Binding Letter of Intent for Pilot and Production Programs - Professional Claims Services Inc. d/b/a WellPoint Pharmacy Management, Cymedix Lynx Corp. and Medix Resources Inc.
September 8, 1999
WellPoint Pharmacy Management
4553 La Tienda Drive
Thousand Oaks, CA 91362
Attention: Michael Nameth,
General Manager
Re: Binding Letter of Intent for Pilot and Production Programs
Ladies and Gentlemen:
This letter summarized the proposed terms for the implementation of a pilot
program (the "Pilot Program") by Professional Claims Services, Inc., doing
business as WellPoint Pharmacy Management ("WPM"), for the introduction of the
pharmacy management component (the "RX Software") of Cymedix.com, a proprietary
software product (the "Software") developed by Cymedix Lynx Corporation
("Cymedix"), and the integration of the RX Software with the data systems of WPM
and providers identified by WPM ("Pilot Providers"). This letter also summarizes
the general terms of the production programs (the "Production Programs") that
WPM will assist Cymedix in implementing with WellPoint (Blue Cross of California
and Unicare) and other health plans (collectively, the "Health Plans"), with the
intent to expand the product and product applications among other physicians and
industry service providers under contract with the Health Plans.
Objective of the Pilot Program. The Pilot Program will establish an
electronic communication link between WPM and the Pilot Providers, enabling WPM
to evaluate the viability of the link and the value of the RX Software to the
Health Plans and determine whether to seek further participation by Health Plans
in the introduction of the Software pursuant to the Production Programs.
Objective of the Production Programs. Each Production Program will
establish an electronic communication link for use of the Software by the Health
Plan, WPM and the providers under contract with the Health Plan ("Production
Providers").
Overview of Cymedix.com. As discussed with representatives of WPM, the
Software employs Internet technology to enable industry participants to
effectively communicate vital medical, financial and administrative information
over the Internet on a secure basis. The Software is designed to allow users to
expedite standard administrative transactions, simplify communications, improve
patient care and reduce the cost of that care. Because of the Software's modular
architecture, health plan insurers sponsoring the implementation of Cymedix.com
with their participating physicians and industry service providers can elect to
introduce specific functionality modules of the Software ("Modules") in phases.
Cymedix represents and warrants that the Software, as installed for the Pilot
Program and, if implemented, the Production Providers, will meet or exceed the
requirements for encryption of authentications and identifications as set forth
in the HCFA Internet Security Policy issued on November 24, 1998.
Pilot Procedures. During the period of up to 30 days following your
acceptance of this proposal, representatives of Cymedix and WPM will exchange
relevant information and confer on a regular basis to develop more definitive
terms and conditions for the Pilot Program , with a view to completing a
detailed document describing the Pilot Program (the "Pilot Agreement") by the
end of the period and commencing installation procedures immediately thereafter.
The Pilot Agreement will set forth objective criteria for determining the
success of the Pilot Program (the "Pilot Criteria").
Pilot Objectives and Issues. In developing the Pilot Agreement, the
objective of the parties will be to identify the intended scope and parameters
of the Pilot Program and resolve the following issues:
o Applications - Identification of specific applications to be tested
during the Pilot Program
o Pilot Participants - Confirmation and consent of the Pilot Providers
and identification of responsible personnel in each organization
o System Analysis - Completion of technical analysis (hardware, software
and platforms) for WPM and each Pilot Provider
o Tasks - Identification of specific tasks necessary for implementation
and management of the Pilot Program and assignment of personnel
responsible for each task, including WellPoint's best efforts to
complete the information system issues outlined in Schedule A
o Systems Modifications - Identification of any additional hardware
requirements, technical development or software programming needed for
completion of tasks
o Scheduling - Specification of time frames anticipated for completion
of each task
Summary of the Pilot Program. At the commencement of the Pilot Program, the
RX Software will be installed by Cymedix on site at the Pilot Providers.
Arrangements for installation and utilization of the RX Software at the Pilot
Providers will be made by WPM, which will use its best efforts to obtain the
cooperation of the appropriated personnel at tall Pilot Provider organizations.
Cymedix will make its technical personnel available to assist in installing and
testing of the RX Software, which will initially be limited to the pharmacy
management applications to be specified in the Pilot Agreement.
The Pilot Program will be conducted for a period specified in the Pilot
Agreement, not to exceed five months (the "Pilot Period"). At any time during
the Pilot Period, additional Modules may be added if agreed upon by WPM and
Cymedix. At the end of the Pilot Period, if the Pilot Criteria are satisfied,
WPM will assist Cymedix in securing definitive agreements with Health Plans for
the implementation of Production Programs (the "Production Program Agreements").
It is anticipated that the Production Program Agreements will provide for terms
ending no earlier than December 31, 2000, with automatic annual renewal terms
subject to termination by the Health Plans only upon 60 days' notice prior to
the end of the current term.
Documentation for the Pilot Program. It is anticipated that the Pilot
Agreement will cover the following points in addition to those addressed
elsewhere in this letter:
o Personnel - Identification of technical and business contact personnel
at each organization participating in the Pilot Program
o Marketing - Specifications for sharing of sales and marketing expenses
and responsibilities
o Technical Map - Specification of installation tasks and requirements,
including any requirements by WPM for Software customization
o Scheduling - Specification of time frames and target completion dates
for each identified task
o Budgeting - Memorialization of any cost sharing arrangements for the
Pilot Program
o Transaction Fees - Specification of transaction fees to apply during
the Pilot Period
Fees for the Production Programs. During the continuation of each
Production Program, Cymedix intends to invoice the Health Plan for a monthly fee
equal to the greater of (a) $100 for each Production Provider location covered
thereunder or (b) the total of all transactions by those Production Providers at
$.50 per transaction (collectively, the "Production Fee Target").
Revenue Sharing. If WPM agrees to utilize Cymedix as it preferred Internet
transaction service provider, Cymedix will provide WPM with 40% of the revenue
received by Cymedix for each completed Production Program transaction with a
Health Plan affiliated (by ownership) with WPM's parent company and 25% of the
revenue for all Production Program transactions with other (nonaffiliated)
Health Plans referred by WPM. These sharing arrangements will be contingent on
achieving the Production Fee Target. If transaction fees are negotiated below
the Production Fee Target for any reason, the foregoing sharing rations will be
reduced to 20% for affiliated Health Plans and 12.5% for nonaffiliated Health
Plans. Cymedix will make these payments monthly within 15 days after receiving
revenues from invoiced transactions.
WPM Warrants. Upon your acceptance of this proposal, Medix Resources, Inc.,
the parent company of Cymedix ("Medix"), will issue to WPM five-year warrants
(the "Warrants") to purchase up to 6,000,000 shares of Medix common stock (the
"Warrant Shares") a the exercise prices set forth below. The number of warrants
available to WellPoint will be equal to 19.9%, on a fully diluted basis
calculated as of the date of issuance, of the total number of outstanding shares
of Medix common stock. The warrants will contain customary antidilution
provisions for extraordinary transactions and issuance of stock below fair
market value. The Warrants will be transferable in whole or in part only to
affiliates of WPM and will vest incrementally as follows:
Number of
Warrant Shares Exercise Price Vesting Event
--------------- -------------- ------------------------------------------------
1,000,000 $ .30 Completion by WPM of tasks set forth on Schedule
A hereto
1,000,000 .30 Execution of the Pilot Agreement by WPM and
Cymedix
1,000,000 .30 25,000 total Providers in the Production Programs
1,000,000 .50 50,000 total Providers in the Production Programs
1,000,000 .50 75,000 total Providers in the Production Programs
1,000,000 .50 100,000 total Providers in the Production
Programs
Board Seats. Medix will nominate a WellPoint designee for membership on its
Board of Directors.
Confidentiality. The parties acknowledge that their discussions and
implementation of the Pilot Program may entail the exchange of confidential
information, including technical specifications for the Software and information
about business methods, operations and prospects, costs, markets, pricing
policies, technical processes and applications and confidential patient records
("Information"). Each party agrees that, subject to the exceptions set forth
below, for five years after the date hereof, it will (a) keep all Information
confidential, (b) refrain from disclosing any Information to any person or firm,
other their respective employees and agents having a need to know and (c)
refrain from using any Information, directly or indirectly, for its own benefit
or the benefit of any affiliate.
For purposes of this undertaking, Information shall not include information
that (a) is in the public domain at the time of disclosure to a party, (b)
becomes part of the public domain after disclosure to a party through no fault,
act or failure to act, error or breach of this undertaking by the recipient, (c)
is known to the party at the time of disclosure, (d) is discovered by the party
independently, (e) is required by order, stature or regulation of any government
authority to be disclosed to any court or other body, provided that the party
shall notify the other party thereof to provide or afford it the opportunity to
obtain a protective order or other relief, or (f) is obtained from a third party
who has acquired a legal right to disclose the specific information.
In addition to any other remedies for breach of the foregoing
confidentiality undertakings, the parties will be entitled to equitable relief
in the event of any breach or threatened breach thereof. In the event of
litigation relating thereto, the prevailing party shall be entitled to recover
the reasonable legal fees incurred in connection therewith, including any appeal
therefrom.
Publicity. Neither party shall use the name of the other party in any
marketing, advertising or other public announcement about the subject matter of
this letter without the other party's written consent. A party desiring to make
a public disclosure shall submit a draft thereof for prior approval by the other
party, which will use its best efforts to provide comments thereon within 48
hours.
We appreciate the opportunity to work with you on this project. Please
acknowledge your acceptance of this letter of intent on the foregoing terms by
countersigning a copy of this letter in the space provided and returning the
countersigned copy to us.
Sincerely yours,
CYMEDIX LYNX CORPORATION MEDIX RESOURCES, INC.
By:/s/John P. Yeros By:/s/John P. Yeros
John P. Yeros, John P. Yeros,
Chief Executive Officer Chief Executive Officer
AGREED TO AND ACCEPTED
This 8th day of September, 1999
PROFESSIONAL CLAIMS SERVICES, INC.
By:/s/Michael Nameth
Michael Nameth
General Manager
Schedule A
Initial Pilot Tasks for WellPoint Pharmacy Management
WellPoint Pharmacy Management ("WPM") will be responsible for completing
the following tasks as soon as practicable after acceptance of the accompanying
letter agreement. Capitalized terms used in this Schedule A and not otherwise
defined shall have the respective meanings ascribed to them in the letter of
intent.
1. WPM will provide a secured, non-dial up Internet access to the Cymedix
host PC located on site at WPM, within WellPoint security policy.
2. WPM will replace current pilot equipment from Cymedix with equivalent
or better equipment to serve as the WPM PC and Cymedix host PC
dedicated to the Pilot Program.
3. WPM and Cymedix will create a task plan (Project Plan) outlining the
remaining information systems issues to be resolved for the Pilot and
Production Programs. Both parties will work together to resolve those
issues to meet the time schedule and responsibilities outlined in the
Project Plan.