Termination Agreement - UICI and HealthAxis Inc.
EXECUTION COPY
TERMINATION AGREEMENT
This Agreement, dated as of June 11, 2002, is by and between UICI, a
Delaware corporation ("UICI"), and Healthaxis, Inc., a Pennsylvania corporation
("Healthaxis").
WHEREAS, UICI directly and indirectly through Affiliates beneficially
holds approximately 45.98% of the issued and outstanding shares of common stock
of Healthaxis;
WHEREAS, UICI and Healthaxis, Ltd. (a Texas limited partnership and
subsidiary of Healthaxis Inc.) are parties to an Information Technology Services
Agreement, dated as of January 3, 2000, as amended, pursuant to which
Healthaxis, Ltd. provides information systems and software development services
(including administration of UICI's computer data center) to UICI and its
insurance company affiliates; and
WHEREAS, Healthaxis has solicited the assistance of UICI and requested
certain accommodations from UICI, all as more particularly hereinafter set
forth.
NOW THEREFORE, for and in consideration of the mutual covenants herein
contained, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. Definitions. As used in this Agreement, the following capitalized
terms shall have the respective meanings hereafter set forth:
"Affiliate" of any Person shall mean and include any Person who
controls, is controlled by or is under common control with such Person.
"AST Employees" shall mean any employee of Healthaxis who is
currently or who has ever been dedicated to providing applications system
technology services to UICI and Affiliates of UICI (including without
limitation UICI's Insurance Center, Student Insurance Division and UICI
Marketing subsidiary) under the terms of the Services Agreement.
"Designated AST Employee" shall mean specifically designated
current AST Employees identified by UICI on Schedule 4.1 hereof.
"Employee Accrual Amount" shall mean $50,000, representing an
agreed upon portion of the cash paid to Healthaxis by UICI associated with
employee bonus, vacation and sick time accruals in connection with the
transfer of employees to Healthaxis from UICI in 1997.
"Employee Adjustment Amount" shall mean the dollar amount
designated in Schedule 2.1.4 hereof.
"Healthaxis" shall mean Healthaxis Inc. and, as the context may
require, the subsidiaries of Healthaxis Inc.
"Non-Retained AST Employees" shall mean, collectively, (a) any
Designated AST Employee who does not accept UICI's offer of employment and
(b) any Terminated AST Employees.
"Person" shall mean an individual, a corporation, partnership,
limited liability company, trust, unincorporated association or any other
legal entity.
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"Retained AST Employees" shall mean those Designated AST Employees
who accept UICI's offer of employment to be made pursuant to Section 4.2
hereof.
"Services Agreement" shall mean the Information Technology
Services Agreement, dated as of January 3, 2000, and as heretofore amended,
between UICI and Healthaxis.
"Terminated AST Employees" shall mean any current AST Employee who
is not a Designated AST Employee.
"Unaffiliated Shareholders" shall mean all holders of Healthaxis
Common Stock other than (a) UICI, (b) Affiliates of UICI, (c) officers of
Healthaxis, and (d) directors of Healthaxis.
2. Transactions on Effective Date.
2.1. On June 15, 2002, or such later date as the parties
hereto may mutually agree (the "Effective Date"), the parties hereto
agree, subject to satisfaction of the conditions set forth in Section 3
hereof, to complete the following transactions:
2.1.1. UICI shall remit and pay to Healthaxis cash in
the amount of $6,500,000 less the Employee Accrual Amount, by
wire transfer of immediately available funds to an account
designated by Healthaxis.
2.1.2. UICI shall transfer, or cause to be
transferred, to Healthaxis 500,000 shares of Healthaxis Common
Stock (the "Shares"), and UICI shall deliver or cause to be
delivered to Healthaxis certificates evidencing the Shares
duly endorsed in blank or with stock powers duly executed by
UICI, free and clear of any and all covenants, conditions,
restrictions, voting trust arrangements, liens, charges,
encumbrances, options and adverse claims or rights whatsoever.
2.1.3. The Services Agreement (including licenses to
use the UICI Owned Software and UICI Owned Materials and
rights to access and use Third Party Software and related UICI
Third Party Contracts, in each case as such capitalized terms
are defined in the Services Agreement) shall terminate and be
of no further force or effect.
2.1.4. UICI shall pay to Healthaxis (a) all amounts
accrued to the Effective Date for services rendered to the
Effective Date under the terms of the Services Agreement,
which amount shall be subject to adjustment as provided in
Section 2.2.1 below, less (b) the Employee Adjustment Amount
as designated in SCHEDULE 2.1.4 hereof.
2.1.5. Healthaxis shall assign to UICI all of its
right, title and interest in and to, and UICI shall agree to
assume liability under, the third party consulting
arrangements designated on Schedule 2.1.5 hereto (the "Assumed
Third Party Agreements").
2.2. In addition to the foregoing, the parties hereto agree to
complete the following transactions subsequent to the Effective Date:
2.2.1. The payment to be made by UICI pursuant to
Section 2.1.4 above, as well as any other payments for
services rendered under the Services Agreement subsequent to
March 31, 2002, shall be subject to the "look back adjustment"
in accordance with the arrangement previously adopted by UICI
and Healthaxis under the
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Services Agreement. Notwithstanding the foregoing, in no event
shall any payments for services rendered under the Services
Agreement prior to March 31, 2002, be subject to further "look
back adjustment" or any other adjustment, and it is hereby
agreed that all such payments for services prior to March 31,
2002 are final and are not subject to any further review or
adjustment whatsoever. Any final "look back adjustment" will
be resolved and paid within 15 days following the date that
UICI is in receipt from Healthaxis of all information
necessary to compute such look back adjustment in accordance
with the procedures and practice previously adopted by
Healthaxis and UICI (the "Final Settlement Date").
2.2.2. On the Final Settlement Date, UICI shall pay
to Healthaxis any undisputed outstanding receivables under the
Services Agreement for periods prior to March 31, 2002. All
disputed amounts (if any) shall be resolved, and the final
agreed amount paid on, the Final Settlement Date.
3. Representations and Warranties.
3.1. Representations and Warranties of Healthaxis. Healthaxis
represents and warrants to UICI as follows:
3.1.1. Healthaxis is a corporation duly organized,
validly existing and in good standing under the laws of the
State of Pennsylvania, and has full power and authority to
own, lease and operate its properties and assets and to
conduct its business as presently conducted, and to enter into
this Agreement and to carry out the transactions contemplated
by this Agreement.
3.1.2. The execution, delivery and performance by
Healthaxis of this Agreement have been duly authorized by all
necessary corporate action, and this Agreement has been duly
executed and delivered by Healthaxis. This Agreement
constitutes the valid and binding obligation of Healthaxis,
legally enforceable in accordance with its terms.
3.1.3. The execution of and performance by Healthaxis
of its obligations under this Agreement will not violate any
provision of law or governmental rule or regulation, and will
not conflict with or result in any breach of any of the terms,
conditions or provisions of, or constitute a default under (i)
Healthaxis' Certificate of Incorporation, (ii) Healthaxis'
by-laws as currently in effect, (iii) any judgment, decree or
order to which Healthaxis is bound or (iv) any agreement,
contract, lease, indenture or other instrument to which
Healthaxis is bound.
3.1.4. Healthaxis's authorized capital stock consists
of (a) preferred stock, $1 par value per share, of which
100,000,000 shares have been authorized and no shares are
issued and outstanding; and (b) Common Stock, $0.10 par value
per share, of which at April 30, 2002 (i) 1,900,000,000 shares
have been authorized and (ii) 53,711,070 shares are issued and
outstanding. All issued and outstanding shares of Healthaxis
Common Stock have been, and on the Effective Date will be,
duly and validly issued and are, or will be on such date,
fully paid and non-assessable.
3.2. Representations and Warranties of UICI. UICI represents
and warrants to Healthaxis as follows:
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3.2.1. UICI is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware, and has full power and authority to own, lease and
operate its properties and assets and to conduct its business
as presently conducted, and to enter into this Agreement and
to carry out the transactions contemplated by this Agreement.
3.2.2. The execution, delivery and performance by
UICI of this Agreement have been duly authorized by all
necessary corporate action, and this Agreement has been duly
executed and delivered by UICI. This Agreement constitutes the
valid and binding obligation of UICI, legally enforceable
against UICI in accordance with its terms.
3.2.3. The execution of and performance by UICI of
its obligations under this Agreement will not violate any
provision of law or governmental rule or regulation, and will
not conflict with or result in any breach of any of the terms,
conditions or provisions of, or constitute a default under (i)
UICI's Certificate of Incorporation, (ii) UICI's by-laws as
currently in effect, (iii) any judgment, decree or order to
which UICI is bound or (iv) any agreement, contract, lease,
indenture or other instrument to which UICI is bound.
3.2.4. UICI will have on the Effective Date, good and
marketable title to the Shares, free and clear of any and all
covenants, conditions, restrictions, voting trust
arrangements, liens, charges, encumbrances, options and
adverse claims or rights whatsoever.
3.2.5. As of the date hereof, UICI holds, directly or
through Affiliates, the following securities issued by
Healthaxis:
(a) 20,598,443 shares of Common Stock
registered in the name of UICI;
(b) 3,557,179 shares of Common Stock
registered in the name of The MEGA Life and Health
Insurance Company (a wholly owned subsidiary of
UICI);
(c) $1,666,666 stated principal amount of
Debentures, convertible into 185,185 shares of Common
Stock (equivalent to $9.00 per share of Common
Stock);
(d) warrants registered in the name of UICI
entitling the holder thereof to purchase 12,291
shares of Common Stock at an exercise price of $3.01
per share;
(e) warrants registered in the name of UICI
entitling the holder thereof to purchase 200,100
shares of Common Stock at an exercise price of $4.40
per share; and
(f) warrants registered in the name of UICI
entitling the holder thereof to purchase 10,005
shares of Common Stock at an exercise price of $12.00
per share.
4. AST Employment Matters.
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4.1. Set forth on Schedule 4.1 hereto is a list of Designated
AST Employees. The parties may make mutually agreeable adjustments to
Schedule 4.1 on or prior to the Effective Date, provided that on the
Effective Date the number of Designated AST Employees shall constitute
not less than 92% of all Healthaxis employees working full time at UICI
or its Affiliates on a dedicated basis under the Services Agreement.
Within three days following execution of this Agreement by all parties,
Healthaxis shall deliver to UICI a schedule setting forth, for each
Designated AST Employee, such Designated AST Employee's (a) annual
salary, (b) accrued and unused vacation time and sick leave to June 15,
2002, (c) accrued bonus, if any, to June 15, 2002, (d) social security
number, (e) position and (f) such other employee-specific information
as UICI shall reasonably request.
4.2. With respect to Retained AST Employees constituting
Healthaxis salaried employees, Healthaxis will pay such employees on
the Effective Date (a regular Healthaxis payroll date) for services
rendered through the Effective Date. With respect to Retained AST
Employees constituting Healthaxis hourly employees, Healthaxis will pay
such employees on June 22, 2002 for services rendered through the
Effective Date.
4.3. Prior to the Effective Date, UICI or an Affiliate of UICI
shall make an offer of employment to each Designated AST Employee,
which offer of employment shall be effective commencing on a date on or
after the Effective Date, shall be at a compensation level equal to
such Designated AST Employee's current compensation level and shall
otherwise be on terms that UICI in its sole discretion shall determine
except as otherwise herein set forth. Healthaxis acknowledges, agrees
and understands that there can be no assurance that Designated AST
Employees will accept UICI's offer of employment herein described.
4.4. With respect to Retained AST Employees, UICI agrees as
follows:
4.4.1. Retained AST Employees shall be entitled to
participate in all UICI health and welfare benefit plans in
which current UICI employees are entitled to participate,
including health, dental and disability insurance programs and
participation in UICI's Employee Stock Ownership and Savings
Plan (the "UICI Plan").
4.4.2. For seniority-based rights under UICI's health
and welfare benefit plans, including vacation time and sick
leave (for eligibility and vesting purposes only), credit
shall be given to each Retained AST Employee for such
employee's term of service with Healthaxis to the same extent
that Healthaxis has given credit to such Retained AST
Employee's term of service with Healthaxis.
4.4.3. With respect to insurance under UICI's
benefits, pre-existing condition limitations and waiting
periods shall be waived for Retained AST Employees and
Retained AST Employees shall be given credit for deductibles
and co-payments previously met under Healthaxis' policies.
4.4.4. Each Retained AST Employee shall receive
credit for the employee's term of service with Healthaxis for
purposes of participation and vesting in the UICI Plan. Each
Retained AST Employee who meets the eligibility requirements
under the UICI Plan based on his/her combined years of service
with Healthaxis and UICI will be eligible to enroll in the
UICI Plan as of the next enrollment date effective July 1,
2002. Upon commencement of employment with UICI, each Retained
AST Employee who has a vested account balance in the
Healthaxis defined contribution and/or 401(k) plan will also
have the option to roll over his/her vested account balance to
the UICI Plan.
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4.4.5. Each Retained AST Employee shall receive
credit for accrued and unused vacation time and sick leave and
accrued and unpaid bonuses, and UICI agrees to assume
liability therefor (such liabilities referred to herein as
"Assumed Employee Liabilities.")
4.5. With respect to Terminated AST Employees, Healthaxis
agrees as follows:
4.5.1. Healthaxis will hold a meeting with all
Terminated AST Employees on Thursday, June 13, at 4:00 pm at a
mutually agreed upon location (the "Healthaxis Employee
Meeting") to communicate to such employees that their
employment at Healthaxis will be terminated and that UICI does
not intend to offer them employment. At the Healthaxis
Employee Meeting, Healthaxis will direct all Terminated AST
Employees not to return to UICI facilities, it being agreed
and understood that following the Healthaxis Employee Meeting
no Terminated AST Employee will be authorized or permitted by
UICI to enter any UICI facility.
4.6. UICI and Healthaxis will cooperate in assisting each
other in all employee transition issues.
5. Closing Conditions.
5.1. UICI's Closing Conditions. UICI's obligation to complete
the transactions set forth in this Agreement shall be subject to
satisfaction, on or prior to the Effective Date, of each of the
following conditions
5.1.1. The representations and warranties of
Healthaxis shall be true and correct in all respects on and as
of the Effective Date. Healthaxis shall have performed and
complied with all terms, conditions, covenants, obligations,
agreements and restrictions required by this Agreement to be
performed or complied with by it prior to or at the Effective
Date.
5.1.2. All governmental agencies, department,
bureaus, commissions and similar bodies, including any
insurance regulatory approvals, the consent, authorization or
approval of which is necessary or material under any
applicable law, rule, order or regulation for the consummation
by UICI shall have consented to, authorized, permitted or
approved such transactions.
5.1.3. Healthaxis shall have received all requisite
consents and approvals of all lenders, lessors and other third
parties whose consent or approval is required in order for
Healthaxis to consummate the transactions contemplated by this
Agreement.
5.1.4. No action or proceeding by or before any court
or other governmental body shall have been instituted or
threatened by any governmental body or person whatsoever which
shall seek to restrain, prohibit or invalidate the
transactions contemplated by this Agreement.
5.1.5. Each of the Board of Directors of Healthaxis
and the Related Party Transactions Committee of the Board of
Directors of Healthaxis (consisting of Henry G. Hager, Dennis
B. Maloney and Kevin R. Brown) shall have unanimously approved
and endorsed the transactions contemplated hereby in all
respects and shall have determined that the transactions
contemplated by this Agreement shall be fair in all respects
to the
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Unaffiliated Shareholders of Healthaxis. At the Effective
Date, the Chairman of the Board of Healthaxis and the Chairman
of the Related Party Transactions Committee shall jointly
deliver to UICI a letter executed by each confirming that (a)
the transactions contemplated by this Agreement were initiated
by Healthaxis and were not in any way the result of any
action, writing or request by UICI or any designee of UICI,
(b) each of the Board of Directors of Healthaxis and the
Related Party Transactions Committee of the Board of Directors
of Healthaxis have unanimously approved and endorsed the
transactions contemplated hereby in all respects and (c) the
Related Party Transactions Committee has determined that the
transactions contemplated by this Agreement are fair in all
respects to the Unaffiliated Shareholders of Healthaxis.
5.1.6. The Healthaxis Founders Stock Option Plan
shall have been amended to extend the period during which
certain vested options granted and outstanding thereunder may
be exercised until June 30, 2003.
5.1.7. At the Effective Date, Healthaxis shall have
delivered to UICI a certificate signed by the President and
Chief Financial Officer of Healthaxis, certifying that the
conditions set forth in this Section 5.1 have been satisfied.
5.2. Healthaxis's Closing Conditions. Healthaxis's obligation
to complete the transactions set forth in this Agreement shall be
subject to satisfaction, on or prior to the Effective Date, of each of
the following conditions:
5.2.1. The representations and warranties of UICI
shall be true and correct in all respects on and as of the
Effective Date. UICI shall have performed and complied with
all terms, conditions, covenants, obligations, agreements and
restrictions required by this Agreement to be performed or
complied with by it prior to or at the Effective Date.
5.2.2. All governmental agencies, department,
bureaus, commissions and similar bodies, including any
insurance regulatory approvals, the consent, authorization or
approval of which is necessary or material under any
applicable law, rule, order or regulation for the consummation
by UICI of the transactions contemplated by this Agreement
shall have consented to, authorized, permitted or approved
such transactions.
5.2.3. UICI shall have received all requisite
consents and approvals of all lenders, lessors and other third
parties whose consent or approval is required in order for
UICI to consummate the transactions contemplated by this
Agreement.
5.2.4. No action or proceeding by or before any court
or other governmental body shall have been instituted or
threatened by any governmental body or person whatsoever which
shall seek to restrain, prohibit or invalidate the
transactions contemplated by this Agreement.
5.2.5. At the Effective Date, UICI shall have
delivered to Healthaxis a certificate signed by the President
or any Executive Vice President of UICI, certifying that the
conditions set forth in this Section 5.2 have been satisfied.
6. Mutual Release. Each of UICI and Healthaxis, on behalf of itself and
each of its present and former parents, subsidiaries, affiliates, officers,
employees, directors, shareholders, agents, attorneys, successors, and assigns,
hereby fully releases, acquits, forever discharges, and covenants not to sue the
other party from any and all claims, liens, demands, suits, causes of action and
damages, of whatever
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source or nature, whether in law or equity, known or unknown, including but not
limited to attorneys' fees and costs, of any nature whatsoever, existing on, or
at any time prior to, the date hereof in law, in equity or otherwise, which UICI
or Healthaxis, its successors, or assigns had or have against the other party
upon or by reason of any fact, matter, cause, or thing whatsoever.
7. Transition Matters.
7.1. Healthaxis and Ingenix, Inc. are parties to a master
license agreement (the "Old Ingenix License"), pursuant to which
certain UICI Affiliates utilize Ingenix, Inc. software. The Old Ingenix
License has a term ending on December 31, 2003, and UICI has paid to
Healthaxis, and Healthaxis acknowledges receipt of, the amount of
$93,790 for use of such software for the year ending December 31, 2002.
Healthaxis acknowledges and understands that UICI is negotiating the
terms of a separate license agreement with Ingenix, Inc. (the "New
Ingenix License") to be effective on or about the Effective Date,
pursuant to which UICI and its Affiliates will separately license from
Ingenix, Inc. the software that is the subject of the Old Ingenix
License. If and only if (a) UICI and Ingenix Inc. execute and deliver
the New Ingenix License and (b) Healthaxis shall not have on or before
December 31, 2002 negotiated a new license agreement with Ingenix, Inc.
for use of the software for the year ending December 31, 2003, then in
such event on January 1, 2003, UICI shall pay to Healthaxis the sum of
$98,360, representing the amount that UICI shall have otherwise been
obligated to pay to Healthaxis for use of the software under the terms
of the Old Ingenix License for 2003. UICI expressly acknowledges that
(i) Healthaxis is not obligated to negotiate a new license agreement
with Ingenix, and (ii) if UICI and Ingenix Inc. execute and deliver the
New Ingenix License, then in such event UICI will no longer be
authorized to use the Ingenix products under the Old Ingenix License
following the Effective Date; provided however, that if UICI and
Ingenix Inc. do not execute and deliver the New Ingenix License, then
in such event UICI will be authorized to use the Ingenix products under
the Old Ingenix License following the Effective Date only to the extent
permitted therein, in which event UICI and Healthaxis will cooperate to
ensure that they maximize the ability of UICI to continue to benefit
from the Old Ingenix Agreement.
7.2. Notwithstanding the termination of the Services Agreement
as herein provided, Healthaxis will provide to UICI the
termination/expiration assistance requested by UICI to allow the
Services (as such term is defined in the Services Agreement) to
continue without interruption or any material adverse effect to UICI,
and to facilitate the orderly transfer of the Services to UICI and/or
its Affiliates and designees. Without limiting the generality of the
foregoing:
7.2.1. Healthaxis will in an expeditious and timely
manner transfer the control and responsibility for all
information technology functions and Services, including
delivery of all documentation (including without limitation
all source and object code for the Healthaxis Time Reporting
System used by UICI or its Affiliates, such source and object
code to be provided on an "as is" basis, based upon the
version in use at Healthaxis, UICI acknowledging that any
version in use at the Insurance Center or otherwise within
UICI has been under the control of UICI through AST Employees
operating under the direction of UICI, and that Healthaxis has
no information beyond that currently in possession of AST
Employees), software support and data management functions,
previously performed by or for Healthaxis to UICI and/or
UICI's designees by the execution of any documents reasonably
necessary to effect such transfers.
7.2.2. Healthaxis shall provide any and all
reasonable assistance requested by UICI to permit the systems
associated with the Services to operate efficiently, the
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Services to continue without interruption or material adverse
effect; and the orderly transfer of the Services to UICI
and/or its designee(s).
7.2.3. On the Effective Date, Healthaxis will
transfer to UICI all documents, computer files, workplans,
etc. ("Documentation") that it has prepared and are in its
possession in connection with Services (as such term is
defined in the Services Agreement) provided by Healthaxis to
UICI under the terms of the Services Agreement.
7.3. Notwithstanding the foregoing provisions of this Section
7, it is acknowledged that the substantial portion of
termination/expiration assistance services to be provided hereunder
following the Effective Date will be provided by Retained AST Employees
who will no longer be under the control or direction of Healthaxis
following the Effective Date. In addition, it is acknowledged that the
substantial portion of Documentation has been under the control of
Retained AST Employees.
7.4. UICI and Healthaxis acknowledge that a joint project is
currently underway and commonly referred to as the "Disconnect
Project", and that the various remaining tasks have been mutually
identified and defined, and responsibilities assigned as between UICI
(through Retained AST Employees or other direct employees of UICI) and
Healthaxis (through Non-Retained AST Employees or other Healthaxis
employees). Completion of the portion of the Disconnect Project
assigned to Healthaxis as currently scoped will constitute substantial
discharge of Healthaxis's obligations under this Section 7.
7.5. UICI shall retain responsibility for separation of American
Administrative Group, Inc. ("AAG") from the UICI networks under
separate agreements between UICI and AAG.
7.6. UICI acknowledges that the license for the Support Magic
helpdesk software is in the name of Healthaxis and that UICI may be
required to obtain its own license to such software upon completion of
the transactions contemplated hereby to the extent such software is
utilized by UICI.
7.7. Healthaxis currently occupies space within UICI's Insurance
Center data processing facility located at 9151 Grapevine Highway,
North Richland Hills, Texas (the "NRH Premises"), pursuant to an oral
agreement between UICI and Healthaxis. On the Effective Date, UICI and
Healthaxis will execute and deliver a transition agreement addressing,
among other things, the continued use and occupation of the facilities
for a period ending December 31, 2002 (the "Transition Period") and
other transition issues. UICI will agree pursuant to the transition
agreement to waive and discharge Healthaxis from liability for payment
of monthly rent on the NRH Premises for a period ending December 31,
2002; provided, however, that on and after December 31, 2002 and
termination of Healthaxis's right to use and occupy the NRH Premises,
monthly holdover rent will commence at the rate of $50,000 per month.
Except as provided in Section 9.2 hereof, UICI shall bear no
responsibility for the Healthaxis employees situated within the NRH
Premises or for the data processing equipment that Healthaxis continues
to maintain at the NRH Premises. Healthaxis shall be responsible for
any and all losses and damages to its employees and equipment at the
NRH Premises, including all losses and damages arising from the actions
of third parties and acts of God. UICI has agreed to provide to
Healthaxis the NRH Premises on a rent-free basis to December 31, 2002
as an accommodation and on an "as-is, where-is" basis with no
obligations to UICI as a landlord in any respect.
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8. Non-Solicitation. For a period of six months following the Effective
Date, Healthaxis will not solicit for employment directly, nor employ, any
current employee of UICI without the prior written consent of UICI. Except as is
otherwise specifically contemplated hereby, for a period of six months following
the Effective Date, UICI will not solicit for employment directly, nor employ,
any current employee of Healthaxis (other than Designated AST Employees) without
the prior written consent of Healthaxis.
9. Indemnification.
9.1. Indemnification by Healthaxis. Healthaxis agrees to
indemnify and hold harmless UICI and its directors, officers,
successors, agents, employees, partners, representatives, heirs,
assigns, affiliates and subsidiaries harmless from and against any and
all losses, damages (excluding punitive, consequential and
extra-contractual damages), liabilities, regulatory fines, penalties,
costs and expenses (including, without limitation, attorneys' fees,
investigation costs and all other reasonable costs associated with the
defense thereof) (collectively, "Losses"), as incurred, arising out of
or relating to (a) breach of any of the covenants or agreements to be
performed by Healthaxis hereunder; (b) breaches of any representation
or warranty made by Healthaxis hereunder; (c) severance and other
employee termination costs and claims associated with Non-Retained AST
Employees; (d) claims of any AST Employees accruing in connection with
activities on or prior to the Effective Date; (e) activities of any
Healthaxis employee and/or losses to personal property situated at the
NRH Premises; (f) any third party claims with respect to any Assumed
Third Party Agreement arising out of activities on or prior to the
Effective Date; (g) any third party claims arising out of the Old
Ingenix Agreement; and (h) any claims made by or on behalf of any
shareholder or group of shareholders of Healthaxis (including
derivative claims), by any director of Healthaxis or any other third
party or parties challenging the fairness to Healthaxis of the
transactions contemplated by this Agreement.
9.2. Indemnification by UICI. UICI agrees to indemnify and
hold harmless Healthaxis and its directors, officers, successors,
agents, employees, partners, representatives, heirs, assigns,
affiliates and subsidiaries harmless from and against any and all
Losses, as incurred, arising out of or relating to (a) breach of any of
the covenants or agreements to be performed by UICI hereunder; (b)
breaches of any representation or warranty made by UICI hereunder; (c)
actions taken by UICI after the Effective Date associated with Retained
AST Employees; (d) any third party claims under or with respect to any
Assumed Third Party Agreement arising out of activities after the
Effective Date; (e) the gross negligence or willful misconduct of UICI
in connection with the separation of American Administrative Group,
Inc. from the UICI networks under separate agreements between UICI and
AAG; (f) the gross negligence or willful misconduct of UICI resulting
in an unreasonable disruption of the use of the NRH Premises by
Healthaxis during the Transition Period; and (g) Assumed Employee
Liabilities.
9.3. Conduct of Indemnification Proceedings.
9.3.1. If any proceeding shall be brought or asserted
against any person entitled to indemnification hereunder (an
"Indemnified Party"), such Indemnified Party promptly shall
notify the person from whom indemnity is sought (the
"Indemnifying Party") in writing, and the Indemnifying Party
shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and
the payment of all fees and expenses incurred in connection
with defense thereof; provided, however, that the failure of
any Indemnified Party to give such notice shall not relieve
the Indemnifying Party of its obligations or liabilities
pursuant to this Agreement, except
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(and only) to the extent that it shall be finally determined
by a court of competent jurisdiction (which determination is
not subject to appeal or further review) that such failure
shall have proximately and materially adversely prejudiced the
Indemnifying Party.
9.3.2. An Indemnified Party shall have the right to
employ separate counsel in any such proceeding and to
participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified
Party or Parties unless: (1) the Indemnifying Party has agreed
in writing to pay such fees and expenses; or (2) the
Indemnifying Party shall have failed promptly to assume the
defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding;
or (3) the named parties to any such proceeding (including any
impleaded parties) include both such Indemnified Party and the
Indemnifying Party, and such Indemnified Party shall have been
advised by counsel that a conflict of interest is likely to
exist if the same counsel were to represent such Indemnified
Party and the Indemnifying Party (in which case, if such
Indemnified Party notifies the Indemnifying Party in writing
that it elects to employ separate counsel at the expense of
the Indemnifying Party, the Indemnifying Party shall not have
the right to assume the defense thereof and such counsel shall
be at the reasonable expense of the Indemnifying Party). The
Indemnifying Party shall not be liable for any settlement of
any such proceeding effected without its written consent,
which consent shall not be unreasonably withheld. No
Indemnifying Party shall, without the prior written consent of
the Indemnified Party, effect any settlement of any pending
proceeding in respect of which any Indemnified Party is a
party, unless such settlement includes an unconditional
release of such Indemnified Party from all liability on claims
that are the subject matter of such proceeding.
9.3.3. All fees and expenses of the Indemnified Party
(including reasonable fees and expenses to the extent incurred
in connection with investigating or preparing to defend such
proceeding in a manner not inconsistent with this Section)
shall be paid to the Indemnified Party, as incurred, within
ten (10) business days of a detailed written notice thereof to
the Indemnifying Party (regardless of whether it is ultimately
determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the Indemnifying
Party may require such Indemnified Party to undertake to
reimburse all such fees and expenses to the extent it is
finally judicially determined that such Indemnified Party is
not entitled to indemnification hereunder).
10. Confidentiality. Each of the parties hereto agrees that the terms
of this Agreement, the negotiations leading to this Agreement, and this
Agreement shall be treated as strictly confidential, and that no such party
shall disclose, disseminate, or publicize, or cause or permit to be disclosed,
disseminated, or publicized the terms of this Agreement, the negotiations
leading to this Agreement or the Agreement to any Person, other than (a) orally
and confidentially to affected AST Employees; (b) confidentially to such party's
legal counsel and tax advisors under such circumstances where such persons have
a need to know, (c) to the extent necessary to report income to appropriate
taxing authorities; (d) to the extent required under applicable state and
federal securities laws; and (e) in response to an order or subpoena of a court
or governmental agency of competent jurisdiction, provided in such case that
notice of receipt of any such order or subpoena shall be immediately
communicated to the other parties hereto so that they may have an opportunity to
intervene and assert their rights with respect to non-disclosure prior to such
party's response to such order or subpoena.
11. Other Agreements. Except with respect to the termination of the
Services Agreement as contemplated hereby, the rent free use of the NRH Premises
during the Transition Period and otherwise
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solely to the extent as specifically modified or amended hereby, Healthaxis and
UICI confirm and acknowledge that each other agreement between the parties
hereto shall remain unmodified and in full force and effect.
12. Transfer of Healthaxis Common Stock. During the one year period
ending June 15, 2003, UICI agrees that it will not, and will not permit any of
its Affiliates to, sell, transfer or otherwise dispose of any shares of
Healthaxis common stock, $0.10 par value per share, except (a) in privately
negotiated sales or (b) in market transactions in minimum blocks of 25,000
shares.
13. General Matters.
13.1. Any notice, request, instruction or other document to be
given hereunder shall be in writing and: (a) delivered personally; (b)
sent by registered or certified United States mail, postage prepaid,
return receipt requested; (c) sent by Federal Express or other
similarly reputable overnight courier; or (d) transmitted by facsimile,
according to the instructions set forth below. Such notices shall be
sent to the following addresses and/or facsimile numbers and shall be
deemed given: (w) if delivered personally, at the time delivered; (x)
if sent by registered or certified United States mail, at the time
deposited in the United States mail; (y) if sent by Federal Express or
other similarly reputable overnight courier, at the time sent, or (z)
if transmitted by facsimile, at the time when receipt is confirmed by
the sending facsimile machine.
If to UICI, to:
UICI
4001 McEwen Drive
Suite 200
Dallas, TX 75244
Attention: Mr. Gregory T. Mutz
With a copy to:
Mr. Glenn W. Reed
Executive Vice President and General Counsel
If to Healthaxis, to:
Healthaxis, Inc.
5215 North O'Connor Blvd.
800 Central Tower
Irving, TX 75039
Attention: Mr. James W. McLane
With a copy to:
Mr. John Carradine
Chief Financial Officer
or to such other address as such party may indicate by a notice
delivered to the other parties hereto in accordance with the provisions
of this Section 13.1.
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13.2. This Agreement contains the entire understanding of the
parties hereto with regard to the subject matter contained herein or
therein, and supersedes all prior written or oral agreements,
understandings or letters of intent between or among any of the parties
hereto. This Agreement shall not be amended, modified or supplemented
except by a written instrument signed by an authorized representative
of each of the parties hereto.
13.3. The rights of each party under this Agreement shall not
be assignable without the written consent of each of the other parties.
13.4. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their successors and permitted
assigns. Nothing in this Agreement, expressed or implied, is intended
or shall be construed to confer upon any Person other than the parties
and successors and assigns permitted by this Section 13.4 any right,
remedy or claim under or by reason of this Agreement.
13.5. Headings to sections herein are inserted for convenience
of reference only and are not intended to be part of or to affect the
meaning or interpretation of this Agreement.
13.6. This Agreement has been mutually prepared, negotiated
and drafted by each of the parties hereto and thereto. The parties
agree that the terms of this Agreement shall be construed and
interpreted against each party in the same manner and that no such
provisions shall be construed or interpreted more strictly against one
party on the assumption that an instrument is to be construed more
strictly against the party which drafted the agreement. Any term or
provision of this Agreement may be waived, or the time for its
performance may be extended, pursuant to a written action by the party
or parties entitled to the benefit thereof. Any such waiver shall be
validly and sufficiently authorized for purposes of this Agreement if,
as to any party, it is authorized in writing by an authorized
representative of such party. The failure of any party hereto to
enforce at any time any provision of this Agreement shall not be
construed to be a waiver of such provision, nor in any way to affect
the validity of this Agreement or any part hereof or the right of any
party thereafter to enforce each and every such provision. No waiver of
any breach of this Agreement shall be held to constitute a waiver of
any other or subsequent breach.
13.7. Regardless of whether the transactions provided for in
this Agreement are consummated, each party hereto will pay its own
costs and expenses incident to the negotiation, preparation and
performance of this Agreement, including the fees, expenses and
disbursements of its counsel, financial advisors, and accountants.
13.8. Wherever possible, each provision hereof shall be
interpreted in such manner as to be effective and valid under
applicable law, but in case any one or more of the provisions contained
herein shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such provision shall be ineffective to
the extent, but only to the extent, of such invalidity, illegality or
unenforceability without invalidating the remainder of such invalid,
illegal or unenforceable provision or provisions or any other
provisions hereof, unless such a construction would be unreasonable.
13.9. This Agreement may be executed in one or more
counterparts, each of which shall be considered an original instrument,
and shall become binding when one or more
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counterparts have been signed by each of the parties hereto and
delivered to each of the parties hereto.
13.10. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Texas, without giving
effect to any choice of laws provisions that may direct the application
of the laws of another jurisdiction.
13.11. Each of the parties hereby: (a) agrees that any action
arising out of or related to this Agreement or any of the transactions
contemplated hereby or thereby shall be filed and shall proceed
exclusively in the federal and state courts located in Dallas, Texas;
(b) irrevocably consents to jurisdiction in such courts; and (c) waives
any and all objections to jurisdiction and venue in such courts that
they may have under the federal or state laws of the United States.
13.12. The provisions of this Agreement are intended for the
sole benefit of the parties hereto and shall not inure to the benefit
of any other Person, other than successors and permitted assigns of
parties hereto, whether as third party or otherwise.
IN WITNESS WHEREOF, the undersigned have executed this Agreement on and
as of the date first above written.
UICI
By: /s/ GLENN W. REED
---------------------------------------------
Name: Glenn W. Reed
-------------------------------------------
Its: Executive Vice President and General Counsel
--------------------------------------------
HEALTHAXIS, INC.
By: /s/ JOHN M. CARRADINE
---------------------------------------------
Name: John M. Carradine
-------------------------------------------
Its: Chief Financial Officer
--------------------------------------------
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SCHEDULE 2.1.4
SCHEDULE OF EMPLOYEE ADJUSTMENT AMOUNT
The following costs associated with Chad Congos will be reimbursed by
Healthaxis to UICI:
Cost Amount
MS Windows 2000 Class $2,300.00
Cisco Works Class $3,395.00
Two weeks salary while attending classes $3,000.00
Training cost of replacement $3,000.00
--------
Total $11,695.00
=========
<PAGE>
SCHEDULE 2.1.5
SCHEDULE OF ASSUMED THIRD PARTY CONSULTING ARRANGEMENTS
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Name of Consultant Written Agreement
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Al Hogan
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Troy Howard
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Ann Teeter
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Michael Burec (contract terminates 5/31/02)
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Hilda Crawford
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Dan Mahaley
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<PAGE>
SCHEDULE 4.1
SCHEDULE OF DESIGNATED AST EMPLOYEES