EXHIBIT 10.16
INDEMNIFICATION AGREEMENT
-------------------------
THIS INDEMNIFICATION AGREEMENT (this "Agreement") is made and entered into
as of January 2, 1999 by and between Synetic, Inc., a Delaware corporation
(together with its subsidiaries other than CareInsite, Inc. and CareInsite,
Inc.'s subsidiaries, hereinafter referred to as, "Synetic"), and CareInsite,
Inc., a Delaware corporation (together with its subsidiaries, hereinafter
referred to as, the "Company").
RECITALS
--------
The Company is an indirect subsidiary of Synetic. Synetic and the Company
desire to enter into this Agreement to indemnify each other (and provide for
contribution to each other) against liabilities arising from the operation of
the parties' respective businesses.
AGREEMENT
---------
The parties therefore agree as follows:
1. Indemnification. (a) The Company agrees to indemnify and hold
---------------
harmless Synetic against any and all claims, losses, damages, liabilities, costs
and expenses, joint or several (including reasonable attorneys' fees and costs
of investigation), to which Synetic may become subject insofar as such claims,
losses, damages, liabilities, costs and expenses (or actions in respect thereof)
arise from or are based on the operations of the business of the Company before
or after January 2, 1999, the date of the formation of the Company in connection
with a transaction with Cerner Corporation (the "Formation"); provided, however,
that Synetic shall not be indemnified hereunder for liabilities arising from its
own intentional misconduct or gross negligence or to the extent any liability
arises from a breach by Synetic of its fiduciary duty or contractual obligation
to other stockholders of the Company; provided further, however, that, with
respect to the litigation by Merck & Co., Inc. ("Merck") and Merck-Medco Managed
Care, L.L.C. ("Merck-Medco") against Synetic, the Company and certain other
individual defendants pursuant to a complaint filed on February 18, 1999 in the
Superior Court of New Jersey (the "Merck litigation"), (i) Synetic will bear
both the actual cost of conducting the Merck litigation and any monetary damages
that may be awarded to Merck and Merck-Medco in the Merck litigation; (ii) any
monetary damages awarded to the Company and/or Synetic in the Merck litigation
will be for the account of Synetic; and (iii) Synetic shall not be responsible
for any losses suffered by the Company resulting, directly or indirectly, from
any equitable relief obtained by Merck and Merck-Medco against the Company,
including, but not limited to, any lost profits, other consequential losses,
damages, liabilities, or costs or expenses arising from such equitable relief.
(b) Synetic agrees to indemnify and hold harmless the Company against
any and all claims, losses, damages, liabilities, costs and expenses, joint or
several (including reasonable attorneys' fees and costs of investigation), to
which the Company may become
2
subject insofar as such claims, losses, damages, liabilities, costs and expenses
(or actions in respect thereof) arise from or are based on the operations of the
business of Synetic, other than the business of the Company and its
subsidiaries, before or after the Formation.
(c) The Company agrees to indemnify and hold harmless Synetic against
any and all claims, losses, damages, liabilities, costs and expenses, joint or
several (including reasonable attorneys' fees and costs of investigation), to
which Synetic may become subject insofar as such claims, losses, damages,
liabilities, costs and expenses (or actions in respect thereof) arise from or
are based on guarantees or undertakings made by Synetic to third parties in
respect of liabilities or obligations of the Company or its subsidiaries,
whether such guarantees or undertakings are made by Synetic before or after the
Formation; provided, however, that Synetic shall not be indemnified hereunder
for liabilities arising from its own intentional misconduct or gross negligence
or to the extent any liability arises from a breach by Synetic of its fiduciary
duty or contractual obligation to other stockholders of the Company; provided,
further, however, that if the events giving rise to a particular claim, loss,
damages, liability, cost or expenses occurred prior to the Formation, Synetic
shall not be indemnified pursuant to this Section.
(d) The amount of any claims, losses, damages, liabilities, costs and
expenses indemnified against in this Section 1 ("Claims") shall be: (i)
increased to take into account any net tax cost actually incurred by the
indemnitee arising from any payments received from the indemnifying party
(grossed up for such increase), and (ii) reduced to take account of any net tax
benefit actually realized by the indemnitee arising from the incurrence or
payment of any such Claim. In computing the amount of such tax cost or tax
benefit, the indemnitee shall be deemed to recognize all other items of income,
gain, loss, deduction or credit before recognizing any item arising from the
receipt of any payment with respect to a Claim or the incurrence or payment of
any Claim.
2. Substitution. (a) With respect to any litigation, proceeding or
------------
investigation by or before any court or governmental agency or body which may be
commenced or threatened against Synetic after the date hereof which arises out
of or is based upon the future business or operations of the Company, but not of
Synetic, at Synetic's option, the Company and Synetic shall use their best
efforts to have the Company substituted in the place of and for Synetic and to
have Synetic removed as a party as promptly as is reasonably practicable.
Pending such substitution, and in cases where such substitution cannot be
effected, the Company shall promptly assume and direct the defense, prosecution
and/or settlement of the claims involved, employing for this purpose counsel
satisfactory to Synetic, and shall pay all expenses related thereto. To the
extent that any such expenses are paid by Synetic, the Company shall promptly
reimburse Synetic therefor.
3
(b) With respect to any litigation, proceeding or investigation by or
before any court or governmental agency or body which may be commenced or
threatened against the Company after the date hereof which arises out of or is
based upon the past, present or future business or operations of Synetic, but
not of the Company, at the Company's option, the Company and Synetic shall use
their best efforts to have Synetic substituted in the place of and for the
Company and to have the Company removed as a party as promptly as is reasonably
practicable. Pending such substitution, and in cases where such substitution
cannot be effected, Synetic shall promptly assume and direct the defense,
prosecution and/or settlement of the claims involved, employing for this purpose
counsel satisfactory to the Company, and shall pay all expenses related thereto.
To the extent that any such expenses are paid by the Company, Synetic shall
promptly reimburse the Company therefor.
3. Notice and Payment of Claim. If either party entitled to
---------------------------
indemnification hereunder (an "Indemnified Party") is threatened in writing with
any claim, or any claim is presented in writing to, or any action or proceeding
formally commenced against, an Indemnified Party which may give rise to the
right of indemnification hereunder, the Indemnified Party will promptly give
written notice thereof to the other party (the "Indemnifying Party"), provided
that any delay by the Indemnified Party in so notifying the Indemnifying Party
shall not relieve the Indemnifying Party of any liability to the Indemnified
Party hereunder except to the extent the Indemnifying Party is materially and
adversely prejudiced by such delay. The Indemnifying Party, by delivery of
written notice to the Indemnified Party within 30 days of receipt of notice of
claim to indemnity from the Indemnified Party, may elect to contest such claim,
action or proceeding at the Indemnifying Party's expense and by counsel of its
own choosing. If the Indemnified Party requests in writing that such claim,
action or proceeding not be contested, then it shall not be contested but shall
not be covered by the indemnities provided herein. The Indemnifying Party may
settle an indemnifiable matter which it has duly elected to contest with the
consent of the Indemnified Party, after delivering a written description of the
proposed settlement to, and receiving consent from, the Indemnified Party. In
the event that the Indemnified Party declines to consent to a bona fide
settlement acceptable to the claimant, then the Indemnified Party shall have no
right to indemnification beyond the amount of the proposed settlement.
4. Dispute Resolution. In an effort to resolve informally and amicably
------------------
any claim or controversy arising out of or related to the interpretation or
performance of this Agreement without resorting to litigation, each party shall
first notify the other of any differences or dispute hereunder that requires
resolution. Synetic and the Company shall each designate an employee to
investigate, discuss and seek to settle the matter between them. If the two are
unable to settle the matter within 30 days after such notification, the matter
shall be submitted to an independent director of each of Synetic and the Company
for consideration. If settlement cannot be reached through their efforts within
an additional 30 days, or such longer time
4
period as they shall agree upon, either party may initiate legal proceedings to
resolve such matter.
5. Cooperation. So long as any books, records and files retained by
-----------
Synetic or the Company relating to the business operations or assets of the
Company remain in existence and available, Synetic and the Company shall have
the right upon prior notice to inspect and copy the same at any time during
business hours for any proper purpose. Neither Synetic nor the Company shall
destroy or permit the destruction of (without first having offered to deliver to
the other) any such books, records and files for the time period during which
they would be required to retain such books, records or files by applicable law.
Synetic and the Company shall cooperate with one another in a timely manner in
any administrative or judicial proceeding involving any matter affecting the
potential liability of either Synetic or the Company hereunder or with respect
to any governmental authority. Such cooperation shall include, without
limitation, making available to the other party, during normal business hours,
all books, records and information, officers and employees (without substantial
interruption of employment) necessary or useful in connection with any inquiry,
audit, investigation or dispute, any litigation or any other matter requiring
any such books, records, information, officers or employees for any reasonable
business purpose. The party requesting or otherwise entitled to any books,
records, information, officers, or employees pursuant to this Section shall bear
all reasonable out-of-pocket costs and expenses (except reimbursement of
salaries, employee benefits and general overhead) incurred in connection with
providing such books, records, information, officers or employees.
6. Assignment. Neither party shall assign or transfer any of its rights
----------
under this Agreement without the prior written consent of the other party.
7. Notices. All notices, requests, demands and other communications
-------
provided for by this Agreement shall be in writing (including telecopier or
similar writing) and shall be deemed to have been given at the time when mailed
in any general or branch office of the United States Postal Service, enclosed in
a registered or certified postpaid envelope, or sent by Federal Express or other
similar overnight courier service, addressed to the address of the parties
stated below or to such changed address as such party may have fixed by notice
or, if given by telecopier, when such telecopy is transmitted and the
appropriate answerback is received.
If to Synetic:
Synetic, Inc.
000 Xxxxx Xxxxx, Xxxxx Drive Center II
Elmwood Park, New Jersey 07407-1361
Attn: Chief Financial Officer
5
If to the Company:
CareInsite, Inc.
000 Xxxxx Xxxxx, Xxxxx Drive Center II
Elmwood Park, New Jersey 07407-1361
Attn: Chief Financial Officer
8. Further Assurances. Synetic and the Company shall execute,
------------------
acknowledge and deliver or cause to be executed, acknowledged and delivered such
instruments and take such other action as may be necessary or advisable to
carry out their obligations under this Agreement and under any exhibit, document
or other instruments delivered pursuant hereto.
9. Governing Law. This Agreement shall be governed by the laws of the
-------------
State of New Jersey.
10. Entire Agreement. This Agreement, together with any other agreements
----------------
between the parties, constitutes the entire understanding between the parties
and supersedes all proposals, commitments, writings, negotiations and
understandings, oral and written, and all other communications between the
parties relating to the subject matter of this Agreement. This Agreement may not
be amended or otherwise modified except in writing duly executed by all of the
parties. A waiver by any party of any breach or violation of this Agreement
shall not be deemed or construed as a waiver of any subsequent breach or
violation thereof.
11. Counterparts. This Agreement may be executed in several counterparts,
------------
each of which shall be deemed an original, but all of which together shall
constitute one and the same document.
12. Severability. Should any part, term or condition hereof be declared
------------
illegal or unenforceable or in conflict with any other law, the validity of the
remaining portions or provisions of this Agreement shall not be affected
thereby, and the illegal or unenforceable portions of this Agreement shall be
and hereby are redrafted to conform with applicable law, while leaving the
remaining portions of this Agreement intact.
13. Successors and Assigns. Subject to the provisions of Section 6, this
----------------------
Agreement is solely for the benefit of the parties and their respective
successors and assigns. Nothing herein shall be construed to provide any rights
to any other entity or individual.
14. Headings. Section headings are for convenience only and do not
--------
control or affect the meaning or interpretation of any terms or provisions of
this Agreement.
6
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
Synetic, Inc.
Name: Xxxx X. Xxxxxx
Title: Senior Vice President -- Finance,
Chief Accounting Officer
CareInsite, Inc.
Name: Xxxx X. Xxxxxxx
Title: President and Chief Executive Officer
