Exhibit 10.5
AGREEMENT BETWEEN
UNITED PAYORS & UNITED PROVIDERS, INC.
AND
HEALTHEXTRAS, L.L.C.
This Agreement is made this 23rd day of December, 1998 by and between
United Payors & United Providers, Inc. ("UP&UP"), a Delaware Corporation, and
HealthExtras, L.L.C. ("HE").
Whereas, UP&UP has proprietary contracts with a national network of
physicians and hospitals ("Network");
Whereas, HE has developed a unique set of reinsurance benefits
("Benefits") that may be utilized to supplement and augment disability and
health insurance programs;
Whereas, HE has a contract with Xxxxxxxxxxx Xxxxx ("CR"), via the
Xxxxxxx Xxxxxx Agency, that stipulates CR will assist in the marketing of HE
products and services;
Whereas, HE wishes to market Network to selected populations as an HE
product on behalf of UP&UP; and
Whereas, HE may wish to market Benefits in conjunction with Network;
Now, Therefore, in consideration of the mutual agreements and covenants
herein contained, UP&UP and HE agree as follows:
A. GENERAL UNDERSTANDINGS
----------------------
1. UP&UP has developed various criteria ("Criteria") that those
entities and/or individuals wishing to utilize the Network
must comply with in order to access the Network. Such Criteria
may be revised unilaterally by UP&UP.
2. The Network developed by UP&UP consists of several thousand
hospitals and in excess of one hundred thousand physicians.
UP&UP may unilaterally add or delete individual hospitals and
physicians to, or from, the Network.
3. Those hospitals and physicians which comprise the Network
offer price concessions to those clients of UP&UP that meet
the Criteria.
4. HE is prepared to utilize CR in various advertising campaigns
("Campaigns") promoting Network and/or Benefits.
5. All products marketed and sold by HE as the result of
Campaigns shall conform with Criteria.
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6. In consideration of the Royalty Fee described in Section D. of
this Agreement, HE may utilize the Network in any of its
product offerings for the term of this Agreement and there
shall be no access fee charged to HE or its plan members for
utilization of the Network.
B. APPROVALS
---------
1. Any marketing and promotional materials developed by HE that
references the Network may only be utilized by HE after
receiving written approval by UP&UP that such marketing and
promotional materials are acceptable to UP&UP.
2. Any marketing and promotional materials developed by UP&UP
that references the Benefits may only be utilized by UP&UP
after receiving written approval by HE that such marketing and
promotional materials are acceptable to HE.
3. It is understood by UP&UP that any Campaign utilizing CR for
the marketing of the Network and/or other products may be
subject to the approval of the representatives of CR.
C. CAMPAIGNS AND EXCLUSIVITY
-------------------------
1. HE shall develop and implement various Campaigns to sell
products to individuals and families. Such Campaigns may
utilize the distribution channels of third parties including,
but not limited to, insurance companies, credit card issuing
banks and other financial institutions.
2. All costs incurred in developing and implementing Campaigns
shall be the responsibility of HE unless UP&UP agrees, in
writing, to incur all, or a portion of, such costs.
3. It is recognized that any Campaigns performed by HE to market
products may be in conjunction with HE marketing Benefits.
4. During the term of the Agreement HE shall not allow any entity
or individual to utilize CR, via the HE contract with the
Xxxxxxx Xxxxxx Agency, for the promotion of products or
services competitive to products or services offered by UP&UP.
5. During the term of this Agreement HE shall not, directly or
indirectly, market, promote and/or sell any products or
services other than Network, that offer discounts or price
concessions from physicians, hospitals or other medical
providers, other than products or services approved by UP&UP.
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D. COMPENSATION AND PAYMENT
------------------------
1. HE shall charge an annual fee ("Annual Fee") to all those
individuals and families that elect to purchase Benefits as a
result of Campaign. HE shall have the sole right to establish
the level of Annual Fee for those individuals and families
purchasing products or services as the result of the various
Campaigns developed and implemented by HE.
2. UP&UP shall be paid a portion of all Annual Fees earned and
collected by HE.
3. Those UP&UP portions ("Royalty Fee") of Annual Fees paid to
UP&UP for each individual and family shall be based on the
following schedule:
Royalty Fee Paid UP&UP For Each
Individual or Family Based Upon the
Annual Period Membership Computed on a Monthly Basis
----------------------------- --------------------------------------
Initial Year $12.00 ($1.00 per member per month)
First Subsequent Year $14.00 ($1.17 per member per month)
Second Subsequent Year $16.00 ($1.33 per member per month)
Additional Subsequent Years $18.00 ($1.50 per member per month)
E. PAYMENTS AND AUDIT
------------------
1. All monies due UP&UP from HE as the result of this Agreement
shall be paid within sixty (60) days of each calendar
year-end.
2. UP&UP and its affiliated companies and/or its agents may audit
all HE source documents and other records that may form the
basis of payments of UP&UP Royalty Fee by HE under this
Agreement.
F. TERM
----
1. This Agreement shall terminate on December 31, 2003. Any
payments due UP&UP under the terms of this Agreement shall
survive the termination of this Agreement.
2. If during the term of this Agreement HE causes UP&UP to
receive $25 million market value of HE common stock, then the
fees described in Paragraph D.3. will be eliminated.
G. NON-SOLICITATION
----------------
1. During the term of this Agreement, and for a period of one
year from the date of termination of this Agreement, HE shall
not solicit, hire, contract with or otherwise utilize, or
attempt to utilize UP&UP employees or consultants, unless
otherwise mutually agreed upon.
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2. During the term of this Agreement, UP&UP shall not solicit,
hire, contract with or otherwise utilize, or attempt to
utilize, HE employees or consultants unless otherwise mutually
agreed upon.
H. CONFIDENTIALITY
---------------
1. HE and UP&UP acknowledge that in fulfilling the
responsibilities set forth in this Agreement, HE and UP&UP
shall exchange confidential and proprietary information
concerning business and financial affairs of HE and UP&UP,
their subsidiaries and other affiliated companies. HE and
UP&UP agree not to disclose any such information at any time,
except as necessary to employees or agents of the parties or
as required by law.
2. HE and UP&UP agree that at any time, upon the request of the
other, each will promptly return any and all written or
magnetic media material containing, or reflecting, any
confidential or proprietary business or financial information
and will not retain any copies, extracts, or other
reproductions in whole or in part of such material.
I. ARBITRATION
-----------
1. HE and UP&UP shall attempt to resolve any controversy or claim
arising out of, or relating to, this Agreement by mutual
cooperation. Any controversy or claim arising out of, or
relating to, this Agreement which cannot be settled by the
mutual cooperation of the parties shall be settled by binding
arbitration rendered by the American Arbitration Association
standard commercial rules of arbitration.
2. In all cases submitted to arbitration, HE and UP&UP agree to
share equally the administrative fee, as well as the
Arbitrator's fees, if any, unless otherwise assessed by the
Arbitrator. The Arbitrator's fee shall be advanced by the
initiating party subject to final apportionment by the
Arbitrator in his or her award.
J. INDEMNIFICATION
---------------
1. HE shall indemnify and hold harmless UP&UP and its officers,
employees, agents and affiliates against any and all claims,
actions, expenses and liabilities (including reasonable
attorneys fees) related to any breach of HE's obligations
unless the claim, action, expense or liability is found in a
final judgement by a court of competent jurisdiction (not
subject to further appeal) to have resulted directly and
solely of UP&UP's performance under this Agreement.
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2. UP&UP shall indemnify and hold harmless HE and its officers,
employees, agents and affiliates against any and all claims,
actions, expenses and liabilities (including reasonable
attorneys fees) related to or arising from any breach of
UP&UP's obligations unless the claim, action, expense or
liability is found in a final judgement by a court of
competent jurisdiction (not subject to further appeal) to have
resulted directly and solely of HE's performance under this
Agreement.
K. MODIFICATIONS
-------------
1. All amendments or modifications to this Agreement shall be
mutually agreed to in writing by HE and UP&UP.
L. GOVERNING LAW
-------------
1. This Agreement shall be governed in all respects by the laws
of the State of Delaware.
M. SEVERABILITY OF INVALID PROVISIONS
----------------------------------
1. If any provision of this Agreement is held to be illegal,
invalid or unenforceable under any state or federal laws
effective during this term, such provision shall be fully
severable. The Agreement shall be construed and enforced as if
such illegal, invalid or unenforceable provision had never
comprised a part hereof, and the remaining provisions shall
remain in full force and effect despite such severance, unless
this Agreement is terminated by either party in accordance
with the terms of this Agreement, provided that the invalid
provision is not material to the overall purpose and operation
of this Agreement.
N. WAIVER
------
1. The waiver by HE or UP&UP of any breach of any provision of
this Agreement or warranty or representation herein set forth
shall not be construed as a waiver of any subsequent breach of
the same or any other provision.
2. The failure to exercise any right under this Agreement shall
not operate as a waiver of such right. All rights and remedies
provided for under this Agreement are cumulative.
O. HEADINGS
--------
1. The headings in this Agreement are for convenience of
reference only and shall not be considered in construing the
provisions hereof.
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P. ENTIRE AGREEMENT
----------------
1. This Agreement contains all of the terms and conditions agreed
upon by HE and UP&UP regarding the subject matter of this
Agreement. Any prior agreements, promises, negotiations, or
representations, either oral or written, relating to the
subject matter of this Agreement that are not expressly set
forth in this Agreement are of no force and effect.
Q. EMPLOYEES ON OTHER PARTY'S PREMISES
-----------------------------------
1. The employees or authorized agents of HE and UP&UP shall
comply with the other party's working rules and security
regulations at such time as one party's employees may be on
the premises of the other party.
R. NOTICE OF DEFICIENCY
--------------------
1. If either HE or UP&UP, in the opinion of the other, fails to
comply with one or more terms and conditions of this
Agreement, the aggrieved party shall give written notice of
deficiency to the other party. The party receiving such notice
shall have thirty (30) days from the receipt thereof to remedy
the deficiency in order to comply with the terms and
conditions of this Agreement. In the event said default is not
cured within the 30 day period, the non-defaulting party may
terminate the Agreement immediately.
S. NOTICES
-------
1. All notices provided by this Agreement shall be in writing and
shall be sent by United States certified mail, postage
prepaid, to the address of the other party which is set forth
in this Agreement, or to such other address as the party shall
designate in writing. Any notice shall be deemed to be
effective upon mailing.
If to HE, attention of: Xxxxx X. Xxxxx
Chief Financial Officer
HealthExtras, L.L.C.
0000 Xxxxxxxx Xxxxxxxxx
Xxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
If to UP&UP, attention of: Xxxxx Xxxxxxxxx
Vice President of Operations
United Payors & United
Providers, Inc.
0000 Xxxxxxxx Xxxxxxxxx
Xxxxx Xxxxx
Xxxxxxxxx, XX 00000
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T. BINDING ON SUCCESSORS
---------------------
1. This Agreement shall be binding upon and inure to the benefit
of HE and UP&UP and their respective successors and permitted
assigns.
U. ASSIGNMENT
----------
1. This Agreement may not be assigned by either party without the
prior written approval of the other party.
V. INDEPENDENT RELATIONSHIP
------------------------
1. None of the provisions of this Agreement are intended to
create, nor shall be deemed or construed to create, any
relationship between HE and UP&UP other than that of
independent entities contracting with each other solely for
the purposes of effecting the provisions of this Agreement.
2. The parties to this Agreement, and their respective officers,
directors, or employees, shall not be construed to be joint
ventures, or the agent, employee, or representative of the
other, except as specifically provided in this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement.
HE: HEALTHEXTRAS, L.L.C.
December 23, 1998 By: Xxxxx X. Xxxxx
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Date Signature: /s/ Xxxxx X. Xxxxx
----------------------------
Title: Chief Financial Officer
--------------------------------
UP&UP: UNITED PAYORS & UNITED PROVIDERS, INC.
December 23, 1998 By: Xxxxx Xxxxxxxxx
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Date Signature: /s/ Xxxxx Xxxxxxxxx
----------------------------
Title: Vice President of Operations
--------------------------------
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