Services, Development and License Agreement - Healtheon Corp. and Beech Street Corp.
SERVICES, DEVELOPMENT AND LICENSE AGREEMENT
This Agreement made this 15th day of December, 1997 (the "Effective
Date"), is by and between Healtheon Corporation, a Delaware corporation with
offices at 87 Encina Ave., Palo Alto, CA 94301 ("Healtheon") and Beech Street
Corporation, a Georgia Corporation with offices at 173 Technology, Irvine,
California 92618 ("BSC").
WHEREAS, the parties have agreed to form an alliance to address the
information technology needs of BSC, develop new applications designed to
address the information service needs of companies providing managed care and
other administrative services and pursue other ventures which may be of mutual
interest to the parties. The parties hereby agree as follows:
1. DEFINITIONS.
1.1 "ADDITIONAL APPLICATIONS" shall mean those applications which are
developed by Healtheon, but excluding the Developed Applications and the
Healtheon Platform Software, which are designed to run on the Healtheon
Platform.
1.2 "BSH DIVISION" shall mean the division of Healtheon which shall
be organized to perform the Services hereunder.
1.3 "BSC CLIENT" shall mean those clients of BSC including but not
limited to, health care medical providers (E.G., physicians, hospitals, other
care facilities, and ancillary providers), third party administrators, preferred
provider organizations, health maintenance organizations, employers, unions,
governmental entities, credit card companies, reinsurance companies, health
benefit or workers' compensation software vendors, and medical management
vendors, which use BSC Managed Care Services or as to which BSC has incorporated
such entities' services into BSC Managed Care Services.
1.4 "BSC MANAGED CARE SERVICES" shall mean the following types of
services provided by BSC to BSC Clients: personal health management (demand
management), workers' compensation medical bill review, case management,
pre-admission review, concurrent review, discharge planning, hospital bill
audit, retrospective non-network bill review and fee negotiation, health care
provider contracting and management, data reporting, computer operations,
service bureau services, consulting and other support services and such other
related new products/services that BSC shall develop subsequent to the execution
of this Agreement. Notwithstanding the foregoing, Managed Care Services shall
not include any service where the primary service provided by BSC is either (i)
access to and/or use of the BSC On-Line Service to obtain repricing services or
(ii) other repricing services offered by BSC to BSC Clients which use all or a
portion of the repricing functionality of the Developed Applications The
Management Committee shall determine whether services based upon other
functionality of the Developed Applications shall be excluded from the
definition of "BSC Managed Care Services" at the time that the relevant
specifications for such Developed Applications are being developed.
Notwithstanding the foregoing, workers' compensation medical bill review
services shall be included as part of the BSC Managed Care Services regardless
of whether such services are offered alone or in conjunction with other BSC
Managed Care Services.
<PAGE>
1.5 "BSC ON-LINE SERVICE" shall mean the on-line service provided by
BSC to BSC Clients which incorporates all or a portion of the Developed
Applications and any derivative works thereof.
1.6 "DEVELOPED APPLICATIONS" shall mean those applications and any
improvements thereto which are developed by Healtheon hereunder and which are
designed to run on the Healtheon Platform, as more fully described on Exhibit B.
1.7 "DEVELOPMENT WORK" shall mean the work to be performed hereunder
by Healtheon to develop the Developed Applications.
1.8 "END USER" shall mean any employee, partner, agent or other
representative of (i) BSC, or (ii) a BSC Client; who is authorized to access
the BSC On-Line Service in conjunction with obtaining BSC Managed Care Services.
1.9 "HEALTHEON PLATFORM" shall mean the Healtheon Platform Software,
as well as certain industry standard software applications, tools, and processes
which provide the operating environment which enables the use of Healtheon
developed applications as part of an on-line service which is accessible through
the Internet by using industry standard web browsers.
1.10 "HEALTHEON PLATFORM SOFTWARE" shall mean the proprietary
operating system and other software which has been developed by Healtheon (but
excluding the Developed Applications and the Additional Applications) which is
part of the operating system of the Healtheon Platform.
1.11 "SERVICES" shall mean those information technology services
described on Exhibit A.
2. PERFORMANCE OF THE SERVICES AND THE DEVELOPMENT WORK
2.1 PERFORMANCE OF THE SERVICES. Healtheon, through personnel
assigned to its BSH Division, shall perform the Services at certain sites
controlled by BSC and/or Healtheon. The initial scope of the Services is set
forth as Exhibit A. Exhibit A may be amended with the written consent of the
parties.
2.2 PERFORMANCE OF THE DEVELOPMENT WORK. Healtheon shall design,
develop, test, and complete the Developed Applications. The specifications for
each Developed Application shall be developed jointly and mutually approved by
the parties. In conjunction with the development of each set of specifications,
the parties shall jointly develop a mutually agreeable detailed project plan,
which shall be attached hereto as Exhibit B. Such project plan shall describe,
in a degree of detail reasonably satisfactory to the parties, all tasks and
responsibilities required for the successful and timely completion of the
development and delivery of the applicable Developed Applications, including the
projected costs.
3. PROJECT MANAGEMENT
3.1 PERSONNEL RESOURCES. Healtheon and BSC shall each commit the
number of qualified and experienced personnel which are reasonably necessary to
perform their respective obligations under this Agreement and as further
outlined in the project plan(s). Healtheon shall have the sole right and
obligation to hire, supervise, manage, contract, direct, procure, perform or
cause to be performed all work to be performed by Healtheon and its personnel
hereunder. Healtheon, at its option, may engage third parties to render services
in connection with the performance of the Services and/or Development Work
contemplated hereunder, which may include engaging the services of certain BSC
employees to
2
<PAGE>
provide certain information technology services. All Healtheon employees
utilized to provide the Services shall have entered into Healtheon's standard
form of employee nondisclosure agreement.
3.2 PROJECT MANAGEMENT. Each party shall designate a project manager
(the "Project Managers") and appropriate technical resource persons to
coordinate the development and implementation of the project plan(s). The
Project Managers shall be responsible for resolving any matters arising under
this Agreement and the Services and Development Work contemplated hereunder. In
the event that the Project Managers are not able to resolve a dispute, such
dispute shall be resolved by the Management Committee, as described in Section
3.3.
3.3 MANAGEMENT COMMITTEE. The parties shall each designate an equal
number of management-level personnel to serve on the Management Committee. The
Management Committee shall conduct status meetings on a monthly basis detailing
the performance of the Services and Development Work during the prior four (4)
week period and the work planned to be performed during the upcoming four (4)
week period. The Management Committee shall be responsible for resolving any
disputes which have not been resolved by the Project Managers. The Management
Committee shall be responsible for determining whether services based upon the
Developed Applications shall be included or excluded from the definition of "BSC
Managed Care Services" for the purposes of this Agreement. If such services are
not excluded, then the Management Committee shall be responsible for
establishing the applicable financial arrangements, if any, pursuant to which
such services may be offered by BSC.
3.4 CHANGES TO SERVICES, DEVELOPMENT WORK AND PROJECT PLAN. The scope
of the Services, the Development Work and the project plans shall not be changed
in any material respect without the prior written agreement of the parties,
which agreement shall not be unreasonably withheld.
4. OWNERSHIP AND LICENSE RIGHTS.
4.1 OWNERSHIP. BSC acknowledges and agrees that all of the work
product produced or developed by Healtheon in connection with Healtheon's
performance of the Services and/or Development Work to be provided hereunder,
including, but not limited to, all technology of any nature whatsoever, all
notes, records, drawings, designs, inventions, improvements, developments,
discoveries, trade secrets and any copyrightable material, including but not
limited, to the Developed Applications, and all patentable inventions,
conceived, made or discovered by Healtheon, solely or in collaboration with
others, during the period of this Agreement and which relate in any manner to
the Services and/or Development Work to be performed hereunder or which
Healtheon may be directed to undertake or investigate in performing the Services
and/or the Development Work, including any derivative works of any of the
foregoing (collectively the "Work Product"), is the sole property of Healtheon,
but excluding BSC's contracts and contracted rates with BSC's providers, which
may be incorporated into the Work Product. Subject only to the license rights
to be granted by Healtheon to BSC in Section 5.1, below, BSC acknowledges and
agrees that Healtheon shall have all proprietary rights in and to the Work
Product, including, without limitation, all copyrights, patents and trade secret
rights, all moral rights, all contract and licensing rights, and all claims and
causes of action of any kind with respect to any of the foregoing, whether now
known or hereafter to become known, and that Healtheon shall have the sole and
exclusive right to use, modify and exploit the Work Product in any manner that
Healtheon may choose.
4.2 PROPRIETARY NOTICES. BSC shall not remove or alter any trademark,
trade name, copyright, or other proprietary notices, legends, symbols, or labels
appearing on or in materials pertaining to the Work Product. Each portion of
the Healtheon documentation reproduced by BSC shall include the
3
<PAGE>
intellectual property notice or notices appearing in or on the corresponding
portion of such materials as delivered by Healtheon hereunder.
5. LICENSE AND SERVICE RIGHTS.
5.1 LICENSE RIGHTS. In consideration for the development fees paid to
Healtheon pursuant to Section 7.1, Healtheon hereby grants to BSC a nonexclusive
and nontransferable, fully-paid, perpetual right and license, exercisable at
BSC's primary operations site, to: (i) install, use, copy, modify, create
derivative works and maintain the Developed Applications, in object code and
source code form, solely as (a) part of the BSC On-Line Services which are
offered to BSC Clients in conjunction with the BSC Managed Care Services
obtained by such BSC Clients and to enable world-wide remote access by End Users
in conjunction with the BSC On-Line Service and (b) for BSC's internal use in
providing BSC Managed Care Services to BSC Clients, and (ii) use the Work
Product (excluding the Developed Applications and any derivative works thereof)
delivered to BSC by Healtheon hereunder in conjunction with the operations of
BSC's Managed Care Services. BSC shall not use, sublicense or otherwise
distribute the Healtheon Platform Software or the Work Product, including the
Developed Applications and any derivative works thereof, in any other manner
except as expressly stated herein. The BSC's primary operations site is
anticipated to be in Irvine, California. BSC may from time to time designate
another site to be its primary operations site by providing Healtheon with
thirty (30) days' prior written notice of such redesignation. Notwithstanding
the foregoing, BSC shall make no more than two (2) copies of the source code
relating to the Developed Applications (the "Source Code") and shall restrict
access to such Source Code to only those employees who require such access to
enable BSC to use the Source Code as in the manner contemplated herein and
otherwise secure and protect such Source Code consistent with its own practices
regarding its most highly confidential information.
5.2 OPTION TO LICENSE ADDITIONAL APPLICATIONS. Healtheon hereby
agrees to grant to BSC a nonexclusive and nontransferable, right and license, to
use the Additional Applications as may be licensed at the option of BSC, as part
of the services to be offered to BSC Clients in conjunction with the BSC Managed
Care Services, and to enable worldwide access to End Users in conjunction with
the BSC On-Line Service. The fee for such license shall be [ * ] each
such Additional Application as may be licensed by BSC, net of any third-party
royalty obligations. Each such license agreement for Additional Applications
shall be on commercially reasonable terms and conditions. BSC shall not use,
sublicense or otherwise distribute the Additional Applications in any other
manner except as expressly stated herein.
5.3 OPTION TO LICENSE HEALTHEON PLATFORM SOFTWARE. Subject to the
payment of the license fee set forth below, Healtheon hereby grants to BSC a
nonexclusive and nontransferable, right and license, exercisable at BSC's
primary operational site, to use the Healtheon Platform Software as part of
the Healtheon Platform to be deployed at BSC's primary operational site to
run the Developed Applications and such Additional Applications which may be
licensed from Healtheon, as part of the BSC On-Line service or other BSC
Managed Care Service to be offered to BSC Clients in conjunction with the BSC
Managed Care Services obtained by such BSC Client, and to enable world-wide
access and use by End Users at remote locations in conjunction with the use
of the BSC On-Line Service and to make a single back-up copy. The applicable
one-time, up front fee for such license shall be [ * ] payable upon
such commercially reasonable terms as the parties may agree to at the time of
BSC's exercise of its rights hereunder. BSC shall not have the right to use,
sublicense or otherwise distribute the Healtheon Platform Software in any
other manner except as
[ * ] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
4
<PAGE>
expressly stated herein. BSC shall be solely responsible for the costs
associated with acquiring all third-party hardware and software and
implementation services necessary to deploy the Healtheon Platform at BSC's
site. In the event the BSC exercises its rights hereunder, Healtheon shall make
available to BSC maintenance services on such commercially reasonable terms and
conditions as may be agreed to by the parties.
5.4 OPTION TO USE HEALTHEON SERVICE. If, following the completion
of the Developed Applications, BSC declines to use its licensed rights under
Section 5.1, Healtheon hereby agrees to enter into a Healtheon Service
Agreement with BSC containing Healtheon's standard terms and conditions
whereby Healtheon shall provide BSC and BSC Clients with access to an on-line
service which includes the Developed Applications. Healtheon shall offer such
service to BSC and the BSC Clients at a rate [ * ] as may be mutually
agreed to by the parties, based upon the actual margins of the on-line
service.
6. THIRD-PARTY TECHNOLOGY AND LICENSE RIGHTS
6.1 THIRD-PARTY TECHNOLOGY AND LICENSE RIGHTS. In order to perform
the Services contemplated hereunder (but excluding Services relating solely to
the Developed Applications), BSC represents that Healtheon will need to have
access only to the third-party technology and software listed on Exhibit C which
is licensed and/or deployed by BSC (the "Third-Party Technology and Software").
BSC hereby agrees to use commercially reasonable efforts to obtain, at its own
expense, all necessary consents, licenses and/or assignments which may be
necessary in order for Healtheon to perform the such Services. Healtheon shall
use commercially reasonable efforts to cooperate with BSC to assist BSC in
obtaining any necessary consents, licenses and/or assignments to Third-Party
Technology and Software. In the event that any Development Work requires access
to or use of any other third-party technology or software, the Management
Committee shall be responsible for obtaining any necessary rights.
6.2 BSC TECHNOLOGY AND LICENSE RIGHTS. During the term of this
Agreement, BSC hereby grants to Healtheon a nonexclusive and nontransferable
right and license to use, modify and copy all technology and software owned by
BSC which is necessary for Healtheon to perform the Services and Development
Work.
7. FEES AND PAYMENT; GAIN SHARING
7.1 FEES AND EXPENSES, PAYMENT. BSC shall pay Healtheon the Fees and
Expenses, as set forth in Exhibit D for the Services and the Development Work to
be performed hereunder (the "Fees"). Healtheon shall submit invoices to BSC on
a bi-weekly basis for the Fees when due, corresponding to applicable payroll
cycles. Invoices shall be due and payable within ten (10) days after receipt.
7.2 OTHER EXPENSES. Healtheon shall have sole responsibility for
payment of compensation to its personnel and shall pay and report, for all
personnel assigned to perform services hereunder, federal and state income tax
withholding, social security taxes, and unemployment insurance applicable to
such personnel. Healtheon shall bear sole responsibility for any health or
disability insurance, retirement benefits, or other welfare or pension benefits
(if any) to which its own personnel may be entitled.
7.3 REVENUE SHARING. In the event that BSC declines to use its
licensed rights under Section 5.1 and Healtheon provides services in accordance
with Section 5.4 for any current or future BSC Client
[ * ] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
5
<PAGE>
which (i) utilizes any of the Developed Applications and (ii) such BSC
Client has entered into a written contract for one or more of BSC's Managed
Care Services (a "Qualified BSC Client"), then BSC shall pay to Healtheon the
Applicable Percentage (as defined below) of Net Revenues (as defined below
with respect to repricing services) with respect to each such Qualified BSC
Client. "Net Revenues" shall mean the revenues received by BSC from a
Qualified BSC Client for BSC Managed Care Services less any fees paid by BSC
to any third party which facilitates the sale or delivery of BSC's Managed
Care Services, including but not limited to leased network fees, broker fees,
commissions paid to outside third parties, fees payable to Healtheon pursuant
to Section 5.4, subcontractor vendor fees and other such reasonable and
customary fees as may apply from time to time. The "Applicable Percentage"
with respect to BSC's repricing services shall be as follows: [ * ]
The revenue sharing described above will be reviewed by the Management
Committee periodically, and at least on an annual basis, to determine that
the cost savings objectives are being achieved and to determine the
appropriate applicable percentage for other BSC Managed Care Services which
are performed through the Healtheon service as the applicable Developed
Applications are deployed as part of the Healtheon service. Additionally if
other significant cost savings are identified they will be reviewed by the
Management Committee to determine appropriate sharing.
7.4 THIRD-PARTY HARDWARE AND SOFTWARE. In the event that it is
reasonably necessary for Healtheon to purchase or license any third-party
hardware and/or software in order to perform the Services and/or the Development
Work, the Project Managers shall determine whether such third-party hardware
and/or software should be purchased and/or licensed by BSC or Healtheon and how
the costs and ownership shall be allocated between the parties.
7.5 TAXES. All Fees and payments are exclusive of all taxes, duties
or levies, however designated or computed. BSC shall be responsible for and pay
all taxes upon payments due under this Agreement including, but not limited to,
sales, use, or value-added taxes, duties, withholding taxes and other
assessments now or hereafter imposed on or in connection with this Agreement,
exclusive of taxes based upon Healtheon's net income.
7.6 AUDIT RIGHTS. Each of the parties shall have the right,
exercisable no more frequently than once per calendar quarter and exercisable
upon thirty (30) days prior written notice, to audit the appropriate books and
records of the other party during regular business hours to review the
calculations of the amounts payable pursuant to Section 7. The costs of such
audit shall be borne by the auditing party, unless the results of such audit
reveal an underpayment (or overpayment) of more than ten percent (10%) for a
twelve month period, in which case the reasonable expenses of the auditing party
shall be reimbursed by the other party. The parties shall promptly pay (or
refund) to the other, the amounts of any underpayments (or overpayments).
8. CONFIDENTIALITY
8.1 CONFIDENTIAL INFORMATION. The parties acknowledge that in the
course of performing under this Agreement, each party may be exposed to or
acquire information which is proprietary to or confidential to the other party,
its suppliers or customers ("Confidential Information"). Any and all such
Confidential Information of one party in any form obtained by the other party or
its employees, agents,
[ * ] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
6
<PAGE>
or representatives in the performance of this Agreement shall be deemed to be
confidential and proprietary information of such party. The parties agree to
hold such Confidential Information in strict confidence, to only permit use of
such Confidential Information by its employees and agents having a need to know
in connection with performance under this Agreement, and not to copy, reproduce,
sell, assign, license, market, transfer, give or otherwise disclose the
Confidential Information of the other party to third parties or to use such
Confidential Information for any purposes whatsoever, except as expressly
contemplated by this Agreement, without the express written permission of the
other party and to advise each of their employees, agents, and representatives
of their obligations to keep such information confidential. Work Product shall
be deemed to be the Confidential Information of Healtheon.
8.2 EXCEPTIONS TO CONFIDENTIAL INFORMATION. Confidential Information
shall not include information that (i) was, as of the time of its disclosure, or
thereafter becomes part of the public domain through a source other than the
receiving party; (ii) the receiving party can demonstrate was known to the
receiving party as of the time of its disclosure; (iii) the receiving party can
demonstrate was independently developed by the receiving party without use of
the Confidential Information; or (iv) the receiving party can demonstrate was
subsequently learned from a third party not under a confidentiality obligation
to the providing party. In the event that a receiving party is required to
disclose certain Confidential Information of a disclosing party pursuant to
applicable law, court order or government authority, the receiving party shall
provide reasonable notice to the disclosing party prior to such disclosure and
shall cooperate with the disclosing party to obtain protection from such
disclosure.
9. REPRESENTATIONS AND WARRANTIES
9.1 WARRANTIES FOR SERVICES AND THE DEVELOPMENT WORK. Healtheon
hereby represents and warrants that (i) each person assigned to perform the
Services and/or the Development Work shall have the proper skill, training and
background so as to be able to perform the such Services and/or Development
Work in a competent and professional manner and (ii) all Services and/or
Development Work and any Work Product and other materials or documentation
delivered under this Agreement shall have been completed in a thorough and
professional manner. In the event of a breach of Healtheon's representations
and warranties under this Section 9.1, Healtheon's sole obligation shall be to
promptly correct any defects identified by BSC, provided that BSC provides
Healtheon with written notice within thirty (30) days of becoming aware of the
defective work.
9.2 THIRD-PARTY TECHNOLOGY. BSC hereby represents and warrants that
it has obtained all necessary consents, licenses and/or assignments with respect
to the Third-Party Technology and Software which is licensed and/or deployed by
BSC and which are necessary in order for Healtheon to perform the Services and
Development Work to be performed hereunder.
9.3 AUTHORITY. Healtheon and BSC each hereby represents and warrants
to the other that it is duly organized and validly existing under the laws of
the jurisdiction in which it is organized, in good standing therein, and has the
power to enter into this Agreement and to perform its obligations hereunder and,
furthermore, that the performance by it of its obligations under this Agreement
has been duly authorized by all necessary corporate or other action and will not
violate any provision of law or regulation or of any corporate charter or
bylaws.
9.4 INFRINGEMENT. Healtheon and BSC each hereby represents and
warrants to the other that any information or technology provided by it to the
other party in order to define the specifications or to accomplish the
development objectives of this Agreement does not infringe, violate,
misappropriate, or
7
<PAGE>
in any manner contravene or breach any U.S. patent or any trademark, copyright,
trade secret right, license or other property, or proprietary right of any third
party.
9.5 NO IMPLIED WARRANTIES. THE WARRANTIES STATED ABOVE IN THIS
SECTION 9 ARE THE ONLY WARRANTIES MADE BY EITHER PARTY. THE PARTIES DO NOT MAKE
AND HEREBY DISCLAIM ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, BUT NOT
LIMITED TO, WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
THE PARTIES ACKNOWLEDGES THAT COMPLEX COMPUTER SOFTWARE AND SERVICES, SUCH AS
THE DEVELOPED APPLICATIONS AND THE SERVICES, ARE RARELY FREE OF DEFECTS OR
ERRORS AND HEALTHEON DOES NOT WARRANT THE SAME.
10. LIMITATION OF LIABILITY
EXCLUSION OF CERTAIN DAMAGES. [ * ] UNDER NO CIRCUMSTANCES AND
UNDER NO LEGAL THEORY SHALL EITHER PARTY HAVE ANY LIABILITY FOR LOSS OF
PROFITS, CONSEQUENTIAL, EXEMPLARY, INCIDENTAL OR PUNITIVE DAMAGES, EVEN IF
SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
10.2 LIMITATION OF LIABILITY. [ * ] IN NO EVENT SHALL
EITHER PARTY'S AGGREGATE LIABILITY FOR ALL MATTERS ARISING OUT OF THE SUBJECT
MATTER OF THIS AGREEMENT, WHETHER IN CONTRACT, TORT OR OTHERWISE [ * ].
The remedies provided herein are the parties' sole and exclusive remedies.
11. INDEMNIFICATION
11.1 INDEMNIFICATION. Healtheon agrees to hold harmless and defend
BSC from and against any and all claims, demands, suits, actions, or
proceedings, arising out of any actual or alleged infringement by Healtheon of
any copyright or any U.S. patent, trademark, or trade secret right or other
proprietary right, with respect to the Work Product and Healtheon Platform
Software, as delivered by Healtheon hereunder and used by BSC in accordance with
the terms of this Agreement. BSC agrees to hold harmless and defend Healtheon
from and against any and all claims, demands, suits, actions, or proceedings,
arising out of any actual or alleged infringement by Healtheon of any copyright
or any U.S. patent, trademark, or trade secret right or other proprietary right
which arises out of BSC's failure to obtain any necessary consents, licenses, or
assignments with respect to any Third-Party Technology or Software which has
been licensed and/or deployed by BSC and which is necessary in order for
Healtheon to perform the Services (but excluding Services relating solely to the
Developed Applications).
11.2 LIMITATIONS. Healtheon shall have no indemnity obligation for
claims resulting from or alleged to result from (i) development work performed
by Healtheon in compliance with BSC's specifications where Healtheon's method of
compliance has been specifically compelled by the terms of BSC's specifications;
or (ii) BSC's use of the Work Product in combination with any hardware or
software not furnished by or authorized by Healtheon hereunder, if such
combination is the cause of such claim and the Work Product is not material to
the claim, or any modifications which have been made by BSC if such modification
is the cause of the claim. In addition, Healtheon shall have no indemnity
[ * ] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
8
<PAGE>
obligation for claims of infringement resulting or alleged to result from BSC's
failure within a reasonable time frame to implement any replacement or
modification which conforms to the requirements of Section 11.4 herein. BSC
shall have no indemnity obligations for claims resulting from or alleged to
result from Healtheon's breach of any Third-Party Technology or Software rights
where appropriate consents, licenses and/or assignments were obtained and
provided to Healtheon and Healtheon failed to adhere to the terms of applicable
consents, licenses and/or assignments.
11.3 PAYMENT AND COOPERATION. Subject to the limitations set forth in
Section 11.2 above, the indemnifying party shall pay all losses, damages,
damages, settlements, expenses, costs and reasonable attorney's fees, incurred
by the indemnified party arising out of the matters set forth in Section 11.1
provided that such payment shall be contingent on: (i) cooperation by the
indemnified party with the indemnifying party in the defense and or settlement
thereof, at the indemnifying party's expense; and (ii) allowing the
Indemnifying Party to control the defense and all related settlement
negotiations. The indemnified party shall give the indemnifying party prompt
written notice of any such claim to enable the indemnifying party to defend or
mitigate the claim.
11.4 REMEDY. If, in the event of an infringement action pertaining to
the Work Product, including the Developed Applications, and/or Healtheon
Platform Software and BSC's use of the such Work Product and/or Healtheon
Platform Software is disrupted, Healtheon shall, at its option, (i) provide BSC
with access to software which is functionally equivalent to the infringing
elements of the Work Product and/or Healtheon Platform Software as applicable,
without additional charge; (ii) modify the infringing portions of the Work
Product and/or Healtheon Platform Software, as applicable, to avoid the
infringement; or (iii) obtain a license for BSC to continue use of such Work
Product and/or Healtheon Platform Software, as applicable, for the term of the
applicable license and pay, on an annual basis, if Healtheon elects not to
acquire a perpetual license, the additional fee required for such license(s).
11.5 LIMITATIONS. SECTION 11 SETS FORTH THE PARTIES' SOLE OBLIGATION,
AND THE SOLE RECOURSE AGAINST THE OTHER PARTY IN THE EVENT OF ANY CLAIM OF
INFRINGEMENT OF THIRD PARTY INTELLECTUAL PROPERTY RIGHTS.
12. TERM AND TERMINATION
12.1. TERM. This Agreement shall continue for a fixed term of five
(5) years from the date hereof (the "Term") unless terminated earlier under
the provisions of this Section 12 or by the mutual agreement of the parties.
Notwithstanding the foregoing, (i) the license granted in Section 5.1 shall
have a perpetual term unless terminated earlier pursuant to Section 12.3 or
12.4, or by the mutual consent of the parties; and (ii) the license granted
in Section 5.3, if exercised, shall continue for a term of [ * ] from
the Effective Date and shall renew automatically for successive additional
[ * ] terms unless terminated earlier pursuant to Section 12.3 or
12.4, or by the mutual consent of the parties.
12.2 TERMINATION FOR CONVENIENCE. Either party may terminate this
Agreement upon one hundred-eighty (180) days prior written notice to the other
for any reason. Promptly following the notice of termination the parties shall
use good faith efforts to agree to a commercially reasonable transition plan
which will enable the parties' to mitigate to on-going expenses during the
notice period.
12.3 TERMINATION BY EITHER PARTY FOR DEFAULT. If either party
defaults in the performance of any material provision of this Agreement, then
the non-defaulting party may give written notice to the defaulting party that if
the default is not cured within thirty (30) days of such notice the Agreement
will be terminated. If the non-defaulting party gives such notice and the
default is not cured during the thirty
[ * ] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
9
<PAGE>
(30) day period, then the Agreement shall automatically terminate at the end of
that thirty (30) day period.
12.4 INSOLVENCY. Either party may terminate this Agreement by written
notice to the other, and may regard the defaulting party as in default of this
Agreement, if the defaulting party becomes insolvent, makes a general assignment
for the benefit of creditors, suffers or permits the appointment of a receiver
for its business or assets, becomes subject to any proceeding under any
bankruptcy or insolvency law whether domestic or foreign, or has wound up or
liquidated, voluntarily or otherwise.
12.5 EFFECT OF TERMINATION. The provisions of Sections 7 (solely with
respect to Fees and other payments which were due and payable as of the date of
termination), 4, 8, 10, 11, and 13 (to the extent applicable) shall survive the
termination of this Agreement for any reason. All other rights and obligations
of the parties shall cease upon termination of this Agreement. In the event of
a termination, neither party shall be entitled to any refund of the fees paid or
cost incurred for the development performed hereunder. Provided that this
Agreement is not terminated by Healtheon pursuant to either Section 12.3 or 12.4
or by BSC pursuant to Section 12.2, upon termination, Healtheon shall deliver to
BSC a copy of each Developed Application which has been completed as of the date
of termination, in source and object code form, and the related user
documentation, and, in the event of the exercise of BSC's option pursuant to
Section 5.3, Healtheon shall deliver to BSC a copy of Healtheon Platform
Software in object code form.
12.6 RETURN OF MATERIALS. Within thirty (30) days after the
termination of this Agreement, each party shall return to the other, all
Confidential Information, and other material of any kind which is the property
of the other party.
13. GENERAL
13.1 NO EXCLUSIVITY OR RESTRICTION ON OTHER ACTIVITY. Except as
expressly set forth in this Agreement, nothing herein shall preclude either
party from entering into agreements to obtain similar services or development
work from third parties or from providing similar services or development work
to third parties.
13.2 RELATIONSHIP OF PARTIES. The relationship of the parties shall
be that of independent contractors. Neither party will represent that it has any
authority to assume or create any obligation, express or implied, on behalf of
the other party, or to represent the other party as agent, employee, or in any
other capacity, except as specifically provided herein.
13.3 BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding on
and inure to the benefit of the respective parties and their permitted
successors and assigns. Neither party shall not transfer, assign, sublicense or
subcontract any right or obligation hereunder, except as expressly provided
herein. In the event of a change in control of BSC, BSC shall be permitted to
assign this Agreement to the surviving or new corporation acquiring all or
substantially all of the business and assets of BSC by merger, acquisition,
consolidation or otherwise, with the prior written consent of Healtheon, which
consent shall not be unreasonably withheld. BSC may assign its rights under
this Agreement to an entity which is controlled by BSC with the prior written
consent of Healtheon, which consent shall not be unreasonably withheld. It
shall not be unreasonable for Healtheon to withhold its consent if any proposed
assignment would materially increase Healtheon's obligations under this
Agreement or materially increase the scope of BSC's rights (including but not
limited to the grant of rights contained in Section 5) or if such proposed
assignee is a competitor of Healtheon.
10
<PAGE>
13.4 NO WAIVER. Either party's failure to exercise any right under
this Agreement shall not constitute a waiver of any other terms or conditions of
this Agreement with respect to any other or subsequent breach, nor a waiver by
such party of its right at any time thereafter to require exact and strict
compliance with the terms of this Agreement.
13.5 NOTICES. All notices or other communications which are required
or permitted to be given hereunder shall be in writing and shall be sent to the
address of the recipient set forth below or such other address as the recipient
may designate by notice given in accordance with the provisions of this Section
with copies to:
In the case of Healtheon: In the case of BSC:
Healtheon Corporation Beech Street Corporation
87 Encina Avenue 173 Technology
Palo Alto, California 94301 Irvine, California 92618
Attn: President Attn: President and COO
Copy to: General Counsel Copy to: Chief Financial Officer
Any such notice shall be delivered by either (i) first class registered or
certified airmail, postage prepaid, and shall be deemed to have been served
forty-eight (48) hours after posting; or (ii) express courier service, service
fee prepaid, and shall be effective upon delivery.
13.6 APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
13.7 SEVERABILITY. The invalidity of one or more phrases, sentences,
clauses or articles contained in this Agreement shall not affect the remaining
portions of this Agreement or any part thereof; and in the event that one or
more phrases, sentences, clauses or articles shall be declared void or
unenforceable this Agreement shall be amended to include only such portions of
such phrases, sentences, clauses or articles that are not invalid, void or
unenforceable.
13.8 ENTIRE AGREEMENT; AMENDMENTS. This Agreement, along with the
Exhibits attached hereto, sets forth the entire agreement between the parties
and supersedes any other prior proposals, agreements and representations between
them related to its subject matter, whether written or oral, including but not
limited to the Letter of Intent between the parties. No modifications or
amendments to this Agreement shall be binding upon the parties unless made in
writing and duly executed by authorized officials of both parties.
13.9 ATTORNEYS FEES. The prevailing party in any dispute shall be
entitled to collect from the other party the prevailing party's reasonable
attorneys' fees and costs in connection with the enforcement of this Agreement.
13.10 NON-SOLICITATION OF EMPLOYEES. Neither party shall solicit the
services or employment of any employee or agent of the other party for a period
beginning at the Effective Date and ending on the termination date of this
Agreement, without the prior written consent of the other party. The soliciting
party, who violates this Section 13.10, shall pay to the other party an amount
equal to one (1) year's salary for any solicited employee of the other party, as
liquidated damages and not as a penalty. The amount of annual salary shall be
the annual salary in effect at the date the employee was solicited. For
11
<PAGE>
purposes of this Section, the term "employee" means current or former
employees of the other party who were employed by the other party at any time
during the period beginning on the Effective Date and ending on the date on
which the nonsolicitation period above terminates. Initiation by an
individual of contact regarding employment or response by an individual to an
advertisement or other generally available notice, shall not constitute
solicitation.
13.11 BANKRUPTCY. The parties agree that the Agreement and any related
agreements are contracts under which Healtheon is a licensor of rights to
intellectual property within the scope of Section 101 of the United States
Bankruptcy Code and that BSC shall have all the rights of a licensee set forth
in Section 365(n) of the Bankruptcy Code. Upon the commencement of a bankruptcy
petition involving either party, the other party shall be entitled to retain and
may fully exercise all rights and licenses available under the Bankruptcy Code.
13.12 USE OF NAME. Neither party shall use the name of the other party,
or refer to the other party, directly or indirectly, in any advertising, sales
presentation, news release, information provided to any profession or trade
publication, or any other promotional or informational material, for any purpose
whatsoever, or in any manner indicate any endorsement or support of any product,
without such party's prior written approval.
13.13 RESIDUAL INFORMATION. Without prejudice to either party's
proprietary rights, neither party shall be liable for using general ideas,
concepts and know-how that may be gained as a result of exposure to or contact
with the other party or its materials.
13.14 ESCROW. Healtheon agrees that it will put the Healtheon Platform
Software and the Developed Applications, as they are developed, in escrow with
an independent escrow agent. The escrow agreement will be on terms and
conditions which are mutually agreeable to parties.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
as of the day and year first written above.
Healtheon Corporation Beech Street Corporation
By: /s/ By: /s/
-------------------------------- --------------------------------
Title: President & CEO Title: President & CEO
----------------------------- -----------------------------
Date: 12/15/97 Date: 12/15/97
-------------------------------- --------------------------------
12
<PAGE>
EXHIBIT A
SERVICES
Healtheon will operate and maintain BSC's information technology infrastructure
and data processing functionality and related services, including the following
types of services, as necessary and agreed to by the parties:
- maintain hardware operations
- maintain software infrastructure
- maintain data network(s)
- desktop computing
- provide internal and external technical support
- provide project planning and management
- software installation
- hardware installation
- provide user technical support
- provide user training
- provide IT personnel management services
- provide IT consulting services
- provide custom software solution design and development services
13
<PAGE>
EXHIBIT B
DEVELOPMENT WORK OVERVIEW
Healtheon shall provide an engineering team staffed with up to forty engineers
by December 31, 1998 to perform the general development tasks set forth below (
the "Development Team"). The Development Team will begin staffing during
January, 1998 and is anticipated to be fully staffed by December 31, 1998.
Unless otherwise agreed to by the parties, the Development Team will remain
fully staffed during calendar years 1999, 2000 and 2001 and will reduce its
staffing during calendar year 2002, depending upon the resources need to fulfill
the Development Work in accordance with the project plans which are developed by
the parties pursuant to Section 2.2. In the event that the applicable project
plans, as they are agreed to by the parties pursuant to Section 2.2, require
additional personnel resources, the parties will revise the Development Team
staffing commitments hereunder. The Development Team will develop the following
types of internet-based solutions, but not limited to, with the objective of
creating a Network Computing PPO/Managed Care capability:
- Claims Repricing
- Integrated Provider Management System
- Demand Management(Personal Health Management)
- Interfaces to internal and external systems (which are not "custom
development")
Phase 1 of the Development Work will consist of developing appropriate Project
Plans and related design specifications and cost estimates to be approved by
Management Committee. The work products of this phase will consist of:
1. An overall Project Plan;
2. Specific Project Plans and general specifications for Claims
Repricing and Integrated Provider Management; and
3. General specifications for the Demand Management service and
internet integration of the Demand Management service.
Phase 1 is anticipated to take approximately sixty work days to complete with
interim deliverables as tasks are completed and submitted to the Management
Committee for approval.
14
<PAGE>
EXHIBIT C
THIRD-PARTY TECHNOLOGY AND SOFTWARE
15
<PAGE>
EXHIBIT D
FEES AND EXPENSES
1. FEES AND EXPENSE FOR SERVICES AND "CUSTOM DEVELOPMENT" WORK.
[ * ] of the "costs" incurred by Healtheon which are associated
with performing the Services and any "custom" development work performed on
behalf of BSC.
For the purposes of this Agreement, "Custom" development work shall mean
any development work performed to meet BSC's own specifications which is not
anticipated to be reusable for other Healtheon clients.
2. FEES AND EXPENSE FOR DEVELOPMENT WORK FOR THE DEVELOPED APPLICATIONS
[ * ] of the "costs" incurred by Healtheon which are associated
with developing the Developed Applications.
3. DEFINITION OF "COST."
For the purposes of this Agreement "cost" shall be defined as follows:
A. For employees/contractors assigned to perform the Services and/or
Development Work on a full-time basis, "cost" will include direct expenses
(such as salary, benefits, recruiting, consulting, travel, etc.), support
expenses (rent, phone, computing, office expenses) and allocated expenses
(such as management, administration, other overhead cost, etc.). The
average hourly loaded cost per employee is currently approximately
[ * ] per hour.
B. For Healtheon's employees that are not assigned to perform the
Services and/or Development Work on a full-time basis, they will charge their
time performing or supporting the Services and/or Development Work based on a
set rate, which is subject to change based on the cost structure of Healtheon.
The initial rates are :-
Level 1 [ * ] per hour
Level 2 [ * ] per hour
Level 3 [ * ] per hour
C. For Healtheon's employees that are not generally assigned to perform
the Services and/or Development Work on a regular basis, they will charge their
time providing short term consulting services to this project based on a reduced
standard consulting rate. The current rates, [ * ] are :-
Level 1 [ * ] per hour
Level 2 [ * ] per hour
Level 3 [ * ] per hour
Cost for additional capital equipment or computer processing needed to perform
the Services or Development Work will be invoiced separately.
[ * ] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
16