1
Exhibit 10.36
AGREEMENT
AGREEMENT made as of the 23rd day of March, 1998 by and between
HEALTHCARE MANAGEMENT SYSTEMS, INC., a Tennessee corporation, whose address is
0000 Xxxx Xxx Xxxxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxxx 00000 ("HMS") and NEW
AMERICAN HEALTHCARE CORPORATION, a Tennessee, whose address is 000 Xxxx Xxxx
Xxxxx, Xxxxxxxxx, Xxxxxxxxx 00000 (Company").
PREMISES:
A. HMS develops and licenses proprietary computer software modules
designed for the management of hospital records and data and, in addition, sells
the computer hardware necessary to operate such software.
B. HMS agrees to license the use of its proprietary software listed on
Exhibit A the "Software", which is attached hereto and incorporated herein by
reference, and Company agrees to accept such license.
C. HMS agrees to sell and Company agrees to purchase the computer
hardware listed on Exhibit B.1 the "Hardware", which is attached hereto and
incorporated herein by reference.
D. Company agrees that the Software and Hardware will be installed at
the locations ("Installation Sites") shown on Exhibit E, including certain
hospitals owned, leased or operated by the Company (the "Hospitals").
NOW THEREFORE, for and in consideration of the premises, the payment of
the license fee, installation cost and purchase price listed below and the
mutual promises and covenants contained herein, the parties agree as follows:
1. PURCHASE PRICE AND PAYMENT TERMS. The parties agree to the paces to be
paid upon the terms set forth on Exhibits A, B and C, which is attached
hereto and incorporated herein by reference.
It is acknowledged by Company that the purchase pace is valid for the Software
modules on Exhibit A, on which payment is made on initial software delivery
until December 31,1998. After December 31, 1998, HMS may increase the purchase
pace of the financial/clinical software listed on Exhibit A by an amount equal
to fifty percent (50%) of the published HMS list price or an average annual
increase of seven percent (7%) whichever is lower. Optional Applications listed
on
2
Exhibit A shall increase no more than an average annual seven percent (7%) over
the first five (5) years.
2. GENERAL TERMS AND CONDITIONS.
2.1. DEFINED TERMS.
2.1.1. The forms "Company" and "HMS" are intended to
describe parties to the Agreement and are not used in
their ordinary context.
2.1.2. Specific words used in this Agreement shall have the
meaning assigned to them in this Agreement.
2.13. "Employee" means an individual, on whose behalf
Company or HMS withholds income taxes or makes
contributions under the Federal Insurance
Contributions Act or similar statutes.
2.1.4. "Documentation" shall mean user/operator manuals and
appropriate record layouts as provided to the
Company.
2.1.5. "Software" means all software modules listed on
Exhibit A and any modifications subsequently made
thereto.
2.1.6. "Hardware" shall mean the computer hardware listed
and identified on Exhibit B.
2.1.7. "Initial Application Load" shall mean when the
Company authorizes HMS to deliver the Software to the
Installation Site and the Software is loaded onto the
Hardware at the Installation Site.
2.1.8. "Initial Application Go-Live" shall mean first use of
the Software in a, production environment.
2.2. NOTICES. All notices given under this Agreement shall be in
writing and delivered by a national courier service or by
certified mail, return receipt requested, by overnight courier
with exception of monthly invoices, or hand delivered to the
address of the recipient shown above. All notices shall be
deemed given when actually received or three (3) days after
deposit in the US. Mail as provided above, all charges
prepaid? whichever first occurs. Either party may change its
address by notice to the other party, given as provided above.
2.3. MODIFICATION. This Agreement may not be modified except by
written amendment executed by both HMS and Company. No
representative of HMS has
2
3
any authority to bind HMS to any affirmation, representation
or warranty other than the express terms of this Agreement.
2.4. PARTIES BOUND. This Agreement binds and inures to the benefit
of the parties and their respective successors and permitted
assigns. This Agreement binds Company and HMS and each of
their respective employees, affiliated and subsidiary firms,
corporations or other organization with which Company may
enter a joint venture or other cooperative enterprise which
utilizes the HMS Software.
2.5. ASSIGNMENT. Neither this Agreement nor the rights and
obligations of the parties hereto may be assigned without the
prior express written consent of the other party hereto;
provided, however, that Company may assign its rights
hereunder, but not its obligations to its direct and indirect
subsidiaries, and provided further, that the Company may
assign this Agreement to any person or entity that acquires
all or substantially all of the assets of the Company provided
that the acquire executes and delivers to HMS an agreement to
be bound by the terms of this Agreement. Notwithstanding the
foregoing, Company may assign its rights under this Agreement
with respect to a particular Hospital to any person or entity
that acquires all or substantially all of the assets of the
Hospital, provided that the acquiror delivers to HMS (within
thirty (30) days of the effective date of the acquisition),
(i) an amount equal to forty (40%) percent of the then current
list price for those software modules assigned and (ii) an
executed original of HMS then current form of agreement. The
parties agree that the requested consent to any such
assignment shall not be unreasonably withheld. Any attempt
by either party to assign any portion of this Agreement
without the prior express written consent of either party
shall render such assignment voidable at the election of
either party.
2.6. SEVERABILITY. If any provision of this Agreement is declared
to be invalid or unenforceable by a court of competent
jurisdiction, such provisions shall be severed here from and
the remaining provisions shall remain binding with the same
effect as if such provisions were deleted.
2.7. REMEDIES UPON BREACH.
2.7.1. Both parties agree that upon the occurrence of a
default pursuant to Section 2.15, the party failing
to perform shall be liable to the other party for all
attorneys fees, court costs and other reasonable
expenses incurred by the nondefaulting party in
connection with enforcing any part of this Agreement
in addition to any other right or remedy to which
such party may be entitled.
2.7.2. If Company attempts to use, copy, license or convey
the HMS Software in a manner contrary to the terms of
this Agreement or in competition with HMS or in
derogation of HMS's proprietary rights, whether these
rights are
3
4
explicitly stated herein, determined by law or
otherwise, HMS shall have, in addition to any other
remedies available to it under applicable state or
federal laws, the right to injunctive relief
enjoining such action, Company hereby acknowledging
that all other remedies are inadequate.
2.8. LAW & JURISDICTION. The Agreement shall be construed and
governed under the laws of the United States of America and
the State of Tennessee applicable to agreements entered into
and wholly performed in such state. The parties further agree
that any and all disputes as to enforcement or construction of
any of the terms and conditions of this Agreement shall be
brought in the state or federal courts in Davidson County,
Nashville, Tennessee, which courts shall have exclusive
jurisdiction over all such matters.
2.9. NECESSARY DOCUMENTS. If additional documents are reasonably
required or desired to effectuate the terms end conditions of
this Agreement either party shall execute such documents
promptly upon the request of the other.
2.10. NOTIFICATION OF INFRINGEMENT CLAIMS. HMS shall indemnify
Company with respect to any claim that the use of the HMS
Software for its intended purpose according to the
Documentation, exclusive of any use in connection with any
other software or hardware not acquired from HMS, and in
accordance with this Agreement infringes upon the rights of
any third party. Failure of the Company to comply with the
notice requirements and other provisions of this Section shall
not relieve HAS of its indemnification obligations hereunder,
but may create a cause of action for beach for damages
directly attributable thereto.
Notice of Asserted Liability. Within thirty (30) calendar days after
Company receives notice or obtains knowledge of any claim, demand, fact
or circumstance that the use by the Company of the Software excluding
any use by Company in violation of this Agreement constitutes an
infringement of a third party's rights or properties (an "Asserted
Liability"), the Company will give notice (the "Claims Noticed") to HMS
(the "Indemnifying Party"). The Claims Notice must describe the
Asserted Liability in reasonable detail, and must indicate the amount
(estimated, if necessary and to the extent feasible) of the Loss that
has been or could be suffered by the Company.
At any time following receipt of the Claims Notice, HMS may elect to
compromise or defend any Asserted Liability which arises from the claim
or demand of a third party against the Company, at its own expense and
by its own counsel, the same extent that an election with respect to
compromise or defense is available to the Company. If HMS elects to
compromise or defend such an Asserted Liability, it will within fifteen
(15) calendar days after receipt of the Claims Notice notify the
Company of its intent to do so. Pending receipt of HMS notice of
election, the Company will use its best efforts to minimize the amount
of Loss from the Asserted Liability, and will take all reasonably
necessary interim actions to protect the
4
5
interests of itself and HMS, including but not limited to filing
responsive pleadings or seeking emergency relief to maintain the status
quo. In no event shall Company compromise or settle the Asserted
Liability during that fifteen (15) calendar day period following
delivery of the Claims Notice. If HMS elects to compromise or defend
the Asserted Liability, HMS will not be liable to the Company for any
legal or other expenses incurred by the Company in connection with
the Asserted Liability, than the Company's reasonable costs of (i)
investigating the Asserted Liability before the date of the Claims
Notice, and (ii) taking any interim actions described in the preceding
sentence. If HMS elects to compromise or defend the Asserted
Liability, the Company will furnish to HMS any books, records, or
other documents within its control that are necessary or appropriate
for the defense of the Asserted Liability, and HMS will furnish to the
Company at reasonable intervals a copy of all written communications
concerning the Asserted Liability, including but not limited to
pleadings, motion, judgements, and other documents filed in court. HMS
will not, in the defense or compromise of the Asserted Liability,
consent to the entry of any judgement or enter into any compromise
or settlement which does not include an unconditional release of the
Company from all liability based upon, arising out of or otherwise in
respect of the Asserted Liability. If HMS elects not to compromise or
defend the Asserted Liability, fails to notify Company of its election
or contests its obligation to indemnify under this Agreement, the
Company may then pay, compromise, or defend the Asserted Liability as
the Company considers appropriate, at the expense of HMS.
In no event shall HMS be obligated to indemnify Company for any Loss
arising from Company's violation of this Agreement, the gross
negligence, recklessness or willful misconduct of Company, its agents,
contractors, employees, directors, officers, or others acting on
Company's behalf, or for any punitive or exemplary damages award.
2.11. INABILITY TO PERFORM. HMS shall not be liable for any failure to
perform under this Agreement if inability to obtain materials, parts,
or supplies at reasonable prices or through usual and regular sources
or on a timely basis, interruption of transportation, government
regulation, labor disputes, strikes, war, fire, flood, accident, or
other cause beyond HMS's control, makes it impracticable for HMS to
perform; provided that if HMS is unable to perform as set forth above
it shall return to the Company all sums previously paid for the
Software by the Company for the installation Site affected.
2.12. TAXES AND RECORDATION FEES. Prices and fees set forth herein are
exclusive of all excise, sales, use, occupational, or like taxes now in
force or enacted in the future and, therefore, prices are subject to an
increase equal to the amount of any tax HMS may be required to collect
or pay upon the sale or delivery of items purchased or licensed
hereunder. If a certificate of exemption or similar document or
proceeding is to be utilized in order to exempt the safe or license
from sales or use tax liability, Company will obtain and pursue such
certificate, document or proceeding. Company shall pay all taxes
(however designated, levied, or based on the price or on the product
sold or licensed or used under this Agreement,
5
6
other than taxes based on HMS's income) levied against Company or HMS
immediately when due.
2.13. RISK OF LOSS. HMS bears risk of loss of any Hardware until such
Hardware is delivered to the installation site whereupon the risk of
loss passes to Company.
2.14. REMOVAL OF HARDWARE OR SOFTWARE. No Hardware or HMS Software sold or
licensed hereunder may be used or transported in any manner outside of
the territory in which the installation is performed without the
advance written permission of HMS, which permission shall not be
unreasonably withheld. Company agrees that in no event shall the
Hardware or HMS Software be used or transported in any manner outside
of the United States, its territories or possessions.
2.15. DEFAULT. This Agreement shall terminate immediately upon the occurrence
of any of the following events of "default" without liability of HMS
to Company and/or any third parties:
2.15.1. Upon the election of HMS if the Company fails to pay
any installment of the purchase price within ten (10)
days of the date when due;
2.15.2. Upon the election of the nondefaulting party if
Company or HMS fails to comply with each and every
other provision of this Agreement within thirty (30)
days after receipt of written notice of such failure;
2.15.3. Upon the election of the nondefaulting party if
Company or HMS attempts to Assign this Agreement in
violation of this Agreement;
2.15.4. In the event of the filing of a petition in voluntary
bankruptcy or an assignment for the benefit of
creditors by either party, or upon other action taken
or suffered, voluntarily or involuntarily, under any
federal or state law for the benefit of debtors by
such party, except for the filing of a petition in
involuntary bankruptcy against a party which is
dismissed within thirty (30) days thereafter, the
nondefaulting party may give notice to the immediate
termination of this Agreement.
2.16. WAIVER. No provision of this Agreement shall be deemed waived unless
such waiver is contained in a written instrument signed by the party to
be charged therewith. Should either party waive any individual default
by the other party in writing, such waiver shall not be construed as a
waiver of such party's rights upon subsequent defaults, whether or not
similar.
2.17. DELIVERY. All Hardware and Software shall be delivered by HMS to
Company at the Installation Sites. Company acknowledges that some of
the Hardware may be shipped directly from the manufacturer, and Company
agrees to store same in a reasonable manner until the installation
thereof. In no event shall HMS be liable to Company or to any other
6
7
party for any losses or damages attributable to a delay in delivery of
any Hardware to be delivered hereunder.
2.18. CANCELLATION OF AGREEMENT.
2.18.1. Company may, at its option, elect to cancel this
Agreement, by notice to HMS, at any time prior to the
delivery of any module of the Software described in
Exhibit A hereto. In such event, Company will pay to
HMS the amount due with respect to all Software
modules Delivered with Company authorization prior to
receipt of such notice.
2.18.2. HMS may, at its option, cancel this Agreement at any
time with thirty (30) days notice should it determine
that Company cannot provide appropriate facilities at
each Installation Site as stated in IBM
specifications, and in such event HMS shall refund to
the Company all amounts previously paid by the
Company for that installation site hereunder less any
reasonable costs for hardware restocking
and shipping.
3. HARDWARE PURCHASE PROVISIONS.
3.1. Company hereby buys the Hardware subject to the terms of this
Agreement.
3.2. The purchase price for the Hardware is designated on the
attached Exhibit B and shall be paid in accordance with the
terms of Exhibits B and C.
3.3. Company understands and agrees that the Hardware carries
certain manufacturer's warranties. Company shall avail itself
of all such remedies available to Company under such
warranties and shall make no claim upon HMS for any defects in
same, pursuant to the terms and conditions of the warranty
limitations herein contained
4. INSTALLATION, IMPLEMENTATION AND TRAINING.
4.1. Upon execution of this Agreement, Company shall designate an
appropriate senior member of its staff to serve as Company's
project coordinator ("CPC").
4.2. Upon execution of this Agreement, HMS shall designate an
appropriate client service representative ("CSR") to serve as
its installation and coordination contact and representative.
4.3. Upon execution of this Agreement, Company and HMS shall
prepare an installation schedule showing the scheduled
activities to be accomplished during the installation of each
module of the Software to be provided hereunder, and setting
forth each party's responsibilities with respect thereto.
7
8
4.4. Coordination of services during the period in which a module
is being installed shall be the joint responsibility of the
CPC and CSR. Coordination of services after installation has
been completed is to be the responsibility of the CPC and
HMS's Client Support Department.
4.5. Company is responsible, at its expense, for making the
alterations to its facilities that are reasonably required to
accommodate the installation of the Hardware, including the
acquisition, installation and termination of necessary
cabling, and the provision of adequate space and electrical
sources as reasonably determined necessary by HMS.
4.6. HMS will assist Company in coordination of the installation
of the Hardware, however, installation of the Hardware at the
facilities provided at the Installation Site is not, and shall
not be construed to be, a guarantee by HMS that the location
is suitable for the proper functioning of the Hardware.
4.7. A written manual for the operation of the Hardware shall be
furnished to Company by IBM, as provided to HMS by the
manufacturer of each item of the Hardware.
4.8. Installation end implementation will proceed according to the
schedules referred to herein. The project timetable identifies
responsibilities for Company and HMS. Where possible,
discrete responsibilities for tasks are identified.
Performance milestones will be monitored by both written and
oral progress reports. The reports shall be submitted
routinely throughout the duration of the project on a schedule
mutually\agreeable to Company and HMS. Review of work
completed to date by Company shall be completed at these
progress meetings. Responsibility for project management is
shared by Company and HMO.
5. INSTALLATION AND TRAINING CHARGES.
5.1. Installation and training hours for the applications purchased
and shown on this Agreement in the financial and clinical
suites, except for eighty (80) hours for Patient Care
Charting, totaling 1,138 hours and incurred prior to eighteen
(18) months from the date of this Agreement, will be billed at
HMS's standard rates therefor which are currently $95 per hour
plus out-of-pocket expenses. Any installation and training
hours incurred prior to eighteen (18) months from the date of
this Agreement, that exceed 1,138 hours in the financial and
clinical suites except for the eighty (80) hours for Patient
Care Charting, and were a part of the agreed upon Standard
HMS implementation plan, will be billed at $65 per hour. HMS
reserves the right to increase its standard installation and
training rates upon thirty (30) days written notice to Company
after the eighteen (18) month period, but no more than a five
percent (5%) average annual rate increase for the first five
(5) years of this Agreement.
8
9
5.2. All payments shall be made in U.S. Dollars within thirty (30)
days after the date of invoice. HMS reserves the right to add
an interest charge not exceeding 1% per month, or the maximum
amount allowed by applicable law, whichever is less, for
failure to make payment within thirty (30) days after the
invoice date (except where payment is withheld pursuant to the
Company's rights hereunder). Such invoices will also include
the appropriate taxes (sales, excise, occupation or like
taxes) and recordation fees.
6. SOFTWARE LICENSE AGREEMENT.
6.1. MODULES LICENSED. HMS hereby grants Company a perpetual,
nontransferable and nonexclusive license to use the Software.
6.2. GUARANTEE OF TITLE. HMS represents, covenants, and warrants
that it has all rights to the Software, including all
necessary rights in any software owned by others which is
embodied in the Software, necessary to grant the license
provided herein and that the Software will not infringe upon
or violate any copyright or other property right of any third
party.
6.3. PROPRIETARY RIGHTS.
6.3.1. Company recognizes and acknowledges that the
Software, system manuals and certain other materials
identified as proprietary supplied by HMS to
Company are subject to the proprietary right of HMS.
Company agrees with HMS that the Software,
Documentation and all information or data supplied by
HMS in machine-readable form or otherwise are the
property of HMS, are protected by civil and criminal
laws, including the copyright laws of the United
States, are valuable to HMS, and that their use and
disclosure must be carefully and continuously
controlled. Company further understands that operator
manuals, training aids and other written materials,
whether created by HMS or others are also subject to
the copyright laws of the United States.
6.3.2. HMS retains title to the Software, Documentation,
information or data furnished by HMS in
machine-readable form, and the training materials
provided by HMS. HMS does not retain title to
operator manuals and other material bearing the HMS's
copyright, but these items shall not be copied except
as provided herein.
6.4. RESTRICTIONS OF USE. We Software and other items supplied by
HMS hereunder are for the sole use of Company and its
permitted assigns, supporting only terminals operated by
Company at the Installation Sites unless otherwise agreed by
HMS in writing. Company shall not use licensed software in a
service bureau, network time sharing, multiple CPU, or a
multisite arrangement beyond any facility
9
10
specifically licensed hereunder; provided that the Company shall be
permitted to consolidate multiple facilities within a single market.
6.4.1. Company shall use the Software only for the management of
records and data of the facility or facilities as shown on
Exhibit E, and can be updated upon notification by Company.
Company may permit line access to data and the placing and
reviewing of orders by physicians affiliated or associated
with Company.
6.4.2. Company agrees that while this license is in effect, or while
if has custody or possession of any property of HMS (provided
that this provision shall expire upon the occurrence of a
Trigger Event pursuant to Section 12 below if the Company
exercises its rights under said Section IV, it will not (i)
copy or duplicate, or permit anyone else to copy or duplicate,
any physical or magnetic version of the Software in
machine-readable form except for Company's own use; or (ii)
create or attempt to create, or permit others to create or
attempt to create by reverse engineering or otherwise, the
source programs or any part thereof from the object program or
from other information made available under this license or
otherwise (whether oral, written, tangible or intangible).
6.4.3. Each module of the Software shall be used only on a single
central processing unit or mainframe (the "CPU"). Company
shall advise HMS in advance of the location of the CPU. Use of
the Software shall consist either of copying any portion of
the Software from storage units or media into the CPU, or the
processing of data with the Software, or both. All programs,
Documentation, and materials in machine-readable form
supplied under this license shall be kept in a secure place,
under access and use restrictions satisfactory to HMS, and not
less strict than those applied to Company's most valuable and
sensitive programs. The Software may be temporarily
transferred to another CPU while the specified CPU is
undergoing repairs.
6.4.4 The Software may be copied in whole or in part for use by
Company only for operations backup or archive purposes. These
copies of all or any part of the original Software shall be
marked with the copyright notice designated by HMS along with
a notice that the Software is proprietary and the property of
HMS, its agents or licensors. Company shall maintain records
of the number and location of all copies and shall make these
records available to HMS.
6.5. INSPECTION. To assist HMS in the protection of its proprietary rights,
Company shall permit representatives of HMS following receipt of prior
written notice to inspect during normal business hours any location at
which items supplied by HMS hereunder are being used or kept by or
under the authority of Company. All
10
11
inspections shall be performed in a manner consistent with applicable
federal and state confidentiality and privacy laws and the
confidentiality provisions of this Agreement and HMS shall not
unreasonably disrupt the Company's operations.
6.6. INDEMNIFICATION AGAINST INFRINGEMENT CLAIMS.
6.6.1. Should the Software or any part thereof become, or in HMS's
opinion be likely to become, the subject of a claim of
infringement, HMS's sole obligation shall be, at HMS's option
and expense, promptly either (i) to procure for Company the
right to continue using it, (ii) to replace or modify it so
that it becomes non-infringing (providing that such
modification or replacement does not degrade the quality of
performance or materially affect the functionality,
capabilities, quality or reliability of the Software) or (iii)
after reasonable attempts have been made with respect to the
foregoing alternatives, to refund all sums paid to HMS by
Company for such allegedly infringing module, and terminate
this Agreement with respect to such allegedly infringing
Software module only; provided that the Company may terminate
this entire Agreement if it determines that the infringing
Software is an integral portion of the Software licensed
hereunder.
6.6.2. HMS shall have no liability or obligation with respect to
any infringement claim based upon the combination of the
Software and any other software not authorized by HMS in
writing.
7. CONFIDENTIAL INFORMATION. HMS shall not divulge or disclose to any
third parties or use for its own benefit any information concerning the
affairs of Company which may be communicated to HMS at any time, unless
such information becomes publicly available through no fault of HMS.
HMS shall not exploit, divulge or disclose to third parties
any proprietary systems, application programs or any business or
economic information or methods of Company of which HMS may gain
knowledge in connection with or in the course of performing
obligations under this Agreement. HMS shall execute such covenants
relating to nondisclosure of Company operations or authorized
modifications to the HMS Software as Company may reasonably request.
8. WARRANT AND LIMITATION OF LIABILITY.
8.1. SOFTWARE ADAPTION. HMS warrants that the Software will
perform according to the current version of the Documentation
and will be year 2000 compliant by March 31,1999. If Company
notifies HMS in writing of any errors in the HMS Software, HMS
will correct the errors at no charge within a reasonable
amount of time so long as Company's Software Maintenance
Program is in effect.
11
12
8.2. MODIFICATIONS OF SOFTWARE. Company shall inform HMS in writing
of any modifications made to the Software. HMS shall not be
responsible for maintaining Company's modified portions of the
Software. Corrections for difficulties or defects traceable to
Company's errors or system changes will be billed at HMS's
standard time and materials rates then in effect.
8.3. LIMITATIONS. EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT OR
ANY AMENDMENTS HERETO, HMS MAKES NO WARRANTY EXPRESS OR
IMPLIED, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE OR USE.
8.3.1. HMS SHALL NOT BE LIABLE FOR PERSONAL INJURY OR
PROPERTY DAMAGE, EXCEPT PERSONAL INJURY OR
PROPERTY DAMAGED CAUSED BY HMS'S NEGLIGENCE. HMS
SHALL IN NO EVENT HAVE OBLIGATIONS OR LIABILITIES FOR
OTHER THAN ORDINARY DAMAGES. HMS SHALL NOT BE LIABLE
FOR ANY SPECIAL, INCIDENTAL, OR CONSEQUENTIAL
DAMAGES; INCLUDING BUT NOT LIMITED TO LOSS OF
PROFITS OR OTHER ECONOMIC LOSS.
8.3.2. HMS. MAKES NO WARRANTIES WITH RESPECT TO THE HARDWARE
EXCEPT THAT IT FUNCTIONS WITH THE SOFTWARE. COMPANY
ACKNOWLEDGES THAT THE MANUFACTURER'S WARRANTIES ON
THE HARDWARE ARE PROVIDED TO COMPANY AS PART OF THIS
AGREEMENT, AND COMPANY SHALL TAKE REASONABLE
MEASURES TO CONFORM TO ALL REQUIREMENTS TO
EFFECT AND ENFORCE MANUFACTURER'S WARRANTIES WITH
RESPECT TO THE HARDWARE.
8.3.3. IN NO EVENT SHALL HMS BE LIABLE FOR ANY LOSS OF DATA
WHETHER CAUSED BY THE HARDWARE OR THE HMS
SOFTWARE.
8.3.5. COMPANY ACKNOWLEDGES THAT THE LICENSED SOFTWARE
PROVIDED BY HMS CONSTITUTES PART OF A COMPANY
INFORMATION SYSTEM TO BE USED BY COMPANY, ITS STAFF,
EMPLOYEES AND AUTHORIZED AGENTS IN THE PERFORMANCE
OF THEIR PROFESSIONAL RESPONSIBILITIES AND. IS NO
WAY INTENDED TO REPLACE THEIR PROFESSIONAL SELL AND
JUDGEMENT. COMPANY AGREES THAT IT IS SOLELY
RESPONSIBLE FOR THE CARE OF ITS
12
13
PATIENTS AND THAT THE USE OF THE LICENSED SOFTWARE
FOR ANY PURPOSE RELATED TO SUCH CARE CANNOT IN ANY
WAY BE CONTROLLED BY HMS. COMPANY IS RESPONSIBLE FOR
VERIFYING THE ACCURACY AND COMPLETENESS OF ANY
MEDICAL OR OTHER SIMILAR INFORMATION CONTAINED IN,
ENTERED INTO, OR USED IN CONNECTION WITH THE LICENSED
SOFTWARE.
8.3.6. COMPANY ACCEPTS ALL RESPONSIBILITY FOR DEVELOPMENT
AND EXECUTION OF ADMINISTRATIVE PROCEDURES, INCLUDING
THE PERFORMANCE OF PERIODIC BACKUPS,
SECURITY ADMINISTRATION, OR OTHER PRUDENT BUSINESS
PRACTICES NECESSARY TO CONTROL AND MAINTAIN THE
INTEGRITY OF COMPANY'S DATA.
9. SOFTWARE MAINTENANCE PROGRAM.
9.1. TERM. The term of the Software Maintenance Program shall
commence at the Initial Application Go-Live of the Software
when HMS gives written notification to Company that the
applicable Hardware and Software module have been placed in
good working order and are ready for daily operation
utilizing real patient/hospital data by Company and shall
continue until terminated as provided herein.
9.2. FEE. Maintenance fees shall be payable monthly, in advance, in
accordance with Exhibit A. After twelve (12) months HMS shall
have the right to increase such fees by giving thirty (30)
days written notice. In no event, shall the increase exceed a
five percent (am) average annual rate for the first five years
of this Agreement. In the event that Company fails to pay any
maintenance fee within thirty (30) days after such payment is
due, HMS shall have the right to terminate the Software
Maintenance Program immediately upon notice to Company.
9.3. COVERAGE. The Software Maintenance Program (herein so called)
shall consist of the following:
9.3.1. HMS will supply Company with any improvements or
modifications to the HMS Software for which HMS does
not charge separately as options, including all
federally required changes. Any corrections or
alterations to or new versions of the Software that
HMS shall provide under this Agreement shall be
limited to the delivery of one (1) copy of such HMS
Software and Documentation per installation site.
Company agrees to install all Software improvement
and modification releases no later than sixty (60)
days after Company's receipt thereof. HMS shall
provide reasonable assistance to the Company to
install such improvements and modifications.
13
14
9.3.2. HMS will correct or replace the HMS Software and/or
provide services necessary to remedy any programming
error which is attributable to HMS and which
significantly affects the use of the HMS Software.
Such correction, replacement or services will be
promptly accomplished after Company has identified
and notified HMS of any such error in accordance with
HMS's reporting procedures. Company agrees to provide
HMS with file data, as requested, and with sufficient
support and test time on Company's computer system to
duplicate the problem, certify that the problem has
indeed been fixed.
9.3.3. The number of hours per month of software support by
HMS staff, including telephone, travel and on site
support is listed on Exhibit A for each module of
Software. All Company requested support exceeding the
accumulative number of hours per month will be billed
monthly at HMS's then current standard hourly rate as
provided in Section 9.5 below.
9.3.4. If the problems originate in Company's computer
network or in software not covered by this Article or
result from modifications to the licensed Software
made by any one other than HMS, HMS responsibility
shall be limited to providing assistance and advice
to enable Company to determine appropriate remedial
action to be taken by Company or authorized personnel
(not by HMS) to resolve such problems.
9.4. TERMINATION. As a condition to the continuation of the
Software Maintenance Program, Company will maintain its
operating system at the level currently supported by HMS.
9.4.1. The Software Maintenance Program shall immediately
terminate upon the termination of the License
Agreement.
9.4.2. The Software Maintenance Program may be terminated by
either party at any time following the expiration of
the initial five (5) year term, provided that at
least one hundred eighty (180) days prior written
notice is given to the other party; or
9.4.3. The Software Maintenance Program may be terminated by
the nondefaulting party in the event of a default
hereunder.
9.4.3.1. Following termination of the Software
Maintenance Program, HMS shall immediately
invoice Company for all accrued fees and
charges and all reimbursable expenses, and
Company shall pay the invoiced amount
immediately upon receipt of such invoice.
Company may continue to use any work
14
15
supplied to Company by HMS for the remaining
term of the License Agreement.
9.5. ADDITIONAL CHARGES. Corrections for difficulties or defects
traceable solely to Company errors or system changes not made
or authorized by HMS will be billed at HMS's then current
standard time and material rates. HMS's current standard
hourly rate is $95 per hour. The rate for modification,
enhancement or other Company requested changes to the Software
will be the then current published programming rate. The
current rate is $100 per hour; HMS programming rate may be
increased by an amount not to exceed an average annual rate of
five percent (5%) for the first five (5) years of this
Agreement, unless the Company's request for
programming requires HMS to contract for outside programming
services.
9.6. OUT-OF-POCKET EXPENSES. Company shall reimburse HMS for any
reasonable out-of-pocket expenses incurred at Company's
request, including travel to and from the Installation
Site, lodging, meals, telephone and shipping as may be
necessary in connection with duties performed under this
Agreement by HMS.
10. SURVIVAL. NOTWITHSTANDING any termination of this Agreement or the
license granted hereunder, the provisions set forth herein concerning
the nondisclosure of information either of the confidential
information of Company by HMS or the disclosure of the proprietary
rights and information concerning the HMS Software by Company and
indemnification shall survive any such expiration or termination.
11. MISCELLANEOUS. This Agreement represents the entire, complete and
exclusive statement of the terms and the agreement between the parties,
superseding any and all understandings, prior representations and
agreements, whether oral or written, and all other communications
relating to the subject master of this Agreement. Company agrees that
it has read this Agreement, understands it, and agrees to be bound by
its terms and conditions. Special provisions of this Agreement are
provided in Exhibit G. Each party signing this Agreement has the full
authority to bind the principal.
12. SOURCE CODE ESCROW: ADDITIONAL LICENSES. HMS and the Company shall
enter into an Escrow Agreement simultaneous with the execution of this Agreement
pursuant to which HMS shall deposit the source code for the Software with Escrow
Agent (as defined in said Escrow Agreement). HMS shall also deposit with Escrow
Agent all updates and modifications to said source code and materials
(collectively, as updated, the "Code"). In the event that (i) at anytime prior
to February 1, 2005, engages in a "Change of Control" transaction, (ii) HMS at
any time discontinues the maintenance and support of the Software, or (iii) HMS
defaults under this Agreement pursuant to Section 2.15 (the occurrence of (i),
(ii) or (iii) is herein referred to as a Trigger Events), then each "Eligible
Hospital" and the Company's corporate office shall be entitled to a perpetual,
nonexclusive, non-transferable
15
16
license without the right to grant sub-licenses, (except as set forth herein)
with respect to the Code.
For the purposes of this section, "Change in Control" shall mean: any
merger, consolidation, liquidation, dissolution, business combination,
recapitalization, acquisition, disposition or comparable transaction
(or series of such transactions) that results in any person, entity or
"group" (as that term is used in Section 13 (d) (3) of the Securities
Exchange Act of 1934, as amended) other than a wholly owned subsidiary
of HMS acquiring more than (a) 50% of the outstanding voting stock of
HMS or (b) all or substantially all of the assets of HMS.
Notwithstanding the above, "Change of Control" shall not mean the sale
of stock (or instrument convertible into stock) in HMS in a transaction
(including the sale of said stock pursuant to an initial public
offering by HMS or subsequent public offerings) in which Xxxxxx X.
Xxxxxx or Xxxx X. Xxxx, III maintains operational control of HMS or
remains on The Board of Directors. In the event of death, disability or
retirement after the age of sixty (60) of both Xxxxxx X. Xxxxxx
and Xxxx X. Xxxx, III, then for purposes of this Agreement, then
successors shall be substituted for the purposes of the foregoing
sentence.
For the purpose of this Section, an Eligible Hospital is a hospital
leased, owned or operated by the Company on the date of the Trigger
Event (the "Effective Date") and that satisfies each of the following
requirements on the Effective Date:
12.1. The Hospital is listed on the then current version of Exhibit
E of this Agreement.
12.2. The Company is not in default hereunder, and no event shall
have occurred and be continuing that with the lapse of time,
the provision of notice, or both would constituted default by
the Company.
12.3. The Hospital subscribed to monthly maintenance service from
HMS at the time of the initial installation of the HMS MONITOR
Software and continually maintained that subscription without
interruption through and including The Effective Date.
In the event that the Company desires. to purchase additional perpetual
non-exclusive, nontransferrable licenses, without the right to grant
sub-licenses, with respect to Code, after the Trigger Event, but prior
to February 1,2010, Company must send a written notice for desired
number of licenses to Escrow Agent. Upon receipt of said notice and the
applicable license. fee, Escrow Agent will grant said license to the
Company and notify HMS at last known address, and forward the license
fee to HMS.
The license fee for the Code after the Trigger Event, but prior to
February 1,2010, will be the lower of 50% of the list price of the
Software at that time, if HMS (or its succesor-in-interest) continues
to sell and support the Software, or the license fee on Exhibit A as
adjusted by allowable increases per Paragraph 1 of this Agreement on
the Effective Date multiplied by an annually compounded 10% increase
for every year beyond the Effective Date.
16
17
HMS hereby represents and warrants to the Company that HMS is not
currently, and has not at any time during the prior twelve (12) months,
engaged in discussions or negotiations with any party regarding any
potential change of control transaction.
If the Company exercises its rights to obtain the Code, then as of the
date of said exercise, other than the Company's obligation to pay
license fees for new Eligible Hospitals, it shall have no obligations
to make any payments to HMS hereunder, and the Software Maintenance
program shall automatically be terminated, but other obligations
pursuant to Section 6.4 remains in place.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
written above.
New American Healthcare Corporation Healthcare Management Systems, Inc.
By: /s/ Xxxxxxx X. Xxxx By: /s/Xxxxxx X. Xxxxxx
-------------------------------- ---------------------------------
Title: Controller/VP Title: President
----------------------------- ------------------------------
Date: 3/23/98 Date: 3/23/98
------------------------------ -------------------------------
17
