Exhibit 10(a)
SETTLEMENT AND RELEASE AGREEMENT
THIS SETTLEMENT AND RELEASE AGREEMENT is made and entered into effective
as of June __, 1998, by and among CAREADVANTAGE, INC., a Delaware corporation,
located at 000-X Xxxxx 0 Xxxxx, Xxxxxx, Xxx Xxxxxx 00000 ("CAI"), CAREADVANTAGE
HEALTH SYSTEMS, INC., a Delaware corporation, located at 000-X Xxxxx 0 Xxxxx,
Xxxxxx, Xxx Xxxxxx 00000 ("CAHS"), CONTEMPORARY HEALTHCARE MANAGEMENT, INC., a
New Jersey corporation, located at 000-X Xxxxx 0 Xxxxx, Xxxxxx, Xxx Xxxxxx 00000
("CHCM"), BLUE CROSS AND BLUE SHIELD OF NEW JERSEY, INC., a New Jersey health
service corporation, located at 0 Xxxx Xxxxx Xxxx, Xxxxxx, Xxx Xxxxxx 00000
("BCBSNJ"), ENTERPRISE HOLDING COMPANY, INC., a New Jersey corporation, located
at 0 Xxxx Xxxxx Xxxx, Xxxxxx, Xxx Xxxxxx 00000 ("EHC"), and CW VENTURES II,
L.P., a New York limited partnership, located at 0000 Xxxxx Xxxxxx, Xxx Xxxx,
Xxx Xxxx 00000 ("CW") (with respect to Section 10 only).
RECITALS:
WHEREAS, BCBSNJ and CW beneficially own, in the aggregate, approximately
__% of the issued and outstanding shares of capital stock of CAI;
WHEREAS, on or about March 22, 1996, an action entitled Xxxxxxx X. Xxxxxx
v. BCBSNJ and CHCM was filed in the Law Division of the Superior Court, Xxxxxx
County, New Jersey, Docket No. HUD-L-2540-96 (the "Bodino Action");
WHEREAS, the complaint in the Bodino Action alleged, inter alia, that
representations made on behalf of BCBSNJ by an employee of CHCM led Xx. Xxxxxx'x
surgeon to believe that contractually excluded heart transplant coverage was
available;
WHEREAS, at the time of the events underlying the Bodino Action, CHCM was
wholly-owned by EHC, and was an indirect subsidiary of BCBSNJ;
WHEREAS, at the time of the events underlying the Bodino Action, CHCM was
engaged by CAI and CAHS to provide certain staff and assistance to CAHS in
support of CAHS' obligation, guaranteed by CAI, to provide services to BCBSNJ
under the terms of an Interim Services Agreement, dated as of April 1, 1995 (the
"Interim Services Agreement") among BCBSNJ, CHCM, CAI and CAHS;
WHEREAS, by letter dated February 15, 1996, counsel for Xx. Xxxxxx gave
written notice to CHCM contesting the denial of coverage for the heart
transplant and threatening litigation against CHCM and BCBSNJ;
WHEREAS, on February 22, 1996 (the "Acquisition Date"), CAHS purchased all
of the issued and outstanding stock of CHCM from EHC pursuant to the Stock
Acquisition Agreement, dated February 22, 1996 (the "Acquisition Agreement");
WHEREAS, neither CAI nor CAHS maintained insurance to cover claims against
BCBSNJ or CHCM arising from events occurring prior to the Acquisition Date;
WHEREAS, counsel for BCBSNJ is presently defending the Bodino Action on
behalf of BCBSNJ and CHCM;
WHEREAS, BCBSNJ has filed a third party lawsuit against Xx. Xxxxxx'x
surgeon and the admitting hospital and has denied liability in all respects;
WHEREAS, BCBSNJ and CHCM have filed a motion for summary judgment as to
all claims, and Xx. Xxxxxx, the surgeon and the admitting hospital have filed
cross-motions for summary judgment against BCBSNJ and CHCM as to all claims;
1
WHEREAS, all motions for summary judgment are returnable for hearing on
July 24, 1998;
WHEREAS, by letter to CAI dated April 23, 1996, BCBSNJ agreed to the
representation of CHCM and placed CAI on notice of a potential claim by BCBSNJ
for indemnification against CAI and CAHS under the Interim Services Agreement;
WHEREAS, by letter to EHC dated February 20, 1997, CAI, on behalf of
itself and CAHS, requested indemnification pursuant to the Acquisition Agreement
for damages sustained by CAI and CAHS as a result of the Bodino Action;
WHEREAS, by letter to CAI dated February 26, 1997, BCBSNJ, on behalf of
itself and EHC, denied liability for indemnification of CAI and CAHS;
WHEREAS, by letter to BCBSNJ dated March 6, 1997, CAI agreed to BCBSNJ's
continued representation of CHCM, subject to a reservation of rights under the
Interim Services Agreement;
WHEREAS, in a letter to CAI and CAHS dated May 28, 1998, BCBSNJ provided
formal notice of a claim for indemnification by CAI and CAHS pursuant to the
Interim Services Agreement for damages arising in connection with the Bodino
Action;
WHEREAS, on June 2, 1998, counsel to CAI responded to BCBSNJ's letter,
whereby CAI denied that BCBSNJ is entitled to indemnification by CAI and CAHS
under the Interim Services Agreement and reasserted its own claim to
indemnification by EHC pursuant to the Acquisition Agreement;
WHEREAS, by letter to CAI's counsel dated June 15, 1998, BCBSNJ again
denied liability for indemnification of CAI and CAHS and proposed a settlement
of the dispute regarding alleged indemnification claims among the parties; and
WHEREAS, the parties hereto wish to allocate the potential liability of
each party with respect to the Bodino Action and to otherwise agree to the
mutual release of all claims and damages relating to the Bodino Action.
NOW, THEREFORE, the undersigned parties, intending to be legally bound,
hereby agree as follows:
1. SETTLEMENT OF INDEMNIFICATION CLAIMS.
(a) BCBSNJ hereby agrees to indemnify and hold harmless CAI, CAHS and CHCM
from and against any and all losses, liabilities or obligations, payments or
other disbursements, suits, claims, awards, demands, settlement payments, costs
and expenses which may be imposed on, incurred by or asserted against any of
CAI, CAHS and CHCM in connection with the claims, facts and circumstances which
are the subject of the Bodino Action, other than internal costs, attorneys' fees
and other expenses incurred in connection with the Bodino Action or this
Agreement; provided, however, that BCBSNJ shall not be responsible for, and
shall not indemnify CAI, CAHS and CHCM pursuant to this Section 1(a) for, an
amount equal to the lesser of (i) five percent (5%) of any amount as to which
BCBSNJ, CAI, CAHS and CHCM are or may be individually or collectively held
liable in the Bodino Action (whether by judgment, settlement or otherwise), or
(ii) $50,000.
(b) BCBSNJ shall be entitled to collect and retain all insurance proceeds,
if any, in connection with the Bodino Action.
2. PARTICIPATION IN DEFENSE. CAI, CAHS and CHCM shall be entitled to
participate in the defense of the Bodino Action; provided, however, that (i) all
substantive and procedural activities undertaken on behalf of CAI, CAHS and CHCM
in connection with such defense (including but not limited to a determination of
whether to settle or adjudicate such action and the amount of any potential
2
settlement) shall be subject to prior approval by BCBSNJ in its sole discretion,
which shall not be unreasonably withheld; and (ii) prior to such time, CAI, CAHS
and CHCM shall enter into a joint defense agreement with BCBSNJ reasonably
acceptable to BCBSNJ and its counsel.
3. COOPERATION. CAI, CAHS and CHCM agree to fully and completely cooperate
and assist counsel for BCBSNJ in the defense of the Bodino Action. Such
cooperation shall include furnishing documentation, participating in
depositions, testifying at trial and making current employees reasonably
available to counsel for BCBSNJ for purposes of defending against the Bodino
Action, at all times seeking to minimize business disruption to CAI, CAHS and
CHCM.
4. PAYMENTS. All payments required to be made by or on behalf of CAI, CAHS
or CHCM pursuant to this Agreement shall be made within thirty (30) days of
notice from BCBSNJ that the Bodino Action has been resolved, whether by
judgment, settlement or otherwise.
5. RELEASE BY BCBSNJ AND EHC. For and in consideration of the obligations
recited herein, BCBSNJ and EHC, jointly and severally, hereby release CAI, CAHS
and CHCM from any and all debts, obligations, covenants, agreements, contracts,
suits, actions, causes of action, damages, claims or demands with respect to the
claims, facts and circumstances which are the subject of the Bodino Action, now
known or hereafter discovered, asserted or unasserted, contingent or otherwise,
which either of BCBSNJ or EHC ever had, now has or may now or hereafter claim to
have. Notwithstanding the foregoing, CAI, CAHS and CHCM shall not be released
from any obligation to BCBSNJ under this Agreement.
6. RELEASE BY CAI, CAHS AND CHCM. For and in consideration of the
obligations recited herein, CAI, CAHS and CHCM, jointly and severally, hereby
release BCBSNJ and EHC from any and all debts, obligations, covenants,
agreements, contracts, suits, actions, causes of action, damages, claims or
demands with respect to the claims, facts and circumstances which are the
subject of the Bodino Action, now known or hereafter discovered, asserted or
unasserted, contingent or otherwise, which any of CAI, CAHS and CHCM ever had,
now has or may now or hereafter claim to have. Notwithstanding the foregoing,
BCBSNJ shall not be released from any obligation to CAI, CAHS and/or CHCM under
this Agreement.
7. BINDING NATURE. This Agreement, including the releases set forth
herein, shall be binding upon, and inure to the benefit of each released party's
successors, assigns, officers, directors, agents, employees, heirs, executors
and/or administrators of any such assigns, officers, directors, agents or
employees.
8. NO ADMISSION OF LIABILITY. The parties recognize and acknowledge that
the execution of this Agreement is not an admission of liability by any party to
any other party and that this Agreement is executed solely in the interest of
settling disputed matters.
9. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement among
the parties hereto, and there are no other written or oral understandings or
agreements connected with it that are not incorporated herein.
10. GOVERNING LAW. This Agreement is to be construed in accordance with
the laws of the State of New Jersey. Any action to enforce this Agreement shall
be brought before a state court of competent jurisdiction, within the State of
New Jersey.
11. CONSENT OF CW. Pursuant to Section 1.3 of the Stockholders' Agreement,
dated as of February 22, 1996, among EHC (as predecessor to BCBSNJ), CW and XXX,
XX hereby acknowledges and consents to the terms of this Agreement and the
transactions contemplated hereby.
3
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals on
the date set forth above, intending to be legally bound:
CAREADVANTAGE, INC.
By: /s/ Xxxxxx X. Xxxxx
------------------------
Name: Xxxxxx X. Xxxxx
Title: President/CEO
CAREADVANTAGE HEALTH
SYSTEMS, INC.
By: /s/ Xxxxxx X. Xxxxx
------------------------
Name: Xxxxxx X. Xxxxx
Title: President/CEO
CONTEMPORARY HEALTHCARE
MANAGEMENT, INC.
By: /s/ Xxxxxx X. Xxxxx
------------------------
Name: Xxxxxx X. Xxxxx
Title: President/CEO
BLUE CROSS AND BLUE SHIELD OF
NEW JERSEY, INC.
By: /s/ Xxxxx Xxxxxxx Connor
------------------------
Name: Xxxxx Xxxxxxx Xxxxxx
Title: Vice President
ENTERPRISE HOLDING COMPANY, INC.
By: /s/ Xxxxx Xxxxxxx Connor
------------------------
Name: Xxxxx Xxxxxxx Xxxxxx
Title: Secretary
CW VENTURES II, L.P.
By: /s/ Xxxxx Xxxxxxxx
-------------------------
Name: Xxxxx Xxxxxxxx
Title: General Partner
4