EXHIBIT F EXECUTION COPY
MANAGEMENT INFORMATION SYSTEMS AND CLAIMS PROCESSING SERVICES
MANAGEMENT AGREEMENT
This Management Information Systems and Claims Processing Services
Management Agreement (this "Agreement") is entered into this 30th day of April,
1997, by and between FOHP, Inc., a New Jersey corporation ("FOHP"), and
Foundation Health Systems, Inc., a Delaware corporation, formerly known as
"Health Systems International, Inc." ("FHS")
RECITALS
A. FOHP is a New Jersey corporation which, together with its subsidiaries
(FOHP and such subsidiaries being referred to herein, collectively, as the "FOHP
Health Plans"), provides managed health care services in the Northeastern United
States.
B. FHS has entered into the Amended and Restated Securities Purchase
Agreement, dated February 10, 1997 as amended by an Amendment dated as of March
13, 1997 (referred to herein, as so amended, as the "Purchase Agreement"), with
FOHP and First Option Health Plan of New Jersey, Inc. (a New Jersey corporation
and a wholly-owned subsidiary of FOHP), pursuant to which FHS has committed to
purchase (on specified terms and conditions) convertible debentures of FOHP (the
"Debentures") in the aggregate principal amount of the sum of (1) $50 million
(subject to adjustment as set forth therein) and (2) the Phase-in Period
Management Fee Amount (as such term is defined in Section 4.2(a) of the General
Administrative Services Management Agreement, dated the date hereof, between FHS
and FOHP).
C. FHS owns, operates and manages various managed care entities
throughout the country. By entering into this Agreement, the FOHP Health Plans
desire to secure from FHS certain support services which are intended to enhance
the management information systems and claims processing capacity of the FOHP
Health Plans. The FOHP Health Plans will maintain ultimate organizational and
administrative capacity required in order to carry out its operations.
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and undertakings hereunder and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto hereby agree as follows:
AGREEMENT
SECTION 1. AUTHORITY OF THE PARTIES.
(a) The respective Boards of Directors of the FOHP Health Plans shall
retain the ultimate legal responsibility and authority over the assets and
operations of the FOHP Health Plans. FHS shall perform the services to be
performed by it hereunder in accordance, in all material respects, with
applicable health maintenance organization acts and other applicable laws,
rules and regulations (collectively, the "Applicable Laws"). It is the
intent of the parties hereto that this Agreement and the services to be
performed by FHS hereunder shall at no time serve to interfere with the
ability of the Boards of Directors of the FOHP Health Plans to carry out
their respective duties and responsibilities under the Applicable Laws.
FHS shall have the authority and responsibility described in this Agreement
and otherwise as mutually agreed upon by the parties hereto from time to
time. FOHP agrees that, during the term hereof, the FOHP Health Plans shall
provide employee staffing sufficient to perform the functions and conduct
the business and operations of the FOHP Health Plans in a manner consistent
with the current functions and conduct of the business and operations of
the FOHP Health Plans (other than the corporate, administrative and
consultative services to be performed hereunder by FHS). FHS' services in
connection with the activities shall be strictly limited to those
specifically provided for herein.
(b) FHS shall have the right to designate and employ the business
executives in charge of FOHP and the other FOHP Health Plans and each
executive in charge of a principal business division, unit or function
(including, without limitation, finance, legal, operations, sales and
marketing, information systems, medical management, and provider
contracting and relations), all of which executives would report to FHS'
senior management. All such executives shall be appointed by the FOHP
Board of Directors to the offices requested by FHS; provided, however, that
such Board of Directors may reject any proposed appointee it reasonably
finds to be of insufficient ethical character for such office; and
provided, further, that such Board of Directors may, after due consultation
with FHS, based on a reasonable determination of intentional and material
unethical behavior or insubordination or willful misconduct or gross
negligence, remove any such executives.
(c) FHS acknowledges that FOHP will continue to employ an internal
auditor who will report directly to the Board of Directors of FOHP and who
will perform functions consistent with those performed thereby prior to the
Initial Closing Date (as such term is defined in the Purchase Agreement).
SECTION 2. CONDITIONS PRECEDENT.
This Agreement shall not become effective until the later of (a) the
receipt of all necessary governmental approvals or (b) the receipt by FOHP from
FHS of notice of effectiveness of this Agreement.
SECTION 3. MANAGEMENT INFORMATION SYSTEMS AND CLAIMS PROCESSING SERVICES.
3.1 Claims Processing, Record Keeping and Data Processing Services. FHS
shall provide all claims processing, record keeping and data processing services
to the FOHP Health Plans that are currently provided by Health Systems
Integration, Inc. ("HSII") pursuant to the current Managed Care Management
Information Services Agreement, between FOHP and HSII (as amended), a copy of
which is attached hereto as Exhibit A (the "HSII Agreement"). Except as
specifically herein provided to the contrary, the FOHP Health Plans shall not
bear any cost or expense with respect to the facilities, services and personnel
to be provided by FHS hereunder. FHS shall perform its obligations under this
Agreement in accordance with the performance standards required of HSII under
the HSII Agreement; provided, however, that (i) FOHP shall use all reasonable
efforts to cause HSII to provide reasonable transition assistance, and
(ii) performance requirements shall commence 90 days following the effective
date of this Agreement to the extent HSII does not provide sufficient transition
assistance in the reasonable judgment of FHS.
3.2 Other Services. In addition to the services set forth in Section 3.1
hereof, FHS shall provide such other related services as are mutually agreed
upon between the parties.
SECTION 4. COMPENSATION.
4.1 Services Fees. In consideration of the services provided by FHS
hereunder, FOHP shall (a) pay FHS the fees and charges set forth on Schedule 1
hereto which shall be delivered by FHS to FOHP concurrently with the notice of
effectiveness to be delivered under Section 2 hereof, which fees and charges
shall be no greater than the compensation currently paid to HSII under the HSII
Agreement, and (b) reimburse FHS for such costs and expenses as to which HSII is
entitled to reimbursement under the HSII Agreement and documents related
thereto. Such compensation for any given month shall become payable within 10
days after the end of such month, without deferral.
SECTION 5. COMPLIANCE WITH APPLICABLE LAWS.
Notwithstanding any other provision of this Agreement to the contrary:
5.1 Availability of Records. Upon request of any of the FOHP Health
Plans, FHS shall make its books and records pertaining to FHS' services
furnished under the terms of this Agreement available to the FOHP Health Plans.
FHS shall have access to any and all of FOHP Health Plan's books and records
reasonably necessary to render the services contemplated to be provided by FHS
under this Agreement.
5.2 Subcontracts. FHS shall ensure that each contract between FHS and any
subcontractor performing portions of FHS' obligations hereunder contain
provisions to the following effect:
(a) that such subcontractor shall make all applicable books and
records available for inspection, examination and copying by the FOHP
Health Plans; and
(b) that the subcontractor shall retain such books and records for a
reasonable period of time following the termination of such subcontract.
The subcontracting by FHS of any of its obligations to FOHP hereunder shall not
relieve FHS of any such obligations to FOHP.
5.3 Confidentiality. FHS shall maintain the confidentiality of any of the
FOHP Health Plans enrollment information and medical records of enrollees of any
of the FOHP Health Plans as required by the Applicable Laws and shall not
disclose such information to any person without FOHP's prior consent.
5.4 Grievance Procedures and Other Policies and Procedures. FHS shall
assist the FOHP Health Plans in complying with the grievance procedures and
other policies and procedures applicable to FOHP under the Applicable Laws.
5.5 Enrollee Responsibility for Obligations of FOHP. FHS shall under no
circumstances look to enrollees of any of the FOHP Health Plans for payment of
obligations of FOHP to FHS hereunder, regardless of the insolvency of FOHP or
the inability of FOHP to pay.
5.6 Books and Records of FOHP. FOHP and FHS shall not, and FOHP shall
cause the other FOHP Health Plans to not, remove any of the books or records of
any of the FOHP Health Plans from the relevant location thereof unless necessary
consents under the Applicable Laws are obtained and such Applicable Laws are
otherwise complied with.
5.7 State and Federal Regulator Access. FHS and FOHP shall, and FOHP
shall cause the other FOHP Health Plans to, provide governmental agencies access
to such records as such governmental agencies may reasonably request, pursuant
to the Applicable Laws.
SECTION 6. MISCELLANEOUS.
6.1 Term. The initial term of this Agreement will commence on the date
hereof or, if later, upon the receipt of all necessary regulatory approvals, and
shall continue until (a) the fifth anniversary of the date hereof, subject to
automatic one-year renewal terms on the same terms and conditions hereof unless
either party hereto provides written notice of non-renewal to the other party
hereto at least two years prior to the expiration of the then-current term of
this Agreement; (b) termination in accordance with this Section 6.1 by one of
the parties hereto after the material breach of this Agreement by the other
party hereto; or (c) termination by one of the parties hereto after the other
party hereto (i) becomes insolvent, (ii) voluntarily seeks, consents to or
acquiesces in the benefit or benefits of any Debtor Relief Law (as hereinafter
defined) or (iii) becomes party to (or be made the subject of) any proceeding
provided by Debtor Relief Law, other than as a creditor or claimant (unless in
the event such proceeding is involuntary, the petition instituting the same is
dismissed within 45 days of filing the same). In the event of a material breach
by either party as described in clause (b) of this Section 6.1, the non-
defaulting party shall provide written notice upon the defaulting party (the
"Default Notice") specifying the nature of the breach. In the event such breach
is not cured within 15 days after service of the Default Notice, this Agreement
shall automatically terminate with the election of the non-defaulting party upon
the giving of a written notice of termination to the defaulting party, such
notice to occur not later than 45 days after service of the Default Notice;
provided, however, that if the nature of the breach is such that it cannot be
cured within 15 days, but is capable of being cured, then this Agreement cannot
be terminated by the non-defaulting party so long as the defaulting party is
taking or has taken reasonable steps within the 45-day period to cure the breach
and such steps are being diligently pursued to the reasonable satisfaction of
the non-breaching party. As used herein, "Debtor Relief Law" means the
Bankruptcy Code of the United States of America and all other applicable
insolvency and other similar laws from time to time in effect affecting the
rights of creditors generally.
6.2 Assignment.
(a) FHS shall not have the right to assign this Agreement or any
right or obligation hereunder (other than to a wholly-owned or majority-
owned subsidiary of FHS), without the prior written consent of FOHP. FOHP
may not assign this Agreement or any right or obligation hereunder without
FHS' prior written consent. A merger or business combination of FHS with
or into another party shall not be considered an assignment for purposes of
this Section 6.2.
(b) All of the terms of this Agreement shall be binding upon, inure
to the benefit of and be enforceable by the heirs, personal
representatives, successors and permitted assigns of the parties hereto.
6.3 Notices. Any notice or other communication required or contemplated
to be delivered under this Agreement by either party hereto to the other party
hereto shall be in writing and shall be deemed effectively given on the date of
receipt thereof if personally delivered, telecopied or telexed to the party to
which such notice is directed, or on the third day after mailing, if mailed to
such party, by registered or certified mail, postage prepaid, addressed to the
following addresses:
(a) If to FHS: Foundation Health Systems, Inc.
000 Xxxxx Xxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Attn: Senior Vice President,
General Counsel and
Secretary
Fax: (000) 000-0000
(b) If to FOHP: FOHP, Inc.
0 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxxxx 00000
Attn: Senior Vice President,
General Counsel and
Secretary
Fax: (000) 000-0000
with a copy to:
Shereff, Friedman, Xxxxxxx &
Xxxxxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attn: Xxxxxxx X. Xxxxxxxx, Esq.
Fax: (000) 000-0000
and an additional copy to:
Xxxxxxxx, Xxxxxxxx & Xxxxxx, P.C.
000 Xxxx Xxxx Xxxx
X.X. Xxx 000
Middletown, New Jersey 07748
Attn: Xxxx X. Xxxxxxx, Esq.
Fax: (000) 000-0000
or to such other address as either party hereto may designate in writing.
6.4 Amendments. This Agreement may not be amended other than by written
consent executed by both parties hereto.
6.5 Headings. The headings contained herein are for convenience of
reference only and are not intended to define, limit or describe the scope or
intent of any provision of this Agreement.
6.6 No Waiver. Neither the failure by an aggrieved party hereunder to
insist upon strict performance of any covenant, agreement, term or condition of
this Agreement or to exercise any remedy upon a breach thereof, nor the
acceptance of full or partial performance during the continuance of any such
breach by the other party hereto, shall constitute a waiver of any such
covenant, agreement, term or condition or any such breach.
6.7 Further Instructions or Action. Each party hereto agrees that it will
execute and deliver such further instruments and will take such other actions as
may be reasonably necessary in order to effectively discharge, perform and carry
out its obligations and agreements hereunder.
6.8 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New Jersey.
6.9 Proprietary Information. It is understood that, during the term of
this Agreement, FHS will have access to certain confidential and proprietary
information concerning FOHP and the FOHP Health Plans, and FOHP shall have
access to certain confidential and proprietary information concerning FHS,
including management information system information and certain technology.
During the term of this Agreement and thereafter, FOHP shall, and FOHP shall
cause the FOHP Health Plans to, take all reasonable precautions to maintain the
confidentiality of any non-public information provided by FHS and shall not
disclose such information to any third party without FHS' prior written consent
or use such information for any purpose other than the purposes contemplated
hereby. During the term of this Agreement and thereafter, FHS shall take all
reasonable precautions to maintain the confidentiality of any non-public
information provided by FOHP and the FOHP Health Plans and shall not disclose
such information to any third party without the prior written consent of FOHP
and the FOHP Health Plans or use such information for any purpose other than the
purposes contemplated hereby. If this Agreement is terminated, both parties
shall forthwith destroy all such non-public written information supplied by the
other party hereto, together with all notes, summaries or other written material
derived from such information, and shall confirm to the other party hereto that
it has not kept copies of such information, notes, summaries or written
materials.
6.10 Relationship. It is mutually understood and agreed that, in
performing duties and obligations under this Agreement, no relationship of
employment (other than employment by FHS of executives of the FOHP Health Plans
in accordance with Section 1(b) hereof), partnership or joint venture is created
by this Agreement.
6.11 Dispute Resolution. The parties hereto hereby waive all rights to a
trial by jury in any dispute relating to this Agreement. In the event of any
dispute, controversy, claim or difference which arises out of or relates to this
Agreement, including, without limitation, disputes about fees, services or
performance of services hereunder, either party hereto may give written notice
of an intention to submit such matter to binding arbitration unless the matter
is resolved within two weeks or such additional period of time as shall be
agreed upon by the parties hereto. If the matter cannot be resolved within such
period through correspondence and mutual consultation of the parties hereto, it
shall be finally settled by arbitration in accordance with the Rules of Civil
Arbitration of the American Arbitration Association ("AAA"). Each party shall
select an arbitrator with expertise in managed care organizations and such
arbitrators shall jointly select a third arbitrator or, if such arbitrators
cannot agree, the AAA shall select the third arbitrator; provided, however, that
such third arbitrator shall not have a residence or office in the State of New
Jersey. If either party fails to select an arbitrator within 20 days after
service of the notice of demand for arbitration, then the AAA shall select such
arbitrator. Arbitration proceedings shall be held in the State of New Jersey
unless otherwise agreed to by the parties in writing. The decision of a
majority of the arbitrators shall be final and binding upon the parties hereto,
shall not be subject to appeal and shall deal with the question of costs of the
arbitration and all matters related thereto. Judgment upon the award or
decision rendered by the arbitrator may be entered in any court having
jurisdiction thereof, or application may be made to such court for a judicial
recognition of the arbitration award or an order of enforcement thereof, as the
case may be. The agreement to arbitrate set forth in this Section 6.11 shall be
specifically enforceable by the parties hereto, and such parties shall
acknowledge and agree that they intend that all disputes, controversies or
claims of any kind covered by this Section 6.11, including disputes over whether
and how to arbitrate, shall be arbitrated. This Section 6.11 shall survive
termination of this Agreement.
6.12 Indemnification.
(a) (i) FHS agrees to defend, indemnify and hold the FOHP Health
Plans and their respective officers, directors, shareholders, employees and
agents, and their respective heirs, executors, personal representatives,
successors and permitted assigns harmless from and against any and all
claims, actions, damages, obligations, losses, liabilities, costs and
expenses (including attorneys' fees, other professional fees, costs of
collection and other costs of defense (collectively "Damages")) resulting
from FHS' gross negligence or willful misconduct.
(ii) FOHP agrees to defend, indemnify and hold FHS and its
officers, directors, shareholders, employees and agents, and their
respective heirs, executors, personal representatives, successors and
permitted assigns harmless from and against any and all Damages resulting
from FHS' execution of this Agreement or performance of services hereunder,
provided that no such indemnification shall be provided to the extent that
such Damages result from FHS' gross negligence or willful misconduct.
(b) Any person or entity seeking indemnity under this Section 6.12
(an "Indemnified Party") shall provide to the party from which indemnity
may be sought (the "Indemnifying Party") written notice, specifying in
reasonable detail the basis of the claim, (i) within 60 days after the
Indemnified Party shall have become aware of facts constituting the basis
for such claim, or (ii) in the case of any action or proceeding by a third
party, within 15 days after the service of such action or proceeding upon
the Indemnified Party; provided, however, that any failure to provide such
timely notice shall only relieve the Indemnifying Party from liability with
respect to such claim to the extent, if any, the Indemnifying Party is
precluded from effectively defending an indemnified claim or otherwise
substantially prejudiced by such delay in providing notice.
(c) The provisions of this Section 6.12 shall survive the termination
of this Agreement.
6.13 Entire Agreement. This Agreement, along with the General
Administrative Services Management Agreement, dated the date hereof, between
FOHP and FHS contain the entire agreement between the parties hereto with
respect to management services, and no prior oral or written, and no
contemporaneous oral, representations or agreements between the parties with
respect to the subject matter of this Agreement shall be of any force or effect.
6.14 Counterparts. This Agreement may be executed in multiple
counterparts, each of which when so executed and delivered shall be an original,
but all of such counterparts shall together constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
FOHP, INC.
By:________________________________
Name: Xxxxxx Xxxxxx
Title: Acting President and Chief Executive Officer and General Counsel
FOUNDATION HEALTH SYSTEMS, INC.
By:________________________________
Name:
Title:
