the calendar year in which the
Determination Date falls. The term "officer" refers to those persons
described in section 416(i)(1)(A)(i) of the Code and in applicable
Treasury Regulations.
(2) One of the ten Employees whose Annual Compensation
more than the amount in effect under Code section 415(c)(1)(A) for the
calendar year in which the Determination Date falls and who owns (or
is considered as owning within section 318 of the Code) both (A) more
than 1/2% of the outstanding stock of the Employer or an Affiliate,
more than 1/2% of the total combined voting power of all stock of the
Employer or an Affiliate, or more than 1/2% of the capital or profits
interest in the Employer or an Affiliate, and (B) the largest
percentage ownership interests in the Employer or any of its
Affiliates.
(3) An owner of 5% or more of the outstanding stock of
the Employer or an Affiliate or of the total combined voting power of
all stock of the Employer or an Affiliate.
(4) An owner of 1% or more of the outstanding stock of the
Employer or an Affiliate or of the total combined voting power of all
stock of the Employer or an Affiliate, and who in such Plan Year had
Annual Compensation from the Employer and all of its Affiliates of
more than $150,000.
Employees other than Key Employees are sometimes referred to in this Appendix
as "non-key employees."
(c) "Required Aggregation Group" means:
(1) each plan of the Employer and its Affiliates which
qualifies under section 401(a) of the Code in which a Key Employee is
a Participant and
(2) each other plan of the Employer and its Affiliates
which qualifies under section 401(a) of the Code and which enables any
plan described in Subsection (a) of this Section to meet the
requirements of sections 401(a)(4) or 410 of the Code.
<PAGE> 38
(d)(1) "Top-Heavy" means:
(A) if the Plan is not included in a Required Aggregation
Group, the Plan's condition in a Plan Year for which, as of the
Determination Date:
(i) the present value of the cumulative Accounts
under the Plan for all Key Employees exceeds 60% of the
present value of the cumulative Accounts under the Plan for
all Members; and
(ii) the Plan, when included in every potential
combination, if any, with any or all of:
(I) any Required Aggregation Group, and
(II) any plan of the Employer which is not
part of any Required Aggregation Group and which
qualifies under section 401(a) of the Code is part of
a Top-Heavy Group (as defined in Paragraph (2) of
this Subsection); and
(B) if the Plan is included in a Required Aggregation
Group, the Plan's condition in a Plan Year for which, as of
the Determination Date:
(i) the Required Aggregation Group is a Top-Heavy
Group (as defined in Paragraph (2) of this Subsection); and
(ii) the Required Aggregation Group, when included in
every potential combination, if any, with any or all of the
plans of the Employer and its Affiliates which are not part of
the Required Aggregation Group and which qualify under section
401(a) of the Code, is part of a Top-Heavy Group (as defined
in Paragraph (2) of this Subsection).
(C) For purposes of Subparagraphs(A)(ii) and (B)
(ii) of this Paragraph (I), any combination of plans must
satisfy the requirements of sections 401(a)(4) and 410 of the
Code.
(2) A group shall be deemed to be a Top-Heavy Group if:
(A) the sum, as of the Determination Date, of the
present value of the cumulative accrued benefits for all Key
Employees under all plans included in such group exceeds
(B) 60% of a similar sum determined for all
participants in such plans.
(3) (A) For purposes of this Section, the present value of the
accrued benefit for any participant in a defined contribution
plan as of any Determination Date or last day of a plan year
shall be the sum of:
B-2
<PAGE> 39
(i) as to any defined contribution plan
other than a simplified employee pension, the
account balance as of the most recent
valuation date occurring within the plan year
ending on the Determination Date or last day
of a plan year, and
(ii) as to any simplified employee pension,
the aggregate employer contributions, and
(iii) an adjustment for contributions due as
of the Determination Date or last day of a
plan year.
In the case of a plan that is not subject to the minimum
funding requirements of section 412 of the Code, the
adjustment in Clause (iii) of this Subparagraph (A) shall be
the amount of any contributions actually made after the
valuation date but on or before the Determination Date or last
day of the plan year to the extent not included under Clause
(i) or (ii) of this Subparagraph (A); provided, however, that
in the first plan year of the plan, the adjustment in Clause
(iii) of this Subparagraph (A) shall also reflect the amount
of any contributions made thereafter that are allocated as of
a date in such first plan year. In the case of a plan that is
subject to the minimum funding requirements, the account
balance in Clause (i) and the aggregate contributions in
Clause (ii) of this Subparagraph (A) shall include
contributions that would be allocated as of a date not later
than the Determination Date or last day of a plan year, even
though those amounts are not yet required to be contributed,
and the adjustment in Clause (iii) of this Subparagraph (A)
shall be the amount of any contribution actually made (or due
to be made) after the valuation date but before the expiration
of the extended payment period in section 412(c)(10) of the
Code to the extent not included under Clause (i) or (ii) of
this Subparagraph (A).
(B) For purposes of this Subsection, the present
value of the accrued benefit for any participant in a defined
benefit plan as of any Determination Date or last day of a
plan year must be determined as of the most recent valuation
date which is within a 12-month period ending on the
Determination Date or last day of a plan year as if such
participant terminated as of such valuation date; provided,
however, that in the first plan year of a plan, the present
value of the accrued benefit for a current participant must be
determined either (i) as if the participant terminated service
as of the Determination Date or last day of a plan year or
(ii) as if the participant terminated service as of such
valuation date, but taking into account the estimated accrued
benefit as of the Determination Date or last day of a plan
year. For purposes of this Subparagraph (B), the valuation
date must be the same valuation date used for computing plan
costs for minimum funding, regardless of whether a valuation
is performed that year. The actuarial assumptions utilized in
calculating the present value of the accrued benefit for any
participant in a defined benefit plan for purposes of this
Subparagraph (B) shall be established by the Plan
Administrator after consultation with the actuary for the
plan, and shall be reasonable in the aggregate and shall
comport with the requirements set forth in section 1.416-1,
Q&A T-26 & T-27, of the Treasury Regulations.
B-3
<PAGE> 40
(C) For purposes of determining the present value of
the cumulative accrued benefit under a plan for any
participant in accordance with this Subsection, the present
value shall be increased by the aggregate distributions made
with respect to the participant (including distributions paid
on account of death to the extent they do not exceed the
present value of the cumulative accrued benefit existing
immediately prior to death) under each plan being considered,
and under any terminated plan which if it had not been
terminated would have been in a Required Aggregation Group
with the Plan, during the five-year period ending on the
Determination Date or last day of the plan year that falls
within the calendar year in which the Determination Date
falls.
(D) For purposes of this Paragraph (3), participant
contributions which are deductible as "qualified retirement
contributions" within the meaning of section 219 of the Code
or any successor, as adjusted to reflect income, gains,
losses, and other credits or charges attributable thereto,
shall not be considered to be part of the accrued benefits
under any plan.
(E) For purposes of this Paragraph (3), if any
employee is not a Key Employee with respect to any plan for
any plan year, but such employee was a Key Employee with
respect to such plan for any prior plan year, any accrued
benefit for such employee shall not be taken into account.
(F) For purposes of this Paragraph (3), if any
employee has not performed any service for any Employer or
Affiliate maintaining the plan during the five-year period
ending on the Determination Date, any accrued benefit for that
employee shall not be taken into account.
(G) (i) In the case of an "unrelated rollover" (as
defined below) between plans which qualify under section
401(a) of the Code, (a) the plan providing the distribution
shall count the distribution as a distribution under
Subparagraph (C) of this Paragraph (3), and (b) the plan
accepting the distribution shall not consider the distribution
part of the accrued benefit under this Section: and
(ii) in the case of a "related rollover" (as defined below)
between plans which qualify under section 401(a) of the Code, (a) the
plan providing the distribution shall not count the distribution as a
distribution under Subparagraph (C) of this Paragraph (3), and (b) the
plan accepting the distribution shall consider the distribution part
of the accrued benefit under this Section.
An "unrelated rollover" is a rollover as defined in sections 402(a)(5) (section
402(c) beginning January 1, 1993) or 408(d)(3) of the Code or a plan-to-plan
transfer which is both initiated by the participant and made from a plan
maintained by one employer to a plan maintained by another employer where the
employers are not Affiliates, or a plan-to-plan transfer which is either not
initiated by the participant or made to a plan maintained by an Employer or an
Affiliate.
B-4
<PAGE> 41
SECTION 2.
(a) Notwithstanding anything contained in the Plan to the
contrary, except as otherwise provided in Subsection (b) of this Section, in
any Plan Year during which the Plan is Top-Heavy, allocations of Employer
contributions and forfeitures for the Plan Year for the Account of each Member
who is not a Key Employee and who has not separated from service with the
Employer prior to the end of the Plan Year shall not be less than 3% of the
Member's Annual Compensation. For purposes of this Subsection, an allocation to
a Member's Account resulting from any Employer contribution attributable to a
salary reduction or similar arrangement shall not be taken into account.
(b) (1) The percentage referred to in Subsection (a) of
this Section for any Plan Year shall not exceed the percentage at which
allocations are made or required to be made under the Plan for the Plan Year
for the Key Employee for whom the percentage is highest for the Plan Year. For
purposes of this Paragraph, an allocation to the Account of a Key Employee
resulting from any Employer contribution attributable to a salary reduction or
similar agreement shall be taken into account.
(2) For purposes of this Subsection (b), all defined
contribution plans which are members of a Required Aggregation Group shall be
treated as part of the Plan
(3) This Subsection (b) shall not apply to any
plan which is a member of a Required Aggregation Group if the plan enables a
defined benefit plan which is a member of the Required Aggregation Group to
meet the requirements of sections 401(a)(4) or 410 of the Code.
SECTION 3.
In any limitation year (as defined in Section 4 of Appendix A to the
Plan) which contains any portion of a Plan Year in which the Plan is Top-Heavy,
the number "1.0" shall be substituted for the number "1.25" in Section 3 of
Appendix A to the Plan.
SECTION 4.
In any Plan Year during which the Plan is Top-Heavy, a Member's
interest in his Account shall not vest at any rate which is slower than the
following schedule:
<TABLE>
<CAPTION>
Full Year of Percentage
Vesting Service Vested
--------------- ----------
<S> <C>
Less than 1 0%
1 10%
2 20%
3 40%
4 60%
5 80%
6 or more 100%
</TABLE>
B-5
<PAGE> 42
The Schedule set forth above shall be inapplicable to a Member who has failed
to perform an Hour of Service after the Determination Date on which the Plan
has become Top-Heavy. When the Plan ceases to be Top-Heavy, the Schedule set
forth above shall cease to apply; provided however, that the provisions of the
Section dealing with changes in the vesting schedule shall apply.
B-6
<PAGE> 43
FIRST AMENDMENT TO SIMIONE CENTRAL HOLDINGS, INC.
PROFIT SHARING PLAN (FORMERLY INFOMED HOLDINGS, INC.
PROFIT SHARING PLAN PRIOR TO THE ADOPTION OF
THIS AMENDMENT)
THIS INDENTURE made on the 14th day of February, 1997, by Simione
Central Holdings, Inc., a corporation organized and existing under the laws of
the State of Delaware (hereinafter called the "Company");
INTRODUCTION
On December 19, 1996, the name of InfoMed Holdings, Inc. was changed
to "Simione Central Holdings, Inc." Accordingly, the Company desires to amend
the InfoMed Holdings, Inc. Profit Sharing Plan (the "Plan") to reflect that
name change.
NOW, THEREFORE, the Company does hereby amend the Plan effective
December 19, 1996, by changing the name of the Plan to the "Simione Central
Holdings, Inc. Profit Sharing Plan" and by changing all references in the Plan
from "InfoMed Holdings, Inc." to "Simione Central Holdings, Inc."
Except as specifically amended hereby, the Plan shall remain in full
force and effect as prior to this First Amendment.
IN WITNESS WHEREOF, the Company has executed this First Amendment as
of the day and year first above written.
SIMIONE CENTRAL HOLDINGS, INC.
By: /s/ James A. Tramonte
------------------------------------------
Title: Secretary
---------------------------------------
<PAGE> 1
EXHIBIT 10.11
SIMIONE CENTRAL HOLDINGS, INC.
SECTION 125 PLAN
TAX IDENTIFICATION # 58-2205244
ARTICLE I
INTRODUCTION
The Name of this Plan is SIMIONE CENTRAL HOLDINGS, INC. Section 125 Plan.
1.1 Purpose of Plan. The purpose of this Plan is to provide eligible
employees a choice of receiving certain tax free fringe benefits or
taxable income.
1.2 Cafeteria Plan Status. The Plan will be a flexible benefits plan and
is intended to qualify as a "cafeteria plan" under Section 125 of the
Internal Revenue Code of 1986, as amended, or successor provisions
thereto, including any appropriate Treasury Regulations promulgated
thereunder, and that certain benefits which an employee elects to
receive under the Plan be eligible for exclusion from the employee's
gross income pursuant to Section 125(a) of the Internal Revenue Code
of 1986, as amended.
1.3 "Effective Date" is JANUARY 1, 1997.
ARTICLE II
DEFINITIONS
2.1 "Code" means the Internal Revenue Code of 1986, as amended.
2.2 "Primary Sponsor" means SIMIONE CENTRAL HOLDINGS, INC.
2.3 "Administrator" means the Primary Sponsor, or such other person, or
committee appointed from time to time by the Primary Sponsor to
supervise the administration of the Plan.
2.4 "Plan" means a Premium Only funded Salary Reduction Benefit Plan of
SIMIONE CENTRAL HOLDINGS, INC. as set forth herein, together with any
and all amendments and supplements thereto.
<PAGE> 2
2.5 "Participant" means any individual who participates in the Plan in
accordance with Article III.
2.6 "Employee" means any individual employed by a Plan Sponsor who
qualifies for benefits as illustrated under Article IV, Section 4.1.
2.7 "Key Employee" means any person who is a key employee as defined in
Section 416(I)(1) of the Code.
2.8 "Plan Year" means a twelve (12) month period beginning JANUARY 1 and
ending DECEMBER 31 of each year which benefit coverage is provided.
2.9 "Plan Sponsor" means SIMIONE CENTRAL HOLDINGS, INC. and any affiliate
of the Primary Sponsor which, with the consent of the Primary Sponsor,
has adopted the Plan.
2.10 "Salary Reduction Agreement" shall mean a legally enforceable written
document executed by both the Participant and a Plan Sponsor.
"Salary Reduction" means an agreement between the Participant and a
Plan Sponsor under which the Participant agrees to reduce his/her
compensation or to forego all or part of the increases in such
compensation and to have such amounts contributed by the Plan Sponsor
to the Plan on the Participant's behalf. The Salary Reduction
Agreement shall apply only to compensation that has not been actually
or constructively received by the Participant as of the date of the
agreement (after taking this Plan and Code Section 125 into account)
and, subsequently does not become currently available to the
Participant.
2.11 "Salary Reduction Amount" shall mean the amount which the Employee has
elected as a reduction in this compensation.
2.12 "Insurance Coverage" means any contributions toward premiums or other
payments which are required by a Participant to obtain coverage under
each excess group term life or medical or dental plan maintained by a
Plan Sponsor for the Participant, his/her spouse and/or dependents for
the Plan Year.
ARTICLE III
PARTICIPATION
3.1 Commencement of Participation. No Employee shall be eligible to
participate until the date he/she becomes eligible for any excess
group term life insurance or medical or dental plan of a Plan Sponsor
which requires Participant contributions. In order to participate in
the Plan, an Employee must complete and file with a Plan Sponsor an
application for
2
<PAGE> 3
participation and such other information or documentation as may be
required by the Company or the Plan Administrator.
3.2 Cessation of Participation. A Participant will cease to be a
Participant as of the earlier of (a) the date on which the Plan
terminates or, (b) the date on which he/she ceases to be an Employee
eligible to participate under Section 3.1, or (c) the date on which
this Plan no longer qualifies under the provisions of Section 125.
3.3 Reinstatement of Former Participant. A former Participant will become
a Participant again if and when he/she meets the eligibility
requirements of Section 3.1.
ARTICLE IV
OPTIONAL BENEFITS
4.1 Available Benefit Options. A Participant may choose under this Plan to
receive his full compensation for any Plan Year in (1) cash, or (2)
have a portion of his compensation applied by a Plan Sponsor toward
the cost of Insurance Coverage.
4.2 Sources of Health and/or Welfare Benefits. While the Participant may
choose under this Plan to have a Plan Sponsor apply a part of his or
her compensation to the cost of the benefits listed in Section 4.1,
the welfare plan benefits will not be provided by this Plan, but by
the applicable benefit plans themselves. The applicable welfare
benefit plan, as amended from time to time, will govern the terms of
coverage and benefits available.
4.3 Cash Benefit. If a Participant fails to properly make any election of
Benefit options or does not elect any Salary Reduction, such
Participant shall be deemed to have chosen the Cash Benefit as his/her
sole Benefit option.
4.4 Automatic termination of election. Elections made under this Plan (or
deemed to be made under Section 4.8) shall automatically terminate on
the date on which the Participant ceases to be a Participant in the
Plan.
4.5 Maximum Company contributions. The maximum amount of Plan Sponsor
contributions under the Plan for any Participant shall be the costs
from time to time of the most expensive benefits available to the
Participant under all Plans listed in Section 4.1 (including the
portion of such costs payable with nonelective Plan Sponsor
contributions).
4.6 Election Procedure. Approximately thirty (30) days prior to the
commencement of each Plan Year, the Administrator shall provide one or
more written election forms and salary reduction agreements to each
Participant and to any other Employee who is expected to become a
Participant at the beginning of the Plan Year effective as of the
first day of the
3
<PAGE> 4
Plan Year. Each Participant who desires one or more optional benefits
coverage described in Section 4.1 for the Plan Year shall so specify
on the appropriate election form(s) and shall agree to a reduction in
his/her compensation. The amount of the reduction in the Participant's
compensation for the Plan Year for each optional benefit described in
Section 4.1 that is elected by the Participant shall equal the
Participant's share of the cost of such optional benefit. Each
election form must be completed and returned to the Administrator on
or before such date as the Administrator shall specify, which date
shall be no later than the beginning of the first pay period for which
the Participant's salary reduction agreement will apply.
4.7 New Participants. As soon as practicable before an Employee becomes a
Participant under Section 3.1 or 3.3, the Administrator shall provide
the employee with the written election forms and salary reduction
agreements described in Section 4.6. If the Employee desires one or
more optional benefits coverage described in Section 4.1 for the
balance of the Plan Year, he/she shall so specify on the election
forms and shall agree to a reduction in his/her compensation as
provided in Section 4.6. The election forms must be completed and
returned to the Administrator on or before such date as the
Administrator shall specify, which date shall be no later than the
beginning of the first pay period for which the Participant's salary
reduction agreements will apply.
4.8 Failure to Elect. A new Participant failing to return a completed
election form to the Administrator on or before the specified due date
for the initial Plan Year of the Plan, or for the Plan Year in which
he/she becomes a Participant shall be deemed to have elected to
receive his/her full compensation in cash. An existing Participant
failing to return a completed election form to the Administrator
relating to the optional benefits described in Section 4.1 on or
before the specified due date for any subsequent Plan Year, shall be
deemed to have made the same election as was in effect as to such
optional benefits just prior to the end of the preceding Plan Year.
The Participant shall also be deemed to have agreed to a reduction in
his/her compensation for the subsequent Plan Year equal to the
Participant's share of the cost from time to time during such Plan
Year of each such optional benefit he/she is deemed to have elected
for such Plan Year.
4.9 Change of Elections.
(a) Any Participant may change a Benefit election after the Plan
Year (to which such election relates) has commenced, and make
new elections with respect to the remainder of such Plan Year
if the changes are necessitated by and are consistent with a
change in family status which is acceptable under rules and
regulations adopted by the Department of Treasury. Benefit
election changes are consistent with family status changes
only if the election changes are necessary or
appropriate as a result of the family status change. Any new
election under this Section 4.9 shall be effective at such
time as the Administrator shall prescribe, but not earlier
than the first pay period
4
<PAGE> 5
beginning after the election form is completed and returned
to the Administrator. For the purposes of this paragraph, the
following events shall be considered examples of a change in
family status:
(1) the marriage or divorce of the Participant;
(2) the birth or adoption of a child by the Participant;
(3) the death of the Participant's spouse or a
Dependent;
(4) the termination or commencement of employment of the
Participant's spouse;
(5) the switching from part-time to full-time employment
status (or from full- time to part-time status) by
the Participant or the Participant's spouse;
(6) the taking of an unpaid leave of absence by the
Participant or the Participant's spouse; or
(7) a significant change in health coverage attributable
to the Spouse's employment.
(b) If the Administrator offers a group health insurance program
under the Plan, and a Participant has elected benefits
thereunder, and the independent third party insurer
underwriting such plan increases or decreases the premium
cost, the Salary Reduction Agreement of such Participant
shall be automatically revised accordingly. In the event of a
substantial increase in premium costs, if the Participant
elects in writing, within thirty (30) days after notice of
such substantial increase, to drop his/her enrollment in the
prior group health insurance program adopted by the
Administrator and offered under this plan, the Participant's
Salary Reduction Agreement shall be automatically revised
consistent with the Participant's election to participate in
the new group health insurance program.
4.10 Changes by Administrator. If the Administrator determines, before or
during any Plan Year, that the Plan may fail to satisfy for such Plan
Year any nondiscrimination requirement imposed by the Code or any
limitation on benefits provided to Key Employees, the Administrator
shall take such action as it deems appropriate, under rules uniformly
applicable to similarly situated Participants, to assure compliance
with such requirement or limitation. Such action may include, with
limitation, a modification of elections by highly compensated
Employees or Key Employees with or without the consent of such
Employees.
4.11 Revocation of Salary Reduction Agreement. Except as otherwise provided
in this Plan, a Participant's Salary Reduction Agreement shall
continue in effect from Plan Year to Plan Year unless and until
revoked by the Participant. Revocation must be in writing and
delivered
5
<PAGE> 6
to the Company.
4.12 Effective Date of Revocation. Except as otherwise provided in this
Plan, any revocation delivered to the Company shall be effective on
the first pay period of the Plan Year next following the Plan Year
during which the revocation is received by the Company.
ARTICLE V
5.1 Plan Administrator. The Primary Sponsor may serve as the Administrator
or it may designate any entity, individual or committee or individuals
to serve as Administrator. The administration of the Plan shall be
under the supervision of the Administrator. It shall be a duty of the
Administrator to see that the Plan is carried out, in accordance with
its terms, for the exclusive benefit of persons entitled to
participate in the Plan without discrimination among them. The
Administrator will have full power to administer the Plan in all of
its details, subject to applicable requirements of law. For this
purpose, the Administrator's powers will include, but will not be
limited to, the following authority, in addition to all other powers
provided by this Plan:
(a) To make and enforce such rules and regulations as it deems
necessary or proper for the efficient administration of the
Plan, including the establishment of any claims procedures
that may be required by applicable provisions of law;
(b) To interpret the Plan and its interpretation thereof in good
faith to be final and conclusive on all persons claiming
benefits under the Plan;
(c) To decide all questions concerning the Plan and the
eligibility of any person to participate in the Plan;
(d) To appoint such agents, counsel, accountants, consultants,
and other persons as may be required to assist in
administering the Plan;
(e) To allocate and delegate its responsibilities under the Plan
and to designate other persons to carry out any of its
responsibilities under the Plan, any such allocation,
delegation or designation to be in writing.
(f) To reject elections or to limit contributions or benefits for
certain highly compensated Participants if it deems such to
be desirable in order to avoid discrimination under the Plan
in violation of applicable provisions of the Code;
Notwithstanding the foregoing, any claim which arises under any excess
group term life insurance or medical or dental plan shall not be
subject to review under this Plan, and the
6
<PAGE> 7
Administrator's authority under this Section 5.1 shall not extend to
any matter as to which an administrator under any such plan is
empowered to make determinations under such plan.
The Administrator, if it is someone other than the Primary Sponsor,
may be removed by the Primary Sponsor at anytime upon the giving of
thirty (30) days prior written notice to the Plan Administrator. The
Plan Administrator may resign at any time upon the giving of thirty
(30) days prior written notice to the Primary Sponsor.
5.2 Examination of Records. The Administrator will make available to each
Participant such of his/her records as pertain to the Participant, for
examination at reasonable times during normal business hours.
5.3 Reliance on tables, etc. In administering the Plan, the Administrator
will be entitled to the extent permitted by law to rely conclusively
on all tables, valuation, certificates, opinions, and reports which
are furnished by accountants, counsel, or other experts employed or
engaged by the Administrator.
5.4 Nondiscriminatory exercise of authority. Whenever, in the
administration of the Plan, any discretionary action by the
Administrator is required, the Administrator shall exercise its
authority in a nondiscriminatory manner so that all persons similarly
situated will receive substantially the same treatment.
5.5 Indemnification of Administrator. The Primary Sponsor agrees to
indemnify and to defend to the fullest extent permitted by law any
Employees serving as the Administrator or as a member of a committee
designated as Administrator (including any Employee or former Employee
who formerly served as Administrator or as a member of such
committee); also, any person serving as an enroller for the Plan,
against all liabilities, damages, costs, and expenses (including
attorney's fees and amounts paid in settlement of any claims approved
by the Primary Sponsor) occasioned by any act or omission to act or
any material used in connection with the Plan, if such act or omission
or material is in good faith.
5.6 Assignability. Except insofar as applicable law may otherwise
require no benefits hereunder, shall be subject in any manner
to alienation by anticipation, sale, transfer, assignment, bankruptcy,
pledge, attachment, charge or encumbrance of any kind, and may attempt
to alienate, sell, transfer, assign, pledge, attach, charge or
otehrwise encumber any such benefit, whether presently or hereafter
acquired, shall be void.
5.7 Grievance Procedures. Any person believing that the Primary Sponsor
has failed to apply his/her Salary Reduction Amount in accordance with
his/her Salary Reduction Agreement may file a claim in writing for the
additional benefits to which he/she believes he/she is entitled. The
Plan Administrator shall do all in his/her power to help the
Participant
7
<PAGE> 8
satisfy his/her claim.
A. In the event that any grievance is not satisfied within sixty
(60) days, the Administrator shall give written notification
to the Participant as to the status of the grievance. If the
request for additional benefits is denied in whole, or in
part by any insurance plan, the Plan Administrator shall
notify the Participant in writing the specific reasons for
denial.
B. If benefits are provided or administered by an insurance
company which is subject to regulation under the insurance
laws, the claims procedure relating to these benefits may
provide for review. If so, that insurance company shall be
the entity to which claims are addressed.
ARTICLE VI
LIMITATIONS ON BENEFITS
6.1 Nontaxable benefits provided to Employees who are classified as Key
Employees shall not exceed twenty-five percent (25%) of the total
nontaxable benefits provided to all Employees.
In the event that nontaxable benefits to such Key Employees should
exceed twenty-five percent (25%) of the total nontaxable benefits
provided to all employees, then such Key Employees receiving benefits
shall be treated as though they received all available taxable
benefits under the Plan. For purposes of applying this Section, the
term "nontaxable benefits" refers to the cost of coverage.
A. If the Administrator finds discrimination exists, the
Administrator may adjust the Salary Reduction elections of
Key Employees prorated until not more than twenty-five
percent (25%) of total nontaxable benefits are provided to
Key Employees.
B. Contributions and benefits under the Plan shall not
discriminate in favor of Highly Compensated Participants.
C. "Highly Compensated Employees" are defined in Section 125 of
the Code.
ARTICLE VII
AMENDMENT OR TERMINATION
7.1 This Plan is intended to be permanent, but the Plan may be amended to
any extent, at any time, and from time to time, or may be terminated
at any time by the Primary Sponsor; provided, however, that the
Primary Sponsor shall have no power to amend the Plan in
8
<PAGE> 9
any manner which would deprive any Participant of any benefit which
had accrued to the Participant prior to the effective date of such
amendment, modification, supplementation or termination. The Primary
Sponsor specifically reserves the right to change, cancel or modify
all other plans and policies at any time.
ARTICLE VIII
MISCELLANEOUS
8.1 Information to be furnished. Participants shall provide the Plan
Sponsor and Administrator with such information and evidence, and
shall sign such documents, as may reasonably be requested from time to
time for the purpose of administration of the Plan.
8.2 Limitation of rights. Neither the establishment of the Plan, nor any
amendment thereof, nor the payment of any benefits, will be construed
as giving to any Participant or other person any legal or equitable
right against a Plan Sponsor or Administrator, except as provided
herein.
8.3 Governing law. This Plan shall be construed, administered and enforced
according to the laws of the State of GEORGIA, except to the extent
that such laws are preempted by the laws of the United States of
America. It is the intent of the employer that this Plan be a
qualified "Cafeteria Plan" under the provisions of Section 125 of the
Internal Revenue Code, and any ambiguities in the construction shall
be interpreted in order to effectuate such intent.
8.4 Non-guarantee of employment. Nothing contained in this Plan shall be
construed as a contract of employment between a Plan Sponsor and any
Employee, or as a right of any Employee to be continued in the
employment of a Plan Sponsor, or as a limitation of the right of a
Plan Sponsor to discharge any of its Employees, with or without cause.
8.5 Non-alienation of benefits. Benefits payable under this Plan shall not
be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, charge, garnishment, execution, or
levy of any kind, either voluntary or involuntary, including any such
liability which is for alimony or other payments for the support of a
spouse or former spouse, or for any other relative of the Employee,
prior to actually being received by the person entitled to the benefit
under the terms of the Plan. Any attempt to anticipate, alienate,
sell, transfer, assign, pledge, encumber, charge, or otherwise dispose
of any right to benefits payable hereunder, shall be void. A Plan
Sponsor shall not in any manner be liable for, or subject to, the
debts, contracts, liabilities, engagements, or torts of any person
entitled to benefits hereunder.
8.6 Divestment of Benefits. Subject only to the specific provisions of
this Plan, nothing shall be deemed to divest a Participant of a right
to the benefit to which the Participant becomes
9
<PAGE> 10
entitled in accordance with the provisions of this Plan.
8.7 Legal Contract. This Plan, together with the Salary Reduction
Agreement executed by each Participant, is intended to be a valid
binding and legally enforceable contract.
8.8 To the extent required by the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended from time to time, continuation
of coverage shall be provided in accordance with applicable law. The
Administrator shall notify the Participant in writing within the time
period specified by law of the Participant's rights and
responsibilities relating to continuation coverage under COBRA.
8.9 Notice. Any notice, application, instruction, designation or other
form of communication required to be given or submitted by any
Participant, shall be in such form, as is prescribed from time to time
by the Administrator, sent by first class mail or delivered in person
to the Administrator. Any notice, statement, report or other
communication from a Plan Sponsor or the Administrator to any
Participant required or permitted by the Plan shall either be mailed
by first class mail to such person at his/her address last appearing
on the records of the Plan Sponsor, or otherwise be provided to such
person by any other method allowed by law. Each person entitled to
receive any benefit under the Plan shall file with the Administrator
his/her complete mailing address and each change thereof. If the
Administrator shall be in doubt as to whether benefits are being
received by the person entitled thereto, it may, by registered mail
addressed to such person at his/her address, last known to the
Administrator, notify such person that all future benefits will be
withheld until such person submits to the Administrator his/her proper
mailing address and such other information as the Administrator may
reasonably request.
8.10 Filing of Information. Each Participant shall file with the
Administrator such pertinent information concerning himself/herself
and his/her dependents as a Plan Sponsor or the Administrator may
specify, and in such manner and form as a Plan Sponsor or the
Administrator may specify or provide, and such Participant shall not
have rights or be entitled to any benefits or further benefits
hereunder unless such information is filed by him/her or on his/her
behalf.
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<PAGE> 11
IN WITNESS WHEREOF, the Primary Sponsor has caused this instrument to be
executed effective as of the day and year first above written.
SIMIONE CENTRAL HOLDINGS, INC.
Signed: /s/Gary M. Bremer
-----------------------------------
By: GARY M. BREMER
-----------------------------------
Title: President/CEO
-----------------------------------
11
<PAGE> 1
EXHBIT 10.13
SUBLEASE
1. PARTIES
This Sublease dated this 22 day of November, 1996, is made between
ENVIRONMENTAL DESIGN INTERNATIONAL, LTD.("Sublessor") and SIMIONE
CENTRAL, INC.("Sublessee").
2. MASTER LEASE
Sublessor is the lessee under a written lease dated December 8, 1993,
wherein Resurgens Plaza South Associates, L.P. ("Lessor") leased to
Sublessor the real property located in the City of Atlanta, County of
Fulton, State of Georgia, described as Suite 200, 6600 Powers Ferry Road,
Atlanta, Georgia 30339. Said lease is herein referred to as the "Master
Lease" and is attached hereto as Exhibit "A".
3. PREMISES
Sublessor hereby subleases to Sublessee on the terms and conditions set
forth in this Sublease the entire portion of the Master Premises
("Premises") consisting of 8,771 rentable square feet as depicted on
Exhibit "B" attached hereto.
4. WARRANTY BY SUBLESSOR
Sublessor warrants and represents to Sublessee that the Master Lease has
not been amended or modified that Sublessor is not now, and as of the
commencement of the Term hereof will not be, in default or breach of any
of the provisions of the Master Lease, and that Sublessor has no
knowledge of any claim by Lessor that Sublessor is in default or breach
of any of the provisions of the Master Lease.
5. TERM
5.1 The Term of this Sublease shall commence on March 1, 1997 and end
on February 28, 2001, unless otherwise sooner terminated in
accordance with the provisions of this Sublease. Possession of the
Premises ("Possession") shall be delivered to Sublessee on the
commencement of the Term and the Premises shall be in
substantially the same condition as they are in as of the date of
this Sublease. If for any reason Sublessor does not deliver
Possession to Sublessee on the commencement of the Term, or same
are not in the condition set forth above, Sublessor shall not be
subject to any liability for such failure, the Termination Date
shall not be extended by the delay, and the validity of this
Sublease shall not be impaired, but rent shall abate until
delivery of Possession in the condition set forth above.
Notwithstanding the
<PAGE> 2
foregoing, if Sublessor has not delivered Possession in the
condition set forth above to Sublessee on or before April 1, 1997,
then at any time thereafter and before such delivery of
Possession, Sublessee may give written notice to Sublessor of
Sublessee's intention to cancel this Sublease. Said notice shall
set forth an effective date for such cancellation which shall be
at least ten (10) days after delivery of said notice to Sublessor.
If Sublessor delivers such Possession to Sublessee on or before
such effective date, this Sublease shall remain in full force and
effect. If Sublessor fails to deliver such possession to sublessee
on or before such effective date, then, at the option of
Sublessee: (a) this Sublease shall be canceled, in which case all
consideration previously paid by Sublessee to Sublessor on account
of this Sublease shall be returned to Sublessee, this Sublease
shall thereafter be of no further force or effect, and Sublessor
shall have no further liability to Sublessee on account of such
delay or cancellation; or (b) Sublessee may take whatever actions
and remedies it is entitled to at law and/or equity. If Sublessor
permits Sublessee to take Possession prior to the commencement of
the Term, such early Possession shall not advance the Termination
Date and shall be subject to the provisions of this Sublease
including, without limitation, the payment of rent.
5.2 Subject to the prior written consent of Sublessee, Lessor may
terminate the Master Lease at any time during the Term. In the
event of any termination of this Sublease under the provisions of
this, paragraph 5.2, the Sublease shall, after the termination, be
of no further force or effect and, except as set forth in this,
paragraph 5.2, Sublessee shall have no further liability to
Sublessor on account of this Sublease or any matters related
thereto.
6. RENT
Sublessee shall pay to Lessor as minimum rent, without deduction, set
off, notice or demand at the office of Lessor, the sum set forth below,
per month, in advance, on the first day of each month of the Term. If the
Term begins or ends on a day other than the first or last day of the
month, the rent for the partial month shall be prorated on a per diem
basis.
March 1997 to February 1998 9,352.04
March 1998 to February 1999 10,082.96
March 1999 to February 2000 10,813.87
March 2000 to February 2001 11,544.79
In addition to the above, Sublessee shall also pay to Lessor Additional
Rental and all other sums due Lessor under the Master Lease during the
Term to the extent that such Additional Rent is applicable to the
Premises and the Term.
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<PAGE> 3
7. USE OF PREMISES
The Premises shall be used and occupied only for general office purposes
and for no other use or purpose.
8. ASSIGNMENT AND SUBLETTING
Sublessee shall not assign this Sublease or further sublet all or any
part of the Premises without the prior written consent of Sublessor,
which consent shall not be unreasonably withheld (and the consent of
Lessor, if such is required under the terms of the Master Lease).
Notwithstanding anything to the contrary, however, Sublessee shall have
the right to sublet or assign all or any part of the Premises to any
entity with which Sublessee is related through full or partial common
control, ownership or management.
9. OTHER PROVISIONS OF SUBLEASE
All applicable terms and conditions of the Master Lease are incorporated
into and made a part of this Sublease as if Sublessor were the lessor
thereunder, Sublessee the lessee thereunder, and the Premises the Master
Premises, except for the rental amounts stipulated herein. Sublessee
assumes and agrees to perform the lessee's obligations under the Master
Lease during the Term to the extent that such obligations are applicable
to the Premises and the Term. Neither Sublessor nor Sublessee shall
commit or suffer any act or omission that will violate any of the
provisions of the Master Lease. Sublessor shall exercise due diligence in
attempting to cause Lessor to perform its obligations under the Master
Lease for the benefit of Sublessee. If the Master Lease terminates, this
Sublease shall terminate and the parties shall be relieved of any further
liability or obligation under this Sublease, provided however, that if
the Master Lease terminates as a result of a default or breach by
Sublessor or Sublessee under this Sublease and/or the Master Lease, then
the defaulting party shall be liable to the non-defaulting party for the
damage suffered as a result of such termination.
It is expressly understood and agreed, however, that Sublessor is not in
the position to render any of the services or to perform any of the
obligations required of Sublessor by the terms of this Sublease which are
the responsibility of the Lessor under the Master Lease, and that
performance by Sublessor of its obligations hereunder is conditioned upon
due performance by Lessor of its corresponding obligations under the
Master Lease. It is further understood and agreed, therefore, that
notwithstanding anything to the contrary contained in this Sublease,
Sublessor shall not be in default under this Sublease for failure to
render such services or perform such obligations required of Sublessor by
the terms of this Sublease which are the responsibility of the Lessor
under the Master Lease, but Sublessor agrees to exercise due diligence
to insure that Lessor performs said obligations as above provided. The
terms "due diligence" shall not include legal action against Lessor for
its failure to so perform unless Sublessee agrees to pay all costs and
expenses incurred in connection therewith.
3
<PAGE> 4
10. ATTORNEYS' FEES
If Sublessor or Sublessee shall commence an action against the other
arising out of or in connection with this Sublease, the prevailing party
shall be entitled to recover its costs of suit and reasonable attorney's
fees.
11. NOTICES
All notices and demands which may or are required or permitted to be
given by either party on the other hereunder shall be in writing. All
notices and demands by the Sublessor to Sublessee shall be sent by United
States Mail, postage prepaid, addressed to the Sublessee at the address
hereinbelow, or to such other place as Sublessee may from time to time
designate in a notice to the Sublessor. All notices and demands by the
Sublessee to Sublessor shall be sent by United States Mail, postage
prepaid, addressed to the Sublessor at the address set forth herein, and
to such other person or place as the Sublessor may from time to time
designate in a notice to the Sublessee.
To Sublessor:
Environmental Design International, Ltd.
6600 Powers Ferry Rd., Ste. 200
Atlanta, GA 30339
To Sublessee:
Simione Central, Inc.
6600 Powers Ferry Road
Suite 300
Atlanta, Georgia 30339
12. CONSENT BY LESSOR
Lessor hereby consents to the foregoing Sublease without waiver or
release of any other rights of Lessor under the Master Lease or any
obligations of Sublessor under said Master Lease.
Date: 11/22/96 Date: 11/19/96
4
<PAGE> 5
Sublessor: Sublessee:
ENVIRONMENTAL DESIGN SIMIONE CENTRAL, INC.
INTERNATIONAL, LTD.
By: /s/ Authorized Officer By: /s/ James A. Tramonte
----------------- ---------------------
Title: President Title: Secretary
-------------- ------------------
RESURGENS PLAZA SOUTH ASSOCIATES, L.P.,
A Georgia Limited Partnership
By: RESURGENS PLAZA SOUTH, LTD.,
A Georgia Limited Partnership
By: RESURGENS - AHE, L.P.,
A Georgia Limited Partnership,
its sole general partner
By: RESURGENS PLAZA - AHE, INC.,
A Georgia Corporation,
its sole general partner
By: /s/ James L. McMahan
--------------------
JAMES L. McMAHAN
Its: President
5
<PAGE> 1
EXHIBIT 10.14
CONSENT AND ESTOPPEL CERTIFICATE
AND ASSIGNMENT
The undersigned representative of Resurgens Plaza South Associates,
L.P. DOES HEREBY CERTIFY, REPRESENT, AND WARRANT to Simione Central, Inc., a
Georgia corporation, the following:
1. The undersigned is the true, lawful and duly authorized agent of
Resurgens Plaza South Associates, L.P. (the "Landlord").
2. Resurgens Plaza South Associates, L.P. is "Landlord" under that
certain Lease Agreement dated as of January 21, 1992 (the "Lease"), by and
between Landlord and Central Health Services, Inc. as tenant (the "Tenant"), a
true and correct copy of which, together with all addenda and amendments
thereto, if any, is attached as Exhibit A.
3. The Lease has not been modified, amended, and or supplemented,
except as indicated in Exhibit A, and is in full force and effect in accordance
with the provisions thereof.
4. The Landlord or any agent thereof has not assigned its interests in
the Lease.
5. The original term of the Lease commenced and will end on December
31, 1997, unless sooner terminated in accordance with the provisions of the
Lease.
6. The Tenant currently leases approximately 53,169 square feet of
rentable area under the Lease.
7. The current rent being paid by Tenant to Landlord under the Lease
is $61,897.60 per month. Such current rent due pursuant to the Lease has been
paid through October 1996 and is being paid on a current basis. Except as set
forth in this Lease, Tenant does not pay Landlord and Tenant is not obligated
to pay Landlord additional sums under the terms of the Lease.
8. All of the terms, conditions, and provisions of the Lease to be
performed by the Tenant have been duly and timely performed in all material
respects.
9. There has been no default, nor any claim of default, under the
Lease by either Tenant, the Landlord or any agent thereof; and no event has
occurred which, with the giving of notice, the lapse of time, or both, would
constitute a default under the Lease by either Tenant, the Landlord or any
agent thereof.
10. The Landlord presently has no charge, lien, claim, defense,
set-off, or counterclaim against Tenant under the Lease or against the Lease,
other than the Landlord's lien provided in the Lease.
<PAGE> 2
11. Tenant hereby assigns to Simione Central, Inc. ("Simione"), and
Simione hereby accepts, the Assignment of the Lease, effective October 31,
1996. Landlord consents to the terms of this Assignment.
IN WITNESS WHEREOF, the undersigned have executed this Consent and
Estoppel Certificate and Assignment as of this 29th day of October, 1996.
Resurgens Plaza South Associates, L.P.
Resurgens Plaza AHE, Inc.
By: /s/ J.L. McMahon
------------------------
Name: James L. McMahon
Title: President
Simione Central, Inc.
By: /s/ Gary M. Bremer
------------------------
Name: Gary M. Bremer
Title: Chairman and C.E.O.
Central Health Services, Inc.
By: /s/ Gary M. Bremer
------------------------
Name: Gary M. Bremer
Title: President and C.E.O.
<PAGE> 1
EXHIBIT 10.15
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT is made effective as of the 10th day of
December 1996, between INFOMED HOLDINGS, INC. (the "Company") and GARY
M. BREMER (the "Executive").
INTRODUCTION
The Company and the Executive desire to enter into an employment
agreement embodying the terms and conditions of Executive's employment.
NOW, THEREFORE, the parties agree as follows:
1. DEFINITIONS.
(a) "Affiliate" means any person, firm, corporation, partnership,
association or entity that, directly or indirectly or through one or more
intermediaries, controls, is controlled by or is under partial or complete
common control with the Company.
(b) "Applicable Period" means the period of the Executive's
employment hereunder and for 1 year after termination of his employment with
the Company, provided, that such one (1) year period shall not apply if within
six (6) months before or two (2) years after a Change in Control, the Executive
terminates his employment with the Company for Good Reason or the Company
terminates his employment without Cause.
(c) "Area" means the states of Texas and California and all states
of the United States east of the Mississippi River. The Area may be adjusted
from time-to-time but only pursuant to a written agreement between the
Executive and the Company.
(d) "Board" means the Board of Directors of the Company.
(e) "Business of the Company" means any business that: (i)
involves the marketing, sale or performance of administrative, management,
consulting or information management or resource services to the home
healthcare industry.
(f) "Cause" means the occurrence of all conditions specified in
Section 4(f) of this Agreement.
(g) "Change in Control" means the consummation of (i) a merger,
consolidation, share exchange, combination, reorganization, or like transaction
involving the Company in which the shareholders of the Company immediately
prior to such transaction do not own at least fifty percent (50%) of the value
or voting power of the issued and outstanding capital stock of the Company or
its successor immediately after such transaction, (ii) the sale or transfer
(other than as security for the Company's obligations) of more than fifty
percent (50%) of the assets of the
<PAGE> 2
Company in any transaction, a series of related transactions, or a series of
transactions occurring within a one (1) year period, in which the Company, any
corporation controlled by the Company, or the shareholders of the Company
immediately prior to the transaction do not own at least fifty percent (50%) of
the value or voting power of the issued and outstanding equity securities of
the acquiror immediately after the transaction (iii) except as a result of a
Public Offering, the sale or transfer of fifty percent (50%) or more of the
value or voting power of the issued and outstanding capital stock of the
Company by the holders thereof in a single transaction, a series of related
transactions, or a series of transactions occurring within a one (1) year
period, in which the Company, any corporation controlled by the Company, or the
shareholders of the Company immediately prior to such transaction do not own at
least fifty percent (50%) of the value or voting power of the issued and
outstanding equity securities of the acquiror immediately after the
transaction, (iv) the dissolution or liquidation of the Company, (v) the
acquisition by any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) (a "Person") of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of voting securities of the
Company where such acquisition causes such person to own 25% or more of the
combined voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that for purposes of this
subsection (v), the following shall not be deemed to result in a Change in
Control: (A) any acquisition directly from the Company, (B) any acquisition by
any employee benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company, (C) any acquisition by
merger, consolidation, share exchange, combination, reorganization, sale, or
transfer or like transaction not described in Paragraph (i) or (iii) above and
in which no Person (other than an employee benefit plan or related trust
sponsored or maintained by the Company, any corporation controlled by the
Company, or company resulting from such business combination) becomes the
beneficial owner of 25% or more of the combined voting power of the then
outstanding voting securities of such company as a result of the transaction,
or (D) the acquisition of beneficial ownership of voting securities of the
Company by the Executive or a Person who beneficially owns 25% of the voting
power of the outstanding voting securities of the Company as of the date
hereof; and provided, further, that if any Person's beneficial ownership of the
Outstanding Company Voting Securities reaches or exceeds 25% as a result of a
transaction described in clause (A) above, and such Person subsequently
acquires beneficial ownership of additional voting securities of the Company
other than as a result of a transaction in clause (A) above, such subsequent
acquisition shall be treated as an acquisition that causes such Person to own
25% or more of the Outstanding Company Voting Securities; or (vi) individuals
who as of the date hereof, constitute the Board (the "Incumbent Board") cease
for any reason to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to the date hereof
whose election, or nomination for election by the Company's shareholders, was
approved by a vote of at least two-thirds of the directors then comprising the
Incumbent Board shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors or other
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<PAGE> 3
actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board. Notwithstanding the foregoing, the consummation of
the transactions contemplated by the Amended and Restated Agreement and Plan of
Merger by and among InfoMed Holdings, Inc., Simione Central Holding, Inc. and
InfoSub, Inc. dated as of September 5, 1996 shall not result in a Change in
Control for purposes of this Agreement.
(h) "Company Invention" means any Invention which is conceived by
the Executive alone or in a joint effort with others during the period of the
Executive's employment hereunder or during the Executive's employment with the
Company or an Affiliate prior or subsequent to the term of this Agreement which
(i) may be reasonably expected to be used in a product of the Company or an
Affiliate, or a product similar to a Company or Affiliate product, (ii) results
from work that the Executive has been assigned as part of his duties as an
employee of the Company, (iii) is in an area of technology which is the same or
substantially related to the areas of technology with which the Executive is
involved in the performance of his duties as an employee of the Company, or
(iv) is useful, or which the Executive reasonably expects may be useful, in any
manufacturing or product design process of the Company.
(i) "Competing Business" means any person, firm, corporation,
joint venture or other business entity which is engaged in the Business of the
Company (or any aspect thereof) within the Area.
(j) "Confidential Information" means data and information relating
to the business of the Company or an Affiliate (which does not rise to the
status of a Trade Secret) which is or has been disclosed to the Executive or of
which the Executive became aware as a consequence of or through its
relationship to the Company and which has value to the Company and is not
generally known to its competitors. Confidential Information shall not include
any data or information that has been voluntarily disclosed to the public by
the Company (except where such public disclosure has been made by the Executive
without authorization) or that has been independently developed and disclosed
by others, or that otherwise enters the public domain through lawful means.
The provisions in this Agreement restricting the use of Confidential
Information shall survive for a period of two (2) years following termination
of this Agreement.
(k) "Disability" means a disability of the Executive within the
meaning of Section 72(m)(7) of the Internal Revenue Code; that is, the
Executive is unable to engage in any substantial gainful activity with the
Company or any other employer, by reason of any medically determinable physical
or mental impairment which can be expected to result in death or to be of long
continued and indefinite duration. If the Executive claims to have a
Disability, he shall submit to the Company a written request for Disability
within the meaning of this definition. The Company may then elect to have the
Executive submit to an examination by a licensed physician selected by the
Company. The determination as to whether the Executive is subject to a
Disability shall be made at the sole reasonable discretion of the Company based
on medical evidence submitted by either or both of the physicians.
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<PAGE> 4
(l) "Good Reason" means the occurrence of any of the following
events: (i) the Executive's job title described in Section 2 hereof is
modified without the Executive's written consent, (ii) the Executive is
required to report to anyone other than the Board without the Executive's
written consent, or (iii) the Company changes the location where the Executive
is based to more than seventy-five (75) miles from his present job location
without the Executive's written consent.
(m) "Invention" means any discovery, whether or not patentable,
including, but not limited to, any useful process, method, formula, technique,
machine, manufacture, composition of matter, algorithm or computer program, as
well as improvements thereto, which is new or which the Executive has a
reasonable basis to believe may be new.
(n) "Public Offering" means the offering or sale by the Company of
equity securities pursuant to a registration statement filed in accordance with
the Securities Act of 1933, as amended, or any comparable law then in effect,
and the effective date of any such Public Offering shall be the first day on
which the securities covered thereby may lawfully be offered and sold pursuant
to such registration statement.
(o) "Termination Date" means the date which corresponds to the
first to occur of (i) the death or Disability of the Executive, (ii) the last
day of the Term as provided in Section 4(a) below or (iii) the date set forth
in a notice given pursuant to Section 4(b) below.
(p) "Trade Secrets" means information including, but not limited
to, technical or nontechnical data, formulas, patterns, compilations, programs,
devices, methods, techniques, drawings, processes, financial data, financial
plans, product plans or lists of actual or potential customers or suppliers
which (i) derives economic value, actual or potential, 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 (ii) is the
subject of efforts that are reasonable under the circumstances to maintain its
secrecy. The provisions in this Agreement restricting the use of Trade Secrets
shall survive termination of this Agreement for so long as is permitted by the
Georgia Trade Secrets Act of 1990, O.C.G.A Section Section 10-1-760-10-1-767.
(q) "Work" means a copyrightable work of authorship, including
without limitation, any technical descriptions for products, user's guides,
illustrations, advertising materials, computer programs (including the contents
of read only memories) and any contribution to such materials.
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<PAGE> 5
2. TERMS AND CONDITIONS OF EMPLOYMENT.
(a) Employment. The Company hereby employs the Executive as its
Chief Executive Officer, and the Executive accepts such employment with the
Company subject to the terms and conditions hereof. The Executive also agrees
to act as the Chairman of the Board, if duly elected. The Executive shall have
such duties and responsibilities as are assigned by the Board (but to be
commensurate with Executive's position(s)) and shall have the general
supervision, direction and control of the business of the Company, subject to
overall control of the Board. The Executive shall be required to report only
to the Board.
(b) Throughout the Executive's employment hereunder, the Executive
shall devote sufficient time, energy and skill to faithfully and industriously
perform his duties hereunder, and shall diligently follow and implement all
management policies and decisions of the Company.
3. COMPENSATION.
(a) Base Salary. In consideration for the Executive's services
hereunder, the Company shall pay to the Executive an annual base salary in the
amount of $329,000 for the first full twelve calendar months of the Term.
Executive's annual base salary may be reviewed annually by the Company, and the
Company may increase the Executive's annual base salary in its discretion. The
Company shall pay annual base salary in accordance with the normal payroll
payment practices of the Company and subject to such deductions and
withholdings as law or policies of the Company, from time to time in effect,
require.
(b) Bonus. The Executive shall be entitled to an annual bonus of
$70,000 for each calendar year, starting with the calendar year ending December
31, 1997, if the Company's earnings before interest, taxes, depreciation and
amortization ("EBITDA") for such year as determined in accordance with
generally accepted accounting principles by the Company's Chief Financial
Officer equals or exceeds 80% of the target EBITDA established by the Board for
such year. Such bonus will be payable, if so earned, as soon as feasible after
the receipt by the Company of certified financial statements from its certified
public accountants for such year. The Executive may be entitled to any other
bonuses determined by the Board in accordance with an operating budget or other
specific bonus criteria, if any, adopted by the Board for purposes of executive
bonus calculations.
(c) Car Allowance. The Company shall pay the Executive a monthly
car allowance of $2,000.
(d) Memberships. The Company shall reimburse the Executive for
memberships in business, social or recreational clubs in an aggregate amount
not to exceed $4,000 for each twelve months of the Term.
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<PAGE> 6
(e) Insurance. The Company shall reimburse the Executive for
premiums on life and/or disability insurance policies owned by him in an
aggregate amount not to exceed $18,000 for each twelve months of the Term.
(f) Vacation. The Executive shall be entitled to such vacation
and time off with pay as generally may be available to executive employees of
the Company from time to time.
(g) Benefits. In addition to the annual base salary, bonus, and
other benefits payable to the Executive as set forth in this Agreement, the
Executive shall be entitled to such benefits as generally may be made available
to executive employees of the Company from time to time; provided, however,
that nothing contained herein shall require the establishment or continuation
of any particular plan or program.
(h) Expenses. The Executive shall be entitled to be reimbursed in
accordance with the policies of the Company, as adopted and amended from time
to time, for all reasonable and necessary expenses incurred by the Executive in
connection with the performance of the Executive's duties of employment
hereunder; provided, however, the Executive shall, as a condition of such
reimbursement, submit verification of the nature and amount of such expenses in
accordance with the reimbursement policies from time to time adopted by the
Company.
4. TERM, TERMINATION AND TERMINATION PAYMENTS.
(a) Term. The term of this Agreement (the "Term") shall commence
as of the date of this Agreement first set forth above (the "Commencement
Date") and shall expire on the third anniversary of the Commencement Date.
This Agreement shall be automatically renewed at the end of the initial term,
and at the end of each term thereafter, for a period of one (1) year on the
same terms and conditions provided herein, unless written notice of termination
is provided by either party at least sixty (60) days prior to the expiration of
the term then in force.
(b) Termination. This Agreement and the Executive's employment by
the Company hereunder may only be terminated (i) by mutual written agreement of
the Executive and the Company; (ii) by the Executive without Good Reason upon
not less than two (2) months prior to the Company; (iii) by the Executive with
Good Reason upon not less than two (2) weeks prior notice to the Company; (iv)
by the Company without Cause; or (v) by the Company for Cause. This Agreement
shall also terminate immediately upon the death or the Disability of the
Executive. Notice of termination by either the Company or the Executive shall
be given in writing and shall specify the basis for termination and the
effective date of termination.
(c) Effect of Termination. Upon termination of this Agreement and
the Executive's employment hereunder, the Company shall have no further
obligation to the Executive or the Executive's estate with respect to this
Agreement, except for payment of amounts, if any, for services rendered by
Executive through the Termination Date accrued pursuant to Section 3 hereof and
unpaid at the Termination Date, and termination payments set forth in Section
4(e)
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<PAGE> 7
hereof, if applicable. Nothing contained herein shall limit or impinge any
other rights or remedies of the Company or the Executive under any other
agreement or plan to which the Executive is a party or of which the Executive
is a beneficiary.
(d) Survival. The covenants of the Executive in Sections 5, 6, 7,
8 and 9 hereof shall survive the termination of this Agreement and the
Executive's employment hereunder and shall not be extinguished thereby.
(e) Termination by Company without Cause, or by Executive with
Good Reason. Except as set forth in Section 4(b)(i) and 4(g) hereof, upon
termination of Executive's employment (y) by the Company without Cause or (z)
by Executive for Good Reason subject to the requirements of this Subsection,
the Company shall be obligated to (i) pay the Executive a cash amount equal to
(I) the sum of salary under Section 3(a) plus bonus under Section 3(b) plus
payments and reimbursements under Section 3(c), (d) and (e) of Executive for
the immediately preceding calendar year multiplied by (II) the number of years
(including fractions thereof) remaining on the unexpired Term (if the Agreement
was not effective for the full year, such amounts shall be extrapolated based
on a full year and if the Agreement was not in effect at all during the
preceding calendar year, such amounts shall be based on the current calendar
year and shall be extrapolated based on a full year, and if the Executive did
not have a bonus for the applicable period, he shall be deemed for purposes of
this severance calculation to have had an annual bonus for the applicable
period of at least $46,667), plus (ii) at the Company's option, either provide
Executive all benefits made available to Executive pursuant to Section 3(g),
for the remaining Term, or pay Executive, a cash amount equal to the Company's
cost of providing coverage for such benefits for the remaining Term if
Executive had remained employed; provided however, that if the payments and
benefits under this Section 4(e) when combined with all other "payments in the
nature of compensation" (within the meaning of Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code") would result in a "parachute
payment" within the meaning of Code Section 280G as determined by the Company,
then the aggregate payments and benefits hereunder shall not exceed the largest
amount (when combined with all other "payments in the nature of compensation")
as determined by the Company that can be paid to Executive without resulting in
a "parachute payment." The cash amounts payable hereunder may be payable at the
Company's option either in one lump sum within thirty (30) days of termination
or in substantially equal installments payable no less frequently than monthly
over the remaining Term commencing within thirty (30) days of termination. If
the Company terminates Executive's employment without Cause or Executive
terminates his employment for Good Reason, the Company shall be required
thereupon to cause the Executive to be immediately released from all existing
obligations of the Executive to guaranty the indebtedness of the Company and
its subsidiaries to third parties. In order to be entitled to the severance
described in this Subsection, the Executive must, within 120 days after the
earlier of the date the Executive becomes aware or should have become aware of
the occurrence of the event constituting Good Reason, give the Company written
notice of the facts and circumstances giving rise to the occurrence of the
event constituting Good Reason, and the Company must thereafter have failed to
cure the event as provided below. The Company shall
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<PAGE> 8
have ten (10) days after the date of Executive's notice of the event
constituting Good Reason to cure or begin a cure if completing a cure within
ten (10) days is not feasible. For purposes of this Subsection, "cure" means,
in the case of an event of Good Reason described in (a) Section 1(l)(i), the
Company prospectively restoring the Executive's job title to his job title
immediately before the event or obtaining his written consent to another job
title, (b) Section 1(l)(ii), the Company prospectively requiring the Executive
to report to the position to which he was required to report immediately before
the event or obtaining his written consent to his reporting to another, (c)
Section 1(l)(iii), the Company prospectively moving the location where the
Executive is based to seventy-five (75) miles or less from the job location
where the Executive was based immediately before the event or obtaining his
written consent to another job location. The occurrence of each separate event
constituting Good Reason shall give the Executive the right to terminate his
employment with Good Reason, subject to compliance with the procedures in this
Subsection, and the failure of the Executive to notify timely the Company of
the occurrence of an event allowing the Executive to terminate his employment
with Good Reason shall not operate as a waiver to prevent the Executive from
terminating his employment for Good Reason in the event of the occurrence of
another event (including an event of the same type) with respect to which the
Executive satisfies the notice requirements herein.
(f) Termination with Cause. Subject to the provisions of this
Section 4(f) and notwithstanding anything herein to the contrary, the Company
may terminate this Agreement in the event that Executive; (i) commits any act
of fraud or embezzlement against the Company or any affiliate; (ii) commits any
act of gross negligence or gross mismanagement in the performance of his duties
hereunder; (iii) is convicted of a felony; (iv) uses alcohol or drugs in a
habitual and disabling manner; (v) breaches any of the covenants or conditions
of Section 5, 6, 7, 8, or 9 of this Agreement; or (vi) willfully and
continually fails to perform any of his duties described in Section 2 hereof.
Provided, any omission resulting from temporary disability which does not
constitute a "Disability" as defined in section 1(j) hereof shall not be deemed
on that basis to constitute gross negligence or gross mismanagement. The
grounds for termination detailed in this Section 4(f) are the sole grounds for
termination for which the Company may terminate Executive "with Cause".
Termination by the Company on any other grounds (other than the disability or
death of Executive) or lack thereof, is hereby deemed "without Cause".
Excepting only claims of fraud against the Company or embezzlement of funds,
the Company shall provide, within 120 days after the date the Board becomes
aware of the occurrence of the event constituting Cause, Executive with written
notice of any claim by it that Executive has committed grounds for termination
with Cause and Executive shall thereafter have thirty (30) days to cure by (i)
restoring the Company to the same position it would have been in but for the
alleged breach; or (ii) with respect to Subsection (f)(iv) in the absence of
other grounds for termination with Cause, ceasing any such habitual or
disabling use. If the Executive is unable or otherwise fails to so cure within
said thirty (30) days, then the Company may proceed with the termination with
Cause pursuant to the terms of this subsection. The occurrence of each
separate event constituting Cause shall give the Company the right to terminate
the Executive with Cause, subject to compliance with the procedures in this
Subsection, and the failure of the Company to notify timely the Executive of
the occurrence of an event allowing the Company
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<PAGE> 9
to terminate his employment with Cause shall not operate as a waiver to prevent
the Company from terminating the Executive's employment with Cause in the event
of the occurrence of another event (including an event of the same type) with
respect to which the Company satisfies the notice requirements herein. Until
the earlier of (i) the rendering of a decision by an arbitrator supporting the
Company's determination that the Executive's termination was with Cause as
provided below, or (ii) 90 days following the date of the Company's written
notice to the Executive of the grounds for Executive's termination of
employment with Cause, the Company shall pay Executive severance in
installments pursuant to Section 4(e) as if such termination were without
Cause. At the end of such period, the Company shall have no further obligation
to make payments pursuant to Section 4(e), unless the Company shall fail
(before or after the end of such period) to establish pursuant to a decision
rendered by an arbitrator that Executive's termination was with Cause. If the
Company fails to establish pursuant to a decision rendered by an arbitrator
that the termination was with Cause, Executive shall be deemed to have been
terminated without Cause and shall thereupon be entitled to his remaining
severance payments pursuant to Section 4(e), with any past due payments being
immediately paid in a cash lump sum. If the Company establishes pursuant to a
decision rendered by an arbitrator that Executive's termination was with Cause,
Executive shall immediately repay to the Company all severance payments he
received pursuant to Section 4(e). In the event that the Company properly
terminates this Agreement with Cause pursuant to this Section 4(f), it shall be
obligated to Executive for all obligations under this Agreement accruing prior
to the date of termination, but shall be relieved from all obligations under
this Agreement accruing subsequent to the date of termination. Notwithstanding
any other provision hereof, if the Company terminates Executive's employment
with Cause, the Company shall be required thereupon to cause the Executive to
be immediately released from all existing obligations of the Executive to
guaranty the indebtedness of the Company and its subsidiaries to third parties.
If the Company fails for any reason to satisfy its obligation to cause the
Executive to be so released, the Company shall be required to continue to pay
Executive's base salary as if he were still employed for the period after the
date of termination of employment that Executive remains liable under any such
guaranty; provided, however, that such payments shall not excuse the Company's
failure to cause such releases to occur and shall not limit any of the
Executive's rights to specific performance and/or damages relating to such
failure.
(g) Limitation on Section 4(e). Among other things, it is the
intent of this Agreement to continue to provide Executive with certain
compensation and benefits (as set forth in Section 4(e) of this Agreement) in
the event that the Company terminates this Agreement without Cause. However,
notwithstanding anything to the contrary, in the event that Executive in his
capacity as an officer, director or shareholder of the Company or any of its
subsidiaries, specifically and directly votes to terminate without Cause or not
to renew this Agreement, then, in such event, Executive shall not be entitled
to any of the compensation or benefits he would otherwise be entitled to under
Section 4(e) in the event the Company terminated without Cause.
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5. AGREEMENT NOT TO COMPETE AND NOT TO SOLICIT CUSTOMERS.
(a) Agreement Not to Compete. The Executive agrees that
commencing on the Commencement Date and continuing through the Applicable
Period he will not (except on behalf of or with the prior written consent of
the Company, which consent may be withheld in the Company's sole discretion),
within the Area, either directly or indirectly, on the Executive's own behalf,
or in the service of or on behalf of others, engage in or provide managerial,
supervisory, sales, marketing, financial, management information,
administrative or consulting services or assistance (collectively "Prohibited
Services") to, or own (other than ownership of less than five percent (5%) of
the outstanding voting security of an entity whose voting securities are traded
on a national securities exchange or quoted on the National Association of
Securities Dealers, Inc. Automated Quotation System) a beneficial or legal
interest in any Competing Business. Notwithstanding anything to the contrary,
however, this, section 5(a) shall not prohibit the Executive from engaging in
or providing the Prohibited Services to a Competing Business if and only if:
(i) that Competing Business is itself a home healthcare agency or hospice (and
not a business providing services to a home healthcare agency or hospice); (ii)
that Competing Business was not an actual or actively sought prospective
acquisition candidate, client or customer of the Company or an Affiliated
during the Executive's last year of employment with the Company; and (iii) the
Executive's performance of the Prohibited Services will inure only to the
benefit of that individual and specific Competing Business, and will not be
directly or indirectly sold, marketed, used, or made available to other
Competing Businesses. For purposes of this Section 5(a), the Executive
acknowledges and agrees that the Business of the Company is conducted in the
Area. Notwithstanding the foregoing, the Executive may (i) perform services
for Medical Center-West, Inc. pursuant to his employment agreement dated
October 31, 1996 and (ii) have an ownership interest in Healthfield, Inc.
(b) Agreement Not to Solicit Customers. The Executive agrees that
commencing on the Commencement Date and continuing through the Applicable
Period, he will not, either directly or indirectly, on the Executive's own
behalf or in the service of or on behalf of others, solicit or divert, or
attempt to solicit or divert, for the purpose of providing managerial,
supervisory, buying, sales, marketing, financial, management information
services, administrative or consulting services or assistance, any individual
or entity which was an actual or actively sought prospective acquisition
candidate, client or customer of the Company or an Affiliate and with whom the
Executive had direct or indirect contact as part of his employment during the
Executive's last year of employment with the Company. For purposes of this
Section 5(b), the Executive acknowledges and agrees that he/she is engaged in
performing services under this Agreement related to actual and actively sought
prospective acquisition candidate, clients or customers.
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6. AGREEMENT NOT TO SOLICIT EMPLOYEES.
The Executive agrees that commencing on the Commencement Date and
continuing through the Applicable Period, he will not, either directly or
indirectly, on the Executive's own behalf or in the service of or on behalf of
others, solicit, divert of hire, or attempt to solicit, divert or hire to any
Competing Business any person employed by the Company or an Affiliate, whether
or not such employee is a full-time employee or a temporary employee of the
Company or an Affiliate and whether or not such employment is pursuant to
written agreement and whether or not such employment is for a determined period
or is at will.
7. OWNERSHIP AND PROTECTION OF PROPRIETARY INFORMATION.
(a) Confidentiality. All Confidential Information and Trade
Secrets and all physical embodiments thereof received or developed by the
Executive while employed by the Company are confidential to and are and will
remain the sole and exclusive property of the Company. Except to the extent
necessary to perform the duties assigned to him by the Company or as required
by judicial process after at least ten (10) days written notice to the Company,
the Executive will hold such Confidential Information and Trade Secrets in
trust and strictest confidence, and will not use, reproduce, distribute,
disclose or otherwise disseminate the Confidential Information and Trade
Secrets or any physical embodiments thereof and may in no event take any action
causing or fail to take the action necessary in order to prevent, any
Confidential Information and Trade Secrets disclosed to or developed by the
Executive to lose its character or cease to qualify as Confidential Information
or Trade Secrets.
(b) Return of Company Property. Upon request by the Company, and
in any event upon termination of the employment of the Executive with the
Company for any reason, as a prior condition to receiving any final
compensation hereunder (including any payments pursuant to Section 4 hereof),
the Executive will promptly deliver to the Company all property belonging to
the Company, including, without limitation, all Confidential Information and
Trade Secrets (and all embodiments thereof) then in the Executive's custody,
control or possession.
(c) Survival. The covenants of confidentiality set forth herein
will apply on and after the date hereof to any Confidential Information and
Trade Secrets disclosed by the Company or developed by the Executive prior to
or after the date hereof. These covenants restricting the use of Confidential
Information will continue and be maintained by the Executive for a period of
two years following the termination of this Agreement. The covenants
restricting the use of Trade Secrets will continue and be maintained by the
Executive following termination of this Agreement for so long as permitted by
the Georgia Trade Secrets Act of 1990, O.C.G.A. Section 10-1-760-10-1-767.
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<PAGE> 12
8. INVENTIONS.
(a) Company Inventions. The Executive agrees that all Company
Inventions conceived or first reduced to practice by the Executive at any time
during his employment with the Company or an Affiliate, and all patent rights
and copyrights to such Company Inventions shall become and remain the property
of the Company, and the Executive hereby irrevocably assigns to the Company all
of his rights to all Company Inventions. If the Executive conceives an
Invention at any time during his employment with the Company or an Affiliate,
for which there is a reasonable basis to believe that the conceived Invention
is a Company Invention, the Executive shall promptly provide a written
description of the conceived Invention to the Company adequate to allow
evaluation thereof for a determination by the Company as to whether the
Invention is a Company Invention. Notwithstanding the foregoing, the
provisions of this Section 8(a) shall not apply to any Invention that the
Executive may develop without using the Company's equipment, supplies,
facilities, or trade secret information, except for any Inventions that either
(i) relate at the time of conception or reduction to practice of the Invention
to the Business of the Company, or to actual or demonstrably anticipated
research or development of the Company; or (ii) result from any work performed
at any time by the Executive for the Company.
(b) Prior Inventions. If prior to the date the Executive first
became employed by the Company or an Affiliate he conceived any Invention or
acquired any ownership interest in any Invention which (i) is the property of
the Executive, or of which the Executive is a joint owner with another person
or entity, (ii) is not described in any issued patent as of the Commencement
Date, and (iii) would be a Company Invention if such Invention were made during
his employment with the Company or an Affiliate, then, with respect to any such
Invention, the Executive hereby grants to the Company and Affiliates a
non-exclusive, paid up royalty-free license to use such Invention. Subject
only to this non-exclusive license, the Invention is and shall remain the
property of the Executive.
(c) Prior Patents. The Executive represents to the Company that
the Executive owns no (i) patents, (ii) copyrights or Works, or (iii)
Inventions related to the Business of the Company, individually or jointly with
others.
(d) Patent Applications. The Executive agrees that should the
Company elect to file an application for patent protection, either in the
United States or in any foreign country, on a Company Invention of which the
Executive was an inventor, the Executive will execute all necessary truthful
papers, including formal assignments to the Company relating to such patent
applications. The Executive further agrees to cooperate with any attorneys or
other persons designated by the Company by explaining the nature of any Company
Invention for which the Company elects to file an application for patent
protection, reviewing applications and other papers and providing any other
cooperation reasonably required for orderly prosecution of such patent
applications. The Company shall be responsible for all expenses incurred for
the
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<PAGE> 13
preparation and prosecution of all patent applications on Company Inventions
filed by the Company.
9. COPYRIGHTS.
(a) Ownership and Assignment. The Executive acknowledges and
agrees that any Works created by the Executive in the course of his employment
with the Company or an Affiliate are subject to the "Work for Hire" provisions
contained in Sections 101 and 201 of the United States Copyright Law, Title 17
of the United States Code, and that all right, title and interest to copyrights
in all Works which have been or will be prepared by the Executive within the
scope of his employment shall be the property of the Company. The Executive
further acknowledges and agrees that, to the extent the provisions of Title 17
of the United States Code do not vest in the Company the copyrights to any such
Works, the Executive will assign and hereby does assign to the Company all
right, title and interest to copyrights which the Executive may have in such
Works.
(b) Registration. The Executive agrees to disclose to the Company
all Works referred to in the immediately preceding paragraph and execute and
deliver all applications for registration, registrations, and other documents
relating to the copyrights to the Works and provide such additional assistance,
as the Company may deem necessary and desirable to secure the Company's title
to the copyrights in the Works. The Company shall be responsible for all
expenses incurred in connection with the registration of all such copyrights.
10. REMEDIES.
The Executive agrees that the covenants and agreements contained in
Sections 5, 6, 7, 8 and 9 hereof are of the essence of this Agreement; that
each of such covenants is reasonable and necessary to protect and preserve the
interests and properties of the Company and the Business of the Company; that
the Company is engaged in and throughout the Area in the Business of the
Company; that irreparable loss and damage will be suffered by the Company
should the Executive breach any of such covenants and agreements; that each of
such covenants and agreements is separate, distinct and severable not only from
the other of such covenants and agreements but also from the other and
remaining provisions of this Agreement; that the unenforceability of any such
covenant or agreement shall not affect the validity or enforceability of any
other such covenant or agreements or any other provision or provisions of this
Agreement; and that, in addition to other remedies available to it, the Company
shall be entitled to specific performance of this Agreement and to both
temporary and permanent injunctions to prevent a breach or contemplated breach
by the Executive of any of such covenants or agreements.
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11. NO SET-OFF.
The existence of any claim, demand, action or cause of action by the
Executive against the Company, or any Affiliate of the Company, whether
predicated upon this Agreement or otherwise, shall not constitute a defense to
the enforcement by the Company of any of its rights hereunder. The existence
of any claim, demand, action or cause of action by the Company against the
Executive, whether predicated upon this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Executive of any of his rights
hereunder.
12. NOTICE.
All notices, requests, demands and other communications required
hereunder shall be in writing and shall be deemed to have been duly given if
delivered or if mailed, by United States certified or registered mail, prepaid
to the party to which the same is directed at the following addresses (or at
such other addresses as shall be given in writing by the parties to one
another):
If to the Company: InfoMed Holdings, Inc.
6650 Powers Ferry Road
Atlanta, Georgia 30339
Attn: General Counsel
If to the Executive: Gary M. Bremer
3212 Arden Road
Atlanta, Georgia 30305
Notices delivered in person shall be effective on the date of delivery.
Notices delivered by mail as aforesaid shall be effective upon the third
calendar day subsequent to the postmark date hereof.
13. MISCELLANEOUS.
(a) Assignment. Neither this Agreement nor any right of the
parties hereunder may be assigned or delegated by any party hereto without the
prior written consent of the other party; provided, however, that the Company
may assign to an Affiliate in which case the Affiliate will be deemed to be the
Company for relevant purposes of this Agreement. Notwithstanding any such
assignment by the Company to an Affiliate the assignor (i.e., the Company)
shall remain liable jointly and severally with the assignee for the obligations
of the Company hereunder.
(b) Waiver. The waiver by the Company of any breach of this
Agreement by the Executive shall not be effective unless in writing, and no
such waiver shall constitute the waiver of the same or another breach on a
subsequent occasion.
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<PAGE> 15
(c) Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Georgia.
(d) Entire Agreement. This Agreement embodies the entire
agreement of the parties hereto relating to the subject matter hereof and
supersedes all oral agreements, and to the extent inconsistent with the terms
hereof, all other written agreements.
(e) Amendment. This Agreement may not be modified, amended,
supplemented or terminated except by a written instrument executed by the
parties hereto.
(f) Severability. Each of the covenants and agreements
hereinabove contained shall be deemed separate, severable and independent
covenants, and in the event that any covenant shall be declared invalid by any
court of competent jurisdiction, such invalidity shall not in any manner affect
or impair the validity or enforceability of any other part or provision of such
covenant or of any other covenant contained herein.
(g) Captions and Section Headings. Except as set forth in Section
1 hereof, captions and section headings used herein are for convenience only
and are not a part of this Agreement and shall not be used in construing it.
14. ARBITRATION. Any dispute or controversy arising under or in
connection with this Agreement shall be resolved exclusively by arbitration
before a single arbitrator in Atlanta, Georgia, in accordance with the rules of
the American Arbitration Association ("AAA") then in effect, subject to the
procedures agreed to below. Either party may serve upon the other party by
providing notice by registered mail and otherwise in accordance with Section 12
of this Agreement, a written demand that the dispute, specifying in detail its
nature, be submitted to arbitration. The written demand shall be brought as
soon as practicable after the dispute or controversy arose. The arbitrator
shall be selected by the joint agreement of the parties, but if they do not
agree within ten (10) days of the written demand, then selection shall be made
pursuant to the rules from the panels of arbitrators maintained by AAA. The
parties agree to cooperate in causing the arbitration proceeding to proceed
expeditiously. Any award rendered by the arbitrator shall be accompanied by a
written opinion of the arbitrator giving the reasons for the award. The award
shall be conclusive and binding upon the parties, and there shall be no right
of appeal therefrom. The arbitrator's award shall be specifically enforceable,
and judgment may be entered on the award in any court having appropriate
jurisdiction. Subject to Section 15, each party shall pay its own expenses of
arbitration, and the expenses of the arbitrator shall be equally shared.
Nothing contained in this section 14 shall prevent the parties from settling
any dispute by mutual agreement at any time.
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15. EXECUTIVE'S EXPENSES. The Company shall pay all of the Executive's
legal and other advisory fees and expenses incurred by the Executive: (a) in
defending the validity of this Agreement, and (b) to the extent he prevails on
the merits, in contesting in good faith any determinations by the Company that
his termination was with Cause or concerning the amounts payable (or
reimbursable) by the Company to the Executive hereunder.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the Company and the Executive have each executed
and delivered this Agreement.
COMPANY:
WITNESS: INFOMED HOLDINGS, INC.
/s/ James A. Tramonte By: /s/ James R. Henderson
- --------------------------- -----------------------------------
James A. Tramonte
Title: President
---------------------------------
[CORPORATE SEAL]
WITNESS: EXECUTIVE:
/s/ James A. Tramonte /s/ Gary M. Bremer
- --------------------------- ---------------------------------------
Gary M. Bremer
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<PAGE> 1
EXHIBIT 10.16
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of the 1st day of January, 1996, between S
Consulting, Inc. a Georgia corporation (the "Company"), and William J. Simione,
Jr. (the "Executive").
INTRODUCTION
The Company and the Executive desire to enter into an employment
agreement embodying the terms and conditions of Executive's employment.
NOW, THEREFORE, the parties agree as follows:
1. DEFINITIONS
(a) "Affiliate" means any person, firm, corporation, partnership,
association or entity that, directly or indirectly or through one or more
intermediaries, controls, is controlled by or is under common control with the
Company.
(b) "Applicable Period" means the period of the Executive's employment
hereunder and for one (1) year after termination of his employment with the
Company; and provided, the Applicable Period shall continue for so long as
Executive receives annual base salary hereunder pursuant to Section 4(e), or
4(g), and shall continue for three (3) years after termination of employment if
the Executive receives payment under Section 4(f); and provided further in the
case of a termination not governed by Section 4(f) by the Executive for Good
Reason or by the Company without Cause, or in the case of a non-renewal of this
Agreement at the end of the original term or any extended term, the Applicable
Period shall not extend beyond the period during which the Executive receives
annual base salary.
(c) "Area" means the United States excluding Wyoming, South Dakota and
Montana.
(d) "Business of the Company" means any business that involves the
marketing, sale or performance of administrative, consulting, management or
information systems outsourcing services to Medicare certified and other home
healthcare agencies (including but not limited to hospital-based and hospital
affiliated home health organizations, visiting nurse associations, health
departments, Health Maintenance Organizations, proprietary organizations and
claim organizations), hospitals, nursing homes, ambulatory facilities,
long-term care providers and other health-care related providers of health care
products and services, and management companies in the business of providing
support or management services to any such providers.
<PAGE> 2
(e) "Cause" the occurrence of any of the following events: (i) willful
and continued failure (other than such failure resulting from his incapacity
during temporary physical or mental illness) by the Executive to substantially
perform his duties with the Company or an Affiliate; (ii) any act by the
Executive of fraud, misappropriation, dishonesty, embezzlement or similar
conduct against the Company or an Affiliate; (iii) conviction of the Executive
for a felony or any other crime involving moral turpitude pertaining to the
Business; or (iv) the habitual and disabling use by the Executive of alcohol or
drugs; or (v) a violation by the Executive of the provisions of Section 5, 6 or
7 of this Agreement.
(f) "Change in Control" means the consummation of (i) a merger,
consolidation, share exchange, combination, reorganization, or like transaction
involving the Company in which the shareholders of the Company immediately
prior to such transaction do not own at least fifty percent (50%) of the value
or voting power of the issued and outstanding capital stock of the Company or
its successor immediately after such transaction, (ii) the sale or transfer
(other than as security for the Company's obligations) of more than fifty
percent (50%) of the assets of the Company in any transaction, a series of
related transactions, or a series of transactions occurring within a one (1)
year period, (iii) except as a result of a Public Offering, the sale or
transfer of fifty percent (50%) or more of the value or voting power of the
issued and outstanding capital stock of the Company by the holders thereof in a
single transaction, a series of related transactions, or a series of
transactions occurring within a one (1) year period, or (iv) the dissolution or
liquidation of the Company.
(g) "Company Invention" means any Invention which is conceived by the
Executive alone or in a joint effort with others during the period of the
Executive's employment hereunder which (i) may be reasonably expected to be
used in a product of the Company, or a product similar to a Company product,
(ii) results from work that the Executive has been assigned as part of his
duties as an employee of the Company, (iii) is in an area of technology which
is the same or substantially related to the areas of technology with which the
Executive is involved in the performance of his duties as an employee of the
Company, or (iv) is useful, or which the Executive reasonably expects may be
useful, in any manufacturing or product design process of the Company.
Provided, the term "Company Invention" does not include any invention unrelated
to the Business of the Company.
(h) "Competing Business" means any person, firm, corporation, joint
venture or other business entity which is engaged in the Business of the
Company (or any aspect thereof) within the Area.
(i) "Confidential Information" means data and information relating to
the business of the Company (which does not rise to the status of a Trade
Secret) which is or has been disclosed to the Executive or of which the
Executive became aware as a consequence of or through its relationship to the
Company and which has value to the Company and is not generally known to its
competitors. Confidential Information shall not include any data or information
that has been voluntarily disclosed to the public by the Company (except where
such public disclosure has been made by the Executive without authorization) or
that has been independently developed and disclosed by others, or that
otherwise enters the public domain through lawful means. The provisions in this
Agreement restricting the use of Confidential Information shall survive for a
period of two (2) years following termination of this Agreement.
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<PAGE> 3
(j) "Disability" means a disability of the Executive within the
meaning of Section 72(m)(7) of the Internal Revenue Code; that is, the
Executive is unable to engage in any substantial gainful activity with the
Committee or any other employer, by reason of any medically determinable
physical or mental impairment which can be expected to result in death or to be
of long continued and indefinite duration. If the Executive claims to have a
Disability, he shall submit to the Company a written request for Disability
status together with medical evidence from a licensed physician identifying the
existence of a Disability within the meaning of this definition. The Company
may then elect to have the Executive submit to an examination by a licensed
physician selected by the Company. In the event of a difference of opinion
between the physicians, the final determination as to whether the Executive is
subject to a Disability shall be made by a reasonable mutually agreeable
independent physician consistent with the requirements set forth in the
Company's disability policy.
(k) "Good Reason" means the occurrence of any of the following events:
(i) the nature of the Executive's duties or the scope of his responsibilities
are materially modified without the Executive's written consent, or (ii) the
Company changes the location of the Executive's place of employment to more
than thirty miles from its present location without the prior consent of the
Executive.
(l) "Invention" means any discovery, whether or not patentable,
including, but not limited to, any useful process, method, formula, technique,
machine, manufacture, composition of matter, algorithm or computer program, as
well as improvements thereto, which is new or which the Executive has a
reasonable basis to believe may be new.
(m) "Public Offering" means the offering or sale by the Company of
equity securities pursuant to a registration statement filed in accordance with
the Securities Act of 1933, as amended, or any comparable law then in effect,
and the effective date of any such Public Offering shall be the first day on
which the securities covered thereby may lawfully be offered and sold pursuant
to such registration statement.
(n) "Trade Secrets" means information relating to the Business of the
Company including, but not limited to, technical or nontechnical data,
formulas, patterns, compilations, programs, devices, methods, techniques,
drawings, processes, financial data, financial plans, product plans or lists of
actual or potential customers or suppliers which (i) derives economic value,
actual or potential, 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 (ii) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy. The provisions in
this Agreement restricting the use of Trade Secrets shall survive termination
of this Agreement for so long as is permitted by the Georgia Trade Secrets Act
of 1990, O.C.G.A. ss.ss. 10-1-760-10-1-767.
(o) "Work" means a copyrightable work of authorship relating to the
Business of the Company, including without limitation, any technical
descriptions for products, user's guides, illustrations, advertising materials,
computer programs (including the contents of read only memories) and any
contribution to such materials.
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<PAGE> 4
2. TERMS AND CONDITIONS OF EMPLOYMENT.
(a) Employment. The Company hereby employs the Executive as its
President and the Executive accepts such employment with the Company in such
capacity subject to the terms and conditions hereof. The Executive shall report
to the Chief Executive Officer of the Company and shall have such authority and
responsibilities and perform such duties as shall reasonably be assigned to the
Executive from time to time by the Chief Executive Officer of the Company.
(b) Exclusivity. Throughout the Executive's employment hereunder, the
Executive shall devote substantially all the Executive's time, energy and skill
during regular business hours to the performance of the duties of the
Executive's employment (vacations and reasonable absences due to illness
excepted), shall faithfully and industriously perform such duties, and shall
diligently follow and implement all management policies and decisions of the
Company. Provided, the Executive may engage in other business activities that
are unrelated to the Business of the Company and that does not impact upon or
adversely affect the Business of the Company or the Executive's performance of
duties hereunder.
3. COMPENSATION.
(a) Base Salary. In consideration for the Executive's services
hereunder, the Company shall pay to the Executive an annual base salary in the
amount of $300,000 for the first full twelve calendar months of the Term.
Executive's annual base salary shall be reviewed at least annually by the
Company's Board of Directors. The Company shall pay annual base salary in
accordance with the normal payroll payment practices of the Company and subject
to such deductions and withholdings as law or policies of the Company, from
time to time in effect, require.
(b) Bonus. In addition to the annual base salary payable under Section
3(a) hereof, the Executive shall be entitled to bonuses determined by the Board
of Directors of the Company in accordance with an operating budget or other
specific bonus criteria adopted by the Board of Directors of the Company for
purposes of bonus calculations.
(c) Vacation. The Executive shall be entitled to such vacation and
time off with pay as generally may be available to executive employees of the
Company from time to time.
(d) Benefits. In addition to the annual base salary, bonus, and other
benefits payable to the Executive hereunder as listed on Exhibit A hereto and
made a part hereof, the Executive shall be entitled to such benefits as
generally may be made available to executive employees of the Company from time
to time; provided, however, that nothing contained herein shall require the
establishment or continuation of any particular plan or program.
(e) Expenses. The Executive shall be entitled to be reimbursed in
accordance with the policies of the Company, as adopted and amended from time
to time, for all reasonable and necessary expenses incurred by the Executive in
connection with the performance of the Executive's duties of employment
hereunder; provided, however, the Executive shall, as a condition of such
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<PAGE> 5
reimbursement, submit verification of the nature and amount of such expenses in
accordance with the reimbursement policies from time to time adopted by the
Company.
4. TERM, TERMINATION AND TERMINATION PAYMENTS.
(a) Term. The term of this Agreement (the "Term") shall commence as of
the date of this Agreement (the "Commencement Date") and shall expire, unless
terminated earlier in accordance with Section 4(b), on the fifth anniversary of
the Commencement Date, and will extend thereafter for additional terms of one
year each, unless either party gives the other written notice sixty (60) days
before the end of a term. Before the end of the Term, the Company and the
Executive will discuss whether they mutually desire to renew or extend this
Agreement.
(b) Termination. This Agreement and the Executive's employment by the
Company hereunder may only be terminated (i) by mutual agreement of the
Executive and the Company; (ii) by the Executive without Good Reason upon not
less than three (3) months prior notice to the Company; (iii) by the Executive
with Good Reason upon not less than two (2) weeks prior notice to the Company;
provided however that the Executive shall first give the Company written notice
of any facts or circumstances upon which such termination with "Good Reason" is
based and the Company shall thereafter have thirty (30) days to cure, or to
begin a cure if completing a cure within thirty (30) days is not feasible and a
plan acceptable to the Executive is submitted by the Company; (iv) by the
Company without Cause; or (v) by the Company for Cause, provided however that
the Company shall first give the Executive written notice of any facts or
circumstances upon which such termination with Cause is based and the Executive
shall thereafter have thirty (30) days to cure, or to begin a cure if
completing a cure within thirty (30) days is not feasible, and a plan
acceptable to the Company is submitted by the Executive. This Agreement shall
also terminate immediately upon the death or the Disability of the Executive.
Notice of termination by either the Company or the Executive shall be given in
writing and shall specify the basis for termination and the effective date of
termination.
(c) Effect of Termination. Upon termination of this Agreement and the
Executive's employment hereunder, the Company shall have no further obligation
to the Executive or the Executive's estate with respect to this Agreement,
except for payment of salary and provision of benefits, if any, accrued
pursuant to Section 3(a) or 3(b) hereof and unpaid at the Termination Date, and
termination payments, if any, set forth in Section 4(e), 4(f), or 4(g) hereof,
as applicable, subject to the provisions of Section 12 hereof. Nothing
contained herein shall limit or impinge any other rights or remedies of the
Company or the Executive under any other agreement or plan to which the
Executive is a party or of which the Executive is a beneficiary.
(d) Survival. The covenants of the Executive in Sections 5, 6, 7, 8
and 9 hereof shall survive the termination of this Agreement and the
Executive's employment hereunder and shall not be extinguished thereby.
(e) Certain Terminations not in Connection with a Change in Control.
Except as set forth in Section 4(b)(i) hereof, upon termination of the
Executive's employment, more than six (6) months preceding or more than two (2)
years after a Change in Control, by the Company without Cause or
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<PAGE> 6
by Executive for Good Reason, the Company shall be obligated, in consideration
of the covenants of the Executive in Section 5, 6 and 7 hereof, to continue to
pay the Executive his annual base salary at the time of termination of
employment for the remaining original Term of this Agreement; provided,
however, that if such termination occurs on or within one year before a Change
in Control, the aggregate amount payable shall not exceed the largest amount
that could be paid to the Executive under Section 280G of the Internal Revenue
Code, which when combined with all other " payments in the nature of
compensation" (within the meaning of Section 280G) received by Executive, will
not result in a "parachute payment" (within the meaning of such Section 280G),
determined without regard to Section 280G(b)(5) thereof.
(f) Certain Terminations in Connection with a Change in Control.
Except as set forth in Section 4(b)(i) hereof, upon termination of Executive's
employment, within six (6) months preceding or within two (2) years after a
Change in Control, by the Company without Cause or by Executive for Good
Reason, the Company shall be obligated in consideration of the covenants of the
Executive in Section 5, 6 and 7 hereof, to pay the Executive a lump sum in cash
immediately upon such termination equal to (i) the lessor of three times his
average annual W-2 compensation for the five year period preceding the date on
which the Change in Control occurs (or such shorter period of employment), or
(ii) the largest amount that could be paid to the Executive under Section 280G
of the Internal Revenue Code, which when combined with all other "payments in
the nature of compensation" (within the meaning of such Section 280G) received
by Executive, will not result in a "parachute payment" (within the meaning of
such Section 280G), determined without regard to Section 280G(b)(5) thereof.
(g) Payments Upon Disability. If the Executive's employment under this
Agreement should be terminated because of the Disability of the Executive, the
Company shall be obligated to continue to pay the Executive his annual base
salary for the remaining Term of this Agreement, but only in an amount in
excess of the proceeds available to the Executive from one or more disability
insurance policies or plans, if any, with respect to which the Company has paid
the premiums.
5. AGREEMENT NOT TO COMPETE.
(a) The Executive agrees that commencing on the Commencement Date and
continuing through the Applicable Period he will not (except on behalf of or
with the prior written consent of the Company, which consent may be withheld in
Company's sole discretion), within the Area, either directly or indirectly, on
the Executive's own behalf, or in the service of or on behalf of others, engage
in a Competing Business or provide managerial, supervisory, buying, sales,
marketing, financial, administrative or consulting services or assistance
(collectively "Prohibited Services") to, or own (other than ownership of less
than five percent of the outstanding voting securities of an entity whose
voting securities are traded on a national securities exchange or quoted on the
National Association of Securities Dealers, Inc. Automated Quotation System) a
beneficial interest in any Competing Business. For purposes of this Section 5,
the Executive acknowledges and agrees that the Business of the Company is
conducted in the Area. Provided, notwithstanding anything to the contrary in
the Asset Purchase Agreement which is executed in connection herewith and to
which this Executive Employment Agreement is ancillary, in the event this
noncompetition restriction in
- 6 -
<PAGE> 7
this Section 5(a) terminates, then the Agreement Not to Compete in Section 5.01
of the Asset Purchase Agreement as it applies to the Executive shall likewise
terminate.
(b) The parties further agree that Executive's performance of duties
hereunder shall not constitute any breach of any agreement not to compete,
agreement not to solicit employees and agreement not to solicit customers
contained herein or in the Asset Purchase Agreement which is executed in
connection herewith, and to which this Executive Employment Agreement is
ancillary.
(c) The Executive agrees that commencing on the Commencement Date and
continuing through the Applicable Period, he will not, either directly or
indirectly, on the Executive's own behalf or in the service of or on behalf of
others, solicit or divert, or attempt to solicit or divert, for the purpose of
providing the Prohibited Services, any individual or entity which was an actual
or actively sought prospective client or customer of the Company or an
Affiliate and with whom the Executive had direct or indirect contact as part of
his employment during the Executive's last year of employment with the Company.
For purposes of this Section 5(c), the Executive acknowledges and agrees that
he is engaged in performing services under this Agreement related to actual and
actively sought prospective clients or customers.
6. AGREEMENT NOT TO SOLICIT EMPLOYEES.
The Executive agrees that commencing on the Commencement Date and
continuing through the Applicable Period, he will not, either directly or
indirectly, on the Executive's own behalf or in the service of or on behalf of
others, solicit, divert or hire, or attempt to solicit, divert or hire, any
person employed by the Company or an Affiliate, whether or not such employee is
a full-time employee or a temporary employee of the Company or an Affiliate and
whether or not such employment is pursuant to written agreement and whether or
not such employment is for a determined period or is at will.
7. OWNERSHIP AND PROTECTION OF PROPRIETARY INFORMATION.
(a) Confidentiality. All Confidential Information and Trade Secrets
and all physical embodiments thereof received or developed by the Executive
while employed by the Company are confidential to and are and will remain the
sole and exclusive property of the Company. Except to the extent necessary to
perform the duties assigned to him by the Company, the Executive will hold such
Confidential Information and Trade Secrets in trust and strictest confidence,
and will not use, reproduce, distribute, disclose or otherwise disseminate the
Confidential Information and Trade Secrets or any physical embodiments thereof
and may in no event take any action causing or fail to take the action
necessary in order to prevent, any Confidential Information and Trade Secrets
disclosed to or developed by the Executive to lose its character or cease to
qualify as Confidential Information or Trade Secrets.
- 7 -
<PAGE> 8
(b) Return of Company Property. Upon request by the Company, and in
any event upon termination of the employment of the Executive with the Company
for any reason, as a prior condition to receiving any final compensation
hereunder (including any payments pursuant to Section 4(e) hereof), the
Executive will promptly deliver to the Company all property belonging to the
Company, including, without limitation, all Confidential Information and Trade
Secrets (and all embodiments thereof) then in the Executive's custody, control
or possession.
(c) Survival. The covenants of confidentiality set forth herein will
apply on and after the date hereof to any Confidential Information and Trade
Secrets disclosed by the Company or developed by the Executive prior to or
after the date hereof. These covenants restricting use of Confidential
Information will continue and be maintained by the Executive for a period of
two (2) years following the termination of this Agreement. The covenants
restricting the use of Trade Secrets will continue and be maintained by the
Executive following termination of this Agreement for so long as permitted by
the Georgia Trade Secret Act of 1990, O.C.G.A. 10-1-760 through 10-1-767.
8. Inventions.
(a) Company Inventions. The Executive agrees that all Company
Inventions conceived or first reduced to practice by the Executive during the
Term of this Agreement, and all patent rights and copyrights to such Company
Inventions shall become and remain the property of the Company, and the
Executive hereby irrevocably assigns to the Company all of his rights to all
Company Inventions. If the Executive conceives an Invention during the Term of
this Agreement for which there is a reasonable basis to believe that the
conceived Invention is a Company Invention, the Executive shall promptly
provide a written description of the conceived Invention to the Company
adequate to allow evaluation thereof for a determination by the Company as to
whether the Invention is a Company Invention. Notwithstanding the foregoing,
the provisions of this Section 8(a) shall not apply to any Invention that the
Executive may develop without using the Company's equipment, supplies,
facilities, or trade secret information, except for any Inventions that either
(i) relate at the time of conception or reduction to practice of the Invention
to the Business of the Company, or to actual or demonstrably anticipated
research or development of the Company; or (ii) result from any work performed
by the Executive for the Company.
(b) Prior Inventions. If prior to the Commencement Date the Executive
conceived any Invention or acquired any ownership interest in any Invention
which (i) is the property of the Executive, or of which the Executive is a
joint owner with another person or entity, (ii) is not described in any issued
patent as of the Commencement Date, and (iii) would be a Company Invention if
such Invention were made during the Term of this Agreement, then (A) with
respect to any such Invention described in Exhibit A attached hereto, the
Executive hereby agrees that such written description (but no rights to the
Invention) is and shall remain the property of the Company and (B) with respect
to any such Invention not described in Exhibit A attached hereto, the Executive
hereby grants to the Company a nonexclusive, paid up, royalty-free license to
use and practice such Invention, including a license under all patents to issue
in any country which pertain to such Invention.
- 8 -
<PAGE> 9
(c) Prior Patents. The Executive represents to the Company that the
Executive owns no patents or copyrights, individually or jointly with others,
except those described in Exhibit A attached hereto.
(d) Patent Applications. The Executive agrees that should the Company
elect to file an application for patent protection, either in the United States
or in any foreign country, on a Company Invention of which the Executive was an
inventor, the Executive will execute all necessary truthful papers, including
formal assignments to the Company relating to such patent applications. The
Executive further agrees to cooperate with any attorneys or other persons
designated by the Company by explaining the nature of any Company Invention for
which the Company elects to file an application for patent protection,
reviewing applications and other papers and providing any other cooperation
reasonably required for orderly prosecution of such patent applications. The
Company shall be responsible for all expenses incurred for the preparation and
prosecution of all patent applications on Company Inventions filed by the
Company.
9. COPYRIGHTS.
(a) Ownership and Assignment. The Executive acknowledges and agrees
that any Works created by the Executive in the course of his employment
hereunder are subject to the "Work for Hire" provisions contained in Sections
101 and 201 of the United States Copyright Law, Title 17 of the United States
Code, and that all right, title and interest to copyrights in all Works which
have been or will be prepared by the Executive within the scope of his
employment hereunder shall be the property of the Company. The Executive
further acknowledges and agrees that, to the extent the provisions of Title 17
of the United States Code do not vest in the Company the copyrights to any
Works, the Executive will assign and hereby does assign to the Company all
right, title and interest to copyrights which the Executive may have in such
Works.
(b) Registration. The Executive agrees to disclose to the Company all
Works referred to in the immediately preceding paragraph and execute and
deliver all applications for registration, registrations, and other documents
relating to the copyrights to the Works and provide such additional assistance,
as the Company may deem necessary and desirable to secure the Company's title
to the copyrights in the Works. The Company shall be responsible for all
expenses incurred in connection with the registration of all such copyrights.
(c) Prior Works. The Executive claims no ownership rights in any Works,
except as described in Exhibit A attached hereto.
10. CONTRACTS OR OTHER AGREEMENTS WITH FORMER EMPLOYER OR BUSINESS.
The Executive hereby represents and warrants that it is not subject to
any employment agreement or similar document, except as previously disclosed
and delivered to the Company, with a former employer or any business with which
the Executive has been associated, which on its face prohibits the Executive
during a period of time which extends through the Commencement Date from any of
the following: (i) competing with, or in any way participating in a business
which competes
- 9 -
<PAGE> 10
with the Executive's former employer or business; (ii) soliciting personnel of
such former employer or business to leave such former employer's employment or
to leave such business; or (iii) soliciting customers of such former employer
or business on behalf of another business. The Executive hereby further
represents and warrants that he has not executed any agreement with any other
party which, on its face, purports to require the Executive to assign any Work
or any Invention created, conceived or first reduced to practice by the
Executive during a period of time which extends through the Commencement Date
except as previously disclosed in writing to the Company.
11. SEVERABILITY, ETC.
The Executive agrees that the covenants and agreements contained in
Sections 5, 6, 7, 8 and 9 hereof are of the essence of this Agreement; that
each of such covenants is reasonable and necessary to protect and preserve the
interests and properties of the Company and the Business of the Company; that
the Company is engaged in and throughout the Area in the Business of the
Company; that irreparable loss and damage will be suffered by the Company
should the Executive breach any of such covenants and agreements; that each of
such covenants and agreements is separate, distinct and severable not only from
the other of such covenants and agreements but also from the other and
remaining provisions of this Agreement; that the unenforceability of any such
covenant or agreement shall not affect the validity or enforceability of any
other such covenant or agreements or any other provision or provisions of this
Agreement; and that, in addition to other remedies available to it, the Company
shall be entitled to specific performance of this Agreement and to both
temporary and permanent injunctions to prevent a breach or contemplated breach
by the Executive of any of such covenants or agreements.
12. NO SET-OFF.
The existence of any claim, demand, action or cause of action by the
Executive against the Company, or any Affiliate of the Company, whether
predicated upon this Agreement or otherwise, shall not constitute a defense to
the enforcement by the Company of any of its rights hereunder. The existence of
any claim, demand, action or cause of action by the Company against the
Executive, whether predicated upon this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Executive of any of his rights
hereunder.
13. NOTICE.
All notices, requests, demands and other communications required
hereunder shall be in writing and shall be deemed to have been duly given if
delivered or if mailed, by United States certified or registered mail, prepaid
to the party to which the same is directed at the following addresses (or at
such other addresses as shall be given in writing by the parties to one
another):
- 10 -
<PAGE> 11
If to the Company: S Consulting, Inc.
6600 Powers Ferry Road
Suite 300
Atlanta, Georgia 30339
Attn: Gary M. Bremer, Chief Executive Officer
If to the Executive: William J. Simione, Jr.
185 Crestwood Terrace
Orange, CT 06477
Notices delivered in person shall be effective on the date of delivery. Notices
delivered by mail as aforesaid shall be effective upon the third calendar day
subsequent to the postmark date hereof.
14. MISCELLANEOUS.
(a) Assignment. Neither this Agreement nor any right of the parties
hereunder may be assigned or delegated by any party hereto without the prior
written consent of the other party.
(b) Waiver. The waiver by the Company of any breach of this Agreement
by the Executive shall not be effective unless in writing, and no such waiver
shall constitute the waiver of the same or another breach on a subsequent
occasion.
(c) Jurisdiction. Any action to enforce any provision of this
Agreement shall be brought only in a Federal or State Court located in the
State of Georgia, and all parties hereto consent to and shall not contest
jurisdiction in Georgia.
(d) Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of Georgia.
(e) Entire Agreement. This Agreement embodies the entire agreement of
the parties hereto relating to the subject matter hereof and supersedes all
oral agreements, and to the extent inconsistent with the terms hereof, all
other written agreements.
(f) Amendment. This Agreement may not be modified, amended,
supplemented or terminated except by a written instrument executed by the
parties hereto.
(g) Severability. Each of the covenants and agreements hereinabove
contained shall be deemed separate, severable and independent covenants, and in
the event that any covenant shall be declared invalid by any court of competent
jurisdiction, such invalidity shall not in any manner affect or impair the
validity or enforceability of any other part or provision of such covenant or
of any other covenant contained herein.
- 11 -
<PAGE> 12
(h) Captions and Section Headings. Except as set forth in Section 1
hereof, captions and section headings used herein are for convenience only and
are not a part of this Agreement and shall not be used in construing it.
IN WITNESS WHEREOF, the Company and the Executive have each executed
and delivered this Agreement as of the date first shown above.
COMPANY:
S CONSULTING, INC.
By:/s/ Gary M. Bremer
--------------------------
Gary M. Bremer
Title: Chief Executive Officer
[CORPORATE SEAL]
EXECUTIVE:
/s/William J. Simone, Jr.
--------------------------
William J. Simione, Jr.
- 12 -
<PAGE> 13
EXHIBIT A
INVENTIONS, PATENTS AND COPYRIGHTS
1. PREVIOUSLY CONCEIVED INVENTIONS
[DESCRIBE ANY INVENTIONS WHICH THE EXECUTIVE DEVELOPED OR HAS AN
OWNERSHIP INTEREST IN. IF NONE, INSERT "NONE". NOTE: With respect to
any such Inventions not described herein, the Company shall have a
nonexclusive, paid up, royalty-free license to use and practice such
Invention, including a license under all patents to issue in any
country which pertain to such Invention.]
None
2. PATENTS
[LIST OR DESCRIBE ALL PATENTS WHICH THE EXECUTIVE OWNS INDIVIDUALLY,
WITH OTHERS, OR FOR WHICH APPLICATIONS ARE PENDING. IF NONE, INSERT
"NONE".]
None
3. COPYRIGHTS
[DESCRIBE ANY WORKS FOR WHICH THE EXECUTIVE CLAIMS THE COPYRIGHT EITHER
INDIVIDUALLY OR WITH OTHERS. IF NONE, INSERT "NONE".]
None
- 13 -
<PAGE> 1
EXHIBIT 10.17
AGREEMENT
THIS AGREEMENT (this "Agreement") is made and entered into as of October 4,
1996, by and between InfoMed Holdings, Inc., a Delaware corporation (the
"Company"), and EGL Holdings, Inc., a Georgia corporation ("EGL").
WHEREAS, the Company has entered into an Amended and Restated Agreement and
Plan of Merger, dated as of September 5, 1996 (as the same may be amended, the
"Merger Agreement"), providing for the merger (the "Merger") of Infosub, Inc.
("Infosub"), a wholly-owned subsidiary of the Company, with and into Simione
Central Holding, Inc., a Georgia corporation ("SCHI"), with SCHI as the
surviving entity of the Merger; and
WHEREAS, the Merger Agreement provides that it is a condition to the
obligations of SCHI to consummate the Merger that EGL and certain other
stockholders of the Company shall have executed and delivered the Agreement,
dated as of October 4, 1996 (the "Related Agreement"), pursuant to which EGL
and certain other stockholders of the Company have released, effective as of
the effective time of the Merger as provided in the Merger Agreement (the
"Effective Time of the Merger"), certain rights under various Stock Purchase
Agreements and Stock and Warrant Purchase Agreements with the Company (as
described in the Related Agreement, the "Former Agreements"), including, among
other things, an agreement whereby EGL would provide to the Company certain
management services; and
WHEREAS, the parties to desire to enter into this Agreement to provide for
the provision by EGL of certain management services to the Company on
substantially the same terms as provided in the Former Agreements, to be
effective as of the Effective Time of the Merger;
All capitalized terms not otherwise defined herein shall have the meaning
ascribed them in the Merger Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Engagement of Advisor. The Company hereby engages EGL to act as
advisor to the Company for the term beginning on the date hereof and ending on
June 30, 1999. The fee for services rendered by EGL pursuant to this
engagement shall be $5,000.00 per month. In addition, the Company shall
reimburse EGL for its reasonable out-of-pocket expenses; provided, however, any
single expense in excess of $250.00 must be approved in advance by the Company.
2. Amendments. This Agreement may be amended by a subsequent writing
signed by all Parties materially affected thereby upon the approval of each of
such parties.
<PAGE> 2
3. Counterparts. This Agreement may be executed in two or more
counterparts all of which shall be one and the same Agreement and shall become
effective when one or more counterparts have been signed by each party and
delivered to each other party.
4. Successors and Assigns. All terms and conditions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by any
successor to EGL and any successor to the Company.
5. Entire Agreement. This Agreement constitutes the entire
understanding between and among the parties with respect to the subject matter
hereof and shall supersede any prior agreements and understandings among the
parties with respect to such subject matter.
6. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard for any
principles of conflicts of laws thereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
INFOMED HOLDINGS, INC.
By: /s/ authorized officer
-----------------------------------
Title:
--------------------------------
EGL HOLDINGS, INC.
By: /s/ authorized officer
-----------------------------------
Title:
--------------------------------
- 2 -
<PAGE> 1
EXHIBIT 10.18
KEY:
"Section" references are to provisions in the Agreement.
"Clause" references are to provisions in the Schedules.
January 4, 1996
Agreement - Execution Document
<PAGE> 2
INFORMATION SYSTEMS MANAGEMENT AGREEMENT
This Agreement is entered into as of January 4, 1996 (the "Effective
Date"), between
1. Integrated Systems Solutions Corporation, a Delaware corporation and a
wholly owned subsidiary of International Business Machines Corporation
("ISSC")
AND
2. Central Health Management Services, Inc., a Georgia corporation
("CHMS").
The Parties agree to the terms and conditions set forth in this
Agreement including the Supplement and Schedules A through O referenced in this
Agreement.
Signed for and on behalf of Integrated Systems Solutions Corporation:
Signature: /s/ K. R. Johnson Position: V.P. Business Services
---------------------------- ------------------------------
Name: K. R. Johnson Date: January 4, 1996
--------------------------------- ----------------------------------
Signed for and on behalf of Central Health Management Services, Inc.:
Signature: /s/ Gary M. Bremer Position: CEO
---------------------------- ------------------------------
Name: Gary M. Bremer Date: January 4, 1996
--------------------------------- ----------------------------------
January 4, 1996
Agreement - Execution Document
<PAGE> 3
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. PURPOSE OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. DEFINITIONS AND AGREEMENT AND RELATIONSHIP PROTOCOLS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 General Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Evolving Nature of Relationship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.3 Required Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.4 Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.5 Conflicts of Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.6 Alternate Source for Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.7 Use of Subcontractors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3. THE SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.1 Obligation to Provide Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.2 Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.3 Annual Technology Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.4 Disaster Recovery Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.5 Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.6 Data Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.7 Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.8 Technology Refresh . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.9 Software Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.10 Software Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4. TRANSITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.1 Transition Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.2 Affected Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.3 Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5. SERVICES STAFFING AND MANAGEMENT AND ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.1 Project Executives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.2 Replacement of Personnel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.3 Retention of Experienced Personnel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.4 Efficient Use of Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.5 CHMS Approvals and Notification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6. CHARGES AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.1 Disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.2 Annual Service Charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.3 Additional Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.4 Cost of Living Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.5 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.6 New Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
January 4, 1996
Agreement - Execution Document Page i of iv
<PAGE> 4
<TABLE>
<S> <C> <C>
6.7 Replacement Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.8 Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.9 Reduction of CHMS Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.10 Benefit Sharing Opportunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.11 Service Credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7. INVOICING AND PAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.1 Annual Service Charge Invoices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.2 Cost of Living Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.3 Other Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.4 Invoice Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.5 Proration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.6 Disputed Charges/Credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.7 Other Credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8. INTELLECTUAL PROPERTY RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.1 Ownership of Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.2 Obligations Regarding Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9. CONFIDENTIALITY/DATA SECURITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.1 Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.2 Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.3 Exclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.4 Loss of Company Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.5 Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10. TERM AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.1 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.2 Renewal and Expiration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.3 Termination By CHMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.4 Termination by ISSC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.5 Termination Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.6 Termination Proration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.7 Extension of Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.8 Services Transfer Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.9 Other Rights Upon Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
11. LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
11.1 Liability Caps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
11.2 Exclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
11.3 Direct Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
11.4 Dependencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
11.5 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
12. WARRANTIES/COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
12.1 Work Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>
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<PAGE> 5
<TABLE>
<S> <C> <C>
12.2 Noninfringement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
12.3 Disabling Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
12.4 Authorization and Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
12.5 Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
12.6 Regulatory Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
13. INDEMNITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
13.1 Indemnity by ISSC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
13.2 Indemnity by CHMS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
13.3 Employment Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
13.4 Exclusive Remedy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
13.5 Indemnification Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
13.6 Customer Contractual Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
14. INSURANCE AND RISK OF LOSS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
14.1 ISSC Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
14.2 CHMS Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
14.3 Risk of Property Loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
14.4 Mutual Waiver of Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
15. ADVISORY COMMITTEES/DISPUTE RESOLUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
15.1 CHMS/ISSC Management Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
15.2 Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
15.3 Continued Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
16. GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
16.1 Control of Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
16.2 Entire Agreement, Updates, Amendments and Modifications . . . . . . . . . . . . . . . . . . . . . . 49
16.3 Force Majeure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
16.4 Nonperformance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
16.5 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
16.6 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
16.7 Limitations Period upon Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
16.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
16.9 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
16.10 Binding Nature and Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
16.11 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
16.12 No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
16.13 Other Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
16.14 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
16.15 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
16.16 Remarketing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
</TABLE>
January 4, 1996
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<PAGE> 6
TABLE OF SCHEDULES
<TABLE>
<CAPTION>
SCHEDULE TITLE
<S> <C>
A CHMS Software
- Applications Software
- CHMS Systems Software
B Systems Software
- ISSC Systems Software - IBM
- Systems Software - OEM
C CHMS Provided Hardware
D ISSC Machines
E Support Services, Performance Standards and Operational Responsibilities
F Third Party Agreements
G Disaster Recovery Services
H Transition Plan
I Help Desk Services
J ISSC Charges, Measures of Utilization and Financial Responsibilities
K Security Procedures
L Market Cooperation and Operations
M Network Locations
N Services Transfer Assistance
O Affected Employees
</TABLE>
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<PAGE> 7
1. PURPOSE OF AGREEMENT
a) ISSC is provider of a broad range of information technology, information
management, data communications and related services and desires to
provide to CHMS certain information technology and perform for CHMS
certain of the information management and data communications functions,
responsibilities and tasks that are currently performed by CHMS for the
CHMS Business. CHMS desires that with the exception of the development
of applications software, Level One Support, print operations, LAN and
LAN support, the CHMS information technology and information management
and data communications services functions, responsibilities and tasks
be migrated from CHMS to ISSC, and that such technology and services be
provided to CHMS and its Affiliates by ISSC which is experienced and
skilled in the administration, management, provision and performance of
such functions and responsibilities. This Agreement documents the terms
and conditions under which CHMS and its Affiliates will obtain such
migration, technology and information management and communications
services from ISSC, and ISSC will administrate, manage, provide and
perform such functions and responsibilities for CHMS and its Affiliates.
b) In entering into this Agreement, the Parties have identified specific
objectives and goals intended to be satisfied through performance of
this Agreement. These objectives and goals include, but are not limited
to the following: (1) reducing the on-going monthly operating costs of
CHMS; (2) securing favorable rates for additional resource consumption;
(3) taking advantage of new technology to improve performance and the
cost to performance ratios experienced by CHMS; (4) improving the
current level of service; (5) minimizing any potential risk to CHMS's
customer base; (6) insuring the integrity and security of existing and
future hardware and software systems; (7) increasing flexibility
regarding resource commitments and availability and evolving
technologies to meet the dynamic requirements of the CHMS Business; (8)
implementing joint marketing arrangements to expand the CHMS Business
and the ISSC business as described on Schedule L; and (9) providing an
opportunity to transition the Services back to CHMS or to another
service provider from ISSC with minimal disruption.
c) ISSC recognizes that CHMS expects to be treated as a valued customer and
agrees that the definition of customer satisfaction goes beyond ISSC's
performance against established Performance Standards and Minimum
Service Levels and requires that ISSC exhibit customer service attitude
focused on assisting CHMS in reducing operating costs and improving
service to CHMS, its Affiliates and the CHMS customers.
d) The provisions of this Section 1 are intended to be statement of the
purpose of this Agreement and are not intended to alter the plain
meaning of the terms and conditions of this Agreement. To the extent
that the terms and conditions of this Agreement are unclear or
ambiguous, such terms and conditions are to be interpreted and construed
consistent with the purposes set forth in this Section 1.
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<PAGE> 8
2. DEFINITIONS AND AGREEMENT AND RELATIONSHIP PROTOCOLS
2.1 GENERAL DEFINITIONS
In this Agreement including the Supplement and Schedules A through O, the
following terms will have the following meanings:
<TABLE>
<S> <C>
Additional Resource has the meaning given in Schedule J.
Charge or RC
Affiliates means, with respect to Party, any entity at any time
Controlling, Controlled by or under common Control
with such Party.
Affected Employees has the meaning set forth in Section 4.2.
Agreement means this Information Systems Management Agreement,
the Supplement, and Schedules A through O referenced
herein.
Annual Service Charge has the meaning given in Schedule J.
Application(s) Software means those programs and programming, including all
supporting documentation and media, that perform
specific user related data processing and
telecommunications tasks, including updates,
enhancements, modifications, releases and Derivative
Works thereof. Applications Software as of the
Effective Date is listed in Schedule A, which
schedule shall be updated pursuant to Section 2.2 to
reflect the then-current Applications Software.
Authorized User(s) "Authorized Users" means any person or entity
authorized to use the Services to be provided by
ISSC under this Agreement, which shall include
without limitation (1) CHMS, (2) CHMS's
Affiliates, (3) third parties who use CHMS or its
Affiliates services including their customers, or
(4) any other person or entity rendering services to
CHMS, its Affiliates or customers.
Authorized User Data means information provided by Authorized Users for
use in connection with the System.
Baseline has the meaning given in Schedule J.
Change Management has the meaning given in Schedule E.
Procedures
Change of Control means the transfer of the Control of a Party from the
persons or persons who hold such control on the
Effective Date to another person or persons.
CHMS Business means the business engaged in by CHMS and its
Affiliates of providing information technology and
information management, data processing, system
integration, system development, telecommunications
and related consulting services to the healthcare
industry.
</TABLE>
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<PAGE> 9
<TABLE>
<S> <C>
CHMS Code means Code Developed by ISSC and/or its
subcontractors independently or jointly with CHMS, at
CHMS's expense, as part of the Services, or that is
specifically related to the core business of CHMS.
CHMS Data Center means the data center owned and operated by CHMS
located at 6666 Powers Ferry Road, Atlanta, Georgia,
as of the Commencement Date.
CHMS Derivative Code means Developed Code which constitutes Derivative
Work of software for which the copyright is owned by
CHMS, its affiliates or their subcontractors.
CHMS/ISSC has the meaning given in Section 15.2.
Management Committee
CHMS Provided Hardware means the computer equipment peripheral devices,
storage media, cabling, connectors and other
equipment (however described) provided from time to
time by CHMS for use by ISSC to perform and deliver
the Services and fulfill its obligations under this
Agreement. The CHMS Provided Hardware as of the
Effective Date is listed on Schedule C, which
schedule shall be updated pursuant to Section 2.2
during the Term to reflect the then-current CHMS
Provided Hardware.
CHMS Sale means a sale of all or substantially all of the
assets of CHMS or the transfer by sale or merger of
seventy-five percent (75%) of the voting power of
CHMS in one transaction from one shareholder or group
of shareholders to another person or persons;
provided, however, a CHMS Sale shall not include the
"spin-off" of CHMS from Central Health Holding
Company, Inc., the initial public offering of the
voting securities of CHMS, any secondary offering of
the voting securities of CHMS or the acquisition by
CHMS or any subsidiary of CHMS of the Simione &
Simione or its assets.
CHMS Software means Applications Software and CHMS Systems
Software.
CHMS Systems Software means the systems and applications development tools
software listed in Schedule A provided or to be
provided by CHMS.
CHMS Works means literary works of authorship (other than Code)
Developed by ISSC and/or its subcontractors
independently or jointly with CHMS, at CHMS's
expense, as part of the Services, or that is
specifically related to the CHMS Business, including
without limitation user manuals, charts, graphs and
other written documentation, and machine-readable
text and files.
Code has the meaning given in Section 8.
Computer Hardware means the ISSC Machines and CHMS Provided Hardware.
Commencement Date means January 1, 1996.
</TABLE>
January 4, 1996
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<PAGE> 10
<TABLE>
<S> <C>
Confidential Information has the meaning given in Section 9.1.
Contract Year means the first twelve (12) months following the
Commencement Date and each twelve (12) month period
thereafter beginning on the first anniversary of the
Commencement Date.
Control, Controlling, means possessing, directly or indirectly, the power
or Controlled to direct or cause the direction of the management
and policies of an entity, whether through ownership
of voting securities, by contract or otherwise.
Cost of Living has the meaning given in Schedule J.
Adjustment ("COLA")
Data Center means the ISSC data center at a site to be mutually
agreed by February 1, 1996, and/or other such
location authorized under this Agreement.
Derivative Work means a work based on one or more pre-existing works,
including without limitation, a condensation,
transformation, expansion or adaptation, which would
constitute a copyright infringement if prepared
without authorization of the owner of the copyright
of such pre-existing work.
Develop has the meaning given in Section 8.
Direct Damages Cap has the meaning given in Section 11.2(a).
Disaster Recovery means the location designated by such name or its
Center equivalent in the Disaster Recovery plan.
Disaster Recovery means the Disaster Recovery services described in
Services Schedule G.
Effective Date means the date set forth on the initial page of this
Agreement.
End-User has the meaning given in Schedule J.
Existing Network has the meaning given in Schedule M.
Force Majeure Event has the meaning given in Section 16.3.
Help Desk means the ISSC help desk located at an ISSC facility
which is staffed by ISSC to provide support to CHMS
as described in Schedules E and I.
Indemnified Party has the meaning given in Section 13.5(a).
Indemnifying Party has the meaning given in Section 13.5(a).
Indemnities has the meaning given in Section 13.1.
ISSC Code means Code Developed by ISSC personnel at ISSC's
expense, and used to provide the Services, which does
not constitute a Derivative Work of any software
owned by CHMS, ISSC, IBM or their Affiliates or
subcontractors.
</TABLE>
January 4, 1996
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<PAGE> 11
<TABLE>
<S> <C>
ISSC Derivative Code means Code Developed under this Agreement, which
constitutes Derivative Works of software for which
the copyright is owned by ISSC, IBM, their Affiliates
or their subcontractors.
ISSC Indemnitees has the meaning given in Section 13.2.
ISSC Interfaces means Code and/or literary works of authorship
created at ISSC's expense and used to interface
between the CHMS Software and ISSC Software which
does not constitute a Derivative Work of any software
or literary works of authorship owned by CHMS, ISSC,
IBM or their Affiliates or subcontractors, including
without limitation, user manuals, charts, graphs and
other written documentation, and machine-readable
text and files.
ISSC Machines means the computer equipment, peripheral devices,
storage media, cabling, connectors, extenders and
other equipment (however described) including without
limitation, modems, routers and termination boxes for
the Network located in the Data Center and at the
Network Locations (including the CHMS headquarters
and offices) used from time to time by ISSC to
perform and deliver the Services and fulfill its
obligations under this Agreement. The ISSC Machines
as of the Effective Date are listed on Schedule D,
which schedule shall be updated pursuant to Section
2.2 during the Term to reflect the then-current ISSC
Machines.
ISSC Software means the ISSC Systems Software-IBM and Systems
Software-OEM.
ISSC Systems Software- means Systems Software listed on Schedule B
IBM under the heading "ISSC Systems Software-IBM",
provided or to be provided by ISSC.
ISSC Works means literary works of authorship (other than Code)
Developed at ISSC's expense, by ISSC personnel and/or
its contractors and used to provide the Services,
including without limitation user manuals, charts,
graphs and other written documentation and
machine-readable text and files.
Level One Support has the meaning given in Schedule E.
Level Three Support has the meaning given in Schedule E.
Level Two Support has the meaning given in Schedule E.
Losses means all losses, liabilities, damages, penalties and
claims (including taxes), and all related costs,
expenses and other charges (including any and all
reasonable attorneys' fees and reasonable costs of
investigation, litigation, settlement, judgment,
interest and penalties).
Machines means the ISSC Machines and CHMS Provided Hardware.
Maintenance Release means those Software fixes and updates provided by
the Software vendor as part of normal maintenance
service for the Software.
</TABLE>
January 4, 1996
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<PAGE> 12
<TABLE>
<S> <C>
Materials means the CHMS Code, the CHMS Derivative Code, the
CHMS Works, the ISSC Derivative Code, the ISSC Code,
the ISSC Works and the ISSC Interfaces.
Minimum Service Levels has the meaning given in Schedule E. N-1 has the
meaning given in Section 3.8.
Network has the meaning given in Schedule M.
New Services has the meaning given in Section 6.6.
Out-of-Pocket Expenses means all actual, direct, verified payments made by
ISSC for equipment, materials, supplies and services,
other than New or Replacement Services, (i) outside
or beyond the scope of the Services, or (ii) payments
in addition to those made to otherwise fulfill its
obligations under this Agreement, which payments in
both instances are incremental or in addition to
those payments that ISSC would otherwise make to
provide the Services or to fulfill its obligations
under this Agreement. All such payments and the
purposes for such payments must be approved in
writing by CHMS in advance. Such payments may include
the reasonable costs of ISSC personnel that would not
otherwise have been used in connection with the
provision of the Services or to fulfill ISSC's
obligations under this Agreement, including a
reasonable allocation of overhead expenses allocable
to such personnel while providing services
constituting the subject of Out-of-Pocket Expenses.
In no event will Out-of-Pocket Expenses include any
element of profit for ISSC or any subsidiary of ISSC.
Parties means ISSC and CHMS as detailed on the initial page
of this Agreement.
Party means ISSC or CHMS as detailed on the initial page
of this Agreement.
Performance Standards means the service levels and performance
responsibilities under which the Services will be
provided. The Performance Standards are described in
Schedule E.
Operational has the meaning given in Schedule E.
Documentation
Replacement Services has the meaning given in Section 6.7.
Required Consents means any consents or approvals required to be
obtained (a) to allow ISSC to assume financial,
support, operational, management and administrative
responsibility for the CHMS Software and CHMS
Provided Hardware in connection with the Services;
(b) for the licensing, transfer or grant of the right
to CHMS to use the ISSC Software and ISSC Machines as
contemplated by this Agreement; and (c) for CHMS and
ISSC to have access to and use of the space,
equipment, software and/or third party services
provided under the Third Party Agreements in
connection with the Services as contemplated by this
Agreement.
</TABLE>
January 4, 1996
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<PAGE> 13
<TABLE>
<S> <C>
Resource Unit ("RU") has the meaning given in Schedule J.
Revised Improvement has the meaning given in Section 6.10.
Service Credits has the meaning set forth in Section 6.11.
Service Employees has the meaning given in Section 10.9(g).
Services means the administration, management, provision and
performance of the information technology and
information management and communications services
functions and responsibilities of CHMS and the
migration and transition of such services from CHMS
to ISSC, as described and defined in this Agreement,
the Supplement and Schedules A through O.
Services Transfer has the meaning given in Section 10.8.
Assistance
Similarly Situated means ISSC customers with substantially the same
Customers mix of on-line and batch processing applications
and systems resources utilization at similar or
lesser volumes.
Software means ISSC Software and CHMS Software.
Software Maintenance means Software defect identification and fixes and
the installation of Maintenance Releases.
Strategic Steering has the meaning given in Section 15.1.
Committee
Supplement means the Supplement to this Agreement
containing the charges and certain other necessary
information.
System means the Machines and Software provided
under this Agreement and the operating
environment therefor.
Systems Software means those programs and programming, including all
supporting documentation and media, that perform
tasks related to the functioning of the data
processing and telecommunication equipment which is
used to operate the Applications Software or
otherwise to support the provision of the Services by
ISSC under this Agreement, whether or not licensed to
ISSC. Systems Software includes, but is not limited
to, operating systems, software utilities, data
security software, data network software,
communications monitors and data base managers.
Systems Software as of the Effective Date is listed
in Schedule B, which schedule shall be updated
pursuant to Section 2.2 to reflect the then current
Systems Software.
Systems Software-OEM means Systems Software listed in Schedule B under the
heading "Systems Software-OEM", provided or to be
provided by ISSC.
Technology Plan has the meaning given in Section 3.3.
</TABLE>
January 4, 1996
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<PAGE> 14
<TABLE>
<S> <C>
Term has the meaning given in Section 10.1 and any
extension and renewal term described in this
Agreement.
Termination Charge means the amount that will reimburse ISSC for the
expenses incurred and investments made by ISSC to
provide the ISSC Machines and ISSC Software and
perform the functions, responsibilities and tasks
that collectively comprise the Services, together
with an ISSC profit based on such expenses and
investments, that ISSC has not recovered as of a
termination date occurring prior to the expiration of
the Term, but such charge does not include any
element of profit allocable to periods after the
termination date or any charge for lost opportunity
or expectancy, however described or denominated,
before or after such date.
Third Party Agreements means those contractual, leasing and licensing
arrangements for which ISSC has undertaken financial,
management and/or administrative responsibility and
CHMS receives third party products, software and/or
services in connection with the provision of the
Services. Third Party Agreements to which CHMS is a
party are listed on Schedule F, which schedule shall
be updated pursuant to Section 2.2 to reflect the
then-current Third Party Agreements.
Third Party Provider means a business or entity other than CHMS or ISSC
that performs tasks by providing products, software
and/or service under a Third Party Agreement, in
support of the provision of the Services by ISSC.
Transition Plan has the meaning given in Section 4.1(a).
Transition Period has the meaning given in Section 4.1(a).
Transition Personnel has the meaning given in Section 4.1(b).
Version means those Software updates that generally add
function to the existing Software and may be provided
by the Software vendor at a fee over and above the
standard software maintenance costs.
Virus or Viruses has the meaning given in Schedule E.
Visit has the meaning given in Schedule E.
Wind-Down Expenses means the amount that will reimburse ISSC for the
actual costs that ISSC incurs in the disposition
and/or reallocation of ISSC Machines, ISSC Software
and the portion of the Data Center dedicated to the
performance of the Services, the placement of ISSC
personnel allocated to the delivery of the Services,
and the termination, if appropriate, of the Third
Party Agreements, in the event of a termination
occurring prior to the expiration of the Term;
provided, however, CHMS shall have the right to
mitigate such costs by purchase of, or assumption of
the leases for, the ISSC Machines, assumption of the
licenses and maintenance agreements for the ISSC
Software, hiring the ISSC personnel delivering the
Services, assuming Third Party Agreements and taking
similar actions.
</TABLE>
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<PAGE> 15
2.2 EVOLVING NATURE OF RELATIONSHIP
a) The Supplement and Schedules A through O to this Agreement will be
updated by the Parties as necessary or appropriate during the Term to
accurately reflect the evolution of the Services and components and
elements of the Services as described therein.
b) Following the Effective Date, ISSC and CHMS reserve the right to
inventory, validate and update any information that is reflected in or
omitted from the Agreement and attached Supplement and/or Schedules. If
discrepancies are detected, the Agreement, Supplement and/or Schedules
shall be promptly changed, modified, updated and adjusted to correct
such discrepancies upon mutual agreement, so that the Agreement,
Supplement and/or Schedules will be correct and accurately reflect the
Services and charges provided by ISSC to CHMS. If either Party disputes
the existence of a discrepancy identified by the other Party, the
Parties will submit the matter to the CHMS/ISSC Management Committee
and/or the Strategic Steering Committee for dispute resolution as
specified in Section 15.
c) Both CHMS and ISSC agree that the Services provided may require
adjustments to reflect the evolving business and operations of CHMS and
ISSC, that the relationship memorialized by this Agreement is dynamic in
nature and will change as the operating and business environment of CHMS
changes and evolves, and that it is impossible to define with
specificity the scope of the Services that will be provided by ISSC
during the Term. Therefore, the CHMS/ISSC Management Committee and the
Strategic Steering Committee will periodically evaluate the business and
operating strategies of each Party and recommend modifications to, and
evolution of, the Services (including the Performance Standards and
Minimum Service Levels) to optimize such strategies.
d) While the Parties will endeavor to update, modify and amend this
Agreement, the Supplement and the Schedules as necessary or appropriate
from time to time to reflect the parameters and changing nature of the
Services and the requirements of the CHMS Business, the Parties
acknowledge that such activities may not always be documented with
specificity. Therefore, the Parties agree to deal with each other in
good faith to resolve all issues presented and any disputes that may
arise.
2.3 REQUIRED CONSENTS
a) CHMS shall remain the contracting party of record for the Third Party
Agreements to which CHMS is a party on the Commencement Date. ISSC will
provide CHMS with advice and counsel regarding ISSC's experience and
agreements with the vendors under the Third Party Agreements to which
CHMS is a party on the Commencement Date and the benefit of any
relationship of ISSC with each such vendor to the extent permitted under
the ISSC-vendor arrangement to obtain any Required Consent. ISSC and
CHMS will share management and administrative responsibilities for
obtaining all Required Consents under the Third Party Agreements
existing on the Commencement Date. CHMS shall have the responsibility
for timely obtaining all Required Consents under the Third Party
Agreements entered into after the Commencement Date and for which CHMS
bears financial responsibility and pays the vendors directly thereunder,
except Third Party Agreements to which any Affiliate of ISSC is a party.
ISSC shall have the responsibility for timely obtaining all Required
Consents under Third Party Agreements entered into after the
Commencement Date
January 4, 1996
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<PAGE> 16
(i) with affiliates of ISSC, and (ii) for which ISSC bears financial
responsibility and pays the vendors directly or indirectly through a
third party, thereunder.
b) CHMS shall bear the costs, if any, of obtaining all Required Consents,
including without limitation, all charges and fees related to obtaining
the Required Consents (i) for the Third Party Agreements existing as of
the Commencement Date, except Third Party Agreements to which any
Affiliate of ISSC is a party, and (ii) for the Third Party Agreements
entered into after the Commencement Date for which CHMS bears financial
responsibility and pays the vendor directly thereunder, except Third
Party Agreements to which any Affiliate of ISSC is a party. ISSC shall
bear such costs of obtaining all Required Consents (A) for the Third
Party Agreements to which an ISSC Affiliate is a party as of the
Commencement Date or during the Term, and (B) for all Third Party
Agreements entered into after the Commencement Date for which ISSC bears
financial responsibility and pays the vendor directly or indirectly
through a third party, thereunder. All Required Consents with regard to
Third Party Agreements existing on the Commencement Date shall be
obtained within ninety (90) days after the Effective Date unless
otherwise agreed by the Parties in writing. In addition, CHMS shall bear
the costs, if any, associated with the cancellation and re-licensing of
any Software licensed by CHMS prior to the Commencement Date if required
for ISSC to provide the Services after the Commencement Date, except
Software licensed from ISSC or any Affiliate of ISSC. ISSC shall bear
the cost, if any, associated with the cancellation and re-licensing of
any Software licensed by CHMS prior to the Commencement Date licensed
from ISSC or any Affiliate of ISSC, if required for ISSC to provide the
Services after the Commencement Date.
c) ISSC will publish a list each month setting forth the status of each
Required Consent until all Required Consents are obtained. If any
Required Consent is not obtained with respect to any of the Third Party
Agreements existing as of the Commencement Date, the Parties shall
cooperate with each other in achieving a reasonable alternative
arrangement for CHMS to continue to process its work with minimum
interference to its business operations unless and until such Required
Consents are obtained. The cost of achieving such reasonable alternative
arrangement shall be borne by ISSC if caused by Required Consents needed
from ISSC or Affiliates of ISSC or from the licensors of the ISSC
Software, and in all other instances, such cost shall be borne by CHMS.
2.4 AGENCY
a) CHMS appoints ISSC as its agent for the limited purposes of
administering, managing and paying under the Third Party Agreements to
which CHMS is a party. Under this Agreement CHMS does not appoint ISSC
as its agent for the purposes of entering into oral or written
agreements with any individual or business entity for or in the name of
CHMS or its Affiliates, without the prior express written approval of
CHMS. CHMS agrees to promptly notify all Third Party Providers under the
Third Party Agreements to which CHMS is a party of such appointment.
Subject to its obligation to pay applicable penalties, damages,
termination or other charges under Section 13.1, ISSC may cancel,
substitute, change or add to the Third Party Providers under such Third
Party Agreements as it chooses so long as ISSC continues to perform the
Services in the manner required by this Agreement; provided however,
ISSC must submit written notification to CHMS and obtain CHMS' written
agreement prior to the termination, modification or addition of any
Third Party Agreement to which CHMS is a party. If such termination will
have an impact on the operations
January 4, 1996
Agreement - Execution Document Page 10 of 53
<PAGE> 17
of CHMS' other Authorized Users or other users that are outside the
scope of the Services, ISSC will provide or cause to be provided the
services that are the subject of such Third Party Agreements to CHMS'
other Authorized Users or other users on terms no less favorable than
the terms of the applicable Third Party Agreement.
b) As agent for CHMS, ISSC will perform all obligations and
responsibilities of CHMS under all Third Party Agreements to which CHMS
is a party, subject to the provisions of Section 2.3, this Section 2.4,
Section 6.1 and Section 9. Upon CHMS's request, ISSC will provide to
CHMS all information and documentation related to its activities as
CHMS's agent with regard to such Third Party Agreements. CHMS may in its
sole discretion terminate or provide additional restrictions on ISSC's
agency appointment with respect to any Third Party Agreement to which
CHMS is a party if ISSC (i) fails to pay any amount due in a timely
manner; (ii) fails to act in CHMS's best interests; (iii) permits a
claimed or actual default to occur; or (iv) ISSC does not diligently
pursue the service and financial benefits available to CHMS under such
Third Party Agreement. If CHMS terminates or provides additional
restrictions on ISSC's agency appointment with respect to any Third
Party Agreement to which CHMS is a party solely for the reason set forth
in Section 2.4(b)(ii) or (iv), then CHMS shall relieve ISSC of the
service level impact and/or reimburse ISSC for the additional costs
directly attributable to such termination or additional restrictions to
the extent CHMS's action affects ISSC's ability to provide the Services
and/or increases ISSC's costs of providing the Services.
c) Beginning on the earlier of the Commencement Date or the Effective Date
and for the Term, CHMS will not enter into any new or amend any existing
Third Party Agreement to which CHMS is a party that adversely impacts
ISSC's ability to provide the Services or increases ISSC's cost of
providing such Service without the prior written consent of ISSC.
2.5 CONFLICTS OF INTERESTS
a) Each Party recognizes that ISSC personnel providing Services to CHMS
under this Agreement may perform similar services for others and this
Agreement shall not prevent ISSC from performing similar services for
others subject to the restrictions set forth in Section 9; provided,
however, ISSC shall not use any of the Machines or Software to perform
such similar services for others.
b) Neither Party shall knowingly solicit or hire away any employee of the
other Party during the Term of the Agreement unless otherwise agreed in
writing by the Parties and except as provided in Section 10.9(g). CHMS
or ISSC employee's responses to or employment resulting from general
solicitations will be exempted from this provision.
2.6 ALTERNATE SOURCE FOR WORK
a) During the Term, CHMS shall have the right to retain third party
suppliers to perform any service, function, responsibility or task that
is within the scope of the Services or would constitute a New Service
pursuant to Section 6.6 or a Replacement Service pursuant to Section
6.7, or to perform any such services, functions, responsibilities or
tasks (whether all or a part of the Services or the New Services or the
Replacement Services) internally. ISSC shall cooperate with any such
third party supplier and CHMS. Such cooperation shall include, without
limitation, (1) providing
January 4, 1996
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<PAGE> 18
reasonable physical and electronic access to the Data Center; (2) use of
any Machines used by ISSC to perform services provided that such use of
any Machines shall be for the purpose of providing services to CHMS and
its Affiliates for the CHMS Business but may not be for the purpose of
providing services directly to customers and potential customers of CHMS
and its Affiliates; (3) use of any of the Software (other than any
Software where the underlying license agreement does not authorize such
access and a Required Consent permitting such access has not been
obtained); (4) providing such information regarding the operating
environment, System constraints, and other operating parameters as is
reasonably necessary for the work product of the third party supplier or
CHMS to be compatible with the Services or New Services; and (5) such
other reasonable cooperation as mutually agreed by the Parties.
b) ISSC's obligations hereunder shall be subject to the third party
suppliers' compliance with reasonable Data Center data and physical
security and other applicable standards and procedures, execution of
appropriate confidentiality agreements, and reasonable scheduling of
computer time and access to other resources to be furnished by ISSC
pursuant to this Agreement.
c) If ISSC's cooperation with CHMS or any third party supplier performing
work as described in Section 2.6(a), causes ISSC to expend additional
resources that ISSC would not otherwise have expended but which fall
within the scope of activities comprising the Services, such additional
resources will be charged to CHMS under the established charging
mechanism and/or Resource Baseline therefor. The Parties agree that any
other additional resources utilized by ISSC in support of such
cooperative work will be charged as an Out-of-Pocket Expense and not as
a New Service, except as otherwise provided in Section 10.8(b). The
Parties further agree that if in ISSC's reasonable, good faith
determination, a third party supplier's activities affect ISSC's ability
to meet the Performance Standards or otherwise provide the Services in
accordance with this Agreement, ISSC will provide written notice to CHMS
of such determination. The Parties will cooperate to determine and
verify whether such affect is caused by a third party supplier, the
extent of such affect, and how to ameliorate any such affect. ISSC
shall be excused for any inability to meet the Performance Standards,
Minimum Service Levels or otherwise provide any of the Services to the
extent any such third party supplier's activities directly affect and
impact ISSC's ability to meet any Performance Standard or Minimum
Service Level or otherwise provide any of the Services in accordance
with this Agreement.
2.7 USE OF SUBCONTRACTORS
a) ISSC shall notify CHMS in writing of a decision to delegate or
subcontract any function, responsibility or task, or change
subcontractors for any function, responsibility or task, that could have
a material impact on the Services or on the operations of CHMS or on the
security of the Authorized User Data, or on the CHMS Business, at least
thirty (30) days prior to the proposed date of commencement of such
subcontractor's activity with respect hereto. Upon CHMS's request, ISSC
shall promptly provide to CHMS information regarding the proposed new or
replacement subcontractors, the scope of the Services to be delegated
thereto, experience and financial position of the proposed
subcontractor, and ISSC's selection criteria therefor and conclusions
regarding its selection in order to permit CHMS to determine whether to
grant its consent to such delegation or subcontract. Subject to ISSC's
timely provision of the foregoing information to CHMS, CHMS shall be
deemed to have accepted such delegation or subcontract or
January 4, 1996
Agreement - Execution Document Page 12 of 53
<PAGE> 19
change that is the subject of the notification by ISSC to CHMS, if CHMS
has not notified ISSC in writing of its good faith objections to such
delegation or subcontract on or before the thirtieth (30th) day after
receipt of such notice from ISSC. ISSC shall not delegate or subcontract
or change subcontractors unless and until ISSC and CHMS shall have
resolved any objection timely made by CHMS to such proposed action by
ISSC. In addition, ISSC shall not disclose any Confidential Information
of CHMS to any subcontractor unless and until such subcontractor has
agreed in writing to protect the confidentiality of such Confidential
Information in a manner equivalent to that required of ISSC by Section
9.
b) ISSC shall remain primarily liable and obligated to CHMS for the timely
and proper performance of all of its obligations hereunder even if such
obligations are delegated to third party subcontractors, and the proper
and timely performance and actions of any person or entity to which it
delegates or subcontracts any such obligation.
3. THE SERVICES
3.1 OBLIGATION TO PROVIDE SERVICES
Starting on the Effective Date and continuing during the Term, ISSC shall
provide and perform the Services to and for CHMS, as the Services may evolve
and be supplemented and enhanced during the Term as provided in this Agreement,
including the following:
a) The Services as described and defined in this Agreement (including the
Supplement and Schedules referenced in this Agreement); and
b) Subject to Section 2.2, if any services, functions, responsibilities or
tasks not specifically described in this Agreement are required for the
proper performance and provision of the Services and are an inherent
part of, or a necessary sub-part included within, the Services described
above in this Section 3, such services, functions, responsibilities and
tasks shall be deemed to be implied by and included within the scope of
the Services to the same extent and in the same manner as if
specifically described in this Agreement. Except as otherwise expressly
provided in this Agreement, ISSC shall be responsible for providing all
facilities, personnel and other resources as necessary to provide the
Services.
3.2 PERFORMANCE
a) ISSC agrees that its performance of the Services will meet or exceed
each of the applicable Performance Standards and Minimum Service Levels
set forth in Schedule E, except as specifically provided otherwise in
this Agreement. During the Term, ISSC shall upgrade the ISSC Machines
and associated Disaster Recovery Services as necessary to insure that
the Performance Standards, Minimum Service Levels and ISSC's other
obligations and responsibilities hereunder are satisfied, subject to
rate adjustments caused by changes, if any, to the "Customer Visit",
"Overhead" and "Utilization" profiles set forth in Schedule J.
January 4, 1996
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<PAGE> 20
b) ISSC also agrees to use commercially reasonable efforts to perform the
Services in a manner that will result in a rating of acceptable or
higher on the customer surveys to be conducted in accordance with
Schedule E.
c) Concurrent with the annual Technology Plan review process described in
Section 3.3, CHMS and ISSC will review and agree to commercially
reasonable modifications of, additions to and replacements of the
Performance Standards, the Minimum Service Levels and the Service
Credits for the purposes of better reflecting and supporting the
continuing development of, and evolving priorities for, the CHMS
Business. The Performance Standards and the Minimum Service Levels shall
not be modified or adjusted downward below the highest level agreed to
by the Parties at any time without the prior written agreement of CHMS.
The Parties agree that the Performance Standards and the Minimum Service
Levels will be improved over time. The Parties agree to cooperate and
deal with each other in good faith to promptly resolve on a reasonable
basis in consonance with the purposes of the review process, any
differences between the Parties regarding appropriate modifications to,
additions to and replacements of the Performance Standards, the Minimum
Service Levels and the Service Credits.
d) Subject to CHMS's prior approval, ISSC shall implement the necessary
measurement and monitoring tools and procedures required to measure and
report ISSC's performance of the Services against the Performance
Standards and Minimum Service Levels. Such measurement and monitoring
shall permit reporting at a reasonable level of detail sufficient to
verify compliance with the Performance Standards and Minimum Service
Levels and application of any attendant Service Credits and shall be
subject to reasonable audit by CHMS. Upon request, ISSC shall provide
CHMS with information and access to such tools and procedures for
purposes of verification of the reported performance levels.
3.3 ANNUAL TECHNOLOGY PLAN
The Parties shall jointly prepare a "Technology Plan" in accordance with the
following procedures:
a) The Technology Plan will be composed of short-term and long-range plans,
which tie into the CHMS Business goals and objectives. The long-range
plan will include strategic and flexible use of the Data Center in light
of the CHMS Business priorities and strategies. The short-term plan will
include an identification of proposed software and hardware, as
appropriate, and a projected time schedule for developing and
implementing the proposed changes.
b) CHMS will draft the Technology Plan with ISSC's active participation and
advice. ISSC will provide CHMS with its written comments regarding the
draft Technology Plan within thirty (30) days after ISSC's receipt
thereof. ISSC's response will include, without limitation, information
regarding industry trends in production capabilities and pricing and the
implementation of proposed hardware and software changes. The final
Technology Plan will be subject to mutual agreement by the Parties. If
the Parties are unable to agree on a particular element of the
Technology Plan, then with respect to such element this Agreement shall
continue without reference to the Technology Plan. Implementation of any
portion of the Technology Plan that is inconsistent with the Parties'
obligations hereunder will require an amendment to this Agreement
pursuant to Section 16.2.
January 4, 1996
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<PAGE> 21
c) The first Technology Plan under this Agreement will be completed on or
before June 1, 1996. The Technology Plan for subsequent years of this
Agreement will be completed on or before December 31 of each year,
commencing 1996.
3.4 DISASTER RECOVERY SERVICES
If ISSC fails to provide Disaster Recovery Services to the extent and in
accordance with the time table set forth in Schedule G and in accordance with
the Performance Standards and Minimum Service Levels set forth in Schedules G
and E, CHMS will be entitled, at its election, to receive the Service Credits
specified in Schedule E or to terminate this Agreement pursuant to Section
10.3(a) (without giving the notices and observing the cure periods set forth in
Section 10.3(a)) upon written notice to ISSC. If CHMS elects to terminate this
Agreement as described in this Section 3.4, CHMS shall give notice to ISSC of
such election within thirty (30) days after the occurrence of the event on
which such termination is based. In the event of a termination authorized under
this Section 3.4, CHMS shall not be required to pay any Termination Charges or
Wind-Down Expenses to ISSC, and such termination shall constitute the sole and
exclusive remedy of CHMS for such failure of performance by ISSC.
3.5 AUDITS
a) ISSC will assist CHMS in meeting its audit and regulatory requirements,
including providing access to the Data Center to enable CHMS and its
auditors and examiners to conduct appropriate audits and examinations of
ISSC's operations relating to the performance of the Services to verify
the accuracy of ISSC's charges to CHMS and that the Services are being
provided in accordance with this Agreement and the Performance Standards
and Minimum Service Levels. Such access will require forty-eight (48)
hour notice to ISSC and will be provided at reasonable hours, provided
that any audit does not interfere with ISSC's ability to perform the
Services in accordance with the Performance Standards and Minimum
Service Levels. ISSC will provide access only to information reasonably
necessary to perform the audit which shall include, but not be limited
to system management facility records. ISSC shall not allow CHMS, its
examiners or auditors access to ISSC's proprietary data or other ISSC
customer's data except as reasonably necessary to permit the audits
described in this Section 3.5. ISSC will also assist CHMS's employees or
auditors in testing Authorized User Data files and Software, including,
without limitation, installing and running audit software.
b) For a period of four (4) years following the last date ISSC furnished
Services pursuant to this Agreement, ISSC shall make available upon
request of the Secretary of the United States Department of Health and
Human Services, the United States Comptroller General and their duly
authorized representatives, all contracts, books, documents and records
of ISSC to the extent required by 42 U.S.C. Section 1395x(v)(1)(I) (as
amended or recodified from to time to time or any substitute or
successor statute) and lawful regulations promulgated thereunder. ISSC
shall notify CHMS within ten (10) days of its receipt of such a request
and of ISSC's proposed response to the request.
c) If ISSC carries out any of its duties under this Agreement through a
subcontract with a value of $10,000.00 or more over a twelve (12) month
period with an Affiliate of ISSC or CHMS, such subcontract shall contain
a clause to the effect that until four (4) years after the furnishing of
such
January 4, 1996
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<PAGE> 22
services pursuant to such subcontract, such related organization shall
make available, upon written request of the Secretary of the United
States Department of Health and Human Services, the United States
Comptroller General or any of their authorized representatives, the
subcontract and the books, documents and records of such organization to
the extent required by 42 U.S.C. Section 1395x(v)(1)(I) (as amended or
recodified from time to time or any substitute or successor statute) and
lawful regulations promulgated thereunder.
d) Subject to Section 12.6, ISSC agrees to make any changes and take other
actions which are necessary in order to maintain compliance with
applicable laws or regulations applicable to its performance and
provision of the Services. CHMS may submit additional findings or
recommendations regarding compliance with applicable laws and
regulations to ISSC which ISSC will analyze and consider in good faith.
ISSC shall promptly respond to CHMS regarding ISSC's evaluation and
activity plan for such findings and recommendations. If any audit or
examination reveals that ISSC's invoices for the audited period are not
correct other than amounts in dispute pursuant to Section 7.6, ISSC
shall promptly reimburse CHMS for the amount of any overcharges, or CHMS
shall promptly pay ISSC for the amount of any undercharges.
3.6 DATA CENTER
a) ISSC will not relocate the Services from the Data Center without the
prior written consent of CHMS, which consent will not be unreasonably
withheld.
b) During the Term, ISSC will provide CHMS with access to the Data Center
or an equivalent ISSC data center in order for CHMS to provide tours of
the Data Center in support of the CHMS Business.
c) ISSC will provide access to the Data Center to Third Party Providers and
third party suppliers of installation, maintenance, support and upgrade
services for the System and any other CHMS equipment or software located
in the Data Center serviced thereby. To the extent feasible in light of
such installation, maintenance, support and upgrade requirements, CHMS
will provide 24 hours notice to ISSC prior to any visits by such Third
Party Providers and third party suppliers.
d) All access to the Data Center shall be subject to reasonable Data Center
data and physical security measures and such Third Party Providers' and
third party suppliers' undertaking reasonable confidentiality
requirements relating to such visits.
3.7 SECURITY
CHMS shall administer access to all Software operated by ISSC in support of the
Services through the data security procedures described in Schedule K. ISSC
shall notify CHMS of what entities and personnel are to be authorized access to
the Systems Software utilized in support of the Services and the level of
security access required by each. The Parties shall cooperate in administering
security procedures regarding such access, in accordance with Schedule K.
January 4, 1996
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<PAGE> 23
3.8 TECHNOLOGY REFRESH
As part of the Services, ISSC agrees to take commercially reasonable actions to
provide the Services to CHMS at a technological level that will enable CHMS to
take advantage of technological advancement in its industry without an increase
in charges to CHMS within the existing System technology architecture;
provided, however, that ISSC, subject to the provisions of Section 3.10
regarding "Software Currency", will maintain the Machines, at a level that is
within one generation of current technology ("N-1"). If ISSC fails to satisfy
the requirements of this Section 3.8 with respect to the technological upgrades
in the Machines, included in the Annual Service Charges and the Resource
Baselines and CHMS incurs additional costs due to CHMS's inability to exploit
the functionality provided by the N-1 technology, ISSC shall reimburse or
credit CHMS for such additional costs and expenses. If any technological
advancement has the effect of increasing, reducing or otherwise altering the
volume or capacity represented by one or more Resource Baselines or altering
the interaction of the resources represented by a Resource Baseline with other
resources provided by ISSC in connection with the Services, and as a direct
result creates an anomaly in which such Resource Baseline or the resources
represented by such Resource Baseline are no longer integrated on a practical
basis with such other resources, ISSC and CHMS will cooperate to adjust the
affected Resource Baseline(s) and the applicable ARC Rate(s) so that CHMS
receives the same or an improved level of performance and the same or improved
price-performance benefit over that provided under the methodology used at
inception of this Agreement; provided, however, it is the intent of the Parties
that CHMS will receive the price and performance benefits attendant with any
technology refresh not otherwise factored or included in price-performance
methodology to determine the Annual Service Charges and/or ARCs at the
inception of this Agreement, and the Parties must reach agreement on the extent
of the adjustments resulting from the activities described in this Section 3.8
before such adjustments are put into effect. ISSC and CHMS will review the
conversion methodology (e.g., bench-marking, historical data, technical
specifications, etc.) which ISSC proposes to use to support such adjustments.
3.9 SOFTWARE LICENSES
a) ISSC will comply with all license obligations under all licenses for the
Software, including without limitation, the obligations of nondisclosure
and scope of use; provided, however, ISSC will only be obligated under
this Section 3.9(a) with regard to the licenses for CHMS Software to the
extent the license obligations thereunder are disclosed to and accepted
by ISSC. ISSC shall be deemed to have reviewed and accepted the
obligations under the licenses for the CHMS Software listed on Schedule
F on the Effective Date.
b) All Systems Software-OEM provided by ISSC in connection with the
Services and any CHMS Software licensed under a Third Party Agreement
shall be licensed (and the attendant maintenance arrangements
contracted) in CHMS's name and as licensee with ISSC having the right to
access and use such Software in performing the Services, unless ISSC can
procure such Software (and/or attendant maintenance arrangement) on a
more cost effective basis in its own name. ISSC shall negotiate with the
applicable Software vendors to provide for a right to assign or transfer
any licenses (and attendant maintenance arrangements) for the Software
licensed and contracted in ISSC's name to CHMS upon termination or
expiration of this Agreement, and ISSC shall promptly provide written
documentation to CHMS describing in detail, and attesting to the grant,
of such rights by the vendors upon request by CHMS from time to time,
for copies of such documentation.
January 4, 1996
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<PAGE> 24
c) Prior to (1) the addition to the ISSC Software of any software which is
not listed in Schedule B or (2) any upgrade, enhancement or modification
of any ISSC Software listed in Schedule B, ISSC shall (i) obtain CHMS's
prior written consent for any such actions, (ii) provide CHMS with
information regarding the amount of any fees and other reasonable
requirements CHMS would be required to undertake in order to obtain a
license to and maintenance for such ISSC Software upon the expiration or
termination of this Agreement, and (iii) use commercially reasonable
efforts to obtain a firm commitment from the providers of such ISSC
Software to license and provide maintenance for the ISSC Software to
CHMS upon the expiration or termination of this Agreement upon the
payment of such fees and satisfaction by CHMS of such requirements. ISSC
shall consider and take into account in the negotiation of its licensing
arrangements with providers of the ISSC Software, CHMS's reasonable
concerns regarding the terms and conditions of such ISSC Software
licenses and make such licenses and related documentation, excluding
pricing information, available to CHMS upon request.
d) ISSC shall not terminate, extend, replace, amend or add licenses for the
Software and/or the maintenance arrangements attendant therewith, in
CHMS's name without CHMS's prior written agreement. ISSC may terminate,
replace, amend or add licensees for the ISSC Software as it chooses so
long as ISSC continues to perform the Services in the manner required by
this Agreement; provided, however, ISSC agrees to provide sixty (60)
days written notification to CHMS prior to each such termination,
replacement, amendment or addition. In addition, if such action by ISSC
with respect to a license and/or maintenance arrangement for the ISSC
Software will have an impact on the Services in a manner that in turn
will have an impact on the operations or costs of CHMS, its Affiliates
or other Authorized Users, ISSC will provide or cause to be provided the
services, rights and other benefits that are the subject of such
licenses to CHMS, its Affiliates and other Authorized Users, as
applicable, on terms no less favorable than the terms of such license.
If CHMS in connection with or resulting from ISSC's termination,
replacement, amendment or addition of any license for ISSC Software
and/or maintenance arrangement incurs additional expenses or other
costs, including but not limited to personnel costs, ISSC shall promptly
reimburse CHMS for such costs.
3.10 SOFTWARE CURRENCY
The Parties agree to maintain reasonable currency for Maintenance
Releases and Versions of Software, unless CHMS determines otherwise. For
purposes of this Section, "reasonable currency" shall mean that the next
Maintenance Release or Version is installed not later than the longer of
(a) 24 months after the date the licensor makes such Maintenance Release
or Version commercially available, or (b) within 1 month after the date
the licensor makes a subsequent Maintenance Release or Version
commercially available which causes CHMS to be more than one Maintenance
Release or Version behind.
In the event CHMS requests ISSC to expedite installation of a
Maintenance Release or Version or to delay upgrading of specific
Software beyond such period or requires operation and maintenance of
multiple versions of Software, ISSC shall do so, provided, that if ISSC
reasonably determines that it will incur any Out-of-Pocket Expenses as a
result of such requests (e.g., Software support costs due to withdrawal
of maintenance by the licensor, multiple version charges, etc.), then
ISSC
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will notify CHMS of the amount of such Out-of-Pocket Expenses in writing
and CHMS, at its option, will either delay installation of such
Maintenance Release or Version or update the Software to the current
level (as applicable) or reimburse ISSC for any demonstrable
Out-of-Pocket Expenses.
In addition, CHMS shall relieve ISSC from any failure to meet a
Performance Standard or Minimum Service Level to the extent directly
impacted by the delay of the next Maintenance Release or Version until
such time as the affected Software is brought to "reasonable currency"
as defined in this Section 3.10.
4. TRANSITION
4.1 TRANSITION PLAN
a) Within thirty (30) days after the Effective Date, ISSC and CHMS will
complete the development and preparation of, and will reach agreement
on, the details of the "Transition Plan" set forth in Schedule H,
describing the transition from CHMS to ISSC of the Affected Employees;
the transition of the administration, management and financial
responsibility for the Third Party Agreements; and the transition of the
performance of the other functions, responsibilities and tasks currently
performed by CHMS which constitute a part of the Services. The
Transition Plan shall be implemented and completed over a mutually
agreed period as set forth in the Transition Plan starting on the
Commencement Date, which period shall in no event extend beyond May 31,
1996, without the prior written agreement of the Parties (the
"Transition Period").
b) During the Transition Period, CHMS will cooperate with ISSC in
implementing the Transition Plan by providing the personnel (or portions
of the time of the personnel) set forth in the Transition Plan
("Transition Personnel") and performing the tasks described for CHMS in
the Transition Plan. During the Transition Period, ISSC will be
responsible for the provision of the Services (including within the
Services the implementation of the Transition Plan) and will promptly
reimburse CHMS for the amount of any salary and benefit costs incurred
by CHMS with respect to the Transition Personnel for the portion of
their time used to implement the Transition Plan.
4.2 AFFECTED EMPLOYEES
CHMS will be eliminating certain of the positions within CHMS associated with
its information management and communications services functions during or at
the end of the Transition Period. ISSC may interview and offer employment to
each of the individuals holding the positions with CHMS listed on Schedule O
(the "Affected Employees"). All costs and expenses incurred by ISSC in
connection with the offer to employ and the employment of the Affected
Employees shall be the responsibility of ISSC.
4.3 FACILITIES
To enable ISSC to provide the Services, CHMS agrees:
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a) to provide, at no charge to ISSC, the use of the CHMS Data Center and
such additional space as may be reasonably necessary for the performance
of that portion of the Services performed with the CHMS Provided
Hardware and the CHMS Software. This obligation includes the provision
of reasonable office space, storage space, analog telephone capability
(but excluding long-distance telephone charges, which CHMS will be
reimbursed by ISSC), office support services (e.g., janitorial and
security), office supplies and furniture. CHMS shall be responsible for
ensuring such CHMS facilities provide for a safe working environment,
including compliance with applicable laws and regulations;
b) to provide at the CHMS Data Center and related facilities provided to
ISSC, all heat, light, power, air conditioning, UPS and such other
similar utilities as may reasonably be necessary for ISSC to perform
that portion of the Services performed with the CHMS Provided Hardware
and the CHMS Software;
c) to provide access to CHMS parking (if any) facilities for ISSC
employees;
d) during the entire Term, CHMS shall provide to ISSC at the CHMS corporate
offices the use of office space, storage space and other facilities
necessary for the performance by ISSC and the ISSC Project Executive of
the Services. This obligation is limited to the provision of reasonable
office space for the Project Executive and an assistant to the Project
Executive, storage capacity for Network termination Machines, analog
telephone capability (but excluding long-distance telephone charges),
office support services (e.g., janitorial and security), and office
furniture; and
e) the use by ISSC of the CHMS Data Center and other CHMS facilities and
resources described in this Section 4.3 does not constitute or create a
leasehold interest.
At the expiration of the Transition Period, the obligations of CHMS, and the
rights of ISSC, under this Section 4.3(a) through (c) shall terminate.
5. SERVICES STAFFING AND MANAGEMENT AND ADMINISTRATION
5.1 PROJECT EXECUTIVES
a) Prior to the Effective Date, ISSC and CHMS will each designate a Project
Executive to whom all the appointing Party's communications may be
addressed and who has the authority to act for the appointing Party and
its subcontractors in connection with all aspects of this Agreement.
b) ISSC shall cause the person assigned as the ISSC Project Executive to
devote his or her working time and effort in the employ of ISSC
primarily to his or her responsibilities for the provision of the
Services under this Agreement, subject to ISSC's reasonable holiday,
vacation and medical leave policies and subject to occasional,
short-term, non-recurring work on other assignments by ISSC related to
the Project Executive's areas of expertise. Before the initial or
subsequent assignment of an individual to such position, ISSC shall
notify CHMS of the proposed assignment, introduce the individual to
appropriate CHMS representatives, and consistent with ISSC's personnel
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<PAGE> 27
practices, provide CHMS with a resume and any other information about
the individual reasonably requested by CHMS. ISSC agrees to discuss with
CHMS any objections CHMS may have to such assignment and the Parties
will resolve such concerns on a mutually agreed basis.
c) ISSC will give CHMS at least thirty (30) days advance notice of a change
of the person appointed as the ISSC Project Executive, will discuss with
CHMS any objections CHMS may have to such change and the Parties will
resolve such concerns on a mutually agreed basis. ISSC shall not
reassign or replace any person assigned as the ISSC Project Executive
during the first year of his or her assignment to the CHMS service team,
nor shall ISSC assign more than four (4) different individuals to such
position during the Term, unless CHMS consents to such reassignment or
replacement, or the ISSC employee voluntarily resigns from ISSC, is
terminated by ISSC or is unable to work due to his or her death or
disability.
5.2 REPLACEMENT OF PERSONNEL
If CHMS reasonably and in good faith determines that it is not in CHMS's best
interests for any ISSC or subcontractor employee to be appointed to perform or
to continue performing any of the Services, CHMS shall give ISSC written notice
specifying the reasons for its position and requesting that such employee not
be appointed or be removed from the ISSC employee group servicing CHMS and be
replaced with another ISSC employee or subcontractor. Promptly after its
receipt of such a notice, ISSC shall investigate the matters set forth in the
notice, discuss with CHMS the results of the investigation, and resolve the
matter on a mutually agreed basis with CHMS.
5.3 RETENTION OF EXPERIENCED PERSONNEL
If ISSC fails to meet the Performance Standards or Minimum Service Levels
persistently or continuously and if CHMS reasonably determines such failure is
attributable in whole or in part to ISSC's turnover or position change rate of
employees and/or subcontractors assigned to the CHMS service team, CHMS will
notify ISSC of such determination. If such persistent failure is due to ISSC's
turnover rate or position change rate, (i) ISSC will promptly provide data
concerning its personnel and subcontractor turnover rate or position change
rate for providing the Services and will meet with CHMS to discuss the reasons
for the turnover rate or position change rate; (ii) ISSC shall submit to CHMS
its proposals for reducing the turnover rate or position change rate; and (iii)
in any event, ISSC shall reduce the turnover rate or position change rate to a
level at which it ceases to adversely impact Performance Standards and/or
Minimum Service Levels.
5.4 EFFICIENT USE OF RESOURCES
ISSC shall take commercially reasonable actions to efficiently administer,
manage and use the resources employed by ISSC to provide and perform the
Services that are chargeable to CHMS under this Agreement. As examples, but not
by way of limiting ISSC's obligations under this Section 5.4, ISSC will provide
data center and network technical and operations consulting resources and
services as reasonably requested by CHMS as a part of the Services and at no
additional charge to CHMS, to assist in identifying areas for improvement such
as unused datasets, fragmented datasets, inefficient DASD configuration and
management techniques, proper media use (e.g. tape versus DASD), inappropriate
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retention periods and similar operational considerations in order to insure a
continuing improvement in the Parties' efficient use of resources.
5.5 CHMS APPROVALS AND NOTIFICATION
For those areas of the Services where CHMS (a) has reserved right-of-approval,
consent or agreement, (b) is required to provide notification, and/or (c) is to
perform a responsibility set forth in this Agreement, and such approval,
consent, notification or performance is delayed or withheld beyond the period
provided in this Agreement, Supplement or the Schedules without authorization
or right and, such delay or withholding is not caused by ISSC and affects
ISSC's ability to provide the Services under this Agreement, CHMS will relieve
ISSC of the responsibility for meeting the Minimum Service Levels for that
portion of the Services to the extent, but only to the extent, directly
affected by such delay or withholding and only during the period such approval,
consent, notification or performance is delayed or withheld beyond the period
provided in this Agreement, Supplement or the Schedules. CHMS will reimburse
ISSC for its Out-of-Pocket Expenses, if any, incurred during such period as a
result thereof. If not specified otherwise in this Agreement, the period for
such approval or notification shall be fifteen (15) business days unless
another time period is otherwise agreed by the Parties.
6. CHARGES AND EXPENSES
6.1 DISBURSEMENTS
Beginning on the Commencement Date or the date specified in Schedule F, ISSC
will pay the Third Party Providers under the Third Party Agreements for the
provision of the software, products and services under such Third Party
Agreements, including without limitation, the Third Party Providers of Machines
and Software, except as specifically set forth in Schedule F as the
responsibility of CHMS. In addition, ISSC will reimburse CHMS in a timely
manner for CHMS's payments to such Third Party Providers under the Third Party
Agreements for which ISSC has financial responsibility for amounts allocable to
periods on and after the Commencement Date or the date specified in Schedule F,
as applicable.
6.2 ANNUAL SERVICE CHARGE
For each Contract Year during the Term, CHMS agrees to pay the Annual Service
Charge specified in the Supplement and Schedule J together with the other
amounts as described in this Section 6 and Schedule J.
6.3 ADDITIONAL CHARGES
Beginning for the initial full calendar month following the Transition Period
and monthly thereafter, CHMS and ISSC will review the quantity of Resource
Units utilized by CHMS during the preceding month and calculate applicable
Additional Resource Charges (ARCs) for such month in accordance with Schedule
J. Beginning for the initial full calendar quarter and for each calendar
quarter thereafter, CHMS and ISSC will review the quantity of Customer Visits
utilized by CHMS during the preceding calendar quarter and calculate the
applicable Customer Visit Charge for such calendar quarter in accordance with
Schedule J. CHMS will pay these additional charges in accordance with Section
7.4.
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6.4 COST OF LIVING ADJUSTMENT
Beginning in the first January after the Commencement Date, CHMS will pay ISSC
a Cost of Living Adjustment ("COLA"), in accordance with Section 7.2 and
Schedule J.
6.5 TAXES
a) The Annual Service Charges paid by CHMS are inclusive of applicable
sales, use, excise, personal property or other taxes attributable to the
period on or after the Commencement Date based upon or measured by
ISSC's cost in acquiring or providing equipment, materials, supplies or
third party services furnished to or used by ISSC in performing the
Services, including without limitation, all sales, personal property,
use, excise and other taxes, if any, due on the ISSC Machines and ISSC
Software; provided, however, CHMS will be responsible for paying all
personal property or use taxes due on or with respect to CHMS-Provided
Hardware and CHMS Software. Each Party shall bear sole responsibility
for all taxes, assessments and other real property-related levies on its
owned or leased real property.
b) If a sales, use, excise or services tax is assessed on ISSC's provision
of the Services (or any New Services or Replacement Services) to CHMS or
on ISSC's charges to CHMS under this Agreement, however levied or
assessed, CHMS will be responsible for and pay the amount of any such
tax.
c) The Parties agree to reasonably cooperate with each other to more
accurately determine each Party's tax liability and to minimize such
liability to the extent legally permissible. Each Party shall provide
and make available to the other any resale certificates, and other
exemption certificates or information reasonably requested by either
Party. The Parties will also work together to segregate the Annual
Service Charges into separate payment streams for Services that are
taxable, nontaxable, for which a sales, use or similar tax has already
been paid by ISSC, and for which ISSC functions merely as a paying agent
for CHMS in receiving goods, supplies or services (including licensing
arrangements) that otherwise are nontaxable or have previously been
subject to tax.
6.6 NEW SERVICES
If CHMS requests ISSC to perform functions, responsibilities or tasks that are
not within the scope of the Services and do not simply require use of resources
for which there exists a current Resource Baseline ("New Services"), the charge
to CHMS for ISSC's performing such functions will be determined as follows:
a) If the additional function requires only those resources which have a
current Resource Baseline or charging methodology, the additional
function, responsibilities or tasks will not be considered a New
Service.
b) If the additional function, responsibility or task requires resources
not covered by an existing Resource Baseline or charging methodology,
such additional function, responsibility or task will be considered New
Services. Prior to performing such New Services, ISSC will quote to CHMS
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<PAGE> 30
the increase in the Annual Service Charge or other payment method that
will be attributable to such New Services. Such increase will be based
upon the required proportional increase in System and other applicable
resources relative to the Annual Service Charge. Upon receipt of such
quote, CHMS may then elect to have ISSC perform the New Services, and
the Annual Service Charge and, if applicable, Resource Baselines will be
established and/or adjusted to reflect such New Services.
Notwithstanding the foregoing, nothing herein shall be interpreted as
obligating CHMS to obtain New Services from ISSC.
c) The Parties acknowledge that changes during the Term in functions,
responsibilities and tasks that are within the scope of the Services
will not be deemed to be New Services, if such functions,
responsibilities and tasks evolved or were supplemented and enhanced
during the Term by ISSC in its sole discretion or pursuant to the
provisions of this Agreement, including without limitation, changes made
which keep pace with technological advancements or improvements.
d) If the Parties cannot agree either that the function, responsibility or
task falls within the definition of a New Service or that the additional
compensation proposed by ISSC is an appropriate amount, ISSC shall
nevertheless perform the disputed function, responsibility or task if
requested by CHMS. The determination of whether any function,
responsibility or task is a New Service and the amount of additional
compensation, if any, to be paid by CHMS will be determined pursuant to
the dispute resolution provisions in Section 15. CHMS shall pay fifty
percent (50%) of any disputed charges under this Section 6.6 to ISSC and
fifty percent (50%) of any disputed charges under this Section 6.6 in
accordance with Section 7.6, pending a resolution of the dispute in
accordance with Section 15. Any payment to CHMS of any such disputed
charge paid by CHMS to ISSC and into escrow pursuant to this Section
6.6(d) after resolution of the applicable dispute, shall be paid first
from the amount in escrow with respect to such dispute and then by ISSC.
All amounts paid by ISSC to CHMS shall be paid promptly upon resolution
of the disputed charge together with interest at the rate of two percent
(2%) per month from the date of payment by CHMS to ISSC through the date
of payment by ISSC to CHMS.
6.7 REPLACEMENT SERVICES
If CHMS's request for different or additional services includes a request for
ISSC to correspondingly reduce or eliminate Services being provided hereunder,
such different, additional or reduced services will be deemed "Replacement
Services." In such event, the Parties shall determine the resources and
expenses related to the Services being replaced and to the services being
added. The net increase or decrease in such resources and expenses will be the
basis on which ISSC will quote a price to CHMS for Replacement Services.
6.8 AFFILIATES
If CHMS acquires any additional Affiliates during the Term and desires that
ISSC provide Services for such Affiliates, ISSC will provide such Affiliates
with Services in accordance with this Agreement, subject to additional charges
if acceptance of such responsibilities would require (1) New Services as
described in Section 6.6, (2) Replacement Services described in Section 6.7, or
(3) resource usage in excess of an existing Resource Baseline.
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6.9 REDUCTION OF CHMS REQUIREMENTS
a) During the Term, if CHMS experiences significant changes in the scope or
nature of the CHMS Business, which have or are reasonably expected to
have the effect of causing sustained decreases in the amount of any ISSC
resources used in providing the Services, such changes shall be governed
by this Section 6.9; provided, however, decreases in resources required
in the following circumstances shall not qualify under this Section 6.9:
(i) decrease of resources required to support the Minimum Customer
Visits Baselines; (ii) decreases in resources required due to CHMS
performing such Services (excluding a change in the technology platform
used by CHMS to perform such Services, subject to (i) above); and (iii)
decreases in resources required due to CHMS transferring the provision
of such Services to another vendor (excluding a change in the technology
platform used by CHMS to perform such Services, subject to (i) above).
b) CHMS will notify ISSC of any event or discrete set of events which CHMS
determines qualifies under this Section 6.9. ISSC will promptly identify
the changes and the ISSC resource disposition and asset reallocation
schedule that will need to be implemented in order to accommodate the
decrease of resource requirements for the significant change in a
cost-effective manner without disruption to CHMS's ongoing operations.
The disposition schedule and cost savings that will result therefrom
will be promptly submitted to CHMS for review and acceptance. Upon
acceptance by CHMS, ISSC will make the applicable adjustments to the
Annual Service Charge and the Resource Baselines in accordance with such
disposition schedule to reflect the foregoing in accordance with Section
16.2 and distribute an amended Supplement and Schedule J to CHMS for
acceptance.
c) CHMS may, at its option and expense, employ an accredited and mutually
agreed upon independent auditor to verify that ISSC's methodology for
calculating the savings referenced in this Section 6.9 is accurate and
conforms to generally accepted accounting principles. ISSC will
cooperate with such auditor and make such information and records
available to the auditor as the auditor may request in order to effect
the purpose of this Section 6.9(c).
6.10 BENEFIT SHARING OPPORTUNITIES
With respect to any project proposed to optimize and/or reduce the expense of
delivering the Services hereunder other than (i) technology improvements over
time pursuant to Section 3.2, (ii) the Efficiency Projects set forth in VI(K)
of Schedule J, and (iii) the tape technology migration scheduled for
implementation by December of 1996, (a "Project"), the Parties will evaluate
whether the Project lends itself to objective measurements of benefits to ISSC,
such as program run-time, network response time or System availability which
could be realized through the introduction of new technology, procedures or
other similar changes. If such measurements are practical, the Parties will
evaluate and establish the specific objective benefits and goals that may be
realized by ISSC and will jointly develop metrics to measure such benefits. The
Parties will mutually agree on separate scopes of work to implement a test or
pilot phase for the Project and for a full roll-out or implementation thereof.
ISSC shall bear the full cost of planning, testing, full roll-out and
implementation of such Project. ISSC shall first recover its Out-Of-Pocket
Expenses related to the Project from the benefits derived by it and thereafter
shall split the benefits and savings realized by ISSC in its provision of
Services under this Agreement on a 50-50 basis with CHMS. CHMS's portion of the
benefits and savings shall be paid to CHMS in the form of
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<PAGE> 32
credits against the Annual Service Charges during the Term of this Agreement.
If CHMS does not realize the agreed measurable benefits of the Project and such
failure is not due to CHMS's failure to perform its responsibilities or a Force
Majeure Event as specified in this Agreement, at CHMS's option, ISSC will
either remove the Project deliverables or CHMS may elect to retain use of the
Project deliverables.
6.11 SERVICE CREDITS
If ISSC fails to provide the Services in accordance with the Minimum Service
Levels, ISSC shall incur the charges set forth in Schedule E (each, a "Service
Credit"; collectively, the "Service Credits") against the amounts owed to ISSC
for the second month following the month in which the Service Credits were
incurred. Service Credits are deemed by the Parties to be liquidated damages
awarded in lieu of actual damages which would be difficult and costly to
determine in each instance in which the Service Credits are awarded. The
Parties agree that the Service Credits are not penalties.
7. INVOICING AND PAYMENT
7.1 ANNUAL SERVICE CHARGE INVOICES
On a monthly basis ISSC will invoice CHMS the proportional amount of the Annual
Service Charge for that month in advance. The invoice will separately state
applicable taxes owed by CHMS by tax jurisdiction.
7.2 COST OF LIVING ADJUSTMENT
CHMS agrees to pay ISSC a COLA adjustment beginning in the first January after
the Commencement Date, if actual cumulative inflation exceeds the Protection
Index, in accordance with the procedures set forth in Schedule J.
7.3 OTHER CHARGES
Any amount due under this Agreement including amounts described in Sections 7.1
and 7.2 shall be payable as described in Section 7.4. No invoice for any such
amount shall be delivered to CHMS until after the Services which are the
subject of such invoice, have been provided to CHMS; provided, however, any
Services that are expressly stated as prepaid or paid in advance in this
Agreement, shall be excluded from the limitation of this sentence to the
extent, but only to the extent, expressly set forth in this Agreement.
7.4 INVOICE PAYMENT
At its election, CHMS will pay each invoice either by wire funds transfer or
other electronic means acceptable to ISSC to an account specified by ISSC or by
bank check within the calendar month in which such invoice is received by CHMS,
provided CHMS receives the invoice on or before the tenth (10th) day of the
month; otherwise such payment shall be made within thirty (30) days after the
date of CHMS's receipt of the invoice. In the event that any invoice payment is
not received by ISSC within
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five (5) days following the date specified for such payment herein, a late
payment fee of two percent (2%) per month of the unpaid, late invoice payment
will be due and payable by CHMS to ISSC from the date such payment became
overdue through the date of payment to ISSC.
7.5 PRORATION
All periodic charges under this Agreement are to be computed on a calendar
month basis, and will be prorated for any partial month, unless specifically
stated otherwise in this Agreement.
7.6 DISPUTED CHARGES/CREDITS
In the event CHMS disputes the accuracy or applicability of a charge or credit
(i.e., Customer Visit Charges/Credits, Annual Service Charge, ARC, COLA,
Service Credits, pass-through billings, etc.), CHMS shall notify ISSC of such
dispute as soon as practicable after the discrepancy has been discovered. The
Parties will investigate and resolve the dispute using the dispute resolution
processes provided under Section 15 of this Agreement. Any undisputed amounts
contained in an invoice containing a disputed charge, will be paid by CHMS.
CHMS, in the case of a disputed charge, or ISSC, in the case of a disputed
credit, shall place the disputed amount in an escrow account until such dispute
is resolved. Upon resolution of the dispute, the Parties shall be paid any
interest having accrued on the disputed amounts held in escrow in connection
with such dispute in proportion to the amount received by each Party with
respect to such dispute, and the Parties shall each pay a portion of the escrow
fees attributable to the disputed amount in an inverse proportion to the
percentage of the disputed amount paid to each Party. Unpaid monies that are in
dispute and placed in escrow will not be considered a basis for monetary
default under this Agreement.
7.7 OTHER CREDITS
Except as otherwise set forth in this Agreement, with respect to any amount to
be paid or reimbursed to CHMS by ISSC at the time any such amount is due and
payable to CHMS, ISSC may pay that amount to CHMS by applying a credit for the
month such amount is due and payable against the charges otherwise payable to
ISSC hereunder, at ISSC's option. Notwithstanding the foregoing, if the amount
to be so paid or reimbursed by ISSC in any specific month, exceeds the charges
to CHMS for such month, ISSC shall promptly pay any difference to CHMS by check
or wire transfer during such month. If ISSC fails to pay any amount due and
payable to CHMS or fails to apply a credit during the month such amount is due
and payable, ISSC shall pay or credit such amount together with interest
thereon payable at a rate of two percent (2%) per month of the unpaid, late
monies will be due and payable by ISSC to CHMS from the date such monies became
due to CHMS through the date of payment or credit to CHMS.
8. INTELLECTUAL PROPERTY RIGHTS
ISSC, CHMS and their subcontractors may develop, create, modify or personalize
(collectively, "Develop") certain computer programming code, including source
and object code ("Code") and documentation in order to perform the Services.
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8.1 OWNERSHIP OF MATERIALS
With respect to any Materials whether Developed solely by ISSC or its
subcontractors, or jointly by CHMS personnel and ISSC or its subcontractors,
ownership will be as follows:
a) CHMS Derivative Code, CHMS Code and CHMS Works shall be owned by CHMS.
During the Term, ISSC shall have an irrevocable, nonexclusive,
worldwide, paid-up license to use, execute, reproduce, display, perform,
operate, distribute, modify, develop, personalize and create Derivative
Works from such Materials internally, and the right to sublicense third
parties to do any of the foregoing, for the sole purpose of performing
the Services.
b) ISSC Derivative Code, ISSC Code, ISSC Works and ISSC Interfaces, shall
be owned by ISSC. During the Term, CHMS and its Affiliates shall have an
irrevocable, nonexclusive, worldwide, paid-up license to use in the CHMS
Business, execute, operate, reproduce, display, perform, distribute,
modify, Develop, personalize and create Derivative Works from, such
Materials internally, and the right to sublicense third parties to do
any of the foregoing for CHMS and its Affiliates.
c) With respect to any Materials whether or not Developed under this
Agreement, which are or have been Developed solely by CHMS personnel,
such Materials shall be owned by CHMS. At CHMS's sole option ISSC shall
have an irrevocable, nonexclusive, worldwide, paid-up license to use,
execute, operate, reproduce, display, perform, distribute, modify,
Develop, personalize and create Derivative Works from such Materials
internally and the right to sublicense third parties to do any of the
foregoing, for the sole purpose of performing the Services during the
Term.
d) Any ownership or license rights herein granted to either Party are
limited by and subject to any patents and copyrights held by, and terms
and conditions of any license agreements with, applicable Third Party
Providers.
e) To the extent that by operation of law, any of the Materials may not be
owned by the Party to which ownership has been allocated under this
Section 8, each Party agrees to promptly assign and take such actions
and execute and deliver such documents as shall be necessary or
appropriate to effect such assignment. Each Party hereby assigns,
without further consideration, the ownership of all right, title and
interest in all U.S. and foreign copyrights, mask work rights (if any)
and patents in the Materials to the other Party as set forth in this
Section 8. Such assignee Party shall have the right to obtain and hold
in its own name copyrights, registrations, renewals and all other rights
relating or pertinent thereto.
8.2 OBLIGATIONS REGARDING MATERIALS
a) The Parties agree to reproduce copyright legends which appear on any
portion of the Materials which may be owned by the Parties and any and
all third parties.
b) Except as set forth in Section 9, this Agreement shall not preclude
either Party from Developing materials or providing services which are
competitive to the Materials or Services which might be
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delivered pursuant to this Agreement, except to the extent any of same
may infringe any of the other Party's patent rights, copyrights or mask
work rights.
c) Neither this Agreement nor any disclosure made hereunder grants any
license to either Party under any patents or copyrights, mask work
rights of the other Party, except for the licenses expressly granted
under this Section 8.
9. CONFIDENTIALITY/DATA SECURITY
9.1 CONFIDENTIAL INFORMATION
ISSC and CHMS each acknowledge that the other Party possesses and will continue
to possess information, which has commercial value in its business and is not
in the public domain, that has been created, discovered, developed by it or
provided to it by a third party, and in which property rights have been
assigned or otherwise conveyed to it. "Confidential Information" means any and
all proprietary business information of the disclosing Party treated as secret
by the disclosing party that does not constitute a Trade Secret (defined
below), including, without limitation, any and all proprietary information of
such Party of which the receiving Party becomes aware as a result of its access
to and presence at the other Party's facilities. "Trade Secrets" mean
information related to the services or business of the disclosing Party or its
Affiliates which (a) derives economic value, actual or potential, from not
being generally known to or readily ascertainable by other persons who can
obtain economic value from its disclosure or use; and (b) is the subject of
efforts by the disclosing Party or its Affiliates that are reasonable under the
circumstances to maintain its secrecy, including without limitation (1) marking
any information reduced to tangible form clearly and conspicuously with a
legend identifying its confidential or proprietary nature; (2) identifying any
oral presentation or communication as confidential immediately before, during
or after such oral presentation or communication; or (3) otherwise, treating
such information as confidential or secret. Assuming the criteria in clauses
(a) and (b) above are met, Trade Secrets include, but are not limited to,
technical and nontechnical data, formulas, patterns, compilations, computer
programs and software, devices, drawings, processes, methods, techniques,
designs, programs, financial plans, product plans, and lists of actual or
potential customers and suppliers. "Company Information" means collectively the
Confidential Information and Trade Secrets. Company Information also includes
information which has been disclosed to either Party by a third party which
such Party is obligated to treat as confidential or secret.
9.2 OBLIGATIONS
a) CHMS and ISSC will each refrain from disclosing, will hold as
confidential and will use the same level of care to prevent disclosing
to third parties, the Company Information of the other Party as it
employs to avoid disclosure, publication or dissemination of its own
information of a similar nature but in no event less than a reasonable
standard of care. Notwithstanding the foregoing, the Parties may
disclose Company Information to authorized subcontractors and Authorized
Users involved in providing and using the Services under this Agreement
where: (i) such disclosure is necessary to permit the subcontractor or
Authorized User to perform its duties hereunder or use the Services;
(ii) the subcontractor or Authorized User agrees in writing to observe
the confidentiality and restricted use and disclosure covenants and
standards of care set forth in this
January 4, 1996
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<PAGE> 36
Section 9 and under which the disclosing Party is a third party
beneficiary for all purposes; and (iii) the receiving Party assumes full
responsibility for the acts or omissions of its subcontractor, no less
than if the acts or omissions were those of the receiving Party.
b) Neither CHMS nor ISSC shall use the Company Information of the other
Party except in the case of ISSC and its subcontractors, in connection
with the performance of the Services, and as otherwise specifically
permitted in this Agreement, and in the case of CHMS and its Authorized
Users, as specifically permitted in this Agreement and in connection
with the use of the Services. ISSC shall be responsible to ensure that
its subcontractors comply with this Section 9.2(b) and CHMS shall be
responsible to ensure that its Authorized Users comply with this Section
9.2(b).
c) Without limiting the generality of the foregoing, neither Party will
publicly disclose the terms of this Agreement, except to the extent
permitted by Sections 9.3 and 14.1 without the prior written consent of
the other. Furthermore, neither ISSC nor CHMS will make any use of the
Company Information of the other Party except as contemplated by this
Agreement; acquire any right in or assert any lien against the other
Party's Company Information except as contemplated by this Agreement; or
refuse to promptly return, provide a copy of or destroy such Company
Information upon the request of the disclosing Party.
d) Neither Party will be restricted in using, in the development,
manufacturing and marketing of its products and services and in its
operations, any data processing or network management ideas, concepts,
know-how and techniques which are retained in the minds of employees who
have had access to the other Party's Company Information (without
reference to any physical or electronic embodiment of such information),
unless such use shall infringe any of such Party's patent rights,
copyrights or mask works rights.
9.3 EXCLUSIONS
Notwithstanding the foregoing, this Section 9 will not apply to any information
which ISSC or CHMS can demonstrate was: (a) at the time of disclosure to it, in
the public domain; (b) after disclosure to it, published or otherwise becomes
part of the public domain through no fault of the receiving Party; (c) without
a breach of duty owed to the disclosing Party, is in the possession of the
receiving Party at the time of disclosure to it; (d) received after disclosure
to it from a third party who had a lawful right to and, without a breach of
duty owed to the disclosing Party, did disclose such information to it; or (e)
independently developed by the receiving Party without reference to Company
Information of the disclosing Party. Further, either Party may disclose the
other Party's Company Information to the extent required by law or order of a
court or governmental agency. However, the recipient of such Company
Information must give the other Party prompt notice and make a reasonable
effort to obtain a protective order or otherwise protect the confidentiality of
such information, all at the discloser's cost and expense. It is understood
that the receipt of Company Information under this Agreement will not limit or
restrict assignment or reassignment of employees of ISSC and CHMS within or
between the respective Parties and their Affiliates.
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<PAGE> 37
9.4 LOSS OF COMPANY INFORMATION
The receiving Party will immediately notify the disclosing Party, orally or in
writing in the event of any disclosure, loss, or use in violation of this
Agreement of a disclosing Party's Company Information known to the receiving
Party.
9.5 LIMITATION
The covenants of confidentiality set forth herein (a) will apply after the
Effective Date to any Company Information disclosed to the receiving Party
before and after the Effective Date and (b) will continue and must be
maintained from the Effective Date through the termination of the relationship
between the Parties and (i) with respect to Trade Secrets, at any and all times
after termination of the relationship between the Parties during which such
Trade Secrets retain their status as such under applicable law; and (ii) with
respect to Confidential Information for a period equal to the shorter of two
(2) years after termination of the Parties' relationship, or until such
Confidential Information no longer qualifies as confidential under applicable
law. ISSC will not be responsible for the security of data during transmission
via public communications facilities if the breach of security occurred through
access to the public communications facilities, except to the extent that such
breach of security is caused by the failure of ISSC to perform its obligations
under this Agreement, or the negligent acts or omissions of ISSC, its
subcontractors or Affiliates.
10. TERM AND TERMINATION
10.1 TERM
The term of this Agreement will begin as of 12:01 a.m. on the Effective Date
and will end as of 12:00 midnight on December 31, 2005, (the "Term"), unless
earlier terminated or extended in accordance with this Agreement.
10.2 RENEWAL AND EXPIRATION
ISSC shall notify CHMS in writing, whether it desires to renew this Agreement
and of the proposed prices and terms to govern such renewal not less than
sixteen (16) months prior to the expiration of the Term. If ISSC notifies CHMS
that it desires to renew this Agreement, CHMS agrees to inform ISSC in writing
whether it desires to renew not less than nine (9) months prior to the
expiration of the Term. If CHMS notifies ISSC that it desires to renew the
Agreement, but the Parties are unable to agree upon renewal prices, terms and
conditions as of six (6) months prior to the expiration of the Term, this
Agreement will be extended for one (1) year at the then-current prices, terms
and conditions. If the Parties are unable to reach agreement on renewal during
such extension period, this Agreement will expire at the end of such extension
period.
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<PAGE> 38
10.3 TERMINATION BY CHMS
CHMS may terminate this Agreement for the following reasons:
a) A material breach of this Agreement by ISSC that remains uncured for ten
(10) days after receipt of written notice thereof; provided, however, if
a material breach of this Agreement by ISSC occurs that cannot be cured
by ISSC in such ten (10) day period but ISSC submits a written plan to
CHMS within such period to cure such breach after the ten (10) day
period (but in no event more than thirty (30) days after such breach)
and the plan (including the timing of the cure set forth in the plan) is
accepted by CHMS in writing, the cure period for such breach shall be
extended to the date set forth in the plan; or
b) There exists a series of non-material or persistent breaches by ISSC
that in the aggregate have a significant adverse impact on the Services
support of the administrative, management, planning or operations
functions of CHMS or its customers, or on the management of the
Services; or
c) For convenience upon one hundred eighty (180) days prior notice by CHMS
to ISSC given after the expiration of the first Contract Year, unless
there is a CHMS Sale within nine (9) months before or after the
effective date of a termination for convenience in the first three (3)
Contract years, in which event, after the expiration of the first three
(3) Contract Years; or
d) Upon a Change of Control of ISSC with one hundred eighty (180) days
notice given within ninety (90) days after the later to occur of (i) the
effective date of the Change of Control, or (ii) the date on which ISSC
gives CHMS written notice of the effective date of the Change of Control
of ISSC; or
e) ISSC becomes insolvent or is unable to pay its debts or enters into or
files (or has filed or commenced against it) a petition, arrangement,
application, action or other proceeding seeking relief or protection
under the bankruptcy laws of the United States or any similar laws of
the United States or any state of the United States or any other
country, or changes its legal status, or transfers all or substantially
all of its assets to another person or entity.
10.4 TERMINATION BY ISSC
ISSC may terminate this Agreement for a material default by CHMS that remains
uncured for a period of thirty (30) days after written notice thereof to CHMS
from ISSC.
10.5 TERMINATION CHARGES
a) In the event of a termination by CHMS pursuant to Sections 10.3(c)
Convenience or (d) Change of Control and notwithstanding any other
provision of this Agreement except Section 10.5(c), CHMS shall only be
responsible for the following payment obligations (i) all fee due and
payable through the termination date, (ii) the Termination Charge, and
(iii) the Wind-Down Expenses incurred by ISSC. However, in the event of
a termination by CHMS pursuant to Sections 10.3(a) Cause or (b)
Persistent Failure or (e) Bankruptcy and notwithstanding any other
provision of this Agreement except Section 10.5(c), CHMS shall only be
responsible for the payment obligations
January 4, 1996
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<PAGE> 39
described in Section 10.5(a)(i) above, but not for the amounts set forth
in Sections 10.5(a)(ii) and (iii) above. Moreover, in the instances of
a termination by CHMS pursuant to Sections 10.3(a) Cause or (e)
Bankruptcy, CHMS may recover damages from ISSC for the defaults and
breaches by ISSC giving rise to the termination, but in the instance of
a termination by CHMS pursuant to Section 10.3(b) Persistent Failure,
CHMS may not recover any damages from ISSC for the defaults and breaches
by ISSC giving rise to the termination, except as set forth in Section
10.5(c).
b) In the event of a termination by ISSC under Section 10.4 above and
notwithstanding any other provision of this Agreement except Section
10.5(c), (i) if such termination is effective at any time while CHMS is
not permitted to terminate for convenience under Section 10.3(c), ISSC
may recover only the amount of its projected profits for the period
between the effective date of such termination and the first date on
which a termination for convenience by CHMS could be effective under
Section 10.3(c), plus the amounts payable by CHMS to ISSC in Section
10.5 for a termination by CHMS pursuant to Section 10.3(c) on such date,
and (ii) if such termination is effective at any time during the Term
other than as described in item (i) above, ISSC may recover only the
amounts payable by CHMS to ISSC in Section 10.5 for a termination by
CHMS pursuant to Section 10.3(c) Convenience.
c) The limitations on damages and recoveries set forth in Sections 10.3 and
10.4 shall be effective in all instances except such limitations shall
not apply to the following: (i) monetary damages and recoveries covered
under the Parties' respective indemnification obligations pursuant to
Section 11; and monetary damages and recoveries arising out of or
resulting from breaches of the confidentiality provisions of Section 9.
10.6 TERMINATION PRORATION
Any Termination Charge will be prorated according to the following formula:
[((A-B) / 12 months) x C] + B = Prorated Termination charge.
<TABLE>
<CAPTION>
where:
<S> <C> <C>
A = the Termination Charge specified in the Supplement for the
year in which termination is effective;
B = the Termination Charge specified in the Supplement for the
year after the year in which termination is effective; and
C = the number of months remaining during the year in which
termination is effective.
</TABLE>
10.7 EXTENSION OF SERVICES
CHMS may request and ISSC will once extend the provision of Services for not
more than one hundred eighty (180) days ("Extension Period") upon not less than
sixty (60) days prior written notice before the scheduled termination or
expiration of this Agreement. However, in the event of a material breach by
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<PAGE> 40
CHMS either prior to or after the start of the Extension Period, ISSC will
extend the provision of Services as described in this Section 10.7, only if
CHMS prepays the Annual Service Charges and a reasonable projection of other
charges due under this Agreement for the entire period CHMS requests such
extension.
10.8 SERVICES TRANSFER ASSISTANCE
a) It is the intent of the Parties that ISSC will cooperate with CHMS to
assist in the orderly transfer of the services, functions,
responsibilities, tasks and operations provided by ISSC hereunder to
CHMS itself or another services provider in connection with the
expiration or earlier termination of this Agreement. Upon CHMS's request
ISSC shall provide transfer assistance in connection with migrating the
work of CHMS to CHMS itself or another services provider ("Services
Transfer Assistance") commencing six (6) months prior to expiration or
upon any notice of termination, or of non-renewal of this Agreement. In
the event CHMS shall fail to pay any amounts when due and payable under
this Agreement with or without an attendant termination for cause by
ISSC, ISSC shall not be required to provide Services Transfer Assistance
unless CHMS prepays the Annual Service Charge, if any, and a reasonable
projection of other charges due under this Agreement for the entire
period CHMS requests Services Transfer Assistance. In no event will
CHMS's escrow of monies pursuant to Section 7.6 be considered a failure
by CHMS to pay amounts due and payable hereunder. Further, ISSC shall
provide the Services Transfer Assistance in accordance with this Section
10.8 even in the event of CHMS's material breach (other than a payment
default) with or without an attendant termination for cause by ISSC, if
CHMS prepays a reasonable projection of the Out-of-Pocket Expenses for
the Services Transfer Assistance for the entire period CHMS desires ISSC
to provide such services to CHMS or its designees. Notwithstanding the
provisions of Sections 10.8(a) and (b), if ISSC terminates this
Agreement for cause or CHMS terminates this Agreement for convenience,
CHMS will pay the then current standard hourly rates of ISSC, discounted
by fifteen percent (15%), in each instance in which CHMS is to be
charged the Out-of-Pocket Expenses of ISSC in connection with the
Services Transfer Assistance services of ISSC under this Agreement.
Services Transfer Assistance shall be provided through the effective
date of expiration or termination of the Services, and upon request by
CHMS, for up to one hundred eighty (180) days thereafter. Services
Transfer Assistance shall include, but not be limited to, providing CHMS
and its Affiliates and their agents, contractors and consultants, as
necessary, with services described in Schedule N.
b) If any Services Transfer Assistance provided by ISSC requires the
utilization of additional resources that ISSC would not otherwise use in
the performance of this Agreement but for which there is a current
Resource Baseline, CHMS will pay ISSC for such usage at the then-current
Agreement charges and in the manner set forth in this Agreement. If the
Services Transfer Assistance requires ISSC to incur Out-of-Pocket
Expenses that ISSC would not otherwise incur in the performance of this
Agreement (such as providing Services Transfer Assistance after the
expiration or termination of this Agreement), then ISSC shall notify
CHMS of the identity and scope of the activities requiring that ISSC
incur such expense and the projected Out-of-Pocket Expenses associated
with the performance of such activities. Upon CHMS's authorization, ISSC
shall perform the activities and invoice CHMS for the associated
Out-of-Pocket Expenses. Within thirty (30) business days after the date
of the invoice, CHMS shall pay ISSC for authorized,
January 4, 1996
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<PAGE> 41
additional Out-of-Pocket Expenses incurred to provide such additional
services to perform the authorized activities.
c) If CHMS exercises its option to prepay the Annual Service Charges and
other costs reasonably projected by ISSC for Services Transfer
Assistance and it is determined that such prepayment is in excess of the
actual costs associated with the Services Transfer Assistance, then ISSC
shall apply such overpayment to monies otherwise due ISSC or, if no
monies are due ISSC, promptly refund such overpayment to CHMS at the end
of such Services Transfer Assistance. Conversely, if the amount prepaid
by CHMS to ISSC for Services Transfer Assistance does not fully
reimburse ISSC for the actual Annual Service Charges due and
Out-of-Pocket Expenses incurred by ISSC for the provision of Services
Transfer Assistance to CHMS, then ISSC shall invoice CHMS and CHMS shall
pay ISSC for such additional amounts as incurred.
10.9 OTHER RIGHTS UPON TERMINATION
At the expiration or earlier termination of this Agreement for any reason,
however described, ISSC agrees:
a) Upon CHMS's request, ISSC agrees to sell to CHMS or its designee at fair
market value, the ISSC Machines owned by ISSC then currently being used
by ISSC on a dedicated basis to perform the Services. In the case of
dedicated ISSC Machines that ISSC is leasing, ISSC agrees to permit CHMS
or its designee to either buy-out the lease on the ISSC Machines and
purchase the ISSC Machines from the lessor or assume the lease(s) and
secure the release of ISSC thereon. CHMS shall be responsible for any
sales, use or similar taxes associated with such purchase of such ISSC
Machines.
b) ISSC will grant to CHMS and its Affiliates an irrevocable, nonexclusive,
worldwide, perpetual, paid-up license to use, execute, operate,
reproduce, display, perform, distribute, modify, Develop and
personalize, and create Derivative Works from, the ISSC Derivative Code,
ISSC Code, ISSC Works and ISSC Interfaces as a part of and in connection
with the CHMS Business, and the right to sublicense third parties to do
any of the foregoing for CHMS and its Affiliates.
c) ISSC will provide to CHMS and its Affiliates a source code and object
code license for ISSC Software proprietary to ISSC and not otherwise
owned by or licensed to CHMS in accordance with Section 10.9(b) and not
generally commercially available, with rights that are the same as those
granted to CHMS and its Affiliates in Section 10.9(b) for use by CHMS
and its Affiliates as a part of and in connection with the CHMS
Business, upon terms and prices to be mutually agreed upon by the
Parties (which prices shall not be greater than those offered to other
Similarly Situated Customers or, in the case where no Similarly Situated
Customers exist, other third parties). At CHMS's option, ISSC will
recommend a mutually agreeable commercially available substitute to
perform the same function.
d) If ISSC has licensed or purchased and is using any generally
commercially available ISSC Software to provide the Services to CHMS at
the date of expiration or termination, CHMS may elect to take a transfer
or an assignment of the license for such software (and any attendant
maintenance agreement) and reimburse ISSC for the initial license or
purchase charges for such
January 4, 1996
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<PAGE> 42
ISSC Software in an amount equal to the remaining unamortized cost of
such ISSC Software, if any, depreciated over a five (5) year life. CHMS
shall also pay any transfer fee or charge imposed by the applicable
vendor and such licensed Software shall be transferred or assigned to
CHMS.
e) If ISSC has licensed or purchased and is using any generally
commercially available ISSC Software to provide the Services to CHMS and
other ISSC customers in a shared environment at the date of expiration
or termination, ISSC, upon request by CHMS, will assist CHMS in
obtaining licenses for such software subject to CHMS's payment of any
license fee or charge imposed by the applicable vendor.
f) ISSC will use commercially reasonable efforts to negotiate license
arrangements with third parties that will minimize the amount of license
transfer and assignment fees to be paid by CHMS. CHMS may participate in
the negotiation of such license arrangements. ISSC shall provide
reasonable advance written notice to CHMS of such anticipated
negotiations.
g) Upon the date of expiration or termination of this Agreement, CHMS shall
have the right to make offers of employment to any or all ISSC employees
performing Services for CHMS or its Affiliates hereunder ("Service
Employees"). Promptly after either Party sends the other Party written
notice of termination or expiration, ISSC agrees to supply CHMS with the
names and resumes requested by CHMS for the purpose of exercising its
rights under this Section 10.9, at no charge. CHMS's rights under this
Section 10.9 will take precedence over any ISSC/employee employment
contract or covenant that may otherwise limit an employee's right to
accept employment with CHMS.
h) Upon CHMS's request, ISSC will transfer or assign to CHMS or its
designee, on mutually acceptable terms and conditions, any Third Party
Agreements not otherwise treated in this Section 10.9, applicable solely
to services being provided to CHMS, including, without limitation, Third
Party Agreements for maintenance, Disaster Recovery Services and other
necessary third party services then being used by ISSC to perform the
Services subject to the payment by CHMS of any transfer fee or charge
imposed by the applicable vendors.
11. LIABILITY
11.1 LIABILITY CAPS
The liability of ISSC to CHMS arising out of or resulting from the performance
or non-performance of ISSC and its subcontractors of the Services and its
obligations under this Agreement shall be limited (a) to "Direct Damages"
incurred by CHMS for each event which is the subject matter of a claim or cause
of action with a liability cap for each such event which is not declared by
CHMS as the basis for its termination of this Agreement pursuant to Section
10.3(a) or (c), equal to the actual charges to CHMS for the Services during the
three (3) calendar months immediately following each such event; and (b) to the
"Direct Damages" incurred by CHMS for the event(s) which are the subject matter
of claim(s) or cause(s) of action which are declared by CHMS as the basis for
its termination of this Agreement pursuant to Section 10.3(a) or (c), with a
liability cap for such event(s) and termination equal to the actual
January 4, 1996
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<PAGE> 43
charges to CHMS for the Services during the twelve (12) month period
immediately preceding such event(s) (the "ISSC Direct Damages Cap"). The
liability of CHMS to ISSC arising out of or resulting from the performance and
non-performance of its obligations under this Agreement shall be limited in all
cases to Direct Damages which in the aggregate shall not exceed the amounts
payable by CHMS upon a termination for convenience under Section 10.5(b) (the
"CHMS Direct Damages Cap"). The ISSC Direct Damages Cap and the CHMS Direct
Damages Cap are herein collectively called the "Direct Damages Caps".
11.2 EXCLUSIONS
The Direct Damages Caps will not apply to (a) failure to pay charges for the
Services that are due and payable hereunder up to the effective date of the
early termination of this Agreement (excluding from this exception any payments
due and payable by CHMS upon a termination by CHMS for convenience or upon a
change of control pursuant to Section 10.3(c) and (d) or upon a termination by
ISSC pursuant to Section 10.4); (b) Losses covered under the Party's
indemnification obligations to others pursuant to Section 13; (c) Losses
arising from a violation of the confidentiality provisions of Section 9; (d)
amounts to be paid or credited to CHMS as Service Credits; (e) Losses incurred
by either Party caused by or arising out of the inaccuracy or untruthfulness of
the representations and warranties of the other Party contained in this
Agreement; (f) amounts payable by ISSC under the force majeure provision of
Section 16.3 of this Agreement; and (g) amounts payable to CHMS under Section
7.7 (Other Credits).
11.3 DIRECT DAMAGES
Unless specifically provided to the contrary in this Agreement, neither party
shall have any liability whether based on contract, tort (including without
limitation, negligence), warranty, guarantee or any other legal or equitable
grounds to the other party for any damages other than Direct Damages. "Direct
Damages" mean actual, direct damages incurred by the claiming Party which
include, by way of example but without limitation, (i) the costs of cover
incurred by CHMS to obtain services which are the same as or substantially
similar to the Services, (ii) the costs to correct any deficiencies in the
Services rendered by ISSC, (iii) the costs incurred by CHMS to transition to
another provider of information management and communication services and/or to
take some or all of such functions and responsibilities in-house, (iv) the
difference in the amounts to be paid to ISSC hereunder and the charges to be
paid to such other provider and/or the costs of providing such functions,
responsibilities and tasks in-house, (v) payments incurred by CHMS to third
parties (including customers of CHMS and its Affiliates) in connection with the
failure of ISSC to provide the Services in accordance with this Agreement, (vi)
the Service Credits, and (vii) similar damages, but "Direct Damages" shall not
include loss of interest, profit (except as provided in Section 10.5(b)(i), as
included in the Termination Charge and as included as a part of the Service
Credits) or revenue of the claiming Party or any indirect, punitive or
exemplary damages suffered by the claiming Party arising from or related to
this Agreement, even if such Party has been advised of the possibility of such
losses or damages.
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<PAGE> 44
11.4 DEPENDENCIES
In no event will ISSC or its subcontractors be liable for any damages if and to
the extent caused by CHMS's failure to perform its responsibilities hereunder.
Neither CHMS nor its subcontractors shall be liable for any damages if and to
the extent caused by any failure to perform by ISSC or its subcontractors.
11.5 REMEDIES
At its option, CHMS may seek all remedies available to it under law and in
equity or recover as liquidated damages the Service Credits, subject to the
limitations and provisions specified in this Section 11. If ISSC's provision of
the Services is such that ISSC would otherwise owe CHMS a Service Credit and
CHMS elects to recover Service Credits, CHMS's recovery of Service Credits
shall constitute acknowledgement by CHMS of full satisfaction and release of
any claim by CHMS that ISSC has breached its obligations under this Agreement
with respect to any such event(s) giving rise to the Service Credits. However,
within six (6) months of the receipt of any Service Credits CHMS received with
respect to any action or inaction by ISSC upon which CHMS is basing termination
for cause under Section 10.3(a) or termination for persistent breaches under
Section 10.3(b), CHMS may return, such Service Credits and pursue a damage
claim against ISSC, if any such claim exists.
12. WARRANTIES/COVENANTS
12.1 WORK STANDARDS
ISSC warrants and covenants that (a) it has, and each of the ISSC employees and
subcontractors that it will use to provide and perform the Services has, the
necessary knowledge, skills, experience, qualifications, rights and resources
to provide and perform the Services in accordance with the Agreement; (b) it
has successfully provided and performed the Services or services that are
substantially equivalent to the Services for other customers of ISSC; and (c)
the Services will be performed for CHMS in a diligent, workmanlike manner in
accordance with industry standards and best practices applicable to the
performance of such services.
12.2 NONINFRINGEMENT
The Parties represent and warrant that they will perform their responsibilities
under this Agreement in a manner that does not infringe, or constitute an
infringement or misappropriation of, any patent, Trade Secret, copyright or
other proprietary right of any third party. Notwithstanding this provision or
any other provision in this Agreement, CHMS makes no warranty or representation
with respect to any claims for such infringement or misappropriation by virtue
of its compliance with obligations herein to provide ISSC access to, use of or
benefits of any Third Party Agreements prior to receiving the necessary
Required Consents.
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<PAGE> 45
12.3 DISABLING CODE
ISSC represents and warrants that ISSC will take commercially reasonable steps
to ensure that no code in the Systems Software which could have the effect of
disabling or otherwise shutting down all or any portion of the Services, will
be permitted to be invoked without the prior written consent of CHMS. ISSC
further represents and warrants that with respect to any disabling code that
may be part of the Software, ISSC will not invoke disabling code at any time,
including upon expiration or termination of this Agreement for any reason,
without CHMS's prior written consent.
12.4 AUTHORIZATION AND ENFORCEABILITY
Each Party hereby represents that:
a) it has all requisite corporate power and authority to enter, and fully
perform pursuant to, into this Agreement;
b) the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
properly authorized by all requisite corporate action on the part of
each Party; and
c) this Agreement has been duly executed and delivered by such Party.
12.5 DISCLAIMER
a) ISSC does not warrant the accuracy of any advice, report, data or other
product delivered to CHMS to the extent any inaccuracies are caused by
data and/or software provided by CHMS. Such products are delivered AS
IS, and ISSC shall not be liable for any inaccuracy thereof. ISSC will
promptly notify CHMS of any such inaccuracies of which ISSC becomes
aware and the cause therefore. ISSC will provide reasonable assistance
to CHMS to remedy any problems.
12.6 REGULATORY PROCEEDINGS
Each Party agrees at its cost and expense to obtain all necessary regulatory
approvals applicable to its business, obtain any necessary permits, and to
comply with all regulatory requirement applicable to the performance of its
services to its customers.
13. INDEMNITIES
13.1 INDEMNITY BY ISSC
ISSC will indemnify and hold CHMS and the other Authorized Users and their
respective officers, directors, employees, agents, customers, successors and
assigns (each an "Indemnitee") harmless from and against any and all Losses
incurred by any of them arising from or in connection with:
January 4, 1996
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<PAGE> 46
a) any Claims of infringement of any United States letters patent, or any
copyright, trademark, service mark, trade name, trade secret, or similar
property right conferred by contract or by common law or by any law of
the United States or any state alleged to have been incurred because of
any information technology and information management and communications
services, equipment, software or other resources provided by ISSC or its
subcontractors in its performance of the Services; provided, however,
ISSC will have no obligation with respect to any Losses to the extent
arising from or in connection with Claims for copyright infringement
and/or breach of software licenses related to the Services committed by
an Indemnitee or any employee of an Indemnitee that is not the result of
ISSC failing to perform its obligations under this Agreement including,
without limitation, obtaining any Required Consent for which it has
responsibility; provided, further, that ISSC will have no obligation
with respect to any Losses to the extent arising out of or in connection
with an Indemnitee's modification of a program or a machine provided by
ISSC or its subcontractors or an Indemnitee's combination, operation or
use of the services, equipment, software or other resources provided by
ISSC or its subcontractors with devices, data or programs not furnished
by ISSC or its subcontractors;
b) any Claims accruing on or after the Effective Date regarding any Third
Party Agreements, however described (including without limitation,
failure to obtain Required Consents); provided, however, ISSC will have
no obligation with respect to any Losses to the extent arising out of or
in connection with Claims for copyright infringement and/or breach of
software licenses related to the Services committed by any Indemnitee or
any employee of an Indemnitee that is not the result of ISSC failing to
perform its obligations under this Agreement including, without
limitation, obtaining any Required Consent for which it has
responsibility;
c) the untruthfulness or inaccuracy of any representation or warranty made
by ISSC in this Agreement;
d) any amounts, including without limitation, taxes, interest and penalties
assessed against CHMS which are obligations of ISSC under this
Agreement;
e) personal injuries, death or damage to tangible personal or real property
of third parties including employees of ISSC, its contractors and
subcontractors; provided that ISSC will have no obligation under this
part, to the extent the same arise out of or in connection with the
negligence or willful misconduct of CHMS;
f) any Claims resulting from or arising out of the Services or operations
of ISSC (including, without limitation, Claims by customers of CHMS and
its Affiliates arising out of the failure of ISSC to provide the
Services in accordance with this Agreement, subject to Section 11.3(b),
if such Claims do not arise out of a breach of this Agreement by CHMS
and are not the subject of a specific indemnity provided to ISSC by CHMS
in Section 13.2; provided, however, that ISSC will have no obligation
under this item, to the extent the Claims arise out of or result from
the negligence or wilful misconduct of ISSC;
January 4, 1996
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<PAGE> 47
g) any Claims for copyright infringement and/or breach of software licenses
related to the Services, committed by ISSC or any of its subcontractors
or any employee of ISSC and its subcontractors that is not the result of
CHMS failing to perform its obligations under this Agreement including
obtaining any Required Consent for which it has responsibility; and
h) any environmental Claim arising out of this Agreement or as a result of
the Services performed at the CHMS Data Center facilities if ISSC or its
subcontractors has caused the environmental damage or violation of
environmental laws or regulations from which the Claim arises.
i) any Claims directly attributable to ISSC's decision to request that CHMS
terminate, cancel, change or breach any Third Party Agreement and CHMS'
assent to and compliance with such decision and any Losses incurred by
CHMS associated with such decision by ISSC and compliance by CHMS.
In the event and to the extent that a Claim is made against an Indemnitee by an
employee of ISSC, its contractors or subcontractors providing Services
hereunder, the Parties agree that ISSC shall indemnify and hold harmless the
Indemnitee to the same extent as if the Claim was made by a non-employee of
ISSC, its contractors or subcontractors. ISSC's indemnification hereunder
shall be primary and immediate. Accordingly, in addition to other provisions
herein, and in order to render the Parties' intent and this indemnification
agreement fully enforceable, ISSC, in an indemnification claim hereunder,
expressly and without reservation waives any defense or immunity it may have
under any applicable workers' compensation law(s) or any other statute or
judicial decision disallowing or limiting such indemnification and consents to
a cause of action for indemnity. This waiver and consent to indemnification is
made irrespective of and specifically waiving any defense or immunity under any
statute or judicial decision.
13.2 INDEMNITY BY CHMS
CHMS will indemnify and hold harmless ISSC and its officers, directors,
employees, agents, successors and assigns (each an "ISSC Indemnitee") harmless
from and against any and all Losses incurred by ISSC arising from or in
connection with
a) any Claims of infringement of any United States letters patent, or any
copyright, trademark, service mark, trade name, trade secret, or similar
property right conferred by contract or by common law or by any law of
the United States or any state alleged to have been incurred because of
any information technology and information management and communications
services equipment, software or other resources provided to ISSC by CHMS
in connection with the performance of the Services; provided, however,
CHMS will have no obligation with respect to any Losses to the extent
arising out of or in connection with Claims for copyright infringement
and/or breach of software licenses related to the Services, committed by
an ISSC Indemnitee or any employee of an ISSC Indemnitee that is not the
result of CHMS failing to perform its obligations under this Agreement
including, without limitation, obtaining any Required Consent for which
it has responsibility; and provided, further, that CHMS will have no
obligation with respect to any Losses to the extent arising out of or in
connection with an ISSC Indemnitee's modification of a program or a
machine or an ISSC Indemnitee's combination, operation or use of the
equipment, software or other resources provided by CHMS;
January 4, 1996
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<PAGE> 48
b) any Claims accruing before the Effective Date regarding any Third Party
Agreements between CHMS and a third party, including without limitation,
failure to obtain Required Consents;
c) the untruthfulness or inaccuracy of any representation or warranty made
by CHMS under this Agreement;
d) any amounts, including without limitation, taxes, interest and penalties
assessed against ISSC which are obligations of CHMS under this
Agreement;
e) personal injuries, death or damage to tangible personal or real property
of third parties including employees of CHMS, its contractors and
subcontractors; provided that CHMS will have no obligation, under this
part, to the extent the same arise out of or in connection with the
negligence of ISSC;
f) any Claims arising out of or resulting from the operations of CHMS,
including the remarketing of the Services by CHMS (except as provided in
Section 11), if such Claims do not arise out of a breach of this
Agreement by ISSC and are not the subject of a specific indemnity
provided to CHMS by ISSC in Section 13.1; provided, however, that CHMS
will have no obligation under this item, to the extent the Claims arise
out of or result from the negligence or wilful misconduct of ISSC;
g) any Claims for copyright infringement and/or breach of software licenses
related to the Services, committed by CHMS or any employee of CHMS that
is not the result of ISSC failing to perform its obligations under this
Agreement including, without limitation, obtaining any Required Consent
for which it has responsibility; and
h) any environmental Claim arising out of this Agreement or as a result of
the Services performed at the CHMS Data Center facilities unless ISSC or
its subcontractors has caused the environmental damage or violation of
environmental laws or regulations from which the Claim arises.
In the event and to the extent that a Claim is made by an employee of CHMS
against an ISSC Indemnitee, the Parties agree that CHMS shall indemnify and
hold harmless the ISSC Indemnitee to the same extent as if the Claim was made
by a non-employee of CHMS. CHMS's indemnification hereunder shall be primary
and immediate. Accordingly, in addition to other provisions herein, and in
order to render' the Parties' intent and this indemnification agreement fully
enforceable, CHMS, in an indemnification Claim hereunder, expressly and without
reservation waives any defense or immunity it may have under any applicable
workers' compensation law(s) or any other statute or judicial decision
disallowing or limiting such indemnification and consents to a cause of action
for indemnity. This waiver and consent to indemnification is made irrespective
of and specifically waiving any defense or immunity under any statute or
judicial decision.
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<PAGE> 49
13.3 EMPLOYMENT ACTIONS
It is understood and agreed that ISSC shall be solely and exclusively
responsible for personnel decisions affecting ISSC's employees, contractors and
agents (including without limitation, hiring, promotions, training,
compensation, evaluation, discipline, and discharge). CHMS shall be solely and
exclusively responsible for personnel decisions affecting CHMS's employees,
contractors, and agents (including without limitation, hiring, promotion,
training, compensation, evaluation, discipline and discharge).
13.4 EXCLUSIVE REMEDY
The indemnification rights of each Indemnitee and ISSC Indemnitee (individually
an "Indemnified Party") for third party Claims pursuant to Sections 13.1 and
13.2, shall be the sole and exclusive remedy of such Indemnified Party with
respect to each such third party Claim to which such indemnification relates.
13.5 INDEMNIFICATION PROCEDURES
a) Written notice shall be given to the Party that is obligated to provide
indemnification under Sections 13.1 and 13.2 (the "Indemnifying Party"),
if any civil, criminal, administrative or investigative action or
proceeding is commenced or threatened (any of the above being a "Claim")
against any Indemnified Party. Such notice shall be given as promptly as
practicable but in all events, within a period that will not prejudice
the rights of the Indemnified Party under this Agreement or to defend
the Claim. After such notice, if the Indemnifying Party acknowledges in
writing to the Indemnified Party that this Agreement applies with
respect to such Claim, then the Indemnifying Party shall be entitled to
take control of the defense and investigation of such Claim and to
employ and engage attorneys of its sole choice to handle and defend the
same, at the Indemnifying Party's sole cost and expense. The
Indemnifying Party must deliver written notice of its election of taking
such control of the claim to the Indemnified Party not fewer than ten
(10) days prior to the date on which a response to such Claim is due or
such lesser period as is reasonable given the nature of the Claim and
the notice and response time permitted by law or the facts and
circumstances. The Indemnified Party shall cooperate in all reasonable
respects with the Indemnifying Party and its attorneys in the
investigation, trial, defense and settlement of such Claim and any
appeal arising therefrom. The Indemnified Party may participate in such
investigation, trial, defense and settlement of such Claim and any
appeal arising therefrom, through its attorneys or otherwise, at its own
cost and expense. No settlement of a Claim that involves a remedy other
than the payment of money by the Indemnifying Party shall be entered
into without the consent of the Indemnified Party, which consent will
not be unreasonably withheld.
b) After notice to the Indemnified Party of the Indemnifying Party's
election to assume full control of the defense of any such Claim, the
Indemnifying Party shall not be liable for any legal expenses incurred
thereafter in connection with the defense of that Claim by the
Indemnified Party. If the Indemnifying Party does not promptly assume
full control over and diligently pursue the defense of a Claim as
provided in this Section 13.5, the Indemnified Party shall have the
right to defend, settle or otherwise resolve the Claim in such manner as
it may deem appropriate, at the cost and expense of the Indemnifying
Party, and the Indemnifying Party may participate in such defense, at
its sole cost and expense. In no event shall any settlement of the Claim
require the consent of the Indemnifying Party which consent shall not be
unreasonably withheld.
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<PAGE> 50
13.6 CUSTOMER CONTRACTUAL CLAIMS
Notwithstanding the foregoing provisions of Sections 13.1 through 13.5, ISSC
shall promptly upon request by CHMS and/or its Affiliates pay sixty percent
(60%) of any Losses paid by CHMS and its Affiliates to their respective
customers for each Claim arising pursuant to a contractual obligation of CHMS
and its Affiliates with their respective customers and resulting from the
failure of ISSC to provide the Services in accordance with this Agreement, but
ISSC shall not be obligated to pay the other forty percent (40%) of any such
Losses. Notwithstanding any other provision of this Agreement, CHMS and its
Affiliates shall also have the right to recover the Service Credits, if any,
and other damages associated with such failure by ISSC to provide the Services
in accordance with this Agreement.
14. INSURANCE AND RISK OF LOSS
14.1 ISSC INSURANCE
During the Term of this Agreement, ISSC and each ISSC contractor and
subcontractor shall maintain and keep in force, at its own expense, the
following minimum insurance coverages and minimum limits:
a) workers' compensation insurance, with statutory limits as required by
the various laws and regulations applicable to the employees of ISSC or
any ISSC contractor or subcontractor;
b) employer's liability insurance, for employee bodily injuries and deaths,
with a limit of $500,000 each accident;
c) comprehensive or commercial general liability insurance, covering claims
for bodily injury, death and property damage, including premises and
operations, independent contractors, products and completed operations,
personal injury, contractual, and broad-form property damage liability
coverages, with limits as follows: (1) occurrence/aggregate limit of
$1,000,000 for bodily injury, death and property damage each occurrence
of $2,000,000 general aggregate; or (2) split liability limits of (i)
$1,000,000 for bodily injury per person; (ii) $1,000,000 for bodily
injury per occurrence; and (iii) $500,000 for property damage;
d) comprehensive automobile liability insurance, covering owned, non-owned
and hired vehicles, with limits as follows (1) combined single limit of
$500,000 for bodily injury, death and property damage per occurrence; or
(2) split liability limits of (i) $500,000 for bodily injury per person;
(ii) $500,000 for bodily injury per occurrence; and (iii) $250,000 for
property damage; and
e) all-risk property insurance, on a replacement cost basis, covering the
real property of ISSC which ISSC is obligated to insure by this
Agreement. Such real property may include buildings, equipment,
furniture, fixtures and supply inventory.
All such policies of insurance of ISSC and its contractors and subcontractors
shall provide that the same shall not be canceled nor the coverage modified nor
the limits changed without first giving thirty (30) days prior written notice
thereof to CHMS. No such cancellation, modification or change shall affect
ISSC's obligation to maintain the insurance coverages required by this
Agreement. Except for workers'
January 4, 1996
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<PAGE> 51
compensation insurance, CHMS shall be named as an additional insured on all
such required policies. All liability insurance policies shall be written on an
"occurrence" policy form. CHMS shall be named as loss payee as its interest may
appear on the property insurance policies of ISSC. ISSC shall be responsible
for payment of any and all deductibles from insured claims under its policies
of insurance. The coverage afforded under any insurance policy obtained by ISSC
pursuant to this Agreement shall be primary coverage regardless of whether or
not CHMS has similar coverage. ISSC or its contractors and subcontractors shall
not perform under this Agreement without the prerequisite insurance and/or
self-insurance in effect. Upon CHMS's request, ISSC shall provide CHMS with
certificates of such insurance including renewals thereof. ISSC shall have the
right to self-insure any of the insurance coverages required by this Agreement
upon prior written notification to CHMS. Unless previously agreed to in writing
by CHMS, ISSC's contractors and subcontractors shall comply with the insurance
requirements herein. The minimum limits of coverage required by this Agreement
may be satisfied by a combination of primary and excess or umbrella insurance
policies. If ISSC or its contractors or subcontractors shall fail to comply
with any of the insurance requirements herein, upon written notice to ISSC by
CHMS and a thirty (30) day cure period, CHMS may, without any obligation to do
so, procure such insurance and ISSC shall pay CHMS the cost thereof plus a
reasonable administrative fee as designated by CHMS. The maintenance of the
insurance coverages required under this Agreement shall in no way operate to
limit the liability of ISSC to CHMS under the provisions of this Agreement.
14.2 CHMS INSURANCE
During the Term of this Agreement, CHMS and each CHMS contractor and
subcontractor shall maintain and keep in force, at its own expense, the
following minimum insurance coverages and minimum limits:
a) worker's compensation insurance, with statutory limits as required by
the various laws and regulations applicable to the employees of CHMS or
any CHMS contractor or subcontractor;
b) employer's liability insurance, for employee bodily injuries and deaths,
with a limit of $500,000 each accident;
c) comprehensive or commercial general liability insurance, covering claims
for bodily injury, death and property damage, including premises and
operations, independent contractors, products and completed operations,
personal injury, contractual, and broad-form property damage liability
coverages, with limits as follows: (1) occurrence/aggregate limit of
$1,000,000 for bodily injury, death and property damage each occurrence
of $2,000,000 general aggregate; or (2) split liability limits of (i)
$1,000,000 for bodily injury per person; (ii) $1,000,000 for bodily
injury per occurrence; and (iii) $500,000 for property damage;
d) comprehensive automobile liability insurance, covering owned, non-owned
and hired vehicles, with limits as follows (1) combined single limit of
$500,000 for bodily injury, death and property damage per occurrence; or
(2) split liability limits of (i) $500,000 for bodily injury per person;
(ii) $500,000 for bodily injury per occurrence; and (iii) $250,000 for
property damage; and
e) all-risk property insurance, on a replacement cost basis, covering the
real property of CHMS which CHMS is obligated to insure by this
Agreement. Such real property may include buildings, equipment,
furniture, fixtures and supply inventory.
January 4, 1996
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<PAGE> 52
All such policies of insurance of CHMS and its contractors and subcontractors
shall provide that the same shall not be canceled nor the coverage modified nor
the limits changed without first giving thirty (30) days prior written notice
thereof to ISSC. No such cancellation, modification or change shall affect
CHMS's obligation to maintain the insurance coverages required by this
Agreement. Except for workers' compensation insurance, ISSC shall be named as
an additional insured on all such required policies. All liability insurance
policies shall be written on an "occurrence" policy form. CHMS shall be named
as loss payee as its interest may appear on the property insurance policies of
CHMS. CHMS shall be responsible for payment of any and all deductible's from
insured claims under its policies of insurance. The coverage afforded under any
insurance policy obtained by CHMS pursuant to this Agreement shall be primary
coverage regardless of whether or not ISSC has similar coverage. CHMS or its
contractors and subcontractors shall not perform under this Agreement without
the prerequisite insurance or self insurance in effect. CHMS shall have the
right to self-insure any of the insurance coverages required by this Agreement
upon prior written notification to ISSC. Unless previously agreed to in writing
by ISSC, CHMS's contractors and subcontractors shall comply with the insurance
requirements herein. The minimum limits of coverage required by this Agreement
may be satisfied by a combination of primary and excess or umbrella insurance
policies. If CHMS or its contractors or subcontractors shall fail to comply
with any of the insurance requirements herein, upon written notice to CHMS by
ISSC and a thirty (30) day cure period, ISSC may, without any obligation to do
so, procure such insurance and CHMS shall pay ISSC the cost thereof plus a
reasonable administrative fee as designated by ISSC. The maintenance of the
insurance coverages required under this Agreement shall in no way operate to
limit the liability of CHMS to ISSC under the provisions of this Agreement.
14.3 RISK OF PROPERTY LOSS
ISSC is responsible for risk of loss of, or damage to, the Software, Computer
Hardware and Authorized User Data in its possession, and CHMS is responsible
for risk of loss of, or damage to, the Software, Computer Hardware and
Authorized User Data in its possession.
14.4 MUTUAL WAIVER OF SUBROGATION
a) To the extent permitted by law, ISSC, its contractors and subcontractors
hereby waive their rights of subrogation against CHMS, its directors,
officers, employees and agents for any loss or damage to the ISSC
Machines, ISSC Software, and other tangible and intangible, real and
personal property of ISSC, its contractors and subcontractors resulting
from operations in connection with this Agreement. Each property
insurance policy of ISSC, its contractors and subcontractors shall be
endorsed to provide a waiver of any and all rights of subrogation
against CHMS, its directors, officers, employees and agents for loss
resulting from operations in connection with this Agreement.
b) To the extent permitted by law, CHMS, its directors, officers, employees
and agents hereby waive their rights of subrogation against ISSC, its
contractors and subcontractors for any loss or damage to the
CHMS-Provided Hardware, CHMS Software and other tangible and intangible,
real and personal property of CHMS, its directors, officers, employees
and agents resulting from operations in connection with this Agreement.
Each property insurance policy of CHMS shall be endorsed to provide a
waiver of any and all rights of subrogation against ISSC, its
contractors and subcontractors for loss resulting from operations in
connection with this Agreement.
January 4, 1996
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<PAGE> 53
15. ADVISORY COMMITTEES/DISPUTE RESOLUTION
15.1 CHMS/ISSC MANAGEMENT COMMITTEE
The "CHMS/ISSC Management Committee" shall consist of two or more
representatives from each organization, including representatives from CHMS's
lines of business as determined by CHMS. The CHMS/ISSC Management Committee
will: (a) conduct monthly and quarterly reviews on the progress of projects;
(b) prioritize projects and identify any applicable expected ARCs that will be
incurred to accomplish the workload; (c) attempt to resolve disputes between
the Parties; (d) review the "look ahead" schedule for ongoing and planned
changes, on a monthly basis; (e) review ongoing operations and discuss areas of
concern and appropriate action plans; (f) identify new application development
projects and Applications Software requirements; (g) develop new project action
plans; (h) provide advice and direction on technology changes; (i) target areas
for improved efficiency and cost reduction and assign responsibility and report
on progress of efficiency and cost reduction initiatives; (j) commit resources
as required; (k) review the operating and strategic plans prepared by the
Project Executives, on an annual basis; (l) review performance objectives and
measurements, on an annual basis; (m) set priorities for projects; (n) review
that portion of the CHMS Business plan affecting information system strategy,
on an annual basis; and (o) set annual targets for cost reduction and
efficiency initiatives and monitor performance against targets.
15.2 DISPUTE RESOLUTION PROCEDURES
a) Any dispute between the Parties either with respect to the
interpretation of any provision of this Agreement or with respect to the
performance by ISSC or by CHMS hereunder shall be resolved as specified
in this Section 15.2.
1) Upon the written request of either Party, each of the Parties
will appoint a designated representative who does not devote
substantially all of his or her time to performance under this
Agreement, whose task it will be to meet for the purpose of
endeavoring to resolve such dispute.
2) The designated representatives shall meet as often as
necessary to gather and furnish to the other Party all
information with respect to the matter in issue which is
appropriate and germane in connection with its resolution.
3) Such representatives shall discuss the problem and negotiate
in good faith in an effort to resolve the dispute without the
necessity of any formal proceeding relating thereto.
4) During the course of such negotiation, all reasonable requests
made by one Party to the other for nonprivileged information
reasonably related to this Agreement, will be honored in order
that each Party may be fully advised of the other Party's
position.
5) The specific format for such discussions will be left to the
discretion of the designated representatives, but may include
the preparation of agreed upon statements of fact or written
statements of position furnished to the other Party.
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<PAGE> 54
b) If the designated representatives do not resolve the dispute within
thirty (30) days after the date of receipt by the other Party of a
request to appoint a designated representative as described in Section
15.2(a)(1) (the "Notice"), then the dispute shall be escalated to the
Vice President of Technology of CHMS and the ISSC Vice President of
Cross Industry Services, for their review and resolution within
forty-five (45) days after receipt of the dispute for resolution.
c) If the designated representatives do not resolve the dispute within
forty-five (45) days after the Notice, then the dispute shall be
escalated to the President of CHMS and the President of ISSC, for their
review and resolution within sixty (60) days after the Notice.
d) If the dispute is not resolved by the Parties' Presidents within ninety
(90) days after the Notice, the Parties agree to try in good faith to
resolve the dispute by mediation under the Commercial Mediation Rules of
the American Arbitration Association, before resorting to litigation or
some other dispute resolution procedure.
e) If the dispute is not resolved by mediation within one hundred twenty
(120) days after the Notice, then the Parties may initiate formal
proceedings; however, formal proceedings for the judicial resolution of
any such dispute may not be commenced until the earlier of:
1) the designated representatives concluding in good faith that
amicable resolution through continued negotiation of the
matter in issue does not appear likely; or
2) one hundred twenty (120) days after the Notice; or
3) thirty (30) days before the statute of limitations governing
any cause of action relating to such dispute would expire.
Notwithstanding anything to the contrary in this Section 15.2(e), the CHMS/ISSC
Management Committee shall have the authority to stay the time periods set
forth in this Section 15.2 upon unanimous vote of its members to take such
action.
f) Notwithstanding any other provision of this Section 15.2, either Party
may resort to court action for injunctive relief at any time if the
dispute resolution processes set forth in this Section would permit or
cause irreparable injury due to delay to such Party or any third party
claiming against such Party.
15.3 CONTINUED PERFORMANCE
The Parties agree to continue performing their respective obligations under
this Agreement while the dispute is being resolved unless and until such
obligations are terminated or expire in accordance with the provisions of this
Agreement.
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<PAGE> 55
16. GENERAL
16.1 CONTROL OF SERVICES
This Agreement shall not be construed as constituting either Party as partner
of the other or to create any other form of legal association that would impose
liability upon one Party for the act or failure to act of the other or as
providing either Party with the right, power or authority (express or implied)
to create any duty or obligation of the other Party. Each Party shall be
responsible for the management, direction and control of its employees and such
employees shall not be employees of the other Party.
Each Party will submit to the other Party all advertising, written sales
promotion, press releases and other publicity matters relating to this
Agreement in which the other Party's name or mark is mentioned or language from
which the connection of said name or mark may be inferred or implied, and will
not publish or use such advertising, sales promotion, press releases, or
publicity matters without prior written approval of the other Party. However,
either Party may include the other Party's name and a factual description of
the work performed under this Agreement on employee bulletin boards, in its
list of references and in the experience section of proposals to third parties,
in internal business planning documents and in its annual report to
stockholders, and whenever required by reason of legal, accounting or
regulatory requirements.
16.2 ENTIRE AGREEMENT, UPDATES, AMENDMENTS AND MODIFICATIONS
This Agreement including the Supplement and Schedules A through O, constitute
the entire agreement of the Parties with regard to the Services and matters
addressed therein, and all prior agreements, letters, proposals, discussions
and other documents regarding the Services and the matters addressed in this
Agreement (including the Supplement and Schedules) and are superseded and
merged into this Agreement (including the Supplement and Schedules). Updates,
amendments and modifications to this Agreement may not be made orally, but
shall only be made by a written document signed by both Parties. Any terms and
conditions varying from this Agreement (including the Supplement and Schedules)
on any order or written notification from either Party shall not be effective
or binding on the other Party.
16.3 FORCE MAJEURE
a) Neither Party shall be liable for any default or delay in the
performance of its obligations hereunder if and to the extent and while
such default or delay is caused, directly or indirectly, by fire, flood,
earthquake, elements of nature or acts of God, acts of war, terrorism,
riots, civil disorders, rebellions or revolutions in the United States,
strikes, lockouts, or labor difficulties or any other similar cause
beyond the reasonable control of such Party other than strikes,
lockouts, or labor difficulties initiated by such Party's or its
subcontractor's employees; and provided such default or delay could not
have been prevented by reasonable precautions and cannot reasonably be
circumvented by the nonperforming Party through the use of alternate
sources, work-around plans or other means, (individually, each being a
"Force Majeure Event").
b) If a Force Majeure Event occurs, the nonperforming Party will be excused
from any further performance or observance of the obligation(s) so
affected for as long as such circumstances prevail and such Party
continues to use commercially reasonable efforts to recommence
performance or
January 4, 1996
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<PAGE> 56
observance whenever and to whatever extent possible without delay. Any
Party so delayed in its performance will immediately notify the other by
telephone and describe at a reasonable level of detail the circumstances
causing such delay (to be confirmed in writing within twenty-four (24)
hours after the inception of such delay).
c) If any Force Majeure Event substantially prevents, hinders, or delays
performance of the Services necessary for the performance of CHMS's
critical functions for more than fifteen (15) consecutive days, then at
CHMS's option:
1) CHMS may procure such Services from an alternate source. ISSC
will directly and timely pay the alternate source the full
amount charged by such alternate source for the provision of
such Services to CHMS until such time as ISSC is able to
restore the Services and meet the Performance Standards; or
2) CHMS may terminate this Agreement as of a date specified by
CHMS in a written notice of termination to ISSC, and CHMS will
pay all fees due and payable through the termination date. If
CHMS elects such termination, CHMS shall not be obligated to
pay any other termination or other fees, however described, to
ISSC, except for Services Transfer Assistance.
d) This Section 16.3 does not limit or otherwise affect ISSC's obligation
to provide Disaster Recovery Services in accordance with Schedule G. In
the event of a Force Majeure Event affecting CHMS this Section 16.3 will
not limit or otherwise relieve CHMS's obligation to pay any monies due
ISSC under the terms of this Agreement, except as provided in Section
16.3(c)(2).
16.4 NONPERFORMANCE
Except as otherwise provided in this Agreement, to the extent any
nonperformance by either Party of its nonmonetary obligations under this
Agreement results from or is caused by the other Party's failure to perform its
obligations under this Agreement, such nonperformance shall be excused.
16.5 WAIVER
No waiver of any breach of any provision of this Agreement shall constitute a
waiver of any prior, concurrent or subsequent breach of the same or any other
provisions hereof.
16.6 SEVERABILITY
If any provision of this Agreement shall be held to be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby, and such
provision shall be deemed to be restated to reflect the Parties' original
intentions as nearly as possible in accordance with applicable law(s).
January 4, 1996
Agreement - Execution Document Page 50 of 53
<PAGE> 57
16.7 LIMITATIONS PERIOD UPON TERMINATION
Neither Party may bring an action, regardless of form, arising out of this
Agreement more than three (3) years after the cause of action has arisen or the
date such cause of action was or should have been discovered.
16.8 COUNTERPARTS
This Agreement shall be executed in counterparts. Each such counterpart shall
be an original and together shall constitute but one and the same document.
16.9 GOVERNING LAW
This Agreement shall be governed by the laws of the State of Georgia as such
laws are applied to contracts which are entered into and performed entirely
within the State of Georgia. The Parties agree that any lawsuit commenced by
either Party shall be commenced in the appropriate court for Fulton County,
Georgia or the U.S. District Court for the Northern District, Atlanta division
of Georgia. Each of the Parties hereby consents to the jurisdiction of and
service of process from the appropriate court for Fulton County, Georgia or the
U.S. District Court for the Northern District, Atlanta division of Georgia.
16.10 BINDING NATURE AND ASSIGNMENT
This Agreement will be binding on the Parties and their respective successors
and permitted assigns. Except as provided in this Section 16.10, neither Party
may, or will have the power to, assign this Agreement without the prior written
consent of the other, which consent shall not be unreasonably withheld, except
that either Party may assign its rights and obligations under this Agreement to
an Affiliate which expressly assumes such Party's obligations and
responsibilities hereunder, without the approval of the other Party. The
assigning Party shall remain fully liable for and shall not be relieved from
the full performance of all obligations under this Agreement. Any attempted
assignment that does not comply with the terms of this Section 16.10 shall be
null and void. Any Party assigning its rights or obligations to an Affiliate in
accordance with this Agreement shall provide written notice thereof to the
other Party together with a copy of the assignment document, within three (3)
business days of such assignment.
16.11 NOTICES
a) Under this Agreement whenever one Party is required or permitted to give
notice to the other Party, such notice will be in writing unless
otherwise specifically provided herein and will be deemed given when
delivered in hand, one day after being given to an express courier with
a reliable system for tracking delivery, or three (3) days after the day
of mailing, when mailed by United States mail, registered or certified
mail, return receipt requested, postage prepaid, or when sent by
facsimile and thereafter delivered by one of the foregoing methods of
delivery.
January 4, 1996
Agreement - Execution Document Page 51 of 53
<PAGE> 58
b) Notifications will be addressed as follows:
1) For termination, breach or default, notify:
<TABLE>
<S> <C> <C>
In the case of ISSC: with a courtesy, but not legally required, copy to:
ISSC Project Executive ISSC General Counsel
6666 Powers Ferry Road Route 1, Box 100
Atlanta, Georgia 30339 Somers, New York 10589
Facsimile: 770-644-6559 Facsimile: 914-766-8444
In the case of CHMS: with a courtesy, but not legally required, copy to:
Services Technology CHMS General Counsel
Officer 6666 Powers Ferry Road
6666 Powers Ferry Road Atlanta, Georgia 30339
Atlanta, Georgia 30339 Facsimile: 770-644-6559
Facsimile: 770-644-6559
2) For all other notices:
In the case of ISSC: In the case of CHMS:
ISSC Project Executive CHMS Project Executive
6666 Powers Ferry Road 6666 Powers Ferry Road
Atlanta, Georgia 30339 Atlanta, Georgia 30339
Facsimile: 770-644-6559 Facsimile: 770-644-6559
</TABLE>
Either Party hereto may from time to time change its address for notification
purposes by giving the other prior written notice of the new address and the
date upon which it will become effective.
16.12 NO THIRD PARTY BENEFICIARIES
Except as specified in this Agreement for Authorized Users and Affiliates of
CHMS and in Sections 4 and 13, the Parties do not intend, nor will any Section
hereof be interpreted, to create for any third party any third party
beneficiary rights with respect to either of the Parties.
16.13 OTHER DOCUMENTS
Upon request of the other Party, on or after the Effective Date and the date(s)
of any amendments or revisions hereto each Party shall furnish to the other
such certificate of its Secretary, certified copy of resolutions of its Board
of Directors, or opinion of its counsel as shall evidence that this Agreement
or any amendment or revision hereto has been duly executed and delivered on
behalf of such Party.
January 4, 1996
Agreement - Execution Document Page 52 of 53
<PAGE> 59
16.14 CONSENTS AND APPROVALS
The Parties agree that in any instance where consent, approval or agreement is
required of a Party in order for the other Party to perform under or comply
with the terms and conditions of this Agreement, then such Party will not
unreasonably withhold or delay such consent, approval or agreement and where
consent, approval or agreement cannot be provided, the Party shall notify the
other Party in a timely manner.
16.15 HEADINGS
All headings herein and the table of contents are not to be considered in the
construction or interpretation of any provision of this Agreement. This
Agreement was drafted with the joint participation of both Parties and shall be
construed neither against nor in favor of either, but rather in accordance with
the fair meaning thereof. In the event of any apparent conflicts or
inconsistencies between the Agreements, the Schedules or other attachments to
this Agreement, to the extent possible such provisions shall be interpreted so
as to make them consistent, and if such is not possible, the provisions of this
Agreement shall prevail.
16.16 REMARKETING
CHMS may not remarket all or any portion of the Services provided under this
Agreement, or make all or any portion of the Services available to any party,
without the prior written consent of ISSC; provided, however, CHMS may sell or
make available to the Authorized Users and potential Authorized Users, the
Services under this Agreement. CHMS shall independently set its own pricing and
policies in connection with any such disposition of the Services. Nothing
herein may be construed to limit or hinder CHMS from (i) marketing, selling or
performing its services to and for any Authorized Users, and/or (ii) from
providing any portion of the Services to any Authorized Users.
January 4, 1996
Agreement - Execution Document Page 53 of 53
<PAGE> 1
EXHIBIT 10.19
July 10, 1996
Mr. Reed Horovitz
InfoMed
1180 SW 36th Avenue
Pompano Beach, FL 33069
SENT VIA FAX
Dear Reed:
This letter outlines the terms and conditions of InfoMed's renewal of
System Maintenance for the MSM products as you and I have previously discussed.
This will become a part of the standard Micronetics VAR Agreement. To the extent
this document modifies anything contained in the standard Micronetics VAR
Agreement, is limited exclusively to the fees paid for Systems Maintenance on
MSM-UNIX licenses purchased by InfoMed for its use.
1. Beginning July 1, 1996 through June 30, 1997 InfoMed will pay a fixed
fee of $10,500.00 per month for MSM-UNIX Systems Maintenance; regardless of the
number of MSM-UNIX licenses purchased from Micronetics for InfoMed's use.
2. InfoMed will pay Micronetics $2,424.00 for Systems Maintenance on
MSM-UNIX licenses purchased from Micronetics between January 1, 1996 through
June 30, 1996.
3. Systems Maintenance fees for all other MSM products purchased by InfoMed
will follow the standard Micronetics Systems Maintenance schedule as outlined in
the current Micronetics VAR Agreement.
4. 30 days prior to June 30, 1997 Micronetics and InfoMed must have in
place an agreement that perpetuates the MSM-UNIX Systems Maintenance beyond June
30, 1997 permitting uninterrupted service to InfoMed. In the absence of an
agreement, then the standard terms and conditions of the Micronetics VAR
Agreement will take precedence. At such time it will automatically become in
effect to produce the appropriate fees to be paid to Micronetics for Systems
Maintenance on all MSM product licenses currently in inventory with InfoMed.
5. The fixed fee of $10,500.00 is to be paid monthly and is due at
Micronetics by the beginning of each month. July's fixed fee payment together
with $2,424.00 equals a total due of $12,924.00 to be paid upon confirmation of
this agreement. Reed InfoMed will need to authorize a current standard VAR
Agreement. Where do you want me to send it? My phone number is 301-258-2605 ext.
529.
Sincerely,
/s/ DAVID G. LENHART
--------------------------------------
David G. Lenhart
Manager, US Channel Marketing
cc: File
<PAGE> 1
EXHIBIT 10.20
SOFTWARE 2000
MASTER SOFTWARE LICENSE AGREEMENT
NUMBER 96-2283
This Master Software License Agreement (this "Agreement") is made as of the
last date written below, by and between SOFTWARE 2000, INC., a corporation
having a principal place of business at 25 Communications Way, Hyannis,
Massachusetts 02601, USA ("SOFTWARE 2000") and SIMIONE CENTRAL HOLDING, INC., a
corporation having a place of business at 6650 Powers Ferry Road, Atlanta,
Georgia 30339 ("CUSTOMER").
1. LICENSE GRANTED.
(a) Subject to all of the limitations and conditions contained in this
Agreement, SOFTWARE 2000 grants to CUSTOMER the following non-transferable and
non-exclusive license rights to use the software system(s) described in the
attached schedule(s) (the "Software Schedule(s)") and any corrections,
enhancements, updates and new releases thereto which are provided generally by
SOFTWARE 2000 to its customers who are active on maintenance for the software
system(s) and are not independently priced and licensed (the software
system(s), together with any corrections, enhancements, updates and new
releases being referred to as the "Software System(s)"), and the related system
and user documentation provided by SOFTWARE 2000. The Software System(s) and
documentation may be used solely within North America, in the ordinary business
activities of CUSTOMER, for its internal operations only. The Software
System(s) or portions thereof which operate on an IBM AS/400 computer may be
used only on the designated production computer specified in the Software
Schedule(s) (the "Designated Production Computer(s)") at the designated
production location(s) specified in the Software Schedule(s) (the "Designated
Production Location") The Software System(s) or portions thereof which operate
on a personal computer, if any, may be used only by the number of "client
seats" specified in the Software Schedule(s) (i.e. number of authorized
personal computer(s)). The Repository (as described in the technical
documentation provided by SOFTWARE 2000) may be installed and stored only on
the number of intermediate server(s) specified in the Software Schedule(s).
(b) The Software System(s) which operate on an IBM AS/400 computer may be used
on a temporary back-up computer located at the designated production
location(s) only if the designated production computer(s) is inoperative
because of a malfunction, the performance of preventive maintenance, or
engineering changes to the designated production computer(s).
(c) The Software System(s) (i) include source code for the Software Systems(s),
with the exception of source code for certain Software System(s) or portions
thereof, and (ii) do not include class libraries for any Infinium Software
System(s). Customer may from time to time request SOFTWARE 2000's then current
list of the Software System(s) or portions thereof for which source code and/or
class libraries are not provided.
2. OWNERSHIP; NON-DISCLOSURE AND COPIES
CUSTOMER acknowledges that the Software System(s); all source code,
object code, class libraries, user interface screens, algorithms, development
frameworks, repository, system designs, system logic flow, and processing
techniques and procedures related thereto; any system, user, or other
documentation related thereto; any copies and derivatives of any of the
foregoing, in whole or in part; as well as all copyright, patent, trade secret
and other proprietary rights in any of the foregoing; are and shall remain the
sole and exclusive confidential property of SOFTWARE 2000 or SOFTWARE 2000's
licensor. CUSTOMER AGREES THAT IT WILL NOT DISCLOSE OR OTHERWISE MAKE
AVAILABLE TO THIRD PARTIES THE SOFTWARE SYSTEM(S) OR RELATED DOCUMENTATION
EXCEPT WHEN DISCLOSURE IS NECESSARY TO THE CUSTOMER's PERMITTED USE HEREUNDER
OF THE SOFTWARE SYSTEM(S) AND THE THIRD PARTY AGREES TO BE BOUND BY THE TERMS
CONTAINED IN THIS AGREEMENT. CUSTOMER shall hold as SOFTWARE 2000's
confidential property, and shall further safeguard against disclosure, all
copies of the Software System(s) in whole or in part, and all other information
furnished by SOFTWARE 2000 to CUSTOMER in connection with the Software
System(s) licensed under this Agreement or in connection with any other product
or service or proposed product or service of SOFTWARE 2000, including all
source and object code (whether provided on physical media, electronically or
otherwise), all system documentation (in any form), and the terms and
conditions of this Agreement, in the same manner as it safeguards its own
confidential property against disclosure, provided that such safeguards are at
least equal to industry standards, and shall take such steps as are reasonably
necessary to ensure that the provisions of this Agreement relating to
confidentiality and non-disclosure are not violated by any employee, agent or
other representative of CUSTOMER. CUSTOMER shall not rent, lease, decompile,
disassemble, or reverse engineer any portion of the Software System(s).
CUSTOMER may not copy the Software System(s) without the prior written
permission of SOFTWARE 2000, except to make a copy of any program which is
required as an essential step in its utilization or to make an archival or
back-up copy of the Software System(s). CUSTOMER shall not alter or remove any
SOFTWARE 2000 or other copyright notice from the Software System(s), the
documentation or any permitted copies thereof and shall ensure that all copies
contain any such SOFTWARE 2000 or other copyright notice. CUSTOMER shall
indemnify and save SOFTWARE 2000 harmless from any and all damages arising out
of or in connection with a breach of this Paragraph 2, including but not
limited to the legal fees and disbursements of SOFTWARE 2000 incurred in
connection with any breach or threatened breach of this Paragraph 2. CUSTOMER
agrees that if it learns of any breach of the non-disclosure provisions
contained herein, it shall, within ten (10) business days of learning of any
such breach, notify SOFTWARE 2000 in writing of the breach, specifying fully
the nature and manner of the breach. CUSTOMER further agrees to cooperate fully
with SOFTWARE 2000 in any investigations and legal actions relating to such
breach, including legal actions for injunctive or other equitable relief, that
SOFTWARE 2000 may take in connection with such breach.
<PAGE> 2
3. PAYMENT; TAXES
With each Software System, CUSTOMER shall pay SOFTWARE 2000, or its agent or
designee, license and, if applicable, professional service fees in accordance
with the payment terms specified in the Software Schedule(s). CUSTOMER shall
pay SOFTWARE 2000, within thirty (30) days of billing by SOFTWARE 2000, all
charges for travel and out-of-pocket expenses incurred by SOFTWARE 2000 in
connection with training, education or other professional services provided by
SOFTWARE 2000, and, for so long as SOFTWARE 2000 is maintaining the Software
System(s) and CUSTOMER has elected to continue such maintenance, for ongoing
maintenance fees and expenses related thereto. CUSTOMER shall pay all taxes or
duties, fees and governmental charges, however designated, (including personal
property taxes, sales taxes, use taxes and customs duties but not including any
income or corporate excise taxes assessed against SOFTWARE 2000) arising from,
or based upon, the Software System(s) licensed hereunder, the license fee for
the Software System(s), other amounts payable under this Agreement, any services
provided under this Agreement or the operation and use of the Software
System(s), CUSTOMER shall pay SOFTWARE 2000's then current administrative fee
in connection with any transfer of a Software System from one Designated
Production Computer to another.
4. DELIVERY.
Within thirty (30) days after the date of execution of this Agreement by
SOFTWARE 2000, or such later date specified in a Software Schedule, SOFTWARE
2000 will deliver to CUSTOMER the Software System(s) and all related
documentation.
5. MODIFICATIONS.
CUSTOMER may modify the Software System(s) only in order to adapt the Software
System(s) for CUSTOMER's permitted use hereunder, provided, however, SOFTWARE
2000's maintenance and warranty obligations set forth in Paragraph 6 and 7
shall apply only to the version of the Software System(s) released generally by
SOFTWARE 2000 to its customers and not to any version which has been modified
by CUSTOMER. If modifications are made by CUSTOMER that result in SOFTWARE
2000 being relieved of its obligation to provide maintenance services, SOFTWARE
2000 shall not be required to reimburse CUSTOMER for any prepaid maintenance.
6. MAINTENANCE SERVICES; PROFESSIONAL SERVICES. CUSTOMER may purchase
maintenance for the Software System(s) for so long as SOFTWARE 2000 continues
to maintain such Software System(s), and in accordance with SOFTWARE 2000's
then current maintenance policies. Maintenance services do not include the
maintenance of conversion programs, interfaces or other software delivered as
part of professional services under this or any other agreement for
professional services. Professional services will be priced on a time and
materials basis at SOFTWARE 2000's then current rates or at such other rates as
may be set forth in the Software Schedule(s) or a separate Professional
Services Agreement or similar agreement, and, at SOFTWARE 2000's discretion,
will be subject to the execution by CUSTOMER of a Professional Services
Agreement or similar agreement. For these purposes, one (1) consulting equals
one (1) person for eight (8) hours and one (1) education credit equals one (1)
person in one (1) class for one (1) day. All professional services provided by
SOFTWARE 2000, which are not listed on a Software Schedule(s) to this Agreement
or provided under a Professional Services Agreement, including but not limited
to services provided by SOFTWARE 2000's support organization, shall be deemed
to have been provided under this Agreement.
7. WARRANTIES. (a) SOFTWARE 2000 represents and warrants that it is the lawful
owner or licensee of the Software System(s) and has full legal power and
authority to license the Software System(s) to CUSTOMER as provided in this
Agreement. (b) SOFTWARE 2000 warrants that, for as long as CUSTOMER is active
on maintenance for the Software System(s), the Software System(s) will operate
in substantial conformity with the Functional Documentation supplied by
SOFTWARE 2000 within the Software System(s) when used in strict compliance
therewith; provided, however, that any graphical user interface separately
priced and licensed hereunder (including but not limited to Infinium: Desktop
Manager) will operate only in conjunction with certain Software System(s) and
releases thereto in accordance with a list published by SOFTWARE 2000 from time
to time. ("Functional Documentation" is the "help text" and/or the "how to"
text provided within the Software System(s).) This warranty is contingent upon
(a) CUSTOMER's installation of all corrections, enhancements, updates, and new
releases provided by SOFTWARE 2000 to CUSTOMER as part of maintenance services
and (b) the absence of damage or abuse to the Software System(s).
Notwithstanding the foregoing, CUSTOMER acknowledges that (i) it is solely
responsible for having the appropriate compatible network(s) and operating
system environment(s), and (ii) since the Software System(s) is complex and,
therefore, may have defects, CUSTOMER'S sole and exclusive remedy for any such
defects shall be as follows: If the Software System(s) fails to perform as
warranted, SOFTWARE 2000 shall, within a reasonable period of time, provide all
reasonable programming services to correct programming errors in the Software
System(s), or at its sole option, replace the Software System(s). (c) Any
professional services provided under this Agreement are provided "as is"
without representation of warranty of any kind or nature. (d) SOFTWARE 2000
may offer CUSTOMER the opportunity to license programs of third parties by
agreement between CUSTOMER and the third party (including but not limited to,
"shrink wrap" agreements). SOFTWARE 2000 MAKES NO REPRESENTATION OR WARRANTY
WITH RESPECT TO SUCH PROGRAMS. CUSTOMER agrees that SOFTWARE 2000 shall have
no responsibility or liability whatsoever with respect to such programs and
that any damage, loss, expense, claim, suit, or other problem arising in
connection with such programs shall be exclusively between CUSTOMER and such
third parties.
8. DISCLAIMER OF WARRANTIES.
EXCEPT AS EXPRESSLY SET FORTH IN PARAGRAPH 7, SOFTWARE 2000 MAKES NO WARRANTY
OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO,
ANY IMPLIED WARRANTIES OR MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE,
ANY WARRANTIES OF QUALITY OR PERFORMANCE, OR ANY WARRANTIES OF COMPATIBILITY
WITH HARDWARE OR WITH NETWORK OR OPERATING SYSTEM ENVIRONMENTS OR WITH
NON-SOFTWARE 2000 SOFTWARE.
<PAGE> 3
9. LIMITATIONS OF LIABILITY.
________ event shall Software 2000's aggregate, cumulative monetary
liability for any damages under or related to this Agreement from any cause
whatsoever, regardless of the form of action, exceed the license fees actually
paid by CUSTOMER to SOFTWARE 2000 for the applicable Software System(s).
Without affecting the applicability of the preceding sentence, in no event will
SOFTWARE 2000 or its officers, directors, affiliates, employees, agents or
representatives, be liable for loss of profits, business, use or data, nor for
interruption of business, nor for any other indirect, incidental,
consequential or punitive damages even if SOFTWARE 2000 was advised of the
possibility thereof, regardless of the form of action.
10. TERM; TERMINATION AND OTHER REMEDIES OF SOFTWARE 2000.
(a) This Agreement shall remain in effect until terminated pursuant to this
Paragraph 10. If CUSTOMER (i) fails to pay any amount due hereunder within
thirty (30) days of the date such amount is due, (ii) breaches any of its
obligations under Paragraph 2 or the first sentence of Paragraph 11; (iii)
fails to perform any other material obligation hereunder if such failure has
not been cured within thirty (30) days after SOFTWARE 2000 has given CUSTOMER
notice of such failure; or (iv) causes or permits the winding up or liquidation
of its affairs, voluntarily, or by order of a court adjudging CUSTOMER bankrupt
or insolvent or approving as properly filed a petition seeking reorganization
of CUSTOMER, then SOFTWARE 2000 may, in its sole discretion, do all or any of
the following: terminate this Agreement and/or the license to use the Software
System(s) granted hereunder, by providing written notice to CUSTOMER, suspend
and/or terminate performance of any maintenance, professional or other
services, upon delivery of written notice to CUSTOMER, and/or disable or
deactivate the Software System(s) to the extent it is technically possible to
do so and/or refuse to issue the key or other mechanism which enables the
Software Systems(s) to operate on any computer(s), upon delivery of written
notice to CUSTOMER.
(b) Upon any termination of this Agreement and/or the license to use any
software System(s), CUSTOMER shall cease to use the Software System(s) and
shall return to SOFTWARE 2000 the Software System(s) and all copies thereof and
all proprietary and confidential property of SOFTWARE 2000, including, without
limitation, all source code, object code and documentation. CUSTOMER shall
expunge all copies of the source code or object code from its designated single
production computer or any other computer containing such codes and shall
provide a certificate of an officer of CUSTOMER stating that all such codes
have been expunged from its computer hardware. SOFTWARE 2000 shall also have
such other legal and equitable rights and remedies to which it may be entitled
with respect to CUSTOMER's failure to comply with the provisions of this
Agreement. CUSTOMER agrees that Paragraphs 2, 3, 7, 8, 9, 10 and 11 of this
Agreement shall survive any termination of this Agreement and/or any license to
use a Software System and shall remain in full force and effect.
11. GENERAL.
CUSTOMER shall not, voluntarily or involuntarily, sublicense, sell, assign,
give or otherwise transfer the license granted hereunder, or any copies of the
Software System(s) or any other information furnished by SOFTWARE 2000 to
CUSTOMER. This Agreement, which shall include all schedules and addenda
attached hereto or as may be executed hereafter in reference to this Agreement,
may be executed in counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument. This
Agreement shall be governed by and interpreted under the laws of the
Commonwealth of Massachusetts without giving effect to the conflict of laws
principles thereof. This Agreement sets forth the entire understanding between
the parties, is binding upon and inures to the benefit of the parties hereto and
their respective successors and may be amended only by a written instrument
executed by both an officer of SOFTWARE 2000 and by CUSTOMER. If two or more
entities are named herein as CUSTOMER, their obligations shall be joint and
several. This Agreement supersedes any and all prior and contemporaneous
conversations, understandings and agreements between the parties, including any
request for proposal or similar document and any responses thereto and any oral
or written information or advice given by SOFTWARE 2000, its employees, agents
or representatives, all of which are of no further force and effect, and
supersedes the terms of any and all purchase orders or invoices. The execution
of any amendment, schedule or addenda hereto after the date of this Agreement
shall also be deemed to supersede any and all conversations, understandings and
agreements or similar documents and responses thereto and any oral or written
information or advice given by SOFTWARE 2000, its employees, agents or
representatives, which are prior to or contemporaneous with the execution of
such amendment, schedule, or addenda, and any and all purchase orders or
invoices are related thereto. If any provision of this Agreement shall be
held by a court of competent jurisdiction to be contrary to law, that provision
will be enforced to delay the maximum extent permissible, and the remaining
provisions of this Agreement will remain in full force and effect. Neither the
failure nor any delay on the part of either party to exercise any right, remedy,
power or privilege under this Agreement shall operate as a waiver thereof. No
claim or action, regardless of form, arising out of this Agreement, other than
a claim or action relating to a breach of Paragraph 2 or the first sentence of
this Paragraph 11, may be brought by either party more than one (1) year after
the cause of action has arisen.
<PAGE> 4
EACH PARTY HAS CAUSED THIS AGREEMENT TO BE EXECUTED BY ITS DULY AUTHORIZED
OFFICIALS(S).
SOFTWARE 2000, INC. SIMIONE CENTRAL HOLDING, INC.
By: /s/ Anne Marie Monte By:/s/ Lori N. Siegel
----------------------------------- ---------------------------------
Name: Anne Marie Monte Name: Lori N. Siegel
---------------------------------- -------------------------------
Title: Vice President Title: CFO
--------------------------------- ------------------------------
Date: Oct 31, 1996 Date: 10-30-96
---------------------------------- -------------------------------
<PAGE> 1
EXHIBIT 10.21
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT by SIMIONE CENTRAL, INC., a Georgia corporation
("Guarantor"), is made this 31st day of October, 1996, in favor of HCA, INC., a
Delaware corporation ("Acquiror").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Guarantor as a subsidiary of SCHI (as hereinafter defined) is
presently an affiliate of Central Health Holding Company, Inc., a Delaware
corporation (the "Company"), and through certain subsidiaries provides skilled
intermittent home care services in the states of Georgia, Florida and Tennessee;
WHEREAS, Acquiror and the Central Health Holding Company, Inc. Employee
Stock Ownership Plan (the "ESOP"), Gary M. Bremer and Rod D. Windley and certain
other stockholders of the Company (collectively, the "Stockholders") are parties
to that certain Stock Purchase Agreement dated as of September 19, 1996 (the
"Stock Purchase Agreement"), pursuant to which Acquiror shall purchase
substantially all of the capital stock of the Company;
WHEREAS, Simione Central Holding Company, Inc. ("SCHI") is the parent
company of Guarantor, which provides consulting, information system and
management services to home health agencies;
WHEREAS, the ESOP and certain stockholders of the Company are stockholders
of SCHI;
WHEREAS, Acquiror has requested and Guarantor has agreed to provide home
health agency management and information services to certain hospital based home
health agencies that are owned and operated by affiliates of Acquiror; and
WHEREAS, in order for Acquiror to consummate the transactions contemplated
by the Stock Purchase Agreement and in consideration of Acquiror causing its
affiliates to enter into home health agency management and information
management services contract with Guarantor, Guarantor desires to guaranty
certain obligations of the Stockholders set forth in the Stock Purchase
Agreement as set forth herein.
NOW, THEREFORE, (i) in consideration of Acquiror causing its affiliates
to enter into home health agency management and information management services
contracts with Guarantor, (ii) at the special request of the stockholders of the
Company and of the Acquiror and (iii) for other good and valuable consideration,
the receipt and sufficiency of which is hereby forever acknowledged and
confessed, Guarantor and Acquiror hereby agree as follows:
<PAGE> 2
ARTICLE 1
GENERAL
Section 1.01 Terms Defined Above. As used in this Guaranty Agreement, the
terms Acquiror, ESOP, Guarantor, SCHI, Stockholders and Stock Purchase Agreement
shall have the meanings indicated above.
Section 1.02 Certain Definitions. As used in this Guaranty Agreement, the
following terms shall have the following meanings, unless the context otherwise
requires:
"Guaranty Agreement" shall mean this Guaranty Agreement, as the same
may from time to time be amended or supplemented.
"Guaranteed Obligations" shall have the meaning indicated in Section
2.01 hereof.
"Minority Stockholders" shall mean all of the Stockholders other than
the ESOP.
Section 1.03 Definitions. All terms beginning with a capital letter which
are defined in the Stock Purchase Agreement shall have the same meanings herein
as therein unless clearly indicated to the contrary herein.
ARTICLE 2
THE GUARANTY
Section 2.01 Payment Guaranteed. (a) Subject to the terms set forth
herein, Guarantor hereby absolutely, unconditionally and irrevocably guarantees
to Acquiror the full and faithful payment (i) by the ESOP, for any Loss (x)
incurred or suffered as a result of or arising under any one of the matters
described in Section 12.01 (c), (d), (f), (g) or (k)(i) of the Stock Purchase
Agreement or (y) which is not paid to Acquiror based on a claim by a person
other than any Acquiror Indemnified Person that the payment of such amount to
Acquiror for such Losses is a fiduciary breach, prohibited transaction or other
violation of law relating to the CHHC Plan (with such limitations or conditions
as provided by the Stock Purchase Agreement, including, without limitation,
those set forth in Sections 12.01, 12.02, 12.04 and 12.05), (ii) by the Minority
Stockholders for any Losses incurred or suffered as a result of or arising under
any of the matters described in Section 12.01(c), (d), (f), (g) or (k)(i) of the
Stock Purchase Agreement (with such limitations or conditions as provided by the
Stock Purchase Agreement, including, without limitation, those set forth in
Sections 12.01, 12.02, 12.04 and 12.05), and (iii) of the matters described in
Section 2.01(d) hereof (the "Guaranteed Obligations"). Subject to the terms and
conditions set forth herein and the Stock Purchase Agreement, if for any reason
or under any contingency the Stockholders do not pay Acquiror for the Guaranteed
Obligations, any Acquiror Indemnified Person shall have the option to require
Guarantor to assume all responsibility therefor in accordance with the procedure
set forth in Section 2.01(b) hereof, and Guarantor hereby agrees to assume all
responsibility therefor and, at its own costs and expense, to cause the
Guaranteed Obligations to be fully satisfied.
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<PAGE> 3
(b) Any Acquiror Indemnified Person may require Guarantor to pay such
person for a Guaranteed Obligation only as follows:
(i) If the Losses claimed by an Acquiror Indemnified Person
are undisputed as evidenced by a written agreement signed by the duty
authorized representatives of the Stockholders and the Escrow Agent
does not release to Acquiror Escrowed Funds equal in amount to such
Losses in accordance with the terms of the applicable escrow agreement
or if such Escrowed Funds are less than the amount of such Losses and
the Stockholders fail to pay Acquiror for such Losses in accordance
with the terms of the Stock Purchase Agreement, then such Acquiror
Indemnified Person may upon written notice to Guarantor require payment
of same; provided, however, that for any ESOP payment obligation the
Acquiror Indemnified Person must demand payment from the Minority
Stockholders pursuant to the last paragraph of Section 12.01 of the
Stock Purchase Agreement prior to requiring payment from Guarantor and
the Minority Stockholders shall fail to pay such Losses in accordance
with the Stock Purchase Agreement; or
(ii) If the Losses claimed by an Acquiror Indemnified Person
are disputed, then to ascertain such Losses, Acquiror Indemnified
Person must submit its claim for Losses to nonbinding arbitration as
set forth in Section 13.09 of the Stock Purchase Agreement. If it is
determined through such nonbinding arbitration that an Acquiror
Indemnified Person has a Loss and the Escrow Agent does not release to
Acquiror Escrowed Funds equal in amount to such Losses in accordance
with the terms of the applicable escrow agreement or if such Escrowed
Funds are less than the amount of such Losses and the Stockholders fail
to pay Acquiror for such Losses in accordance with the terms of the
Stock Purchase Agreement, then such Acquiror Indemnified Person may
upon written notice to Guarantor require payment of same; provided,
however, that for any ESOP payment obligation the Acquiror Indemnified
Person must demand payment from the Minority Stockholders pursuant to
the last paragraph of Section 12.01 of the Stock Purchase Agreement
prior to requiring payment from Guarantor and the Minority Stockholders
shall fail to pay same in accordance with the Stock Purchase Agreement;
and
(iii) In accordance with Section 2.01(b)(i) and 2.01(b)(ii), an
Acquiror Indemnified Person shall actively pursue, in a commercially
reasonable manner, the Stockholders to pay for such Losses prior to
any demand for payment from the Guarantor.
(c) Notwithstanding anything herein to the contrary, Guarantor's
maximum liability under this Guaranty Agreement shall be limited in the
aggregate to $20,000,000 for Guaranteed Obligations deemed to arise on or before
the first anniversary date of the Closing Date; $17,500,000 for Guaranteed
Obligations deemed to arise on or before the second anniversary date of the
Closing Date; $15,000,000 for Guaranteed Obligations deemed to arise on or
before the third anniversary date of the Closing Date; $15,000,000 for
Guaranteed Obligations deemed to arise on or before the fourth anniversary date
of the Closing Date, and $0 for Guaranteed Obligations arising thereafter.
Guaranteed Obligations deemed to arise in any year which are thereafter paid by
Guarantor to an Acquiror Indemnified Person shall be applied to each year for
purposes of determining the maximum
-3-
<PAGE> 4
liability in a given year. Notwithstanding anything herein to the contrary, in
no event shall Guarantor's maximum liability hereunder exceed $20,000,000 in the
aggregate.
(d) If Guarantor pays an Acquiror Indemnified Person for a Guaranteed
Obligation and Guarantor or anyone acting by, through or under Guarantor
collects any sum of money from the ESOP, any successor thereto or the
beneficiaries of the ESOP (the "ESOP Parties"), which collection is based upon
Guarantor's payment of such Guaranteed Obligation to an Acquiror Indemnified
Person, then for purposes of determining Guarantor's liability hereunder the sum
of all such collections from the ESOP Parties relating to such Guaranteed
Obligations shall be added to the maximum liability of Guarantor under this
guaranty (but not in excess of the amounts set forth in Section 2.01(c) for the
period in which the Guaranteed Obligation was deemed to arise) for the limited
purpose of guaranteeing Guarantor's payment of the Guaranteed Obligations, if
any, that result from the collection by Guarantor of such sum of money from the
ESOP Parties, regardless of when such Guaranteed Obligation arises.
(e) A Guaranteed Obligation shall be deemed to arise when the
Stockholders receive notice of an Asserted Claim from an Acquiror Indemnified
Person in accordance with Section 12.05 of the Stock Purchase Agreement;
provided, however, a claim under Section 2.01(d) is deemed to arise on the date
the Guaranteed Obligation to which such claim relates was deemed to arise.
(f) As an interested party, Guarantor shall have the right to
participate in nonbinding arbitration between an Acquiror Indemnified Person and
the Stockholders to assert defenses and claims regarding the disputed Losses on
behalf of the Stockholders. Guarantor hereby agrees that any defenses or claims
it may have by or on behalf of itself or the Stockholders regarding the
validity, existence, nature, scope or amount of any claimed Losses shall only be
asserted at the time that the Stockholders are able to assert their defenses or
claims either through nonbinding arbitration as required by Section 13.09 of the
Stock Purchase Agreement or before a court of competent jurisdiction if the
determination of such nonbinding arbitration is not brought before such court.
Section 2.02 Obligations Absolute and Unconditional. (a) Subject to the
terms, conditions and limitations set forth herein, the obligations of Guarantor
under this Guaranty Agreement shall be absolute, unconditional and irrevocable
and shall remain in full force and effect until there shall be no duties,
obligations, covenants, agreements or liabilities of the Stockholders or
Guarantor in respect of the Guaranteed Obligations as set forth in Section 2.01
above, and until such collection by an Acquiror Indemnified Person, such
obligations shall not be affected, modified or impaired upon the happening from
time to time of any act or failure to act by any Acquiror Indemnified Person,
whether or not with notice to or the consent of Guarantor, with respect only to
the following:
(i) the failure to give notice to Guarantor of the occurrence of
a default under the terms and provisions of this Guaranty Agreement or
the Stock Purchase Agreement, as applicable;
(ii) the waiver of the payment, performance or observa nce by the
Stockholders, of any of the obligations, covenants, or agreements of
any Acquiror Indemnified Person contained in the Stock Purchase
Agreement;
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<PAGE> 5
(iii) the extension of the time for performance of any
obligations, covenants or agreements under or arising out of the Stock
Purchase Agreement or under or arising out of this Guaranty Agreement,
or the extension or the renewal of any thereof,
(iv) the modification or amendment (whether material or
otherwise) of any obligation, covenant or agreement set forth in the
Stock Purchase Agreement;
(v) the taking or the omission of any actions by the Stockholders
referred to in the Stock Purchase Agreement; or
(vi) any failure, omission, delay or lack on the part of the
Stockholders to enforce, assert or exercise any right, power or remedy
conferred on the Stockholders in the Stock Purchase Agreement at law
or in equity, or any other act or acts on the part of the
Stockholders.
(b) This Guaranty Agreement is not conditioned or contingent upon the
enforceability of the Stock Purchase Agreement or other instruments relating to
the creation of performance of the Guaranteed Obligations as to or against the
Stockholders, except to the extent that any obligation of the Acquiror is
determined to be invalid or unenforceable for any reason and such invalidity or
unenforceability gives rise to the claim which is the subject of the Guaranteed
Obligations.
(c) Subject to the terms set forth herein (including without limitation
the right of offset set forth herein) this Guaranty Agreement and the
obligations of Guarantor hereunder shall be valid and enforceable and, subject
to the terms set forth herein, shall not be subject to any reduction,
limitation, impairment, discharge or termination for any reason other than
prompt and complete payment and performance of the Guaranteed Obligations.
(d) In the event that all or any portion of the Guaranteed Obligations
are paid by the Stockholders, the obligation of Guarantor under this Guaranty
Agreement shall continue and remain in full force and effect to be reinstated as
the case may be, in the event that all or any part of any such payment(s) are
rescinded or recovered directly or indirectly from an Acquiror Indemnified
Person as a preference, fraudulent transfer or otherwise, and any such payments
that are so rescinded or recovered shall constitute Guaranteed Obligations for
all purposes, as of the date of such payment of the Guaranteed Obligations.
(e) Guarantor hereby waives for the benefit of any Acquiror Indemnified
Person any defense of the Stockholders arising by reason of incapacity, lack of
authority, lack of consideration, failure of consideration, illegality, duress,
undue influence or fiduciary breaches, prohibited transactions or other
violations of law relating to the CHHC Plan with respect to the Stock Purchase
Agreement or any agreement or instrument relating to the Stock Purchase
Agreement.
(f) Guarantor hereby waives for the benefit of any Acquiror Indemnified
Person any defense arising by reason of incapacity, lack of authority, lack or
failure of consideration, illegality, duress, undue influence or any disability
or defense of Guarantor based on or arising out of the lack of validity or the
unenforceability of this Guaranty Agreement.
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<PAGE> 6
(g) Guarantor hereby waives for the benefit of any Acquiror Indemnified
Person any defense based upon any statute or rule of law that provides that the
obligation of a surety must be neither larger in amount nor in other respects
more burdensome than that of principal.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
Guarantor hereby represents and warrants as of the date hereof that:
Section 3.01. Organization and Qualification Subsidiaries. Guarantor is a
corporation, and each of Guarantor's other subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as it is now being conducted and is duly qualified and in good standing to do
business in each jurisdiction in which the nature of the business conducted by
it or the ownership or leasing of its properties makes such qualification
necessary.
Section 3.02 Certificate of Incorporation and Bylaws. Guarantor has
heretofore furnished or made available to Acquiror complete and correct copies
of the Articles of Incorporation and Bylaws, in each case as amended or restated
to the date hereof, of Guarantor.
Section 3.03 Authority. Guarantor has all requisite corporate power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by Guarantor and the consummation by Guarantor of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action and all other corporate proceedings on the part of Guarantor
that are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Guarantor and constitutes the legal, valid and binding obligation of Guarantor.
Section 3.04 No Conflict. The execution and delivery of this Guaranty
Agreement by Guarantor does not, and the performance by Guarantor of its
obligations hereunder will not (i) conflict with or violate the Articles of
Incorporation or Bylaws, in each case and as amended and restated, of Guarantor,
(ii) conflict with or violate any federal, state, foreign or local law, statute,
ordinance, rule or regulation in effect as of the date hereof (collectively,
"Laws') applicable to Guarantor or any judgment, order or decree applicable to
Guarantor or by which any of its properties is bound or subject or (iii) result
in any breach of or constitute a default (or an event that with notice or lapse
of time or both would become a default) under, or give rise to others any right
of termination, amendment, acceleration or cancellation of, or require payment
under, or result in the creation of a lien or encumbrance on any of the
properties or assets of Guarantor pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company is a party or by which the Company
or its properties is bound or subject.
-6-
<PAGE> 7
ARTICLE 4
PAYMENT OF OBLIGATION
Section 4.01 Right of Offset/Recoupment. (a) Guarantor hereby expressly
authorizes and grants Acquiror and any affiliate of Acquiror that receives
management or information services from Guarantor the absolute right to offset
and recoup from any obligation of such persons to Guarantor (on a pro rata basis
determined in accordance with the annual fees payable under such management and
information services agreements) any Guaranteed Obligations that are required to
be paid by Guarantor hereunder. If the Guaranteed Obligations to be paid by
Guarantor exceed $500,000, then Acquiror and Guarantor hereby agree to negotiate
in good faith for a payment plan for Guarantor whereby such persons shall apply
the right of offset and recoupment granted hereby over an agreed upon period of
time. It is hereby agreed that in no event shall such payment plan extend beyond
the later to occur of (i) the fifth anniversary date of this Guaranty Agreement
or (ii) the second anniversary date of the accrual of such Guaranteed
Obligation.
(b) Acquiror hereby expressly authorizes and grants Guarantor the
absolute right to offset and recoup against the payment of any Guaranteed
Obligations to be paid by Guarantor hereunder, the amount of any undisputed
obligation of the affiliates of Acquiror under the home health agency management
and information management services contracts between such affiliates and
Guarantor.
Section 4.02 Security Interest. Guarantor hereby agrees that as of each
date that a Guaranteed Obligation is required to be paid by Guarantor hereunder,
Guarantor pledges, assigns and grants to Acquiror a security interest equal to
the entire amount of such Guaranteed Obligation in all of Guarantor's accounts
receivable, subject only to a security interest in the accounts receivable of
Guarantor granted by Guarantor prior to the date hereof to a third party, to
secure the prompt payment and performance of the Guaranteed Obligations by
Guarantor as set forth herein. Guarantor hereby agrees to execute such security
instruments as requested by Acquiror to secure these obligations.
ARTICLE 5
MISCELLANEOUS
Section 5.01 Successors and Assigns. (a) This Guaranty Agreement is a
continuing obligation of Guarantor and is not assignable without the express
written consent of Acquiror. 'Ibis Guaranty Agreement shall (i) be binding upon
Guarantor and its successors and assigns, and (ii) inure to the benefit of and
be enforceable by any Acquiror Indemnified Person. This Guaranty Agreement is
intended solely for the benefit of each Acquiror Indemnified Person and it is
not the intention of Guarantor to confer third party beneficiary rights upon any
other person.
(b) Guarantor hereby agrees that it shall not assign any home health
agency management agreement or information management services agreement entered
into by and between Guarantor and any affiliate of Acquiror without the express
written consent of Acquiror, which consent shall not be unreasonably withheld or
delayed. It is hereby agreed that Acquiror shall make a determination of whether
Guarantor shall be able to satisfy its obligations hereunder in determining
whether to grant such consent and that Acquiror may require such proposed
assignee to assume certain obligations hereunder as a condition to such consent.
-7-
<PAGE> 8
Section 5.02 Preservation of Rights. Notwithstanding anything set forth
herein, any Acquiror Indemnified Person may provide notice to Guarantor or
institute any legal action it deems necessary in order to preserve and not to
jeopardize its rights against Guarantor hereunder.
Section 5.03 Notices. All notices, requests and other communications
hereunder shall be in writing and shall be given to the party to whom sent,
addressed to it as follows:
If directed to Acquiror:
HCA, Inc.
One Park Plaza
Nashville, Tennessee 37203
Attn:Vice President, Development
Fax: (615) 320-2558
with a copy to:
Columbia/HCA Healthcare Corporation
One Park Plaza
Nashville, Tennessee 37203
Attn:General Counsel
Fax: (615) 320-2598
If directed to Guarantor:
Simione Central, Inc.
6650 Powers Ferry Road
Suite 200
Atlanta, Georgia 33039
Attn:President
Fax: (770) 644-6559
with a copy to:
Simione Central, Inc.
6650 Powers Ferry Road
Suite 200
Atlanta, Georgia 33039
Attn:General Counsel
Fax: (770) 644-6559
Acquiror and Guarantor may designate a different address to which such notices
should be sent by giving the other written notice thereof. Each such notice,
request or communication shall be effective when received by telefax or other
electronic means or overnight courier, or three (3) days after being deposited
in the United States Mail, with postage prepaid thereon, registered or certified
mail, return receipt requested, addressed as aforesaid or, if given by any other
means, when delivered at the address of the party to whom such notice is being
delivered.
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<PAGE> 9
Section 5.04 Amendments. This Guaranty Agreement may be amended only upon
the written consent of Acquiror and Guarantor. No course of dealing between
Guarantor nor any delay in exercising any rights hereunder, shall operate as a
waiver of any rights of any Acquiror Indemnified Person hereunder.
Section 5.05 Severability. Any provision of this Guaranty Agreement which
is prohibited, unenforceable or not authorized shall be fully severable and this
Guaranty Agreement shall be construed and enforced as if such prohibited,
unenforceable, or unauthorized provision had never comprised a part
hereof
Section 5.06 Governing Law. This Guaranty Agreement is intended to be
performed in the state of Georgia, and shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the state of Georgia, excluding any conflicts of law, rule or principal that
might refer the governance or the construction of this Guaranty Agreement to the
laws of another jurisdiction.
Section 5.07 Entire Agreement; Multiple Counterparts. This Guaranty
Agreement constitutes the entire agreement, and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof and may be executed simultaneously in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, Guarantor has duly executed and delivered this Guaranty
Agreement, or caused same to be duly executed and delivered as of the date first
set above.
GUARANTOR: SIMIONE CENTRAL, INC.
By: /s/ Gary M. Bremer
----------------------------------
Gary M. Bremer
Chief Executive Officer
ACQUIROR: HCA, INC.
By: /s/ C. Michael Ford
----------------------------------
C. Michael Ford
Vice President
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<PAGE> 1
EXHIBIT 10.22
LEASE AGREEMENT
Lease Number: 100
<TABLE>
<CAPTION>
Lessor Lessee
<S> <C>
National Leasing, Inc. Simione Central, Inc.
- ---------------------------------------- ----------------------------------------
6600 Powers Ferry Road 6650 Powers Ferry Roasd
- ---------------------------------------- ----------------------------------------
Atlanta Fulton Georgia 30339 Atlanta Fulton Georgia 30339
- ---------------------------------------- ----------------------------------------
City County State Zip City County State Zip
Gary Rasmussen 770.644-6517 Rhett Crook 770/859-1860
- ---------------------------------------- ----------------------------------------
Contact Person Phone Contact Person Phone
4130 Whitney Ave./Hamden, CT 06518-0248 550 Cochituate Rd./Framingham, MA 01701
- -----------------------------------------------------------------------------------------------------------
Installation address if different from above
</TABLE>
Description: Make, Model & Serial Number
Quantity (Use Exhibit A if Space Does Not Permit A Full Description Here)
- -------------------------------------------------------------------------------
8 9005680-0101/ Extensa 560CDT/ 75
- -------------------------------------------------------------------------------
8 KTI-EXT550/8 KTI-EXT550/8
- -------------------------------------------------------------------------------
8 XJ1144/ XH1144S/R 14.4/ FAX
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
A. Term of Agreement (Check One Plan) D. Advance Payment $1,571.68
---------
12 Month X 36 Month Other Apply to X First Month (13 days) First & Last Month(s)
--- --- --- ----- --- ---
24 Month 48 Month X Security Deposit
--- --- ---
B. Payment Due 1st of each Month E. Lease Commencement Date 3/18/96
$1,107.32 -------
---------
C. Amount of each payment plus F. Lease End Purchase Option $4800.00
sales, use, property, and other taxes --------
</TABLE>
The undersigned Lessee has applied to Lessor for a lease of the above described
items ("Equipment") for commercial purposes. For good and valuable
consideration, including processing this application, and intending to be
legally bound, LESSEE WILL NOT CANCEL THIS APPLICATION. THIS IS A
NON-CANCELABLE LEASE FOR THE MINIMUM TERM INDICATED IN "A" ABOVE. If Lessor
accepts, Lessee agrees to lease from Lessor, and Lessor agrees to lease to
Lessee, the Equipment, on all the terms hereof, including the Terms and
Conditions on the reverse side. THIS WILL ACKNOWLEDGE THAT I HAVE READ AND
UNDERSTAND THIS LEASE AND HAVE RECEIVED A COPY OF THE LEASE.
/s/ Simione Central, Inc. GUARANTY
- -------------------------------------
Lessee Full Legal Name (Please Print)
Undersigned hereby acknowledges that he
By X /s/ Gary W. Rasmussen has read and understands this Lease and
- ------------------------------------- guarantees performance of this Lease by
Authorized Signer Lessee and payment of all sums due
hereunder in event of default, hereby
Gary Rasmussen, CFO waiving any modification, amendment,
- ------------------------------------- renewal or extension and notice thereof.
Authorized Signer's Printed Name Title
Signature
------------------------------
An Individual (No Title)
Printed Name of Guarantor
Accepted By Lessor --------------
Address
By /s/ Gary Bremer --------------------------
- ------------------------------------- City/State
National Leasing, Inc. --------------------------
- ------------------------------------- Business Phone
Gary Bremer, President --------------------------
- -------------------------------------
<PAGE> 2
TERMS AND CONDITIONS
1. The term of this Lease Agreement (the "Lease") will commence on the lease
commencement date shown above and shall continue from the first day of the
following month for the number of consecutive months shown on the reverse side.
Lessor agrees to lease to Lessee and Lessee agrees to lease from Lessor the
personal property together with any attachment and accessories (collectively
the "Equipment") described on the reverse side hereof and on attached Exhibit A
(if any). The Lease shall be subject to the terms and conditions set forth in
this Lease. This Lease cannot be cancelled or terminated except as expressly
provided herein.
2. Lessee shall pay monthly lease payments as provided on the reverse side
hereof, each being due in advance on the first day of each month. The lease
payment for the month of commencement shall be prorated, as appropriate. Time
is of the essence of payments due hereunder. Should any lease payment not be
paid within five (5) days of when due, Lessee shall pay interest on the amount
owned from the due date until paid at the lesser of 1 1/2% per month or the
highest legal rate allowed under applicable law. In addition, should any
payment not be made within five (5) days of when due, Lessee shall pay to
Lessor, for administrative services and not as a penalty, an amount equal to
the greater of $100.00 or % of the past due amount. Lessee agrees to pay
$20 to Lessor for any check returned by the bank for insufficient funds or any
other reason. Upon termination of this Lease, Lessee shall immediately return
the Equipment to Lessor at the location designated by Lessor, at Lessee's
expense. Lessee to pay all costs of packing, delivery, and dismantlement;
provided, however, that without acting as a renewal of the Lease or prejudicing
the rights of Lessor, Lessee shall pay monthly rental payments equal to 150%
of the then monthly rate until the Equipment is returned. This is a net Lease
and all rentals are to be made by Lessee irrespective of any setoff,
counterclaim, recoupment or defense which Lessee may have against the supplier
of the Equipment or any other party. Provided Lessee is not then in default,
Lessee may, at its option, renew this Lease on the same terms and conditions
for 12 month term(s) by providing Lessor with written notice of its intention
to so renew at least sixty (60) days prior to the end of the initial Lease term
or any renewal Lease term, At the end of the term of this Lease, whether
after the initial period or after any renewal period, Lessee shall have the
option to purchase the Equipment which is the subject of this Lease for the
purchase option, if any, shown on the reverse side by giving Lessor written
notice of its intent to purchase at least sixty (60) days prior to the end of
the term of this Lease. In the event that Lessee shall fail duly and promptly
any of its obligations under the provisions of this Lease to be performed by
it, Lessor may, at its option, immediately or at any time thereafter perform
the same for the account of Lessee without thereby waiving such default. Any
amount paid or expense or liability incurred by Lessor in such performance,
together with interest at the rate specified in paragraph two hereof, until
paid by Lessee to Lessor, shall be payable by Lessee upon demand as additional
rent for the Equipment. The parties agree that the monthly lease rate set
forth on the reverse side hereof is based on a mutually determined estimated
cost of all Equipment and that the actual lease rate may, at the option of the
Lessor, be adjusted upward or downward if the actual cost exceeds or is less
than the estimate.
3. Lessee shall pay when due all sales, use, personal property and other
taxes and filing fees related to the Equipment, excluding only Lessor's income
taxes. This is a net Lease.
4. Lessee acknowledges that the Equipment is of a size, design, capacity,
description, manufacturer and supplier selected by the Lessee and will be
maintained solely by Lessee or its contractors, but that the Equipment is
and shall remain the sole and exclusive property of Lessor. LESSOR MAKES NO
WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED, AS TO VALUE, DESIGN,
CONDITION, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE
EQUIPMENT. LESSOR WILL NOT BE LIABLE FOR ANY LOSS, COSTS OR DAMAGE TO LESSEE
OR OTHERS ARISING FROM DEFECTS, NEGLIGENCE, DELAYS, FAILURE OF DELIVERY, OR OF
NON-PERFORMANCE OF THE EQUIPMENT, AND THERE WILL BE NO REDUCTIONS OF PAYMENTS
BY LESSEE FOR ANY REASON, INCLUDING BUT NOT LIMITED TO, ANY DEFENSE, SET OFF OR
ANY CLAIM ARISING OUT OF OR RELATED TO ANY DEFECTS OR DAMAGES TO THE EQUIPMENT
FROM ANY CAUSE WHATSOEVER, IT BEING THE INTENTION OF THE PARTIES THAT LEASE
PAYMENTS SHALL BE PAID IN ALL EVENTS.
5. Lessee shall keep the Equipment at the above Lessee's address or at the
locations shown on Exhibit A in Lessee's sole and absolute control, or such
other location consented to in advance in writing by Lessor, free and clear of
any liens, levies and encumbrances, other than in favor of any financial
institutions which from time to time provide financing to Lessor. Lessee shall
keep and maintain the Equipment in a careful, proper manner, in good order,
condition and appearance, reasonable wear and tear excepted and shall permit
the Equipment to be used only by Lessee or its employees. Lessee shall not
modify the Equipment, unless in accordance with a recommendation by the
manufacturer, without the prior written consent of Lessor. LESSEE SHALL NOT
ASSIGN OR IN ANY WAY DISPOSE OF ALL OR ANY PART OF ITS RIGHTS OR OBLIGATIONS
UNDER THIS LEASE OR ENTER INTO ANY SUBLEASE OF ALL OR ANY PART OF THE EQUIPMENT
WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR. Lessor hereby assigns and
transfers to Lessee for the term of this Lease and any buy-out all warranties,
updates, and rights, if any, made by the manufacturer or supplier of the
Equipment.
6. Lessee hereby assumes all risk of loss, damage or destruction of the
Equipment from any cause whatsoever; no loss, damage or destruction of or to
the Equipment or any part thereof shall impair or abate any obligation of
Lessee under the Lease. Lessee shall at its own expense obtain and maintain on
or with respect to the Equipment insurance against fire and other perils
customarily covered by owners of like property, in a reasonable amount not less
than the greater of the full replacement value of the Equipment or the
remaining payments under the Lease, and shall name Lessor and/or Lessee's
assignee as additional insureds on such insurance policies and provide a copy
of same to Lessor or its assignee. Lessor reserves the right to select the
insurer and/or deductible for any such policies. Lessee shall promptly notify
Lessor of any damage to or loss of the Equipment or any part thereof.
7. Lessee hereby indemnifies and agrees to save Lessor harmless from any and
all liability and expense arising out of the ordering, ownership, use,
condition, or operation of each item of Equipment during the term of this
Lease, including liability for death or injury to persons, damage to property,
whether or not caused by removal of the Equipment, strict liability under the
laws or judicial decisions of any state or the United States, and legal
expenses in defending any claim brought to enforce any such liability or
expense. Lessee's obligations under this paragraph shall survive termination
of the Lease Agreement.
8. COMPUTER SOFTWARE. Notwithstanding any other terms and conditions of the
Lease Agreement, in the event that this Lease includes software equipment, then
Lessee agrees that as to such software only: (a) Lessor has not had, does not a
have, nor shall have, any title to such software, (b) Lessee has executed
or will execute a separate software license agreement and Lessor is not party
to, nor has any responsibilities whatsoever, e.g., fees or other payments, in
regards to such license agreement, (c) Lessee has selected such software and as
per Lease paragraph 4, LESSOR MAKES ABSOLUTELY NO WARRANTY OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE OR OTHERWISE IN REGARDS TO SUCH SOFTWARE AND
HAS ABSOLUTELY NO RESPONSIBILITY FOR THE FUNCTION OR DEFECTIVE NATURE OF SUCH
SOFTWARE. (d) Lessee shall indemnify and hold harmless Lessor from any loss
(including, without limitation, legal fees and costs) or liability incurred by
Lessor under this Lease Agreement or otherwise in any way related to or
connected with the abovesaid license or related agreement(s), and in the event
Lessor incurs or is threatened by such liability, then upon request of Lessor,
Lessee shall promptly accelerate all Lease payments due under the entire Lease
contract, and (a) LESSEE'S LEASE PAYMENTS AND OTHER OBLIGATIONS UNDER THIS
LEASE AGREEMENT SHALL IN NO WAY BE DIMINISHED ON ACCOUNT OF OR IN ANY WAY
RELATED TO THE ABOVESAID SOFTWARE LICENSE AGREEMENT. None of the foregoing
terms of this paragraph are intended to diminish the Lessee's obligations under
the other terms and conditions of this Lease Agreement.
9. Lessee's rights and obligations under this Lease are personal and
non-assignable, absent the express written consent of Lessor. Lessee will
affix on the Equipment appropriate plates or labels identifying the Equipment
as the property of Lessor, maintain the identification at all times, and
replace it in kind if it becomes defaced or destroyed. Should the Equipment be
located in premises leased by the Lessee, Lessee shall obtain upon Lessor's
request a form of landlord's waiver acceptable to Lessor which form of waiver
shall include the following provisions, and such other provisions as may be
reasonably required by lessor; landlord acknowledges that any lien held by
landlord with respect to Equipment, statutory or otherwise, is subordinated to
the Lease; landlord agrees that Lessor or its successors or assigns is the owner
of all the Equipment, whether attached to the leased premises or not and that
the Lessee and Lessor or their successors and assigns have the right to remove
the Equipment from the leased premises at any time without hindrance or let on
the part of landlord. Lessee shall not assign, transfer, pledge or mortgage
this Lease or any part of the Equipment, nor allow a lien of other encumbrance
or attachment of any kind to be placed on such Equipment. Lessor may sell,
assign, transfer, pledge or mortgage as security, its rights under this Lease
and its ownership in the Equipment. Lessor will have the right to enter
Lessee's premises at reasonable times in the presence of Lessee to inspect the
Equipment. Lessee authorizes Lessor, its successors, assigns, and lenders to
Lessor, to file a copy of this Lease as a financing statement for the Equipment
and will execute other documents for filing or recording as requested, and pay
the fees therefore. Further, Lessee authorizes Lessor to sign on behalf of
Lessee any U.C.C. or financing statement or related documents deemed necessary
or advisable by Lessor its assigns. The Equipment is, and at all times will
remain personal property, even if affixed to any land or building. Lessee
authorizes Lessor to insert in this Lease, and in any filings, the serial
number(s) of the Equipment.
10. Should Lessee fail to pay any rental or other sum due hereunder or breach
any covenant, warranty or representation hereunder or if any execution or
other writ of process shall be issued in any action or proceeding against
Lessee whereby the Equipment may be taken or restrained or a proceeding in
bankruptcy, receivership or insolvency shall be instituted against Lessee and
continue undismissed for a period of thirty (30) days, or if Lessee shall enter
into any agreement or composition with its creditors, Lessor may, without
further notice, take the following action: (a) declare due, sue for, and
receive from the Lessee the sum of all rents and other amounts due and owing
under this Lease plus the sum of the rents and other amounts to become payable
during the balance of the term of this Lease (reduced to present value at an
assumed rate of six (6) percent) plus the reversionary value of the Equipment
as reasonably determined by Lessor. Upon such recovery the equipment shall
become the property of the Lessee; (b) retake possession of any and all
Equipment without any court order or other process of law. For such purpose,
the Lessor may enter upon any premises where such Equipment is located and
remove same therefrom without being liable to any suit, action, or other
proceeding by the Lessee. The Lessor may, at its option, relet the Equipment.
The Lessee shall be liable for arrears of rent, if any, the expense of retaking
possession, and the removal of the Equipment, court costs, in addition to the
balance of the rentals provided for herein, or in any renewal hereof, less the
net proceeds of the re-letting of the Equipment, if any, after deducting all
costs of taking, storage, repair and sale, and reasonable attorneys fees. THE
LESSEE WAIVES ANY AND ALL RIGHTS TO NOTICE AND TO A JUDICIAL HEARING WITH
RESPECT TO THE REPOSSESSION OF THE EQUIPMENT BY THE LESSOR; (c) Terminate this
Lease as to any or all Equipment; (d) Terminate any other Lease between the
Lessor and the Lessee; or (e) Pursue any other remedy at law or in equity. The
rights granted to the Lessor under paragraph (10) shall be cumulative and
action on one shall not be deemed to constitute an election or waiver of any
other right to which the Lessor may be entitled. The Lessee waives trial by
jury in any action or proceeding arising hereunder. Lessee shall pay all costs
of enforcing Lessor's rights hereunder, including collection and attorney's
fees equal to 15% of all sums owed Lessor under this Lease. No express or
implied waiver by Lessor of any default shall constitute a waiver of any other
default by Lessor or a waiver of any of Lessor's rights.
11. This Lease shall inure to the benefit of and be binding upon the Lessee's
successors and permitted assigns, however, no assignment shall relieve Lessee
of its liabilities and obligations hereunder. This Lease shall also inure to
the benefit of and be binding upon Lessor's successors and assigns.
12. Notices to Lessor shall be mailed Certified Mail Return Receipt Requested,
in care of the President to the address on the reverse side and to the Lessee
at the Lessee's address by the same method, unless changed by written notice
given to the other party. Notices shall be deemed received on the date when
mailed.
13. Lessor may apply any advance payment to any overdue sum at any time, and
on termination of this Lease and fulfillment of all the terms and conditions
thereof by Lessee. Lessor will return the unapplied balance thereof to the
Lessee.
14. This Lease and the rights and remedies of the parties shall be
interpreted, construed and enforced in accordance with the laws of the State of
Georgia, including all matters of construction, validity and performance. This
Lease was executed in the State of Georgia and as such, Lessee and Lessor
agree to submit to the jurisdiction of the state and/or federal courts thereof.
The parties expressly waive any right to a trial by jury.
15. This Lease constitutes the entire understanding or agreement between the
parties and may not be amended except in writing signed by the parties to be
bound.
<PAGE> 1
EXHIBIT 10.23
IBM VENDOR MARKETING PROGRAMS
COOPERATIVE SERVICES MARKETING AGREEMENT
AGREEMENT NUMBER: VMP-587
Date of Agreement: December 16, 1996
This is an Agreement between IBM Corporation ("IBM") and You:
Your Name and Address:
Simione Central Holding, Inc.
6600 Powers Ferry Road
Atlanta, GA 30339
You and IBM hereby agree as follows:
1.0 PURPOSE
This Agreement sets forth the terms and conditions under which IBM, for a
fee, will assist You in the marketing of Your Services.
2.0 DEFINITIONS
When used in this Agreement, the capitalized terms listed below will have
the following meanings:
2.1 FEDERAL PROSPECT means a Prospect that is (a) an agency or other unit
of the Federal government, (b) that You know or should know is a prospective
federal prime or subcontractor, or (c) a Prospect which You otherwise know or
have reason to believe will acquire Services for use in connection with a
federal acquisition or project.
2.2 MARKETING ACTIVITIES means: the activities undertaken by the Marketing
Force in marketing the Services to Prospects where at a minimum the Marketing
Force:
2.2.1 establishes contract with the Prospect;
2.2.2 provides information regarding the Services to the Prospect; and
2.2.3. maintains contact with the Prospect in the sales cycle.
2.3 MARKETING FORCE means:
2.3.1 IBM; and
2.3.2 any IBM Business Partners and IBM Subsidiaries that IBM utilizes in
marketing the Services.
2.4 MARKETING PACKAGE means materials provided by You to the Marketing
Force. The Marketing Package shall include the following:
2.4.1 Marketing Materials means Service brochures, technical specification
sheets, demonstration presentations, Service descriptions utilized in electronic
online services, and other marketing sales literature provided by You to IBM, or
prepared by IBM and approved by You, for use by IBM in marketing Your Services
to Prospectus. IBM's use of the marketing materials and demonstration materials
may include transmission of them on electronic, online services.
2.4.2 Vendor Marketing Programs Notice means an IBM supplied description
of IBM's responsibilities to Prospects with respect to the Services.
<PAGE> 2
2.4.3 Order Form means an IBM supplied form on which the Marketing Force
records the Services sold by you to Prospects and used by IBM in providing sales
compensation to the Marketing Force and in confirming orders with You.
2.4.4 Price Schedule means a written statement supplied by You of Your
retail prices for the Services, including discounts offered, if any.
2.4.5 Service Agreement means the agreement supplied by You under which
You provide Services.
2.5 PROSPECT means a potential or actual customer of the Services that is
subject to Marketing Activities.
2.6 SERVICES means Your services. Such services are listed and described
in Attachment A "Services List."
3.0 APPOINTMENT
Subject to the terms and conditions hereof, You hereby designate and
appoint the Marketing Force as a non-exclusive representative for the marketing
of the Services in the United States and Puerto Rico.
4.0 YOUR RESPONSIBILITIES
4.1 PRICING Notwithstanding anything contained herein, You shall retain
full and absolute freedom and flexibility in pricing Your Services, and in
establishing the terms and conditions under which they may be offered to
Prospects.
4.2 MARKETING PACKAGE
4.2.1 You shall provide to IBM a copy of the items in the Marketing Package
provided by You prior to sending the Initial Marketing Package to the Marketing
Force. You shall give IBM forty-five (45) days prior written notice should You
elect to change any materials supplied by You in the Marketing Package and shall
provide IBM with a complete copy of the revised Marketing Package at least
thirty days prior to the effective date of the changes. IBM shall have the right
to review all changes to the Marketing Package and to request reasonable
modifications.
4.2.2 You shall at all times during the term of this Agreement ensure that
the Marketing Package completely and accurately represents the Services and
shall provide reasonable quantities of the most current Marketing Package to the
Marketing Force upon request.
4.3 MARKETING SUPPORT You shall cooperate with the Marketing Force in the
marketing of the Services. Such cooperation shall include the reasonable
provision of technical support services and training to the Marketing Force
(including, but not limited to, telephone support), and reasonable participation
and assistance with the Marketing Force in sales calls to Prospects, trade shows
and conferences. In addition, You shall, in a manner reasonably consistent with
industry practice, promote the Services through national and local advertising.
4.4 SERVICES In order to ensure that the Services marketed by the
Marketing Force under this Agreement are the most current release or version
offered by You to Your customers, You shall make available for marketing by the
Marketing Force under this Agreement all maintenance modifications, engineering
changes, upgrades, enhancements, or new versions (including any future
adaptations of the Services to current or future IBM operating systems, systems,
and platforms) of the Services that You offer to Your customers.
4.5 YOUR MISCELLANEOUS RESPONSIBILITIES
4.5.1 You shall perform all of Your obligations under accepted Service
Agreements.
4.5.2 You shall invoice and use reasonable efforts to collect all amounts
payable under each Service Agreement accepted by You.
<PAGE> 3
4.5.3 You shall pay to IBM the compensation set forth in Section 6.0,
"PAYMENT," and shall provide IBM with documentation and maintain records as
provided therein.
4.5.4 You shall timely notify IBM when a Prospect's signature on a Service
Agreement is independently obtained by You and payment is due IBM under Section
6.0, "PAYMENT."
4.5.5 Throughout the term of this Agreement, You shall amend in writing the
information provided to IBM on the business and service overview forms (provided
by You by IBM and incorporated herein by reference) to ensure that such
information remains accurate and complete.
4.5.6 You shall (1) promptly disclose to all Federal Prospects the
existence of this Agreement, including the existence of the contingent fee
payment arrangement in effect with IBM that would apply to the Federal
Prospect's acquisition of the Services, (2) promptly, completely, and accurately
execute any certifications, representations, and disclosure documents that may
be required by any Federal Prospect to comply with federal regulations requiring
certification and disclosure of contingent fee arrangements applicable to the
acquisition of the Services.
4.5.7 You will approve in a timely manner all Marketing Materials and
demonstration materials provided by IBM for IBM's use in marketing Your
Service(s) to Prospects. You shall provide written approval to IBM for all
information included in such Marketing Materials, including but not limited to,
content, descriptions, pricing, technical information and usage of trademarks,
trade names and copyrighted materials.
4.6 PROSPECT REGISTRATION The Marketing Force may provide You with
Prospect registration(s) identifying, at a minimum, the Prospect's name and
location. You shall, upon receipt of the registration, promptly review and reply
to IBM in ten (10) business days or less from date of receipt whether You will
accept or reject Prospect. If You accept the Prospect registration, You will
send to the initiator of the registration a completed Marketing Package. If You
reject said Prospect registration, You will provide in writing to IBM the
reason(s) for rejection.
4.7 ORDER CONFIRMATION IBM may provide You with order confirmation notices
identifying Services sold to Prospects. You shall confirm in writing within ten
(10) working days from date of receipt, the Services sold to a Prospect, the
dollar value of the related Service Agreement(s) and the estimated date You will
pay to IBM the associated fees as described in Section 6.1 of this Agreement.
5.0 IBM'S RESPONSIBILITIES
5.1 MARKETING SUPPORT ACTIVITIES IBM will, at its sole cost, undertake the
following market support activities for the Services:
5.1.1 provide to You the IBM Business Partner emblem as described in
Section 11.3 "Advertising and Trademark Usage" of this Agreement; and
5.1.2 issue an availability notice to the Marketing Force that describes
the Services and announces that the Marketing Force may solicit and assist in
obtaining orders for the Services on Your behalf; and
5.1.3 make available to You a registration process whereby You may accept
or reject a Prospect; and
5.1.4 include Your Services (identified as Cooperative Program offerings)
in IBM National Solution Center database.
5.2 IBM may assist you in obtaining the Prospect's signature on your
Service Agreements.
5.3 IBM may participate in joint sales calls with You.
5.4 IBM will, in its Marketing Activities, rely on the information supplied
by You and contained in the Marketing Package, training, and instruction
received from You, and information otherwise provided by You regarding the
Services.
5.5 IBM may, in a manner and amount that it deems appropriate, compensate
the Marketing Force based upon fees received by IBM from You under this
Agreement.
<PAGE> 4
5.6 Notwithstanding anything contained herein, IBM shall have full freedom
and flexibility in its marketing effort for the Services, including whether to
market or discontinue marketing. IBM makes no guarantee or commitment that the
Services will be marketed nor does IBM guarantee the financial or other success
of any marketing effort engaged in.
6.0 PAYMENT
6.1 FEE In consideration for the Marketing Activities (as defined in
Section 2.2) and Marketing Support Activities (as described in Section 5.1), You
shall owe IBM a fee equal to the applicable percentage (as listed in the
Attachment A -- "Services List") of the total revenue received by You for
Services under:
6.1.1 Service Agreements with Prospects obtained as a result of Marketing
Activities (with or without an order confirmation notice as described in Section
4.8 of this Agreement and/or with or without a Prospect registration as describe
in Section 4.7 of this Agreement); and
6.1.2 Service Agreements with Prospects rejected by You under Section 4.8,
"Prospect Registration," provided You subsequently accept a Service Agreement
for the Services from such Prospects during the term of this Agreement and for
six (6) months after IBM's withdrawal of the Services from marketing by the
Marketing Force; and
6.1.3 And additional Service Agreements issued to Prospects by You during
the term of this Agreement and six (6) months after IBM's withdrawal of the
Services from marketing by the Marketing Force which are a direct or follow-on
result of Marketing Activities; and
6.1.4 Service Agreements with Prospects obtained as a result of Marketing
Activities initiated before IBM's withdrawal of the Services from marketing by
the Marketing Force and three (3) months following said withdrawal.
6.2 PAYMENT OBLIGATION Your payment to IBM shall accrue when the
Prospect's fee for the Services are paid to You.
6.3 REMITTANCE Payment shall be made to IBM within thirty (30 ) days after
the conclusion of each calendar month for the amounts received by You in such
calendar month. Payment shall be accompanied by an activity report summarizing
the basis for the payment to IBM. For months in which no payment is due IBM, You
will send an activity report so stating.
6.3.1 For Services, payment shall be accompanied by a copy of each of Your
invoices to Prospect(s) for the Services rendered under this Agreement. You must
also include under each Service Agreement an activity report summarizing the
basis for the payment to IBM, including the names of each of the Prospects, the
identification and nature of the Services provided, the order number (where
applicable), the total payments made to You by Prospect to date, the total fee
due IBM, the amount of the fee paid to IBM to date and the amount of the fee to
IBM included in this payment.
6.3.2 Rejection or Refund In addition, in the event You reject any Service
Agreement, a Prospect cancels prior to making payment to You, or You grant a
refund to a Prospect, the activity report shall contain detailed information
identifying the reasons for and amounts of any resulting adjustment in payment
due IBM.
6.4 AUDIT You shall maintain records in accordance with generally accepted
methods of accounting of all transactions which are the subject of this
Agreement for three years from the date revenue from the Services accrues to
You. If IBM deems it necessary, IBM (or an accounting organization retained by
IBM) shall have access to such records, upon reasonable notice, for the purposes
of audit during normal business hours, for so long as such records are required
to be maintained.
6.5 FEE DISPUTE In the event IBM determines that additional payment is
due, IBM will issue an invoice for such additional amount with supporting
documentation. Except for disputed fees, You agree to pay such invoice within 30
days of receipt. In the event a dispute arises over fees due to IBM, IBM and You
agree to work in good faith toward a mutually agreeable resolution of the
dispute.
<PAGE> 5
Attachment A to this agreement is a Services List which has been
omitted. The Company agrees to furnish supplementally a copy of this omitted
Schedule to the Commission upon request.
<PAGE> 6
7.0 WARRANTY
You represent and warrant, as a present and ongoing affirmation of the
facts, that:
7.1 You have all intellectual property rights to the Services that are
necessary to perform Your obligations under this Agreement and all agreements
entered into with Prospect(s); and
7.2 The Services and all related materials (including Marketing Materials
and demonstration materials) do not infringe any intellectual property right of
any third party; and
7.3 The Services conform to the statements and representations made by You
in the Marketing Package or otherwise provided by You to Prospects and the
Marketing Force; and
7.4 Your performance of Your obligations hereunder do not conflict with any
agreement between You, the Prospects or any third party; and
7.5 You, in entering into this Agreement, have not relied on any promises,
inducements, or representations by IBM except those expressly stated in this
Agreement; and
7.6 The Services comply with all applicable governmental regulations, rules
and guidelines.
8.0 INDEMNIFICATION
8.1 You hereby agree to defend, indemnify, and hold harmless IBM against
any and all claims, losses, and expenses, including reasonable attorney fees and
other costs of litigation, based on or arising out of any claim that:
8.1.1 the Services infringe any third party's intellectual property rights;
8.1.2 You negligently performed, or failed to perform, Your obligations
under a Service Agreement, or this Agreement;
8.1.3 You breached Your representations or warranties under any agreement
with Prospects or this Agreement.
8.2 The foregoing indemnities are conditioned on the following:
8.2.1 prompt written notice to You of the claim or proceeding subject to
indemnification; and
8.2.2 cooperation by IBM at Your expense in the defense and settlement of
any such claim; and
8.2.3 IBM's obtaining Your prior consent to settlement or resolution of any
such claim, which consent shall not unreasonably be withheld.
8.3 IBM hereby agrees to defend, indemnify, and hold harmless You against
any and all claims, losses, and expenses, including reasonable attorney fees and
other costs of litigation, to the extent that such claims, losses, and expenses
arise out of the intentional misrepresentation of the Services by IBM; provided,
however, that any such misrepresentation is not caused by Your acts or
omissions.
8.3.1 The foregoing indemnities are conditioned on the following:
8.3.1.1. Prompt written notice to IBM of any claims of proceeding subject
to indemnity; and
8.3.1.2. cooperation by You in the defense and settlement of such claim at
the expense of IBM; and
8.3.1.3. prior written approval by IBM of any settlement, which approval
shall not be unreasonably withheld.
9.0 TERM AND TERMINATION
9.1 This Agreement shall be effective for a period of two years from the
date IBM issues the first availability notice for the Services and shall be
automatically renewed on a yearly basis thereafter unless terminated under this
Section.
<PAGE> 7
9.2 Either party may elect to terminate this Agreement with or without
cause by written notification to the other party. Termination will be effective
ninety (90) days after such notice.
9.3 In the event of any termination or expiration of this Agreement in
whole or in part:
9.3.1 the provisions of Sections 2.0, "DEFINITIONS," 7.0, "WARRANTY," 8.0,
"INDEMNIFICATION," 10.0, "INFORMATION," and 11.0, "GENERAL" shall survive and
continue until they expire in accordance with their terms; and
9.3.2 any obligation under Section 6.0, "PAYMENT" shall survive and
continue until satisfied.
10.0 INFORMATION
10.1 Unless otherwise agreed to in writing by the authorized representative
of both parties, neither party shall provide the other party with information
that is confidential to itself or any third party. Accordingly, in the absence
of such a writing, no obligation of confidentiality of any kind is assumed by,
or shall be implied against, either party by virtue of its discussions and/or
correspondence with the other party or with respect to any information received
(in whatever form and whenever received) from the other party under this
Agreement or in activities related hereto notwithstanding any legend or
statement to the contrary.
10.2 Notwithstanding the foregoing, You agree to use the methods and
procedures You use to protect Your own information that You do not wish to
disclose, to avoid disclosure of the provisions of the terms and conditions of
this Agreement and its amendments. You may not disclose the terms and conditions
of this Agreement and its amendments to any third party without the prior
written consent of IBM. Such consent shall not be unreasonably withheld. You may
refer to this Agreement solely by stating IBM has been granted the right to
market and take orders for the Services.
11.0 GENERAL
11.1 FREEDOM OF ACTION Nothing in this Agreement shall be construed as
prohibiting or restricting either party from independently developing,
acquiring, and marketing products, services, and other materials which are
competitive in any form with the Services.
11.2 EXPENSES Each party shall bear its own expenses.
11.3 ADVERTISING AND TRADEMARK USAGE
11.3.1 IBM hereby grants You the use of the IBM Business Partner emblem
("Emblem") in Your advertising and promotional materials in the United States
and Puerto Rico for the Services ("Advertising Materials"). You shall not use
the Emblem prior to IBM's initial announcement of the availability of the
Services to the Marketing Force. Any use must comply with the instructions set
forth in guidelines issued by IBM from time to time entitled "IBM Advertising
and Promotion Guidelines" ("Guidelines").
A copy of the Guidelines shall be provided to You and is incorporated
herein by reference. You may not use the IBM logotype other than as part of the
Emblem. Except for Your press releases and as otherwise specified in the
Guidelines, You do not need to provide to IBM for IBM's prior review and
approval Your Advertising Materials Incorporating trademarks or trade names of
IBM or that which refers to You as a participant in the IBM Vendor Marketing
Program if such use complies with the Guidelines. You must provide to IBM for
IBM's prior review and approval, in a manner reasonably consistent with industry
practice, Your press releases if such release makes any reference to the IBM
Vendor Marketing Program. You shall make no reference to IBM, IBM equipment and
IBM products that may be misleading. You agree to change, at Your expense, any
Advertising Materials which IBM, in its sole judgment, determines to be
inaccurate, objectionable, misleading, or a misuse of IBM trademarks or trade
names which IBM did not pre-approve. You, on written demand by IBM, shall
immediately cease the use of any materials that IBM deems to be in violation of
this Section.
11.3.2 The authorization granted in this Section 11.3, "Advertising and
Trademark Usage" shall terminate immediately upon the termination or expiration
of this Agreement. IBM reserves the right to modify or revoke the authorization
granted to You hereunder effective upon thirty (30) days written notice.
<PAGE> 8
Such revocation shall be effective immediately upon written notice in the event
of any violation by You of the Guidelines or breach of this Agreement. Upon
revocation of the rights granted in this Section 11.3, "Advertising and
Trademark Usage," or upon termination or expiration of this Agreement, You shall
cease using the Emblem, and shall destroy any and all Advertising Materials.
11.3.3 Except as expressly provided herein, this Agreement grants You no
right to use IBM's trademarks or trade names in connection with any product,
service, promotion, or publication without the prior written consent of IBM.
11.3.4 You hereby authorize IBM to use Your trademarks and trade names for
the Services solely in performing Marketing Activities; however, any use by IBM
will be pre-approved by You.
11.4 ASSIGNMENT AND DELEGATION You shall not sell, transfer, assign, or
subcontract any right or obligation hereunder without the prior written consent
of IBM. Any act in derogation of the foregoing shall be null and void. In no
event may You use the services of an IBM dealer or an IBM remarketer for the
performance of any obligation hereunder.
11.5 LIMITATIONS Except for claims arising under the Sections entitled
7.0, "WARRANTY" and 8.0, "INDEMNIFICATION," neither party shall be entitled to
indirect, incidental or consequential damages, including lost profits, based on
any breach or default under this Agreement.
11.6 NATURE OF THE RELATIONSHIP IBM is acting under this Agreement solely
as Your marketing representative. Nothing herein shall be deemed to create any
other relationship, including that of partnership. Neither You nor any employee
or Yours shall be considered an employee or agent of IBM for any purpose.
11.7 NOTICE Any notice required or permitted under this Agreement shall be
sent to:
In the case of IBM:
IBM Corporation
Vendor Marketing Programs
Department BAR (WG09A)
3200 Windy Hill Road
Atlanta, GA 30339
In the case of You:
Simione Central Holding, Inc.
6600 Powers Ferry Road
Atlanta, GA 30339
11.8 PAYMENT
11.8.1 Any payment to IBM under this Agreement shall be sent to:
IBM Corporation
Vendor Marketing Programs Control Desk
Department BAR (WG09A)
3200 Windy Hill Road
Atlanta, GA 30339
11.9 GOVERNING LAW The validity, construction, and performance of this
Agreement will be governed by the substantive law of the State of New York.
11.10 AMENDMENTS IN WRITING No amendment, modification or waiver of any
provision of this Agreement shall be effective unless it is set forth in a
writing which refers to the provisions so affected and is executed by an
authorized representative of both parties. No failure or delay by IBM in
exercising any right, power or remedy will operate as a waiver of any such
right, power, or remedy.
11.11 ENTIRE AGREEMENT The provisions of this Agreement constitute the
entire agreement between the parties and supersede all prior agreements, oral or
written, relating to the subject matter of this Agreement.
<PAGE> 9
Any payments due IBM under this Agreement shall be separate from, and in
addition to, any due IBM under any other agreement between the parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective Authorized Representatives.
International Business Machines
Corporation
ACCEPTED AND AGREED TO:
By:
----------------------------------
JOHN G. SCHWARZ
----------------------------------
Print Name
VP, Solution Developers
Marketing
----------------------------------
Title
----------------------------------
Date
Simione Central Holding, Inc.
ACCEPTED AND AGREED TO:
By: /s/ JAMES R. HENDERSON
----------------------------------
James R. Henderson
----------------------------------
Print Name
President
----------------------------------
Title
11-17-96
----------------------------------
Date
<PAGE> 1
Exhibit 11.1 - Statement re: computation of per-share earnings
<TABLE>
<CAPTION>
12/31/94 12/31/95 12/31/96
-------- -------- --------
Primary
<S> <C> <C> <C>
Weighted average shares outstanding 5,989,712(1) 5,989,712(1) 8,575,912 (1)
Net effect of dilutive stock options
based on the treasury stock method
using average market price - - -
--------- --------- ----------
Total 5,989,712 5,989,712 8,575,912
========= ========= ==========
Net loss (707,614) (956,125) (15,898,897)
Net loss per share (.12) (.16) (1.85)
========= ========= ==========
Fully diluted
Weighted average shares outstanding 5,989,712(1) 5,989,712(1) 8,575,912 (1)
Net effect of dilutive stock options-
based on the treasury stock method
using the higher of ending or average market price - - -
--------- --------- ----------
Total 5,989,712 5,989,712 8,575,912
========= ========= ==========
Net loss (707,614) (956,125) (15,898,897)
======== ========= ==========
Net loss per share (.12) (.16) (1.85)
======== ========= ==========
</TABLE>
- -------------
(1) Prior to January 16, 1996 the Company was a subsidiary of Central Health
Holding Company, Inc. and had only 22 shares of common stock issued and
outstanding. The 5,989,712 shares issued in the reorganization of the
Company on January 16, 1996 have been treated as outstanding for all
periods presented.
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
1. Simione Central, Inc., a Georgia corporation authorized to do business
in Connecticut, Massachusetts and Texas
2. Simione Central Consulting, Inc., a Georgia corporation authorized to
do business in Connecticut and Massachusetts
3. Simione Central National, Inc., a Georgia corporation authorized to do
business in Texas and Connecticut
4. SC Holding, Inc., a Georgia corporation
5. InfoMed, Inc., a New Jersey corporation
6. Script Systems, Inc., a New Jersey corporation (Inactive)
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 33-97772) pertaining to the 1994 Incentive Stock Option and
Non-Qualified Stock Option Plan of InfoMed Holdings, Inc. of our report dated
March 21, 1997, except for Note 16 as to which the date is March 26, 1997, with
respect to the financial statements of Simione Central Holdings, Inc. included
in the Annual Report (Form 10-K) for the year ended December 31, 1996.
/s/ ERNST & YOUNG LLP
--------------------------------------
ERNST & YOUNG LLP
Atlanta, Georgia
March 28, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 3,384,728
<SECURITIES> 0
<RECEIVABLES> 6,714,429
<ALLOWANCES> 1,063,014
<INVENTORY> 0
<CURRENT-ASSETS> 9,906,872
<PP&E> 2,245,546
<DEPRECIATION> 377,550
<TOTAL-ASSETS> 18,775,679
<CURRENT-LIABILITIES> 11,109,714
<BONDS> 0
0
0
<COMMON> 11,904
<OTHER-SE> 4,667,794
<TOTAL-LIABILITY-AND-EQUITY> 18,775,679
<SALES> 25,994,641
<TOTAL-REVENUES> 25,994,641
<CGS> 0
<TOTAL-COSTS> 14,698,177
<OTHER-EXPENSES> 27,287,446
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 114,817
<INCOME-PRETAX> (15,898,897)
<INCOME-TAX> 0
<INCOME-CONTINUING> (15,898,897)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15,898,897)
<EPS-PRIMARY> (1.85)
<EPS-DILUTED> (1.85)
</TABLE>
