-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VUutKeZKcBjh4YjiLQoI27HLS7VtHDjFlTjca35gmbWKgaW7qyG3LOz++yB4J0nv LZpBRqNJ9lNXa/hJyTU8CA== 0001047469-98-034142.txt : 19980911 0001047469-98-034142.hdr.sgml : 19980911 ACCESSION NUMBER: 0001047469-98-034142 CONFORMED SUBMISSION TYPE: S-1/A PUBLIC DOCUMENT COUNT: 13 FILED AS OF DATE: 19980909 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: HEALTHEON CORP CENTRAL INDEX KEY: 0001009575 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROCESSING & DATA PREPARATION [7374] IRS NUMBER: 943236644 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1/A SEC ACT: SEC FILE NUMBER: 333-60427 FILM NUMBER: 98706391 BUSINESS ADDRESS: STREET 1: 4600 PATRICK HENY DRIVE CITY: SANTA CLARA STATE: CA ZIP: 95054 BUSINESS PHONE: 4088765000 MAIL ADDRESS: STREET 1: 4600 PATRICK HENY DRIVE CITY: SANTA CLARA STATE: CA ZIP: 95054 S-1/A 1 S-1/A AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 9, 1998 REGISTRATION NO. 333-60427 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- AMENDMENT NO. 1 TO FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------- HEALTHEON CORPORATION (Exact name of Registrant as specified in its charter) DELAWARE 7374 94-3236644 (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification Number)
4600 PATRICK HENRY DRIVE SANTA CLARA, CA 95054 (408) 876-5000 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) --------------------- W. MICHAEL LONG CHIEF EXECUTIVE OFFICER 4600 PATRICK HENRY DRIVE SANTA CLARA, CA 95054 (408) 876-5000 (Name, address, including zip code, and telephone number, including area code, of agent for service) --------------------- COPIES TO: LARRY W. SONSINI JACK DENNISON GORDON K. DAVIDSON STEVEN E. BOCHNER VICE PRESIDENT AND LAIRD H. SIMONS III MARK L. REINSTRA GENERAL COUNSEL JEFFREY R. VETTER Wilson Sonsini Goodrich & Rosati 4600 Patrick Henry Drive MICHAEL J. MCADAM Professional Corporation Santa Clara, CA 95054 Fenwick & West LLP 650 Page Mill Road (408) 876-5000 Two Palo Alto Square Palo Alto, CA 94304-1050 Palo Alto, CA 94306 (650) 493-9300 (650) 494-0600
--------------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT. --------------------- If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: / / If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: / / - ---------- If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: / / - ---------- If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: / / - ---------- If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box: / / --------------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following table sets forth the costs and expenses, other than underwriting discounts and commissions, payable by the Registrant in connection with the sale of Common Stock being registered. All amounts are estimates except the Securities and Exchange Commission registration fee, the NASD filing fee and the Nasdaq National Market listing fee.
AMOUNT TO BE PAID ------------- Securities and Exchange Commission registration fee............................ $ 22,125 NASD filing fee................................................................ 8,000 Nasdaq National Market listing fee............................................. 50,000 Printing and engraving expenses................................................ * Legal fees and expenses........................................................ * Accounting fees and expenses................................................... * Blue Sky fees and expenses..................................................... * Transfer agent fees............................................................ * Miscellaneous.................................................................. * ------------- Total...................................................................... $ * ------------- -------------
- --------- * To be provided by amendment. ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 145 of the Delaware General Corporation Law permits a corporation to include in its charter documents, and in agreements between the corporation and its directors and officers, provisions expanding the scope of indemnification beyond that specifically provided by the current law. Article V of the Registrant's Restated Certificate of Incorporation provides for the indemnification of directors to the fullest extent permissible under Delaware law. Article VI of the Registrant's Bylaws provides for the indemnification of officers and directors (and allows the Registrant to indemnify other employees and third parties) acting on behalf of the Registrant if such person acted in good faith and in a manner reasonably believed to be in and not opposed to the best interest of the Registrant, and, with respect to any criminal action or proceeding, the indemnified party had no reason to believe his or her conduct was unlawful. The Registrant intends to enter into indemnification agreements with its directors and executive officers, in addition to indemnification provided for in the Registrant's Bylaws, and intends to enter into indemnification agreements with any new directors and executive officers in the future. The Registrant intends to obtain directors' and officers' insurance providing indemnification for certain of the Registrant's directors, officers and employees for certain liabilities. Reference is also made to Section 7 of the Underwriting Agreement to be filed as Exhibit 1.1 to the Registration Statement for information concerning the Underwriters' obligation to indemnify the Registrant and its officers and directors in certain circumstances. II-1 ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES (a) Since its founding in December 1995, through July 31, 1998, the Registrant has issued and sold the following unregistered securities: (1) On January 26, 1996, the Registrant sold 10,305,000 shares of Series A Preferred Stock to 22 investors at a purchase price of $.50 per share, which was paid in cash. (2) On January 26, 1996, the Registrant sold 1,000,000 shares of Common Stock to four investors at a purchase price of $.05 per share, which was paid in cash. (3) On July 8, 1996, the Registrant sold 10,000 shares of Series A Preferred Stock to a vendor in consideration for services rendered. (4) On October 1, 1996, the Registrant sold 3,000,000 shares of Series B Preferred Stock to five investors at a purchase price of $2.00 per share, which was paid in cash. (5) On November 1, 1996, the Registrant issued warrants to purchase 2,000,000 shares of Series B Preferred Stock with an exercise price of $2.00 per share to two entities, in consideration of services rendered and as an incentive to continue to provide services. (6) On July 1, 1997, the Registrant issued warrants to purchase a total of 61,947 shares of Series B Preferred Stock with an exercise price of $2.00 per share to three entities pursuant to a bridge loan financing. (7) Between July 1 and July 27, 1997, the Registrant sold an aggregate of 2,600,000 shares of Series C Preferred Stock to nine investors at a purchase price of $2.50 per share, in consideration of cash and cancellation of indebtedness incurred in connection with a bridge loan financing. (8) Between July 7 and July 16, 1997, the Registrant sold 25,000 shares of Series B Preferred Stock to one entity at a purchase price of $2.00 per share, in consideration of services rendered. (9) On July 11, 1997, the Registrant sold 10,000 shares of Series A Preferred Stock to the same vendor referred to in (3) above in consideration of services rendered. (10) On July 11, 1997, the Registrant sold 250,000 shares of Series B Preferred Stock to an officer at a purchase price of $2.00 per share, paid with an amount of cash equal to the par value of the purchased shares and with a promissory note which has subsequently been paid in full. (11) On July 11, 1997, the Registrant issued a warrant to purchase 750,000 shares of Series B Preferred Stock with an exercise price of $2.00 per share to an officer as an incentive to continue to provide services. (12) On July 22, 1997, the Registrant sold 15,000 shares of Series B Preferred Stock to one investor at a purchase price of $2.00 per share, which was paid in cash. (13) From October 17 through December 19, 1997, the Registrant sold an aggregate of 4,807,692 shares of Series D Preferred Stock to 13 investors at a purchase price of $5.20 per share, which was paid in cash. (14) On May 1, 1998, the Registrant sold 1,017,229 shares of Series B Preferred Stock to one investor upon the exercise of warrants with an exercise price of $2.00 per share which was paid in cash. (15) On May 19, 1998, 22,019,921 shares of the Registrant's Preferred Stock of the Company were converted into Common Stock on a one-for-one basis, in connection with the ActaMed acquisition. II-2 (16) On May 19, 1998, in connection with the ActaMed acquisition, the Registrant assumed options to purchase ActaMed Common Stock which were held by former ActaMed employees which are now exercisable for an aggregate of 3,497,007 shares of Registrant's Common Stock. (17) On May 19, 1998, the Registrant issued 23,271,353 shares of its Common Stock to former shareholders of ActaMed in connection with the acquisition of ActaMed Corporation ("ActaMed") in exchange for all of the issued and outstanding shares of capital stock of ActaMed. (18) On May 19, 1998, in connection with the acquisition of ActaMed, the Registrant assumed a warrant to purchase shares of ActaMed capital stock which are now exercisable for an aggregate of 282,533 shares of Healtheon Common Stock. (19) On June 26, 1998, the Registrant sold 1,336,209 shares of Common Stock to one entity in consideration for certain assets and licenses relating to SmithKline Labs. (20) Since January 1996, the Registrant has granted 11,611,084 options to purchase shares of Registrant's Common Stock to employees pursuant to the Company's 1996 Stock Plan. (21) From July 6, 1996 through July 17, 1998, the Company issued an aggregate of 4,739,920 shares of Common Stock for aggregate consideration, in the form of cash and promissory notes, of $1.1 million. (b) There were no underwriters, brokers or finders employed in connection with any of the transactions set forth above. (c) The transactions referred to in numbers 16-18 were exempt from registration pursuant to the provisions of Section 3(a)(10) of the Securities Act. The sales of the above securities were deemed to be exempt from registration under the Securities Act in reliance on Section 4(2) of the Securities Act, or Regulation D promulgated thereunder, or, with respect to issuances to employees, Rule 701 promulgated under Section 3(b) of the Securities Act as transactions by an issuer not involving a public offering or transactions pursuant to compensatory benefit plans and contracts relating to compensation as provided under such Rule 701. The recipients of securities in each such transaction represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the instruments representing such securities issued in such transactions. All recipients had adequate access, through their relationships with the Company, to information about the Registrant. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) EXHIBITS 1.1* Form of Underwriting Agreement. 2.0** Agreement and Plan of Reorganization, dated as of February 24, 1998, by and among the Registrant, MedNet Acquisition Corp. and ActaMed Corporation. 2.1 Agreement and Plan of Merger, dated as of March 1, 1996, by and among ActaMed Corporation, EDI Acquisition, Inc., UHC Green Acquisition, Inc. and United HealthCare Corporation. 3.1** Amended and Restated Certificate of Incorporation of the Registrant, as currently in effect. 3.2** Form of Amended and Restated Certificate of Incorporation, to be filed prior to the closing of the offering made under this Registration Statement. 3.3** Bylaws of the Registrant, as currently in effect. 3.4** Form of Bylaws of the Registrant, to be adopted prior to the closing of the offering made under this Registration Statement.
II-3 4.1* Specimen Common Stock certificate. 5.1* Form of Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation, regarding the legality of the securities being issued. 10.1 Form of Indemnification Agreement entered into by the Registrant with each of its directors and executive officers. 10.2 1996 Stock Plan and form of Stock Option Agreement thereunder. 10.3** ActaMed Corp. 1997 Stock Option Plan 10.4** ActaMed Corp. 1996 Stock Option Plan 10.5** ActaMed Corp. 1995 Stock Option Plan 10.6** ActaMed Corp. 1994 Stock Option Plan. 10.7** ActaMed Corp. 1993 Class B Common Stock Option Plan. 10.8** ActaMed Corp. 1992 Stock Option Plan. 10.9** ActaMed Corp. 1996 Director Stock Option Plan, as amended. 10.10** Amended and Restated Investors' Rights Agreement dated as of May 19, 1998 among the Registrant and certain of the Registrant's securityholders. 10.11** Lease Agreement, dated December 2, 1997, between Larvan Properties and Registrant. 10.12** Lease Agreement, dated November 6, 1995, as amended, between ActaMed Corporation and ZML-Central Park, L.L.C. 10.13+ Services and License Agreement, dated as of April 4, 1996, between ActaMed Corporation and United HealthCare Corporation. 10.14+ Services Agreement, dated as of December 31, 1997, as amended, between ActaMed Corporation and SmithKline Beecham Clinical Laboratories, Inc. 10.15+ Assets Purchase Agreement, dated as of December 31, 1997, as amended, between ActaMed Corporation and SmithKline Beecham Clinical Laboratories, Inc. 10.16+ License Agreement, dated as of December 31, 1997, between ActaMed Corporation and SmithKline Beecham Clinical Laboratories, Inc. 10.17+ Development Agreement, dated as of October 31, 1997, between ActaMed Corporation and SmithKline Beecham Clinical Laboratories, Inc. 10.18+ Services, Development and License Agreement, dated as of December 15, 1997, between the Registrant and Beech Street Corporation. 10.19+ Services, Development and License Agreement, dated as of September 30, 1997, between the Registrant and Brown & Toland Physician Services Organization. 10.20** Amended and Restated Securities Purchase Agreement, dated as of January 26, 1996, between the Registrant and investors. 10.21** Amended and Restated Series B Preferred Stock Purchase Agreement dated October 31, 1996, between Registrant and investors. 10.22** Form of Series B Preferred Stock Purchase Warrant between the Registrant and certain of the Registrant's investors. 10.23** Series C Preferred Stock Purchase Agreement dated July 25, 1997, between the Registrant and investors. 10.24** Series D Preferred Stock Purchase Agreement dated October 13, 1997, between the Registrant and investors. 10.25** Full Recourse Promissory Note dated as of July 11, 1997, between the Registrant and W. Michael Long. 10.26** Form of Promissory Note for Bridge Financing
II-4 10.27 W. Michael Long Employment Agreement 10.28 Michael Hoover Employment Agreement 21.1** Subsidiaries of the Registrant. 23.1* Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation (included in Exhibit 5.1). 23.2** Consent of Ernst & Young LLP, independent auditors (see page II-7). 23.3** Consent of Deloitte & Touche LLP, independent auditors (see page II-8). 23.4** Consent of Deloitte & Touche LLP, independent auditors (see page II-9). 24.1** Power of Attorney (see page II-6). 27.1** Financial Data Schedule.
- --------- * To be supplied by amendment. ** Previously filed. + Confidential treatment requested as to portions of this exhibit. (b) FINANCIAL STATEMENT SCHEDULES All schedules have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or notes thereto. ITEM 17. UNDERTAKINGS (a) The undersigned hereby undertakes to provide to the Underwriters at the closing specified in the Underwriting Agreement certificates in such denominations and registered in such names as required by the Underwriters to permit prompt delivery to each purchaser. (b) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions referenced in Item 14 of this Registration Statement or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered hereunder, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (c) The undersigned Registrant hereby undertakes that: (1) For purposes of determining any liability under the Act, the information omitted from the form of Prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Act shall be deemed to be part of this Registration Statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Act, each post-effective amendment that contains a form of Prospectus shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial BONA FIDE offering thereof. II-5 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Santa Clara, State of California, on this 9th day of September, 1998. HEALTHEON CORPORATION By: /s/ JOHN L. WESTERMANN III ----------------------------------------- John L. Westermann III CHIEF FINANCIAL OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE - ------------------------------ -------------------------- ------------------- /s/ W. MICHAEL LONG* Chief Executive Officer - ------------------------------ and Director (Principal September 9, 1998 W. Michael Long Executive Officer) /s/ JOHN L. WESTERMANN III Chief Financial Officer - ------------------------------ (Principal Financial and September 9, 1998 John L. Westermann III Accounting Officer) - ------------------------------ Chairman of the Board September 9, 1998 James Clark /s/ L. JOHN DOERR* - ------------------------------ Director September 9, 1998 L. John Doerr /s/ MICHAEL HOOVER* - ------------------------------ President and Director September 9, 1998 Michael Hoover /s/ C. RICHARD KRAMLICH* - ------------------------------ Director September 9, 1998 C. Richard Kramlich /s/ WILLIAM MCGUIRE, M.D.* - ------------------------------ Director September 9, 1998 William McGuire, M.D. /s/ P. E. SADLER* - ------------------------------ Director September 9, 1998 P. E. Sadler /s/ TADATAKA YAMADA* - ------------------------------ Director September 9, 1998 Tadataka Yamada
*By: /s/ JOHN L. WESTERMANN III /s/ JACK DENNISON ------------------------------------ -------------------------------------- John L. Westermann III Jack Dennison ATTORNEY-IN-FACT ATTORNEY-IN-FACT
II-6 EXHIBIT INDEX
EXHIBIT SEQUENTIAL NUMBER DESCRIPTION PAGE NUMBER - --------- ------------------------------------------------------------------------------------------- ----------- 1.1* Form of Underwriting Agreement. 2.0** Agreement and Plan of Reorganization, dated as of February 24, 1998, by and among the Registrant, MedNet Acquisition Corp. and ActaMed Corporation. 2.1 Agreement and Plan of Merger, dated as of March 1, 1996, by and among ActaMed Corporation, EDI Acquisition, Inc., UHC Green Acquisition, Inc. and United HealthCare Corporation. 3.1** Amended and Restated Certificate of Incorporation of the Registrant, as currently in effect. 3.2** Form of Amended and Restated Certificate of Incorporation, to be filed prior to the closing of the offering made under this Registration Statement. 3.3** Bylaws of the Registrant, as currently in effect. 3.4** Form of Bylaws of the Registrant, to be adopted prior to the closing of the offering made under this Registration Statement. 4.1* Specimen Common Stock certificate. 5.1* Form of Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation, regarding the legality of the securities being issued. 10.1 Form of Indemnification Agreement entered into by the Registrant with each of its directors and executive officers. 10.2 1996 Stock Plan and form of Stock Option Agreement thereunder. 10.3** ActaMed Corp. 1997 Stock Option Plan 10.4** ActaMed Corp. 1996 Stock Option Plan 10.5** ActaMed Corp. 1995 Stock Option Plan 10.6** ActaMed Corp. 1994 Stock Option Plan. 10.7** ActaMed Corp. 1993 Class B Common Stock Option Plan. 10.8** ActaMed Corp. 1992 Stock Option Plan. 10.9** ActaMed Corp. 1996 Director Stock Option Plan, as amended. 10.10** Amended and Restated Investors' Rights Agreement dated as of May 19, 1998 among the Registrant and certain of the Registrant's securityholders. 10.11** Lease Agreement, dated December 2, 1997, between Larvan Properties and Registrant. 10.12** Lease Agreement, dated November 6, 1995, as amended, between ActaMed Corporation and ZML-Central Park, L.L.C. 10.13+ Services and License Agreement, dated as of April 4, 1996, between ActaMed Corporation and United HealthCare Corporation. 10.14+ Services Agreement, dated as of December 31, 1997, as amended, between ActaMed Corporation and SmithKline Beecham Clinical Laboratories, Inc. 10.15+ Assets Purchase Agreement, dated as of December 31, 1997, as amended, between ActaMed Corporation and SmithKline Beecham Clinical Laboratories, Inc. 10.16+ License Agreement, dated as of December 31, 1997, between ActaMed Corporation and SmithKline Beecham Clinical Laboratories, Inc. 10.17+ Development Agreement, dated as of October 31, 1997, between ActaMed Corporation and SmithKline Beecham Clinical Laboratories, Inc.
EXHIBIT SEQUENTIAL NUMBER DESCRIPTION PAGE NUMBER - --------- ------------------------------------------------------------------------------------------- ----------- 10.18+ Services, Development and License Agreement, dated as of December 15, 1997, between the Registrant and Beech Street Corporation. 10.19+ Services, Development and License Agreement, dated as of September 30, 1997, between the Registrant and Brown & Toland Physician Services Organization. 10.20** Amended and Restated Securities Purchase Agreement, dated as of January 26, 1996, between the Registrant and investors. 10.21** Amended and Restated Series B Preferred Stock Purchase Agreement dated October 31, 1996, between Registrant and investors. 10.22** Form of Series B Preferred Stock Purchase Warrant between the Registrant and certain of the Registrant's investors. 10.23** Series C Preferred Stock Purchase Agreement dated July 25, 1997, between the Registrant and investors. 10.24** Series D Preferred Stock Purchase Agreement dated October 13, 1997, between the Registrant and investors. 10.25** Full Recourse Promissory Note dated as of July 11, 1997, between the Registrant and W. Michael Long. 10.26** Form of Promissory Note for Bridge Financing 10.27 W. Michael Long Employment Agreement 10.28 Michael Hoover Employment Agreement 21.1** Subsidiaries of the Registrant. 23.1* Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation (included in Exhibit 5.1). 23.2** Consent of Ernst & Young LLP, independent auditors (see page II-7). 23.3** Consent of Deloitte & Touche LLP, independent auditors (see page II-8). 23.4** Consent of Deloitte & Touche LLP, independent auditors (see page II-9). 24.1** Power of Attorney (see page II-6). 27.1** Financial Data Schedule.
- --------- * To be supplied by amendment. ** Previously filed. + Confidential treatment requested as to portions of this exhibit. EX-2.1 2 EXHIBIT 2.1 AGREEMENT AND PLAN OF MERGER BY AND AMONG ACTAMED CORPORATION, EDI ACQUISITION, INC., UHC GREEN ACQUISITION, INC. AND UNITED HEALTHCARE CORPORATION TABLE OF CONTENTS
PAGE ---- ARTICLE 1 TRANSACTIONS AND TERMS OF MERGER. . . . . . . . . . . . . . 1 1.1 Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.2 Time and Place of Closing . . . . . . . . . . . . . . . . . 2 1.3 Effective Time. . . . . . . . . . . . . . . . . . . . . . . 2 1.4 Items to Be Delivered at Closing. . . . . . . . . . . . . . 2 ARTICLE 2 THE SURVIVING CORPORATION . . . . . . . . . . . . . . . . . 4 2.1 Articles of Incorporation . . . . . . . . . . . . . . . . . 4 2.2 Bylaws. . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.3 Directors and Officers. . . . . . . . . . . . . . . . . . . 4 ARTICLE 3 MANNER OF CONVERTING SHARES . . . . . . . . . . . . . . . . 5 3.1 Conversion of Shares. . . . . . . . . . . . . . . . . . . . 5 3.2 Exchange Procedures . . . . . . . . . . . . . . . . . . . . 5 ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF UHC AND THE COMPANY . . . 5 4.1 Ownership of Shares; Operations . . . . . . . . . . . . . . 5 4.2 Capacity and Validity . . . . . . . . . . . . . . . . . . . 6 4.3 Organization, Standing and Foreign Qualification. . . . . . 6 4.4 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . 6 4.5 Subsidiaries and Investments. . . . . . . . . . . . . . . . 7 4.6 EDI Financial Statements. . . . . . . . . . . . . . . . . . 7 4.7 Absence of Undisclosed Liabilities. . . . . . . . . . . . . 7 4.8 No Liabilities as Guarantor . . . . . . . . . . . . . . . . 8 4.9 Absence of Changes. . . . . . . . . . . . . . . . . . . . . 8 4.10 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . 9 4.11 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . 10 4.12 Real Property . . . . . . . . . . . . . . . . . . . . . . . 10 4.13 Personal Property . . . . . . . . . . . . . . . . . . . . . 10 4.14 Intellectual Property . . . . . . . . . . . . . . . . . . . 11 4.15 Accounts and Notes Receivable . . . . . . . . . . . . . . . 11 4.16 The Proprietary Software. . . . . . . . . . . . . . . . . . 11 4.17 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.18 Compliance with Laws. . . . . . . . . . . . . . . . . . . . 12 4.19 Environmental Conditions. . . . . . . . . . . . . . . . . . 13 4.20 Litigation and Claims . . . . . . . . . . . . . . . . . . . 13 4.21 Contracts and Commitments; Warranties . . . . . . . . . . . 13 4.22 Powers of Attorney. . . . . . . . . . . . . . . . . . . . . 14 4.23 Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . 14 -i- PAGE ---- 4.24 Remuneration. . . . . . . . . . . . . . . . . . . . . . . . 14 4.25 Union and Employment Agreements . . . . . . . . . . . . . . 14 4.26 Officers, Directors, and Bank Accounts. . . . . . . . . . . 15 4.27 Interested Party Transactions . . . . . . . . . . . . . . . 15 4.28 Brokers and Finders . . . . . . . . . . . . . . . . . . . . 15 4.29 Investment Representations; Legend on Shares. . . . . . . . 15 4.30 Compliance with Regulation D Information Requirements . . . 16 4.31 Schedules . . . . . . . . . . . . . . . . . . . . . . . . . 17 ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF ACTAMED AND SUBCORP . . . 17 5.1 Organization and Good Standing. . . . . . . . . . . . . . . 17 5.2 Authorization of Agreement, No Breach . . . . . . . . . . . 18 5.3 Corporate Power . . . . . . . . . . . . . . . . . . . . . . 18 5.4 ActaMed Financial Statements. . . . . . . . . . . . . . . . 18 5.5 Consents. . . . . . . . . . . . . . . . . . . . . . . . . . 19 5.6 Capitalization. . . . . . . . . . . . . . . . . . . . . . . 19 5.7 Validity and Rights of the Preferred Shares . . . . . . . . 19 5.8 Registration Rights . . . . . . . . . . . . . . . . . . . . 20 5.9 Offering. . . . . . . . . . . . . . . . . . . . . . . . . . 20 5.10 Changes . . . . . . . . . . . . . . . . . . . . . . . . . . 20 5.11 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . 20 5.12 Pending Litigation, etc.. . . . . . . . . . . . . . . . . . 20 5.13 Title to Properties . . . . . . . . . . . . . . . . . . . . 20 5.14 Intellectual Property, etc. . . . . . . . . . . . . . . . . 21 5.15 Compliance with Other Instruments . . . . . . . . . . . . . 21 5.16 Compliance with Law . . . . . . . . . . . . . . . . . . . . 22 5.17 Employees . . . . . . . . . . . . . . . . . . . . . . . . . 22 5.18 Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . 22 5.19 Compliance with Environmental Laws. . . . . . . . . . . . . 22 5.20 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 23 5.21 Material Contracts and Agreements . . . . . . . . . . . . . 23 5.22 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 5.23 Investment Company. . . . . . . . . . . . . . . . . . . . . 24 5.24 Labor Relations . . . . . . . . . . . . . . . . . . . . . . 24 5.25 No Conflict of Interest . . . . . . . . . . . . . . . . . . 25 5.26 Brokers or Finders. . . . . . . . . . . . . . . . . . . . . 25 5.27 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . 25 ARTICLE 6 RELATED AGREEMENTS OF THE PARTIES . . . . . . . . . . . . . 25 6.1 Conduct of Business . . . . . . . . . . . . . . . . . . . . 25 6.2 Access to Properties. . . . . . . . . . . . . . . . . . . . 26 6.3 Relationship with Employees and Customers . . . . . . . . . 26 -ii- PAGE ---- 6.4 Hired Employees . . . . . . . . . . . . . . . . . . . . . . 27 6.5 Employee Benefits . . . . . . . . . . . . . . . . . . . . . 27 6.6 Other Offers and Exclusive Dealing. . . . . . . . . . . . . 28 6.7 Certain Tax Matters . . . . . . . . . . . . . . . . . . . . 29 6.8 Consents and Approvals. . . . . . . . . . . . . . . . . . . 29 6.9 Qualification and Corporate Existence . . . . . . . . . . . 29 6.10 Public Announcements. . . . . . . . . . . . . . . . . . . . 29 6.11 Confidentiality . . . . . . . . . . . . . . . . . . . . . . 30 6.12 Covenant Not to Compete . . . . . . . . . . . . . . . . . . 30 6.13 Closing Conditions. . . . . . . . . . . . . . . . . . . . . 30 6.14 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 30 6.15 Repayment of Debts to Company . . . . . . . . . . . . . . . 31 6.16 Compliance with Regulation D. . . . . . . . . . . . . . . . 31 6.17 Voting for Merger . . . . . . . . . . . . . . . . . . . . . 31 6.18 Antitrust Notification. . . . . . . . . . . . . . . . . . . 31 6.19 Review of Registration Statement. . . . . . . . . . . . . . 31 6.20 Escrow of Software. . . . . . . . . . . . . . . . . . . . . 31 ARTICLE 7 CONDITIONS PRECEDENT TO OBLIGATIONS OF ACTAMED AND SUBCORP 32 7.1 Representations True and Covenants Performed at Closing . . 32 7.2 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . 32 7.3 No Injunction, etc. . . . . . . . . . . . . . . . . . . . . 32 7.4 Approval of Legal Matters . . . . . . . . . . . . . . . . . 32 7.5 Governmental Approvals. . . . . . . . . . . . . . . . . . . 32 7.6 No Material Adverse Change. . . . . . . . . . . . . . . . . 32 ARTICLE 8 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF UHC AND THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . 33 8.1 Representations True and Covenants Performed at Closing . . 33 8.2 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . 33 8.3 No Injunction, etc. . . . . . . . . . . . . . . . . . . . . 33 8.4 Approval of Legal Matters . . . . . . . . . . . . . . . . . 33 8.5 Governmental Approvals. . . . . . . . . . . . . . . . . . . 33 8.6 No Material Adverse Change. . . . . . . . . . . . . . . . . 34 ARTICLE 9 SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . 34 9.1 Survival of Representations and Warranties of UHC and the Company . . . . . . . . . . . . . . . . . . . . . . . . . . 34 9.2 Survival of Representations and Warranties of ActaMed and SubCorp . . . . . . . . . . . . . . . . . . . . . . . . . . 34 -iii- PAGE ---- 9.3 Obligation of UHC to Indemnify. . . . . . . . . . . . . . . 35 9.4 Obligation of ActaMed and SubCorp to Indemnify. . . . . . . 35 9.5 Claims Notice . . . . . . . . . . . . . . . . . . . . . . . 36 9.6 Procedures Involving Non-Third Party Claims . . . . . . . . 36 9.7 Procedures Involving Third Party Claims . . . . . . . . . . 36 9.8 Limitations on Indemnification. . . . . . . . . . . . . . . 37 9.9 No Release for Fraud. . . . . . . . . . . . . . . . . . . . 38 9.10 Payment . . . . . . . . . . . . . . . . . . . . . . . . . . 38 9.11 Exclusive Remedy. . . . . . . . . . . . . . . . . . . . . . 38 9.12 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . 39 ARTICLE 10 TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . 39 10.1 Tax Indemnities . . . . . . . . . . . . . . . . . . . . . . 39 10.2 Returns and Payments. . . . . . . . . . . . . . . . . . . . 40 10.3 Tax Audit . . . . . . . . . . . . . . . . . . . . . . . . . 41 10.4 Cooperation and Exchange of Information . . . . . . . . . . 41 10.5 Tax Sharing Agreements. . . . . . . . . . . . . . . . . . . 42 10.6 Article 9 . . . . . . . . . . . . . . . . . . . . . . . . . 42 ARTICLE 11 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . 42 11.1 Method of Termination . . . . . . . . . . . . . . . . . . . 42 11.2 Notice of Termination . . . . . . . . . . . . . . . . . . . 43 11.3 Effect of Termination . . . . . . . . . . . . . . . . . . . 43 11.4 Risk of Loss. . . . . . . . . . . . . . . . . . . . . . . . 43 ARTICLE 12 ADDITIONAL COVENANTS OF ACTAMED . . . . . . . . . . . . . . 44 12.1 Securities Law Filings. . . . . . . . . . . . . . . . . . . 44 12.2 Transactions with Substantial Holders . . . . . . . . . . . 44 12.3 Business and Financial Covenants. . . . . . . . . . . . . . 44 12.4 Corporate Existence, Business, Maintenance, Insurance . . . 46 12.5 Payment of Taxes, etc.; ERISA . . . . . . . . . . . . . . . 47 12.6 Books and Records, Compliance . . . . . . . . . . . . . . . 47 12.7 Repurchase of Preferred Shares. . . . . . . . . . . . . . . 48 12.8 Compensation. . . . . . . . . . . . . . . . . . . . . . . . 48 ARTICLE 13 INFORMATIONAL COVENANTS OF ACTAMED. . . . . . . . . . . . . 48 13.1 Audited Annual Financial Statements . . . . . . . . . . . . 48 13.2 Quarterly Unaudited Financial Statements. . . . . . . . . . 48 13.3 Monthly Unaudited Financial Statements. . . . . . . . . . . 49 13.4 Management's Analysis . . . . . . . . . . . . . . . . . . . 49 13.5 Budgets . . . . . . . . . . . . . . . . . . . . . . . . . . 49 13.6 Inspection. . . . . . . . . . . . . . . . . . . . . . . . . 49 13.7 Other Information . . . . . . . . . . . . . . . . . . . . . 50 -iv- PAGE ---- ARTICLE 14 GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . 51 14.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 51 14.2 Further Assurances. . . . . . . . . . . . . . . . . . . . . 52 14.3 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . 52 14.4 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . 52 14.5 Binding Effect. . . . . . . . . . . . . . . . . . . . . . . 53 14.6 Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . 53 14.7 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . 53 14.8 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . 53 14.9 Governing Law . . . . . . . . . . . . . . . . . . . . . . . 53 14.10 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . 53 14.11 Pronouns. . . . . . . . . . . . . . . . . . . . . . . . . . 53 14.12 Time of Essence . . . . . . . . . . . . . . . . . . . . . . 53 14.13 Schedules and Exhibits. . . . . . . . . . . . . . . . . . . 53
-v- EXHIBITS AND SCHEDULES
EXHIBITS - -------- A Defined Terms 1.4(a)(1) Services and License Agreement 1.4(a)(2) Registration Rights Agreement Amendment 1.4(a)(3) Stockholders' Agreement Amendment 1.4(a)(4) Standstill Agreement Amendment 1.4(a)(5) Terms of Transition Services Agreement 1.4(a)(6) UHC Compliance Certificate 1.4(a)(7) UHC Secretary's Certificate 1.4(a)(8) Company Compliance Certificate 1.4(a)(9) Company Secretary's Certificate 1.4(b)(2) Third Amended and Restated Articles of Incorporation 1.4(b)(3) ActaMed Compliance Certificate 1.4((b)(4) ActaMed Secretary's Certificate 1.4(b)(5) SubCorp Compliance Certificate 1.4(b)(6) SubCorp Secretary's Certificate SCHEDULES 4.6 EDI Financial Statements 4.9 Changes 4.13(a) Company Personal Property 4.14 Company Intellectual Property 4.19 Company Environmental Conditions 4.20 Company Litigation 4.21(a) Company Contracts 4.27 Interested Party Transactions 5.4(a) ActaMed Financial Statements 5.4(b) Undisclosed Liabilities 5.5 Consent Requirements 5.6 ActaMed Derivative Securities 5.12 ActaMed Litigation 5.13 ActaMed Liens 5.14 ActaMed Intellectual Property 5.20 ActaMed Insurance Policies 5.21 ActaMed Contracts 5.22 Description of 1993 IRS Audit 5.24 ActaMed Labor Practices 5.25 ActaMed Conflicts 6.5 Hired Employees
-vi- AGREEMENT AND PLAN OF MERGER THIS AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), dated as of March 1, 1996, is made and entered into by and among ACTAMED CORPORATION, a Georgia corporation ("ACTAMED"), EDI ACQUISITION, INC., a Georgia corporation ("SUBCORP"), UNITED HEALTHCARE CORPORATION, a Minnesota corporation ("UHC") and UHC GREEN ACQUISITION, INC., a Nevada corporation (the "COMPANY"). PREAMBLE The Boards of Directors of ActaMed, SubCorp and the Company, and UHC are of the opinion that the transactions described in this Agreement are in the best interests of the parties and their respective shareholders. UHC is the sole shareholder of the Company and ActaMed is the sole shareholder of SubCorp. The assets dedicated to the EDI Services Group of UHC ("EDI") were transferred to the Company. This Agreement provides for the acquisition of the Company by ActaMed pursuant to the merger of SubCorp with and into the Company. At the effective time of such merger, the outstanding shares of the capital stock of the Company shall be converted into the right to receive preferred stock of ActaMed. As a result, UHC shall become a shareholder of ActaMed and the Company shall continue to conduct its business and operations as a wholly-owned subsidiary of ActaMed. The transactions described in this Agreement are subject to the approval of the Federal Trade Commission and the United States Department of Justice, and the satisfaction of several other conditions described in this Agreement. Capitalized terms used in this Agreement are defined in EXHIBIT A to this Agreement. AGREEMENT In consideration of the mutual representations, warranties and covenants contained herein, the parties hereto agree as follows: ARTICLE 1 TRANSACTIONS AND TERMS OF MERGER 1.1 MERGER. At the Effective Time, SubCorp shall be merged with and into the Company in the Merger. The Company shall be the Surviving Corporation of the Merger and shall be governed by the laws of the State of Nevada. The Merger shall be consummated pursuant to the terms and subject to the conditions of this Agreement, which has been approved and adopted by the respective Boards of Directors (or authorized committees thereof) of ActaMed, SubCorp and the Company, and by UHC. -vii- 1.2 TIME AND PLACE OF CLOSING. The Closing of the transactions contemplated by this Agreement will take place at 9:00 a.m., Atlanta, Georgia local time, three business days after satisfaction of the conditions set forth in Articles 7 and 8, or on such other day or at such other time as the parties hereto may mutually agree. Notwithstanding the foregoing, if the Closing does not occur on the first day of a month, then solely for financial accounting and reporting purposes and filing of income tax returns in connection with the Company, the parties hereto agree that the transactions contemplated herein shall be deemed to have closed on as of the first day of the month in which the Closing occurs; provided that the parties hereto agree that for all other purposes, including, without limitation, risk of loss, the Closing shall occur, and shall be deemed to have occurred, on the actual date of the Closing. Executed counterparts of the documents required for the Closing shall be exchanged by mail prior to the Closing Date, and the parties shall inspect and approve such executed documents prior to the Closing Date. Prior to the Closing Date any documents so exchanged shall not be deemed to have been delivered, but shall be held in escrow for inspection and approval pending the Closing. On the Closing Date the parties shall confirm to each other in writing that the documents are satisfactory, the documents shall be deemed to be delivered, the Closing shall occur and the Merger shall be effected. 1.3 EFFECTIVE TIME. The Merger and other transactions contemplated by this Agreement shall become effective at the later of: (a) the date and the time that a Certificate of Merger reflecting the Merger is filed with the Secretary of State of the State of Georgia or (b) the date and the time that articles of merger reflecting the Merger are filed with the Secretary of State of the State of Nevada. 1.4 ITEMS TO BE DELIVERED AT CLOSING. At the Closing, the parties shall exchange the following documents in connection with the Merger. (a) UHC and the Company shall deliver to ActaMed and SubCorp the following: (1) a Services and License Agreement, executed by UHC as attached hereto as EXHIBIT 1.4(a)(1); (2) a Second Amendment to the Registration Rights Agreement, executed by UHC and substantially in the form of EXHIBIT 1.4(a)(2); (3) a Second Amendment to the ActaMed Stockholders' Agreement, executed by UHC and substantially in the form of EXHIBIT 1.4(a)(3); (4) an Amendment to the Standstill Agreement, executed by UHC, UHC Management Company, Inc. and HLM Partners VII, L.P. and substantially in the form of EXHIBIT 1.4(a)(4); -viii- (5) a Transition Services Agreement, to be negotiated in good faith by ActaMed and UHC and to be executed by UHC on substantially the terms set forth on EXHIBIT 1.4(a)(5); (6) a compliance certificate executed by an appropriate officer of UHC and substantially in the form of EXHIBIT 1.4(a)(6); (7) a Secretary's certificate executed by the Secretary of UHC and substantially in the form of EXHIBIT 1.4(a)(7); (8) a compliance certificate executed by the President of the Company and substantially in the form of EXHIBIT 1.4(a)(8); (9) a Secretary's certificate executed by the Secretary of the Company and substantially in the form of EXHIBIT 1.4(a)(9); (10) an opinion of Kevin H. Roche to be negotiated in good faith by ActaMed, UHC and Mr. Roche; (11) the written consents of other persons obtained pursuant to SECTION 6.8; (12) the resignation of each officer and director of the Company; (13) all of the books and records of the Company and the Company Business including, but not limited to, (a) all corporate and other records of the Company and each of its predecessors, including the minute books, stock books, stock registers, books of account, leases and contracts, deeds, title documents, customer lists, financial statements, (b) employee records and (c) such other documents or certificates as shall be reasonably requested by ActaMed and SubCorp; (14) the good standing and other certificates referred to in SECTION 6.9 hereof; and (15) all other documents reasonably requested by ActaMed or SubCorp. (b) ActaMed and the SubCorp shall deliver to UHC and the Company the following: (1) executed counterpart originals of the Services and License Agreement, the Registration Rights Agreement Amendment, the Stockholders' Agreement Amendment, the Standstill Agreement Amendment, the Transition Services Agreement and the Sublease Agreement; -ix- (2) a certified copy of the Third Amended and Restated Articles of Incorporation of ActaMed, filed in the office of the Secretary of State of Georgia and substantially in the form of EXHIBIT 1.4(b)(2); (3) a compliance certificate executed by the President of ActaMed and substantially in the form of EXHIBIT 1.4(b)(3); (4) a Secretary's certificate executed by the Secretary of ActaMed and substantially in the form of EXHIBIT 1.4(b)(4); (5) a compliance certificate executed by the President of SubCorp and substantially in the form of EXHIBIT 1.4(b)(5); (6) a Secretary's certificate executed by the Secretary of SubCorp and substantially in the form of EXHIBIT 1.4(b)(6); (7) an opinion of Alston & Bird to be negotiated in good faith by UHC, ActaMed and Alston & Bird; and (8) all other documents reasonably requested by UHC or the Company. ARTICLE 2 THE SURVIVING CORPORATION 2.1 ARTICLES OF INCORPORATION. The Articles of Incorporation of the Company as in effect immediately prior to the Effective Time shall be the Articles of Incorporation of the Surviving Corporation after the Effective Time, and thereafter may be amended in accordance with its terms as provided by law and this Agreement. 2.2 BYLAWS. The Bylaws of SubCorp as in effect immediately prior to the Effective Time shall be the Bylaws of the Surviving Corporation, and thereafter may be amended in accordance with their terms and as provided by laws and this Agreement. 2.3 DIRECTORS AND OFFICERS. The directors of SubCorp in office immediately prior to the Effective Time shall be the directors of the Surviving Corporation, and the officers of SubCorp in office immediately prior to the Effective Time shall be the officers of the Surviving Corporation, in each case until their respective successors are duly elected and qualified. -x- ARTICLE 3 MANNER OF CONVERTING SHARES 3.1 CONVERSION OF SHARES. Subject to the provisions of this ARTICLE 3, at the Effective Time, by virtue of the Merger and without any action on the part of UHC: (a) All of the Company Common Stock issued and outstanding immediately prior to the Effective Time shall be deemed canceled and cease to be outstanding and shall be converted into the right to receive at the Effective Time as consideration from ActaMed for the Merger 10,344,828 shares of Series C Preferred Stock of ActaMed. If, after the date of this Agreement and before the Effective Time, ActaMed shall take any action that would have caused conversion of the Preferred Shares had they been outstanding, then the Company Common Stock shall be exchanged for the number of shares of the ActaMed Common Stock that would have been issued upon the conversion of the Preferred Shares. If, after the date of this Agreement and before the Effective Time, ActaMed shall take any action that would have caused an adjustment to the Series C Conversion Price (as defined in the Restated Articles) had the Preferred Stock been outstanding, then the Series C Conversion Price shall be so adjusted. (b) Any and all shares of Company Common Stock held as treasury shares by the Company shall be canceled and retired at the Effective Time, and no consideration shall be issued in exchange therefor. (c) Each share of the common stock of the SubCorp issued and outstanding immediately prior to the Effective Time shall remain issued and outstanding from and after the Effective Time and shall be unaffected by the Merger. 3.2 EXCHANGE PROCEDURES. At the Closing, UHC shall deliver to ActaMed the certificates held by it that formerly represented Company Common Stock, and shall promptly upon surrender thereof receive in exchange therefor the consideration provided in SECTION 3.1 of this Agreement. The certificates so surrendered shall be duly endorsed as ActaMed may require. Until surrendered for exchange in accordance with the provisions of this SECTION 3.2, each certificate for Company Common Stock shall from and after the Effective Time represent for all purposes only the right to receive the consideration provided in SECTION 3.1 of this Agreement in exchange therefor. ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF UHC AND THE COMPANY UHC and the Company jointly and severally represent and warrant to ActaMed and SubCorp as follows: 4.1 OWNERSHIP OF SHARES; OPERATIONS. UHC is the owner of all right, title and interest (legal and beneficial) in and to all of the Shares, free and clear of any and all -xi- Liens of any nature whatsoever, and UHC holds no other interest in the Company or the Company Business. Except as pursuant to this Agreement, no person or entity has any agreement or option or any right or privilege (whether pre-emptive or contractual) capable of becoming an agreement or option for the purchase of any of the Shares. Substantially all of the assets required for the operation of the Company Business have been transferred to the Company on _____________, 199_ and the Company did not have any operations prior to such date. 4.2 CAPACITY AND VALIDITY. UHC and the Company each have the full power, authority and capacity necessary to enter into and perform its obligations under this Agreement and the other UHC Documents and to consummate the transactions contemplated hereby and thereby. This Agreement and all other UHC Documents have been or will be duly executed and delivered by UHC and the Company, and constitute or will constitute the legal, valid and binding obligations of UHC and the Company, enforceable in accordance with their respective terms. Neither the execution, delivery and performance of this Agreement or any other UHC Document, nor the consummation of the transactions contemplated hereby or thereby, will violate any provisions of the articles of incorporation or bylaws of UHC or the Company, or any Regulation or Court Order to which UHC or the Company is subject. 4.3 ORGANIZATION, STANDING AND FOREIGN QUALIFICATION. UHC is a corporation duly incorporated, validly existing and in good standing under the laws of Minnesota. The Company is a corporation duly incorporated, validly existing, and in good standing under the laws of the State of Nevada, and has the power and authority to carry on its business in the places as it has been and is now being conducted and to own and lease the properties and assets which it now owns or leases. The Company is duly qualified and/or licensed to transact business and is in good standing as a foreign corporation in the State of Minnesota, and the character of the property owned or leased by the Company and the nature of the business conducted by it do not require such qualification and/or licensing in any other jurisdiction. Copies of the articles of incorporation and all amendments thereto of the Company (certified by the Secretary of State of the State of Nevada), the bylaws of the Company (certified by the Secretary of the Company) and copies of the corporate minutes of the Company, which have been made available to ActaMed and SubCorp for review, are true and complete copies of such documents and accurately reflect all proceedings of the shareholders and directors of the Company (and all committees thereof). The stock record books of the Company, which have been made available to ActaMed and SubCorp for review, contain true, complete and adequate records of the stock ownership of the Company and the transfer of the shares of its capital stock. 4.4 CAPITAL STOCK. The authorized capital stock of the Company consists of 1,000 shares of Common Stock, $.01 par value per share, all of which are issued and outstanding. All of the issued and outstanding Shares are duly and validly issued and outstanding, are fully paid and nonassessable, and were issued pursuant to a valid exemption from registration under the Securities Act and all applicable state securities -xii- laws. There are no outstanding warrants, options, rights, calls or other commitments of any nature relating to the Company Common Stock or any other capital stock of the Company, and there are no outstanding securities of the Company convertible into or exchangeable for shares of Company Common Stock or any other capital stock of the Company. There are no shares of capital stock held in the treasury of the Company. 4.5 SUBSIDIARIES AND INVESTMENTS. The Company has not in the past and does not currently own, directly or indirectly, any capital stock or other equity, ownership or proprietary interest in any corporation, partnership, association, trust, joint venture or other entity. 4.6 EDI FINANCIAL STATEMENTS. (a) SCHEDULE 4.6 contains audited balance sheets of EDI as of December 31, 1994, and December 31, 1995, and audited statements of operations and statements of cash flows for the three years ending December 31, 1995, together with the notes thereto and the reports thereon of Deloitte & Touche, LLP. (b) The EDI Financial Statements (1) are in accordance with the books and records of the UHC Group, which have been properly maintained and are complete and correct in all material respects; (2) present fairly the financial condition, assets and liabilities (whether accrued, absolute, contingent or otherwise) of the Company Business as of the respective dates indicated and the results of operations for the respective periods indicated; (3) have been prepared in accordance with GAAP consistently applied throughout the periods involved, and (4) reflect adequate reserves for all known Liabilities and reasonably anticipated losses. (c) The EDI Financial Statements contain no untrue statements of any material fact nor do they omit to state any material fact required to be stated to make the EDI Financial Statements not misleading. No member of the UHC Group has received any advice or notification from its independent certified public accountants that the UHC Group has used any improper accounting practice that would have the effect of not reflecting or incorrectly reflecting in the EDI Financial Statements any properties, assets, liabilities, revenues or expenses. The EDI Financial Statements do not contain any items of special or nonrecurring income, or other income not earned in the ordinary course of business, individually or in the aggregate in excess of $5,000. (d) The Company owns all of the assets reflected in the EDI Financial Statements and the EDI Financial Statements reflect all of the assets currently used by EDI in connection with the Company Business. 4.7 ABSENCE OF UNDISCLOSED LIABILITIES. The Company has no Liabilities that are not reflected on the EDI Financial Statements, other than Liabilities for the performance by the Company after the Closing Date of the contracts assigned to the Company as set forth on the Schedules hereto. -xiii- 4.8 NO LIABILITIES AS GUARANTOR. The Company is not directly or indirectly liable, by guaranty, indemnity, or otherwise, upon or with respect to, or obligated, by discount or repurchase agreement or in any other way, to provide funds in respect to, or obligated to guarantee or assume any debt, dividend or other obligation of any person, corporation, association, partnership or other entity. 4.9 ABSENCE OF CHANGES. Except as disclosed on SCHEDULE 4.9, and except as contemplated by this Agreement, since December 31, 1995, the business and operations of the Company have been carried on only in the ordinary course, and there has not been any transaction or occurrence, whether or not in the ordinary course, in which the Company (and, with respect to (e), (f), (h), (i) and (n), any other member of the UHC Group in connection with the Hired Employees) has: (a) suffered or experienced any event or condition materially and adversely affecting the business, operations, assets, properties or condition of the Company, financial or otherwise; (b) declared, set aside or made, or agreed to declare, set aside or make any payments or dividends or any distribution to shareholders, or purchased, redeemed or otherwise acquired, directly or indirectly, or agreed to purchase, redeem or acquire, any shares of capital stock or other securities; (c) effected any changes in its capital structure, or issued, sold or otherwise transferred any equity or other interest in itself or any other securities, or granted or agreed to grant any options or rights to purchase any securities; (d) suffered any damage, destruction or loss, whether or not covered by insurance, which materially and adversely affected the properties or business of the Company, or suffered any extraordinary losses or waived any rights of substantial value; (e) increased the rate of compensation payable or to become payable by it to any of its officers, directors, employees or agents over the rate being paid to them as of December 31, 1995, or agreed so to do, except general hourly rate increases and normal merit increases for employees other than officers; (f) hired, committed to hire, terminated or received the resignation of any Hired Employee; (g) suffered any loss or termination, or threatened loss or termination, of any material customer or supplier; (h) through negotiation or otherwise, made any commitment or incurred any Liability, whether or not enforceable, to any labor organization; -xiv- (i) directly or indirectly paid or entered into a Contract to pay any severance or termination pay to any officer, director, employee or agent; (j) changed any of the accounting principles followed by it or the methods of applying such principles; (k) offered or extended more favorable prices, discounts or advertising, promotional, display or other allowances than were offered or extended regularly as of the date of the most recently dated EDI Financial Statements; (l) entered into any commitment or transaction not in the ordinary course of business involving aggregate value in excess of $10,000 or made or approved the making of any capital expenditure exceeding the amount of $10,000 in any instance; (m) paid, discharged or satisfied any material liability other than the payment, discharge or satisfaction of liabilities in the ordinary course of business; (n) except in the ordinary course of business and consistent with past practice, canceled or compromised any debts or waived or permitted to lapse any claims or rights or sold, transferred or otherwise disposed of any of its properties or assets; (o) incurred any liabilities or obligations (absolute, accrued or contingent) in excess of $10,000, except for accounts payable incurred in the ordinary course of business; (p) mortgaged, pledged, subjected or agreed to subject, any of its assets, tangible or intangible, to any Lien, except for Liens for current property taxes not yet due and payable; (q) terminated or amended any material Contract, License or other instrument to which the Company is a party or suffered any loss or termination or threatened loss or termination of any existing business arrangement or material supplier, the termination or loss of which could materially and adversely affect the Company; (r) paid or agreed to pay any service charge, interest charge, investment charge, intercompany charge or similar fee to any member of the UHC Group that is not reflected in the Transition Services Agreement or entered into any other transactions other than in the ordinary course of business; (s) charged off any bad debts or increased its bad debt reserve; (t) experienced any significant development, quality assurance or network operations problems. 4.10 INDEBTEDNESS. The Company has no indebtedness for money borrowed. -xv- 4.11 TAX MATTERS. (a) The Company has filed all Tax returns and information returns required to be filed, taking into account any extensions of the filing deadlines which have been validly granted to the Company, and such returns are and will be true and correct in all material respects and properly reflect the Tax liabilities of the Company for the periods, property or events covered thereby, and the Company has paid all Taxes (including penalties and interest in respect thereof, if any) that are due, whether shown on such returns or not. (b) Adequate provision has been made on the EDI Financial Statements for all accrued Tax liabilities not required to be paid prior to such date and for all current and deferred Taxes. (c) The UHC Group has withheld or collected from each of the Hired Employees the amount of all Taxes required to be withheld or collected therefrom and has paid the same to the proper tax depositories or collecting authorities. (d) All ad valorem property taxes imposed on the Company and each of its predecessors or its Affiliates to which it has succeeded with respect to, or which may become a Lien on, its assets have been paid in full. 4.12 REAL PROPERTY. The Company neither owns nor leases (either as lessee or lessor) any real property. 4.13 PERSONAL PROPERTY. (a) SCHEDULE 4.13(a) contains a true, complete and correct list of the material equipment, machinery, or other tangible personal property owned by the Company, other than inventories held for resale and personal property of the Hired Employees. The Company has good and marketable title to all of its equipment, machinery, and items of tangible personal property (whether or not disclosed in SCHEDULE 4.13(a)), free and clear of any and all Liens of any kind or nature. (b) The Company does not lease any of the equipment, machinery or other items of tangible personal property used or employed in the Company Business. The Company does not lease any personal property as lessor. (c) The equipment, machinery, or other tangible personal property owned or leased by the Company is in good operating condition and in a state of reasonable maintenance and repair, and is considered adequate and usable for the continued operation of the business of the Company as the same is presently conducted. -xvi- 4.14 INTELLECTUAL PROPERTY. SCHEDULE 4.14 contains a list of all material Intellectual Property owned by, registered in the name of, or used in the Company Business by the UHC Group on the date hereof, or for which application has been made. All licenses constituting Intellectual Property are in full force and effect and constitute legal, valid and binding obligations of the respective parties thereto, and there have not been and there currently are not any Defaults thereunder by any party. The Company owns all of such Intellectual Property free and clear of all assignments, Licenses (or sublicenses), restrictions or Liens, except as set forth on SCHEDULE 4.14. None of the Intellectual Property rights in the version and form used on the Closing Date in the Company's Business infringes upon or otherwise violates the rights of others, nor has any person asserted to UHC Group a claim of such infringement, and to the knowledge of UHC Group, no person is infringing upon or otherwise violating the Intellectual Property rights of the Company. Except as set forth in SCHEDULE 4.14, the Company is not obligated to pay any royalties to any person or entity with respect to any Intellectual Property. The Company does not believe it is or will be necessary to utilize any inventions of any of the employees engaged in the Company Business (or people the Company currently intends to hire) made prior to their employment by any member of the UHC Group. To the best knowledge of the Company, no employee engaged in the Company Business is or has been in violation of any term of any employment contract, patent disclosure agreement or any other contract or agreement relating to the Intellectual Property or the relationship of any such employee with such entity or any other party. 4.15 ACCOUNTS AND NOTES RECEIVABLE. The accounts receivable and notes receivable of the Company as reflected in the most recently dated balance sheet included in the EDI Financial Statements, to the extent uncollected on the date hereof, and the accounts receivable and notes receivable reflected on the books of the Company are: (a) valid and existing, (b) enforceable by the Company in accordance with the terms of the instruments or documents creating them, and (c) collectible within ninety (90) days in an amount not less than the aggregate face amount thereof (net of reserves for doubtful and uncollectible accounts) pursuant to the Company's normal collection practices. 4.16 THE PROPRIETARY SOFTWARE. (a) The proprietary computer software of the Company included in the Intellectual Property (the "SOFTWARE") performs in accordance with the documentation and other written material used in connection with the Software, is in machine-readable form, contains all current revisions of such software, and includes all computer programs, materials, tapes, object and source codes and other written materials related to the Software. The Company has delivered to ActaMed complete and correct copies of all user and technical documentation related to the Software. (b) Neither the UHC Group nor, to the best knowledge of the UHC Group, any employee or agent thereof has developed or assisted in the -xvii- enhancement of the Software except for enhancements included in the Software as delivered to ActaMed pursuant hereto. (c) No employee of UHC Group is, or is now expected to be, in default under any term of any employment contract, agreement or arrangement relating to the Software or noncompetition arrangement, or any other Contract or any restrictive covenant relating to the Software or its development or exploitation. The Software was developed entirely by the employees of UHC Group during the time they were employees only of UHC Group or by consultants who assigned in writing all of their rights in the Software to UHC Group. (d) All right, title and interest in and to the Software is owned by the Company, free and clear of all liens, claims, charges or encumbrances, are fully transferable to the Purchaser, and no party other than the Company has any interest in the Software, including without limitation, any security interest, license, contingent interest or otherwise. UHC Group's development or sale of the Software did and does not violate any rights of any other person or entity and UHC Group has not received any communication alleging such a violation. UHC Group does not have any obligation to compensate any Person for the development, use, sale or exploitation of the Software nor has UHC Group granted to any other person or entity any license, option or other right to develop, use, sell or exploit in any manner the Software, whether requiring the payment of royalties or not. (e) UHC Group has kept secret and has not disclosed the source code for the Software to any person or entity other than certain employees of UHC Group. UHC Group has taken all appropriate measures to protect the confidential and proprietary nature of the Software. There have been no patents applied for and no copyrights registered for any part of the Software. To the knowledge of UHC Group, there are no trademark rights of any person or entity other than UHC Group in the name "ProviderLink". (f) Except as set forth in SECTION 6.20, all copies of the Software embodied in physical form are being delivered to ActaMed at or prior to the Closing. 4.17 INSURANCE. UHC has maintained all appropriate types of insurance, relative to its and the Company's Business in order to protect UHC and the Company's assets and employees. 4.18 COMPLIANCE WITH LAWS. (a) The Company and, in the operation of the Company Business, the UHC Group has complied in all material respects with all applicable laws, Regulations and orders. The Company has obtained all material permits, licenses, orders, and -xviii- approvals of federal, state and local governmental and regulatory bodies that are required for the ownership, maintenance and operation of the Company's premises and facilities and the operation of the Company Business; and no member of the UHC Group is aware of any pending threat of cancellation, modification or nonrenewal of any such permits, licenses, orders or approvals, nor any basis for such cancellation, modification or nonrenewal. The Company is not presently in material violation or material Default of any such permit, license, order or approval and the present uses of the Company's assets do not in any material respect violate any law, Regulation or order. No notice or warning from any governmental authority with respect to any failure or alleged failure of the Company to comply with any law, Regulation or order has been issued or given, nor is any member of the UHC Group aware that any such notice or warning is proposed or threatened. With the exception of the acceptance for filing of articles of merger by the secretaries of state of the States of Georgia and Nevada, respectively, and as set forth in SECTION 6.18, no consent or approval of, prior filing with or notice to, or other action by, any governmental body or agency or any other third party is required in connection with the execution and delivery of this Agreement or any assignment, agreement or other instrument to be executed and delivered pursuant to this Agreement by the Company or any of UHC or the consummation of the transactions provided for herein or therein. (b) There are no material capital expenditures that the Company believes are reasonably likely to be required to be made in connection with the Company Business as now conducted in order to comply with any Regulations or other governmental requirements applicable to the Company Business as it is now conducted. 4.19 ENVIRONMENTAL CONDITIONS. Except as set forth in SCHEDULE 4.19, there are no present or past Environmental Conditions in any way relating to the business, properties or assets of the Company. 4.20 LITIGATION AND CLAIMS. There are no outstanding Court Orders or quasi-judicial or administrative decisions to which the Company is subject, and, except as disclosed on SCHEDULE 4.20, there is no Litigation pending or to the best knowledge of the UHC Group threatened against or relating to the Company or its assets or businesses. The UHC Group has not been advised by any attorney representing it that there are any "loss contingencies" (as defined in FASB 5), which would be required by FASB 5 to be disclosed or accrued in financial statements of EDI, were such financial statements prepared as of the date hereof. 4.21 CONTRACTS AND COMMITMENTS; WARRANTIES. (a) SCHEDULE 4.21(a) contains a true, correct and complete list of all Contracts to which the Company is a party or by which the Company benefits, except for the Contracts that (1) are terminable at will by the Company without any Liability, (2) are described in any other Schedule hereto, or (3) do not and can not require payments in excess of $5,000 in the aggregate following the date hereof. -xix- (b) Each of the Contracts listed in SCHEDULE 4.21(a), or described in this SECTION 4.21 but which is included in any other Schedule, is in full force and effect. No Default under any of the terms or conditions set forth in any of the Contracts to which the Company is a party or any document or instrument related thereto has occurred or been asserted by any party which could result in monetary damages or termination of the Contract or require payments to cure such Default. Except as reflected in such Schedules, neither the execution, delivery and performance of this Agreement or any other agreement or other instrument or document to be executed and delivered by the Company or UHC pursuant to this Agreement, nor the consummation of the transactions contemplated hereby or thereby, will conflict with, result in a breach of, or constitute a Default under any Contract to which the Company or UHC is a party or by which any of them is bound, affect the continuation, validity and effectiveness of any of such Contracts, or any terms thereof, or result in the creation of any Lien upon any of the Shares or any of the Company's assets or properties, or result in the acceleration of the maturity of any payment date of any of the Company's obligations, or increase or adversely affect the obligations of the Company thereunder. True, correct and complete copies of all written Contracts or a written description of all oral Contracts referred to in SCHEDULE 4.21(a) have been made available to ActaMed and SubCorp for review. (c) UHC Group has not given any warranties to any third parties with respect to the products or services offered by the Company Business. 4.22 POWERS OF ATTORNEY. The Company has not given or granted any power of attorney, whether limited or general, to any person, firm, corporation or otherwise that is continuing in effect. 4.23 BENEFIT PLANS. The Company has not at any time sponsored, contributed to or been obligated to contribute to any Benefit Plan. Neither the Company nor UHC has at any time sponsored, contributed to or been obligated to contribute to a "multiemployer pension plan" (as defined in ERISA Section 4001(a)(3) and 3(37)(A)) or to a "defined benefit plan" (as defined in ERISA Section 3(35)). Except as provided in SECTION 6.5(b) of this Agreement, the Company, ActaMed and ActaMed's Affiliates shall have no liability or obligation with respect to (i) employment related liabilities, whether contingent or otherwise, arising out of any Hired Employee's or Hired Hold-Over Employee's employment with UHC or its Affiliates or (ii) any Benefit Plan sponsored, maintained or contributed to by UHC or its Affiliates. 4.24 REMUNERATION. The Company has provided complete and accurate information to ActaMed relating to the direct compensation (including wages, salaries and actual or anticipated bonuses) and benefits paid or provided in 1995, and the direct compensation and benefits (as described in the preceding clause) to be paid in 1996, to all of the Hired Employees. 4.25 UNION AND EMPLOYMENT AGREEMENTS. The Company does not have any employees or independent contractors. No member of the UHC Group is a party to any - xx - union agreement that covered the Hired Employees or Hired Hold-Over Employees, nor does any such member have any written or oral agreement that is not terminable by it at will with any of the Hired Employees or Hired Hold-Over Employees, relating to their employment by or performance of service for the Company Business or their compensation therefor. No union attempts to organize such employees have been made, nor are any such attempts now threatened so far as is known to UHC or the Company. 4.26 OFFICERS, DIRECTORS, AND BANK ACCOUNTS. The Company has provided complete and accurate information to ActaMed relating to (a) the names of all directors and officers of any member of the UHC Group who are Hired Employees and (b) the name and location of each bank or other institution in which the Company has an account or safe deposit box, all account numbers and account names, and names of all persons authorized to draw thereon or to have access thereto. 4.27 INTERESTED PARTY TRANSACTIONS. (a) Except as set forth in SCHEDULE 4.27, the Company is not a party to any Contract, loan or other transaction with any of the following persons, or in which any of the following persons have any direct or indirect interest (other than as a Hired Employee): (1) any director, officer, or employee of any member of the UHC Group; or (2) any of the spouses, parents, siblings, children, aunts, uncles, nieces, nephews, in-laws or grandparents of any of the persons described in clause (1). (b) Except as set forth on SCHEDULE 4.27, no member of the UHC Group is a consultant, partner, principal, director or shareholder of any business entity (other than the Company or a corporation whose shares are publicly traded and in which such member of the UHC Group beneficially owns in the aggregate no more than a 5% equity interest) which is engaged in a business similar to the Company Business. 4.28 BROKERS AND FINDERS. No third party is entitled to receive any commission, fees or similar consideration in connection with the transactions contemplated by this Agreement based on any arrangement or agreement made by or on behalf of UHC or the Company. 4.29 INVESTMENT REPRESENTATIONS; LEGEND ON SHARES. UHC hereby acknowledges that the Preferred Shares (or Conversion Shares) delivered pursuant to the Merger will not be registered under the Securities Act, and the resale of such shares will therefore be subject to restrictions imposed by federal and state securities laws. UHC represents to and agrees with ActaMed and SubCorp as follows with respect to the Preferred Shares (and Conversion Shares): - xxi - (a) It is acquiring the shares for its own account for investment purposes only, and not with a view to the distribution, transfer, or assignment of the same in whole or in part. (b) ActaMed and SubCorp have advised it, a reasonable time prior to the execution of this Agreement, that the shares have not been registered under the Securities Act and, therefore, cannot be sold or otherwise disposed of except in a transaction which is registered under the Securities Act or exempted from registration. (c) It has been represented by counsel and advisers, each of whom has been previously selected by UHC, as UHC has found necessary to consult concerning this Agreement and the shares to be issued pursuant to this Agreement. UHC, either alone or with its representative(s), has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the prospective investment. (d) UHC and its counsel and other advisers have been provided with the information described in SECTION 4.30 and with such other information concerning ActaMed as they have deemed relevant with respect to UHC's investment decision relating to the shares being delivered to it. UHC has had a reasonable opportunity to ask questions and receive answers concerning the terms and conditions of the transactions contemplated by this Agreement, to discuss ActaMed's business, management and financial affairs with the management of ActaMed and SubCorp, and to obtain any additional information which ActaMed or SubCorp possesses or can acquire without unreasonable effort or expense that is necessary to verify the accuracy of the information furnished. UHC has received satisfactory responses from management of ActaMed and SubCorp to UHC's inquiries. (e) UHC acknowledges that all certificates representing the shares delivered to UHC shall be stamped or otherwise imprinted with a legend substantially in the following form (together with any other legend required by state law), and that stop transfer orders will be given to ActaMed's transfer agent: "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES ACTS AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THEY HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE SECURITIES ACTS OR EXEMPTIONS FROM SUCH REGISTRATIONS ARE AVAILABLE." 4.30 COMPLIANCE WITH REGULATION D INFORMATION REQUIREMENTS. (a) ActaMed and SubCorp have provided to UHC, a reasonable time prior to the execution of this Agreement: (1) ActaMed's Financial Statements for the year - xxii - ended December 31, 1995; (2) a brief description of the Preferred Shares; and (3) a brief description of the business of ActaMed. The contents of material exhibits to such materials have been identified and such exhibits have been made available to UHC, upon its written request, a reasonable time prior to the execution of this Agreement. (b) ActaMed and SubCorp have made available to UHC a reasonable time prior to the execution of this Agreement the opportunity to ask questions and receive answers concerning the terms and conditions of the transactions contemplated by this Agreement and to obtain any additional information which ActaMed or SubCorp possesses or can acquire without unreasonable effort or expense that is necessary to verify the accuracy of the information furnished pursuant to paragraph (a) above. (c) ActaMed and SubCorp have advised UHC of the limitations on resale of Preferred Shares (and Conversion Shares) imposed by Regulation D promulgated under the Securities Act. 4.31 SCHEDULES. All Schedules referenced in this ARTICLE 4 are true, correct and complete as of the date of this Agreement, and will be true, correct and complete as of the Closing. Matters disclosed on each such Schedule shall be deemed disclosed only for purposes of the matters to be disclosed on such Schedule and shall not be deemed to be disclosed for any other purpose unless expressly provided therein. ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF ACTAMED AND SUBCORP ActaMed and SubCorp jointly and severally represent and warrant to UHC and the Company as follows: 5.1 (a) ORGANIZATION AND GOOD STANDING. ActaMed and SubCorp are duly organized and validly existing corporations in good standing under the laws of the States of Georgia and have full corporate power to carry on their businesses, to own and operate their properties and assets, and to consummate the transactions contemplated by this Agreement. (b) QUALIFIED TO DO BUSINESS. ActaMed is currently engaged in the ActaMed Business. ActaMed is qualified to do business as a foreign corporation in each jurisdiction in which the failure to be so qualified would have a Material Adverse Effect. (c) INCORPORATION DOCUMENTS. ActaMed has delivered to UHC and the Company true, correct and complete copies of the Restated Articles and Bylaws of ActaMed, including all amendments thereto, as presently in effect. (d) POWER TO CONDUCT BUSINESS. ActaMed has all corporate power and all governmental licenses, authorizations, consents and approvals required to carry on - xxiii - the ActaMed Business as now conducted and as proposed to be conducted and to own, operate and lease its properties and assets, except for those licenses, authorizations, consents and approvals the failure of which to have would not have a Material Adverse Effect. 5.2 AUTHORIZATION OF AGREEMENT, NO BREACH. The execution and delivery of this Agreement have been duly authorized by all necessary corporate action on the part of ActaMed and SubCorp, and no further corporate action of any nature is required pursuant to the charter or bylaws of ActaMed or SubCorp. All persons who have executed or will execute this Agreement, or any other agreement or document called for by this Agreement, on behalf of ActaMed or SubCorp have been duly authorized to do so by all necessary corporate action. This Agreement constitutes, and all of the ActaMed Documents to be executed and delivered by ActaMed or SubCorp pursuant to this Agreement will constitute, legal, valid and binding obligations of ActaMed and SubCorp, enforceable against ActaMed and SubCorp in accordance with their respective terms, except as enforceability may be limited by applicable equitable principles, or by bankruptcy, insolvency, reorganization, moratorium or similar laws from time to time in effect affecting the enforcement of creditors' rights generally. The execution, delivery and performance of this Agreement and the other ActaMed Documents and the consummation of the transactions contemplated hereby and thereby will not (1) violate or result in a breach of or Default or acceleration under the charter or bylaws of ActaMed or SubCorp or any material instrument or agreement to which ActaMed or SubCorp is a party or is bound, (2) violate any Court Order, quasi-judicial or administrative decision or award of any court, arbitrator, mediator, tribunal, administrative agency or governmental body applicable to or binding upon ActaMed or SubCorp or upon the securities, property or business of ActaMed or SubCorp, or (3) violate any Regulation of any administrative agency or governmental body relating to ActaMed or SubCorp, or to the securities, property, or business of ActaMed or SubCorp. 5.3 CORPORATE POWER. ActaMed and SubCorp have the requisite corporate power to execute and deliver the ActaMed Documents to which either is a party. 5.4 ACTAMED FINANCIAL STATEMENTS. (a) The Company has set forth as SCHEDULE 5.4(a) hereto the balance sheets of ActaMed at December 31, 1994 and December 31, 1995 and the statements of operations, statements of stockholders equity and statements of cash flows of ActaMed for the years ended December 31, 1994 and December 31, 1995, which have been audited by Deloitte & Touche, LLP independent accountants; and (b) The ActaMed Financial Statements have been prepared in accordance with GAAP applied on a consistent basis during the respective periods covered thereby. The ActaMed Financial Statements are correct and complete and present fairly in all material respects the financial position of ActaMed at the date of the balance sheet included therein and the results of operations and cash flows of ActaMed - xxiv - for the respective periods covered by the statements of operations and cash flows included therein. Except as set forth on SCHEDULE 5.4(b) hereto, ActaMed has no material obligations or liabilities of any nature whatsoever (whether absolute, accrued, contingent or otherwise and whether due or not due) which are required to be disclosed in the ActaMed Financial Statements in accordance with GAAP and which, either individually or in the aggregate, would have a Material Adverse Effect and which are not disclosed by the ActaMed Financial Statements. 5.5 CONSENTS. No consent, approval or authorization of, or qualification, designation, declaration or filing with, or notice to any governmental authority on the part of ActaMed is required in connection with (a) the valid execution and delivery of the ActaMed Documents and (b) the issuance of the Preferred Shares (and the Conversion Shares, except (1) as set forth on SCHEDULE 5.5, (2) the filing of the Restated Articles in the office of the Secretary of State of the State of Georgia, which filings will be accomplished on or prior to the Closing Date, (3) the filing of a Form D with the SEC and (4) the qualification (or taking such action as may be necessary to secure an exemption from qualification, if available) of the offer and sale of the Preferred Shares (and the Conversion Shares) under any applicable state securities laws, which qualification, if required, will be accomplished in a timely manner prior to or promptly upon completion of the Closing, as required by such laws. 5.6 CAPITALIZATION. After giving effect to the issuance of the Preferred Shares, the capital stock of ActaMed, as authorized by its Restated Articles will consist of: (1) 50,000,000 shares of ActaMed Common Stock, no par value per share, 9,321,250 of which are issued and outstanding, 10,344,828 of which will be reserved for issuance upon conversion of the Preferred Shares, 8,800,880 of which will be reserved for issuance upon conversion of issued and outstanding Series A Preferred Stock, 3,448,276 of which will be reserved for issuance upon conversion of issued and outstanding Series B Preferred Stock, and 5,624,188 of which will be reserved for issuance upon exercise of stock options granted or to be granted to officers, key employees, directors and consultants of ActaMed; (2) 8,800,880 shares of Series A Preferred Stock all of which are issued and outstanding, and (3) 3,448,276 shares of Series B Preferred Stock, all of which are issued and outstanding, and 10,344,828 shares of the Preferred Shares, all of which will be issued and outstanding. As of the Closing Date none of such issued shares will be held in the treasury of ActaMed. Except as set forth above and on SCHEDULE 5.6 hereto, as of the Closing Date ActaMed will not have outstanding any stock or securities convertible into or exchangeable for any shares of its capital stock and no person will have any right against ActaMed to subscribe for or to purchase, or any options for the purchase of, or any agreements providing for the issuance of any capital stock or any stock or securities convertible into capital stock of ActaMed. All of the outstanding shares of capital stock of ActaMed are validly issued, fully paid and nonassessable. 5.7 VALIDITY AND RIGHTS OF THE PREFERRED SHARES. The Preferred Shares, when issued to UHC pursuant to this Agreement, will be validly issued, fully paid and nonassessable, will have the designations, preferences, limitations, and relative rights set - xxv - forth in the Restated Articles and will be free and clear of all liens, claims and encumbrances. Any and all of the Conversion Shares, when issuable, will be validly issued, fully paid and nonassessable. 5.8 REGISTRATION RIGHTS. Except as set forth in the Registration Rights Agreement, as of the Closing Date ActaMed will not be under any obligation to register under the Securities Act any of its then outstanding securities or any of its securities which may thereafter be issued. 5.9 OFFERING. Subject to the accuracy of representations and warranties by UHC and the Company in ARTICLE 4 hereof, the issuance of the Preferred Shares (and the issuance of the Conversion Shares) constitute transactions exempt from the registration requirements of Section 5 of the Securities Act, and from the qualification requirements of any applicable state securities or "blue sky" laws. 5.10 CHANGES. Since the date of the latest ActaMed Financial Statements, there has not been any adverse change in the assets, liabilities, financial condition or operations of the ActaMed Business from that reflected in the ActaMed Financial Statements, other than changes in the ordinary course of business, none of which individually or in the aggregate has had a Material Adverse Effect, any adverse change in the prospects of the ActaMed Business or any other event or condition (or events or conditions) of any character which, either individually or cumulatively, has had a Material Adverse Effect. 5.11 SUBSIDIARIES. Other than SubCorp, ActaMed has no Subsidiaries. Except as set forth in this Agreement, ActaMed does not own, or have the right to acquire, any securities or other equity or ownership interest in any corporation, association or other business entity or person. 5.12 PENDING LITIGATION, ETC. Other than as set forth in SCHEDULE 5.12 hereto, there are no actions at law, suits in equity or other proceedings or, to the best knowledge of ActaMed, investigations in any court, tribunal or by or before any other governmental or public authority or agency or any arbitrator or arbitration panel or any governmental or private third-party insurance agency, pending or, to the best knowledge of ActaMed, threatened against or affecting ActaMed that: (a) either individually or in the aggregate, would have a Material Adverse Effect; or (b) would question the validity or enforceability of this Agreement, the ActaMed Documents, or any of the transactions contemplated hereby and thereby. ActaMed is not in default with respect to any Court Order. 5.13 TITLE TO PROPERTIES. ActaMed has good and marketable title to its properties and assets and has good title to all its respective leasehold interests, in each case subject to no Lien, other than as set forth on SCHEDULE 5.13 hereto. SCHEDULE 5.13 - xxvi - accurately lists with respect to the personal property owned by ActaMed (a) each financing statement, deed, agreement or other instrument which has been filed, recorded or registered pursuant to any United States federal, state or local law or regulation that names a business entity as debtor or lessee or as the grantor or the transferor of the interest created thereby, and (b) as to each such financing statement, deed, agreement or other instrument, the names of the debtor, lessee, grantor or transferor and the secured party, lessor, grantee or transferee and the name of the jurisdiction in which such financing statement, deed, agreement or other instrument has been filed, recorded or registered. ActaMed has not signed any agreement or instrument authorizing any secured party thereunder to file any such financing statement, deed, agreement or other instrument. 5.14 INTELLECTUAL PROPERTY, ETC. ActaMed owns or possesses the rights to use, free from burdensome restrictions or conflicts with the rights of others, all copyrights, trademarks, service marks, trade names, patents and intellectual property licenses, and all rights with respect to the foregoing, necessary for the conduct of the ActaMed Business as now conducted and as proposed to be conducted, and is in compliance in all material respects with the terms and conditions, if any, of all such copyrights, trademarks, service marks, trade names, patents and intellectual property licenses and the terms and conditions of any agreements relating thereto. Except as set forth on SCHEDULE 5.14, there are no outstanding options, licenses, or material agreements of any kind relating to the foregoing, nor is ActaMed bound by or a party to any options, licenses or agreements of any kind with respect to the patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information, proprietary rights and processes of any other person or entity. ActaMed has not received any communications alleging that it has violated or, by conducting its business as proposed, would violate any of the patents, trademarks, service marks, trade names, copyrights or trade secrets or other proprietary rights of any other person or entity. To ActaMed's knowledge, none of its employees are obligated under any contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would interfere with the use of their best efforts to promote the interests of ActaMed or that would conflict with ActaMed's business as proposed to be conducted. Neither the execution nor delivery of this Agreement, nor the carrying on of ActaMed's business by the employees of ActaMed, nor the conduct of ActaMed's business as proposed, will, to ActaMed's knowledge, conflict with or result in a breach of the terms, conditions or provisions of, or constitute a default under, any contract, covenant or instrument under which any of such employees is now obligated. ActaMed does not believe it is or will be necessary to utilize any inventions of any of its employees (or people it currently intends to hire) made prior to their employment by ActaMed. 5.15 COMPLIANCE WITH OTHER INSTRUMENTS. ActaMed is not in violation of or in default in any material respect under any term of its organizational documents, any term or provision of any mortgage, indenture, contract, agreement, instrument, judgment or decree, and is not in violation in any material respect of any applicable order, statute, rule or regulation, and to ActaMed's knowledge there is no state of facts which, with the - xxvii - passage of time or giving of notice or both, would constitute any such violation or default that would in the aggregate have a Material Adverse Effect. The execution, delivery and performance of and compliance with the ActaMed Documents, the issuance of the Preferred Shares (and the Conversion Shares) and the consummation of any other transaction contemplated by the ActaMed Documents have not resulted and will not result in any such violation, or be in conflict with, or constitute a default under any of the foregoing, or result in the creation of any Lien upon any of the properties or assets of ActaMed. 5.16 COMPLIANCE WITH LAW. ActaMed is in compliance with all statutes, laws and ordinances and all governmental rules and regulations to which it is subject, the violation of which, either individually or in the aggregate, would have a Material Adverse Effect. Neither the execution, delivery or performance of this Agreement or any of the other ActaMed Documents nor the consummation of the transactions contemplated by the ActaMed Documents will cause ActaMed to be in violation of any law or ordinance, or any order, rule or regulation, of any federal, state, municipal or other governmental or public authority or agency. 5.17 EMPLOYEES. To the best knowledge of ActaMed, no employee of ActaMed is in violation of any term of any employment contract, patent disclosure agreement or any other contract or agreement relating to the intellectual property of ActaMed or the relationship of any such employee with such entity or any other party. 5.18 BENEFIT PLANS. Except as provided in this Agreement, applicable law and the terms of any Benefit Plan sponsored, maintained or contributed to by UHC or its Affiliates, neither UHC nor its Affiliates shall have any liability or obligation with respect to (i) employment related liabilities, whether contingent or otherwise, arising out of any Hired Employee's or Hired Hold-Over Employee's employment with the Company, ActaMed or ActaMed's Affiliates or (ii) any Benefit Plan sponsored, maintained or contributed to by ActaMed or its Affiliates. 5.19 COMPLIANCE WITH ENVIRONMENTAL LAWS. (a) ActaMed is, and will continue to be, in compliance with all applicable federal, state and local environmental laws, regulations and ordinances governing the ActaMed Business with respect to all discharges into the ground and surface water, emissions into the ambient air and generation, accumulation, storage, treatment, recycling, transportation, labeling or disposal of waste materials or process by-products, except violations which, either individually or in the aggregate, would not have a Material Adverse Effect. ActaMed is not liable for any material penalties, fines or forfeitures for failure to comply with any of the foregoing. All licenses, permits or registrations required for the ActaMed Business as presently conducted and proposed to be conducted, under any federal, state, or local environmental laws, regulations or ordinances have been or will, in a timely manner, be obtained or made, other than such licenses, permits or registrations as to which the failure to obtain or make, either individually or in the aggregate, will not have a Material Adverse Effect, and ActaMed is in compliance therewith in all material respects. - xxviii - (b) No release, emission or discharge into the environment of hazardous substances, as defined under the Comprehensive Environmental Response, Compensation, and Liability Act, as amended, or hazardous waste, as defined under the Resource Conservation and Recovery Act, or air pollutants as defined under the Clean Air Act, or pollutants, as defined under the Clean Water Act, by ActaMed has occurred or is presently occurring on or from any property owned or leased by ActaMed in excess of federal, state or local permitted releases or reportable quantities, or other concentrations, standards or limitations under the foregoing laws or any state or local law governing the protection of health and the environment or under any other federal, state or local laws or regulations (then or now applicable, as the case may be) other than such releases, emissions or discharges, either individually or in the aggregate, would not have a Material Adverse Effect. (c) To its knowledge, ActaMed has never (1) owned, occupied or operated a site or structure on or in which any hazardous substance was or is stored, transported or disposed of in violation of any federal, state or local environmental laws, regulations or ordinances at such time as such site or structure was owned, occupied or operated by ActaMed or at any other time, or (2) transported or arranged for the transportation of any hazardous substance other than in full compliance with all applicable federal, state and local environmental laws, regulations and ordinances governing the ActaMed Business or the storage, transportation or disposal of hazardous substances except for such violations as, either individually or in the aggregate, would not have a Material Adverse Effect. ActaMed has never caused or been held legally responsible for any release or threatened release of any hazardous substance, or received notification from any federal, state or other governmental authority of any such release or threatened release, or that ActaMed may be required to pay any costs or expenses incurred or to be incurred in connection with any efforts to mitigate the environmental impact of any release or threatened release, of any hazardous substance from any site or structure owned, occupied or operated by ActaMed, except such releases or threatened releases as, either individually or in the aggregate, would not have a Material Adverse Effect. 5.20 INSURANCE. The ActaMed Business has fire, casualty, liability, and business interruption insurance policies with recognized insurers, in such amounts and with such coverage as set forth on SCHEDULE 5.20. 5.21 MATERIAL CONTRACTS AND AGREEMENTS. SCHEDULE 5.21 lists the parties to, and subject matter of, all material Contracts of the ActaMed Business, including without limitation, all employment or labor contracts, leases or compensation plans. Except as set forth on SCHEDULE 5.21, all material Contracts set forth on such list are valid, binding, and in full force and effect, without any breach by ActaMed or, to the best of ActaMed's knowledge, any other party thereto. - xxix - 5.22 TAXES. Except as set forth on SCHEDULE 5.22, all federal, state and other tax returns of ActaMed required by law to be filed have been duly filed, except for such returns the failure of which to file would not have a Material Adverse Effect, and all federal, state and other taxes, assessments, fees and other federal governmental charges upon ActaMed or any of the properties, incomes or assets of ActaMed that are due and payable have been paid. No extensions of the time for the assessment of deficiencies have been granted to ActaMed in connection with any federal tax, assessment, fee or other federal governmental charge. There are no Liens, on any properties or assets of the ActaMed Business imposed or arising as a result of the delinquent payment or the non-payment of any tax, assessment, fee or other governmental charge that, either individually or in the aggregate, would have a Material Adverse Effect. ActaMed: (a) has not assumed and is not liable for any federal, state or other income tax liability of any other person, including any predecessor corporation, as a result of any purchase of assets or other business acquisition transaction; and (b) has not indemnified any other person or otherwise agreed to pay on behalf of any other person tax liability growing out of or which may be asserted on the basis of any tax treatment adopted with respect to all or any aspect of such a business acquisition transaction. The charges, accruals and reserves, if any, on the books of ActaMed in respect of federal, state and local corporate franchise and income taxes for all fiscal periods to date are adequate in accordance with GAAP, and ActaMed knows of no additional unpaid assessments for such periods or other governmental charges payable by ActaMed in connection with the execution and delivery of this Agreement, the ActaMed Documents or the issuance of the Preferred Shares by ActaMed, other than stock transfer taxes, recording fees and filing fees in connection with state securities or "blue sky" filings. 5.23 INVESTMENT COMPANY. ActaMed is not an "investment company", or an "affiliated person" of an "investment company", or a company "controlled" by an "investment company" as such terms are defined in the Investment Company Act of 1940, as amended, and ActaMed is not an "investment adviser" or an "affiliated person" of an "investment adviser" as such terms are defined in the Investment Advisers Act of 1940, as amended. 5.24 LABOR RELATIONS. ActaMed is not engaged in any unfair labor practices which, either individually or in the aggregate, would have a Material Adverse Effect. Except as set forth on SCHEDULE 5.24, there is: (a) no unfair labor practice complaint pending or, to the best of ActaMed's knowledge, threatened against ActaMed before the National Labor Relations Board or any court or labor board, and no grievance or arbitration proceedings arising out of or under collective bargaining agreements is so pending or, to the best of ActaMed's knowledge, threatened, - xxx - (b) no strike, lock-out, labor dispute, slowdown or work stoppage pending or, to the best of ActaMed's knowledge, threatened against ActaMed, and (c) no union representation or certification question existing or pending with respect to the employees of ActaMed, and, to the best knowledge of ActaMed, no union organization activity taking place, other than such actions or proceedings as, either individually or in the aggregate, would not have a Material Adverse Effect. 5.25 NO CONFLICT OF INTEREST. Except as set forth in SCHEDULE 5.25, ActaMed is not indebted, directly or indirectly, to any Substantial Holder, or, to ActaMed's knowledge, to any Affiliate of a Substantial Holder, in any amount whatsoever. To the best knowledge of ActaMed, and except as set forth on SCHEDULE 5.25, no Substantial Holders, or any of their Affiliates, are indebted to any firm or corporation with which ActaMed is affiliated or with which ActaMed has a business relationship, or any firm or corporation which competes with ActaMed. Except as contemplated by the ActaMed Documents, no Substantial Holder, or, to ActaMed's knowledge, any Affiliate of a Substantial Holder, is directly or indirectly interested in any contract with ActaMed or any of its Subsidiaries. 5.26 BROKERS OR FINDERS. No broker, agent, finder or consultant or other person has been retained by or on behalf of ActaMed or SubCorp (other than legal or accounting advisors), or is may be entitled to be paid based upon any agreements or understandings made by ActaMed or SubCorp in connection with the transactions contemplated hereby. 5.27 FULL DISCLOSURE. This Agreement, the other ActaMed Documents, and any report or financial statement referred to in SECTION 5.4 hereof and any certificate, report, statement or other writing furnished to UHC or the Company by or on behalf of ActaMed in connection with the negotiation of this Agreement and the other ActaMed Documents and the sale of the Preferred Shares, taken as a whole, do not contain any untrue statement of a material fact or omit to state a material fact with respect to which disclosure has been requested and which is necessary to make the statements contained herein or therein not misleading. ARTICLE 6 RELATED AGREEMENTS OF THE PARTIES 6.1 CONDUCT OF BUSINESS. Prior to the Closing Date, except with the prior written consent of ActaMed and SubCorp and except as necessary to effect the transactions contemplated in this Agreement, the Company shall and UHC shall cause the Company to: - xxxi - (a) conduct the Company Business in substantially the same manner as presently being conducted, and refrain from entering into any transaction or Contract other than in the ordinary course of business, and not make any change in its methods of management, marketing, or operations other than in the ordinary course of business; (b) consult with ActaMed and SubCorp prior to undertaking any new business opportunity not in the ordinary course of business and not undertake such new business opportunity without the prior written consent of ActaMed and SubCorp, which consent will not be unreasonably withheld; (c) confer on a regular and reasonable basis with one or more designated representatives of ActaMed and SubCorp to report material operational matters and to report the general status of ongoing operations; (d) notify ActaMed and SubCorp of any change in the normal course of the Company Business or in the operation of its properties, and of any governmental complaints, investigations or hearings (or communications indicating that the same may be contemplated), adjudicatory proceedings, budget meetings or submissions involving any material property of the Company, and keep ActaMed and SubCorp fully informed of such events and permit its representatives prompt access to all materials prepared in connection therewith; and (e) not take any action, or omit to take any action, which would cause the representations and warranties contained in ARTICLE 4 hereof, including but not limited to the representations and warranties in SECTION 4.9 of this Agreement, to be untrue or incorrect at any time through and including the Closing Date. 6.2 ACCESS TO PROPERTIES. At all times prior to the Closing Date, employees, attorneys, accountants, agents and other authorized and designated representatives of ActaMed and SubCorp will be allowed reasonable access to the properties, books and records of the Company and other members of the UHC Group relating to the Company Business, including without limitation, deeds, title documents, leases, customer lists, insurance policies, minute books, share certificate books, share registers, accounts, Tax returns, financial statements and all other data that, in the reasonable opinion of ActaMed and SubCorp, are required for ActaMed and SubCorp to make such investigation as they may desire of the Hired Employees and the properties and business of the Company and the Company Business. ActaMed and SubCorp shall also be allowed reasonable access to consult with the officers, employees, accountants, counsel and agents of the members of the UHC Group in connection with such investigation. No investigation by ActaMed and SubCorp shall diminish or otherwise affect any of the representations, warranties, covenants or agreements of the Company or UHC under this Agreement. 6.3 RELATIONSHIP WITH EMPLOYEES AND CUSTOMERS. At all times prior to the Closing Date, UHC shall cause each member of the UHC Group to use its best efforts (without making any commitments other than in the ordinary course of business), to - xxxii - (a) preserve the Company Business organization intact, (b) keep the Hired Employees available to the Company Business, (c) preserve the present relationships of the Company Business with its suppliers and customers and others having business relationships, and (d) take all steps reasonably necessary to maintain the intangible assets and Intellectual Property of the Company. Prior to the Closing and for two (2) years thereafter, no member of the UHC Group shall, directly or indirectly, on its own behalf or on behalf of others, solicit, divert or take away, or attempt to solicit, divert or take away, any of the Hired Employees. 6.4 HIRED EMPLOYEES. Immediately after the Closing, the Company will offer employment (to commence on the Closing Date) to all of the Hired Employees; provided, however, that, if any Hold-Over Employee presents a medical release from his or her attending physician which allows such employee to return to work within nine months after the beginning of his or her leave of absence, then the Company will offer employment (to commence immediately) to such Hold-Over Employee on the day he or she returns to work ("HIRED HOLD-OVER EMPLOYEE"), and if any Hold-Over Employee does not have a medical release to return to work within such nine-month period, then the Company will not be obligated to offer employment to him or her. UHC shall cause each member of the UHC Group to terminate the employment of each of the Hired Employees effective as of the Closing Date; provided, however, that no member of the UHC Group shall terminate the employment of any Hired Hold-Over Employee until such employee presents a medical release from his or her attending physician and will continue to provide each Hired Hold-Over Employee with benefits in accordance with UHC's standard policies and procedures until the earlier of (a) the day such employee has a medical release to return to work, or (b) nine (9) months after the beginning of such employee's leave of absence. 6.5 EMPLOYEE BENEFITS. (a) The Company has never been a participating employer in any Benefit Plan sponsored, maintained or contributed to by UHC or its Affiliates. Except as provided in SECTION 6.5(B) below, no portion of the assets of any Benefit Plan heretofore sponsored or maintained by any member of the UHC Group for the Hired Employees or Hired Hold-Over Employees (and no amount attributable to any such Benefit Plan) shall be transferred to the Company, and the Company shall not be required to sponsor or maintain any such Benefit Plan after the Closing Date. The amounts payable to the Hired Employees or Hired Hold-Over Employees on account of all benefit arrangements (including, but not limited to, all accrued, but unpaid, sick leave but excluding the UHC 401(k) Plan) shall be either maintained in such Benefit Plan or paid to the Hired Employees and Hired Hold-Over Employees, in each case in accordance with the applicable Benefit Plan documents, except that such amounts shall be determined with reference to the date of the event by reason of which such amounts become payable, without regard to conditions subsequent. - xxxiii - (b) Certain Hired Employees and Hired Hold-Over Employees will have account balances under the UHC 401(k) Plan as of the Closing Date. UHC warrants that the UHC 401(k) Plan that will make the transfer described below is "qualified" within the meaning of Section 401(k) of the Internal Revenue Code, has received a favorable determination letter from the Internal Revenue Service dated August, 1995 and no event has occurred and no condition exists that could reasonably be expected to result in the revocation of any such determination letter. The vested and nonvested account balances under the UHC 401(k) Plan for those Hired Employees and Hired Hold-Over Employees will be transferred to the ActaMed 401(k) Plan as soon as administratively feasible after the Closing Date but (i) for Hired Employees, no later than 60 days after the second "valuation date" (as defined in the UHC 401(k) Plan) following the Closing Date and (ii) for Hired Hold-Over Employees, no later than 60 days after the second "valuation date" following the Hired Hold-Over Employee's initial hire date with the Company. The account balances to be transferred will include cash and any outstanding participant loans. The amount transferred will be calculated in accordance with normally accepted practices by record keepers and ERISA trustees. ActaMed warrants that the ActaMed 401(k) Plan that will receive the transfer is "qualified" within the meaning of Section 401(k) of the Internal Revenue Code, has adopted a standardized prototype plan (as defined in Section 3.08 of Rev. Proc. 89-9, 1989-1 CB 780) with an IRS opinion letter dated November 8, 1993 and no event has occurred and no condition exists that could reasonably be expected to result in the ActaMed 401(k) Plan losing its status as a qualified, standardized prototype plan. The ActaMed 401(k) Plan will be amended to address the transfer of accounts from the UHC 401(k) Plan including the preservation of all Section 411(d)(6) optional forms of benefits available to the Hired Employees or Hired Hold-Over Employees under the UHC 401(k) Plan, distribution rules under Section 401(k) of the Internal Revenue Code, past service credit and participation in the ActaMed 401(k) Plan by such Hired Employees and Hired Hold-Over Employees. United HealthCare Corporation will assume no liability for the payment of account balances that are transferred following the date of transfer and ActaMed will assume no liability for the payment of account balances that are not transferred. However, as provided in SECTION 5.18 of this Agreement, ActaMed and its Affiliates shall continue to be liable to UHC and its Affiliates for any other loss suffered by UHC and its Affiliates arising out of the ActaMed 401(k) Plan. Similarly, as provided in SECTION 4.23 of this Agreement, UHC and its Affiliates shall continue to be liable to ActaMed and its Affiliates for any other loss suffered by ActaMed and its Affiliates arising out of the UHC 401(k) Plan. (c) The Company, ActaMed and ActaMed's Affiliates shall not be liable for any claim for insurance, reimbursement or other benefits payable by reason of any event which occurs prior to the Closing Date. Notwithstanding the foregoing, prior employment of Hired Employees by the UHC Group shall be counted for purposes of eligibility for a medical and dental plan which shall be provided by ActaMed to such Hired Employees without any limitations based upon pre-existing conditions effective (i) for Hired Employees and their dependents, as of the first day of the month following the Closing Date and (ii) for Hired Hold-Over Employees and their dependents, as of the - xxxiv - later of the Hired Hold-Over Employee's initial date of employment with the Company or the first day of the month following the Closing Date. 6.6 OTHER OFFERS AND EXCLUSIVE DEALING. Unless and until this Agreement is terminated prior to Closing pursuant to ARTICLE 10, UHC shall not, acting in any capacity, directly or indirectly, through any officer, director, employee, agent or otherwise of the UHC or any member of the UHC Group, (a) solicit, initiate or encourage submission of proposals or offers from any person, corporation or other entity relating to any purchase of the Shares, or any merger, sale of substantial assets or similar transaction involving the Company or the Company Business, (b) participate in any discussions or negotiations regarding, or, except as required by a legal or judicial process, furnish to any other person, corporation or other entity any information with respect to, or otherwise cooperate in any way with, or assist or participate in, facilitate or encourage, any effort or attempt by any other person, corporation or other entity to purchase the Shares, or engage in a merger, purchase of substantial assets or similar transaction involving the Company or the Company Business, or (c) approve or undertake any such transaction. UHC shall promptly communicate to ActaMed and SubCorp the terms of any such proposal or offer upon knowledge or receipt of such proposal or offer. 6.7 CERTAIN TAX MATTERS. UHC shall cause all Tax returns of the Company required to be filed on or before the Closing Date, taking into account any extensions of the filing deadlines granted to the Company that had not yet been filed prior to the date hereof (including those relating to periods after the Closing Date), to be prepared by the Company but not to be filed without prior examination by or on behalf of ActaMed and SubCorp. 6.8 CONSENTS AND APPROVALS. The Company and UHC agree to use their best efforts to obtain the waiver, consent and approval of all persons whose waiver, consent or approval (a) is required in order to consummate the transactions contemplated by this Agreement, or (b) is required by any Contract, Court Order or License to which the Company or UHC is a party or subject on the Closing Date, and (1) which would prohibit, or require the waiver, consent or approval of such transactions, or (2) under which such transactions would, without such waiver, consent or approval, constitute a Default under the provisions thereof, result in the acceleration of any obligation thereunder, or give rise to a right of any party thereto to terminate its obligations thereunder. All written waivers, consents and approvals obtained by UHC and the Company shall be produced at the Closing in form and content reasonably satisfactory to ActaMed and SubCorp. 6.9 QUALIFICATION AND CORPORATE EXISTENCE. The Company shall deliver to ActaMed and SubCorp (a) a certificate of the Secretary of State of the State of Nevada, dated as of a date no more than ten (10) business days prior to the Closing Date, stating that the Company is a corporation in good standing under the laws of such state and has paid all applicable franchise or other fees and taxes due to such state and (b) certificates of the appropriate officials of the State of Minnesota, all dated as of a date no more than - xxxv - ten (10) business days prior to the Closing Date, stating that the Company is duly qualified and in good standing to transact business as a foreign corporation as stated in SECTION 4.3 of this Agreement in such state and has paid all applicable franchise or other fees and taxes due to each such state. 6.10 PUBLIC ANNOUNCEMENTS. Each party hereto agrees that neither it, nor or any of its representatives, shall make any public announcement with respect to this Agreement or the transactions contemplated hereby without the prior consent of the other parties hereto unless required by law or judicial process, in which case notification shall be given to the other parties hereto prior to such disclosure. 6.11 CONFIDENTIALITY. (a) Each party hereto agrees not to use, copy or disclose the trade secrets of any other party, except as permitted by this Agreement. Each party shall treat any other's trade secrets with at least that degree of care it uses with respect to its own such trade secrets. Each party will give access to any other party's trade secrets only to such of its personnel as have a need to such access and to no other person whatsoever. The requirements herein contained with respect to non-disclosure and non-use and protection of each party's trade secrets shall permanently survive termination of any other provisions of this Agreement. If any party is ordered by a court, administrative agency, or other governmental body of competent jurisdiction to disclose trade secrets, or if it is served with or otherwise becomes aware of a motion or similar request that such an order be issued, then such party will not be liable to the other party for disclosure of trade secrets required by such order if the disclosing party complies with the following requirements: (1) if an already issued order calls for immediate disclosure, then the disclosing party shall immediately move for or otherwise request a stay of such order to permit the other party to respond; (2) the disclosing party promptly notifies the other party of the motion or order; and (3) the disclosing party not oppose a motion or similar request by the other party for an order protecting the trade secrets including joining or agreeing to (or non-opposition to) a motion for leave to intervene by such other party. (b) The term "TRADE SECRETS" means information related to a party (1) which derives economic value, actual or potential, from not being generally known to or readily ascertainable by other persons who can obtain economic value from its disclosure or use, and (2) which is the subject of efforts by said party that are reasonable under the circumstances to maintain its secrecy. 6.12 COVENANT NOT TO COMPETE. UHC hereby acknowledges and agrees that the exclusivity and noncompetition provisions of the Services and License Agreement are an important and substantial part of the consideration to ActaMed for the consummation of the transactions contemplated hereby, and the parties hereby incorporate by reference those provisions of the Services and License Agreement. - xxxvi - 6.13 CLOSING CONDITIONS. ActaMed, SubCorp, the Company and UHC each agree to use its best efforts to satisfy the closing conditions set forth in ARTICLES 1, 7 and 8 of this Agreement. 6.14 EXPENSES. Except as otherwise provided herein and except that UHC shall pay all of the expenses of the Company (including, but not limited to, the audit by Deloitte & Touche, LLP of the books and records of the Company and the Company Business), the parties to this Agreement shall each bear its respective expenses incurred in connection with the preparation, execution and performance of this Agreement and the transactions contemplated hereby, including, without limitation, all fees and expenses of agents, representatives, counsel and accountants. 6.15 REPAYMENT OF DEBTS TO COMPANY. On or before the Closing Date, all loans and advances from the Company to any member of the UHC Group, whether or not disclosed in SCHEDULE 4.27, shall be repaid to the Company in full and the Company shall have delivered to ActaMed and SubCorp appropriate instruments or writings to evidence the receipt of such repayments, and all guaranties by the Company of loans obtained by any member of the UHC Group, from third parties shall have been released. 6.16 COMPLIANCE WITH REGULATION D. ActaMed shall file five copies of a notice on SEC Form D no later than fifteen (15) days after the execution of this Agreement. 6.17 VOTING FOR MERGER. UHC agrees to vote for and approve the Merger and the transactions contemplated by this Agreement and waives its dissenter's rights under the General Corporation Law of the State of Nevada. 6.18 ANTITRUST NOTIFICATION. Each of the parties will promptly file with the United States Federal Trade Commission and the United States Department of Justice the notification and report form required for the transactions contemplated hereby and any supplemental or additional information which may reasonably be requested in connection therewith pursuant to the HSR Act and will comply in all material respects with the requirements of the HSR Act. UHC and ActaMed shall each pay fifty percent (50%) of the applicable filing fees. 6.19 REVIEW OF REGISTRATION STATEMENT. ActaMed shall give UHC the opportunity to review and comment upon those portions of any Registration Statement or amendment thereto prepared by ActaMed in connection with a proposed initial public offering which describe UHC and ActaMed's relationship therewith, prior to filing such Registration Statement or amendment thereto with the Securities and Exchange Commission, and shall cooperate with UHC and use its reasonable efforts to accommodate the reasonable comments of UHC. 6.20 ESCROW OF SOFTWARE. On the Closing Date, the Company shall deliver to one copy of the Software to Fort Knox (the "ESCROW AGENT"), which copy shall serve as a - xxxvii - prototype of the Software delivered to ActaMed on the Closing Date and which copy shall be made available to UHC for the defense of any claims by ActaMed or others regarding the functionality and performance of the Software. ARTICLE 7 CONDITIONS PRECEDENT TO OBLIGATIONS OF ACTAMED AND SUBCORP The obligations of ActaMed and SubCorp to consummate the transactions contemplated by this Agreement shall be subject to the satisfaction, on or before the Closing Date, of each and every one of the following conditions, all or any of which may be waived, in whole or in part, by ActaMed and SubCorp for purposes of consummating such transactions, but without prejudice to any other right or remedy which ActaMed and SubCorp may have hereunder as a result of any misrepresentation by, or breach of any agreement, covenant or warranty of, UHC or the Company contained in this Agreement or any schedule, certificate or instrument furnished or caused to be furnished by UHC or the Company hereunder. 7.1 REPRESENTATIONS TRUE AND COVENANTS PERFORMED AT CLOSING. The representations and warranties made by UHC or the Company in the UHC Documents shall be true and correct in all material respects as of the Closing Date, with the same force and effect as if such representations and warranties had been made on and as of the Closing Date. 7.2 COVENANTS. All of the terms, covenants and conditions in the UHC Documents to be complied with or performed by UHC or the Company on or prior to the Closing shall have been complied with and performed in all material respects. 7.3 NO INJUNCTION, ETC. No action, proceeding, investigation, Regulation or legislation shall have been instituted, threatened or proposed before any court, governmental agency or legislative body to enjoin, restrain, prohibit, or obtain substantial damages in respect of, or which is related to, or arises out of, this Agreement or the consummation of the transactions contemplated hereby, or which is related to or arises out of the Company Business, if such action, proceeding, investigation, regulation or legislation, in the reasonable judgment of ActaMed and SubCorp, would make it inadvisable to consummate such transactions. 7.4 APPROVAL OF LEGAL MATTERS. All actions, proceedings, instruments and documents deemed necessary or appropriate by ActaMed and SubCorp or their counsel to effectuate this Agreement and the consummation of the transactions contemplated hereby, or incidental thereto, and all other related legal matters, shall have been approved by such counsel. - xxxviii - 7.5 GOVERNMENTAL APPROVALS. All governmental and other consents and approvals, if any, necessary to permit the consummation of the transactions contemplated by this Agreement shall have been received by ActaMed and SubCorp. 7.6 NO MATERIAL ADVERSE CHANGE. There shall not have been any material adverse change in the financial condition, operating results or assets of the Company or EDI between the date of the EDI Financial Statements and the Closing Date, and UHC shall have delivered to ActaMed a certificate dated as of the Closing Date certifying to such effect. ARTICLE 8 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF UHC AND THE COMPANY The obligations of UHC and the Company to consummate the transactions contemplated by this Agreement shall be subject to the satisfaction, on or before the Closing Date, of each and every one of the following conditions, all or any of which may be waived, in whole or in part, by UHC and the Company for purposes of consummating such transactions, but without prejudice to any other right or remedy which they may have hereunder as a result of any misrepresentation by, or breach of any agreement, covenant or warranty of ActaMed or SubCorp contained in this Agreement, or any certificate or instrument furnished by it hereunder. 8.1 REPRESENTATIONS TRUE AND COVENANTS PERFORMED AT CLOSING. The representations and warranties made by ActaMed or SubCorp in the ActaMed Documents shall be true and correct in all material respects as of the Closing Date, with the same force and effect as if such representations and warranties had been made on and as of the Closing Date. 8.2 COVENANTS. All of the terms, covenants and conditions in the ActaMed Documents to be complied with or performed by ActaMed or SubCorp on or prior to the Closing shall have been complied with and performed in all material respects. 8.3 NO INJUNCTION, ETC. No action, proceeding, investigation, Regulation or legislation shall have been instituted, threatened or proposed before any court, governmental agency or legislative body to enjoin, restrain, prohibit, or obtain substantial damages in respect of, or which is related to, or arises out of, this Agreement or the consummation of the transactions contemplated hereby, or which is related to or arises out of the business of ActaMed or SubCorp, if such action, proceeding, investigation, Regulation or legislation, in the reasonable judgment of UHC, would make it inadvisable to consummate such transactions. 8.4 APPROVAL OF LEGAL MATTERS. All actions, proceedings, instruments and documents deemed necessary or appropriate by UHC or their counsel to effectuate this -xxxix- Agreement and the consummation of the transactions contemplated hereby, or incidental hereto, and all other related legal matters, shall have been approved by such counsel. 8.5 GOVERNMENTAL APPROVALS. All governmental and other consents and approvals, if any, necessary to permit the consummation of the transactions contemplated by this Agreement shall have been received by UHC and the Company. 8.6 NO MATERIAL ADVERSE CHANGE. There shall not have been any material adverse change in the financial condition, operating results or assets of ActaMed between the date of the ActaMed Financial Statements and the Closing Date, and ActaMed shall have delivered to UHC a certificate dated as of the Closing Date certifying to such effect. ARTICLE 9 SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND INDEMNIFICATION 9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF UHC AND THE COMPANY. ActaMed, SubCorp, UHC and the Company acknowledge and agree that, as contemplated by SECTION 6.2, prior to the Closing Date, ActaMed and SubCorp intend to perform such investigation of the Company as they may deem appropriate; provided, however, no investigation by ActaMed and SubCorp shall diminish or otherwise affect any of the representations, warranties, covenants or agreements made or to be performed by UHC or the Company pursuant to this Agreement or ActaMed's and SubCorp's right to rely fully upon such representations, warranties, covenants and agreements. All such representations, warranties, covenants and agreements made or to be performed by UHC or the Company pursuant to this Agreement shall survive the execution and delivery hereof and the Closing hereunder. The representations and warranties shall thereafter terminate and expire (a) with respect to any General Claim with respect to which a Claims Notice has not been given, on the later of (i) eighteen months after the Closing Date or (ii) the first anniversary of the date on which such covenant is to be performed hereunder; and (b) with respect to any Tax Claim, on the later of (i) the ninetieth (90th) day after the date upon which the Liability to which any such Tax Claim may relate is barred by all applicable statutes of limitation and (ii) the ninetieth (90th) day after the date upon which any claim for refund or credit related to such Tax Claim is barred by all applicable statutes of limitation. With respect to any Ownership Claim, Undisclosed Liability Claim or any type of claim not specifically addressed above, such representations, warranties, covenants and agreements shall survive without limit of time. 9.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF ACTAMED AND SUBCORP. Except for the covenants and agreements contained in ARTICLES 12 and 13, which shall survive termination of this Agreement in accordance with their respective terms, all the representations, warranties, covenants and agreements, made or to be performed by ActaMed and SubCorp pursuant to this Agreement shall be considered to have been relied upon by UHC and shall survive the delivery to UHC of the Preferred -xl- Shares (and the Conversion Shares) and shall terminate and expire, with respect to any Claim for which a Claims Notice has not been given, on the first anniversary of the Closing Date. 9.3 OBLIGATION OF UHC TO INDEMNIFY. Subject to the limitations of SECTIONS 9.1 and 9.8, UHC agrees to indemnify and hold harmless each ActaMed Indemnitee against and in respect of: (a) all Losses, asserted against, imposed upon or incurred by any ActaMed Indemnitee by reason of or resulting from: (1) a breach of any representation or warranty of UHC or the Company contained in or made pursuant to this Agreement; or (2) any nonfulfillment of any covenant or agreement of UHC or the Company contained in or made pursuant to this Agreement; (b) any and all actions, suits, claims, proceedings, investigations, demands, assessments, audits, fines, judgments, costs and other expenses (including, without limitation, reasonable legal fees and expenses) incident to any Loss in connection with SECTION 9.3(a) or to the enforcement of this SECTION 9.3; (c) all Losses asserted against, imposed upon or incurred by any ActaMed Indemnitee by reason or resulting from: (1) any and all costs, judgments, claims, actions at law or in equity, interest charges and reasonable attorneys' fees with respect to any cause of action or proceeding, by any participant or dependent or beneficiary of any participant, arising out of or by reason of the sponsorship by any member of the UHC Group of any Benefit Plan prior to the Effective Time; (2) any Environmental Condition, and arising out of or in connection with any event or events which occurred prior to the Effective Time; and (3) any Litigation pending or threatened as of the Closing Date, or Litigation arising out of events which occurred prior to the Effective Time, against or affecting the Company regardless of whether it is disclosed on SCHEDULE 4.20 or any other Schedule attached to ARTICLE 4 hereto. 9.4 OBLIGATION OF ACTAMED AND SUBCORP TO INDEMNIFY. Subject to the limitations of SECTIONS 9.1 and 9.8, ActaMed and SubCorp agree to indemnify and hold harmless each UHC Indemnitee against and in respect of: (a) all Losses asserted against, imposed upon or incurred by any UHC Indemnitee by reason of or resulting from: -xli- (1) a breach of any representation or warranty of ActaMed or SubCorp contained in or made pursuant to this Agreement; or (2) any nonfulfillment of any covenant or agreement of the ActaMed or SubCorp contained in or made pursuant to this Agreement; and (b) any and all actions, suits, claims, proceedings, investigations, demands, assessments, audits, fines, judgments, costs and other expenses (including, without limitation, reasonable legal fees and expenses) incident to any Loss in connection with SECTION 9.4(a) or to the enforcement of this SECTION 9.4. 9.5 CLAIMS NOTICE. A Claim shall be made by any Indemnitee by delivery of a Claims Notice to any Indemnifying Party requesting indemnification and specifying the basis on which indemnification is sought and the amount of asserted Losses and, in the case of a Third Party Claim, containing (by attachment or otherwise) such other information as such Indemnitee shall have concerning such Third Party Claim. 9.6 PROCEDURES INVOLVING NON-THIRD PARTY CLAIMS. If the Claim involves a matter other than a Third Party Claim, the Indemnifying Party shall have forty-five (45) days to object to such Claim by delivery of a written notice of such objection to such Indemnitee specifying in reasonable detail the basis for such objection. If an objection is timely interposed by the Indemnifying Party, the Indemnifying Party and the Indemnitee shall cooperate in the compromise of the Claim. Failure to object in a timely manner shall constitute a final and binding acceptance of the Claim by the Indemnifying Party on behalf of all Indemnitors, and the Claim shall be paid in accordance with SECTION 9.10 hereof. 9.7 PROCEDURES INVOLVING THIRD PARTY CLAIMS. The obligations and liabilities of the parties hereunder with respect to a Third Party Claim shall be subject to the following terms and conditions: (a) The Indemnitee shall give the Indemnifying Party written notice of a Third Party Claim promptly after receipt by the Indemnitee of notice thereof, and the Indemnifying Party may undertake the defense, compromise and settlement thereof by representatives of its own choosing reasonably acceptable to the Indemnitee. The failure of the Indemnitee to notify the Indemnifying Party of such claim shall not relieve the Indemnifying Party of any liability that they may have with respect to such claim except to the extent the Indemnifying Party demonstrates that the defense of such claim is prejudiced by such failure. The assumption of the defense, compromise and settlement of any such Third Party Claim by the Indemnifying Party shall be an acknowledgment of the obligation of the Indemnifying Party to indemnify the Indemnitee with respect to such claim hereunder. If the Indemnitee desires to participate in, but not control, any such defense, compromise and settlement, it may do so at its sole cost and expense. If, -xlii- however, the Indemnifying Party fails or refuses to undertake the defense of such Third Party Claim within ten (10) days after written notice of such claim has been given to the Indemnifying Party by the Indemnitee, the Indemnitee shall have the right to undertake the defense, compromise and settlement of such claim with counsel of its own choosing. In the circumstances described in the preceding sentence, the Indemnitee shall, promptly upon its assumption of the defense of such claim, make a Claim as specified in SECTION 9.5 which shall be deemed a Claim that is not a Third Party Claim for the purposes of the procedures set forth herein. (b) If, in the reasonable opinion of the Indemnitee, any Third Party Claim or the litigation or resolution thereof involves an issue or matter which could have a material adverse effect on the business, operations, assets, properties or prospects of the Indemnitee (including, without limitation, the administration of the tax returns and responsibilities under the tax laws of the Indemnitee), the Indemnitee shall have the right to control the defense, compromise and settlement of such Third Party Claim undertaken by the Indemnifying Party, and the reasonable costs and expenses of the Indemnitee in connection therewith shall be included as part of the indemnification obligations of the Indemnifying Party hereunder. If the Indemnitee shall elect to exercise such right, the Indemnifying Party shall have the right to participate in, but not control, the defense, compromise and settlement of such Third Party Claim at its sole cost and expense. (c) No settlement of a Third Party Claim involving the asserted liability of the Indemnifying Party under this Article shall be made without the prior written consent by or on behalf of the Indemnifying Party, which consent shall not be unreasonably withheld or delayed. If the Indemnifying Party assumes the defense of such a Third Party Claim, (1) no compromise or settlement thereof may be effected by the Indemnifying Party without the Indemnitee's consent unless (A) there is no finding or admission of any violation of law or any violation of the rights of any person and no effect on any other claim that may be made against the Indemnitee (B) the sole relief provided is monetary damages that are paid in full by the Indemnifying Party and (C) the compromise or settlement includes, as an unconditional term thereof, the giving by the claimant or the plaintiff to the Indemnitee of a release, in form and substance satisfactory to the Indemnitee, from all liability in respect of such Third Party Claim, and (2) the Indemnitee shall have no liability with respect to any compromise or settlement thereof effected without its consent. 9.8 LIMITATIONS ON INDEMNIFICATION. (a) No party to this Agreement shall be entitled to indemnification under this Agreement to the extent that such party's Losses are increased or extended by the willful misconduct, violation of law or bad faith of such party. (b) No Indemnifying Party shall be required to indemnify an Indemnitee with respect to any Loss arising out of or with respect to a General Claim unless the amount of such Loss, when aggregated with all other such Losses, shall exceed -xliii- the Threshold Amount (as defined below), at which time Claims may be asserted to the extent that all Losses or Asserted Liabilities are in excess of the Threshold Amount; provided, however, that the Threshold Amount shall not apply to any Loss: (A) which results from or arises out of an Ownership Claim, Tax Claim or Undisclosed Liability Claim, (B) which results from or arises out of fraud or intentional misrepresentation or an intentional breach of a representation, warranty, covenant or agreement in this Agreement; or (C) which results from or arises out of any Litigation incident to any of the matters referred to in the foregoing clauses (A) and (B). The Threshold Amount shall be One Hundred Thousand Dollars ($100,000). Notwithstanding the foregoing, for any breach of SECTION 4.13, UHC shall indemnify each ActaMed Indemnitee for any individual Loss in excess of $10,000 per item of tangible personal property and any aggregate Loss exceeding $50,000 for items of tangible personal property. (c) In no event shall the aggregate liability of the Indemnifying Party for any General Claim under this ARTICLE 9 exceed $10 million. 9.9 NO RELEASE FOR FRAUD. Nothing contained in this Agreement shall relieve or limit the liability of any party or any officer or director of such party from any Liability arising out of or resulting from common law fraud or intentional misrepresentation in connection with the transactions contemplated by this Agreement or in connection with the delivery of any of the Transaction Documents. Each party shall have a right to indemnification for any Loss incurred as the result of any common law fraud or intentional misrepresentation by any other party or any officer or director of such other party without regard to the Threshold Amount, the maximum liability or any period of limitation. 9.10 PAYMENT. (a) If any party is required to make any payment under this ARTICLE 9, such party shall promptly pay the Indemnified Party the amount so determined. If there is a dispute as to the amount or manner of determination of any indemnity obligation owed under this ARTICLE 9, the Indemnifying Party shall nevertheless pay when due such portion, if any, of the obligation as shall not be subject to dispute. The difference, if any, between the amount of the obligation ultimately determined as properly payable under this ARTICLE 9 and the portion, if any, theretofore paid shall bear interest as provided in SECTION 9.10(c). (b) Any items as to which an Indemnified Party is entitled to payment under this ARTICLE 9 may be paid by set-off against amounts payable to the Indemnifying Party to the extent that such amounts are sufficient to pay such items. (c) If all or part of any indemnification obligation under this Agreement is not paid when due, then the Indemnifying Party shall pay the Indemnified Party interest on the unpaid principal amount of the obligation from the date the amount -xliv- became due until payment in full, at the per annum rate of interest announced from time to time by NationsBank South, N.A., to be its "prime rate." 9.11 EXCLUSIVE REMEDY. Except for equitable remedies and any action for common law fraud, the remedies provided in this ARTICLE 9 constitute the sole and exclusive remedies for recovery against the Indemnifying Party based upon this Agreement. 9.12 ARBITRATION. All disputes arising under this ARTICLE 9 (other than claims in equity) shall be resolved by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association. Arbitration shall be by a single arbitrator experienced in the matters at issue and selected by UHC and ActaMed in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The arbitration shall be held in such place in Atlanta, Georgia as may be specified by the arbitrator (or any place agreed to by UHC, ActaMed and the arbitrator). The decision of the arbitrator shall be final and binding as to any matters submitted under this ARTICLE 9; provided, however, if necessary, such decision and satisfaction procedure may be enforced by either UHC or ActaMed in any court of record having jurisdiction over the subject matter or over any of the parties to this Agreement. All costs and expenses incurred in connection with any such arbitration proceeding (including reasonable attorneys' fees) shall be borne by the party against which the decision is rendered, or, if no decision is rendered, such costs and expenses shall be borne equally by the Indemnifying Party as one party and the Indemnitees as the other party. If the arbitrator's decision is a compromise, the determination of which party or parties bears the costs and expenses incurred in connection with any such arbitration proceeding shall be made by the arbitrator on the basis of the arbitrator's assessment of the relative merits of the parties' positions. ARTICLE 10 TAX MATTERS 10.1. TAX INDEMNITIES. (a) From and after the Closing Date, UHC shall indemnify ActaMed and the Company against all Taxes (i) imposed on the Company with respect to any taxable period or portion thereof that ends before or on (but includes) the Closing Date (ii) imposed on UHC or any member of an affiliated group with which UHC files a consolidated or combined income tax return (other than the Company) with respect to any taxable period. (b) From and after the Closing Date, ActaMed and Company shall indemnify UHC against all Taxes imposed on the Company with respect to its income, business, property or operations for any taxable period or portion thereof that begins after the Closing Date. -xlv (c) For purposes of Sections 10.01(a) and (b), in the case of Taxes that are payable with respect to a taxable period that begins before the Closing Date and ends after the closing Date, the portion of any such Tax that is allocable to the portion of the period ending on the Closing Date shall: (i) in the case of Taxes that are either (x) based upon or related to income or receipts of (y) imposed in connection with any sale, other transfer or assignment or any deemed sale, transfer or assignment of property (real or personal, tangible or intangible), be deemed equal to the amount which would be payable if the taxable year ended on the Closing Date, and (ii) in the case of Taxes imposed on a periodic basis with respect to the assets of the Company or otherwise measured by the level of any item, be deemed to be the amount of such Taxes for the entire period (or, in the case of such Taxes determined on an arrears basis, the amount of such Taxes for the immediately preceding period) multiplied by a fraction the numerator of which is the number of calendar days in the portion of such period ending on the Closing Date and the denominator of which is the number of calendar days in the entire period. For purposes of clause (i) above, any exemption, deduction, credit or other item that is calculated on an annual basis shall be allocated to the period beginning before the Closing Date and, pursuant to clause (i) treated as ending on the Closing Date, based on the pro rata portion of such item determined by multiplying the total amount of such item times a fraction, the numerator of which is the number of calendar days in the period up to and including the Closing Date and the denominator of which is the total number of calendar days in the entire period. 10.2. RETURNS AND PAYMENTS. (a) From the date of this Agreement through and after the Closing Date, UHC shall prepare and file or otherwise furnish to the appropriate party (or cause to be prepared and filed or so furnished) in a timely manner all Tax returns, reports and forms ("RETURNS") with respect to the Company for any taxable period ending on or before the Closing Date, and ActaMed shall do the same for any taxable period ending after the Closing Date. With respect to any Return required to be filed with respect to the Company after the Closing Date and as to which an amount of Tax is allocable to UHC under Section 10.01(c), ActaMed shall provide UHC and its authorized representatives with a copy of such completed Return and a statement (including all necessary supporting schedules and information required to support such statement) that certifies and sets forth the calculation of the amount of Tax shown on such Return that is allocable to UHC pursuant to Section 10.01(c) at least 30 days prior to the due date (including any extension thereof) for the filing of such Return, and UHC and its authorized representatives shall have the right to review such Return and statement (including any supporting Schedules or other documents relevant thereto) prior to the filing of such Return. UHC and ActaMed agree to consult and to attempt in good faith to resolve any issues arising as a result of the review of such Return and statement by UHC or its authorized representatives. -xlvi- (b) UHC and ActaMed shall each pay or cause to be paid when due and payable all Taxes that have not been paid as of the Closing Date that are allocable to them pursuant to the provisions of Section 10.01. (c) Payment of any amounts due under this Article 10 shall be made (i) with respect to agreed amounts, at least three calendar days before the payment of any such Tax is due, provided that no such payment shall be due prior to 10 business days following receipt of written notice that payment of such Tax is due, or (ii) within 10 business days following either an agreement between UHC and ActaMed that an amount is payable by UHC or ActaMed to the other or within 10 business days of a "determination" as defined in section 1313(a) of the Internal Revenue Code. 10.3 TAX AUDIT (a) After the Closing, ActaMed shall promptly notify UHC in writing of the commencement of any Tax audit or administrative or judicial proceeding and shall also separately notify UHC in writing of any demand or claim on ActaMed or the Company which, if determined adversely to the taxpayer or after the lapse of time would be grounds for indemnification by UHC under this Article 10. Such notice shall contain factual information (to the extent known to ActaMed or the Company) describing the asserted Tax liability in reasonable detail and shall include copies of any notice or other document received from any taxing authority in respect of any such asserted Tax liability. If ActaMed fails to give UHC prompt notice of an asserted Tax liability as required by this Section 10.03, then (a) if UHC is precluded by the failure to give prompt notice from contesting the asserted Tax liability in the appropriate administrative or judicial forums, then UHC shall not have any obligation to indemnify ActaMed for any loss or damage arising out of such asserted Tax liability, and (b) if UHC is not so precluded from contesting but such failure to give prompt notice results in a detriment to UHC, then any amount which UHC is otherwise required to pay ActaMed pursuant to this Article 10 with respect to such liability shall be reduced by the amount of such detriment. (b) UHC may elect to direct, through counsel of its own choosing and at its own expense, any audit, or administrative or judicial proceeding involving any asserted liability with respect to which indemnity may be sought under this Article 10 (any such audit or proceeding relating to an asserted Tax liability are referred to herein collectively as a "CONTEST"). If UHC elects to direct the Contest of an asserted Tax liability, it shall within 30 calendar days of receipt of the notice of an asserted Tax liability notify ActaMed of its intent to do so, and ActaMed shall cooperate in good faith and shall cause the Company or its successor to cooperate in good faith, at UHC's expense, in each phase of such Contest. If UHC elects not to direct the Contest, fails to notify ActaMed of its election as herein provided or contests its obligation to indemnify under Section 10.01, ActaMed or the Company may pay, compromise or contest, at its own expense, such asserted liability. However, in such case, neither ActaMed nor the Company (including any designated representative of either) may settle or compromise any asserted liability over the objection of UHC; PROVIDED, HOWEVER, that UHC's consent -xlvii- to settlement or compromise shall not be unreasonably withheld. In any event, each of ActaMed (or the Company) and UHC may participate, at its own expense, in the Contest. If UHC chooses to direct the Contest, ActaMed shall promptly empower and shall cause the Company or its successor promptly to empower (by power of attorney and such other documentation as may be appropriate) such representatives of UHC as it may designate to represent ActaMed or the Company or its successor in the Contest insofar as the Contest involves an asserted Tax liability for which UHC would be liable under this Article 10. 10.4. COOPERATION AND EXCHANGE OF INFORMATION. UHC and ActaMed will provide each other with such cooperation and information as either of them reasonably may request of the other in filing any Tax return, amended return or claim for refund, determining a liability for Taxes or a right to a refund of Taxes or participating in or conducting any audit or other proceeding in respect of Taxes. Such cooperation and information shall include providing copies of relevant Tax returns or portions thereof, together with accompanying schedules and related work papers and documents relating to rulings or other determinations by taxing authorities, but in no event shall UHC or ActaMed be required to disclose to the other any information relating to the operations of either, as the case may be, other than information relating to the Company. The Seller and ActaMed shall make its employees available on a mutually convenient basis to provide explanations of any documents or information provided hereunder. UHC and ActaMed will retain all returns, schedules and work papers and all material records or other documents relating to Tax matters of the Company for its taxable period first ending after the Closing Date and for all prior taxable periods until the later of: (i) the expiration of the statute of limitations of the taxable periods to which such returns and other documents relate, without regard to extensions except to the extent notified by the other party in writing of such extensions for the respective Tax periods; or (ii) eight years following the due date (without extension) for such returns. After such time, before ActaMed shall dispose of any of such books and records, at least 90 calendar days prior written notice to such effect shall be given by ActaMed to UHC, and UHC shall be given an opportunity, at its cost and expense, to remove and retain all or any part of such books and records as UHC may select. Any information obtained under this Section 10.05 shall be kept confidential, except as may be otherwise necessary in connection with the filing of returns or claims for refund or in conducting an audit or other proceeding. 10.5. TAX SHARING AGREEMENTS. UHC shall cause any tax-sharing agreements or arrangements with the Company to be terminated as of the Closing Date, with no amounts payable thereunder after the Closing other than those amounts payable thereunder in respect of current tax payable accounts. 10.6. ARTICLE 9. The provisions of this Article 10 shall supersede the provisions of Article 9 with respect to the matters set forth herein, except to the extent explicitly referenced in this Article 10. ARTICLE 11 -xlviii- TERMINATION 11.1 METHOD OF TERMINATION. This Agreement and the transactions contemplated by it may be terminated at any time prior to the Closing Date: (a) by the mutual consent of UHC and ActaMed; (b) by UHC, if ActaMed and SubCorp shall (1) fail to perform in any material respect their agreements contained herein required to be performed by any of them on or prior to the Closing Date, or (2) materially breach any of their representations, warranties or covenants contained herein; (c) by ActaMed, if UHC or the Company shall (1) fail to perform in any material respect their agreements contained herein required to be performed by any of them on or prior to the Closing Date, or (2) materially breach any of their representations, warranties or covenants contained herein; (d) by either UHC or ActaMed if there shall be any order, writ, injunction or decree of any court or governmental or regulatory agency binding on ActaMed, SubCorp, the Company or UHC, which prohibits or restrains ActaMed, SubCorp, the Company and/or UHC from consummating the Merger, provided that ActaMed, SubCorp, the Company and UHC shall have used their best efforts to have any such order, writ, injunction or decree lifted and the same shall not have been lifted within thirty (30) days after entry, by any such court or governmental or regulatory agency; (e) pursuant to SECTION 11.4; or (f) without action of either party if the Closing has not occurred on or before April 30, 1996. 11.2 NOTICE OF TERMINATION. Notice of termination of this Agreement, as provided for in this ARTICLE 11, shall be given by the parties so terminating to the other parties hereto in accordance with SECTION 14.1 of this Agreement. 11.3 EFFECT OF TERMINATION. If this Agreement terminates pursuant to SECTION 11.1 (a), (d), (e) or (f), then this Agreement shall become void and of no further force and effect, and each party shall pay the costs and expenses incurred by it in connection with this Agreement as set forth in SECTION 6.14 and no party (nor any of its officers, directors, employees, agents, representatives or shareholders) shall be liable to any other party for any costs, expenses, damages (direct or indirect) or loss of anticipated profits. 11.4 RISK OF LOSS. The Company and UHC assume all risk of condemnation, destruction, loss or damage due to fire or other casualty from the date of this Agreement until the Closing. If the condemnation, destruction, loss, or damage is such that the business of the Company is interrupted or curtailed or the assets of the Company are -xlix materially affected, then ActaMed and SubCorp shall have the right to terminate this Agreement. If ActaMed and SubCorp nonetheless elect to close, the Company and UHC shall remit all net condemnation proceeds or third party insurance proceeds to ActaMed and SubCorp and the number of shares of Series C Preferred Stock to be delivered to UHC at the Closing shall be adjusted to reflect such condemnation, destruction, loss, or damage to the extent that insurance or condemnation proceeds are not sufficient to cover such destruction, loss or damage. If ActaMed and SubCorp and UHC are unable to agree upon the amount of such adjustment, the dispute shall be resolved jointly by the independent accounting firms then employed by ActaMed and SubCorp and the Company, and if said accounting firms do not agree, they shall appoint a nationally recognized accounting firm, whose determination of the dispute shall be final and binding. ARTICLE 12 ADDITIONAL COVENANTS OF ACTAMED ActaMed covenants and agrees that, except as provided in SECTION 12.1 below, until such time as ActaMed has consummated a Public Offering: 12.1 SECURITIES LAW FILINGS. Upon consummation of a Public Offering and for so long as the UHC holds the Conversion Shares, ActaMed will timely file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder, to the extent required from time to time to enable the UHC to sell the Conversion Shares without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 under the Securities Act, as such rule may be amended from time to time, or (b) any similar rule or regulation hereafter adopted by the SEC. Upon the request of any UHC, ActaMed will deliver a written statement as to whether it has complied with such requirements. 12.2 TRANSACTIONS WITH SUBSTANTIAL HOLDERS. ActaMed shall not, directly or indirectly, knowingly enter into any material transaction or agreement with any of its Substantial Holders or any Affiliate or officer of ActaMed or a Substantial Holder, or a material transaction or agreement in which a Substantial Holder or Affiliate or officer of ActaMed or a Substantial Holder has a direct or indirect interest, unless such transaction or agreement is on terms and conditions no less favorable to ActaMed or any of its Subsidiaries than could be obtained at the time in an arm's length transaction with a third person that is not such a Substantial Holder or Affiliate or officer of ActaMed or a Substantial Holder, and such transaction or agreement has been reviewed and approved by a majority of those members of ActaMed's Board of Directors who have no such interest in the transaction. Except as provided in SECTION 14.4, this SECTION 12.2 shall not be enforceable against ActaMed by any person or entity not a party to this Agreement. 12.3 BUSINESS AND FINANCIAL COVENANTS. ActaMed covenants that: -l- (a) MERGER, ACQUISITIONS, SALE OF ASSETS. Without the prior written consent of the holders of a majority interest of the Series A Preferred Stock, Series B Preferred Stock and the Series C Preferred Stock, each voting separately as a class: (1) ActaMed shall not merge, effect a statutory share exchange, or consolidate with any entity at a price per preferred share less than the Series C Conversion Price. (2) ActaMed shall not sell, assign, lease or otherwise dispose of all or substantially all of its assets (whether now owned or hereafter acquired) in a transaction that would result in a price per preferred share less than the Series C Conversion Price. (b) MERGER, ACQUISITIONS, SALE OF ASSETS. Without the prior written consent of the holders of a majority interest of the Series A Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock, voting as a single class: (1) ActaMed shall not merge, effect a statutory share exchange, or consolidate with any entity at a price per Preferred Share equal to or greater than the Series C Conversion Price. (2) ActaMed shall not sell, assign, lease or otherwise dispose of all or substantially all of its assets (whether now owned or hereafter acquired) in a transaction that would result in a price per preferred share equal to or greater than the Series C Conversion Price. (3) The Company shall not permit any of its Subsidiaries to merge, effect a statutory share exchange, or consolidate with any entity other than ActaMed, or to sell, assign, lease or otherwise dispose of, all or substantially all of its assets (whether now owned or hereafter acquired) except to ActaMed. (4) Except for (A) up to 500,000 shares of ActaMed Common Stock which may be issued pursuant to ActaMed's 1996 Stock Option Plan approved by the Board of Directors, (B) up to 100,000 shares of ActaMed Common Stock which may be issued pursuant to ActaMed's 1996 Directors Stock Option Plan approved by the Board of Directors, (C) up to 975,000 shares of ActaMed Common Stock which may be issued pursuant to ActaMed's 1995 Stock Option Plan approved by the Board of Directors, (D) any remaining shares which may be issued under ActaMed's 1994 Stock Option Plan, 1993 Stock Option Plan and 1992 Stock Option Plan, (E) the reissuance of any unvested options that terminate under such option plans, (F) the issuance of shares of ActaMed Common Stock pursuant to additional stock option plans that may be established from time to time by the Board of Directors of ActaMed in its discretion, and (E) the conversion of the Series A Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock, ActaMed will not, and will not permit any of its Subsidiaries, to hereafter issue or sell any shares of any securities convertible into, or any warrants, rights, -li- or options to purchase shares of, the capital stock of ActaMed or such Subsidiary to any person or entity other than ActaMed, and ActaMed will not pledge any of the capital stock of any Subsidiary to any person or entity. (c) LOANS TO AND INVESTMENTS IN OTHERS. ActaMed shall not (except for the advancement of money for expenses in the ordinary course of business) make, or permit any of its Subsidiaries to make, any loans or advances to any person or entity or have outstanding any investment in any entity, whether by way of loan or advance to, or by the acquisition of the capital stock, assets or obligations of or any interest in, any person or entity. (d) RESTRICTED PAYMENTS, REPURCHASE OF ACTAMED COMMON STOCK. Except as expressly permitted herein or by the Restated Articles, neither ActaMed nor any of its Subsidiaries shall declare or make any Restricted Payments. (e) ARTICLES OF INCORPORATION. Neither ActaMed nor any of its Subsidiaries will amend or change its Articles of Incorporation or Bylaws, or violate or breach any of the provisions thereof. (f) Without the consent of a majority of the Board of Directors: (1) DEBT. ActaMed shall not create, incur or suffer to exist, or permit any Subsidiary to create, incur or suffer to exist, any debt other than: (A) debt existing on the date hereof and included in the ActaMed Financial Statements or incurred in the ordinary course of business between the date of the ActaMed Financial Statements and the date hereof, and any renewals or replacements of such debt not exceeding the principal amount of the debt being replaced or renewed; and (B) debt not in excess of $1,000,000 in the aggregate in any one calendar year. (2) LEASE OBLIGATIONS. ActaMed shall not create or suffer to exist, or permit any Subsidiary to create or suffer to exist, any obligations for the payment of rent for any property under leases or agreements to lease, other than obligations for (A) the payment of rent which, in the aggregate, do not exceed $1,000,000 annually and (B) payments under leases set forth on SCHEDULE 5.21. (3) ACQUISITIONS. ActaMed shall not acquire, or permit any Subsidiary to acquire, directly or indirectly, the assets of or equity interests in any other business or entity, whether by purchase, merger consolidation or otherwise in excess of $1,000,000. -lii- (4) PUBLIC OFFERING. ActaMed shall not effect an initial public offering of any equity securities, other than equity securities issued in a merger, less than $15,000,000 at a per share price of less than 2.5 times the then existing conversion price of the Series A Preferred Stock. 12.4 CORPORATE EXISTENCE, BUSINESS, MAINTENANCE, INSURANCE. (a) ActaMed will at all times preserve and keep in full force and effect its corporate existence and rights and franchises deemed material to its business and those of its Subsidiaries, except any Subsidiary of ActaMed may be merged into ActaMed or another Subsidiary. (b) ActaMed shall engage solely in the business of developing information networks and businesses closely related thereto. ActaMed (and any Subsidiary) will not purchase or acquire any property other than property useful in and related to such business. (c) ActaMed will maintain or cause to be maintained in good repair, working order and condition all properties used or useful in the business of ActaMed and any Subsidiary and from time to time will make or cause to be made all appropriate repairs, renewals and replacements thereof. ActaMed and any Subsidiary will at all times comply in all material respects with the provisions of all material leases to which it is a party or under which it occupies property so as to prevent any loss or forfeiture thereof or thereunder. (d) ActaMed will maintain or cause to be maintained, with financially sound and reputable insurers, appropriate insurance with respect to its properties and business and the properties and business of any Subsidiary against loss or damage. 12.5 PAYMENT OF TAXES, ETC.; ERISA. (a) ActaMed will pay, and will cause any of its Subsidiaries to pay, all taxes, assessments and other governmental charges imposed upon it or any of its properties or assets or in respect of any of its franchises, business, income or profits before any penalty or interest accrues thereon, and all claims (including, without limitation, claims for labor, services, materials and supplies) for sums which have become due and payable and which by law have or might become a lien or charge upon any of its properties or assets, PROVIDED that no such charge or claim need be paid if being contested in good faith by appropriate proceedings and if such reserve or other appropriate provisions, if any, as shall be required by generally accepted accounting principles shall have been made therefor. (b) ActaMed and any of its Subsidiaries will comply in all material respects with the ERISA. -liii- 12.6 BOOKS AND RECORDS, COMPLIANCE. (a) ActaMed and any of its Subsidiaries will keep true records and books of account in which full, true and correct entries will be made of all dealings or transactions in relation to its business and affairs in accordance with GAAP applied on a consistent basis. (b) ActaMed and any of its Subsidiaries shall duly observe and conform in all material respects to all valid requirements of governmental authorities relating to the conduct of its business or to its property or assets. 12.7 REPURCHASE OF PREFERRED SHARES. Except as provided in the Restated Articles, ActaMed shall not, and shall not permit any of its Subsidiaries or any Affiliate of ActaMed to, directly or indirectly, redeem or repurchase or make any offer to redeem or repurchase any Preferred Shares, unless ActaMed, such Subsidiary or such Affiliate has offered to repurchase Preferred Shares PRO RATA, from all holders of outstanding Preferred Shares) upon the same terms. 12.8 COMPENSATION. All awards of compensation, including, but not limited to, salary, bonus and awards of stock options made to executive officers and/or directors of ActaMed shall be determined by ActaMed in accordance with the terms of the Stockholders' Agreement. ARTICLE 13 INFORMATIONAL COVENANTS OF ACTAMED ActaMed covenants and agrees that it shall deliver the following information to UHC (including permitted transferees in accordance with SECTION 14.4, except as set forth in SECTION 13.6), for so long as UHC (or such transferees) shall hold at least 5% of the aggregate outstanding Preferred Shares and Conversion Shares (considered as a single class), or until such time as ActaMed shall have consummated a Public Offering: 13.1 AUDITED ANNUAL FINANCIAL STATEMENTS. As soon as practicable and, in any case, within one hundred and twenty (120) days after the end of each fiscal year, financial statements of ActaMed, consisting of the balance sheet of ActaMed as of the end of such fiscal year and the statements of operations, statements of shareholders, equity and statements of cash flows of ActaMed for such fiscal year, setting forth in each case, in comparative form, the figures for the preceding fiscal year, all in reasonable detail and fairly presented in accordance with GAAP applied on a consistent basis throughout the periods reflected therein, except as stated therein, and accompanied by an opinion thereon of Deloitte & Touche, or other independent certified public accountants selected by ActaMed of good and recognized national standing in the United States. -liv- 13.2 QUARTERLY UNAUDITED FINANCIAL STATEMENTS. As soon as practicable and, in any case, within forty-five (45) days after the end of each of the first three fiscal quarters in each fiscal year, unaudited financial statements of ActaMed setting forth the balance sheet of ActaMed at the end of each such fiscal quarter and the statements of operations and statements of cash flows of ActaMed for each such fiscal quarter and for the year to date, and setting forth in comparative form figures as of the corresponding date and for the corresponding periods of the preceding fiscal year, all in reasonable detail and certified by an accounting officer of ActaMed as complete and correct, as having been prepared in accordance with GAAP consistently applied (except as otherwise disclosed therein) and as presenting fairly, in all material respects, the financial position of ActaMed and any of its Subsidiaries and results of operations and cash flows thereof subject, in each case, to customary exceptions for interim unaudited financial statements. 13.3 MONTHLY UNAUDITED FINANCIAL STATEMENTS. As soon as available, but in any event within thirty (30) days after the end of each calendar month, copies of the unaudited balance sheet of ActaMed as at the end of such calendar month and the related unaudited statements of operations and cash flows for such calendar month and the portion of the calendar year through such calendar month, in each case setting forth in comparative form the figures for the corresponding periods of (a) the previous calendar year and (b) the budget for the current year, prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein (except as otherwise disclosed therein) and certified by the chief financial officer of ActaMed as presenting fairly the financial condition and results of operations of ActaMed and any of its Subsidiaries (subject to customary exceptions for interim unaudited financial statements). 13.4 MANAGEMENT'S ANALYSIS. All the financial statements delivered pursuant to SECTIONS 13.1 and 13.2 shall be accompanied by an informal narrative description of material business and financial trends and developments and significant transactions that have occurred in the appropriate period or periods covered thereby. 13.5 BUDGETS. As soon as practicable, but in any event within thirty (30) days prior to the commencement of a fiscal year, an annual operating budget for such fiscal year, approved by the Board of Directors, including monthly income and cash flow projections and projected balance sheets as of the end of each quarter within such fiscal year. Extensions of such due date shall not be unreasonably withheld. 13.6 INSPECTION. Upon reasonable notice, ActaMed shall, and shall cause any of its Subsidiaries to, permit UHC (so long as it owns 5% more of the outstanding capital stock of ActaMed) by its representatives, agents or attorneys: (a) to examine all books of account, records, reports and other papers of ActaMed or such Subsidiary except to the extent that such action would, in the reasonable opinion of counsel, constitute a waiver of the attorney/client privilege, -lv- (b) to make copies and take extracts from any thereof, except for information which is confidential or proprietary, (c) to discuss the affairs, finances and accounts of ActaMed or such Subsidiary with ActaMed's or such Subsidiary's officers and independent certified public accountants (and by this provision ActaMed hereby authorizes said accountants to discuss with UHC and its representatives, agents or attorneys the finances and accounts of ActaMed or such Subsidiary), and (d) to visit and inspect, at reasonable times and on reasonable notice during normal business hours, the properties of ActaMed and such Subsidiary. Notwithstanding any provision herein to the contrary, the provisions of this SECTION 13.6 are in addition to any rights of UHC under the Georgia Business Corporation Code and shall in no way limit such rights. The expenses of UHC in connection with any such inspection shall be for the account of UHC. Notwithstanding the foregoing sentence, it is understood and agreed by ActaMed that all reasonable expenses incurred by ActaMed or such Subsidiary, any officers, employees or agents thereof or the independent certified public accountants therefor, shall be expenses payable by ActaMed and shall not be expenses of UHC making the inspection. Notwithstanding anything to the contrary, no member of the UHC Group shall be permitted access to any information of, or related to, any competitor of UHC. 13.7 OTHER INFORMATION. ActaMed shall deliver the following provided that in the reasonable opinion of counsel to ActaMed such disclosure will not constitute a waiver of the attorney/client privilege, the breach of any secrecy covenant or the release of information regarding competitors of UHC: (a) promptly after the submission thereof to ActaMed, copies of any detailed reports (including the auditors' comment letter to management, if any such letter is prepared) submitted to ActaMed by its independent auditors in connection with each annual or interim audit of the accounts of ActaMed made by such accountants; (b) promptly, and in any event within ten (10) days after obtaining knowledge thereof, notice of the institution of any suit, action or proceeding (other than a proceeding of general application which is not directly against ActaMed or one or more of the Subsidiaries), the happening of any event or, to the best knowledge of ActaMed, the assertion or threat of any claim against ActaMed or any of the Subsidiaries which, either individually or in the aggregate, would have a Material Adverse Effect; (c) promptly upon, and in any event within thirty (30) days after obtaining knowledge thereof, notice of any breach of, default under or failure to comply with any material term under SECTIONS 12 or 13 of this Agreement or any material adverse -lvi- change in ActaMed's relationship with its major customers, suppliers, employees or other entity with which ActaMed has a business relationship; (d) with reasonable promptness, a notice of any default by ActaMed or any of its Subsidiaries under any material agreement to which it is a party; (e) with reasonable promptness, copies of all written materials furnished to directors; (f) promptly (but in any event within ten (10) days) after the filing of any document or material with the SEC, a copy of such document or material; (g) promptly after the record date set by the Board of Directors to determine the stockholders entitled to vote at ActaMed's annual meeting of stockholders (but in any event ten (10) days prior to such meeting), a list of all stockholders of ActaMed and their respective holdings; and (h) promptly upon request therefor, such other data, filings and information as any UHC may from time to time reasonably request. ARTICLE 14 GENERAL PROVISIONS 14.1 NOTICES. (a) All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been given if (1) delivered by hand or if mailed by United States registered or certified mail, return receipt requested, first class postage prepaid, (2) sent by Federal Express or similar overnight courier service to the parties or their assignees, or (3) sent by telecopy to the number set forth below and promptly followed by a written copy sent by any other means specified herein, addressed as follows: If to UHC or the Company: United Healthcare Corporation Inc. 9900 Bren Road East Minneapolis, Minnesota 55440-1459 Attention: Chief Information Officer Telephone: (___)____________ Telecopy: (___)_____________ If to ActaMed and/or SubCorp: -lvii- ActaMed Corporation Suite 600 7000 Central Parkway Atlanta, Georgia 30328 Attention: Chief Financial Officer Telephone: (770) 551-1600 Telecopy: (770) 551-1815 with a copy to: Alston & Bird One Atlantic Center 1201 West Peachtree Street Atlanta, Georgia 30309-3424 Attention: J. Vaughan Curtis, Esq. Telephone: (404) 881-7000 Telecopy Number: (404) 881-7777 (b) If delivered personally, the date on which a notice, request, instruction or document is delivered shall be the date on which such delivery is made and, if delivered by mail, telecopy, Federal Express or other overnight courier, the date on which such notice, request, instruction or document is first received shall be the date of delivery. (c) Any party hereto may change its address specified for notices herein by designating a new address by notice in accordance with this SECTION 14.1. (d) Failure of any party to send a copy of any notice to counsel for the other party shall not affect in any way the validity of such notice to other party. 14.2 FURTHER ASSURANCES. Each party covenants that at any time, and from time to time, after the Closing Date, it will execute such additional instruments and take such actions as may be reasonably requested by the other parties to confirm or perfect or otherwise to carry out the intent and purposes of this Agreement. 14.3 WAIVER. Any failure on the part of any party hereto to comply with any of its obligations, agreements or conditions hereunder may be waived by any other party to whom such compliance is owed. No waiver of any provision of this Agreement shall be deemed, or shall constitute, a waiver of any other provision, whether or not similar, nor shall any waiver constitute a continuing waiver. 14.4 ASSIGNMENT. This Agreement shall not be assignable by any of the parties hereto without the written consent of the other parties hereto, and no rights under this Agreement may be transferred, except that: -lviii- (a) the rights of ActaMed under this Agreement may be transferred to any successor, by purchase of assets, merger or other corporate reorganization; (b) the rights of UHC under this Agreement may be transferred after the Closing in connection with a transfer of Preferred Shares made in accordance with the provisions of the Stockholders' Agreement (other than a transfer pursuant to a registration statement under the Securities Act or a transfer pursuant to Rule 144 thereunder); and (c) all the rights of UHC may be transferred to an Affiliate of UHC; PROVIDED, that any such transferee of UHC shall execute and deliver to ActaMed an instrument satisfactory to it agreeing to be bound by the provisions hereof and of the Stockholders' Agreement and the Registration Rights Agreement. 14.5 BINDING EFFECT. Subject to the limitations on transfer set forth in SECTION 14.4, this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, legal representatives, executors, administrators, successors and assigns. 14.6 KNOWLEDGE. The use of the terms "to ActaMed's knowledge" or "to the best of ActaMed's knowledge" shall mean the facts known to P.E. Sadler, Michael K. Hoover, and Nancy J. Ham after reasonable inquiry. 14.7 HEADINGS. The section and other headings in this Agreement are inserted solely as a matter of convenience and for reference, and are not a part of this Agreement. 14.8 ENTIRE AGREEMENT. This Agreement and the Exhibits, Schedules, certificates and other documents delivered pursuant hereto or incorporated herein by reference, contain and constitute the entire agreement among the parties hereto and supersede and cancel any prior agreements, representations, warranties, or communications, whether oral or written, among the parties hereto relating to the transactions contemplated hereby or the subject matter herein. This Agreement may be changed, waived, discharged or terminated only by an agreement in writing signed by (A) ActaMed and (B) UHC or, after the Closing Date, the holder(s) of a majority of the Preferred Shares and any Conversion Shares considered as a single class. 14.9 GOVERNING LAW. Except as set forth in SECTION 6.12, this Agreement shall be governed by and construed in accordance with the laws of the State of Georgia. 14.10 COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 14.11 PRONOUNS. All pronouns used herein shall be deemed to refer to the masculine, feminine or neutral gender as the context requires. -lix- 14.12 TIME OF ESSENCE. Time is of the essence in this Agreement. 14.13 SCHEDULES AND EXHIBITS. All Schedules and Exhibits attached to this Agreement are by this reference made a part hereof. -lx- [SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER DATED MARCH 1, 1996 BY AND AMONG ACTAMED CORPORATION, SUBCORP, INC., UHC GREEN ACQUISITION, INC. AND UNITED HEALTHCARE CORPORATION] IN WITNESS WHEREOF, the parties hereto have executed this Agreement under seal as of the day and year first above written. ACTAMED CORPORATION EDI ACQUISITION, INC. By : /s/ MICHAEL K. HOOVER By: /s/ MICHAEL K. HOOVER --------------------------- ---------------------------- Name: Michael K. Hoover Name: Michael K. Hoover -------------------- --------------------- Title: President Title: President ------------------- -------------------- UNITED HEALTHCARE UHC GREEN ACQUISITION, INC. CORPORATION By : /s/ TRAVERS H. WILLS By: /s/ TRAVERS H. WILLS --------------------------------- ------------------------------- Name: Travers H. Wills Name: Travers H. Wills -------------------------- --------------------------- Title: Chief Operating Officer Title: Chief Operating Officer -------------------------- --------------------------- -lxi- EXHIBIT A DEFINED TERMS "ACTAMED" - ActaMed Corporation, a Georgia corporation. "ACTAMED BUSINESS" - The business of selling and developing information systems and related technology for the healthcare industry. "ACTAMED COMMON STOCK" - The $.01 par value common stock of ActaMed. "ACTAMED DOCUMENTS" - All of the Transaction Documents to which either ActaMed or SubCorp is a party. "ACTAMED FINANCIAL STATEMENTS" - The materials described in SECTION 5.4(a) of this Agreement. "ACTAMED INDEMNITEE" - ActaMed and SubCorp and their respective directors, officers, employees, affiliates and assigns. "AFFILIATE" - Any person, firm, corporation, partnership or association controlling, controlled by or under common control with another person, firm, corporation, partnership or association. "AGREEMENT" - This Agreement and Plan of Merger, including the Exhibits and Schedules delivered pursuant hereto. "BENEFIT PLAN" - An employee benefit plan or agreement of a person for the benefit of its shareholders, officers, directors, employees, or independent contractors, including, without limitation, (a) any affirmative action plans or programs, (b) any current and deferred compensation, severance, vacation, stock purchase, stock option, bonus and incentive compensation benefits, (c) any "employee benefit plan" (as defined in ERISA Section 3(3)) and (d) any medical, hospital, life, health, accident, disability, death and other fringe and welfare benefits, including any split-dollar life insurance policies, all of which plans, programs, practices, policies and other individual and group arrangements and agreements, including any unwritten compensation, fringe benefit, payroll or employment practices, procedures or policies of any kind or description. "CLAIM" - Any claim for indemnification under ARTICLE 9, including but not limited to a General Claim, a Tax Claim or an Ownership Claim. "CLAIMS NOTICE" - A written notice of an indemnification claim delivered pursuant to SECTION 9.5 hereof. "CLOSING" - The closing referred to in SECTION 1.2 hereof. A-1 "CLOSING DATE" - The date referred to in SECTION 1.2 hereof for the closing of the transactions contemplated by this Agreement. "CODE" - The Internal Revenue Code of 1986, as amended. "COMPANY" - UHC Green Acquisition, Inc., a Nevada corporation. "COMPANY BUSINESS" - The business of providing electronic data interchange products and services to the health care industry, excluding EmployerLink and LaborLink, whether conducted by the Company or any other member of the UHC Group. "COMPANY COMMON STOCK" - The common stock, $.01 par value, of the Company. "CONTRACT" - Any written or oral contract, agreement, lease, plan, instrument or other document, commitment, arrangement, undertaking, practice or authorization that is or may be binding on any person or its property under applicable law. "CONVERSION SHARES" - The shares of ActaMed Common Stock issued or issuable upon the conversion of the Preferred Shares. "COURT ORDER" - Any judgment, decree, writ, injunction, order or ruling of any federal, state or local court or governmental or regulatory body or authority that is binding on any person or its property under applicable law. "DEFAULT" - (a) a breach of or default under any Contract or License, (b) the occurrence of an event that with the passage of time or the giving of notice or both would constitute a breach of or default under any Contract or License, or (c) the occurrence of an event that with or without the passage of time or the giving of notice or both would give rise to a right of termination, renegotiation or acceleration under any Contract or License. "EDI FINANCIAL STATEMENTS" - The materials described in SECTION 4.6(a) of this Agreement. "EFFECTIVE TIME" - The date and time at which the Merger becomes effective pursuant to SECTION 1.3 of this Agreement. "ENVIRONMENTAL CONDITION" - (a) The introduction into the environment of any pollution, including without limitation any contaminant, irritant or pollutant or other toxic or hazardous substance (whether or not such pollution constituted at the time thereof a violation of any federal, state or local law, ordinance or governmental rule or Regulation) as a result of any spill, discharge, leak, emission, escape, injection, dumping or release of A-2 any kind whatsoever of any substance or exposure of any type in any work places or to any medium, including without limitation air, land, surface waters or ground waters, or from any generation, transportation, treatment, discharge, storage or disposal of waste materials, raw materials, hazardous materials, toxic materials or products of any kind or from the storage, use or handling of any hazardous or toxic materials or other substances, as a result of which the Company has or may become liable to any person by any reason of which any of the assets of the Company may suffer or be subjected to any Lien, or (b) any noncompliance with any federal, state or local environmental law, rule, Regulation or order as a result of or in connection with any of the foregoing. "ERISA" - The Employee Retirement Income Security Act of 1974, as amended. "EXCHANGE ACT" - The Securities Exchange Act of 1934, as amended. "FASB 5" - Statement of Financing Accounting Standards No. 5 issued by the Financial Accounting Standards Board in March 1975. "GAAP" - Generally accepted accounting principles. "GENERAL CLAIM" - Any claim other than a Tax Claim, Ownership Claim or Undisclosed Liability Claim based upon, arising out of or otherwise in respect of: any inaccuracy in any representation or warranty or any breach of any covenant or agreement made or to be performed by a party pursuant to this Agreement. "HIRED EMPLOYEES" - The employees assigned to the Company Business and identified on SCHEDULE 6.5. "HIRED HOLD-OVER EMPLOYEE" - See SECTION 6.4 of this Agreement. "HSR ACT" - Section 7A of the Clayton Act, as added by Title II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder. "INDEMNITEE" - A party seeking indemnification under SECTIONS 9.3 or 9.4. "INDEMNIFYING PARTY" - The party obligated to provide indemnification pursuant to SECTIONS 9.3 or 9.4. "INTELLECTUAL PROPERTY" - Copyrights, trademarks, service marks, trade names, patents, applications therefor, technology rights and licenses, computer software (including, without limitation, any source or object codes therefor or documentation relating thereto), trade secrets, franchises, know-how, inventions and intellectual property rights. A-3 "IRS" - The Internal Revenue Service. "LIABILITY" - Any direct or indirect liability, indebtedness, obligation, expense, claim, deficiency, guaranty or endorsement of or by any person (other than endorsements of notes, bills and checks presented to banks for collection or deposit in the ordinary course of business) of any type, whether accrued, absolute, contingent, matured, unmatured or other. "LICENSE" - Any license, franchise, notice, permit, easement, right, authorization or filing. "LIEN" - Any mortgage, lien, security interest, pledge, encumbrance, restriction on transferability, defect of title, charge or claim of any nature whatsoever on any property or property interest. "LITIGATION" - Any lawsuit, action, claim, arbitration, administrative or other proceeding, criminal prosecution or governmental investigation or inquiry involving or affecting the Company or its business, assets or Contracts to which the Company is a party or by which it or its business, assets or Contracts may be bound or affected. "LOSSES" - Any and all demands, claims, actions or causes of action, assessments, losses, diminution in value, damages (including special and consequential damages), liabilities, costs, and expenses, including without limitation, interest, penalties, cost of investigation and defense, and reasonable attorneys' and other professional fees and expenses. "MATERIAL ADVERSE EFFECT" - With respect to ActaMed, a material adverse effect on the ability of ActaMed to conduct the ActaMed Business or the impairment of ActaMed's ability to perform its obligations under the ActaMed Documents. "MERGER" - The merger of SubCorp with and into the Company pursuant to this Agreement. "OWNERSHIP CLAIM" - Any claim arising out of or otherwise in respect of any inaccuracy in the representations and warranties set forth in SECTIONS 4.1, 4.2, 4.3, 4.4 or 4.16 or 5.2 or 5.7 of this Agreement. "PUBLIC OFFERING" - A bona fide firm commitment underwritten offering of ActaMed Common Stock pursuant to a registration statement filed with and declared effective by the SEC. "PREFERRED SHARES" - The shares of Series C Preferred Stock issued to UHC pursuant to SECTION 3.1(a). A-4 "REGISTRATION RIGHTS AGREEMENT" - The Registration Rights Agreement dated May 3, 1994, by and among ActaMed and the signatures thereto, as amended. "REGISTRATION RIGHTS AGREEMENT AMENDMENT" - The agreement referenced in SECTION 1.4(a)(2) hereof. "REGULATION" - Any statute, law, ordinance, regulation, order or rule of any federal, state, local or other governmental agency or body or of any other type of regulatory body, including, without limitation, those covering environmental, energy, safety, health, transportation, bribery, recordkeeping, zoning, antidiscrimination, antitrust, wage and hour, and price and wage control matters. "RESTATED ARTICLES" Before the Closing, the Second Amended and Restated Articles of Incorporated of ActaMed and, after the Closing, the Third Amended and Restated Articles of Incorporation of ActaMed. "RESTRICTED PAYMENT" means (a) any payment or the incurrence of any liability to make any payment in cash, property or other assets as a dividend or other distribution in respect of any shares of capital stock of ActaMed or any Subsidiary, excluding, however, any dividends payable to ActaMed by a Subsidiary or dividends which may be payable solely in ActaMed Common Stock of ActaMed or any Subsidiary and (b) except as otherwise permitted by the Transaction Documents or a stock option agreement under the Stock Option Plans, any payment or the incurrence of any liability to make any payment in cash, property or other assets for the purposes of purchasing, retiring or redeeming any shares of any class of capital stock of ActaMed or any Subsidiary or any warrants, options or other rights to purchase any such shares. "SCHEDULE" - Any of the disclosure schedules referred to in ARTICLES 4 or 5. "SEC" - The Securities and Exchange Commission. "SECURITIES ACT" - The Securities Act of 1933, as amended. "SERIES A PREFERRED STOCK" - The Series A Convertible Preferred Stock of ActaMed. "SERIES B PREFERRED STOCK" - The Series B Convertible Preferred Stock of ActaMed. "SERIES C PREFERRED STOCK" - The Series C Convertible Preferred Stock of ActaMed. "SERVICES AND LICENSE AGREEMENT" - The agreement referenced in SECTION 1.4(a)(1) hereof. A-5 "SHAREHOLDERS' AGREEMENT AMENDMENT" - The agreement referenced in SECTION 1.4(a)(3) hereof. "SHARES" - The total of 1,000 shares of Company Common Stock constituting in the aggregate one hundred percent (100%) of the issued and outstanding common stock of the Company. "STANDSTILL AGREEMENT AMENDMENT" - The agreement referenced in SECTION 1.4(a)(4) hereof. "SUBCORP" - EDI Acquisition, Inc., a Georgia corporation. "SUBSIDIARY" - A corporation, limited liability company, partnership, association, trust, joint venture or other entity in which ActaMed or the Company, as the case may be, has, directly or indirectly, an equity, ownership or proprietary interest of greater than ten percent (10%). "SUBSTANTIAL HOLDER" - An officer or employee of ActaMed or SubCorp who is the beneficial owner of one percent (1%) or more of the outstanding voting power or the outstanding equity (on a fully diluted basis) of ActaMed. "SURVIVING CORPORATION" - The Company, as the surviving corporation of the Merger, after the Merger. "TAX CLAIM" - Any claim based upon, arising out of or otherwise in respect of any inaccuracy in any representation or warranty or breach of any covenant or agreement made or to be performed by a party pursuant to this Agreement related to any Taxes. "TAXES" - Any federal, state, county, local and other taxes, including without limitation, income taxes, estimated taxes, excise taxes, sales taxes, use taxes, gross receipts taxes, franchise taxes, taxes on earnings and profits, employment and payroll related taxes, property taxes, real property transfer taxes, Federal Insurance Contributions Act taxes, taxes on value added and import duties, whether or not measured in whole or in part by net income, imposed by the United States or any political subdivision thereof or by any jurisdiction other than the United States or any political subdivision thereof. "THIRD PARTY CLAIM" - Any claim, suit or proceeding (including, without limitation, a binding arbitration or an audit by any taxing authority) that is instituted against an Indemnitee by a person or entity other than an Indemnitor and which, if prosecuted successfully, would result in a Loss for which such Indemnitee is entitled to indemnification hereunder. A-6 "TRANSACTION DOCUMENTS" - This Agreement and the documents exchanged by the parties at the Closing. "TRANSITION SERVICES AGREEMENT" - The agreement referenced in SECTION 1.4(a)(5) hereof. "UHC" - United Healthcare Corporation, a Minnesota corporation. "UHC DOCUMENTS" - All of the Transaction Documents to which either UHC or the Company is a party. "UHC GROUP" - UHC and its Affiliates. "UHC INDEMNITEE" - UHC and its directors, officers, employees, affiliates and assigns. "UNDISCLOSED LIABILITY CLAIM" - Any claim arising out of or otherwise in respect of any inaccuracy in the representations and warranties set forth in SECTIONS 4.7, 4.8, 4.10, 4.20 or 4.23. A-7 AMENDMENT TO AGREEMENT AND PLAN OF MERGER THIS AMENDMENT (this "Amendment") to the Agreement and Plan of Merger dated March 1, 1996 (the "Plan of Merger") is entered into this 4th day of April, 1996, by and among ActaMed Corporation, EDI Acquisition, Inc., United HealthCare Corporation and EDI Services, Inc. (formerly UHC Green Acquisition, Inc.). Capitalized terms used herein but not otherwise defined shall have the meanings ascribed to them in the Plan of Merger. WHEREAS, the parties hereto desire to amend the Plan of Merger as set forth herein. NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. SECTION 1.2. The second sentence of Section 1.2 of the Plan of Merger is hereby deleted and is replaced in its entirety by the following sentence: "Notwithstanding the foregoing, if the Closing does not occur on the first day of a month, then solely for financial accounting and reporting purposes, the parties hereto agree that the transactions contemplated herein shall be deemed to have closed as of the first day of the month in which the Closing occurs or the last day of the preceding month, as appropriate; provided that the parties hereto agree that for all other purposes, including, without limitation, risk of loss, the Closing shall occur, and shall be deemed to have occurred on the actual date of the Closing." 3. SECTION 3.3. The following Section 3.3 is hereby added to the Plan of Merger: "3.3 BASIS OF ASSETS OF THE COMPANY. Actamed and UHC recognize and agree that the prearranged transfer by UHC of the assets to the Company in contemplation of and in connection with the sale of the stock of the Company to Actamed is not a transaction described in Section 351 of the Internal Revenue Code, that such transfer to the Company is taxable to UHC as a taxable transfer of assets to the Company and the Company has a fair market value basis in the assets received in the transfer from UHC immediately prior to the time of the transaction contemplated hereby. UHC and Actamed agree to report the foregoing transactions in a manner consistent herewith. In addition, and in order to assure that Actamed shall have a basis in the assets of the Company equal to the amount paid pursuant to this Agreement, in lieu of the foregoing reporting and at Actamed's request, Actamed and UHC will make a timely election under Section 338(h)(10) of the Internal Revenue Code and any corresponding elections under state or local tax law. Actamed and UHC shall cooperate in taking all actions necessary to report the transaction as described above, or at Actamed's request to effect the election, including the execution and preparation of all forms, returns, elections and schedules and other documents and instruments. Any allocation of basis among the assets of the Company shall be initially prepared by UHC and consented to by Actamed. Any such allocation shall, for tax purposes, be binding on Actamed and UHC and no party shall take any position inconsistent with such allocation. UHC and Actamed agree that any liability for Tax arising out of or in any way attributable to the sale or deemed sale of assets by UHC shall be for the sole account of the UHC." 2. SECTION 4.1. The last sentence of Section 4.1 of the Plan of Merger is hereby deleted and is replaced in its entirety by the following sentence: "Substantially all of the assets required for the operation of the Company Business were transferred to the Company on December 15, 1995, and the Company did not have any operations prior to such date." IN WITNESS WHEREOF, the undersigned parties have executed this Amendment as of the day and year first above written. ACTAMED CORPORATION By: /S/ MICHAEL K. HOOVER ------------------------------ Michael K. Hoover, President EDI ACQUISITION, INC. By: /S/ MICHAEL K. HOOVER ------------------------------ Michael K. Hoover, President UNITED HEALTHCARE CORPORATION By: /s/ TRAVERS H. WILLS ------------------------------ Title: Chief Operating Officer --------------------------- EDI SERVICES, INC. By: /s/ TRAVERS H. WILLS ------------------------------ Title: Chief Operating Officer --------------------------- EX-10.1 3 EXHIBIT 10.1 Exhibit 10.1 HEALTHEON CORPORATION a Delaware corporation INDEMNIFICATION AGREEMENT This Indemnification Agreement ("Agreement") is effective as of ___________, 1998 by and between Healtheon Corporation, a Delaware corporation (the "Company"), and ___________ ("Indemnitee"). WHEREAS, the Company desires to attract and retain the services of highly qualified individuals, such as Indemnitee, to serve the Company and its related entities; WHEREAS, in order to induce Indemnitee to continue to provide services to the Company, the Company wishes to provide for the indemnification of, and the advancement of expenses to, Indemnitee to the maximum extent permitted by law; WHEREAS, the Company and Indemnitee recognize the continued difficulty in obtaining liability insurance for the Company's directors, officers, employees, agents and fiduciaries, the significant increases in the cost of such insurance and the general reductions in the coverage of such insurance; WHEREAS, the Company and Indemnitee further recognize the substantial increase in corporate litigation in general, subjecting directors, officers, employees, agents and fiduciaries to expensive litigation risks at the same time as the availability and coverage of liability insurance has been severely limited; WHEREAS, the Company and Indemnitee desire to continue to have in place the additional protection provided by an indemnification agreement and to provide indemnification and advancement of expenses to the Indemnitee to the maximum extent permitted by Delaware law; NOW, THEREFORE, the Company and Indemnitee hereby agree to the following: 1. CERTAIN DEFINITIONS. (a) "Change in Control" shall mean, and shall be deemed to have occurred if, on or after the date of this Agreement, (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company acting in such capacity or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing more than 50% of the total voting power represented by the Company's then outstanding Voting Securities, (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company and any new director whose election by the Board of Directors or nomination for election by the Company's stockholders was approved by a vote of at least two thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof, or (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation other than a merger or consolidation which would result in the Voting Securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least 80% of the total voting power represented by the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of (in one transaction or a series of related transactions) all or substantially all of the Company's assets. (b) "Claim" shall mean with respect to a Covered Event: any threatened, pending or completed action, suit, proceeding or alternative dispute resolution mechanism, or any hearing, inquiry or investigation that Indemnitee in good faith believes might lead to the institution of any such action, suit, proceeding or alternative dispute resolution mechanism, whether civil, criminal, administrative, investigative or other. (c) References to the "Company" shall include, in addition to Healtheon Corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger to which Healtheon Corporation (or any of its wholly owned subsidiaries) is a party which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees, agents or fiduciaries, so that if Indemnitee is or was a director, officer, employee, agent or fiduciary of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, employee benefit plan, trust or other enterprise, Indemnitee shall stand in the same position under the provisions of this Agreement with respect to the resulting or surviving corporation as Indemnitee would have with respect to such constituent corporation if its separate existence had continued. (d) "Covered Event" shall mean any event or occurrence related to the fact that Indemnitee is or was a director, officer, employee, agent or fiduciary of the Company, or any subsidiary of the Company, or is or was serving at the request of the Company as a director, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action or inaction on the part of Indemnitee while serving in such capacity. (e) "Expenses" shall mean any and all expenses (including attorneys' fees and all other costs, expenses and obligations incurred in connection with investigating, defending, -2- being a witness in or participating in (including on appeal), or preparing to defend, to be a witness in or to participate in, any action, suit, proceeding, alternative dispute resolution mechanism, hearing, inquiry or investigation), judgments, fines, penalties and amounts paid in settlement (if such settlement is approved in advance by the Company, which approval shall not be unreasonably withheld), actually and reasonably incurred, of any Claim and any federal, state, local or foreign taxes imposed on the Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement. (f) "Expense Advance" shall mean a payment to Indemnitee pursuant to Section 3 of Expenses in advance of the settlement of or final judgement in any action, suit, proceeding or alternative dispute resolution mechanism, hearing, inquiry or investigation which constitutes a Claim. (g) "Independent Legal Counsel" shall mean an attorney or firm of attorneys, selected in accordance with the provisions of Section 2(d) hereof, who shall not have otherwise performed services for the Company or Indemnitee within the last three years (other than with respect to matters concerning the rights of Indemnitee under this Agreement, or of other indemnitees under similar indemnity agreements). (h) References to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on Indemnitee with respect to an employee benefit plan; and references to "serving at the request of the Company" shall include any service as a director, officer, employee, agent or fiduciary of the Company which imposes duties on, or involves services by, such director, officer, employee, agent or fiduciary with respect to an employee benefit plan, its participants or its beneficiaries; and if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan, Indemnitee shall be deemed to have acted in a manner "not opposed to the best interests of the Company" as referred to in this Agreement. (i) "Reviewing Party" shall mean, subject to the provisions of Section 2(d), any person or body appointed by the Board of Directors in accordance with applicable law to review the Company's obligations hereunder and under applicable law, which may include a member or members of the Company's Board of Directors, Independent Legal Counsel or any other person or body not a party to the particular Claim for which Indemnitee is seeking indemnification. (j) "Section" refers to a section of this Agreement unless otherwise indicated. (k) "Voting Securities" shall mean any securities of the Company that vote generally in the election of directors. -3- 2. INDEMNIFICATION. (a) INDEMNIFICATION OF EXPENSES. Subject to the provisions of Section 2(b) below, the Company shall indemnify Indemnitee for Expenses to the fullest extent permitted by law if Indemnitee was or is or becomes a party to or witness or other participant in, or is threatened to be made a party to or witness or other participant in, any Claim (whether by reason of or arising in part out of a Covered Event), including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses. (b) REVIEW OF INDEMNIFICATION OBLIGATIONS. Notwithstanding the foregoing, in the event any Reviewing Party shall have determined (in a written opinion, in any case in which Independent Legal Counsel is the Reviewing Party) that Indemnitee is not entitled to be indemnified hereunder under applicable law, (i) the Company shall have no further obligation under Section 2(a) to make any payments to Indemnitee not made prior to such determination by such Reviewing Party, and (ii) the Company shall be entitled to be reimbursed by Indemnitee (who hereby agrees to reimburse the Company) for all Expenses theretofore paid in indemnifying Indemnitee; PROVIDED, HOWEVER, that if Indemnitee has commenced or thereafter commences legal proceedings in a court of competent jurisdiction to secure a determination that Indemnitee is entitled to be indemnified hereunder under applicable law, any determination made by any Reviewing Party that Indemnitee is not entitled to be indemnified hereunder under applicable law shall not be binding and Indemnitee shall not be required to reimburse the Company for any Expenses theretofore paid in indemnifying Indemnitee until a final judicial determination is made with respect thereto (as to which all rights of appeal therefrom have been exhausted or lapsed). Indemnitee's obligation to reimburse the Company for any Expenses shall be unsecured and no interest shall be charged thereon. (c) INDEMNITEE RIGHTS ON UNFAVORABLE DETERMINATION; BINDING EFFECT. If any Reviewing Party determines that Indemnitee substantively is not entitled to be indemnified hereunder in whole or in part under applicable law, Indemnitee shall have the right to commence litigation seeking an initial determination by the court or challenging any such determination by such Reviewing Party or any aspect thereof, including the legal or factual bases therefor, and, subject to the provisions of Section 15, the Company hereby consents to service of process and to appear in any such proceeding. Absent such litigation, any determination by any Reviewing Party shall be conclusive and binding on the Company and Indemnitee. (d) SELECTION OF REVIEWING PARTY; CHANGE IN CONTROL. If there has not been a Change in Control, any Reviewing Party shall be selected by the Board of Directors, and if there has been such a Change in Control (other than a Change in Control which has been approved by a majority of the Company's Board of Directors who were directors immediately prior to such Change in Control), any Reviewing Party with respect to all matters thereafter arising concerning the rights of Indemnitee to indemnification of Expenses under this Agreement or any other agreement or under the Company's Certificate of Incorporation or Bylaws as now or hereafter in -4- effect, or under any other applicable law, if desired by Indemnitee, shall be Independent Legal Counsel selected by Indemnitee and approved by the Company (which approval shall not be unreasonably withheld). Such counsel, among other things, shall render its written opinion to the Company and Indemnitee as to whether and to what extent Indemnitee would be entitled to be indemnified hereunder under applicable law and the Company agrees to abide by such opinion. The Company agrees to pay the reasonable fees of the Independent Legal Counsel referred to above and to indemnify fully such counsel against any and all expenses (including attorneys' fees), claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto. Notwithstanding any other provision of this Agreement, the Company shall not be required to pay Expenses of more than one Independent Legal Counsel in connection with all matters concerning a single Indemnitee, and such Independent Legal Counsel shall be the Independent Legal Counsel for any or all other Indemnitees unless (i) the Company otherwise determines or (ii) any Indemnitee shall provide a written statement setting forth in detail a reasonable objection to such Independent Legal Counsel representing other Indemnitees. (e) MANDATORY PAYMENT OF EXPENSES. Notwithstanding any other provision of this Agreement other than Section 10 hereof, to the extent that Indemnitee has been successful on the merits or otherwise, including, without limitation, the dismissal of an action without prejudice, in defense of any Claim, Indemnitee shall be indemnified against all Expenses incurred by Indemnitee in connection therewith. 3. EXPENSE ADVANCES. (a) OBLIGATION TO MAKE EXPENSE ADVANCES. Upon receipt of a written undertaking by or on behalf of the Indemnitee to repay such amounts if it shall ultimately be determined that the Indemnitee is not entitled to be indemnified therefor by the Company, the Company shall make Expense Advances to Indemnitee. (b) FORM OF UNDERTAKING. Any written undertaking by the Indemnitee to repay any Expense Advances hereunder shall be unsecured and no interest shall be charged thereon. (c) DETERMINATION OF REASONABLE EXPENSE ADVANCES. The parties agree that for the purposes of any Expense Advance for which Indemnitee has made written demand to the Company in accordance with this Agreement, all Expenses included in such Expense Advance that are certified by affidavit of Indemnitee's counsel as being reasonable shall be presumed conclusively to be reasonable. 4. PROCEDURES FOR INDEMNIFICATION AND EXPENSE ADVANCES. (a) TIMING OF PAYMENTS. All payments of Expenses (including without limitation Expense Advances) by the Company to the Indemnitee pursuant to this Agreement shall be made to the fullest extent permitted by law as soon as practicable after written demand by -5- Indemnitee therefor is presented to the Company, but in no event later than forty-five (45) business days after such written demand by Indemnitee is presented to the Company, except in the case of Expense Advances, which shall be made no later than twenty (20) business days after such written demand by Indemnitee is presented to the Company. (b) NOTICE/COOPERATION BY INDEMNITEE. Indemnitee shall, as a condition precedent to Indemnitee's right to be indemnified or Indemnitee's right to receive Expense Advances under this Agreement, give the Company notice in writing as soon as practicable of any Claim made against Indemnitee for which indemnification will or could be sought under this Agreement. Notice to the Company shall be directed to the Chief Executive Officer of the Company at the address shown on the signature page of this Agreement (or such other address as the Company shall designate in writing to Indemnitee). In addition, Indemnitee shall give the Company such information and cooperation as it may reasonably require and as shall be within Indemnitee's power. (c) NO PRESUMPTIONS; BURDEN OF PROOF. For purposes of this Agreement, the termination of any Claim by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of NOLO CONTENDERE, or its equivalent, shall not create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by this Agreement or applicable law. In addition, neither the failure of any Reviewing Party to have made a determination as to whether Indemnitee has met any particular standard of conduct or had any particular belief, nor an actual determination by any Reviewing Party that Indemnitee has not met such standard of conduct or did not have such belief, prior to the commencement of legal proceedings by Indemnitee to secure a judicial determination that Indemnitee should be indemnified under this Agreement or applicable law, shall be a defense to Indemnitee's claim or create a presumption that Indemnitee has not met any particular standard of conduct or did not have any particular belief. In connection with any determination by any Reviewing Party or otherwise as to whether the Indemnitee is entitled to be indemnified hereunder, the burden of proof shall be on the Company to establish that Indemnitee is not so entitled. (d) NOTICE TO INSURERS. If, at the time of the receipt by the Company of a notice of a Claim pursuant to Section 4(b) hereof, the Company has liability insurance in effect which may cover such Claim, the Company shall give prompt notice of the commencement of such Claim to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such Claim in accordance with the terms of such policies. (e) SELECTION OF COUNSEL. In the event the Company shall be obligated hereunder to provide indemnification for or make any Expense Advances with respect to the Expenses of any Claim, the Company, if appropriate, shall be entitled to assume the defense of -6- such Claim with counsel approved by Indemnitee (which approval shall not be unreasonably withheld) upon the delivery to Indemnitee of written notice of the Company's election to do so. After delivery of such notice, approval of such counsel by Indemnitee and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees or expenses of separate counsel subsequently employed by or on behalf of Indemnitee with respect to the same Claim; provided that, (i) Indemnitee shall have the right to employ Indemnitee's separate counsel in any such Claim at Indemnitee's expense and (ii) if (A) the employment of separate counsel by Indemnitee has been previously authorized by the Company, (B) Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Company and Indemnitee in the conduct of any such defense, or (C) the Company shall not continue to retain such counsel to defend such Claim, then the fees and expenses of Indemnitee's separate counsel shall be Expenses for which Indemnitee may receive indemnification or Expense Advances hereunder. 5. ADDITIONAL INDEMNIFICATION RIGHTS; NONEXCLUSIVITY. (a) SCOPE. The Company hereby agrees to indemnify the Indemnitee to the fullest extent permitted by law, notwithstanding that such indemnification is not specifically authorized by statute. In the event of any change after the date of this Agreement in any applicable law, statute or rule which expands the right of a Delaware corporation to indemnify a member of its board of directors or an officer, employee, agent or fiduciary, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits afforded by such change. In the event of any change in any applicable law, statute or rule which narrows the right of a Delaware corporation to indemnify a member of its board of directors or an officer, employee, agent or fiduciary, such change, to the extent not otherwise required by such law, statute or rule to be applied to this Agreement, shall have no effect on this Agreement or the parties' rights and obligations hereunder except as set forth in Section 10(a) hereof. (b) NONEXCLUSIVITY. The indemnification and the payment of Expense Advances provided by this Agreement shall be in addition to any rights to which Indemnitee may be entitled under the Company's Certificate of Incorporation, its Bylaws, any other agreement, any vote of stockholders or disinterested directors, the General Corporation Law of the State of Delaware, or otherwise. The indemnification and the payment of Expense Advances provided under this Agreement shall continue as to Indemnitee for any action taken or not taken while serving in an indemnified capacity even though subsequent thereto Indemnitee may have ceased to serve in such capacity. 6. NO DUPLICATION OF PAYMENTS. The Company shall not be liable under this Agreement to make any payment in connection with any Claim made against Indemnitee to the extent Indemnitee has otherwise actually received payment (under any insurance policy, provision of the Company's Certificate of Incorporation, Bylaws or otherwise) of the amounts otherwise payable hereunder. -7- 7. PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of Expenses incurred in connection with any Claim, but not, however, for all of the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion of such Expenses to which Indemnitee is entitled. 8. MUTUAL ACKNOWLEDGMENT. Both the Company and Indemnitee acknowledge that in certain instances, federal law or applicable public policy may prohibit the Company from indemnifying its directors, officers, employees, agents or fiduciaries under this Agreement or otherwise. Indemnitee understands and acknowledges that the Company has undertaken or may be required in the future to undertake with the Securities and Exchange Commission to submit the question of indemnification to a court in certain circumstances for a determination of the Company's right under public policy to indemnify Indemnitee. 9. LIABILITY INSURANCE. To the extent the Company maintains liability insurance applicable to directors, officers, employees, agents or fiduciaries, Indemnitee shall be covered by such policies in such a manner as to provide Indemnitee the same rights and benefits as are provided to the most favorably insured of the Company's directors, if Indemnitee is a director; or of the Company's officers, if Indemnitee is not a director of the Company but is an officer; or of the Company's key employees, agents or fiduciaries, if Indemnitee is not an officer or director but is a key employee, agent or fiduciary. 10. EXCEPTIONS. Notwithstanding any other provision of this Agreement, the Company shall not be obligated pursuant to the terms of this Agreement: (a) EXCLUDED ACTION OR OMISSIONS. To indemnify Indemnitee for Expenses resulting from acts, omissions or transactions for which Indemnitee is prohibited from receiving indemnification under this Agreement or applicable law; PROVIDED, HOWEVER, that notwithstanding any limitation set forth in this Section 10(a) regarding the Company's obligation to provide indemnification, Indemnitee shall be entitled under Section 3 to receive Expense Advances hereunder with respect to any such Claim unless and until a court having jurisdiction over the Claim shall have made a final judicial determination (as to which all rights of appeal therefrom have been exhausted or lapsed) that Indemnitee has engaged in acts, omissions or transactions for which Indemnitee is prohibited from receiving indemnification under this Agreement or applicable law. (b) CLAIMS INITIATED BY INDEMNITEE. To indemnify or make Expense Advances to Indemnitee with respect to Claims initiated or brought voluntarily by Indemnitee and not by way of defense, counterclaim or crossclaim, except (i) with respect to actions or proceedings brought to establish or enforce a right to indemnification under this Agreement or any other agreement or insurance policy or under the Company's Certificate of Incorporation or Bylaws now or hereafter in effect relating to Claims for Covered Events, (ii) in specific cases if the Board of -8- Directors has approved the initiation or bringing of such Claim, or (iii) as otherwise required under Section 145 of the Delaware General Corporation Law, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification or insurance recovery, as the case may be. (c) LACK OF GOOD FAITH. To indemnify Indemnitee for any Expenses incurred by the Indemnitee with respect to any action instituted (i) by Indemnitee to enforce or interpret this Agreement, if a court having jurisdiction over such action determines as provided in Section 13 that each of the material assertions made by the Indemnitee as a basis for such action was not made in good faith or was frivolous, or (ii) by or in the name of the Company to enforce or interpret this Agreement, if a court having jurisdiction over such action determines as provided in Section 13 that each of the material defenses asserted by Indemnitee in such action was made in bad faith or was frivolous. (d) CLAIMS UNDER SECTION 16(B). To indemnify Indemnitee for expenses and the payment of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 16(b) of the Securities Exchange Act of 1934, as amended, or any similar successor statute; PROVIDED, HOWEVER, that notwithstanding any limitation set forth in this Section 10(d) regarding the Company's obligation to provide indemnification, Indemnitee shall be entitled under Section 3 to receive Expense Advances hereunder with respect to any such Claim unless and until a court having jurisdiction over the Claim shall have made a final judicial determination (as to which all rights of appeal therefrom have been exhausted or lapsed) that Indemnitee has violated said statute. 11. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall constitute an original. 12. BINDING EFFECT; SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors, assigns (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), spouses, heirs and personal and legal representatives. The Company shall require and cause any successor (whether direct or indirect, and whether by purchase, merger, consolidation or otherwise) to all, substantially all, or a substantial part, of the business or assets of the Company, by written agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. This Agreement shall continue in effect regardless of whether Indemnitee continues to serve as a director, officer, employee, agent or fiduciary (as applicable) of the Company or of any other enterprise at the Company's request. 13. EXPENSES INCURRED IN ACTION RELATING TO ENFORCEMENT OR INTERPRETATION. In the event that any action is instituted by Indemnitee under this Agreement or under any liability -9- insurance policies maintained by the Company to enforce or interpret any of the terms hereof or thereof, Indemnitee shall be entitled to be indemnified for all Expenses incurred by Indemnitee with respect to such action (including without limitation attorneys' fees), regardless of whether Indemnitee is ultimately successful in such action, unless as a part of such action a court having jurisdiction over such action makes a final judicial determination (as to which all rights of appeal therefrom have been exhausted or lapsed) that each of the material assertions made by Indemnitee as a basis for such action was not made in good faith or was frivolous; provided, however, that until such final judicial determination is made, Indemnitee shall be entitled under Section 3 to receive payment of Expense Advances hereunder with respect to such action. In the event of an action instituted by or in the name of the Company under this Agreement to enforce or interpret any of the terms of this Agreement, Indemnitee shall be entitled to be indemnified for all Expenses incurred by Indemnitee in defense of such action (including without limitation costs and expenses incurred with respect to Indemnitee's counterclaims and cross-claims made in such action), unless as a part of such action a court having jurisdiction over such action makes a final judicial determination (as to which all rights of appeal therefrom have been exhausted or lapsed) that each of the material defenses asserted by Indemnitee in such action was made in bad faith or was frivolous; provided, however, that until such final judicial determination is made, Indemnitee shall be entitled under Section 3 to receive payment of Expense Advances hereunder with respect to such action. 14. NOTICE. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed duly given (i) if delivered by hand and signed for by the party addressed, on the date of such delivery, or (ii) if mailed by domestic certified or registered mail with postage prepaid, on the third business day after the date postmarked. Addresses for notice to either party are as shown on the signature page of this Agreement, or as subsequently modified by written notice. 15. CONSENT TO JURISDICTION. The Company and Indemnitee each hereby irrevocably consent to the jurisdiction of the courts of the State of Delaware for all purposes in connection with any action or proceeding which arises out of or relates to this Agreement and agree that any action instituted under this Agreement shall be commenced, prosecuted and continued only in the Court of Chancery of the State of Delaware in and for New Castle County, which shall be the exclusive and only proper forum for adjudicating such a claim. 16. SEVERABILITY. The provisions of this Agreement shall be severable in the event that any of the provisions hereof (including any provision within a single section, paragraph or sentence) are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, and the remaining provisions shall remain enforceable to the fullest extent permitted by law. Furthermore, to the fullest extent possible, the provisions of this Agreement (including without limitation each portion of this Agreement containing any provision held to be invalid, void or otherwise unenforceable, that is not itself invalid, void or unenforceable) shall be -10- construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable. 17. CHOICE OF LAW. This Agreement, and all rights, remedies, liabilities, powers and duties of the parties to this Agreement, shall be governed by and construed in accordance with the laws of the State of Delaware without regard to principles of conflicts of laws. 18. SUBROGATION. In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all documents required and shall do all acts that may be necessary to secure such rights and to enable the Company effectively to bring suit to enforce such rights. 19. AMENDMENT AND TERMINATION. No amendment, modification, termination or cancellation of this Agreement shall be effective unless it is in writing signed by both the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed to be or shall constitute a waiver of any other provisions hereof (whether or not similar), nor shall such waiver constitute a continuing waiver. 20. INTEGRATION AND ENTIRE AGREEMENT. This Agreement sets forth the entire understanding between the parties hereto and supersedes and merges all previous written and oral negotiations, commitments, understandings and agreements relating to the subject matter hereof between the parties hereto. 21. NO CONSTRUCTION AS EMPLOYMENT AGREEMENT. Nothing contained in this Agreement shall be construed as giving Indemnitee any right to be retained in the employ of the Company or any of its subsidiaries or affiliated entities. IN WITNESS WHEREOF, the parties hereto have executed this Indemnification Agreement as of the date first above written. HEALTHEON CORPORATION By: ------------------------------ Name: ---------------------------- Title: --------------------------- Address: AGREED TO AND ACCEPTED ------------------------------ -11- EX-10.2 4 EXHIBIT 10.2 EXHIBIT 10.2 HEALTHEON CORPORATION 1996 STOCK PLAN AS AMENDED ON MARCH 1, 1998 AND JULY 8, 1998 1. PURPOSES OF THE PLAN. The purposes of this Stock Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to Employees and Consultants of the Company and its Subsidiaries and to promote the success of the Company's business. Options granted under the Plan may be Incentive Stock Options or Nonstatutory Stock Options, as determined by the Administrator at the time of grant of an Option and subject to the applicable provisions of Section 422 of the Code and the regulations promulgated thereunder. Stock Purchase Rights may also be granted under the Plan. 2. DEFINITIONS. As used herein, the following definitions shall apply: (a) "ADMINISTRATOR" means the Board or any of its Committees appointed pursuant to Section 4 of the Plan. (b) "BOARD" means the Board of Directors of the Company. (c) "CODE" means the Internal Revenue Code of 1986, as amended. (d) "COMMITTEE" means a Committee appointed by the Board of Directors in accordance with Section 4 of the Plan. (e) "COMMON STOCK" means the Common Stock of the Company. (f) "COMPANY" means Healtheon Corporation, a Delaware corporation. (g) "CONSULTANT" means any person who is engaged by the Company or any Parent or Subsidiary to render consulting or advisory services and is compensated for such services, and any Director of the Company whether compensated for such services or not. If the Company registers any class of any equity security pursuant to the Exchange Act, the term Consultant shall thereafter not include Directors who are not compensated for their services or are paid only a Director's fee by the Company. (h) "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT" means that the employment or consulting relationship with the Company, any Parent or Subsidiary is not interrupted or terminated. Continuous Status as an Employee or Consultant shall not be considered interrupted in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company, its Parent, any Subsidiary, or any successor. A leave of absence approved by the Company shall include sick leave, military leave, or any other personal leave approved by an authorized representative of the Company. For purposes of Incentive Stock Options, no such leave may exceed 90 days, unless reemployment upon expiration of such leave is guaranteed by statute or contract, including Company policies. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, on the 91st day of such leave any Incentive Stock Option held by the Optionee shall cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory Stock Option. (i) "DIRECTOR" means a member of the Board of Directors of the Company. (j) "EMPLOYEE" means any person, including Officers and Directors, employed by the Company or any Parent or Subsidiary of the Company. The payment of a Director's fee by the Company shall not be sufficient to constitute "employment" by the Company. (k) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. (l) "FAIR MARKET VALUE" means, as of any date, the value of Common Stock determined as follows: (i) If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq National Market of the National Association of Securities Dealers, Inc. Automated Quotation ("NASDAQ") System, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system for the last market trading day prior to the time of determination and reported in The Wall Street Journal or such other source as the Administrator deems reliable; (ii) If the Common Stock is quoted on the NASDAQ System (but not on the Nasdaq National Market thereof) or regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value shall be the mean between the high bid and low asked prices for the Common Stock on the last market trading day prior to the day of determination; or (iii) In the absence of an established market for the Common Stock, the Fair Market Value thereof shall be determined in good faith by the Administrator. (m) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code. (n) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify as an Incentive Stock Option. -2- (o) "OFFICER" means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder. (p) "OPTION" means a stock option granted pursuant to the Plan. (q) "OPTIONED STOCK" means the Common Stock subject to an Option or a Stock Purchase Right. (r) "OPTIONEE" means an Employee or Consultant who receives an Option or Stock Purchase Right. (s) "PARENT" means a "parent corporation," whether now or hereafter existing, as defined in Section 424(e) of the Code. (t) "PLAN" means this 1996 Stock Plan. (u) "RESTRICTED STOCK" means shares of Common Stock acquired pursuant to a grant of a Stock Purchase Right under Section 11 below. (v) "SECTION 16(b)" means Section 16(b) of the Securities Exchange Act of 1934, as amended. (w) "SHARE" means a share of the Common Stock, as adjusted in accordance with Section 12 below. (x) "STOCK PURCHASE RIGHT" means a right to purchase Common Stock pursuant to Section 11 below. (y) "SUBSIDIARY" means a "subsidiary corporation," whether now or hereafter existing, as defined in Section 424(f) of the Code. 3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 12 of the Plan, the maximum aggregate number of Shares which may be Optioned Stock and sold under the Plan is 15,000,000 Shares. The Shares may be authorized but unissued, or reacquired Common Stock. If an Option or Stock Purchase Right expires or becomes unexercisable without having been exercised in full, or is surrendered pursuant to an option exchange program, the unpurchased Shares which were subject thereto shall become available for future grant or sale under the Plan (unless the Plan has terminated). However, Shares that have actually been issued under the Plan, upon exercise of either an Option or Stock Purchase Right, shall not be returned to the Plan and shall not become available for future distribution under the Plan, except that if either (i) Shares of Restricted Stock or (ii) Shares issued upon exercise of unvested Options and subject to a repurchase right at cost, are repurchased by the Company at their original purchase -3- price, and the original purchaser of such Shares under clause (i) or (ii) did not receive any benefits of ownership of such Shares, such Shares shall become available for future grant under the Plan. For purposes of the preceding sentence, voting rights shall not be considered a benefit of Share ownership. 4. ADMINISTRATION OF THE PLAN. (a) INITIAL PLAN PROCEDURE. Prior to the date, if any, upon which the Company becomes subject to the Exchange Act, the Plan shall be administered by the Board or a Committee appointed by the Board. (b) PLAN PROCEDURE AFTER THE DATE, IF ANY, UPON WHICH THE COMPANY BECOMES SUBJECT TO THE EXCHANGE ACT. (i) MULTIPLE ADMINISTRATIVE BODIES. If permitted by Rule 16b-3, the Plan may be administered by different bodies with respect to Directors, Officers and Employees who are neither Directors nor Officers. (ii) ADMINISTRATION WITH RESPECT TO DIRECTORS AND OFFICERS. With respect to grants of Options and Stock Purchase Rights to Employees who are also Officers or Directors of the Company, the Plan shall be administered by (A) the Board if the Board may administer the Plan in compliance with the rules under Rule 16b-3 promulgated under the Exchange Act or any successor thereto ("Rule 16b-3") relating to the disinterested administration of employee benefit plans under which Section 16(b) exempt discretionary grants and awards of equity securities are to be made, or (B) a Committee designated by the Board to administer the Plan, which Committee shall be constituted to comply with the rules under Rule 16b-3 relating to the disinterested administration of employee benefit plans under which Section 16(b) exempt discretionary grants and awards of equity securities are to be made. Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board. From time to time the Board may increase the size of the Committee and appoint additional members thereof, remove members (with or without cause) and appoint new members in substitution therefor, fill vacancies, however caused, and remove all members of the Committee and thereafter directly administer the Plan, all to the extent permitted by the rules under Rule 16b-3 relating to the disinterested administration of employee benefit plans under which Section 16(b) exempt discretionary grants and awards of equity securities are to be made. (iii) ADMINISTRATION WITH RESPECT TO OTHER EMPLOYEES AND CONSULTANTS. With respect to grants of Options and Stock Purchase Rights to Employees or Consultants who are neither Directors nor Officers of the Company, the Plan shall be administered by (A) the Board or (B) a Committee designated by the Board, which committee shall be constituted in such a manner as to satisfy the legal requirements relating to the administration of incentive stock option plans, if any, of Delaware corporate and securities laws, of the Code, and of any applicable stock exchange (the "Applicable Laws"). Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board. From time to time the Board may -4- increase the size of the Committee and appoint additional members thereof, remove members (with or without cause) and appoint new members in substitution therefor, fill vacancies, however caused, and remove all members of the Committee and thereafter directly administer the Plan, all to the extent permitted by the Applicable Laws. (c) POWERS OF THE ADMINISTRATOR. Subject to the provisions of the Plan and, in the case of a Committee, the specific duties delegated by the Board to such Committee, and subject to the approval of any relevant authorities, including the approval, if required, of any stock exchange upon which the Common Stock is listed, the Administrator shall have the authority in its discretion: (i) to determine the Fair Market Value of the Common Stock, in accordance with Section 2(l) of the Plan; (ii) to select the Consultants and Employees to whom Options and Stock Purchase Rights may from time to time be granted hereunder; (iii) to determine whether and to what extent Options and Stock Purchase Rights or any combination thereof are granted hereunder; (iv) to determine the number of Shares to be covered by each such award granted hereunder; (v) to approve forms of agreement for use under the Plan; (vi) to determine the terms and conditions of any award granted hereunder; (vii) to determine whether and under what circumstances an Option may be settled in cash under subsection 9(f) instead of Common Stock; (viii) to reduce the exercise price of any Option to the then current Fair Market Value if the Fair Market Value of the Common Stock covered by such Option has declined since the date the Option was granted; and (ix) to construe and interpret the terms of the Plan and awards granted pursuant to the Plan. (d) EFFECT OF ADMINISTRATOR'S DECISION. All decisions, determinations and interpretations of the Administrator shall be final and binding on all Optionees and any other holders of any Options or Stock Purchase Rights. 5. ELIGIBILITY. -5- (a) Nonstatutory Stock Options and Stock Purchase Rights may be granted to Employees and Consultants. Incentive Stock Options may be granted only to Employees. An Employee or Consultant who has been granted an Option or Stock Purchase Right may, if otherwise eligible, be granted additional Options or Stock Purchase Rights. (b) Each Option shall be designated in the written option agreement as either an Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the Optionee during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such Options shall be treated as Nonstatutory Stock Options. For purposes of this Section 5(b), Incentive Stock Options shall be taken into account in the order in which they were granted. The Fair Market Value of the Shares shall be determined as of the time the Option with respect to such Shares is granted. (c) Neither the Plan nor any Option or Stock Purchase Right shall confer upon any Optionee any right with respect to continuation of his or her employment or consulting relationship with the Company, nor shall it interfere in any way with his or her right or the Company's right to terminate his or her employment or consulting relationship at any time, with or without cause. (d) Upon the Company or a successor corporation issuing any class of common equity securities required to be registered under Section 12 of the Exchange Act or upon the Plan being assumed by a corporation having a class of common equity securities required to be registered under Section 12 of the Exchange Act, the following limitations shall apply to grants of Options and Stock Purchase Rights to Employees: (i) No Employee shall be granted, in any fiscal year of the Company, Options and Stock Purchase Rights to purchase more than 500,000 Shares. (ii) In connection with his or her initial employment, an Employee may be granted Options and Stock Purchase Rights to purchase up to an additional 500,000 Shares which shall not count against the limit set forth in subsection (i) above. (iii) The foregoing limitations shall be adjusted proportionately in connection with any change in the Company's capitalization as described in Section 12. (iv) If an Option or Stock Purchase Right is cancelled in the same fiscal year of the Company in which it was granted (other than in connection with a transaction described in Section 12), the cancelled Option or Stock Purchase Right shall be counted against the limit set forth in subsection (i) above. For this purpose, if the exercise price of an Option or Stock Purchase Right is reduced, such reduction will be treated as a cancellation of the Option or Stock Purchase Right and the grant of a new Option or Stock Purchase Right. -6- 6. TERM OF PLAN. The Plan shall become effective upon the earlier to occur of its adoption by the Board of Directors or its approval by the shareholders of the Company, as described in Section 18 of the Plan. It shall continue in effect for a term of ten (10) years unless sooner terminated under Section 14 of the Plan. 7. TERM OF OPTION. The term of each Option shall be the term stated in the Option Agreement; provided, however, that the term shall be no more than ten (10) years from the date of grant thereof. In the case of an Incentive Stock Option granted to an Optionee who, at the time the Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Option shall be five (5) years from the date of grant thereof or such shorter term as may be provided in the Option Agreement. 8. OPTION EXERCISE PRICE AND CONSIDERATION. (a) The per share exercise price for the Shares to be issued upon exercise of an Option shall be such price as is determined by the Administrator, but shall be subject to the following: (i) In the case of an Incentive Stock Option (A) granted to an Employee who, at the time of grant of such Option, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than 110% of the Fair Market Value per Share on the date of grant. (B) granted to any other Employee, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant. (ii) In the case of a Nonstatutory Stock Option (A) granted to a person who, at the time of grant of such Option, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than 110% of the Fair Market Value per Share on the date of the grant. (B) granted to any other person, the per Share exercise price shall be no less than 85% of the Fair Market Value per Share on the date of grant. -7- (b) The consideration to be paid for the Shares to be issued upon exercise of an Option, including the method of payment, shall be determined by the Administrator (and, in the case of an Incentive Stock Option, shall be determined at the time of grant). Such consideration may consist of (1) cash, (2) check, (3) promissory note, (4) other Shares which (x) in the case of Shares acquired upon exercise of an Option, have been owned by the Optionee for more than six months on the date of surrender, and (y) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which such Option shall be exercised, (5) delivery of a properly executed exercise notice together with such other documentation as the Administrator and a broker, if applicable, shall require to effect an exercise of the Option and delivery to the Company of the sale or loan proceeds required to pay the exercise price, or (6) any combination of the foregoing methods of payment. In making its determination as to the type of consideration to accept, the Administrator shall consider if acceptance of such consideration may be reasonably expected to benefit the Company. 9. EXERCISE OF OPTION. (a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option granted hereunder shall be exercisable at such times and under such conditions as determined by the Administrator, including performance criteria with respect to the Company and/or the Optionee, and as shall be permissible under the terms of the Plan, but in no case at a rate of less than 20% per year over five (5) years from the date the Option is granted. An Option may not be exercised for a fraction of a Share. An Option shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with the terms of the Option by the person entitled to exercise the Option and full payment for the Shares with respect to which the Option is exercised has been received by the Company. Full payment may, as authorized by the Administrator, consist of any consideration and method of payment allowable under Section 8(b) hereof. Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the stock certificate evidencing such Shares, no right to vote, receive dividends or any other rights as a shareholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such stock certificate promptly upon exercise of the Option. No adjustment shall be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued, except as provided in Section 12 hereof. Exercise of an Option in any manner shall result in a decrease in the number of Shares which thereafter may be available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised. -8- (b) TERMINATION OF EMPLOYMENT OR CONSULTING RELATIONSHIP. In the event of termination of an Optionee's Continuous Status as an Employee or Consultant (but not in the event of an Optionee's change of status from Employee to Consultant (in which case an Employee's Incentive Stock Option shall automatically convert to a Nonstatutory Stock Option on the date three (3) months and one day following such change of status) or from Consultant to Employee), such Optionee may, but only within such period of time as is determined by the Administrator, of at least thirty (30) days, with such determination in the case of an Incentive Stock Option not exceeding three (3) months after the date of such termination (but in no event later than the expiration date of the term of such Option as set forth in the Option Agreement), exercise his or her Option to the extent that the Optionee was entitled to exercise it at the date of such termination. To the extent that the Optionee was not entitled to exercise the Option at the date of such termination, or if the Optionee does not exercise such Option to the extent so entitled within the time specified herein, the Option shall terminate. (c) DISABILITY OF OPTIONEE. In the event of termination of an Optionee's Continuous Status as an Employee or Consultant as a result of his or her disability, the Optionee may, but only within twelve (12) months from the date of such termination (and in no event later than the expiration date of the term of such Option as set forth in the Option Agreement), exercise the Option to the extent otherwise entitled to exercise it at the date of such termination. If such disability is not a "disability" as such term is defined in Section 22(e)(3) of the Code, in the case of an Incentive Stock Option such Incentive Stock Option shall automatically cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory Stock Option on the day three months and one day following such termination. To the extent that the Optionee was not entitled to exercise the Option at the date of termination, or if the Optionee does not exercise such Option to the extent so entitled within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan. (d) DEATH OF OPTIONEE. In the event of the death of an Optionee, the Option may be exercised at any time within twelve (12) months following the date of death (but in no event later than the expiration of the term of such Option as set forth in the Notice of Grant) by the Optionee's estate or by a person who acquired the right to exercise the Option by bequest or inheritance, but only to the extent that the Optionee was entitled to exercise the Option on the date of death, or such greater extent as the Administrator may determine. If, at the time of death, the Optionee was not entitled to exercise his or her entire Option and the Administrator does not determine a greater extent to which such Option may be exercised, the Shares covered by the unexercisable portion of the Option shall immediately revert to the Plan. If, after the Optionee's death, the Optionee's estate or a person who acquires the right to exercise the Option by bequest or inheritance does not exercise the Option within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan. (e) RULE 16b-3. Options granted to persons subject to Section 16(b) of the Exchange Act must comply with Rule 16b-3 and shall contain such additional conditions or -9- restrictions as may be required thereunder to qualify for the maximum exemption from Section 16 of the Exchange Act with respect to Plan transactions. (f) BUYOUT PROVISIONS. The Administrator may at any time offer to buy out for a payment in cash or Shares, an Option previously granted, based on such terms and conditions as the Administrator shall establish and communicate to the Optionee at the time that such offer is made. 10. NON-TRANSFERABILITY OF OPTIONS AND STOCK PURCHASE RIGHTS. Options and Stock Purchase Rights may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Optionee, only by the Optionee. 11. STOCK PURCHASE RIGHTS. (a) RIGHTS TO PURCHASE. Stock Purchase Rights may be issued either alone, in addition to, or in tandem with other awards granted under the Plan and/or cash awards made outside of the Plan. After the Administrator determines that it will offer Stock Purchase Rights under the Plan, it shall advise the offeree in writing of the terms, conditions and restrictions related to the offer, including the number of Shares that such person shall be entitled to purchase, the price to be paid, and the time within which such person must accept such offer, which shall in no event exceed thirty (30) days from the date upon which the Administrator makes the determination to grant the Stock Purchase Right. The offer shall be accepted by execution of a Restricted Stock purchase agreement in the form determined by the Administrator. Shares purchased pursuant to the grant of a Stock Purchase Right shall be referred to herein as "Restricted Stock." (b) REPURCHASE OPTION. Unless the Administrator determines otherwise, the Restricted Stock purchase agreement shall grant the Company a repurchase option exercisable upon the voluntary or involuntary termination of the purchaser's employment with the Company for any reason (including death or disability). The purchase price for Shares repurchased pursuant to the Restricted Stock purchase agreement shall be the original price paid by the purchaser and may be paid by cancellation of any indebtedness of the purchaser to the Company. The repurchase option shall lapse at such rate as the Administrator may determine, but in no case at a rate of less than 20% per year over five years from the date of purchase. (c) OTHER PROVISIONS. The Restricted Stock purchase agreement shall contain such other terms, provisions and conditions not inconsistent with the Plan as may be determined by the Administrator in its sole discretion. In addition, the provisions of Restricted Stock purchase agreements need not be the same with respect to each purchaser. (d) RIGHTS AS A SHAREHOLDER. Once the Stock Purchase Right is exercised, the purchaser shall have rights equivalent to those of a shareholder and shall be a shareholder when -10- his or her purchase is entered upon the records of the duly authorized transfer agent of the Company. No adjustment shall be made for a dividend or other right for which the record date is prior to the date the Stock Purchase Right is exercised, except as provided in Section 12 of the Plan. 12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER. (a) CHANGES IN CAPITALIZATION. Subject to any required action by the shareholders of the Company, the number of shares of Common Stock covered by each outstanding Option or Stock Purchase Right, and the number of shares of Common Stock which have been authorized for issuance under the Plan but as to which no Options or Stock Purchase Rights have yet been granted or which have been returned to the Plan upon cancellation or expiration of an Option or Stock Purchase Right, as well as the price per share of Common Stock covered by each such outstanding Option or Stock Purchase Right, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company. The conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration." Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an Option or Stock Purchase Right. (b) DISSOLUTION OR LIQUIDATION. In the event of the proposed dissolution or liquidation of the Company, the Administrator shall notify the Optionee at least fifteen (15) days prior to such proposed action. To the extent it has not been previously exercised, the Option or Stock Purchase Right shall terminate immediately prior to the consummation of such proposed action. (c) MERGER. In the event of a merger of the Company with or into another corporation, each outstanding Option or Stock Purchase Right may be assumed or an equivalent option or right may be substituted by such successor corporation or a parent or subsidiary of such successor corporation. If, in such event, an Option or Stock Purchase Right is not assumed or substituted, the Option or Stock Purchase Right shall terminate as of the date of the closing of the merger. For the purposes of this paragraph, the Option or Stock Purchase Right shall be considered assumed if, following the merger, the Option or Stock Purchase Right confers the right to purchase or receive, for each Share of Optioned Stock subject to the Option or Stock Purchase Right immediately prior to the merger, the consideration (whether stock, cash, or other securities or property) received in the merger by holders of Common Stock for each Share held on the effective date of the transaction (and if the holders are offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares). If such -11- consideration received in the merger is not solely common stock of the successor corporation or its Parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of the Option or Stock Purchase Right, for each Share of Optioned Stock subject to the Option or Stock Purchase Right, to be solely common stock of the successor corporation or its Parent equal in fair market value to the per share consideration received by holders of Common Stock in the merger. 13. TIME OF GRANTING OPTIONS AND STOCK PURCHASE RIGHTS. The date of grant of an Option or Stock Purchase Right shall, for all purposes, be the date on which the Administrator makes the determination granting such Option or Stock Purchase Right, or such other date as is determined by the Administrator. Notice of the determination shall be given to each Employee or Consultant to whom an Option or Stock Purchase Right is so granted within a reasonable time after the date of such grant. 14. AMENDMENT AND TERMINATION OF THE PLAN. (a) AMENDMENT AND TERMINATION. The Board may at any time amend, alter, suspend or discontinue the Plan, but no amendment, alteration, suspension or discontinuation shall be made which would impair the rights of any Optionee under any grant theretofore made, without his or her consent. In addition, to the extent necessary and desirable to comply with Rule 16b-3 under the Exchange Act or with Section 422 of the Code (or any other applicable law or regulation, including the requirements of the NASD or an established stock exchange), the Company shall obtain shareholder approval of any Plan amendment in such a manner and to such a degree as required. (b) EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or termination of the Plan shall not affect Options or Stock Purchase Rights already granted, and such Options and Stock Purchase Rights shall remain in full force and effect as if this Plan had not been amended or terminated, unless mutually agreed otherwise between the Optionee and the Administrator, which agreement must be in writing and signed by the Optionee and the Company. 15. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued pursuant to the exercise of an Option or Stock Purchase Right unless the exercise of such Option or Stock Purchase Right and the issuance and delivery of such Shares pursuant thereto shall comply with all relevant provisions of law, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the Shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance. As a condition to the exercise of an Option or Stock Purchase Right, the Company may require the person exercising such Option or Stock Purchase Right to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the -12- Company, such a representation is required by any of the aforementioned relevant provisions of law. 16. RESERVATION OF SHARES. The Company, during the term of this Plan, shall at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained. 17. AGREEMENTS. Options and Stock Purchase Rights shall be evidenced by written agreements in such form as the Administrator shall approve from time to time. 18. SHAREHOLDER APPROVAL. Continuance of the Plan shall be subject to approval by the shareholders of the Company within twelve (12) months before or after the date the Plan is adopted. Such shareholder approval shall be obtained in the degree and manner required under applicable state and federal law and the rules of any stock exchange upon which the Common Stock is listed. 19. INFORMATION TO OPTIONEES AND PURCHASERS. The Company shall provide to each Optionee and to each individual who acquires Shares pursuant to the Plan, not less frequently than annually during the period such Optionee or purchaser has one or more Options or Stock Purchase Rights outstanding, and, in the case of an individual who acquires Shares pursuant to the Plan, during the period such individual owns such Shares, copies of annual financial statements. The Company shall not be required to provide such statements to key employees whose duties in connection with the Company assure their access to equivalent information. -13- HEALTHEON CORPORATION 1996 STOCK PLAN STOCK OPTION AGREEMENT Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Option Agreement. I. NOTICE OF STOCK OPTION GRANT ---------------------------- ____________________________ ____ You have been granted an option to purchase Common Stock of the Company, subject to the terms and conditions of the Plan and this Option Agreement, as follows: Grant Number Date of Grant Vesting Commencement Date Exercise Price per Share $ Total Number of Shares Granted Total Exercise Price $ Type of Option: X Incentive Stock Option --- --- Nonstatutory Stock Option Term/Expiration Date: VESTING SCHEDULE: You may exercise this Option, in whole or in part, according to the following vesting schedule: 25% of the Shares subject to the Option shall vest twelve months after the Vesting Commencement Date, and 1/48th of the Shares subject to the Option shall vest each month thereafter. TERMINATION PERIOD: You may exercise this Option for three (3) months after your employment or consulting relationship with the Company terminates, or for such longer period upon your death or disability as provided in the Plan. If your status changes from Employee to Consultant or Consultant to Employee, this Option Agreement shall remain in effect. In no case may you exercise this Option after the Term/Expiration Date as provided above. II. AGREEMENT 1. GRANT OF OPTION. Healtheon Corporation, a Delaware corporation (the "Company"), hereby grants to the Optionee named in the Notice of Grant (the "Optionee"), an option (the "Option") to purchase the total number of shares of Common Stock (the "Shares") set forth in the Notice of Grant, at the exercise price per share set forth in the Notice of Grant (the "Exercise Price") subject to the terms, definitions and provisions of the 1996 Stock Plan (the "Plan") adopted by the Company, which is incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Option Agreement. If designated in the Notice of Grant as an Incentive Stock Option ("ISO"), this Option is intended to qualify as an Incentive Stock Option as defined in Section 422 of the Code. Nevertheless, to the extent that it exceeds the $100,000 rule of Code Section 422(d), this Option shall be treated as a Nonstatutory Stock Option ("NSO"). 2. EXERCISE OF OPTION. (a) RIGHT TO EXERCISE. This Option shall be exercisable during its term in accordance with the Vesting Schedule set out in the Notice of Grant and with the applicable provisions of the Plan and this Option Agreement. In the event of Optionee's death, disability or other termination of the employment or consulting relationship, this Option shall be exercisable in accordance with the applicable provisions of the Plan and this Option Agreement. (b) METHOD OF EXERCISE. This Option shall be exercisable by written notice (in the form attached as EXHIBIT A) which shall state the election to exercise the Option, the number of Shares in respect of which the Option is being exercised, and such other representations and agreements as to the holder's investment intent with respect to such shares of Common Stock as may be required by the Company pursuant to the provisions of the Plan. Such written notice shall be signed by the Optionee and shall be delivered in person or by certified mail to the Secretary of the Company. The written notice shall be accompanied by payment of the Exercise Price. This Option shall be deemed to be exercised upon receipt by the Company of such written notice accompanied by the Exercise Price. No Shares will be issued pursuant to the exercise of an Option unless such issuance and such exercise shall comply with all relevant provisions of law and the requirements of any stock exchange upon which the Shares may then be listed. Assuming such compliance, for income tax purposes the Shares shall be considered transferred to the Optionee on the date on which the Option is exercised with respect to such Shares. 3. OPTIONEE'S REPRESENTATIONS. In the event the Shares purchasable pursuant to the exercise of this Option have not been registered under the Securities Act of 1933, as amended, at the time this Option is exercised, Optionee shall, if required by the Company, concurrently with the exercise of all or any portion of this Option, deliver to the Company his or her Investment Repre-sentation Statement in the form attached hereto as EXHIBIT B, and shall read the applicable rules of the Commissioner of Corporations attached to such Investment Representation Statement. 4. METHOD OF PAYMENT. Payment of the Exercise Price shall be by any of the following, or a combination thereof, at the election of the Optionee: (a) cash; (b) check; (c) if, at the time of exercise, the Company has registered its Common Stock under the Exchange Act, by surrender of other shares of Common Stock of the Company which (A) in the case of Shares acquired pursuant to the exercise of a Company option, have been owned by the Optionee for more than six (6) months on the date of surrender, and (B) have a Fair Market Value on the date of surrender equal to the Exercise Price of the Shares as to which the Option is being exercised; or (d) delivery of a properly executed exercise notice together with such other documentation as the Administrator and the broker, if applicable, shall require to effect an exercise of the Option and delivery to the Company of the sale or loan proceeds required to pay the Exercise Price. 5. RESTRICTIONS ON EXERCISE. This Option may not be exercised until such time as the Plan has been approved by the stockholders of the Company, or if the issuance of such Shares upon such exercise or the method of payment of consideration for such shares would constitute a violation of any applicable federal or state securities or other law or regulation, including any rule under Part 207 of Title 12 of the Code of Federal Regulations ("Regulation G") as promulgated by the Federal Reserve Board. 6. TERMINATION OF RELATIONSHIP. In the event an Optionee's Continuous Status as an Employee or Consultant terminates, Optionee may, to the extent otherwise so entitled at the date of such termination (the "Termination Date"), exercise this Option during the Termination Period set out in the Notice of Grant. To the extent that Optionee was not entitled to exercise this Option at the -3- date of such termination, or if Optionee does not exercise this Option within the time specified herein, the Option shall terminate. 7. DISABILITY OF OPTIONEE. Notwithstanding the provisions of Section 6 above, in the event of termination of an Optionee's consulting relationship or Continuous Status as an Employee as a result of his or her disability, Optionee may, but only within twelve (12) months from the date of such termination (and in no event later than the expiration date of the term of such Option as set forth in the Option Agreement), exercise the Option to the extent otherwise entitled to exercise it at the date of such termination; provided, however, that if such disability is not a "disability" as such term is defined in Section 22(e)(3) of the Code, in the case of an Incentive Stock Option such Incentive Stock Option shall cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory Stock Option on the day three months and one day following such termination. To the extent that Optionee was not entitled to exercise the Option at the date of termination, or if Optionee does not exercise such Option to the extent so entitled within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan. 8. DEATH OF OPTIONEE. In the event of termination of Optionee's Continuous Status as an Employee or Consultant as a result of the death of Optionee, the Option may be exercised at any time within twelve (12) months following the date of death (but in no event later than the date of expiration of the term of this Option as set forth in Section 11 below), by Optionee's estate or by a person who acquired the right to exercise the Option by bequest or inheritance, but only to the extent the Optionee could exercise the Option at the date of death. 9. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Optionee only by Optionee. The terms of this Option shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee. 10. Optionee hereby agrees that if so requested by the Company or any representative of the underwriters in connection with any registration of the offering of any securities of the Company under the Securities Act, Optionee shall not sell or otherwise transfer any Shares or other securities of the Company during the 180-day period following the effective date of a registration statement of the Company filed under the Securities Act; provided, however, that such restriction shall only apply to the first registration statement of the Company to become effective under the Securities Act which include securities to be sold on behalf of the Company to the public in an underwritten public offering under the Securities Act. The Company may impose stop-transfer instructions with respect to securities subject to the foregoing restrictions until the end of such 180-day period. 11. TERM OF OPTION. This Option may be exercised only within the term set out in the Notice of Grant, and may be exercised during such term only in accordance with the Plan and the terms of this Option. The limitations set out in Section 7 of the Plan regarding Options designated as -4- Incentive Stock Options and Options granted to more than ten percent (10%) stockholders shall apply to this Option. 12. TAX CONSEQUENCES. Set forth below is a brief summary as of the date of this Option of some of the federal and California tax consequences of exercise of this Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES. (a) EXERCISE OF ISO. If this Option qualifies as an ISO, there will be no regular federal income tax liability or California income tax liability upon the exercise of the Option, although the excess, if any, of the Fair Market Value of the Shares on the date of exercise over the Exercise Price will be treated as an adjustment to the alternative minimum tax for federal tax purposes and may subject the Optionee to the alternative minimum tax in the year of exercise. (b) EXERCISE OF ISO FOLLOWING DISABILITY. If the Optionee's Continuous Status as an Employee or Consultant terminates as a result of disability that is not total and permanent disability as defined in Section 22(e)(3) of the Code, to the extent permitted on the date of termination, the Optionee must exercise an ISO within three months of such termination for the ISO to be qualified as an ISO. (c) EXERCISE OF NONSTATUTORY STOCK OPTION. There may be a regular federal income tax liability and California income tax liability upon the exercise of a Nonstatutory Stock Option. The Optionee will be treated as having received compensation income (taxable at ordinary income tax rates) equal to the excess, if any, of the Fair Market Value of the Shares on the date of exercise over the Exercise Price. If Optionee is an Employee or a former Employee, the Company will be required to withhold from Optionee's compensation or collect from Optionee and pay to the applicable taxing authorities including, if required, withholding for FICA, FUTA and similar statutes an amount in cash equal to a percentage of this compensation income at the time of exercise, and may refuse to honor the exercise and refuse to deliver Shares if such withholding amounts are not delivered at the time of exercise. (d) DISPOSITION OF SHARES. In the case of an NSO, if Shares are held for at least one year, any gain realized on disposition of the Shares will be treated as long-term capital gain for federal and California income tax purposes. In the case of an ISO, if Shares transferred pursuant to the Option are held for at least one year after exercise and are disposed of at least two years after the Date of Grant, any gain realized on disposition of the Shares will also be treated as long-term capital gain for federal and California income tax purposes. If Shares purchased under an ISO are disposed of within such one-year period or within two years after the Date of Grant, any gain realized on such disposition will be treated as compensation income (taxable at ordinary income rates) to the extent of the difference between the Exercise Price and the lesser of (1) the Fair Market Value of the Shares on the date of exercise, or (2) the sale price of the Shares. -5- (e) NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If the Option granted to Optionee herein is an ISO, and if Optionee sells or otherwise disposes of any of the Shares acquired pursuant to the ISO on or before the later of (1) the date two years after the Date of Grant, or (2) the date one year after the date of exercise, the Optionee shall immediately notify the Company in writing of such disposition. Optionee agrees that Optionee may be subject to income tax withholding by the Company on the compensation income recognized by the Optionee. 13. ENTIRE AGREEMENT; GOVERNING LAW. The Plan is incorporated herein by reference. The Plan and this Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof, and may not be modified adversely to the Optionee's interest except by means of a writing signed by the Company and Optionee. This agreement is governed by California law except for that body of law pertaining to conflict of laws. HEALTHEON CORPORATION a Delaware corporation By: ____________________________________ Its: ____________________________________ OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S STOCK OPTION PLAN WHICH IS INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL IT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT CAUSE. Optionee acknowledges receipt of a copy of the Plan and represents that he is familiar with the terms and provisions thereof, and hereby accepts this Option subject to all of the terms and provisions thereof. Optionee has reviewed the Plan and this Option in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option and fully understands all provisions of the Option. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan or this Option. Optionee further agrees to notify the Company upon any change in the residence address indicated below. Dated: _____________________ ____________________________ Optionee -6- Residence Address: _____________________________ _____________________________ -7- EXHIBIT A --------- 1996 STOCK PLAN EXERCISE NOTICE Healtheon Corporation 87 Encina Avenue Palo Alto, CA 94301 Attention: Secretary 1. EXERCISE OF OPTION. Effective as of today, ___________, 19__, the undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase _________ shares of the Common Stock (the "Shares") of Healtheon Corporation (the "Company") under and pursuant to the 1996 Stock Plan, as amended (the "Plan") and the [ ] Incentive [ ] Nonstatutory Stock Option Agreement dated ________, 19 ___ (the "Option Agreement"). 2. REPRESENTATIONS OF OPTIONEE. Optionee acknowledges that Optionee has received, read and understood the Plan and the Option Agreement and agrees to abide by and be bound by their terms and conditions. 3. RIGHTS AS STOCKHOLDER. Until the stock certificate evidencing such Shares is issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such stock certificate promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued, except as provided in Section 12 of the Plan. Optionee shall enjoy rights as a stockholder until such time as Optionee disposes of the Shares or the Company and/or its assignee(s) exercises the Right of First Refusal hereunder. Upon such exercise, Optionee shall have no further rights as a holder of the Shares so purchased except the right to receive payment for the Shares so purchased in accordance with the provisions of this Agreement, and Optionee shall forthwith cause the certificate(s) evidencing the Shares so purchased to be surrendered to the Company for transfer or cancellation. 4. COMPANY'S RIGHT OF FIRST REFUSAL. Before any Shares held by Optionee or any transferee (either being sometimes referred to herein as the "Holder") may be sold or otherwise transferred (including transfer by gift or operation of law), the Company or its assignee(s) shall have a right of first refusal to purchase the Shares on the terms and conditions set forth in this Section (the "Right of First Refusal"). (a) NOTICE OF PROPOSED TRANSFER. The Holder of the Shares shall deliver to the Company a written notice (the "Notice") stating: (i) the Holder's bona fide intention to sell or otherwise transfer such Shares; (ii) the name of each proposed purchaser or other transferee ("Proposed Transferee"); (iii) the number of Shares to be transferred to each Proposed Transferee; and (iv) the bona fide cash price or other consideration for which the Holder proposes to transfer the Shares (the "Offered Price"), and the Holder shall offer the Shares at the Offered Price to the Company or its assignee(s). (b) EXERCISE OF RIGHT OF FIRST REFUSAL. At any time within thirty (30) days after receipt of the Notice, the Company and/or its assignee(s) may, by giving written notice to the Holder, elect to purchase all, but not less than all, of the Shares proposed to be transferred to any one or more of the Proposed Transferees, at the purchase price determined in accordance with subsection (c) below. (c) PURCHASE PRICE. The purchase price ("Purchase Price") for the Shares purchased by the Company or its assignee(s) under this Section shall be the Offered Price. If the Offered Price includes consideration other than cash, the cash equivalent value of the non-cash consideration shall be determined by the Board of Directors of the Company in good faith. (d) PAYMENT. Payment of the Purchase Price shall be made, at the option of the Company or its assignee(s), in cash (by check), by cancellation of all or a portion of any outstanding indebtedness of the Holder to the Company (or, in the case of repurchase by an assignee, to the assignee), or by any combination thereof within 30 days after receipt of the Notice or in the manner and at the times set forth in the Notice. (e) HOLDER'S RIGHT TO TRANSFER. If all of the Shares proposed in the Notice to be transferred to a given Proposed Transferee are not purchased by the Company and/or its assignee(s) as provided in this Section, then the Holder may sell or otherwise transfer such Shares to that Proposed Transferee at the Offered Price or at a higher price, provided that such sale or other transfer is consummated within 120 days after the date of the Notice and provided further that any such sale or other transfer is effected in accordance with any applicable securities laws and the Proposed Transferee agrees in writing that the provisions of this Section shall continue to apply to the Shares in the hands of such Proposed Transferee. If the Shares described in the Notice are not transferred to the Proposed Transferee within such period, a new Notice shall be given to the Company, and the Company and/or its assignees shall again be offered the Right of First Refusal before any Shares held by the Holder may be sold or otherwise transferred. (f) EXCEPTION FOR CERTAIN FAMILY TRANSFERS. Anything to the contrary contained in this Section notwithstanding, the transfer of any or all of the Shares during the Optionee's lifetime or on the Optionee's death by will or intestacy to the Optionee's immediate family or a trust for the benefit of the Optionee's immediate family shall be exempt from the provisions of this Section. "Immediate Family" as used herein shall mean spouse, lineal descendant or antecedent, father, mother, brother or sister. In such case, the transferee or other recipient shall receive and hold the Shares so transferred subject to the provisions of this Section, and there shall be no further transfer of such Shares except in accordance with the terms of this Section. (g) TERMINATION OF RIGHT OF FIRST REFUSAL. The Right of First Refusal shall terminate as to any Shares 90 days after the first sale of Common Stock of the Company to the general public pursuant to a registration statement filed with and declared effective by the Securities and Exchange Commission under the Securities Act of 1933, as amended. 5. TAX CONSULTATION. Optionee understands that Optionee may suffer adverse tax consequences as a result of Optionee's purchase or disposition of the Shares. Optionee represents that Optionee has consulted with any tax consultants Optionee deems advisable in connection with the purchase or disposition of the Shares and that Optionee is not relying on the Company for any tax advice. 6. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS. (a) LEGENDS. Optionee understands and agrees that the Company shall cause the legends set forth below or legends substantially equivalent thereto, to be placed upon any certificate(s) evidencing ownership of the Shares together with any other legends that may be required by the Company or by state or federal securities laws: THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COMPANY COUNSEL SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH. THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND A RIGHT OF FIRST REFUSAL HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE BINDING ON TRANSFEREES OF THESE SHARES. IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY INTEREST THEREIN, OR TO -3- RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES. Optionee understands that transfer of the Shares may be restricted by Section 260.141.11 of the Rules of the California Corporations Commissioner, a copy of which is attached to EXHIBIT B, the Investment Representation Statement. (b) STOP-TRANSFER NOTICES. Optionee agrees that, in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate "stop transfer" instruc-tions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records. (c) REFUSAL TO TRANSFER. The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Agreement or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred. 7. SUCCESSORS AND ASSIGNS. The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Agreement shall be binding upon Optionee and his or her heirs, executors, administrators, successors and assigns. 8. INTERPRETATION. Any dispute regarding the interpretation of this Agreement shall be submitted by Optionee or by the Company forthwith to the Company's Board of Directors or the committee thereof that administers the Plan, which shall review such dispute at its next regular meeting. The resolution of such a dispute by the Board or committee shall be final and binding on the Company and on Optionee. 9. GOVERNING LAW; SEVERABILITY. This Agreement shall be governed by and construed in accordance with the laws of the State of California excluding that body of law pertaining to conflicts of law. Should any provision of this Agreement be determined by a court of law to be illegal or unenforceable, the other provisions shall nevertheless remain effective and shall remain enforceable. 10. NOTICES. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States mail by certified mail, with postage and fees prepaid, addressed to the other party at its address as shown below beneath its signature, or to such other address as such party may designate in writing from time to time to the other party. -4- 11. FURTHER INSTRUMENTS. The parties agree to execute such further instruments and to take such further action as may be reasonably necessary to carry out the purposes and intent of this Agreement. 12. DELIVERY OF PAYMENT. Optionee herewith delivers to the Company the full Exercise Price for the Shares. 13. ENTIRE AGREEMENT. The Plan and Notice of Grant/Option Agreement are incorporated herein by reference. This Agreement, the Plan, the Option Agreement and the Investment Representation Statement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof, and may not be modified adversely to the Optionee's interest except by means of a writing signed by the Company and Optionee Submitted by: Accepted by: OPTIONEE: HEALTHEON CORPORATION By: ______________________ (Signature) Its: _____________________ ADDRESS: ADDRESS: ___________________________ 87 Encina Avenue ___________________________ Palo Alto, CA 94301 -5- EXHIBIT B --------- INVESTMENT REPRESENTATION STATEMENT OPTIONEE : COMPANY : HEALTHEON CORPORATION SECURITY : COMMON STOCK AMOUNT : SHARES DATE : In connection with the purchase of the above-listed Securities, the undersigned Optionee represents to the Company the following: (a) Optionee is aware of the Company's business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Securities. Optionee is acquiring these Securities for investment for Optionee's own account only and not with a view to, or for resale in connection with, any "distribution" thereof within the meaning of the Securities Act of 1933, as amended (the "Securities Act"). (b) Optionee acknowledges and understands that the Securities constitute "restricted securities" under the Securities Act and have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Optionee's investment intent as expressed herein. In this connection, Optionee understands that, in the view of the Securities and Exchange Commission, the statutory basis for such exemption may be unavailable if Optionee's representation was predicated solely upon a present intention to hold these Securities for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Securities, or for a period of one year or any other fixed period in the future. Optionee further understands that the Securities must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Optionee further acknowledges and understands that the Company is under no obligation to register the Securities. Optionee understands that the certificate evidencing the Securities will be imprinted with a legend which prohibits the transfer of the Securities unless they are registered or such registration is not required in the opinion of counsel satisfactory to the Company, a legend prohibiting their transfer without the consent of the Commissioner of Corporations of the State of California and any other legend required under applicable state securities laws. (c) Optionee is familiar with the provisions of Rule 701 and Rule 144, each promulgated under the Securities Act, which, in substance, permit limited public resale of "restricted securities" acquired, directly or indirectly from the issuer thereof, in a non-public offering subject to the satisfaction of certain conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the time of the grant of the Option to the Optionee, the exercise will be exempt from registration under the Securities Act. In the event the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter (or such longer period as any market stand-off agreement may require) the Securities exempt under Rule 701 may be resold, subject to the satisfaction of certain of the conditions specified by Rule 144, including: (1) the resale being made through a broker in an unsolicited "broker's transaction" or in transactions directly with a market maker (as said term is defined under the Securities Exchange Act of 1934); and, in the case of an affiliate, (2) the availability of certain public information about the Company, (3) the amount of Securities being sold during any three month period not exceeding the limitations specified in Rule 144(e), and (4) the timely filing of a Form 144, if applicable. In the event that the Company does not qualify under Rule 701 at the time of grant of the Option, then the Securities may be resold in certain limited circumstances subject to the provisions of Rule 144, which requires the resale to occur not less than one year after the later of the date the Securities were sold by the Company or the date the Securities were sold by an affiliate of the Company, within the meaning of Rule 144; and, in the case of acquisition of the Securities by an affiliate, or by a non-affiliate who subsequently holds the Securities less than two years, the satisfaction of the conditions set forth in sections (1), (2), (3) and (4) of the paragraph immediately above. (d) Optionee hereby agrees that if so requested by the Company or any representative of the underwriters in connection with any registration of the offering of any securities of the Company under the Securities Act, Optionee shall not sell or otherwise transfer any Shares or other securities of the Company during the 180-day period following the effective date of a registration statement of the Company filed under the Securities Act; provided, however, that such restriction shall only apply to the first registration statement of the Company to become effective under the Securities Act which include securities to be sold on behalf of the Company to the public in an underwritten public offering under the Securities Act. The Company may impose stop-transfer instructions with respect to securities subject to the foregoing restrictions until the end of such 180-day period. (e) Optionee further understands that in the event all of the applicable requirements of Rule 701 or 144 are not satisfied, registration under the Securities Act, compliance with Regulation A, or some other registration exemption will be required; and that, notwithstanding the fact that Rules 144 and 701 are not exclusive, the Staff of the Securities and Exchange Commission has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rules 144 or 701 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such -2- transactions do so at their own risk. Optionee understands that no assurances can be given that any such other registration exemption will be available in such event. (f) Optionee understands that the certificate evidencing the Securities will be imprinted with a legend which prohibits the transfer of the Securities without the consent of the Commissioner of Corporations of California. Optionee has read the applicable Commissioner's Rules with respect to such restriction, a copy of which is attached. Signature of Optionee: ___________________________________ Date:_______________________, 19___ -3- ATTACHMENT 1 STATE OF CALIFORNIA - CALIFORNIA ADMINISTRATIVE CODE Title 10. Investment - Chapter 3. Commissioner of Corporations 260.141.11: RESTRICTION ON TRANSFER. (a) The issuer of any security upon which a restriction on transfer has been imposed pursuant to Sections 260.102.6, 260.141.10 or 260.534 shall cause a copy of this section to be delivered to each issuee or transferee of such security at the time the certificate evidencing the security is delivered to the issuee or transferee. (b) It is unlawful for the holder of any such security to consummate a sale or transfer of such security, or any interest therein, without the prior written consent of the Commissioner (until this condition is removed pursuant to Section 260.141.12 of these rules), except: (1) to the issuer; (2) pursuant to the order or process of any court; (3) to any person described in Subdivision (i) of Section 25102 of the Code or Section 260.105.14 of these rules; (4) to the transferor's ancestors, descendants or spouse, or any custodian or trustee for the account of the transferor or the transferor's ancestors, descendants, or spouse; or to a transferee by a trustee or custodian for the account of the transferee or the transferee's ancestors, descendants or spouse; (5) to holders of securities of the same class of the same issuer; (6) by way of gift or donation inter vivos or on death; (7) by or through a broker-dealer licensed under the Code (either acting as such or as a finder) to a resident of a foreign state, territory or country who is neither domiciled in this state to the knowledge of the broker-dealer, nor actually present in this state if the sale of such securities is not in violation of any securities law of the foreign state, territory or country concerned; (8) to a broker-dealer licensed under the Code in a principal transaction, or as an underwriter or member of an underwriting syndicate or selling group; (9) if the interest sold or transferred is a pledge or other lien given by the purchaser to the seller upon a sale of the security for which the Commissioner's written consent is obtained or under this rule not required; (10) by way of a sale qualified under Sections 25111, 25112, 25113 or 25121 of the Code, of the securities to be transferred, provided that no order under Section 25140 or subdivision (a) of Section 25143 is in effect with respect to such qualification; (11) by a corporation to a wholly owned subsidiary of such corporation, or by a wholly owned subsidiary of a corporation to such corporation; (12) by way of an exchange qualified under Section 25111, 25112 or 25113 of the Code, provided that no order under Section 25140 or subdivision (a) of Section 25143 is in effect with respect to such qualification; (13) between residents of foreign states, territories or countries who are neither domiciled nor actually present in this state; (14) to the State Controller pursuant to the Unclaimed Property Law or to the administrator of the unclaimed property law of another state; or (15) by the State Controller pursuant to the Unclaimed Property Law or by the administrator of the unclaimed property law of another state if, in either such case, such person (i) discloses to potential purchasers at the sale that transfer of the securities is restricted under this rule, (ii) delivers to each purchaser a copy of this rule, and (iii) advises the Commissioner of the name of each purchaser; (16) by a trustee to a successor trustee when such transfer does not involve a change in the beneficial ownership of the securities; (17) by way of an offer and sale of outstanding securities in an issuer transaction that is subject to the qualification requirement of Section 25110 of the Code but exempt from that qualification requirement by subdivision (f) of Section 25102; provided that any such transfer is on the condition that any certificate evidencing the security issued to such transferee shall contain the legend required by this section. (c) The certificates representing all such securities subject to such a restriction on transfer, whether upon initial issuance or upon any transfer thereof, shall bear on their face a legend, prominently stamped or printed thereon in capital letters of not less than 10-point size, reading as follows: "IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES." EX-10.13 5 EXHIBIT 10.13 EXHIBIT 10.13 CONFIDENTIAL TREATMENT REQUESTED Services and License Agreement Between ActaMed Corporation and United HealthCare Corporation This Services and License Agreement (the "Agreement") is made and entered into as of April 4, 1996 (the "Effective Date"), by and between ActaMed Corporation ("ActaMed") and United HealthCare Corporation ("UHC"), for itself and on behalf of each of the Managed Plans which has given its written consent (as hereinafter defined). RECITALS A. ActaMed is in the business of providing electronic data interchange products and services to the health care industry. B. UHC, for itself on and behalf of its Affiliates (including The MetraHealth Companies, Inc.), and other entities that UHC may hereafter acquire, and on behalf of the health maintenance organizations identified in Exhibit A hereto that are managed by UHC or an Affiliate thereof and which have given their consent to be bound by this Agreement (which plans which give their consent are referred to herein as the "Managed Plans"), desires to obtain from ActaMed certain software and materials and access to the Network, on the terms and conditions set forth below. NOW, THEREFORE, in consideration of the premises and the mutual promises contained herein, the parties agree as follows. 1. DEFINITIONS. 1.1 "Affiliate" means with respect to a party, an entity directly or indirectly controlling, controlled by or under common control with such party where control means the ownership or control, directly or indirectly, of more than fifty percent of all of the voting power of the shares (or other securities or rights) entitled to vote for the election of directors or other governing authority, as of the Effective Date or hereafter during the term of this Agreement; provided that such entity shall be considered an Affiliate only for the time during which such control exists. The Managed Plans shall be considered to be Affiliates of UHC. 1.2 "Cosmos" means the computer program owned by UHC which is commonly known as Cosmos, and which UHC operates for health care claims adjudication and other business functions. [*] CONFIDENTIAL TREATMENT REQUESTED 1 1.3 "Enhancements" means changes or additions to application software and documentation that improve existing Functions, add new Functions, or improve performance through changes in the system design or coding. 1.4 "Functions" means the tasks employed by users to exchange information within the Network. 1.5 "Licensed Materials" shall mean the Network Software, the ORBIT software (i.e., the ProviderLink billing and registration system), and the documentation, training materials, and other materials related to the Network Software or the Network which are listed on Exhibit B attached to this Agreement. All updates and new versions of such materials are also included in the definition of "Licensed Materials". 1.6 "Network" means the electronic data interchange ("EDI") system and network operated by ActaMed, which includes the Network Software, including any future versions of the EDI network or products substituting for it which include the basic functionality of the Network Software and network as of the Effective Date, regardless of the name under which it is marketed. The term "Network" specifically excludes any telecommunications network. 1.7 "Network Software" means the personal computer version of the ProviderLink and ActaLink presentation and network software programs, and all updates to them, which are licensed to users and which allow access to the Network for the transmission and reception of information. 1.8 "Provider" means a provider of health care services, which is not UHC, an Affiliate of UHC, or operated by UHC. 1.9 "UHC" means United HealthCare Corporation and its Affiliates. 2. LICENSE AND NETWORK ACCESS. 2.1 ActaMed grants UHC the nonexclusive, nontransferable right to use the Licensed Materials, to reproduce and modify those of the Licensed Materials so designated on Exhibit B, and to access and utilize the services of the Network, for UHC's internal use, on the terms set forth in this Agreement. UHC's internal use shall include use by and/or on behalf of (a) UHC or any UHC Affiliate; and (b) third parties that are purchasers of UHC's products and/or services, including management services, as well as UHC's health care service providers (including, without limitation, NYH Health Plan Services, Inc. ("NYHHPS") and its subsidiaries and/or affiliates pursuant to the First Restated Administrative Services Agreement between UHC and NYHHPS, dated September 1, 1994, as amended from time to time). UHC's access to use the Network will be on the same operational basis which ActaMed offers the Network to its other customers of the Network, except as otherwise provided in this Agreement. 2 2.2 UHC shall submit all permitted modifications it makes to the Licensed Materials for ActaMed's approval, prior to distributing the modifications. If ActaMed does not respond to UHC within fourteen days after UHC submits modifications to ActaMed for approval, the modifications shall be deemed approved. On the copies of the Licensed Materials UHC makes, UHC shall reproduce all notices or legends appearing on the original copy, including the copyright notice. All copies of the Licensed Materials made by UHC can be used only as permitted under this Agreement. At any time within ten days after ActaMed's written request, UHC shall inform ActaMed of the number and location of all copies of the Licensed Materials UHC has made. 2.3 UHC shall have the right to install the Network Software at any UHC location and at any locations of Providers working with UHC, and to connect such locations to the Network. ActaMed will install the Network Software at UHC or Provider sites and connect them to the Network, when mutually agreed by the parties. UHC and ActaMed will do agreed upon installations in a timely manner. UHC and ActaMed must continue to use the installation procedures developed by UHC or other mutually agreeable installation procedures (except as provided in any agreements directly between ActaMed and a UHC health plan, such as UHC Georgia) for such sites. UHC shall not be obligated under paragraph 12.1 to pay a monthly site fee or transaction fees for any Provider connected to the Network by ActaMed, unless UHC has agreed to be responsible for such Provider and fees. 2.4 Any development work on the Licensed Materials or the Network which was in progress on the date of this Agreement, will be provided to UHC upon completion and included within the definition of "Licensed Materials", at no charge to UHC, if it is set forth on Exhibit C attached to this Agreement. 2.5 UHC shall not act as a clearinghouse for health care claims going to payors other than UHC, other than as required by a UHC client, such as UBS misdirected Railroad Retirement claims and Medicare cross-over claims. 2.6 If UHC desires to and ActaMed agrees that UHC may use and implement the Licensed Materials or the Network technology outside North America, UHC and ActaMed shall mutually agree upon the terms and conditions of such use and implementation. 2.7 Except as otherwise provided in this Agreement, ActaMed provides the Licensed Materials to UHC on an "AS IS, WHERE IS" basis. ACTAMED EXPRESSLY DISCLAIMS ANY WARRANTIES, EXPRESS OR IMPLIED, RELATING TO THE LICENSED MATERIALS, INCLUDING, BUT NOT LIMITED TO, THE WARRANTIES OF TITLE, NONINFRINGEMENT, MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE OR USE. 2.8 Except as otherwise provided in this Agreement, UHC shall not (a) copy, reproduce, modify, or excerpt any of the Licensed Materials for any purpose; (b) distribute, 3 rent, sublicense, share, transfer or lease the Licensed Materials or access to the Network, to any person or entity which is not a party to this Agreement; or (c) attempt to reverse engineer or otherwise obtain copies of the source code for the Licensed Materials. 2.9 UHC acknowledges that the Licensed Materials may contain embedded runtime modules of products licensed to ActaMed by Sybase, Inc. ("Sybase") and, accordingly, that Sybase as an interested third party beneficiary of this Agreement, may enforce this Agreement directly against UHC and shall have no liability to UHC. In addition, UHC agrees that Sybase shall have the right to direct a recognized independent accounting firm to conduct, during normal business hours, an audit of appropriate records of UHC to verify (a) the number of copies of the Licensed Materials in use by UHC, and the computer systems on which such copies are installed, the number of processors in such computer systems, and the number of users using such copies; and (b) UHC's compliance with this Agreement. Representatives of the auditing firm shall protect the confidentiality of UHC's confidential information and abide by UHC's reasonable security regulations while on UHC's premises. 2.10 ActaMed agrees that ActaMed does not own and cannot use, distribute or publish any data transmitted over the Network either to or from UHC, except to the extent such data originates with ActaMed. Notwithstanding the above, ActaMed shall have the right to collect and distribute data transmitted over the Network back to the originator of such data. 3. MARKETING AND IMPLEMENTATION OF NETWORK PRODUCTS. 3.1 UHC will identify the business needs, goals and objectives of UHC for ActaMed, and will establish targets for the number and volume of Providers submitting electronic transactions. These numbers will be estimates, and not guarantees, for any amount of business for ActaMed. UHC will provide this information to ActaMed no less often than quarterly, and shall respond to additional requests for information within thirty days of ActaMed's request. The parties shall mutually agree upon any other information or data which UHC may give to ActaMed under this Agreement. 3.2 ActaMed will appoint at least one representative dedicated to the UHC account, who will have decision making capabilities for ActaMed. This person will attend planning meetings with UHC, keep UHC updated on national trends in EDI, and consult with UHC regarding ActaMed's software and network strategy. ActaMed will provide a representative to WEDI and ANSI to represent UHC, upon UHC's request. UHC shall also designate a representative to work with ActaMed and to coordinate UHC's activities with ActaMed, who will have decision making capabilities for UHC. This person will attend planning meetings with ActaMed, keep ActaMed updated on technical developments with respect to Cosmos, and coordinate UHC's activities with ActaMed. J.R. Hughes will be the initial representative for ActaMed and Joy Bahnemann will be the initial representative for UHC. Each party will consult with the other before changing its designated representative. 4 3.3 Exhibit D to this Agreement specifies the reports UHC will deliver to ActaMed and ActaMed will deliver to UHC daily, weekly, monthly, quarterly and annually. The parties shall also provide ad hoc reports to each other at no cost to the requesting party. 3.4 ActaMed will submit to UHC for its input and comments a comprehensive disaster recovery plan and documentation within 90 days after the date of this Agreement. The plan shall include testing of the plan no less often than annually and agreed upon time constraints within which full recovery will be expected. ActaMed will accept comments from UHC and make reasonable commercial efforts within the context of the Network to incorporate such comments. ActaMed will use its best efforts to establish a hot site under its disaster recovery plan which is not at a UHC data center within one year after the date of this Agreement. ActaMed will submit amended disaster recovery plans to UHC, for its information and input, any time that ActaMed makes substantial changes to its plan. ActaMed will participate in UHC's annual test of the UHC disaster recovery plan, with up to forty hours of ActaMed personnel time at no cost to UHC. For any additional time beyond the forty hours which UHC requests from ActaMed for this purpose, UHC will pay ActaMed an agreed upon price. 3.5 ActaMed will establish a user group, to consult on priorities and provide direction to ActaMed on system initiatives, which will include representation from UHC, Providers and payors. ActaMed will solicit user suggestions, input and feedback regarding the Network. ActaMed will provide to UHC copies of customer satisfaction surveys and other similar information regarding use of the Network at sites for which UHC is paying the monthly site fee or any transaction fees. 3.6 UHC will make its sales and Provider relations personnel available to work with ActaMed to develop new sites for use of the Network by Providers working with UHC, to the same extent that such personnel work with UHC's EDI Services to develop new sites as of the Effective Date. Pursuant to paragraph 12.2, UHC shall have the option of performing installations and implementations of the Network software itself, rather than contracting for them through ActaMed. In such circumstances where UHC has decided not to out-source such functions to ActaMed, UHC will continue to use health plan ProviderLink representatives to install and implement the Network for new and existing UHC-sponsored sites. UHC will also continue to use health plan ProviderLink representatives to train and provide technical support to the extent required under Exhibit F and section 8. 3.7 UHC shall sponsor a reasonable number of reference inquiries and visits (not to exceed two visits in any calendar month) by customers and potential customers of the Network, pursuant to ActaMed's Showcase Program, on mutually agreeable terms. UHC shall retain the right to reasonably refuse a site visit to any competitor or potential competitor of UHC, and ActaMed shall inform all customers and potential customers allowed on UHC's premises under this paragraph 3.7 that they are required to abide by 5 UHC's security procedures and policies. 4. ACTAMED'S OBLIGATIONS REGARDING, NETWORK PRODUCT LINE. 4.1 ActaMed will, during the term of this Agreement, continue maintaining the Licensed Materials and the Network, or other ActaMed products which provide, at a minimum, substantially the same functionality as provided by the Licensed Materials and the Network, on the Effective Date. 4.2 ActaMed will update the licensed Materials and the Network with changes mandated by state or federal law and other changes required in the reasonable opinion of the parties to meet market expectations for EDI, including the ANSI X12N standard. The parties will mutually agree upon any additional standards which ActaMed will need to maintain. If the changes mandated by this paragraph apply to substantially all of ActaMed's customers, then ActaMed will make such changes as part of a release of the Network or the Licensed Materials pursuant to paragraph 8.1 or paragraph 8.2. 4.3 Subject to section 9, both parties will continue to work with practice management system vendors to develop interfaces between practice management programs and the Network, in order to be able to market the Network to Providers. UHC will assist ActaMed in its attempts to establish relationships with and work with practice management system vendors. 4.4 ActaMed will work with and cooperate with Allina and UHC to formulate a plan allowing Allina to use the Network to operate its LaborLink product, at UHC's request. 4.5 ActaMed will be responsible for notifying all Providers, practice management vendors and other entities which are signatories to Network agreements to be assigned by UHC to EDI Services, Inc. that the assignee will be merged with and into ActaMed. UHC shall have the right to review and approve the notice prior to ActaMed sending it to any Providers or other signatories. 4.6 ActaMed shall place a copy of the source code, object code and technical documentation for all software used in the operation of the Network in escrow, including the Network Software, for the benefit of UHC, pursuant to the escrow agreement attached to this Agreement as Exhibit E (the "Escrow Agreement"). ActaMed shall cause UHC to be listed as a "Licensee" under the Escrow Agreement and shall cause the Licensed Materials and all operational computer software and documentation ActaMed uses to operate the Network to be listed as a "System" under the Escrow Agreement, as soon as practical after the Effective Date. In the event ActaMed ceases operating the Network for any reason defined in such Escrow Agreement during the duration of this Agreement, ActaMed shall deliver to UHC, for UHC's nonexclusive use, one then-current copy of all operational computer software and documentation ActaMed uses to operate the Network. 6 5. UIHC'S OBLIGATIONS REGARDING THE NETWORK. 5.1 UHC shall generate or receive transaction data in the standard format and the protocol set forth in such format which is in use as of the Effective Date, or as otherwise mutually agreed upon by the parties. In the event that ActaMed changes such format, UHC shall provide ActaMed with standard output and test messages for ActaMed's use. 5.2 UIHC shall provide, at its own expense, all necessary hardware, including terminal equipment, compatible with and suitable for its communications with the Network. UIHC shall prepare the proper operating environment as described in Exhibit J attached to this Agreement. ActaMed shall verify UHC's operating environment with the testing procedure established by ActaMed and agreed to by UHC. 6. ACCESS TO COSMOS AND OTHER PROPRIETARY UHC SOFTWARE. 6.1 ActaMed will not have access to Cosmos or any other UHC proprietary systems, and will have no right to modify the computer code in Cosmos, except as mutually agreed by the parties in writing. ActaMed will not receive any part of the Cosmos code, except as mutually agreed by the parties in writing. The Network will deliver claims and information to Cosmos, and UHC is solely responsible for the operation of Cosmos. 6.2 UHC produces new releases of Cosmos four to five times each year, and new releases of other UHC host computer systems (including host computer systems operated by third party out-sources on behalf of UHC), from time to time. UHC will give ActaMed notice of such changes and information regarding them, and, if the changes require any modifications to the Network or the Licensed Materials, the parties will mutually agree on the scope of the project, the deliverables, deadlines, any fees ActaMed will charge UHC, a test plan and an acceptance test plan. 6.3 If, at any point, UHC agrees that ActaMed needs access to any other proprietary UHC software or systems, the parties shall negotiate a limited license allowing ActaMed such access to be used only for UHC's benefit. 6.4 ActaMed agrees that UHC shall be the sole and exclusive owner of any and all changes ActaMed makes to the code in Cosmos or any other computer system proprietary to UHC. ActaMed agrees to assign and hereby assigns and transfers to UHC any and all rights which ActaMed may have in such code, including any copyright, patent, trademark, trade secret and other intellectual property rights. ActaMed will cooperate with UHC and will execute any documentation reasonably required by UHC to assert or protect its property rights in such code. 7. DEVELOPMENT OF NEW FUNCTIONALITY. 7.1 When ActaMed develops new functionality for the Network that ActaMed 7 offers generally to its customers, which is not included in a maintenance release that ActaMed offers generally to its customers pursuant to paragraph 8.1, [*] 7.2 When UHC specifically requests development work from ActaMed, for UHC's own use, the parties will negotiate a price at the time such work is requested. If ActaMed will be permitted to use this custom work for other customers, the price UHC pays ActaMed for such work [*] that [*] and [*] 7.3 When ActaMed performs development work on the Network at the request of another customer, [*] to [*] at [*] for the [*] as long as ActaMed has the legal right to [*] and such [*] is [*]. 7.4 If, at any time, UHC chooses to contract with ActaMed for a dedicated services team from ActaMed to handle development of new functionality and other changes to the Network, the Licensed Materials, or UHC's proprietary systems which are not covered under maintenance, ActaMed will provide the dedicated team on mutually agreeable terms and conditions. 8. ACTAMED'S MAINTENANCE AND SUPPORT OBLIGATIONS. 8.1 ActaMed's maintenance releases for the Network and the Licensed Materials shall be denoted by a three digit number where the first number is the version number, the second number is the level number, and the third number (if it is greater than 1) is the build number. For example, release 2.1.2 is a maintenance release for the version 2.1.1 software. ActaMed will provide new maintenance releases at no charge to all its Network maintenance customers, including, without limitation, UHC. 8.2 The price UHC will pay ActaMed under paragraph 12.1 for ActaMed's maintenance services under this Agreement does not include Enhancements to the Network Software, such as new Functions, significant redesigns or improvements of current Functions, or significant advances in system performance. Enhancements are contained in Actamed's new versions which are denoted by a three digit number, the first digit of which is the version number, the second digit of which is a level number, and the third digit of which is 1. For example, version 2.1.1 is followed by new version numbers 2.2.1, 2.3.1, 2.4.1, 3.0.1, etc. ActaMed will make new versions of the Network Software available to UHC upon payment in accordance with paragraph 7.1. 8.3 ActaMed will provide free Network maintenance and support services to UHC at a minimum level which will meet or exceed the free Network maintenance and support [*] CONFIDENTIAL TREATMENT REQUESTED 8 ActaMed provides to its other customers for the Network. ActaMed will also provide the support and maintenance services to UHC which are specified on Exhibit F attached to this Agreement. ActaMed will notify UHC of any technical errors in the Network Software reported to the ActaMed help desk, and will use reasonable efforts to provide customers with corrections of such technical errors in a timely manner. ActaMed will provide all support and maintenance services directly to UHC and the Providers who subscribe to the Network, as required. UHC shall have no obligation to provide any support, training or maintenance services to Providers, other than as specified on Exhibit F attached to this Agreement. In order to allow UHC to implement a new release of the Network or the Licensed Materials on an orderly schedule, ActaMed shall maintain the current release and one prior release of the Network and the Licensed Materials, at all times. The maintenance services specified in this Agreement shall be provided at no cost to UHC beyond the fees set forth below in section 12. 8.4 UHC inquiries and appeals will be handled by ActaMed within time frames specified on Exhibit F or as mutually agreed to, and with the utmost customer focus in mind. 8.5 ActaMed will maintain the security standards for the Network which are set forth on Exhibit G attached to this Agreement. 9. EXCLUSIVITY. 9.1 UHC agrees to use the services of the Network under this Agreement. UHC agrees that it will accept and attempt to process all transactions listed on Exhibit H and intended for UHC which the Network delivers to UHC. UHC will pay ActaMed for all such transactions pursuant to paragraph 12.1 of this Agreement. 9.2 For [*] term of this Agreement (except as otherwise permitted under this Agreement), UHC will not promote, develop, sell or distribute any product [*] except as permitted under this Agreement. UHC also agrees that it will not develop an interface for any third party, or provide any third party with access to Cosmos or any other host computer under the control of UHC for the purpose of developing an interface for any network that competes with the Network, except to the extent UHC is allowed to work with other vendors under this section 9 or UHC is allowed to continue existing projects under paragraph 9.6. 9.3 For [*] term of this Agreement, UHC will not promote or contract for services providing essentially the same functionality as the Network from third party providers of [*] PROVIDED, HOWEVER, that UHC shall not be required to terminate any existing contracts with vendors of services similar to the Network (including, specifically, the contracts entered into by The MetraHealth Companies, Inc.), which are listed on Exhibit K attached to this Agreement. Prior to automatic or optional renewal of any such contracts, however, UHC shall give ActaMed 15 business days in which to bid on such contracts, [*] CONFIDENTIAL TREATMENT REQUESTED 9 pursuant to paragraph 9.7 of this Agreement. UHC shall cease actively promoting any products similar to the Network from vendors other than ActaMed in markets where ActaMed's services are available; provided, however, that UHC may promote products similar to the Network in markets where ActaMed has waived its rights under this section 9. Nothing in this paragraph shall limit UHC's ability to meet its contractual obligations in such existing contracts, such as a contractual obligation to perform specified promotional activities. 9.4 UHC agrees that, for [*] term of this Agreement, UHC will not and will not permit any of its subsidiaries to, directly or indirectly, (a) engage in or (b) have any ownership or equity interest exceeding five percent in any business, firm, corporation, joint venture, or other entity engaged in any business which competes with ActaMed's Network product (a "Competitive Business"). However, nothing contained herein shall prohibit UHC from acquiring any business, the principal line of business of which is not a Competitive Business and less than fifty percent of the revenues of which are derived from a Competitive Business. In such case, UHC shall use its reasonable efforts to cause the competitive portion of such business to be sold or disposed of as soon as reasonably possible, and, pending such sale, shall not use such business in such manner as would violate the provisions of this section 9 or seek to expand such business in a manner that would substantially adversely affect ActaMed's rights hereunder. Not later than one month following such acquisition, UHC shall give to ActaMed a notice of the acquisition of such Competitive Business and set forth the net purchase price (collectively, a "Sale Proposal") at which UHC would be prepared to sell such Competitive Business to ActaMed. ActaMed she have the right to purchase such Competitive Business for such terms or on such other basis as UHC and ActaMed may actually agree. In the event that, within 60 days after ActaMed's receipt of a Sale Proposal, UHC and ActaMed shall not have reached agreement that ActaMed will acquire such Competitive Business, each of UHC and ActaMed shall appoint an appraiser, which two appraisers shall select a mutually acceptable third appraiser. As promptly as practicable such three appraisers shall determine the fair value of the Competitive Business and shall notify UHC and ActaMed of their determination. ActaMed shall have sixty days after such notification in which to determine whether to acquire the CompetitiveBusiness at the value so determined. If ActaMed does not elect to acquire the Competitive Business at the appraised value, UHC shall be free to sell such Competitive Business to another entity; PROVIDED, HOWEVER, that UHC shall not sell such Competitive Business to another entity within six months after the appraisers' determination on terms and conditions which are substantially more favorable to such other entity than the terms and conditions last offered to ActaMed. 9.5 The restrictions set forth in this section 9 shall apply only to activities within North America. 9.6 Nothing in this section 9 shall be construed to prohibit UHC from engaging in activities relating to or contracting with third parties relating to the following, as long as each of the following is not intended primarily as a connection from a Provider's desk to a [*] CONFIDENTIAL TREATMENT REQUESTED 10 network for communication of data: (a) promoting, developing, using, selling, and distributing its EmployerLink and LaborLink products and future versions of them, and any other initiatives for employers and brokers, and shall retain the right to contract with third parties to perform any work relating to these products. UHC agrees, however, that EmployerLink, LaborLink and such other initiatives shall not be intended for use primarily as connections to Providers' desk tops; (b) using and developing Internet connections; (c) electronic medical records and clinical data; (d) electronic mail (other than e-mail to and from a Provider's desk top); (e) financial or banking electronic data interchange, telecommunications networks, or EDI used by the UHC purchasing department or other internal departments which are not connecting to a Provider's desk top; (f) EDI between clinics and other facilities owned and/or operated by UHC; (g) claims repricing; or (h) UHC's "Total Recall" project, AdjudiPro product, or Q-Star product, and all future versions of them. 9.7 In the event that this section 9 requires UHC to offer any business opportunities or new development work to ActaMed, ActaMed shall notify UHC of ActaMed's prices and terms for such business or work. If ActaMed declines such business or work, or if ActaMed cannot provide the requested business or work to UHC [*] [*] UHC shall have the right to contract with a third party for such business or work or to do such business or work itself, and the provisions of this section 9 shall not apply to such business or work. To [*] ActaMed's [*] is [*] the parties [*] among other things, the [*] by [*] from [*] the [*] and the [*] offered by [*] and whether [*]. If the parties cannot agree upon [*] the parties shall resolve the dispute pursuant to section 15. In the event that any customer and/or supplier, including an integrated delivery system, of UHC or a UHC Affiliate requires, as a condition of doing business with the customer or supplier, that a different EDI system be-used in regard to that customer or supplier, UHC shall use all reasonable efforts to encourage the customer or supplier to utilize ActaMed's EDI system. In the event the customers or [*] CONFIDENTIAL TREATMENT REQUESTED 11 supplier [*], UHC or the UHC Affiliate [*] with [*]. 9.8 For the initial five year term of this Agreement, ActaMed agrees that it will not sell or distribute the Network in the Republic of South Africa, except with UHC's prior, written approval. 9.9 This section 9 shall not preclude UHC from providing factual information on other EDI vendors to Providers, as long as this section 9 permits UHC to work with such vendors and provided UHC does not promote such vendors. 10. PERFORMANCE STANDARDS. 10.1 Exhibit I to this Agreement specifies the performance standards and measurements ActaMed must achieve and the applicable time periods for measuring compliance with the performance standards (the "Performance Standards"). The parties shall measure, at a minimum, performance of ActaMed's help desk and customer support and the Network. The goal of these Performance Standards is to ensure that the performance of the Network during the term of this Agreement meets or exceeds the performance of the ProviderLink Network immediately prior to the Effective Date. In addition, ActaMed shall develop and deliver to UHC, from time to time, ActaMed's plans to increase performance of the Network beyond the minimum levels specified in Exhibit I. 10.2 The Performance Standards on Exhibit I apply only to transactions sent from or to Cosmos. At any time that UHC uses a different host computer to connect to the Network, the parties shall mutually agree upon performance standards for the Network and its connection to the different host computer, which shall become an amendment to this Agreement. 10.3 Any time that UHC's host computers are down and/or the down time on UHC computers will not be counted as down time for the Network. 10.4 In the event that ActaMed fails to meet any Performance Standard on Exhibit I in any month, ActaMed shall begin to diagnose the cause of the failure to meet the Performance Standard promptly after being notified of or discovering the failure to perform. Thereafter, ActaMed shall work continuously and diligently to correct such failure to perform until it is corrected. The failures to meet the Performance Standards which occur while ActaMed is working to remedy the problem shall continue to be counted for the purposes of paragraph 10.5. 10.5 In the event that ActaMed fails to meet any Performance Standard on Exhibit I for [*] in any [*] period, ActaMed shall be deemed to be in material breach of this Agreement, which allows UHC to terminate this Agreement under paragraph 14.2 of this Agreement. In this event, UHC shall also have the right, at its option, to [*] CONFIDENTIAL TREATMENT REQUESTED 12 terminate section 9 of this Agreement and retain the rest of the Agreement in full force and effect, by giving the notice and opportunity to cure specified in paragraph 14.2 of this Agreement. 11. REPRESENTATIONS AND WARRANTIES. 11.1 The parties agree that ActaMed owns the Network and ActaMed represents that it has the right to license the Licensed Materials and grant access to the Network to UHC. All rights in patents, copyrights, trademarks and trade secrets encompassed in the Licensed Materials will remain in ActaMed or its licensors, as applicable. No title to or ownership of the Licensed Materials is transferred to UHC. UHC agrees that it does not obtain any rights in the Licensed Materials except the limited right to use the Licensed Materials as provided herein. 11.2 ActaMed agrees to defend UHC against and, to the extent of amounts paid to third parties in infringement damage awards and approved settlement awards, hold it harmless from all claims, damages and liabilities resulting from a claim that the Network or the Licensed Materials (other than the version of the Licensed Materials which ActaMed acquired from UHC) infringes a United States patent or United States copyright, provided that UHC gives ActaMed prompt, written notice of any such claim, sole control of the defense and settlement of such claim, and all reasonable assistance to defend such claim. UHC may appear in such action with counsel of its choice, at its own expense. ActaMed shall have no obligations under this paragraph if such claims, damages and liabilities result from UHC's breach of any term of this Agreement, UHC's unauthorized use of or modifications to the Licensed Materials or the Network, or the combination of the Licensed Materials with other materials not provided by ActaMed. 11.3 If UHC's right to use the Licensed Materials or the Network is enjoined or limited in any way, or if ActaMed believes that the Licensed Materials or the Network is likely to become subject to such action, then ActaMed, at its option and expense, may either: (a) procure for UHC the right to continue to use the Licensed Materials and the Network free from such limitations; (b) modify the Licensed Materials and the Network to be free from such limitations, but equivalent in all material functional and performance respects to the Licensed Materials and Network prior to such modification; (c) replace the Licensed Materials and the Network with materials that are free of claims, but equivalent in all material functional and performance respects to the Licensed Materials and the Network; or (d) if none of the above are reasonably possible or likely to be effective, 13 terminate this Agreement and the licenses granted herein. 11.4 Except as set forth in this Agreement, ACTAMED EXPRESSLY DISCLAIMS ANY WARRANTIES, EXPRESS OR IMPLIED, RELATING TO THE NETWORK OR SERVICES TO BE PERFORMED BY ACTAMED HEREUNDER, INCLUDING, BUT NOT LIMITED TO, THE WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE OR USE. 12. PRICES, PATENTS AND AUDITS. 12.1 For [*] after the date of this Agreement, UHC will pay ActaMed (a) [*] per user site identification number established by ActaMed at UHC; (b) [*] per user site identification number established by ActaMed for which UHC has agreed to be responsible; (c) [*] per transaction listed on Exhibit H attached to this Agreement, [*] and (d) [*] transaction listed on Exhibit H [*]. UHC shall not pay for any transactions a Provider sends to a different payor. ActaMed shall not charge UHC for any unclean transactions which are not able to access UHC's host computer. These payments cover all license fees, subscription fees, and access fees for usage of the Licensed Materials and the Network and all fees for the maintenance services set forth in section 8. 12.2 The fees set forth in paragraph 12.1 do not cover charges for any services UHC requests and obtains from ActaMed beyond the services specified in paragraph 12.1, including, without limitation, file transfer of data, installation, implementation or Enhancements of the Network, a particular sales effort from ActaMed which ActaMed would not otherwise be providing, or a telecommunications connection between the Network and UHC's host computers. For all services UHC requests from ActaMed for which this Agreement does not set forth a price (including, without limitation, UHC's request for a particular sales effort from ActaMed which ActaMed would not otherwise be providing), UHC shall pay ActaMed an agreed upon price. ActaMed shall not charge UHC anything for installation and implementation of the Network at sites where UHC chooses to do the installation and implementation itself. UHC shall pay all taxes levied in connection with this Agreement, except for any taxes based on ActaMed's net income. 12.3 After [*] after the date of this Agreement, the parties shall agree upon prices to supersede the prices in paragraph 12.1 of this Agreement, which new prices shall [*] [*]. To [*] is [*] the parties shall [*] among other things, the [*]. If the parties cannot agree upon [*] the parties shall resolve the dispute pursuant to section 15. 12.4 When ActaMed offers transactions other than those set forth on Exhibit H, [*] CONFIDENTIAL TREATMENT REQUESTED 14 UHC will decide, in its sole discretion, whether it will agree to receive and/or send such transactions. Upon deciding to receive and/or send any such new transaction, UHC shall pay ActaMed a mutually agreeable price for its own such transactions and for such transactions from any other user site identification number where UHC (in its sole discretion) decides to be responsible for the fees. 12.5 ActaMed will bill UHC monthly for the site and transaction fees for UHC and any Providers where UHC has asked ActaMed to bill UHC directly, in a mutually agreeable format. When ActaMed bills UHC for a Provider's site and transaction fees, ActaMed shall not bill the Provider directly for the same charges. Invoices will include any additional fees for other services purchased by UHC. UHC agrees to pay all undisputed fees and expenses invoiced by ActaMed within thirty days after receipt of each invoice, and to pay a late payment charge equal to the lesser of [*] per month or the maximum rate allowed by law on all amounts outstanding after thirty days. 12.6 ActaMed shall maintain accurate and complete books and records regarding the transactions to and from UHC and the amounts ActaMed is charging UHC under this Agreement, with a system of audit trails, records and controls sufficient to satisfy the requirements imposed on ActaMed by its external auditors and governmental regulators. UHC shall have the right, not more often than once in each calendar year, to have employees or mutually agreeable external auditors audit the books and records of ActaMed relating to UHC transactions and charges for which UHC is responsible, to determine the proper amounts which should have been billed to UHC, which were billed to UHC, and which UHC has paid under this Agreement, and ActaMed's procedures for handling transactions to and from UHC. UHC shall give ActaMed two weeks prior notice of any such audit, and shall abide by reasonable ActaMed security and confidentiality procedures during the audit. UHC shall bear the cost of such audit, provided that in the event the audit determines that ActaMed has overcharged UHC by more than five percent of the amount properly due ActaMed in any month beginning on or after July 1, 1996, ActaMed shall pay all costs of such audit. 12.7 ActaMed will, at its expense, provide UHC annually with a report produced in accordance with standards established by the American Institute of Certified Public Accounts' Statement on Auditing Standards Number 70: Reports on the Processing of Transactions by Service Organizations. ActaMed shall submit the first such report to UHC by the end of third quarter 1997. 13. CONFIDENTIALITY AND SECURITY. 13.1 "Proprietary Information" means information that is (a) confidential to the business of a party, including, without limitation, computer software source code, technical documentation and information regarding proprietary computer systems, marketing and product development plans, financial and personnel information, and other business information not generally known to the public; and (b) is designated and identified as such [*] CONFIDENTIAL TREATMENT REQUESTED 15 by a party, or which the other party should have reasonably known was confidential. Proprietary Information belonging to ActaMed includes, without limitation, the Licensed Materials and the source code for its proprietary software used in connection with the Network. Proprietary Information belonging to UHC includes, without limitation, information relating to Cosmos or other UHC computer systems, and information regarding UHC's members, Providers or health plans. "Proprietary Information" does not include information which a party had in its possession prior to receiving it from the other party, or which a party properly receives from a third party, or which is or becomes available to the public, or which a party independently develops without reference to information received from the other party under this Agreement. 13.2 Proprietary Information and all physical embodiments thereof received by either party (the "Receiving Party") from the other party (the "Disclosing Party") during the term of this Agreement are confidential to and are and will remain the sole and exclusive property of the Disclosing Party. At all times, both during the term of this Agreement and after its termination, the Receiving Party shall hold all Proprietary Information of the Disclosing Party in confidence, and will not use, copy or disclose such Proprietary Information or any physical embodiment thereof (except as permitted by this Agreement), or cause any of the Proprietary Information to lose its character as confidential information. 13.3 The Disclosing Party's Proprietary Information shall be maintained under secure conditions by the Receiving Party, using reasonable security measures which shall be not less than the same security measures used by the Receiving Party for the protection of its own Proprietary Information of a similar kind, and any specific security measures required by this Agreement. The Receiving Party shall not remove, obscure or deface any proprietary legend relating to the Disclosing Party's rights, on or from any tangible embodiment of any Licensed Materials without the Disclosing Party's prior written consent. Within thirty days after the termination of this Agreement, the Receiving Party shall deliver to the Disclosing Party all Proprietary Information belonging to the Disclosing Party, and all physical embodiments thereof, then in the custody, control or possession of the Receiving Party. 13.4 If the Receiving Party is ordered by a court, administrative agency or other governmental body of competent jurisdiction to disclose Proprietary Information, or if it is served with or otherwise becomes aware of a motion or similar request that such an order be issued, then the Receiving Party will not be liable to the Disclosing Party for disclosure of Proprietary Information required by such order if the Receiving Party complies with the following requirements: (a) If an already-issued order calls for immediate disclosure, then the Receiving Party shall immediately move for or otherwise request a stay of such order to permit the Disclosing Party to respond as set forth in this paragraph 13.4; and (b) The Receiving Party shall immediately notify the Disclosing Party of the 16 motion or order by the most expeditious possible means; and (c) The Receiving Party shall join or agree to (or at a minimum shall not oppose) a motion or similar request by the Disclosing Party for an order protecting the confidentiality of the Proprietary Information including joining or agreeing to (or not opposing) a motion for leave to intervene by the Disclosing Party. 13.5 The Receiving Party shall immediately report to the Disclosing Party any attempt by any person of which the Receiving Party has knowledge (a) to use or disclose any portion of the Proprietary Information without authorization from the Disclosing Party; or (b) to copy, reverse assemble, reverse compile or otherwise reverse engineer any part of the Proprietary Information (except as permitted herein). 13.6 Each party agrees not to disclose or utilize individual health care claim information in any way that would violate any physician-patient confidence or any state or federal regulations. 13.7 The obligations of this section 13 shall survive termination or expiration of this Agreement as to any Proprietary Information which falls under the definition of "trade secret" under the Uniform Trade Secret Act, as adopted in the State of Georgia and as amended from time to time. For all other information which falls under the definition of Proprietary Information used in this Agreement, the obligations of this section 13 shall terminate five years after termination or expiration of this Agreement. 14. TERM AND TERMINATION. 14.1 This Agreement commences as of the date set forth above and continues for five years thereafter, unless earlier terminated as provided herein. The parties shall mutually agree upon any renewal of this Agreement, but the provisions of section 9 shall not be part of any renewal. Upon termination or expiration of this Agreement, UHC's rights to use the Licensed Materials and the Network shall cease. 14.2 If one party breaches any material provision of this Agreement, the nonbreaching party may terminate this Agreement by giving 60 days written notice of termination to the breaching party. If the breach is capable of being cured and the other party acts diligently and continuously to cure such breach within the 60 days, the termination shall not become effective. In the event ActaMed attempts to terminate this Agreement pursuant to this paragraph 14.2 due to UHC's failure to pay any undisputed amounts due, the sixty day notice and cure period set forth above shall be reduced to fifteen working days. 14.3 If UHC or an affiliate thereof shall, at any time, cease to manage or administer any Managed Plan, then, as of the date of such cessation, this Agreement shall terminate as to such Managed Plan. UHC shall inform ActaMed that an entity has ceased or will cease to be a Managed Plan promptly after such information is known to UHC. 17 14.4 Upon termination or expiration of this Agreement, the parties shall cooperate in the orderly and reasonable removal of UHC from the Network. The parties shall jointly develop a transition plan, which will allow UHC to use the Network services for a mutually agreeable time after termination or expiration, which shall be not less than three months. The transition plan will provide for a reasonable level of support to transition UHC off the Network. Each party will bear its own costs in developing the transition plan. During such additional time, UHC shall continue to pay ActaMed all fees due under section 12 of this Agreement. In the event that ActaMed has terminated this Agreement pursuant to paragraph 14.2 due to UHC's failure to pay amounts due to ActaMed, ActaMed will not be required to perform services for UHC or to allow UHC access to the Network during the transition period unless UHC pays ActaMed in advance for such services and Network access. UHC shall not be obligated to pay any site or transaction fees that accrue after the effective date of termination with respect to Providers that remain connected to the Network. 15. DISPUTE RESOLUTION. 15.1 In the event a dispute between ActaMed and UHC arises out of or is related to this Agreement, either party may request in writing that the representatives of the parties designated pursuant to paragraph 3.2 of this Agreement meet and negotiate in good faith to attempt to resolve the dispute without a formal proceeding. During the course of such negotiations, all reasonable requests made by one party to the other for information, including copies of relevant documents, will be honored. The specific format for such discussions will be left to the discretion of the designated representatives. 15.2 If the designated representatives conclude in good faith that amicable resolution through continued negotiation in this forum does not appear likely, then the matter will be escalated to a joint panel of ActaMed and UHC senior executives, by formal written notification by either party to the other. This panel will meet as required to attempt to resolve the dispute. The number and nature of the senior executives will depend on the issues in dispute, but will include those senior executives with authority to resolve all matters in dispute. At either party's election, this panel will be facilitated by an external facilitator designated by both parties. 15.3 Formal proceedings for the resolution of a dispute may not be commenced until the earlier of (a) the panel referred to in paragraph 15.2 concluding in good faith that amicable resolution through continued negotiation of the matter does not appear likely; or (b) 30 days after the first notice of the dispute was sent under paragraph 15.1 or paragraph 15.2. However, nothing in this section 15 shall preclude either party from seeking temporary or preliminary injunctive relief where a party determines in good faith that such relief is necessary to limit its damage or injury under this Agreement. 15.4 In the event the dispute is not resolved as outlined in paragraphs 15.1 and 15.2, and if either party wishes to pursue the dispute, either party may submit it to binding 18 arbitration in accordance with the rules of the American Arbitration Association. In no event may arbitration be initiated more than one year following the sending of written notice of the dispute. The parties shall request a list from the American Arbitration Association of five possible arbitrators who shall each have had at least five years experience in some aspect of computer networking matters or health care. Each of the parties will select one of these arbitrators and the parties or their selected arbitrators shall jointly select the third arbitrator from the proposed list. Any arbitration proceeding under this Agreement shall be conducted in Hennepin County, Minnesota, Atlanta, Georgia, or in a mutually agreeable location. The arbitrators shall have no authority to award any punitive or exemplary damages, or to vary or ignore the terms of this Agreement, and shall be bound by controlling law. 16. LIMITATION ON DAMAGES AND ALLOCATION OF RISK. 16.1 Except to the extent of ActaMed's obligation to indemnify UHC as provided in [*] IN NO EVENT SHALL EITHER PARTY'S LIABILITY TO THE OTHER PARTY (INCLUDING LIABILITY TO ANY PERSON WHOSE CLAIM OR CLAIMS ARE BASED ON OR DERIVED FROM A RIGHT OR RIGHTS CLAIMED BY THE OTHER PARTY) WITH RESPECT TO ANY AND ALL CLAIMS ARISING FROM OR RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT IN CONTRACT, TORT OR OTHERWISE, EXCEED [*]. 16.2 NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY (NOR TO ANY PERSON CLAIMING RIGHTS DERIVED FROM THE OTHER PARTY'S RIGHTS) FOR INCIDENTAL, CONSEQUENTIAL, SPECIAL, PUNITIVE OR EXEMPLARY DAMAGES OF ANY KING (INCLUDING, BUT NOT LIMITED TO, LOST PROFITS, LOSS OF BUSINESS OR OTHER ECONOMIC DAMAGE) AS A RESULT OF BREACH OF THIS AGREEMENT. 16.3 Notwithstanding anything to the contrary set forth in this Agreement, ActaMed shall not be responsible for any breach of this Agreement or loss to UHC to the extent such breach or loss is caused by materials that ActaMed purchased from UHC or services provided by UHC. 17. GENERAL. 17.1 This Agreement, including the Exhibits to it, constitutes the entire understanding between the parties and supersedes all proposals, communications and agreements between the parties relating to its subject matter. However, this Agreement does not supersede the UHC Outsourcing Agreement between ActaMed and UHC, dated December 4, 1995, as amended from time to time. No amendment, change, or waiver of any provision of this Agreement will be binding unless in writing and signed by both parties. [*] CONFIDENTIAL TREATMENT REQUESTED 19 17.2 This Agreement will be governed by and construed in accordance with the laws of the State of Georgia applicable to contracts made and performed therein. 17.3 Neither party may assign this Agreement without the prior, written consent of the other party, which shall not be unreasonably withheld. Any attempted assignment without such consent shall be void. Any assignment with consent does not release the assigning party from any of its obligations under this Agreement unless the consent so states. Notwithstanding the above, however, ActaMed may assign this Agreement without UHC's consent to the purchaser of all or substantially all the business or assets of ActaMed related to the Licensed Materials and the Network, as long as the purchaser is not a company which competes with UHC in any of the businesses UHC owns or operates at the time of the assignment. If the parties cannot agree upon whether a company competes with UHC in any of the businesses UHC owns or operates at the time of the assignment, the parties shall resolve the dispute pursuant to section 15. 17.4 Any notices relating to this Agreement shall be in writing and will be sent by certified United States mail, postage prepaid, return receipt requested, or by facsimile transmission or overnight courier service, addressed to the party at the address set forth below, or at such different address as a party has advised to the other party in writing and shall be deemed given and received when actually received: United HealthCare Corporation ActaMed Corporation 9900 Bren Road East 7000 Central Parkway Minneapolis, MN 55440 Suite 600 Attn: Chief Information Officer Atlanta, Georgia 30328 Attn: President 17.5 In the event one or more of the provisions of this Agreement are found to be invalid, illegal or unenforceable by a court with jurisdiction, the remaining provisions shall continue in full force and effect. 17.6 The obligations of the parties under this Agreement (other than the obligation to make payments) shall be suspended to the extent a party is hindered or prevented from complying therewith because of labor disturbances (including strikes or lockouts), war, acts of God, fires, storms, accidents, governmental regulations, failure of telecommunications vendors or suppliers, or any other cause whatsoever beyond a party's control. For so long as such circumstances prevail, the party whose performance is delayed or hindered shall continue to use all commercially reasonable efforts to recommence performance without delay and shall declare a disaster under its disaster recovery plan. 17.7 Each party shall have the right to include the other party's name on its customer or vendor list and to disclose the nature of the services and products provided under this Agreement, so long as such services and products are accurately represented; provided, however, that neither party has the right to use the other's name, trademarks or 20 trade names for other advertising, sales promotion, or publicity purposes without the other's prior written consent. 17.8 During the term of this Agreement, neither party will solicit or attempt to hire any individual who is then currently an employee of the other party or who has been an employee of the other party within the six months prior to the solicitation or hiring, without the other party's prior, written consent. This paragraph 17.8 shall only apply to individuals who, in the case of ActaMed, have performed services for UHC under this Agreement or worked in connection with the Network or the Licensed Materials, or who, in the case of UHC, have worked with ActaMed or received services from ActaMed, on behalf of UHC. THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION THAT MAY BE ENFORCED BY THE PARTIES. This Agreement may be executed in one or more counterparts each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date set forth above. UNITED HEALTHCARE CORPORATION ACTAMED CORPORATION By: /s/ Travers H. Wills By: /s/ Michael K. Hoover ------------------------------- ------------------------------- Its: Chief Operating Officer Its: President ------------------------------ ------------------------------ Date: Date: April 4, 1996 ----------------------------- ----------------------------- 21 EXHIBIT LIST Exhibit A: Managed Plans Exhibit B: Licensed Materials Exhibit C: Development Work in Progress Exhibit D: Reports Exhibit E: Escrow Agreement Exhibit F: Network Maintenance and Support Services Exhibit G: Security Exhibit H: Transactions Exhibit 1: Performance Standards and Methods of Measurement Exhibit J: UHC Operating Environment Exhibit K: MetraHealth EDI Contracts 22 EXHIBIT A MANAGED PLANS Community Health Network of Louisiana, Inc. (purchase pending) PHP, Inc. (Michigan) PHP of Mid Michigan PHP of South Michigan PHP of Southwest Michigan PHP of West Michigan PHP of South Carolina PHP of North Carolina, Inc. (purchase pending) Physicians Plus Insurance Corporation Allina EXHIBIT B LICENSED MATERIALS
Right to Right to Reproduce Modify --------- ------ *User Manual, versions 2.1 and 2.2.5 No No Portal Specifications No No Communications Interface Document HCFA Claim Validations HCFA National Standard Format Claims ANSI X12 837 Claims Format Implementation Guide for Claims ANSI Xl 2 835 Electronic Remittance Advice UB92 Hospital Claim Format DOS Command Line Routines UNIX Command Line Routines Training Materials Version 2.2.5 Demo Disks and CSI Demo Disks Yes Yes PL Training Manual Yes Yes Network: EDI TCP/IP Interface Specification No No Promotional Material ProviderLink Brochure Yes Yes ProviderLink Send Back Card Yes Yes
*ActaMed will, upon request from UHC, identify UHC as the sponsor and promoter of these materials. EXHIBIT C DEVELOPMENT WORK IN PROGRESS Projects which are completed or will be completed by ActaMed as part of the sale: 1. COSMOS Distributed 'A' 2. Ohio health plan merger 3. Separation of the EmployerLink-ProviderLink network. At that time, a comprehensive list of hardware and software products required will be provided to ActaMed. 4. ORBIT 5. MHS "Mail Rules" EMPLOYERLINK SPLIT FROM PROVIDERLINK NETWORK PRODUCTION ENVIRONMENT
ACQUIRE ALTERNATE HARDWARE: [*] 20 hours, UHC [*] 4 hours, UHC [*] 2 hours, UHC [*] 20 hours, UHC [*] 10 hours, PL ACQUIRE ALTERNATE SOFTWARE: [*] 10 hours, UHC [*] 6 hours, UHC [*] 2 hour, UHC INSTALL VENDOR HARDWARE/SOFTWARE: [*] 40 hours, UHC [*] 40 hours, UHC [*] 10 hours, UHC [*] 10 hours, PL SPLIT PRODUCTION EMPLOYERLINK NETWORK SOFTWARE FROM PROVIDERLINK: [*] 30 UHC, 15 PL [*] 30 UHC, 8 PL [*] 30 UHC, 8 PL [*] 50 UHC [*] 40 UHC, 20 PL [*] 15 hours, PL
[*] CONFIDENTIAL TREATMENT REQUESTED EXHIBIT D REPORTS REPORTS ACTAMED WILL PROVIDE TO UHC The following reports will be provided to UHC from ActaMed on a routine schedule as indicated. - - Orbit reports Three [*] core operating reports, for each market, will be sent to each health plan lead ProviderLink/EDI representative and a central UHC corporate resource. (Available electronically or on paper as requested.) UNI Access Status Report [*] Monthly Detail Transaction report by source UNI [*] Monthly Detail Transaction report by Destination Market [*] - - Intercompany billing detail reports for use in determining allocation of transaction expensed to the proper health plan or business unit. Summary of fees by health plan detailed by plan and DIV [*] Intercompany Billing Details-site fees, mail and Era transactions [*] Intercompany Billing Details-transaction charges [*]
- - Help Desk Reports The following problem notification procedures will be performed by the ActaMed Help Desk staff by call priority level. Severity levels are defined in Exhibit 1. Reporting on these activities will be provided to UHC upon request. Severity 1 - High priority calls will be reported to a health plan on a [*] basis. A report listing each call and its status will be electronically mailed or faxed the following morning. For a specific high priority call, if closure is not expected within [*], a call will be placed to the UHC health plan ProviderLink representative. If the call is closed within [*], notification to UHC health plan ProviderLink representative via the next morning's E-mail report is acceptable. If an UHC health plan ProviderLink representative cannot be accessed "live", a voice mail will be left. [*] contact with the customer is required until closure. Severity 2 - Normal priority calls will also be reported on a [*] report listing each call and its status. No telephone calls will be placed to the plan for these calls except on and as needed basis. Regular customer contact is required until closure. [*] CONFIDENTIAL TREATMENT REQUESTED Severity 3 - Low-priority calls will also be reported in a [*] report to UHC health plan ProviderLink representative containing all calls and status. Customer contact is required as needed or when a course of action has been determined. - - In the event that the ActaMed Help Desk computerized on-line problem management tool is down, call information will be recorded manually and entered into the system as soon as it becomes available. - - Required problem resolution timeframes are outlined in Exhibit D. - - ActaMed should prepare a quarterly Executive Summary report for UHC management detailing the customer issues raised during this time frame and the resolution of these problems. - - Network Availability Reports Modem connectivity-actual performance to standard Monthly Network Transaction Success rate by plan, and in the aggregate Monthly Host and Modem availability Monthly - - Itemization and accounting for the hours worked by the UHC Dedicated Team, and a project status report on each item worked. Reports UHC will provide to ActaMed These reports will include data from health plans centralized on COSMOS, those plans with decentralized UHC host systems including, but not limited to, Complete, PrimeCare, Ramsay, UHC Illinois, etc., and all ex-MetraHealth systems including the previous Travelers and Met Life systems. UHC will provide a resource to coordinate the assembly of this data and will serve as the contact for all questions regarding these reports. - - Membership data by health plan or market provided on paper or Monthly electronically where available. [*] CONFIDENTIAL TREATMENT REQUESTED - - Claims receipts or processed claims, for all commercial UHC Monthly health plans or markets, offices or systems, including the total volume of claims received electronically by month and year-to-date, if available, actual penetration percentages by plans, market, offices or systems, and desired percentage of electronic claim receipts. - - Decision Support System (DSS) Data will be extracted from UHC Monthly health plans and markets to support the market analysis done by ActaMed and for the prioritization of target providers and potential prospects. (A sample report is provided on Attachment 1) - - Physician and Hospital claims volume data for each health Quarterly plan/market by Provider Number and/or submitting Entity Tax ID including: * total claims volumes received by each provider/tax ID * volume received electronically (EDI) by each provider/tax ID * volume received on tape/other by each provider/tax ID, Monthly if applicable and available This information will be provided electronically, as available. - - Other data to be determined in the future to support the analysis of new transactions as mutually agreed by both parties. - - Strategic information from UHC related to EDI growth goals Quarterly and objectives by health plan/market will be provided to ActaMed as needed. This will include pertinent project plans and other material/documentation that will assist ActaMed to enhance and increase electronic transactions for UHC. EXHIBIT E MASTER ESCROW AGREEMENT BETWEEN PRODUCER AND FORT KNOX This escrow agreement is intended for use by a Producer (Developer) and Fort Knox Escrow Services, Inc. The Producer may escrow multiple products under this agreement. In addition, multiple Licensees (End Users) may be registered as beneficiaries of this agreement. Although each Licensee does not sign the agreement, Fort Knox does notify them of the service. Master Escrow Agreement This Master Escrow Agreement ("Agreement") is made as of this 20th day of February, 1995, by and between ActaMed Corp. ("Producer") and Fort Knox Escrow Services, Inc. ("Fort Knox"). PRELIMINARY STATEMENT. Producer intends to deliver to Fort Knox a sealed package containing magnetic tapes, disks, disk packs, or other forms of media, in machine readable form, and the written documentation prepared in connection therewith, and any subsequent updates or changes thereto (the "Deposit Materials") for the computer software products (the "System(s)"), all as identified from time to time on Exhibit B hereto. Producer desires Fort Knox to hold the Deposit Materials, and, upon certain events, deliver the Deposit Materials (or a copy thereof) to those persons or entities listed from time to time on Exhibit C hereto as a licensee of Producer ("Licensee"), in accordance with the terms hereof. Now, therefore, in consideration of the foregoing, of the mutual promises hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. DELIVERY BY PRODUCER. Producer shall be solely responsible for delivering to Fort Knox the Deposit Materials as soon as practicable. Fort Knox shall hold the Deposit Materials in accordance with the terms hereof. Except as provided in Section 10 below, Fort Knox shall have no obligation to verify the completeness or accuracy of the Deposit Materials. 2. DUPLICATION; UPDATES. (a) Fort Knox may duplicate the Deposit Materials by any means in order to comply with the terms and provisions of this Agreement, provided that the Licensee to whom a copy of the Deposit Materials is to be delivered pursuant to the terms hereof shall bear the expense of duplication. (b) Producer shall deposit with Fort Knox any modifications, updates, new releases or documentation related to the Deposit Materials by delivering to Fort Knox an updated version of the Deposit Materials ("Additional Deposit") as soon as practicable after the modifications, updates, new releases and documentation have become generally available to Producer's Licensees, but in any event within thirty (30) days following the first delivery to any Licensee. When Producer delivers an Additional Deposit to Fort Knox, Fort Knox shall return to Producer the previous Deposit Materials it held in custody, except for the Deposit Materials that were the subject of the most recent previous deposit. Except as provided in Section 10 below, Fort Knox shall have no obligation to verify the accuracy or completeness of any Additional Deposit or to verify that any Additional Deposit is in fact a copy of the Deposit Materials or any modification, update, or new release thereof. 3. NOTIFICATION OF DEPOSITS. Simultaneous with the delivery to Fort Knox of the Deposit Materials or any Additional Deposit, as the case may be, Producer shall deliver to Fort Knox and to each Licensee a written statement specifically identifying all items deposited and stating that the Deposit Materials or any Additional Deposit, as the case may be, so deposited have been inspected by Producer and are complete and accurate. Within five (5) days of receipt by Fort Knox of the Deposit Materials or any 1 Additional Deposit, Fort Knox will send notification of such receipt via certified or registered mail to the Licensee(s). 4. DELIVERY BY FORT KNOX 4.1 DELIVERY BY FORT KNOX TO LICENSEES. Fort Knox shall deliver the Deposit Materials, or a copy thereof, to a Licensee only in the event that: (a) Producer notifies Fort Knox to effect such delivery to a Licensee or Licensees at a specific address or addresses, the notification being accompanied by a check payable to Fort Knox in the amount of one hundred dollars ($100.00); or (b) Fort Knox receives from any Licensee: (i) written notification that Producer has failed in a material respect to support the applicable Systems as required by a valid and existing license agreement ("License Agreement") between Licensee and Producer or that Producer has generally ceased its business of supporting the applicable systems ("Producer Default"); (ii) evidence satisfactory to Fort Knox that Licensee has notified Producer, at least ten (10) days prior to the notice to Fort Knox, of such Producer Default in writing; (iii) a written demand that the Deposit Materials be released and delivered to Licensee; (iv) a written undertaking from the Licensee that the Deposit Materials being supplied to the Licensee will be used only as permitted under the terms of the License Agreement; (v) specific instructions from the Licensee for this delivery; and (vi) a cashier's check payable to Fort Knox in the amount of five hundred dollars ($500.00). (c) If the provisions of paragraph 4.1(a) are satisfied, Fort Knox shall, within five (5) business days after receipt of the notification and check specified in paragraph 4.1(a), deliver the Deposit Materials in accordance with the applicable instructions. (d) If the provisions of paragraph 4.1(b) are met, Fort Knox shall, within five (5) business days after receipt of all the documents specified in paragraph 4.1(b), send by certified mail to Producer a photostat copy of all such documents. Producer shall have thirty (30) days from the date on which Producer receives such documents ("Objection Period") to notify Fort Knox of its objection ("Objection Notice") to the release of the Deposit Materials to a Licensee and to request that the issue of Licensee's entitlement to a copy of the Deposit Materials be submitted to arbitration in accordance with the following provisions: 2 (i) If Producer shall send an Objection Notice to Fort Knox during the Objection Period, the matter shall be submitted to, and settled by arbitration by, a panel of three (3) arbitrators chosen by the Atlanta Regional Office of the American Arbitration Association in accordance with the rules of the American Arbitration Association. The arbitrators shall apply Georgia law. At least one (1) arbitrator shall be reasonably familiar with the computer software industry. The decision of the arbitrators shall be binding and conclusive on all parties involved, and judgment upon their decision may be entered in a court of competent jurisdiction. All costs of the arbitration incurred by Fort Knox, including reasonable attorneys' fees and costs, shall be paid by the non-prevailing party. (ii) Producer may, at any time prior to the commencement of arbitration proceedings, notify Fort Knox that Producer has withdrawn the Objection Notice. Upon receipt of any such notice from Producer, Fort Knox shall reasonably promptly deliver the Deposit Materials to the Licensee in accordance with the instructions specified in paragraph 4.1(b)(v). (e) If, at the end of the Objection Period, Fort Knox has not received an Objection Notice from Producer, then Fort Knox shall reasonably promptly deliver the Deposit Materials to the Licensee in accordance with the instructions specified in paragraph 4.1(b)(v). 4.2 DELIVERY BY FORT KNOX TO PRODUCER. Fort Knox shall release and deliver the Deposit Materials to Producer upon termination of this Agreement in accordance with paragraph 7(a) hereof. 5. INDEMNITY. Producer and any party claiming beneficiary status under this Agreement shall indemnify and hold harmless Fort Knox and each of its directors, officers, agents, employees and stockholders ("Fort Knox Indemnities") absolutely and forever, from and against any and all claims, actions, damages, suits, liabilities, obligations, costs, fees, charges, and any other expenses whatsoever, including reasonable attorneys' fees and costs, that may be asserted against Fort Knox Indemnitee in connection with this Agreement or the performance of Fort Knox or any Fort Knox Indemnitee hereunder, except as a result of the negligent act or omission on the part of Fort Knox or any Fort Knox Indemnitee. 6. DISPUTES AND INTERPLEADER. (a) In the event of any dispute between any of Fort Knox, Producer and/or any Licensee relating to delivery of the Deposit Materials by Fort Knox or to any other matter arising out of this Agreement, Fort Knox may submit the matter to any court of competent jurisdiction in an interpleader or similar action. Any and all costs incurred by Fort Knox in connection therewith, including reasonable attorneys' fees and costs, shall be borne by the party seeking the copy of the Deposit Materials. (b) Fort Knox shall perform any acts ordered by any court of competent jurisdiction, without any liability or obligation to any party hereunder by reason of such act. 3 7. TERM AND RENEWAL. (a) The initial term of this Agreement shall be two (2) years, commencing on the date hereof (the "Initial Term"). This Agreement shall be automatically extended for an additional term of one year ("Additional Term") at the end of the Initial Term and at the end of each Additional Term hereunder unless, on or before ninety (90) days prior to the end of the Initial Term or an Additional Term, as the case may be, either party notifies the other party that it wishes to terminate the Agreement at the end of such term. (b) In the event of termination of this Agreement, Producer shall pay all fees due Fort Knox and Fort Knox shall promptly notify all Licensees that this Agreement has been terminated and that Fort Knox shall promptly return to Producer all copies of the Deposit Materials then in its possession. 8. FEES. Producer shall pay to Fort Knox fees in accordance with Exhibit A as compensation for Fort Knox's services under this Agreement. (a) PAYMENT. Fort Knox shall issue an invoice to Producer following execution of this Agreement ("Initial Invoice"), on the commencement of any Additional Term hereunder, and in connection with the performance of any additional services hereunder. Payment is due upon receipt of invoice. All fees and charges are exclusive of, and Producer is responsible for the payment of, all sales, use and like taxes. Fort Knox shall have no obligations under this Agreement until the Initial Invoice has been paid in full by Producer. (b) NONPAYMENT. In the event of non-payment of any fees or charges invoiced by Fort Knox, Fort Knox shall give notice of non-payment of any fee due and payable hereunder to the Producer and, in such an event, the Producer shall have the right to pay the unpaid fee within thirty (30) days after receipt of notice from Fort Knox. If Producer fails to pay in full all fees due during such thirty (30) day period, Fort Knox shall give notice of non-payment of any fee due and payable hereunder to the Licensee(s) and, in such event, the Licensee(s) shall have the right to pay the unpaid fee within ten (10) days of receipt of such notice from Fort Knox. Upon payment of the unpaid fee by either the Producer or the Licensee(s), as the case may be, this Agreement shall continue in full force and effect until the end of the applicable term. Failure to pay the unpaid fee under this paragraph 8(b) by both Producer and the Licensee(s) shall result in termination of this Agreement. 9. OWNERSHIP OF DEPOSIT MATERIALS. Fort Knox and Producer recognize and acknowledge that ownership of the Deposit Materials shall remain with Producer at all times. 10. BANKRUPTCY. Producer and Licensee acknowledge that this Agreement is an "agreement supplementary to" the License Agreement as provided in Section 365(n) of Title 11, United States Code (the "Bankruptcy Code"). Producer acknowledges that if Producer as a debtor in possession or a trustee in Bankruptcy in a case under the Bankruptcy Code rejects the License Agreement or this Agreement, Licensee may elect to retain its rights under the License Agreement and this Agreement as provided in Section 365(n) of the Bankruptcy Code. Upon written request of Licensee to Producer or the Bankruptcy Trustee, Producer or such Bankruptcy Trustee shall not interfere with the rights of Licensee as provided in the License Agreement and this Agreement, including the right to obtain the Deposit Material from Fort Knox in accordance with Section 3. 4 11. MISCELLANEOUS. (a) REMEDIES. Except for actual fraud, gross negligence or intentional misconduct, Fort Knox shall not be liable to Producer for any act, or failure to act, by Fort Knox in connection with this Agreement. Fort Knox will not be liable for special, indirect, incidental or consequential damages hereunder. Licensees are intended to be third party beneficiaries as to the express rights and subject to the obligations set forth herein. (b) NATURAL DEGENERATION; UPDATED VERSION. In addition, the parties acknowledge that as a result of the passage of time alone, the Deposit Materials are susceptible to loss of quality ("Natural Degeneration"). It is further acknowledged that Fort Knox shall have no liability or responsibility to any person or entity for any Natural Degeneration. For the purpose of reducing the risk of Natural Degeneration, Producer shall deliver to Fort Knox a new copy of the Deposit Materials at least once every three years. (c) PERMITTED RELIANCE AND ABSTENTION. Fort Knox may rely and shall be fully protected in acting or refraining from acting upon any notice or other document believed by Fort Knox in good faith to be genuine and to have been signed or presented by the proper person or entity. Fort Knox shall have no duties or responsibilities except those expressly set forth herein. (d) INDEPENDENT CONTRACTOR. Fort Knox is an independent contractor, and is not an employee or agent of either the Producer or any Licensee. The foregoing notwithstanding, nothing in this Agreement shall limit any remedies to which Producer may be entitled, whether at law or in equity, in connection with any claim relating to the misappropriation of confidential information or trade secrets (including the Deposit Materials) or the violation of any copyright or other intellectual property right of Producer. Licensee is a party to this Agreement. (e) AMENDMENTS. This Agreement shall not be modified or amended except by another agreement in writing executed by the parties hereto, except that Producer may modify this Agreement at any time without the consent of Fort Knox to designate additional "Systems" on Exhibit B hereto and additional Licensees on Exhibit C hereto, as appropriate. (f) ENTIRE AGREEMENT. This Agreement, including all exhibits hereto, supersedes all prior discussions, understandings and agreements between the parties with respect to the matters contained herein, and constitutes the entire agreement between the parties with respect to the matters contemplated herein. All exhibits attached hereto are by this reference made a part of this Agreement and are incorporated herein. (g) COUNTERPARTS; GOVERNING LAW. This Agreement may be executed in two (2) counterparts, each of which when so executed shall be deemed to be an original and both of which when taken together shall constitute one and the same Agreement. This Agreement shall be construed and enforced in accordance with the laws of the State of Georgia. (h) CONFIDENTIALITY. Fort Knox will hold and release the Deposit Materials only in accordance with the terms and conditions hereof, and will maintain the confidentiality of the Deposit Materials. 5 (i) NOTICES. All notices, requests, demands or other communications required or permitted to be given or made under this Agreement shall be in writing and shall be delivered by hand or by commercial overnight delivery service which provides for evidence of receipt, or mailed by certified mail, return receipt requested, postage prepaid, and addressed as follows: (i) If to Producer: to the address listed on the signature page hereof (ii) If to Fort Knox: Fort Knox Escrow Services, Inc. 3539-A Church Street Clarkston, Georgia 30021-1717 Attn: Contracts Administrator Copy: Michael A. Payne Vice President If delivered personally or by commercial overnight delivery service, the date on which the notice, request, instruction or document is delivered shall be the date on which delivery is deemed to be made, and if delivered by mail, the date on which such notice, request, instruction or document is received shall be the date on which delivery is deemed to be made. Any party may change its address for the purpose of this Agreement by notice in writing to the other parties as provided herein. (j) SURVIVAL. Paragraphs 5, 6, 8, 9 and 10 shall survive any termination of this Agreement. (k) NO WAIVER. No failure on the part of any party hereto to exercise, and no delay in exercising any right, power or single or partial exercise of any right, power or remedy by any party will preclude any other or further exercise thereof or the exercise of any other right, power or remedy. No express waiver or assent by any party hereto to any breach of or default in any term or condition of this Agreement shall constitute a waiver of or an assent to any succeeding breach of or default in the same or any other term or condition hereof. 6 IN WITNESS WHEREOF each of the parties has caused its duly authorized officer to execute this Agreement as of the date and year first above written. Fort Knox Escrow Services, Inc. By: /s/ Michael A. Payne --------------------------------------------- Title: V.P. ------------------------------------------ Producer By: /s/ Nancy J. Ham ------------------------------------------------------ Print Name: Nancy J. Ham ------------------------------------------------------ Title: CFO ------------------------------------------------------ Address: 7000 Central Parkway, Suite 620 ------------------------------------------------------ Atlanta, GA 30328 ------------------------------------------------------ ------------------------------------------------------ Phone: (404) 551-1600 ------------------------------------------------------ Fax: (404) 551-1601 ------------------------------------------------------ Attention: Nancy Ham ------------------------------------------------------ 7 EXHIBIT A Fees to be paid by Producer shall be as follows: Initialization fee (one time only) $750 (payable for initial term only) Annual maintenance/storage fee - includes one Deposit Material update $800/Product - includes two cubic feet of storage space Annual Licensee registration fee FULL SERVICE $ 150/Licensee (foreign licensee $250) Additional Updates $ 100/Product (above one per year) Additional Storage Space $ 150/Cubic foot Payable by Licensee or Producer: Due Upon Licensee's or Producer's Request for Release of Deposit Materials $ 500
Fees due in full, in US dollars, upon receipt of signed contract or deposit material, whichever comes first. Thereafter, fees shall be subject to their current pricing, provided that such prices shall not increase by more than 10% per year. 8 EXHIBIT B B1. Product Name:____________________________________________________________ Version #:_______________________________________________________________ Prepared/Confirmed by:________________________________________________________ Title:___________________________________ Date:__________________________ Signature:____________________________________________________________________ Type of deposit: ____ Initial Deposit ____ Update Deposit to replace current deposits ____ Other (please describe)_____________________________________________ ITEMS DEPOSITED: Quantity Media Type Description of Material A) ________ ____________ _______________________________________________ B) ________ ____________ _______________________________________________ C) ________ ____________ _______________________________________________ B2. Product Name:____________________________________________________________ Version #:_______________________________________________________________ Prepared/Confirmed by:________________________________________________________ Title:___________________________________ Date:__________________________ Signature:____________________________________________________________________ Type of deposit: ____ Initial Deposit ____ Update Deposit to replace current deposits ____ Other (please describe)_____________________________________________ ITEMS DEPOSITED: Quantity Media Type Description of Material A) ________ ____________ _______________________________________________ B) ________ ____________ _______________________________________________ C) ________ ____________ _______________________________________________ 9 EXHIBIT C Licensees Please list a primary contact person, company names, and address, as well as telephone and facsimile numbers. COMPANY NAME & ADDRESS A.____________________________ Contact Name:____________________ ______________________________ Telephone:_______________________ ______________________________ Facsimile:_______________________ ______________________________ Date:____________________________ Product Name and Version #_____________________________________ B.____________________________ Contact Name:____________________ ______________________________ Telephone:_______________________ ______________________________ Facsimile:_______________________ ______________________________ Date:____________________________ Product Name and Version #______________________________________ C.____________________________ Contact Name:____________________ ______________________________ Telephone:_______________________ ______________________________ Facsimile:_______________________ ______________________________ Date:____________________________ Product Name and Version #______________________________________ (PLEASE COPY PAGE AS NECESSARY) 10 FIRST AMENDMENT TO MASTER ESCROW AGREEMENT This First Amendment to Master Escrow Agreement (the "Agreement") is made to that certain Master Escrow Agreement dated February 1995 (the "master Escrow Agreement"), between Fort Knox Escrow Services, Inc. ("Fort Knox"), and ActaMed Corp. (the "Producer"), to provide certain amended or revised terms to the Master Escrow Agreement. The Master Escrow Agreement and this Amendment together constitute the "Agreement" referred to in the Master Escrow Agreement. All capitalized terms used in this Amendment and not defined herein have the meaning provided for in the Master Escrow Agreement. In the event of any conflict between the terms of this Amendment and the terms of the Master Escrow Agreement, the terms of this Amendment shall govern and control. In consideration of the sum of Ten Dollars ($10.00) in hand resolved, and other good and valuable considerations, the receipt and adequacy of which is hereby acknowledged, the parties hereby do agree as follows: Section 4.1(b)(i) of the Master Escrow Agreement is deleted in its entirety and the following is substituted thereafter: (I) written notification that Producer has failed in material respects to support the applicable Systems as required by a valid and existing License Agreement ("License Agreement") between Licensee and Producer, or that the terms of any other agreement to which Producer and Licensee are a party provides that Licensee is entitled to receive the Deposit Materials, or that Producer has ceased the business of supporting the applicable Systems ("Producer Default"); IN WITNESS WHEREOF, each of the parties has caused this Amendment to be executed in duplicate originals by its duly authorized representative. Fort Knox Escrow Services, Inc. ActaMed Corporation By: /s/ Jane L. Elliott By: /s/ Nancy J. Ham -------------------------- ------------------------------- Name: Jane L. Elliott Name: Nancy J. Ham ------------------------ ----------------------------- Title: Senior Account Manager Title: CFO ----------------------- ---------------------------- Date: 9/27/95 Date: 9/27/95 ------------------------ ----------------------------- EXHIBIT F MAINTENANCE AND SUPPORT SERVICES ActaMed will provide United HealthCare Corporation with the following hardware, network and application (product) maintenance services which will be performed by ActaMed staff not dedicated to UHC enhancements. The cost of these maintenance services are provided as a part of the transaction and site fees, and include: - - Correction of identified system bugs in the network hardware or application; - - Changes and modifications to the ActaMed hardware, application and network required to manage scalability and capacity issues associated with increased transaction volumes; - - Changes required to maintain service level commitments as identified in Exhibit I; - - Help Desk services as defined in Exhibit I, including appropriate staffing, call response time, escalation procedures, reporting, availability, severity levels, problem log tracking and problem resolution, etc; - - Maintaining the ORBIT system and accurately performing the provider registration process on ORBIT to include the assignment of Site and Tax ID's; - - User Security set up and processing; - - Marketing Group Product Support for maintenance of a COMPUTERIZED DEFECT CONTROL SYSTEM problem log to include ongoing discussions between the Help Desk personnel and the ActaMed development staff to communicate customer needs and reactions to daily activity; - - Plan Rep Training for all current and future owned or managed plans as well as UHC corporate staff; - - Plan Rep and Corporate training will be conducted at ActaMed locations unless alternate locations are mutually agreed upon by both parties. - - Maintenance, monitoring and reporting of network and communication systems regarding stability and performance as specified in Exhibit D; F 1 - - Multi-Payor and Vendor technical and administrative support to insure collection and transmission of maximum volumes of electronic claims to UHC; Infrastructure will be upgraded by ActaMed as needed to accommodate provider transactions to UHC; - - Maintenance of appropriate connectivity to UHC host systems to maintain security provisions and data integrity of UHC transactions; - - Administer and maintain license agreement procedures with providers assuring appropriate signatures and approvals from UHC providers; - - Provide routine, updated application and network documentation for UHC sites and corporate; - - Maintain the network and application to assure data integrity of transactions; - - Maintenance releases shall be defined to include any emergency releases issued by ActaMed; - - Technology upgrades to the ActaMed hardware, network, and/or application (to include such things as fault tolerance products and services) will be included as part of ongoing maintenance; - - Provide ongoing support of and communication with the health plan representatives on electronic commerce issues, targets and strategies; - - Provide monthly billing detail by health plan, and in the aggregate, for all transaction activity. - - The following list of projects are "maintenance" and are part of the general support activities provided by ActaMed: 1. TCP/IP socket interface to ESN 2. Claim Batch Processing (CPB) - Report Generation Redesign 3. TALX Voice Response system support 4. Identification of health plans by payer ID 5. Menu navigation and file transfer 6. Accept physician claims using HCFA NSF 2.0 format F 2 EXHIBIT G ACTAMED PROVIDERLINK SECURITY FUNCTION OBJECTIVE To provide adequate data security given the confidential nature of the data and the types of transactions performed on the ActaMed ProviderLink network. Security related to ActaMeds ProviderLink is made up of multiple components: [*]. This document will concentrate on workstation and network security. FUNCTION FEATURES DATA OWNERSHIP The ActaMed ProviderLink network is a system that enables communication between a health care provider's place of business and payer host systems. While the ActaMed ProviderLink network enables the flow of data between these entities, it "owns" none of the data. [*] ActaMed ProviderLink [*]. [*] by the ActaMed ProviderLink network [*]. A [*] when installing the ActaMed ProviderLink application software. In [*] ProviderLink, this consisted of [*]. With [*] the ActaMed ProviderLink application, [*]. The [*] then [*] ActaMed ProviderLink application [*]. A [*] is used [*] to [*]. When the ActaMed ProviderLink application software [*]. It is the responsibility of [*] and the [*]. This allows [*] who [*] of ActaMeds ProviderLink. The [*] is [*] with all [*] the ActaMed's ProviderLink network, but only [*] is [*]. [*] The ActaMed ProviderLink [*] to manage security. ActaMed [*] will [*]. When [*] the [*] can perform and [*] that [*] CONFIDENTIAL TREATMENT REQUESTED G 1 the [*] are granted. The [*] also [*] with some of the [*] ActaMed's ProviderLink. The ActaMed ProviderLink [*] makes a [*] with [*] the ActaMed ProviderLink network. The [*] will return [*] requested transaction [*]. In addition, the [*] that make up the ActaMed ProviderLink [*] use a [*] to control access. Each [*] call will [*] as part of [*]. In this manner, we [*] to a [*] in effect, if you know the [*] of the ActaMed ProviderLink [*] you still cannot [*]. [*] In general, [*] is [*] to the [*]. As necessary, the ActaMed ProviderLink [*] will provide [*] to satisfy the [*]. In the case of [*] ActaMed ProviderLink [*]. Also associated with each [*] are [*]. When transactions are performed to [*] the [*] then the [*]. For [*] transactions (referrals, claim status, etc.), the [*]. [*] CONFIDENTIAL TREATMENT REQUESTED G 2 ACTALINK SECURITY FUNCTION OBJECTIVE To provide adequate data security given the confidential nature of the data and the types of transactions performed on the ActaLink network. FUNCTION FEATURES [*] ActaLink is a distributed database system which operates as if it were centralized. It implements an [*] in a [*]. It supports operations that make it [*]. The user need not be concerned with [*]. [*] a given user is provided with a [*] the information in the system is [*]. [*] all of the details for [*]. The [*] is a set of [*]. The [*] of the detailed information [*]. The [*] of the database system makes [*] and intuitive, a [*]. [*] [*] have [*]. The [*] for [*] at a [*]. Once a [*] the network [*] who must [*] with a [*] for that purpose. From that time onward, until the end of the [*] the [*] must be used by the individual [*]. All [*] and [*] is managed [*]. [*] All ActaLink [*] wherever [*] become the [*]. This [*] which network users are [*] ActaLink [*]. ActaMed provides [*] and [*] that are used only for the [*]. The [*] uses this [*] to access ActaLink through [*]. [*] CONFIDENTIAL TREATMENT REQUESTED G 3 The [*] does not have ActaLink [*] so the local [*] must use a different account for personal ActaLink network access. This reduces the probability that [*] could walk up to [*] and grant [*] without [*]. A given ActaLink [*] may be [*] a variety of [*] but only if [*] have [*]. Accordingly, a physician can [*] at [*] as [*] assuming that [*]. This [*] can be granted with [*]. [*] When a [*] the [*] is [*] and the [*] is returned to [*]. The [*] determines which [*] to be [*] to the user [*] and uses [*] to prevent [*] from [*]. The [*] only presents the user with [*]. [*] The ActaLink [*] is composed of [*] may [*] information in ActaLink [*]. All access to [*] in the ActaLink system [*] are [*]. The only method of [*] is through the ActaLink [*]. A [*] to the [*] governed by [*]. [*] The [*] of using particular [*] to each [*]. This permits the [*] to allow [*] and [*] allowing some [*]. [*] correspond to [*] each of which [*]. As stated in the [*] this [*] is accomplished by [*] to the user. [*] CONFIDENTIAL TREATMENT REQUESTED G 4 EXHIBIT H TRANSACTION DEFINITIONS [*] and [*] allow a user to [*] and [*] to the [*]. [*] which allows a user to [*]. [*] which allows a user to [*] about the [*] and their [*]. A user can also [*] if available. [*] which allows a user to [*] for [*]. [*] which allows a user to [*]. [*] which allows a user to [*]. [*] allow [*]. [*] which allows a user to [*]. [*] CONFIDENTIAL TREATMENT REQUESTED H EXHIBIT I PERFORMANCE STANDARDS AND METHODS OF MEASUREMENT NETWORK AVAILABILITY The network will be available 24 hours a day, 7 days a week with the exception of scheduled downtime. - - During this time, ActaMed will achieve the following performance standards: * [*] of the time or better, hardware and modems will be operational and available for receiving/accepting calls. Hardware specifically includes the ActaMed UNIX machines and the modems attached to the hardware. Measurement will be weekly with reporting monthly. * [*] or better successful modem connectivity, until 30 days after the network is moved and is under the complete control of ActaMed, at which time [*] or better successful modem connection performance will be required. Of the calls attempted, ActaMed's bank of modems will negotiate a successful connection and offer service [*] of the time. This measurement will be based on statistics generated by the HDMS modem rack network controller and will be measured weekly with reporting monthly. * [*] or better of transactions will be successful. Of the transactions submitted to ActaMed, [*] of these will be successfully serviced. Measurement will be weekly with reporting monthly. The definition for transaction success will be those transactions that do not result in a system generated, non-user created error. They may be categorized into the following: - - transactions that return valid data - - transactions that return a meaningful message, but not an error (i.e. "Name not found" when performing an eligibility inquiry by name.) - - transactions returning an error based on the information received (i.e. "Unknown Request Format" which indicates an incorrectly formatted transaction.) [*] CONFIDENTIAL TREATMENT REQUESTED I 1 Transaction failures are defined as those transactions that fail due to a system component failure (i.e. "Internal DCE Error" which identifies that a service necessary to complete the transaction was not available). Transaction failures will be recorded and measured according to the standards described above. AVAILABILITY MEASUREMENT Availability is measured as the number of ACTUAL hours available as a percentage of total AVAILABLE hours. Planned systems downtime is NOT included in the total availability time. The following definitions are used for calculating the availability measurement: - - DEFINED HOURS are the total days in the month multiplied by 24 hours. - - PLANNED HOURS are the planned and published hours that any system is down for maintenance or other planned outages. - - AVAILABLE HOURS are the Defined Hours minus the Planned Hours. - - UNPLANNED HOURS are the unplanned hours of downtime experienced during the month. - - ACTUAL HOURS are the Available Hours minus the Unplanned Hours. - - AVAILABILITY PERCENTAGE is determined by dividing the Actual Hours by Available Hours and multiplying the result by 100. - - CONNECTIVITY PERCENTAGE is determined by dividing the Total Successful Calls to the system by the Total Attempted Calls and multiplying the result by 100. UHC will consider these performance standards achieved if the network availability described above is achieved [*] of the time, or better. UHC will consider less than [*] performance achievement within [*] of any consecutive [*] period to be a material breach of this Service Level Agreement. Reporting as identified in Exhibit D will be the source documents from which these standards will be measured. Compliance to these standards will be determined by UHC upon reviewing the reports provided to the UHC/ActaMed liaison. [*] CONFIDENTIAL TREATMENT REQUESTED I 2 In the event that ActaMed cannot perform according to the standards because of emergent situations. UHC will be notified following the emergency procedures outlined in this document. Reports on performance are due to UHC by no later than the 10th working day following the end of the month. LABORLINK SYSTEM ActaMed will continue to support the batch processing of Allinas LaborLink system, at the level of performance required for the ActaMed ProviderLink network. ActaMed will deliver files to the Third Party Administrator's (TPA) mailboxes as soon as UHC uploads the files to the network, usually available by 8:00 a.m. every Monday, which allows reports to be released to TPA's by noon on Monday, fifty-two weeks a year. DATA INTEGRITY ActaMed will uphold the highest standard of integrity with regard to the transmission and processing of transactions, reporting performance and service. Information received from ActaMed will be correct, and without errors, [*] of the time, measured monthly, unless otherwise stated in the SLA. All updates from COSMOS or other UHC host systems will be promptly and correctly applied [*] of the time. ACTAMED PROVIDERLINK HELP DESK Users, UHC health plans and business units agree to call the ActaMed ProviderLink Help Desk at 612-945-8500 or 1-800-446-8279 for all problem resolution when concerns cannot be resolved by the Health Plan, or a Health Plan representative is not available. The ActaMed ProviderLink Help Desk will be open from 7:00 a.m. - 5:00 p.m. CST, Monday through Friday. Voice mail is available for after hour calls. Messages left on voice mail after business hours will be retrieved the following business day. [*] CONFIDENTIAL TREATMENT REQUESTED I 3 CALL DOCUMENTATION Utilizing the ActaMed ProviderLink Help Desk computerized problem management tool, the following information will be recorded on each call to the help desk: Site ID (PC ID) Site Name Caller Name Phone Number Health Plan Priority Level Date of Call Time of Call Problem Code Call Recipient Problem Definition Call Status Resolution Information The ActaMed ProviderLink Help Desk will attempt to accommodate any requests for additional information as long as the collection of the information does not add significant time and effort in logging the call. The ActaMed ProviderLink Help Desk statistics will be reported to UHC on a routine basis but will not be integrated into any individual health plan's call tracking statistics. DEFINITION OF THE PRIORITY LEVEL CLASSIFICATIONS All calls will be assigned to one of three priority levels. The following definitions will be used by the ActaMed ProviderLink Help Desk Representatives to assign priority to calls: SEVERITY 1 - A critical system or component is down or experiencing degraded service causing UHC's or a customer's business functions to be halted SEVERITY 2 - A single user is down, a component is experiencing degraded service, or scheduled deliverables are unavailable. This does not have a critical impact on the business, but may restrict function to some users and may impact normal business operations. SEVERITY 3 - A user's system is still operating but is experiencing difficulties or a specially requested deliverable is unavailable. The definition of each priority level and the classification of call types into priority levels will be determined through negotiation between ActaMed and UHC. The definitions may be reassessed and are subject to change. The ActaMed ProviderLink Help Desk's method of classifying calls into priority levels will be reviewed periodically with UHC. UHC will be responsible for defining additional situations and communicating to ActaMed any requests on how to classify particular call situations. 14 In the event that the ActaMed ProviderLink Help Desk computerized on-line problem management tool is down, call information will be recorded manually and entered into the system when it becomes available. MEASUREMENT Objectives have been set for both the maximum time required for communicating the current status and action plan to the user and to UHC for each priority level and for the percentage of call volumes that will meet these objectives. Measurement will begin when the problem is received by the ActaMed ProviderLink Help Desk and recorded into the computerized on-line problem management tool. Measurement will end when the call is closed, (i.e. the current status and action plan is communicated to the user and the appropriate UHC health plan has acknowledged the problem) by the ActaMed ProviderLink Help Desk representative. It is the responsibility of the UHC health plan personnel to notify ActaMed ProviderLink Help Desk when an open call has been resolved by a health plan resource, but not communicated to ActaMed by the user. The percent of calls closed within the time frame objectives will be measured by calculating, by priority level, the volume of calls closed within the time frame objectives as a percentage of total calls opened. SALES, INSTALLATION AND TRAINING When selling ProviderLink, UHC will ensure that the users conform to the technical standards that have been established in the current version of Schedule B of the ProviderLink License Agreement. UHC will continue to follow ProviderLink approved installation procedures and will provide an adequate level of user understanding of ProviderLink through appropriate training. The ProviderLink health plan representatives will be trained by ActaMed as described in Exhibit F. UHC recognizes that the quality of ActaMed's ProviderLink Help Desk support is partially dependent on UHC's sales and installation to sites with approved technical requirements and thorough training of users. CAPACITY PLANNING UHC is responsible for providing the ActaMed's ProviderLink Help Desk with as much information as possible to assist ActaMed in planning for the appropriate levels of staffing to meet the service level objectives. Forecasts of site sales, 15 installation scheduling and specific events that will impact ActaMed's ProviderLink volume of calls will be communicated to the best of UHC's ability. Major support requirements will be communicated with a 90 day lead time, whenever possible. TECHNICAL MAINTENANCE/ENHANCEMENT SCHEDULING OBJECTIVES PDR (PROVIDERLINK DEVELOPMENT REQUEST) PROCESS ActaMed will have an established process for documenting all ProviderLink user requests for correction of problems or the development of new functionality. All requests are recorded into a computerized defect control system software product including a detailed description of the requirements. All regular open requests are reviewed by the ActaMed ProviderLink development team on a routine basis, however, UHC will be responsible for establishing the development priorities. ActaMed assumes the responsibility to make the development and maintenance modifications based on UHC priorities. DURING THE TRANSITION, ACTAMED PROVIDERLINK PRODUCT MARKETING WILL AID AND CONTRIBUTE TO THE PRIORITIZATION OF UHC REQUESTS IF NEEDED. FOLLOWING THE TRANSITION PERIOD, ACTAMED WILL CONSIDER THIS ASSISTANCE A LONG TERM BILLABLE SERVICE. NETWORK MAINTENANCE RELEASES Regular ProviderLink network maintenance enhancements and fixes will be completed and certified on a regular basis. They will be released into production on Thursday evenings, AS AVAILABLE. Major software and hardware releases will be scheduled to go into production on weekends. ActaMed will communicate these changes to UHC on a regular, weekly basis. EMERGENCY MAINTENANCE RELEASES Emergency maintenance is defined as the correction of a technical bug or omission in the existing functionality of ActaMed's ProviderLink presentation software or network. The technical problem renders the ProviderLink feature or user inoperable. ActaMed will be responsible for ongoing monitoring and quality control of the network and application. UHC will expect ActaMed to have a well defined problem identification procedure to document and fix inoperable functionality before recognized by UHC or its users. However, when this has not been 16 accomplished, UHC will in cooperation with an ActaMed staff resource, complete a PDR with as much information as is available, designate it as emergency, and submit it to the ActaMed ProviderLink Product Marketing staff. The UHC/ActaMed liaison is responsible for supporting ActaMed with the initial research and documentation of the problem via the PDR. The service level performance objective for emergency correction will be within ten business days. Tracking of the fix will begin at the time of ActaMed's receipt of the PDR. Emergency changes will be released on any given day. These releases are not subject to the Thursday release schedule. The correction of the emergency technical problem will be in the control of the ActaMed development team. ActaMed is not responsible for correcting problems located outside of the ActaMed ProviderLink presentation software or network, i.e. a specific user's configuration, hardware problems, or technical problems located within another vendor's software. APPLICATION MAINTENANCE RELEASES Application Maintenance releases will include maintenance and fixes of presentation software bugs identified and documented in the PDR process. A software bug is defined as existing functionality that fails to perform as designed. Where applicable, it will be the responsibility of UHC to assist ActaMed/ProviderLink development in thoroughly researching user needs and determining the implication of product changes on all stakeholders within United HealthCare and ProviderLink end users. The registration, installation and training of ProviderLink users on the features of any maintenance release is the primary responsibility of UHC. ENHANCEMENT RELEASES All enhancements to the ActaMed ProviderLink software or network will be provided to UHC health plans or affiliates as outlined in the Service Level Agreement. Enhancements are defined as the addition of functionality that does not currently exist in the ProviderLink system, or is currently not supported. In addition, these releases may include maintenance and fixes of presentation or other software bugs not included in the routine application maintenance releases. An enhancement release may also include modifications to any or all of the current ProviderLink features of Claim Submissions, Eligibility, Referrals, Referral Status, Claims Status, ProviderLink E-mail/Fax, and Provider Directory. 17 Enhancements specific to UHC, and those created exclusively for UHC by the ActaMed/UHC dedicated team, will be released according to the agreed upon schedule. Information specific to the dedicated team and enhancements paid for by UHC, will be outlined in the Dedicated Team Agreement. It is the responsibility of UHC to assist ActaMed/ProviderLink development in thoroughly researching user needs and determining the implication of product enhancements on all stakeholders within United HealthCare and ProviderLink end users. The registration, installation and training of ProviderLink users on the features of any new release is the primary responsibility of UHC. All requests for the development of enhancements in functionality will be communicated to ActaMed through the PDR process. COMMUNICATION OF TECHNICAL REQUIREMENTS The ActaMed ProviderLink development team will formally communicate to UHC's health plan ProviderLink Managers, 90 days prior to release date, any anticipated changes in standard hardware requirements, as defined in the current version of schedule B of the ProviderLink License Agreement, that would impact UHC's users of new ProviderLink software releases. PLANNING FOR THE YEAR 2000 ActaMed will plan for, and successfully implement, changes to all applications and network tools and services to accommodate the transition to the year 2000. ActaMed will perform this task on internal software as part of the maintenance agreement with UHC and will be done at no extra cost. If UHC data formats change as a result of adding support for the year 2000, UHC will prioritize this exclusive change for ActaMed and submit the change request for completion by the UHC dedicated team. 18 ALLINA SERVICE LEVEL AGREEMENT (SLA) ActaMed will perform to the level of service described in the 1996 agreement negotiated with Allina by the UHC EDI Services Department through the duration of the 1996 calendar year. 19 EXHIBIT J UHC Operating Environment (a) [*] will provide [*] between ActaMed and [*]. (b) [*] will provide [*] between [*]. (c) [*] will provide [*]. UHC will provide [*] the communications between ActaMed and [*]. (d) [*] may [*] as appropriate [*]. ATTACHED DIAGRAMS: In the first diagram, labeled Attachment 1, the division of responsibility is identified by the vertical line. This division of responsibility is depicted in more detail by the second diagram, labeled 'ProviderLink Architecture'. In the second diagram, the cloud which represents [*] at the bottom of the page [*] are the responsibility of [*]. The [*] to connect the [*]. [*] CONFIDENTIAL TREATMENT REQUESTED 20 EXHIBIT K EMC CONTRACTS
- ------------------------------------------------------------------------------------------------------------------------------------ VENDOR CONTRACT RENEWAL PRODUCTION FEES PER CLAIM CHARGE TO PROVIDER DATE DATE DATE - ------------------------------------------------------------------------------------------------------------------------------------ [*]
[*] CONFIDENTIAL TREATMENT REQUESTED EX-10.14 6 EXHIBIT 10.14 CONFIDENTIAL TREATMENT REQUESTED SERVICES AGREEMENT This SERVICES AGREEMENT (the "Services Agreement" or "Agreement") is made and entered into as of December 31, 1997 by and between ACTAMED CORPORATION, a Georgia Corporation ("ActaMed") and SMITHKLINE BEECHAM CLINICAL LABORATORIES, INC., a Delaware Corporation ("SBCL"). BACKGROUND ActaMed is in the business of providing electronic data interchange products and services to the health care industry, including its ProviderLink software, and desires to develop business involving automated laboratory order entry and results reporting services. SBCL provides laboratory testing services to certain Providers who use SBCL Software (as defined in the License Agreement) for electronic clinical laboratory test order entry and/or test result reporting between an SBCL Lab and such Provider. In addition, SBCL uses the SBCL Software to allow [*] to send laboratory test orders entered electronically to an SBCL Lab and/or to have the test results reported electronically back to the PSC or the Provider ordering the test. The parties previously entered into the Development Agreement pursuant to which ActaMed and SBCL are jointly developing the ActaLab Software. Simultaneously with the execution of this Agreement, ActaMed and SBCL are entering into the Purchase Agreement pursuant to which ActaMed is purchasing and SBCL is selling certain assets associated with SBCL's provision of Lab EDI Services, as more fully set forth therein. Also concurrently with the execution and delivery of this Agreement, SBCL and ActaMed are entering into the License Agreement whereby SBCL, among other things, grants ActaMed a license to the SBCL Software. This Agreement sets forth the parties' agreements relating to their rights and obligations following the date hereof relating to provision of Lab EDI Services to Automated Providers. Pursuant to the Purchase Agreement, the Parties contemplate that there will be a staged transfer to ActaMed of SCAN Assets. The transfer of Region One SCAN Assets is to occur on the Region One Transfer Date. The transfer of the other Regions will occur sequentially when the Transfer Benchmarks (as defined in the Purchase Agreement) have been met. NOW THEREFORE, in consideration of the premises and the mutual promises contained herein, the parties, intending to be legally bound, agree as follows: [*] CONFIDENTIAL TREATMENT REQUESTED I. DEFINITIONS. Capitalized terms used in this Agreement and not otherwise defined herein are defined in EXHIBIT A attached hereto. II. NETWORK READINESS SERVICES. A. GATEWAY REPLICATION. SBCL shall be responsible [*] to provide such reasonable and appropriate software development, installation and support services as are necessary to establish connectivity with an ActaMed gateway (the "ACTAMED GATEWAY") that works substantially as the SBCL gateway works as of the date hereof. In connection with such services from SBCL: 1. ActaMed shall [*] order, acquire, install and configure the necessary hardware and data communications lines required to install and operate the appropriate gateway systems, including without limitation a [*] modems, 800 phone service, [*] and data communications lines for connection to SBCL systems. SBCL will provide specifications and guidance to assist ActaMed in this effort. 2. SBCL will install the gateway software on ActaMed's computer and modify the gateway software as necessary to cause it to communicate with the SBCL systems. At SBCL's determination, this may include new enhancements or additional software as needed to allow the ActaMed Gateway to transmit Transmittal Information for Automated Providers using the SCAN Network. 3. At such time as the ActaMed Gateway has been adequately (in SBCL's determination) tested, including for compliance with applicable SBCL internal standards and using SBCL sample clinical laboratory test orders and/or test result report data, in which testing ActaMed and SBCL shall cooperate, SBCL shall so notify ActaMed. For a period of up to thirty (30) days after the date of such notice, ActaMed shall be entitled to perform such quality assurance testing as it shall reasonably deem appropriate. SBCL shall provide reasonable assistance to ActaMed in this process. If the system is not performing substantially the same as SBCL's gateway and as necessary to enable ActaMed to meet the Key Performance Standards and to provide the Lab EDI Services using the ActaMed Gateway, ActaMed shall provide timely notice to SBCL of such deficiency or performance problem within such thirty (30) day period. SBCL shall supply the appropriate personnel to investigate and correct any such reported deficiencies or performance problems. The acceptance period shall be extended to two (2) weeks beyond the time of such correction. When corrected to the reasonable satisfaction of ActaMed and SBCL, or if SBCL is notified of no further deficiencies or performance problems within such period, the ActaMed Gateway shall be deemed ready and accepted by ActaMed. 4. SBCL will provide reasonable training of ActaMed personnel and any available documentation to allow ActaMed to operate and support its gateway independently; [*] CONFIDENTIAL TREATMENT REQUESTED -2- provided that SBCL will not provide [*] or other base-line training that may be required by ActaMed. 5. The foregoing procedures of this Section II.A shall be completed within one hundred twenty (120) days after the date hereof. 6. After acceptance of the ActaMed Gateway and until [*] SBCL shall, at ActaMed's written request, provide such maintenance and related support to the ActaMed Gateway as may be necessary to continue its effective operation at substantially the same performance levels as SBCL experienced on its gateway immediately prior to the date hereof. SBCL shall charge ActaMed for such services at the then industry standard rates for similar services. After [*] (i) SBCL makes no representation or warranty as to the performance of the ActaMed Gateway software systems so established by SBCL hereunder; and (ii) ActaMed may request SBCL to provide such support and, if SBCL elects to provide such support, SBCL may charge ActaMed for such services at the then industry standard rates for similar services. B. MIGRATION PERIOD. After the Transfer Date of a Region, SBCL and ActaMed shall have the following obligations with respect to SBCL Sites transferred to ActaMed in that Region: 1. ACTAMED TO MIGRATE SITES. ActaMed will use its good faith efforts to migrate the SBCL Sites so transferred from communicating with the SBCL gateway to communicating with the ActaMed Gateway as soon as practicable, and shall similarly use its best efforts, and take all steps reasonably necessary, to assign financial responsibility or otherwise change the billing of dedicated phone lines installed in Automated Providers' offices for Lab EDI Services from SBCL over to ActaMed. SBCL will support ActaMed in ActaMed's efforts to transfer the local phone lines to ActaMed's account and, subject to ActaMed's obligation under Section II.B.7.(g) hereof, pay any charges, assessments, fees or other amounts incurred by SBCL for such transfer. 2. EDI AGREEMENT AMENDMENTS. ActaMed shall obtain signed amendments to any existing CIS Agreement between a Provider and SBCL or a new CIS Agreement between the Provider and ActaMed containing the provisions set forth in EXHIBIT II.B.2(a). SBCL shall obtain a signed agreement from such Provider for Lab EDI Services by ActaMed in the form of EXHIBIT II.B.2(b). 3. ASSISTANCE FROM SBCL. SBCL will make available to ActaMed such resources as SBCL determines is reasonable and appropriate for the transfer of each Region, at no cost to ActaMed. After the earlier of (i) [*] after the Transfer Date for a particular Region or (ii) the full migration of SBCL Sites in such Region from communication with the SBCL gateway to communication with the ActaMed Gateway, SBCL will continue to use its good faith efforts to make such resources available to ActaMed and may charge ActaMed therefor at then industry standard rates for similar services. 4. SUPPORT SERVICES. From time to time prior to the [*] [*] CONFIDENTIAL TREATMENT REQUESTED -3- a. ActaMed may request that SBCL's [*] provide services to ActaMed in [*] to assist ActaMed in the delivery of items relating to ActaMed's delivery of Lab EDI Services to Automated Providers (provided ActaMed delivers the item to [*] for such delivery to the Automated Provider), such services to be provided consistently with the manner and extent to which SBCL has used such [*] during the twelve (12) month period prior to the Transfer Date of the Region in [*] is located. SBCL shall direct its [*] to provide such services provided that SBCL shall not be responsible for any Losses incurred as a result of providing such services. Nothing in this Section III.B.4 shall require SBCL, ActaMed or [*] to provide any service if to do so would cause any party, including [*] to violate any Regulation. b. SBCL may request that ActaMed's employees provide services to SBCL in the course of their normal duties to assist SBCL in the delivery of items (E.G., [*]) to Automated Providers (provided SBCL delivers the item to the employee for such delivery to the Automated Provider), such services to be provided consistently with the manner and extent to which SBCL has used employees for such purposes during the twelve (12) month period prior to the Transfer Date of the Region in which such employee works. ActaMed shall direct its employees to provide such services provided that ActaMed shall not be responsible for any Losses incurred as a result of providing such services. Nothing in this Section III.B.4 shall require ActaMed, SBCL or such employee to provide any service if to do so would cause any party, including the respective employee, to violate any Regulation. 5. USE OF SBCL FACILITIES BY TRANSFERRED EMPLOYEES. ActaMed will employ the Transferred Employees in accordance with the provisions of Article VI of the Asset Purchase Agreement. From the Transfer Date of a Region until [*] after the Transfer Date of that Region, such Transferred Employees may continue to use such office space, office equipment, office telephones, office supplies, and have access to such office services as such Transferred Employees had immediately prior to the applicable Transfer Date (collectively, "OFFICE SPACE"), [*] whether or not such Transferred Employees are responsible for ActaMed Sites. No employees of ActaMed other than the Transferred Employees currently assigned to such Office Space shall be allowed to use such Office Space, and ActaMed may not place signage inside or outside of such Office Space or use such Office Space for any operations other than the transition contemplated by this Section II and the provision by ActaMed of Lab EDI Services. 6. SCAN NETWORK MAINTENANCE. SBCL shall continue to have and support Lab EDI Services between each SBCL Site and SBCL's gateway until migration of such SBCL Site to the ActaMed Gateway is completed. SBCL will continue to operate and maintain its gateway systems for such purposes. [*] CONFIDENTIAL TREATMENT REQUESTED -4- 7. ACTAMED PAYMENTS TO SBCL. In consideration of services provided under this Agreement, ActaMed will pay SBCL the following amounts (in addition to any other amounts which may be charged to ActaMed by SBCL as expressly set forth in this Agreement): a. A fee in the amount of [*] per month for each month after the Region One Transfer Date (prorated for any portion thereof); provided that no payment shall be made under this clause a. either (i) if a payment is made under clause b. below, after the third month after the Region One Transfer Date, or (ii) if a payment is not made under clause b. below, after the Region Two Transfer Date. b. A fee in the amount of [*] for each month prior to the Region Two Transfer Date (prorated for portion thereof) commencing with the fourth month after the Region One Transfer Date, provided, however, that payment under this Section II.B.7.b shall not be made unless the delay in the Region Two Transfer Date beyond the date three (3) months after the Region One Transfer Date is due to ActaMed's failure to meet the Transfer Benchmarks (with any dispute with respect thereto to be resolved in accordance with Section XV hereof). c. A fee in the amount of [*] per month for each month after the Region Two Transfer Date (prorated for any portion thereof), provided that no payment shall be made under this clause c. after the Region Three Transfer Date; d. A fee in the amount of [*] per month after the Region Three Transfer Date (prorated for any portion thereof), provided that no payment shall be made under this clause d. after the Region Four Transfer Date; e. Until the date which is twelve (12) months after the Transfer Date of a Region, reimbursement for any local and long distance telecommunication services (including 800 and 888 service other than 800 and 888 numbers used to [*]) billed to SBCL in respect of SBCL Sites in that Region; f. From and after the date which is twelve (12) months from the Transfer Date of a Region, an amount equal to [*] of the amount of any local and long distance telecommunication services (including 800 and 888 service other than 800 and 888 numbers used to [*]) billed to SBCL in respect of SBCL Sites in that Region; and g. Reimbursement for [*] of any charges, assessments, fees or other amounts incurred by SBCL for the transfer of any dedicated phone lines installed in Automated Providers' offices for Lab EDI Services into the ActaMed name, including without limitation any transfer fees or new installation fees. C. PAYMENT TERMS FOR ACTAMED PAYMENTS TO SBCL. SBCL shall invoice ActaMed monthly for the services rendered by it and chargeable to, or to be reimbursed by, ActaMed pursuant to this Section II. All amounts shown due on such invoice shall be paid within [*] after the date of the invoice. Late payments shall be subject to a late fee equal to [*] per [*] CONFIDENTIAL TREATMENT REQUESTED -5- month on the overdue amount. In the event ActaMed disputes any amount shown due on such invoice, ActaMed shall pay timely any undisputed amounts and send a Dispute Notice to SBCL with respect to any disputed amounts. For a period of thirty (30) days after the date of the Dispute Notice, ActaMed shall have Audit Rights with respect to the portions of SBCL's books and records that relate to the subject of the dispute. In the event the parties are unable to resolve the disputed matter, the matter shall be resolved in accordance with Section XV hereof and application of any late fee to such disputed amount shall be tolled until conclusion of such proceedings and then applied only to the amount so determined to be due. III. SERVICES AFTER TRANSFER. A. PLANNING AND OVERSIGHT COMMITTEE. On or promptly after the Region One Transfer Date, SBCL and ActaMed will establish an Oversight Committee having the obligations set forth in this Section III (the "OVERSIGHT COMMITTEE"). The parties may thereafter, in their respective sole discretion, change the complement of the Oversight Committee, including without limitation to decrease or increase the number of members on the Oversight Committee, so long as the Oversight Committee shall continuously have equal numbers of persons representing ActaMed and SBCL, provided that SBCL may appoint a majority of the Oversight Committee members if ActaMed consents thereto. The Oversight Committee shall continue in effect through the term of the Agreement (including any applicable renewal period). Each member of the Oversight Committee will have responsibility to, among other things, 1. review the performance of ActaMed hereunder, as measured by the Performance Standards, 2. review the compliance of ActaMed with Regulations and report to ActaMed and SBCL with respect to compliance matters, 3. discuss trends in the health care information services industry and service type and quality offered by competitors of ActaMed, 4. exchange information regarding strategic needs and directions of the respective ActaMed and SBCL businesses that are relevant to the relationships contemplated by this Agreement, 5. exchange information about technological developments for electronic connectivity in the health care information services industry, 6. provide feedback to ActaMed and SBCL regarding the implementation and effect of ActaMed's preferred provider status pursuant to Section VII of this Agreement, 7. notify SBCL, ActaMed and other members of the Oversight Committee at any time such member has any knowledge that ActaMed has not performed in accordance with the Performance Standards, and make recommendations to ActaMed and SBCL as to remedying -6- performance that does not comply with this Agreement, including without limitation the Performance Standards, and 8. examine and, collectively with the other members, report to ActaMed and SBCL from time to time on ways in which Agreed Services can be improved. B. AGREED SERVICES. ActaMed will provide the following services to SBCL and Automated Providers at ActaMed Sites in accordance with the Performance Standards and will take all reasonable and appropriate action to preserve the Network and the goodwill of the Automated Providers utilizing such services: 1. NETWORK SUPPORT. ActaMed shall maintain and support the Network for Lab EDI Services between Automated Providers and an SBCL Lab and shall ensure that the Network meets or exceeds all Network Standards. 2. INSTALLATION AND TRAINING. ActaMed will provide installation, set up and training services at all ActaMed Sites as reasonably necessary to enable such ActaMed Sites to utilize the Network accurately and efficiently. In this connection, ActaMed will (i) install software, and if necessary and appropriate and consistent with contractual relationships between SBCL and ActaMed, hardware, (ii) confirm set up thereof, (iii) confirm the ability after set up to successfully transmit and receive modem communications with the applicable SBCL Lab and that requisitions and results functionality is accurate, and (iv) provide competent and timely training to the Automated Provider's personnel regarding Lab EDI Services. Such installation, set up and training services shall be provided to, and connectivity to the Network established for, any Provider or PSC designated by SBCL. If ActaMed identifies a Provider which is a potential new customer for Lab EDI Services, it shall so notify SBCL and SBCL shall determine if such installation, set up and training services shall be provided to such Provider. SBCL and ActaMed shall [*] to establish [*] to provide guidance on [*] of ActaMed suggested Automated Providers. Prior to any installation, set up and training services being rendered hereunder, SBCL and ActaMed shall have each entered into an agreement for such Lab EDI Services with such new customer which agreement shall contain the provisions set forth on EXHIBIT II.B.2(b). 3. SPECIAL SERVICES AT PIF SITES. At up to [*] (the "PIF NUMBER") sites selected by SBCL prior to the [*] [*] where installation training and set up services are required (the "PIF SITES"), SBCL shall be entitled, by written request to ActaMed and payment of the [*] set forth in Section IV.B.2, to require that installation, set up and training services be provided on a top priority accelerated basis. 4. INITIAL ROLL OUT OF ACTALAB SOFTWARE. After market launch of the ActaLab Software (which shall be only after the ActaLab Software functions, features and performance have been accepted by SBCL in accordance with the Development Agreement and the requirement in this Agreement that it comply with Regulations), ActaMed will begin to replace the SCAN Software at ActaMed Sites with the ActaLab Software in accordance with a roll out plan developed by ActaMed [*] CONFIDENTIAL TREATMENT REQUESTED -7- which shall be designed to deploy the ActaLab Software as quickly as practicable with minimal disruption to Automated Providers. ActaMed shall submit the roll out plan to SBCL sufficiently in advance to allow SBCL reasonable opportunity to review and comment on the roll out plan prior to implementation, and shall use its good faith efforts to incorporate SBCL's comments thereon. Such roll out, however, shall not be made to any Provider which has not executed an agreement containing the provisions set forth in EXHIBIT II.B.2(a) or (b). 5. CUSTOMER SUPPORT. ActaMed will provide all reasonably necessary and appropriate end user support for issues relating to connectivity to the Network utilizing any Network Software in use at such time, including without limitation, help desk assistance to Automated Providers, hardware support to applicable Automated Providers, user training and bug fixes to the Network. All customer support services shall be performed in a competent and professional manner meeting or exceeding generally accepted industry standards for confidential EDI and will be rendered by qualified personnel who will perform the tasks assigned consistently with good professional practice and the state of the art involved. SBCL shall have the right to request the removal from Automated Providers accounts of any ActaMed personnel used by ActaMed to perform customer support services, provided such objection would not constitute unlawful discrimination, if SBCL becomes aware that such person is causing customer dissatisfaction. If an objection is raised by SBCL, ActaMed agrees to confer with SBCL and endeavor to furnish a replacement as quickly as is practicable. 6. MONITORING. ActaMed shall continuously monitor its performance against the Performance Standards and shall notify SBCL at any time when it fails to meet the Performance Standards. SBCL shall similarly notify ActaMed of any such failure, provided that the failure to notify shall not constitute a waiver of SBCL's rights hereunder. In the event that ActaMed fails to meet any Performance Standard at any time, ActaMed shall promptly diagnose the cause of the failure and shall work continuously and diligently to correct such failure to perform until it is corrected. Any failure to meet the Performance Standards which occurs while ActaMed is working to remedy the problem shall continue to be counted for the purposes of Section XII.B.1, Section VII.B.4 and IV.F. 7. REPORTS. ActaMed and SBCL will, at their own expense, provide the other with the reports specified on EXHIBIT III.B.7 hereto at the times specified thereon. C. PERFORMANCE STANDARDS. "Performance Standards" shall mean the Network Standards and the Customer Support Standards. EXHIBIT III.C-1 to this Agreement specifies the performance standards for the Network which must be maintained and the applicable time periods for measuring compliance with such standards (the "NETWORK STANDARDS"). EXHIBIT III.C-2 to this Agreement specifies the customer support standards ActaMed must achieve and maintain and the applicable time periods for measuring compliance with such standards (the "CUSTOMER SUPPORT STANDARDS"). In no event shall the Performance Standards be less than the comparable Network maintenance and support standards and services ActaMed utilizes for or provides to its other customers receiving services comparable to Lab EDI Services. ActaMed shall have sixty (60) days following the date -8- hereof to validate the metric performance level set forth in the Performance Standards as representative of SBCL's provision of services which are now Agreed Services. ActaMed shall perform the validation (with cooperation from and access to relevant records and data of SBCL) within such sixty (60) day period, and based upon the period of [*]. In the event that ActaMed's validation process yields a metric different from that set forth in the Performance Standards, a new metric for this Agreement shall be mutually agreed by SBCL and ActaMed, with any disputes with respect thereto resolved in accordance with Section XV hereof. D. SBCL OBLIGATIONS. SBCL shall have no obligation to provide any support, training or maintenance services to Automated Providers, other than as expressly set forth herein. E. Records and Audits. 1. ActaMed shall maintain accurate and complete records regarding the transmissions to and from Automated Providers and SBCL in accordance with accepted information storage practices in the clinical laboratories industry and in compliance with applicable Regulations, but in no event for less than [*] or such longer period as may be required by Regulations or the Integrity Agreement. 2. The records maintained pursuant to Section III.E.1 above shall include without limitation records of the amounts ActaMed charges SBCL under this Agreement, with a system of audit trails, records and controls sufficient to allow SBCL to audit such transactions and charges under this Agreement and to assure satisfaction of any requirements imposed on SBCL by their external auditors or on ActaMed or SBCL by government officials enforcing applicable Regulations. 3. In addition to the grant of Audit Rights pursuant to Sections IV.B, IV.C.3 and VI.B of this Agreement, SBCL shall have the right, exercisable not more often than twice in each calendar year for the first three years after the date hereof, and once in each calendar year thereafter, to have any of its agents or employees, who or which are reasonably acceptable to ActaMed, audit, in accordance with the Audit Rights, the books and records of ActaMed relating to such SBCL transactions to examine or determine the proper amounts which should have been billed to SBCL, the amounts which were billed to SBCL, and the amounts which SBCL has paid under this Agreement. 4. In any exercise of Audit Rights hereunder, including without limitation pursuant to Section III.E.3, SBCL shall give ActaMed two week's prior notice of any such audit, and shall abide by reasonable ActaMed security and confidentiality procedures during the audit. SBCL and ActaMed shall each bear their own costs associated with such audit, provided that in the event the audit determines that ActaMed has overcharged SBCL by more than ten percent (10%) of the amount properly due ActaMed in any month, ActaMed shall pay all costs of such audit. If the audit reveals an overpayment by SBCL to ActaMed, ActaMed shall promptly refund such overpayment to [*] CONFIDENTIAL TREATMENT REQUESTED -9- SBCL. If the audit reveals an underpayment by SBCL, SBCL shall promptly pay to ActaMed the amount of such underpayment. IV. PAYMENTS TO ACTAMED BY SBCL. A. FEES FOR FIXED FEE SITES. SBCL will pay ActaMed for the Agreed Services rendered to Fixed Fee Sites as follows: 1. Fixed Fee payments shall be due [*] on the first (1st) business day of [*] beginning on January 2, 1998 and shall be in an amount equal to a. from January 2, 1998 until the day before the first business day of [*], [*] per month; b. from the first business day of [*] until [*]. B. TRANSACTION FEE FOR SITES OTHER THAN FIXED FEE SITES. From the Region One Transfer Date and continuing until the day before the [*] SBCL will pay to ActaMed, for Agreed Services in respect of sites which are not Fixed Fee Sites only, within thirty (30) days after receipt of an invoice from ActaMed detailing the charges then due, a fee equal to the sum of [*] SBCL in accordance with the Performance Standards during the period covered by the invoice (the "TRANSACTION FEE"). C. [*]. Provided the conditions set forth in Section IV.D are satisfied, SBCL shall pay the following amounts to ActaMed as hereinafter in this Section IV.C provided: 1. An amount (the "FIRST VARIABLE FEE") equal to (i) [*] minus the aggregate of the amount billed to SBCL pursuant to Section IV.B.1 above (the "TRANSACTION FEE AMOUNT") prior to the [*]; (ii) [*] minus the sum of (A) the Transaction Fee Amount for the period from the date hereof to the [*] and (B) the amount paid pursuant to clause (i) above; and (iii) [*] minus the sum of (A) the Transaction Fee Amount for the period from the date hereof to the [*] and (B) the amount paid pursuant to clauses (i) and (ii) above. 2. An amount (the "SECOND VARIABLE FEE" and together with the First Variable Fee, the "VARIABLE FEES") equal to (i) [*] minus the aggregate of the amount paid plus amounts owed (whether or not billed) pursuant to Section IV.M.1 below (the "PIF AMOUNT") prior to the [*]; (ii) [*] minus the sum of (A) the PIF Amount for the period from the date hereof to the [*] CONFIDENTIAL TREATMENT REQUESTED -10- [*] and (B) the amount paid pursuant to clause (i) above; and (iii) [*] minus the sum of (A) the PIF Amount for the period from the date hereof to the [*] and (B) the amount paid pursuant to clauses (i) and (ii) above; PROVIDED THAT if the PIF Amount with respect to an annual period (other than the last such annual period) is at least [*] of the aforementioned dollar amount for that annual period, no payment shall be due under this Section IV.B.2 for such annual period. 3. Subject to Section IV.D, the Variable Fees shall be paid annually within thirty (30) days after invoice therefor from ActaMed, which shall be (i) submitted to SBCL within [*] (ii) detail the calculation thereof, and (iii) reflect the Variable Fees payable in respect of the most recently completed annual period only. SBCL shall have Audit Rights with respect to any disputed amount of the Variable Fees. D. CONDITIONS TO [*]. ActaMed and SBCL have agreed that the foregoing [*] with respect to the provision of Lab EDI Services after the date hereof shall apply (i) [*] and (ii) to the extent set forth in this Section IV.D: 1. With respect to [*] (i) such fees shall cease to be payable if (i) ActaMed shall fail to satisfy any of the Key Performance Standards, or (ii) such fees [*] for the applicable year shall not be payable (but shall be treated as paid for purposes of calculation of any amount payable in the following year) if any of the following shall occur: a. As of [*] shall [*] of [*] at [*] it has [*] as of [*]; b. As of [*] shall [*] of [*] at [*] it has [*] as of [*]; c. As of [*] shall [*] of [*] at [*] it has [*] as of [*]; 2. With respect to the [*] such fees shall be payable [*] in accordance with the Performance Standards [*] pursuant to Section [*]. E. LATE FEE. A late fee of [*] per month on the unpaid balance of any payments owing pursuant to this Section IV after expiration of the thirty (30) day period for payment thereof shall be due from SBCL. [*] CONFIDENTIAL TREATMENT REQUESTED -11- F. [*] OF PAYMENTS. After the [*] Anniversary, with respect to any month after ActaMed has [*] with the [*] for [*] SBCL may, at its option, [*] or other [*] to [*] for such month [*] established with [*] to be [*] the date as of which [*] with the [*]. G. DEFINITION OF FIXED FEE SITES. "Fixed Fee Sites" shall mean the [*] PROVIDED HOWEVER THAT: 1. if the number of SBCL Sites transferred to ActaMed on any Transfer Date, when added to the number of ActaMed Sites on the date of such Transfer, totals more than [*] any sites in excess of [*] (such excess to be identified as described in the next sentence) shall not be Fixed Fee Sites. The sites to be excluded from Fixed Fee Sites will be (i) from the Region transferred on such Transfer Date, and (ii) selected, in order, from a list of such sites that is sorted on the basis of the date of the first successful Requisition from each site, beginning with the site which had the most recent first successful Requisition, and continuing to the sites with the next most recent first successful Requisition; and 2. if, on the last day of [*] the number of sites that are Fixed Fee Sites [*] a number of sites, not to exceed [*] sites in any year, that are not Fixed Fee Sites [*] PROVIDED THAT the aggregate number of Fixed Fee Sites [*]. The [*] will be [*] in order, from a list of [*] that is sorted on the basis of the date of the first successful Requisition from a site, beginning with the site on such list which had the least recent first successful Requisition, and continuing to the sites with next least recent first successful Requisition; [*]. H. RENEGOTIATION OF PRICES. For a period of at least [*] prior to [*] the parties will negotiate new Transaction Fees which shall apply for the [*] period beginning on [*]. The parties will thereafter similarly negotiate new Transaction Fees for each two (2) year period thereafter for each renewal period in the term of this Agreement. [*] [*] CONFIDENTIAL TREATMENT REQUESTED -12- [*]. I. EFFECT OF [*] CHANGES. If either of the following occurs, then the parties agree to negotiate in good faith to restructure the Transaction Fees payable or other provisions hereunder in a manner that will be fair to both parties while at the same time preserving the economic expectations of the parties under this Agreement to the greatest extent possible and in a manner consistent with the [*]. Any dispute as to the amendments to this Agreement to be made in the event of a [*] shall be settled in accordance with the procedures set forth in Article XV hereof. 1. Any [*] is [*] or determined to [*] including without limitation any significant reduction in SBCL's [*] or significant increase in the [*] as compared to SBCL's [*] and [*] as of the date of this Agreement as set forth on EXHIBIT IV.I hereto (which shall be delivered within thirty (30) days after the date hereof); or 2. if the Automated Providers' [*] such that the effective [*] for such period [*] with no corresponding [*]. J. PHONE LINE TRANSFER COSTS. SBCL shall reimburse ActaMed for [*] of any charges, assessments, fees or other amounts incurred by ActaMed for the transfer of any dedicated phone lines installed in Automated Providers' offices for Lab EDI Services into the ActaMed name, including without limitation any transfer fees or new installation fees. K. ActaMed Obligations Regarding Hardware. 1. ActaMed shall reimburse SBCL for the cost of hardware purchased by SBCL and located at SBCL Sites other than Fixed Fee Sites in a Region to be transferred to ActaMed on a Transfer Date. 2. Subject to the limitations of Section III.L.2(b) hereof, ActaMed and SBCL understand and agree that, [*] are to [*] for providing [*] to Providers, there will be situations where [*] is [*] for ActaMed to provide Lab EDI Services to certain Providers. ActaMed desires that the number of such new sites be capped. SBCL and ActaMed have therefore agreed that: [*] CONFIDENTIAL TREATMENT REQUESTED -13- a. ActaMed shall provide [*], PC Systems for up to [*]. ActaMed may provide hardware for such [*] by either moving existing PC Systems from a canceled Fixed Fee Site or by providing new PC Systems, as it determines in its sole discretion. b. In addition, ActaMed shall provide, prior to the [*] Anniversary, [*] PC Systems for New Sites or [*] in excess of the [*]. Notwithstanding the above, this obligation shall be (a) limited to [*] PC Systems prior to the [*] and (b) reduced by each PC System the cost of which is reimbursed to SBCL subject to Section IV.K.1 above. c. Any PC Systems in excess of those required to be provided by ActaMed under (i) and (ii) above may be provided by SBCL to the Automated Provider, subject only to the Automated Provider entering into a contract with, and satisfactory to, SBCL for the use of such PC System. L. SPECIAL FEE FOR USE OF SCAN DEVELOPMENTS. SBCL will pay ActaMed a fee equal to [*], or [*] received by SBCL for [*] that use SCAN Developments for Lab EDI Services over the SCAN Network and which [*]. M. SPECIAL FEES FOR NEW SITES. From the Region One Transfer Date and continuing until the day before the [*], SBCL will pay to ActaMed, within thirty (30) days after receipt of an invoice from ActaMed detailing the charges then due, the following amounts: 1. a one time fee of [*] for [*] services at each PIF Site [*] or "PIF"); and 2. up to the first [*] of any out-of-pocket cost required to be incurred by ActaMed to provide the bar code label printer to be used for orders to SBCL Labs at any New Site or any [*] during the period covered by the invoice. ActaMed shall charge the Automated Provider [*] using the bar code label printer for anything other than Lab EDI Services for the fair market value of any such use. If an Automated Provider ceases to use Lab EDI Services, SBCL may direct where the printer previously installed at such Automated Provider will be next installed or ActaMed shall purchase, at its cost and without reimbursement under this Section IV.M.2, a bar code label printer for installation at another Automated Provider's location to be determined by SBCL. N. DISPUTED INVOICES. In the event SBCL disputes any amount shown due on such invoice, SBCL shall send a Dispute Notice to ActaMed. In such event, SBCL shall timely pay any undisputed amount to ActaMed and shall have Audit Rights with respect to the portions of ActaMed's books and records that relate to the subject of the dispute. In the event the parties are unable to resolve the disputed matter, the matter shall be resolved in accordance with Section XV [*] CONFIDENTIAL TREATMENT REQUESTED -14- hereof and application of any late fee to such disputed amount shall be tolled until conclusion of such proceedings and then applied only to the amount so determined to be due. V. CHANGES AND DEVELOPMENT OF NEW FUNCTIONALITY. A. MAINTENANCE. ActaMed shall provide such maintenance upgrades and updates to the Network as set forth on EXHIBIT V.A and shall maintain and enhance the Network so as to improve from time to time the speed, accuracy, security and other features and functions available for Lab EDI Services. ActaMed shall make available to Automated Providers all such modified, upgraded, enhanced or improved services or software at no additional charge except as permitted by this Agreement or applicable agreement with Automated Providers. B. YEAR 2000 COMPLIANCE. ActaMed shall provide, without charge to SBCL or to Automated Providers (unless the Automated Providers own the PC Systems needing Year 2000 compliance), such maintenance and hardware upgrades and updates to the Network (other than the SBCL gateway), or other software relating (or which will relate) to Lab EDI Services as is necessary for all such software and related hardware to include acceptable design and performance specifications so that any or all such software will not abruptly end or provide invalid or incorrect results due to issues related to Year 2000 compliance and will otherwise be in compliance with the warranties set forth in EXHIBIT V.B hereto. Year 2000 compliance requires that the design and performance specifications of the hardware, software and/or other items include, without limitation: date data century recognition, calculations that accommodate same century and multi-century formulas and date values, and date data interface values that reflect the century change at the year 2000. SBCL shall provide specifications for Year 2000 compliance for SBCL systems in sufficient time to allow ActaMed and SBCL to mutually agree on and ActaMed to complete such modifications as are necessary to enable ActaMed to meet the requirements of this Section V.B. SBCL will also provide reasonable cooperation and assistance to ensure ActaMed's understanding of the requirements of this Section V.B. Prior to any sale of PC Systems to any Automated Provider or potential Automated Provider, ActaMed shall disclose to such Automated Provider any Year 2000 compliance problems of such PC System which are then known to ActaMed after reasonable inquiry. A condition of any such sale shall be appropriate arrangements for making the PC System to be sold Year 2000 compliant. In this regard, the sales price shall reflect the fair market value of the services required to make the PC System Year 2000 compliant. C. REQUIRED CHANGES. ActaMed shall be required to develop and implement, at its expense except to the extent hereinafter provided, as promptly as practicable and in no event later than thirty (30) days prior to the effective date of the applicable Regulatory Change, any Changes which (i) ActaMed determines are required for the Network Software to remain in compliance with all applicable Regulations, or (ii) SBCL requests in writing to ActaMed for compliance with Regulations of the Network Software. 1. If SBCL reasonably determines that ActaMed cannot provide such required work by thirty (30) days prior to a deadline imposed by governmental authority, SBCL shall have the [*] CONFIDENTIAL TREATMENT REQUESTED -15- right to contract with a third party for such work or to do such work itself. In such event, SBCL shall be reimbursed therefor by ActaMed, except as provided in Section V.C.3 below. 2. Upon reasonable advance written notice to ActaMed, SBCL may request, and if it so requests ActaMed shall use its good faith efforts to accommodate, prioritization of such Changes over any other software development work performed by or on behalf of ActaMed. 3. In any event, upon reasonable advance notice to ActaMed, SBCL shall be entitled to change the prioritization of required Changes from time to time and to resolve conflicts between Changes demanding equal prioritization to the extent necessary to deliver any such Change not less than thirty (30) days prior to any government imposed deadlines or as promptly as practicable. 4. If ActaMed disputes that Changes requested by SBCL pursuant to clause (ii) of Section V.C are required by Regulations, either ActaMed or SBCL shall be entitled to cause the dispute to be resolved in accordance with the procedures set forth in Section XV.B.1.a and XV.B.1.b thereof. If such process is used and results in substantial agreement with either (i) ActaMed, then [*] (including the cost of FTEs) in implementing such Changes, or (ii) SBCL, [*]. If such process is not used or does not result in an agreement as to whether or not such Change is required by Regulations, ActaMed and SBCL shall mutually agree on an outside counsel familiar with issues of the nature involved in the dispute and the opinion of such counsel shall be binding on the parties hereto. D. ACTAMED DEVELOPED NEW FUNCTIONALITY. When ActaMed develops new functionality for the Network that ActaMed offers generally to its customers, which is not included in a maintenance release that ActaMed offers generally to its customers pursuant to Section V.A. above, ActaMed will offer such new functionality to Automated Providers on the same basis [*] subject to SBCL's right to accept or reject such new functionality. E. Development Work Requested by SBCL. 1. SBCL at any time may request that ActaMed perform additional development work and, subject to the terms of this Section V.E, shall pay ActaMed for such work at no higher than the then industry standard rates for similar services. a. If SBCL requests in writing that ActaMed provide additional development work for use exclusively by SBCL and, regardless of whether ActaMed or a third party actually performs such development work, ActaMed shall either (i) [*] in which case such work shall be a "Perpetual Exclusive Development", or (ii) acting in good faith, [*] in which case such work shall be a "Temporary Exclusive Development". With respect to Perpetual Exclusive Developments, ActaMed will not use or license [*] CONFIDENTIAL TREATMENT REQUESTED -16- the use of the Perpetual Exclusive Developments (without regard to whether they constitute SCAN Developments or ActaLab Software) other than in support of Lab EDI Services. With respect to Temporary Exclusive Developments, ActaMed will not use or license the use of Temporary Exclusive Developments (without regard to whether they constitute SCAN Developments or ActaLab Software) other than in support of Lab EDI Services for a period of [*] from the date on which ActaMed first makes available to SBCL such Temporary Exclusive Development for use on a commercial basis in support of SBCL's laboratory testing services. After expiration of such [*] period, subject to resolution of any dispute relating to ActaMed's initial designation of such development work as a Temporary Exclusive Development pursuant to Section V.E.1.b, such Temporary Exclusive Development shall no longer be an Exclusive Development. For purposes of this Section V.E, Perpetual Exclusive Developments and Temporary Exclusive Developments shall include any Changes made pursuant to Section V.C and paid for by SBCL by reason of Section V.C.4, to be designated as Perpetual Exclusive Developments or Temporary Exclusive Developments in accordance with the procedures set forth in this Section V.E.1.a. All such developments are herein referred to collectively as "Exclusive Developments." b. Within twenty (20) days after receiving SBCL's request pursuant to Section V.E.1.a, ActaMed shall notify SBCL of ActaMed's prices and terms for performing such development work, and whether such work will constitute a Perpetual Exclusive Development or a Temporary Exclusive Development. If SBCL provides notice ("Acceptance Notice") accepting ActaMed's price and performance terms, ActaMed shall perform such work at the accepted price and on the accepted performance terms. If SBCL provides notice that it disputes ActaMed's determination that the development work should constitute a Temporary Exclusive Development, the parties shall resolve the dispute in accordance with Section XV. If either (i) ActaMed declines any work requested pursuant to this Section V.E.1, or (ii) SBCL provides notice that it does not accept ActaMed's price and performance terms, then SBCL may engage a third party to perform such work. c. Any contract between ActaMed and SBCL (or a third party developer and SBCL) for development of Exclusive Developments shall allocate ownership of and other rights with respect to the Exclusive Developments as between ActaMed and SBCL, in the manner contemplated by the License Agreement and Development Agreement, including, without limitation, Sections 2.1.4 and 2.3.2 of the License Agreement. 2. If, at any time, SBCL chooses to contract with ActaMed for a dedicated services team from ActaMed to handle development of Changes to the Network, the Licensed Materials, or SBCL's proprietary systems which are not required to be performed by ActaMed pursuant to Section V.C and which are not requested pursuant to Section V.E, ActaMed may elect whether to provide the dedicated team and, if it so elects, shall do so only on terms and conditions agreed to in advance by SBCL. [*] CONFIDENTIAL TREATMENT REQUESTED -17- F. Development Work Requested or Used by Another ActaMed Customer. 1. When ActaMed performs development work on the Network at the request of another ActaMed customer, SBCL shall have the right to obtain [*] but only for so long as ActaMed has the legal right to [*] to SBCL and [*] is not proprietary to the contracting party. 2. When ActaMed performs development work on the Network at the request of SBCL and such work is usable in connectivity with Other Labs (and is not an Exclusive Development), [*]. G. ACCESS AND COOPERATION. Whenever SBCL shall use a third party developer, ActaMed shall allow such third party such access to the Network as shall be reasonably necessary to complete such work and shall cooperate with such third party, PROVIDED THAT such access and cooperation shall be subject to such third party (i) executing reasonable and appropriate security and confidentiality agreements with ActaMed, (ii) abiding by ActaMed's internal policies applicable to all third party developers, and (iii) agreeing to [*] in providing such access and cooperation. H. EMPLOYEE WAIVERS. ActaMed shall ensure that all employees or agents who perform customer support services or have access to any Network Software (whether in preliminary or final form) have signed non-disclosure and assignment agreements that, at minimum, contain provisions (i) prohibiting the disclosure of Confidential Information to the same extent as is set forth in Section X hereof, and (ii) effecting the complete transfer and assignment (without further consideration) by such employee or agent to SBCL or ActaMed, as appropriate, of all right, title and interest to all software and documentation and any proprietary rights thereto to the extent required pursuant to the License Agreement. I. STATEMENT OF WORK AND ACCEPTANCE FOR NEW WORK. In the event any Change projected to cost in excess of [*] is to be made by ActaMed pursuant to this Section V, ActaMed shall deliver a Statement of Work therefor within thirty (30) days after the Change becomes known to it and shall, subject to the other provisions of this Section V, dedicate sufficient resources to the development and implementation of such Change as shall be necessary to gain acceptance of and deploy the Change in accordance with such Statement of Work. VI. COMPLIANCE MATTERS. ActaMed is a computer technology company which provides electronic connectivity services, and is not a health care provider. ActaMed acknowledges that, for a laboratory services provider such as SBCL, the ability to assure that it complies with applicable laws, rules or regulations ("Applicable Laws"), including, but not limited to, the federal Physician Self-Referral Law, 42 [*] CONFIDENTIAL TREATMENT REQUESTED -18- U.S.C. 1395nn, and the regulations promulgated thereunder (together, the "Stark Law"), similar state physician self-referral laws and regulations (together with the Stark Law, the "Self-Referral Laws"), the federal Medicare/Medicaid Antikickback Law and regulations promulgated thereunder (the "Federal Antikickback Law"), and similar state antikickback laws and regulations (together with the Federal Antikickback Law, the "Antikickback Laws"), is of critical importance. SBCL and ActaMed intend that the outsourcing of the Lab EDI Services to ActaMed and the subsequent provision of the Agreed Services by ActaMed to SBCL be done in a manner that allows SBCL to maintain its compliance with Applicable Laws. Accordingly, SBCL and ActaMed have agreed to the provisions set forth in this Section VI, although SBCL and ActaMed understand and agree that the provisions of this Section VI and of the separate SOPs (as defined below) that may be agreed to from time to time by SBCL and ActaMed may not be necessary or may be more restrictive than necessary to assure SBCL's continued compliance with Applicable Laws. A. Representation, Warranty and Covenant. ActaMed represents, warrants, and covenants to SBCL as follows: 1. ActaMed will not directly or indirectly provide any remuneration, as defined in the applicable Self-Referral Laws or Antikickback Laws, to any Provider to whom any of such Self-Referral Laws or Antikickback Laws applies on behalf of SBCL, except for direct or indirect remuneration permitted by such law. 2. In furtherance and not in limitation of the foregoing, SBCL and ActaMed may, from time to time, agree upon certain principles, activities, agreements, standard operating procedures and/or actions (the "SOPs") that one or both parties, as applicable, will follow or undertake to help SBCL assure its compliance with Applicable Laws, and each party will follow any such SOPs applicable to it in the course of conducting its respective business. 3. With respect to [*] to which ActaMed is [*] in connection with the provision of Lab EDI Services, ActaMed will not [*] [*] unless and until SBCL has informed ActaMed in writing that it is willing to [*] and that ActaMed and SBCL have agreed upon [*]. 4. ActaMed will provide any reasonable assistance that SBCL may request from ActaMed, including the provision of information or other assistance, in order for SBCL to fulfill any obligation that SBCL, in its sole discretion, determines it has under the Integrity Agreement. Notwithstanding the foregoing, nothing in this provision is intended to or should be interpreted to mean that ActaMed is subject to any of the provisions of the Integrity Agreement. 5. In the event that SBCL becomes aware of an issue with respect to compliance with this Section VI, SBCL will promptly inform ActaMed of such issue and ActaMed will promptly address such issue and take action to remedy any such issue to the reasonable satisfaction of SBCL. [*] CONFIDENTIAL TREATMENT REQUESTED -19- 6. ActaMed will notify SBCL of any proposed changes in ActaMed's business practices with respect to EDI or the provision of LAB EDI Services that are likely to affect SBCL or Automated Providers (other than [*]) a reasonable period prior to the proposed implementation of such change or changes and will provide SBCL with a reasonable opportunity to review those proposed changes for compliance with this Section VI prior to implementation. If [*] any such [*] based on an [*] or the [*], [*] with [*] to [*] before [*]. B. AUDIT RIGHTS. SBCL shall have Audit Rights, exercisable [*] with respect to all of ActaMed's books, records and other materials that relate to any compliance issues covered by this Section VI in order for SBCL to determine ActaMed's fulfillment of its obligations hereunder or under any separately agreed upon SOPs. When ActaMed enters into agreements with Providers, it will use its best efforts to secure the right for ActaMed and, if such Provider is an SBCL client, for SBCL, to audit such Provider's books and records, and other materials and/or to inspect the Provider's premises to assure that any compliance requirements established with such Provider are being satisfied, and, upon request from SBCL, ActaMed will permit SBCL to exercise such rights. In any exercise of Audit Rights under this Section VI.B, SBCL shall give ActaMed two (2) weeks' prior written notice of any such audit, and shall abide by reasonable ActaMed security and confidentiality procedures during the audit. SBCL and ActaMed shall each bear their own expenses associated with such audit. C. DISPUTE RESOLUTION. Notwithstanding any other provision of this Agreement to the contrary, because of the critical nature of compliance to SBCL's business, disputes regarding compliance with this Section VI may not be susceptible to resolution following normal dispute resolution mechanisms. In the event that SBCL and ActaMed have a disagreement or dispute regarding compliance with this Section VI, ActaMed agrees to use its best efforts in working with SBCL to attempt to resolve that dispute as soon as possible. If the parties are not able promptly to resolve any such dispute, and the parties are not able to agree upon another mechanism, such as that provided for in Section V.C.4 hereof, to resolve the issue, SBCL shall have the right to exercise any and all remedies available to it under this Agreement, including the right to terminate the Agreement. VII. PREFERRED LAB EDI VENDOR. A. PREFERRED LAB EDI VENDOR RELATIONSHIP. Provided none of the events has occurred which is described in Section VII.B hereof, SBCL will, [*] afford ActaMed "preferred Lab EDI Vendor" status in the United States to the extent set forth in this Section VII. In this regard, SBCL will: 1. instruct its salespeople that when occasions arise where it is appropriate to do so, inform Providers interested in Lab EDI Services that ActaMed is its preferred vendor for all Lab EDI Services; [*] CONFIDENTIAL TREATMENT REQUESTED -20- 2. indicate that ActaMed is SBCL's preferred vendor for Lab EDI Services in appropriate communications, whether internal or external, written or oral, as determined by SBCL that relate to the topic of Lab EDI Services and where a Lab EDI Services vendor is mentioned; 3. from the date when the ActaLab Software is approved by SBCL for use by Automated Providers, (i) cause the marketing materials for SCAN Software to be revised to feature the ActaLab Software; and (ii) train the SBCL salespeople at no direct expense to ActaMed regarding the general features and benefits of the ActaLab Software; 4. instruct its salespeople of the benefits to SBCL of ActaMed's preferred status so that whenever they undertake sales efforts or negotiations with a Provider whom SBCL believes to be a significant future customer for Lab EDI Services with an SBCL Lab, or with a significant Automated Provider serviced by ActaMed, insofar as it is known to the salesperson, for renewal or extension of lab testing services at an SBCL Lab, if appropriate, invite representatives from ActaMed to be included in such sales efforts and negotiations, so that ActaMed may promote the use of the ActaLab Software to such customer; 5. inform appropriate third parties, including but not limited to practice management system companies, electronic medical record vendors and other EDI clearinghouses interested in establishing Lab EDI Services (or services relating thereto) with SBCL, that, ActaMed is SBCL's preferred provider for Lab EDI Services, and suggest that, provided ActaMed has the capabilities sought by the third party, the third party pursue a contractual relationship with ActaMed regarding such Lab EDI Services. B. LIMITATIONS ON PREFERRED PROVIDER STATUS. The provisions of Section VII.A shall apply unless and until any of the following occurs: 1. ActaMed ceases to offer products and services which have features and functionality which are substantially comparable to other similar products and services of similar vendors for services in the nature of Lab EDI Services; SBCL provides written notice of same and, within thirty (30) days after such notice is given, ActaMed fails to demonstrate to SBCL's reasonable satisfaction that such determination is not accurate. 2. An Other Lab becomes a shareholder of ActaMed; provided that, after ActaMed has consummated a Qualified Public Offering (as defined in ActaMed's Fourth Amended and Restated Articles of Incorporation), this clause 2 shall apply only if the Other Lab becomes a shareholder of ActaMed by reason of either an issuance of equity to the Other Lab by ActaMed or waiver of restrictions in agreements between ActaMed and its stockholders which are comparable to the Standstill Agreement between ActaMed and SBCL dated the date hereof. 3. Any of the events described in clauses 2 through 5 of Section XII.B shall have occurred (without regard to grace periods otherwise applicable thereto and other than an event under clause 7 thereof which is based upon a failure of SBCL to pay amounts due from it hereunder). -21- 4. ActaMed fails to meet any of the Performance Standards in [*] or [*]. 5. Any of the events described in Article X of the Assets Purchase Agreement shall have occurred. 6. In the event that SBCL merges with or into, or acquires or is acquired by an entity, owning or operating a clinical laboratory, or sells substantially all of its assets to another entity in a transaction in which this Agreement is assigned to such entity, SBCL shall have the right to elect to have the preferred provider status removed with respect to such other entity, PROVIDED THAT the [*] set forth in Section IV.C and D hereof shall remain in effect after such transaction; and PROVIDED FURTHER THAT before exercising such right, SBCL shall have used its good faith efforts to preserve the original intention of the parties hereto. C. EXCLUSIONS. Notwithstanding anything to the contrary contained in this Agreement, including without limitation this Section VII, SBCL shall be entitled without restriction and in its sole discretion, to (i) utilize or change any EDI system for purposes of connectivity between an SBCL Lab and a Provider [*], or between SBCL Labs, utilizing Lab EDI Services that SBCL has already established or begun to establish connectivity capabilities as of the date hereof, including without limitation those set forth on EXHIBIT VII.C-1 which Exhibit shall be delivered by January 15, 1998 and shall represent SBCL's best efforts to identify all such capabilities which are significant to SBCL; (ii) terminate or not renew its current contracts or arrangements with third parties relating to Lab EDI Services; (iii) pursue future arrangements or relationships for Lab EDI for any exclusion described in EXHIBIT VII.C-2, and (iv) utilize or change any EDI system between SBCL Labs and other facilities owned, managed and/or operated by SBCL. D. EXCLUSIONS FOR [*]. Notwithstanding anything to the contrary contained in this Agreement, including without limitation this Section VII, SBCL shall be entitled without restriction and in its sole discretion, to change, continue to use or install [*]. At some time in the future, SBCL will consider a proposal from ActaMed for some or all of these [*] transactions and enter into reasonable negotiations, if appropriate. For a period of [*] from the date hereof, SBCL will not [*] Lab EDI Services without notifying ActaMed and affording ActaMed opportunity to propose to provide such services. E. FUTURE ACTAMED PARTICIPATION IN EXCLUDED ARRANGEMENTS. Notwithstanding Section VII.C above, SBCL will endeavor to include ActaMed in opportunities relating to the arrangements identified in Section VII.C(iii) to the extent feasible and appropriate as determined by SBCL for Lab EDI or physician connectivity. The nature and pricing of ActaMed's involvement will be negotiated on a case by case basis. [*] CONFIDENTIAL TREATMENT REQUESTED -22- F. ELIGIBILITY AND CLAIMS PROCESSING SERVICES. During the initial term of this Agreement, SBCL will use all reasonable business efforts, consistent with its competitive needs in the lab testing business, to utilize ActaMed as SBCL's preferred provider of electronic eligibility verification and claims processing services to provide connectivity with all third party payers with which SBCL desires connectivity and ActaMed is then connected, PROVIDED THAT this Section VII.F shall apply only if (i) SBCL desires to use an outside vendor for such services, and (ii) the prices proposed to be charged by ActaMed for such services are [*]. In furtherance of such "preferred" status, SBCL shall offer ActaMed as one of the potential providers of such services in any written response to a request for proposals for lab testing services. For each written SBCL proposal for the provision of such services, SBCL shall provide ActaMed with a copy of the sections thereof describing ActaMed's proposed services. SBCL shall provide ActaMed with such reasonable opportunity as circumstances permit to review and correct or comment on any such proposed language. Notwithstanding the foregoing, SBCL shall not be obligated to comply with the provisions of this Section VII.F in those cases in which (i) the payer designates (in the request for proposals or otherwise) a provider of such services other than ActaMed, or (ii) it would violate any Regulation, contractual provision or obligation by which SBCL is bound. G. FURTHER EXCLUSIONS FOR NON-LABORATORY EDI. Nothing contained herein shall prohibit SBCL from engaging in or contracting with third parties relating to non laboratory related EDI transactions including but not limited to the following, as long as each of the following is not intended primarily as a connection from an Automated Provider to a network for the purposes of Lab EDI Services (or services related thereto): [*]. VIII. COOPERATIVE RELATIONSHIP. A. COOPERATION. Upon SBCL request, ActaMed will work with SBCL's sales people to generate site connectivity and will use reasonable efforts to be available to perform the technical portions of sales presentations made by SBCL's sales people. B. USE OF OTHER PARTIES' NAME. Each party shall have the right to include the other party's name on its client or vendor list and to disclose the nature of the services and products provided under this Agreement, so long as such services and products are accurately represented; PROVIDED, HOWEVER, that neither party has the right to use the other's name, trademarks or trade names for other advertising, sales promotion, or publicity purposes without the other's prior written consent. [*] CONFIDENTIAL TREATMENT REQUESTED -23- C. USER GROUP. ActaMed will establish a user group, to consult on priorities and provide direction to ActaMed on system initiatives, which will include representation from SBCL, Automated Providers and payers. At regular intervals not less frequently than annually ActaMed will solicit user suggestions, input and feedback regarding the Network. D. ACTAMED'S OBLIGATION TO PROMOTE SB FOR DISEASE MANAGEMENT. For so long as ActaMed is SBCL's preferred vendor pursuant to Section VII, ActaMed will undertake actions similar to those set forth in Section VII.A to promote SmithKline Beecham Corporation's Healthcare Services Division for the Disease Management Business. "DISEASE MANAGEMENT BUSINESS" shall be defined in a separate writing reasonably agreed upon by the parties within thirty (30) days after the date hereof. E. REFERENCE CHECKS. SBCL shall designate one or two individuals who shall respond to a reasonable number of reference inquiries and visits (not to exceed two visits in any calendar month) by customers and potential customers of ActaMed on mutually agreeable terms. SBCL shall retain the right to refuse a visit to any competitor or potential competitor of SBCL or to terminate the visit of any customer or potential customer who does not abide by SBCL's policies and procedures. ActaMed shall inform all customers and potential customers allowed on SBCL's premises pursuant to this Section that they are required to abide by SBCL's policies and procedures. IX. SBCL'S OBLIGATIONS REGARDING THE NETWORK. A. STANDARD FORMATS AND PROTOCOLS. SBCL shall receive and generate transaction data and any other Lab EDI in a standard format and protocol mutually agreed upon by the parties. B. HARDWARE AND OPERATING ENVIRONMENT. SBCL shall provide, at its own expense, all necessary hardware, including terminal equipment, compatible with and suitable for its communications with the Network at the SBCL Labs. ActaMed shall verify SBCL's operating environment with testing procedures implemented by ActaMed from time to time, with advance notice to and approval from SBCL, which approval shall not be unreasonably withheld or delayed. C. NEW RELEASES OF SBCL PROPRIETARY SOFTWARE. SBCL will make available to ActaMed all new releases and specifications for the SBCL gateway so as to enable ActaMed to maintain the ActaMed Gateway substantially the same as the SBCL gateway, including for Year 2000 compliance. In addition, SBCL will give ActaMed advance notice of test code changes, new releases of SBCL proprietary software and other SBCL host computer system changes (including host computer systems operated by third party outsourcers on behalf of SBCL), if such changes or releases will affect ActaMed's ability to transmit information over the Network. If any changes are required to the Network by reason of such actions by or on behalf of SBCL, the parties will mutually agree (consistent with Section V hereof) in advance on the scope of the project, the deliverables, deadlines, any fees ActaMed will charge SBCL, a test plan and an acceptance test plan. -24- X. CONFIDENTIALITY AND SECURITY. A. DATA CONFIDENTIALITY. Each party agrees that patient clinical records are Confidential Information and each party shall not disclose or utilize individual lab test information in any way that would violate any patient confidentiality obligation or any Regulations. Without limiting ActaMed's obligations regarding Confidential Information which may be otherwise provided for in this Agreement, ActaMed shall be responsible to ensure the confidentiality of test results and patient information transmitted over the Network, in accordance with all applicable Regulations governing such patient confidential information, including to prevent anyone other than the sender and addressee of Transmittal Information or their respective authorized employees from monitoring, using, gaining access to or learning the import or contents of any Transmittal Information. B. DISTRIBUTION AND USE OF DATA. All Transmittal Information entered onto the Network by SBCL or any Automated Provider from tests referred to SBCL, shall be owned by SBCL and not by ActaMed. ActaMed shall not aggregate, integrate, compile, regenerate, merge, manipulate or otherwise use the Transmittal Information for any purposes and shall not provide the Transmittal Information to any other person or entity, other than as specifically required or allowed under the terms of this Agreement to perform the Agreed Services, without the prior written consent of SBCL. ActaMed agrees that such information cannot be aggregated for any Provider or among different customers' or other health care providers or laboratory service providers for any purpose, without SBCL's prior written consent. 1. If ActaMed is served with a warrant, subpoena or any other order or request from a governmental body or any other entity or person for any records or files of information transmitted over the Network, ActaMed will as soon as practicable, and not in violation of law, deliver to SBCL a copy of such warrant, subpoena, order or request and will not, without SBCL's prior written consent, accede to the same unless and until required to do so under applicable law. 2. ActaMed acknowledges and agrees that in the event it has access to confidential data relating to an Automated Provider and/or the Automated Providers's patients, employees and medical staffs, ActaMed will hold such information in the strictest confidence and will not, without SBCL's prior written consent, disclose any such information, including without limitation in any regeneration, recompilation, or reorganization thereof, or through any statistical analyses or provision of other excerpts thereof. Without limiting the foregoing, ActaMed agrees that it shall limit the ActaMed employees who have access to any patient identifiable health information, including without limitation, laboratory test order or results information, if any, to only those "need to know" employees of ActaMed as is required to perform the Agreed Services to the level of the Performance Standards set forth herein. Such employees shall be identified to SBCL in advance of such access and shall have executed and delivered to ActaMed and to SBCL, an agreement requiring non-disclosure of confidential information, compliance with all ActaMed policies and procedures with respect to Confidential Information and security of the Network (which shall be consistent with the requirements in this Agreement), if applicable, procedures established by SBCL and shall include an acknowledgment of immediate termination for breach of such agreement. To the extent any -25- employee of ActaMed acquires such access to patient health information through any SBCL computer systems, or [*] ("SBCL ACCESS"), ActaMed shall cause such employees to abide by SBCL's [*] Security Access procedures, and shall deliver to SBCL such agreements reflecting same as may be required by SBCL and identified to ActaMed in writing from time to time. ActaMed shall be responsible for promptly notifying SBCL if any employee with SBCL Access is terminated or leaves the employment of ActaMed. 3. Subject to the requirements of Section X.A, ActaMed may, at [*] of [*] to such [*] for which the [*] from such [*] without the [*] SBCL. There shall be [*] such [*]. 4. Subject to Section X.A and without limiting the above restrictions in this Section X.B, ActaMed [*] without the [*]. A copy of [*] shall be provided to SBCL. ActaMed agrees that, if SBCL's consent is obtained, [*] to Automated Providers shall be made available only in accordance with all applicable patient confidentiality laws of the states [*] the patient and SBCL Labs and ActaMed are located, and only [*] or [*]. SBCL shall have Audit Rights with respect to any disputed amounts hereunder. C. TRADE SECRET NONDISCLOSURE COVENANT. Without limiting the foregoing, Trade Secrets and Confidential Information and all physical embodiments thereof received by either party (the "RECEIVING PARTY") from the other party (the "DISCLOSING PARTY") during the term of this Agreement, including those received pursuant to the exercise of Audit Rights as described in Section III.E hereof, are confidential to and are and will remain the sole and exclusive property of the Disclosing Party. In furtherance of the foregoing: 1. At all times, both during the term of this Agreement and after its termination, the Receiving Party shall hold all Trade Secrets of the Disclosing Party in confidence, and will not use, copy or disclose such Trade Secrets, or any physical embodiment thereof, or cause any of such Trade Secrets to lose their character as Trade Secrets. At all times during the term of this Agreement and for a period of [*] following the termination of this Agreement, (except where a longer period is required pursuant to this Agreement or Regulations) the Receiving Party shall hold the Confidential Information of the Disclosing Party in confidence, and will not use, copy or disclose such Confidential Information, or any physical embodiments thereof, or cause any of such Confidential Information to lose its character or cease to qualify as Confidential Information. [*] CONFIDENTIAL TREATMENT REQUESTED -26- 2. Trade Secrets and Confidential Information shall be maintained under secure conditions by the Receiving Party, using reasonable security measures and in any event (1) not less than the same security measures used by the Receiving Party for the protection of its own Trade Secrets and Confidential Information of a similar kind, and (2) any specific security measures required by this Agreement. The Receiving Party shall not remove, obscure or deface any proprietary legend relating to the Disclosing Party's rights, on or from any tangible embodiment of any Licensed Materials without the Disclosing Party's prior written consent. Within thirty (30) days after termination of this Agreement, the Receiving Party shall deliver to the Disclosing Party all Trade Secrets and Confidential Information, and all physical embodiments thereof, then in the custody, control or possession of the Receiving Party. 3. If the Receiving Party is ordered by a court, administrative agency, or other governmental body of competent jurisdiction to disclose Trade Secrets or Confidential Information, or if it is served with or otherwise becomes aware of a motion or similar request that such an order be issued, then the Receiving Party will not be liable to the Disclosing Party for disclosure of Trade Secrets or Confidential Information required by such order if the Receiving Party complies with the following requirements: (i) if an already issued order calls for immediate disclosure, then the Receiving Party shall immediately move for or otherwise request a stay of such order to permit the Disclosing Party to take measures such as are described in clause (iii); (ii) the Receiving Party shall immediately notify the Disclosing Party of the motion or order by the most expeditious possible means; and (iii) the Receiving Party shall join or agree to (or at a minimum shall not oppose) a motion or similar request by the Disclosing Party for an order protecting the confidentiality of the Trade Secrets and Confidential Information, including joining or agreeing to (or non opposition to) a motion for leave to intervene by the Disclosing Party. 4. The Receiving Party shall immediately report to the Disclosing Party any attempt by any person of which the Receiving Party has knowledge (i) to use or disclose any portion of the Trade Secrets and Confidential Information without authorization from the Disclosing Party, or (ii) to copy, reverse assemble, reverse compile or otherwise reverse engineer any part of the Trade Secrets or Confidential Information (except as permitted herein). D. PERMITTED DISCLOSURES. Notwithstanding any provisions of this Agreement to the contrary, SBCL may disclose to the OIG as part of the disclosures SBCL makes under its Integrity Agreement the fact that SBCL and ActaMed have entered into the transactions contemplated by the parties and any information relating to such transaction or this Agreement which SBCL determines, in good faith upon advice of counsel, is required or, in light of SBCL's obligations under the Integrity Agreement, appropriate for SBCL to make, or SBCL proposes to make in response to a request for such information from the OIG, provided that ActaMed shall be given opportunity (which shall be reasonable in light of all facts and circumstances) to review and comment upon the information SBCL intends to include in any such submission. In the event that any such disclosure that SBCL intends to make includes any information that constitutes Confidential Information of ActaMed or Trade Secrets of ActaMed, SBCL will provide reasonable (in light of all facts and circumstances, including the time frame in which such disclosure is required to be made) assistance -27- to ActaMed to take reasonable steps to assure that such Confidential Information or Trade Secrets of ActaMed are maintained in confidence, including, but not limited to, (i) requesting that the OIG treat such information as trade secrets, confidential information or financial information within the meaning of the Freedom of Information Act, 5 U.S.C. Section 552(b)(4), (ii) requesting of the OIG that SBCL and ActaMed be given prior notice of any proposed release of such information to persons or entities outside of the OIG; (iii) requesting that the OIG otherwise assure the confidentiality of the information provided by ActaMed as if such information was confidential information of SBCL [*] and taking other reasonable steps that may be requested by ActaMed and to which SBCL may, in its sole discretion, agree to assure that the OIG honors its confidentiality obligations in that section; (iv) where such information is to be provided in response to a request by the OIG, take reasonable steps to narrow the request for information from the OIG in an appropriate manner in order to limit the amount of information, if any, that constitute Confidential Information or Trade Secrets of ActaMed covered by such request; and (v) make reasonable efforts to permit ActaMed with the concurrence of the OIG, to disclose such information directly to the OIG provided that in any such case, ActaMed shall give SBCL a timely opportunity to review, comment upon, and approve the information ActaMed intends to include in such submission. The additional safeguards described in subsections (i) through (v) above are designed to help assure the confidentiality of Confidential Information and Trade Secrets the disclosure of which would have a material adverse impact on ActaMed. These additional provisions are not intended to interfere with SBCL's ability to meet its disclosure obligations under the Integrity Agreement. Each party shall promptly notify the other in the event it receives an inquiry, investigation, or request for information from the OIG or other governmental agency into the matters relating to the proposed transaction. XI. RELATIONSHIP MANAGERS. ActaMed will designate a representative responsible for the SBCL account and who will have decision making authority for ActaMed (the "ACTAMED RELATIONSHIP MANAGER"). [*] will be the initial Relationship Manager for ActaMed. The ActaMed Relationship Manager will be a member of the Oversight Committee and shall attend planning meetings with SBCL, keep SBCL updated on national trends in EDI and Lab EDI, and consult with SBCL regarding ActaMed's software and Network strategy. SBCL will designate a representative responsible for SBCL's relationship with ActaMed who will have decision making authority for SBCL (the "SBCL RELATIONSHIP MANAGER"). [*] will be the initial Relationship Manager for SBCL. The SBCL Relationship Manager will be a member of the Oversight Committee and will coordinate SBCL's activities with ActaMed, attend planning meetings with ActaMed, and keep ActaMed updated on technical developments with respect to [*] and Lab EDI. Each party will consult with the other before changing its Relationship Manager. [*] CONFIDENTIAL TREATMENT REQUESTED -28- XII. TERM AND TERMINATION. A. INITIAL TERM AND RENEWALS. This Agreement shall continue for five (5) years from the Region One Transfer Date, unless earlier terminated as provided herein. Unless written notice of termination is given by SBCL not less than one hundred eighty (180) days, or by ActaMed not less than three hundred sixty (360) days, prior to the end of the term (including any extension or renewal of the term pursuant to this Section XII.A), the term of this Agreement will be automatically extended for successive two (2) year periods. B. TERMINATION. A party may cause a termination of all rights and obligations of the parties hereunder, except as provided in this Section XII hereof, as follows: 1. In the event that ActaMed fails to meet any of the Key Performance Standards in any [*] during any period of [*] SBCL may terminate this Agreement immediately by giving written notice of termination to ActaMed. 2. SBCL may terminate this Agreement immediately following a breach by ActaMed of its covenants set forth in Section VI hereof by giving written notice of termination to ActaMed. 3. Either party may terminate this Agreement if the other party shall fail to pay any amount when due from it hereunder (disregarding for this purpose any unpaid amount in dispute which dispute is being pursued with diligence) within thirty (30) days after written notice of a failure to pay is provided by the terminating party to the nonpaying party. 4. If one party breaches any material provision of this Agreement, which breach is not described in Sections XII.B.1-3 above (and which is not a breach of Performance Standards other than the Key Performance Standards), the nonbreaching party may terminate this Agreement by giving [*] written notice of termination to the breaching party. If such breach is (in the reasonable estimation of the terminating party) capable of being cured during such period and the other party acts diligently and continuously to cure such breach, the termination shall be suspended during such time, PROVIDED THAT such breach is actually cured prior to the end of such period; AND PROVIDED FURTHER THAT during the period from and after the time an ActaMed breach is discovered, SBCL may, at its election, pay all Fixed Fees, Transaction Fees, Variable Fees, PIFs and other amounts otherwise due ActaMed hereunder into an escrow account established with a nationally recognized financial institution selected by SBCL, to be released to ActaMed upon the later of the date within such [*] period when the breach is cured or the date prior to exercise of the termination right provided in this Section XII.B.4 as of which ActaMed shall have been not in breach of this Agreement for at least thirty (30) days. If ActaMed proves, to SBCL's reasonable satisfaction, that such amounts are needed in order to cure the breach, SBCL will release amounts to enable ActaMed to cure the breach, in which case such released amounts will be used by ActaMed exclusively for purposes of curing such breach. [*] CONFIDENTIAL TREATMENT REQUESTED -29- 5. If one party becomes insolvent, files bankruptcy, or has an involuntary bankruptcy case filed against it which is not dismissed within ninety (90) days, the other party may terminate this Agreement immediately by giving written notice of termination to the breaching party. C. EFFECT OF EXPIRATION. All rights and obligations of the parties hereunder shall cease upon the expiration of this Agreement except that (i) the obligations of the parties pursuant to Section X (relating to confidentiality), and (ii) the exclusive use rights of SBCL pursuant to Section V (relating to development work) shall continue in full force and effect indefinitely. In addition, the obligations of the parties pursuant to Section IV (relating to compliance with Regulations) shall continue for so long as SBCL shall have Long Term Access or Short Term Access. D. EFFECT OF TERMINATION. All rights and obligations of the parties hereunder shall cease upon the effective date of the termination of this Agreement except that (i) the obligations of the parties pursuant to Section X (relating to confidentiality), (ii) the exclusive use rights of SBCL pursuant to Section V (relating to development work), and (iii) the obligations of ActaMed pursuant to Section XII.E hereof (relating to termination transition), shall continue in full force and effect indefinitely. In addition, the obligations of the parties pursuant to Section IV (relating to compliance with Regulations) shall continue for so long as SBCL shall have Long Term Access or Short Term Access. In the event that ActaMed has terminated this agreement for SBCL's failure to pay undisputed amounts due under this Agreement, ActaMed will not be required to perform services for SBCL or to allow SBCL access to or use of the Network during the termination transition period unless SBCL pays ActaMed in advance for such services and Network access. Upon termination of this Agreement, any amount in escrow pursuant to Section IV.F or Section XII.B.4 hereof shall be paid to the terminating party. E. Transition Upon Termination. 1. If this Agreement terminates as a result of a notice of non-renewal given by ActaMed pursuant to Section XII.A, ActaMed will provide [*] or, at SBCL's option, a. SBCL may have [*] so long as ActaMed provides [*] (but not less than [*]), or b. SBCL may require ActaMed [*] prior to the effective date of such termination, and SBCL may exercise the right to [*] as granted by the License Agreement. 2. If this Agreement terminates as a result of a notice of non-renewal given by SBCL pursuant to Section XII.A, ActaMed will provide [*] and SBCL will have [*]. 3. If SBCL terminates this Agreement pursuant to Section XII.B, [*] CONFIDENTIAL TREATMENT REQUESTED -30- a. ActaMed will provide [*], b. SBCL may require ActaMed [*] within [*] after SBCL's notice of termination, c. SBCL may exercise the right to [*] as granted by the License Agreement, and d. until such time [*] by SBCL on a commercial basis, SBCL shall have Long Term Access. 4. [*] shall mean that [*] from [*] who have [*] or a version of [*]. For [*] SBCL will [*] on the date notice of termination is given. ActaMed will [*] and SBCL will [*] is rendered. If SBCL [*] (subject to [*] to those provided in Section [*] hereof), ActaMed will [*]. ActaMed will have [*] and SBCL will [*]. 5. [*] shall mean that ActaMed [*] the date of termination. For [*] SBCL will [*] the date of Termination. ActaMed will [*] the date the bill is rendered. If SBCL [*] (subject to [*] to those provided in Section [*] hereof), ActaMed will [*]. ActaMed will have [*] and SBCL will have [*]. 6. [*] shall mean [*] that will only provide [*] and allows [*], to provide [*] ActaLab Software at their sites. F. TRANSITION UPON TERMINATION. ActaMed's [*] shall mean (i) if the date of termination occurs [*] the transfer to SBCL of [*] requested by SBCL to [*] SBCL at such time [*] and (ii) providing SBCL, as promptly as practicable, with [*] used for [*] whether or not [*] to which ActaMed is in a position to [*] the effective date of the termination and to [*] to the transition. In furtherance of and in addition to the foregoing, upon termination or expiration of this Agreement, the parties shall effect, and shall cooperate with each other in effecting, [*] CONFIDENTIAL TREATMENT REQUESTED -31- the orderly and reasonable removal of ActaMed as a provider of Lab EDI Services to Automated Providers in the manner that is least disruptive to Automated Providers and which allows connectivity between SBCL Labs and Automated Providers to continue uninterrupted with SBCL or a separate vendor. The parties shall jointly develop a removal plan which will provide a reasonable level of support consistent with Section III hereof to transition SBCL off the Network. Each party shall bear its own expenses in developing and implementing the removal plan. G. LICENSE AGREEMENT. To the extent any provisions of the License Agreement depend for their interpretation or application upon provisions of this Agreement, such provisions shall survive termination or expiration of this Agreement but solely for purposes of the License Agreement. XIII. NONSOLICITATION. A. BY SBCL. Until the occurrence of any of the events described in Sections XIII.B, SBCL will not, directly or indirectly, solicit any ActaMed Site to use a clinical laboratory test ordering or results reporting product other than one serviced or distributed by or otherwise affiliated with ActaMed. B. EXCEPTIONS TO SBCL NONSOLICITATION. The restrictions set forth in Section XIII.A shall not apply from and after the occurrence of the following: 1. Any of the events described in clauses 1 through 5 of Section XII.B shall have occurred (without regard to notice or grace periods otherwise applicable thereto and disregarding for this purpose any termination event arising by reason of nonpayment by SBCL of any amount not in dispute). 2. Any of the events described in Article X of the Assets Purchase Agreement shall have occurred. 3. Notice of nonrenewal of this Agreement is given by (i) ActaMed pursuant to Section XII.A in which case Section XIII.A shall not apply for the last [*] of the then remaining term hereof, or (ii) SBCL in which case Section XIII.A shall not apply for the last [*] of the then remaining term hereof. C. Noncompetition by ActaMed. 1. [*] ActaMed shall not, either individually or through any affiliate, employee, director, officer or consultant, directly or indirectly, (i) [*], or (ii) compete with SBCL in the Disease Management Business. The specific terms of such noncompetition shall be detailed in the separate writing referred to in Section VIII.D to be delivered within thirty (30) days after the date hereof. [*] CONFIDENTIAL TREATMENT REQUESTED -32- 2. At any time prior to [*], ActaMed shall not [*] at the SBCL Sites transferred to ActaMed pursuant to the Purchase Agreement, including without limitation, to install or be instrumental in causing [*] to [*] located at such sites which enables the [*], or otherwise provide [*] which facilitate [*]. XIV. OBLIGATION TO INDEMNIFY. A. ACTAMED INDEMNITY. Subject to Section XIV.C hereunder, ActaMed agrees to indemnify and hold harmless each SBCL Indemnitee against and in respect of (i) all Losses, asserted against, imposed upon or incurred by any SBCL Indemnitee by reason of or resulting from any breach of any representation or warranty or covenant of ActaMed contained in this Agreement, as well as from any negligent act or omission of ActaMed; and (ii) any and all actions, suits, claims, proceedings, investigations, demands, assessments, audits, fines, judgments, costs and other expenses (including, without limitation, reasonable legal fees and expenses) incident to any Loss or to the enforcement of this Section XIV.A. B. SBCL INDEMNITY. Subject to Section XIV.C hereunder, SBCL agrees to indemnify and hold harmless each ActaMed Indemnitee against and in respect of (i) all Losses, asserted against, imposed upon or incurred by any ActaMed Indemnitee by reason of or resulting from any breach of any representation or warranty or covenant of SBCL contained in this Agreement, as well as from any negligent act or omission of SBCL; and (ii) any and all actions, suits, claims, proceedings, investigations, demands, assessments, audits, fines, judgments, costs and other expenses (including, without limitation, reasonable legal fees and expenses) incident to any Loss or to the enforcement of this Section XIV.B. C. ALLOCATION OF RISK. 1. ActaMed shall not be liable to SBCL (or to any person claiming to have been injured by SBCL) for any lab testing error, billing error, or other action or failure to act of SBCL, or any error or mistake not caused by ActaMed and made by SBCL in the reporting of lab testing results to ActaMed for delivery by the Network, and SBCL shall hold ActaMed harmless from all claims caused by such errors or mistakes to the extent made by SBCL. 2. SBCL shall not be liable to ActaMed (or to any person claiming to have been injured by ActaMed) for any error in Transmittal Information, billing error, or other action or failure to act of ActaMed, or any error or mistake not caused by SBCL and made by ActaMed in the transmission of test orders and results over the Network, and ActaMed shall hold SBCL harmless from all claims caused by such errors or mistakes to the extent made by ActaMed. 3. Neither party shall be liable to the other hereunder for consequential, special, punitive or exemplary damages of any kind (including, but not limited to, lost profits, loss of business or other similar damages) arising out of any action or proceeding except and only to the [*] CONFIDENTIAL TREATMENT REQUESTED -33- extent that such damages arise from or relate to (i) the failure of a party to comply with Regulations as required by this Agreement, (ii) an action in tort initiated by a third party against either or both of the parties hereto, or (iii) breach of a party's confidentiality undertakings set forth herein. 4. Neither party shall be liable to the other hereunder in connection with any action or proceeding arising from or relating to a matter covered by this Section XIV, or for breach of this Agreement, for an amount in excess of the greater of (i) [*] or (ii) the [*] prior to the date on which such breach occurs; PROVIDED THAT this limitation shall not apply to any Losses or other damages arising out of or relating to any action described in clauses [*]. D. CLAIMS NOTICE. A Claim shall be made by any Indemnitee by delivery of a Claims Notice to any Indemnifying Party requesting indemnification and specifying the basis on which indemnification is sought and the amount of asserted Losses and, in the case of a Third Party Claim, containing (by attachment or otherwise) such other information as such Indemnitee shall have concerning such Third Party Claim. E. PROCEDURES INVOLVING NON THIRD PARTY CLAIMS. If the Claim involves a matter other than a Third Party Claim, the Indemnifying Party shall raise any objection to such Claim within a reasonable period of time by delivery of a written notice of such objection to such Indemnitee specifying in reasonable detail the basis for such objection. If an objection is timely interposed by the Indemnifying Party, the Indemnifying Party and the Indemnitee shall cooperate in the compromise of the Claim or resolve any disagreement in accordance with Section XV hereof. F. PROCEDURES INVOLVING THIRD PARTY CLAIMS. The obligations and liabilities of the parties hereunder with respect to a Third Party Claim shall be subject to the following terms and conditions: 1. The Indemnitee shall give the Indemnifying Party written notice of a Third Party Claim promptly after receipt by the Indemnitee of notice thereof, and the Indemnifying Party may undertake the defense, compromise and settlement thereof by representatives of its own choosing reasonably acceptable to the Indemnitee. The failure of the Indemnitee to notify the Indemnifying Party of such claim shall not relieve the Indemnifying Party of any liability that they may have with respect to such claim except to the extent the Indemnifying Party demonstrates that the defense of such claim is prejudiced by such failure. The assumption of the defense, compromise and settlement of any such Third Party Claim by the Indemnifying Party shall be an acknowledgment of the obligation of the Indemnifying Party to indemnify the Indemnitee with respect to such claim hereunder. If the Indemnitee desires to participate in, but not control, any such defense, compromise and settlement, it may do so at its sole cost and expense. If, however, the Indemnifying Party fails or refuses to undertake the defense of such Third Party Claim within ten (10) days after written notice of such claim has been given to the Indemnifying Party by the Indemnitee, the Indemnitee shall have the right to undertake the defense, compromise and settlement [*] CONFIDENTIAL TREATMENT REQUESTED -34- of such claim with counsel of its own choosing. In the circumstances described in the preceding sentence, the Indemnitee shall, promptly upon its assumption of the defense of such claim, make a Claim as specified in Sections XIV.A and XIV.B which shall be deemed a Claim that is not a Third Party Claim for the purposes of the procedures set forth herein. 2. If, in the reasonable opinion of the Indemnitee, any Third Party Claim or the litigation or resolution thereof involves an issue or matter which could have a material adverse effect on the business, operations, assets, properties or prospects of the Indemnitee, the Indemnitee shall have the right to control the defense, compromise and settlement of such Third Party Claim undertaken by the Indemnifying Party, and the reasonable costs and expenses of the Indemnitee in connection therewith shall be included as part of the indemnification obligations of the Indemnifying Party hereunder. If the Indemnitee shall elect to exercise such right, the Indemnifying Party shall have the right to participate in, but not control, the defense, compromise and settlement of such Third Party Claim at its sole cost and expense. 3. No settlement of a Third Party Claim involving the asserted liability of the Indemnifying Party under this Article shall be made without the prior written consent by or on behalf of the Indemnifying Party, which consent shall not be unreasonably withheld or delayed. If the Indemnifying Party assumes the defense of such a Third Party Claim, (1) no compromise or settlement thereof may be effected by the Indemnifying Party without the Indemnitee's consent unless (a) there is no finding or admission of any violation of law or any violation of the rights of any person and no effect on any other claim that may be made against the Indemnitee (b) the sole relief provided is monetary damages that are paid in full by the Indemnifying Party and (c) the compromise or settlement includes, as an unconditional term thereof, the giving by the claimant or the plaintiff to the Indemnitee of a release, in form and substance satisfactory to the Indemnitee, from all liability in respect of such Third Party Claim, and (2) the Indemnitee shall have no liability with respect to any compromise or settlement thereof effected without its consent. G. NO RELEASE FOR FRAUD. Nothing contained in this Agreement shall relieve or limit the liability of a party or any officer or director of such party from any Liability arising out of or resulting from common law fraud or intentional misrepresentation in connection with the transactions contemplated by this Agreement or in connection with the delivery of this Agreement. Each ActaMed Indemnitee or SBCL Indemnitee, as the case may be, shall have a right to indemnification for any Loss incurred as the result of any common law fraud or intentional misrepresentation by SBCL or ActaMed, respectively, or any officer or director thereof. H. Payment. 1. If any party is required to make any payment under this Section XIV, such party shall promptly pay the Indemnified Party the amount so determined. If there is a dispute as to the amount or manner of determination of any indemnity obligation owed under this Section XIV, the Indemnifying Party shall nevertheless pay when due such portion, if any, of the obligation as shall not be subject to dispute. The difference, if any, between the amount of the obligation -35- ultimately determined as properly payable under this Section XIV and the portion, if any, theretofore paid shall bear interest as set forth in Section XIV.F.3. 2. Any items as to which an Indemnified Party is entitled to payment under this Article may be paid by setoff against amounts payable to the Indemnifying Party to the extent that such amounts are sufficient to pay such items. 3. If all or part of any indemnification obligation under this Agreement is not paid when due, then the Indemnifying Party shall pay the Indemnified Party interest on the unpaid principal amount of the obligation from the date the amount became due until payment in full, at the per annum rate of interest announced from time to time by NationsBank South, N.A., to be its "prime rate." XV. DISPUTE RESOLUTION; ARBITRATION. A. GENERAL. Except as otherwise provided in Section VI of this Agreement, disputes between ActaMed and SBCL relating to the interpretation or application of this provisions of this Agreement shall be resolved in accordance with this Section XV. B. INFORMAL DISPUTE RESOLUTION. Any dispute between the parties arising out of or with respect to this Agreement, either with respect to the interpretation of any provision of this Agreement or with respect to the performance by ActaMed or SBCL, shall be resolved as provided in this Article. 1. Prior to the initiation of formal dispute resolution procedures, the parties shall first attempt to resolve their dispute informally, as follows: a. The Representatives for each party shall meet for the purpose of endeavoring to resolve such dispute. They shall meet as often as the parties reasonably deem necessary in order to gather and furnish to the other all information with respect to the matter in issue which the parties believe to be appropriate and germane in connection with its resolution. The Representatives shall discuss the problem and negotiate in good faith in an effort to resolve the dispute without the necessity of any formal proceeding. During the course of negotiations, all reasonable requests made by one party to another for nonprivileged information, reasonably related to this Agreement, shall be honored in order that each of the parties may be fully advised of the other's position. b. If, within fifteen (15) days after a matter has been identified for resolution pursuant to this Section XV, either of the Representatives concludes in good faith that amicable resolution through continued negotiation in this forum does not appear likely, the matter will be escalated by formal written notification to the SBCL President and the ActaMed President. The parties will use their respective best efforts to cause the SBCL President and the ActaMed President to meet to attempt to resolve the dispute. -36- c. Formal proceedings for the resolution of a dispute may not be commenced until the earlier of: (i) the date on which the SBCL President and the ActaMed President conclude in good faith that amicable resolution through continued negotiation of the matter does not appear likely; or (ii) thirty (30) days after the dispute has been referred to the SBCL President and the ActaMed President. 2. The provisions of this Section XV shall not be construed to prevent a party from instituting, and a party is authorized to institute, formal proceedings earlier to avoid the expiration of any applicable limitations period. C. ARBITRATION. If the parties are unable to resolve any controversy arising under this Agreement as contemplated by Section XV.A and if such controversy is not subject to Section XIV or Section XV.D, then such controversy shall be submitted to mandatory and binding arbitration at the election of either Party (the "DISPUTING PARTY") pursuant to the following conditions: 1. The Disputing Party shall notify the AAA and the other Party in writing describing in reasonable detail the nature of the dispute (the "DISPUTE NOTICE"). The parties shall each select a neutral arbitrator in accordance with the rules of AAA and the two (2) arbitrators selected shall select a third neutral arbitrator. The three (3) arbitrators so selected are herein referred to as the "PANEL." 2. The Panel shall allow reasonable discovery as permitted by the Federal Rules of Civil Procedure, to the extent consistent with the purpose of the arbitration. The Panel shall have no power or authority to amend or disregard any provision of this Section XV. The arbitration hearing shall be commenced promptly and conducted expeditiously, with each of ActaMed and SBCL being allocated one-half of the time for the presentation of its case. Unless otherwise agreed to by the parties, an arbitration hearing shall be conducted on consecutive days. 3. Should any arbitrator refuse or be unable to proceed with arbitration proceedings as called for by this Section, such arbitrator shall be replaced by an arbitrator selected in accordance with the rules of the AAA and consistent with this Section XV. 4. The Panel rendering judgment upon disputes between parties as provided in this Section XV shall, after reaching judgment and award, prepare and distribute to the parties a writing describing the findings of fact and conclusions of law relevant to such judgment and award and containing an opinion setting forth the reasons for the giving or denial of any award. The award of the arbitrator shall be final and binding on the parties, and judgment thereon may be entered in a court of competent jurisdiction. 5. Arbitration hearings hereunder shall be held in Washington D.C. or other mutually agreeable location. 6. The Panel shall be instructed that time is of the essence in the arbitration proceeding. The Panel shall render its judgment or award within fifteen (15) days following the -37- conclusion of the hearing. Recognizing the express desire of the parties for an expeditious means of dispute resolution, the arbitrator shall limit or allow the parties to expand the scope of discovery as may be reasonable under the circumstances. D. LITIGATION. In the event of a breach of the confidentiality obligations set forth in this Agreement, or in the event a party makes a good faith determination that a breach of the terms of this Agreement by the other party is such that the damages to such party resulting from the breach will be so immediate, so large or severe, and so incapable of adequate redress after the fact that a temporary restraining order or other immediate injunctive relief is a necessary remedy, then such party may file a pleading with a court seeking immediate injunctive relief. If a party files a pleading with a court seeking immediate injunctive relief and this pleading is challenged by the other party and the injunctive relief sought is not awarded in substantial part (or in the event of a temporary restraining order is vacated upon challenge by the other party), the party filing the pleading seeking immediate injunctive relief shall pay all of the costs and attorneys' fees of the party successfully challenging the pleading. 1. ActaMed and SBCL each consent to venue in Philadelphia, Pennsylvania and to the nonexclusive jurisdiction of competent Pennsylvania state courts or federal courts located in Philadelphia for all litigation which may be brought, subject to the requirement for arbitration hereunder, with respect to the terms of, and the transactions and relationships contemplated by, this Agreement. XVI. MISCELLANEOUS. A. PUBLICITY. Each party hereto agrees that neither it, nor or any of its representatives, shall make any public announcement with respect to this Agreement or the transactions contemplated hereby without the prior consent of the other party hereto unless required by law or judicial process, in which case notification shall be given to the other party hereto prior to such disclosure and the content of such disclosure approved by such other party, which approval shall not be unreasonably withheld or delayed. Notwithstanding the foregoing, ActaMed agrees that nothing in this Section XVI.A shall prohibit SBCL from disclosing any information SBCL is permitted to disclose under Section X.D. B. ENTIRE AGREEMENT. This Agreement, including the Exhibits to it, constitutes the entire understanding between the parties and supersedes all proposals, communications and agreements between the parties relating to its subject matter. No amendment, change, or waiver of any provision of this Agreement will be binding unless in writing and signed by both parties. C. GOVERNING LAW. This Agreement will be governed by and construed in accordance with the laws of the State of Georgia applicable to contracts made and performed therein. D. ASSIGNMENTS. Neither party may assign this Agreement without the prior, written consent of the other party, which shall not be unreasonably withheld; PROVIDED, HOWEVER, that SBCL may assign its rights and obligations hereunder without approval of ActaMed to any of its affiliates, -38- or an acquiror of substantially all of its assets; PROVIDED FURTHER that ActaMed may assign its rights and obligations under this Agreement without the approval of SBCL to any person that acquires all or substantially all of the business or assets of ActaMed related to the ActaLab Software and the Network, if such person (or any affiliate of such person) is not engaged in the business of providing laboratory testing services. Any attempted assignment without such consent shall be void. If the parties cannot agree upon whether a company competes with SBCL for lab testing, the parties shall resolve the dispute pursuant to Section XV. Any assignment with consent does not release the assigning party from any of its obligations under this Agreement unless the consent so states. E. NOTICES. Any notices relating to this Agreement shall be in writing and will be sent by certified United States mail, postage prepaid, return receipt requested, or by facsimile transmission or overnight courier service, addressed to the party at the address set forth below, or at such different address as a party has advised to the other party in writing and shall be deemed given and received when actually received: If to SBCL: SmithKline Beecham Clinical Laboratories, Inc. 1201 South Collegeville Road Collegeville, Pennsylvania 19426 Attention: John B. Okkerse, Jr., Ph.D., President Telephone: [*] Telecopy: [*] With a copy to: SmithKline Beecham Corporation One Franklin Plaza 16th and Race Streets Philadelphia, PA 19103 Attention: General Counsel-U.S. Telephone: [*] Telecopy: [*] If to ActaMed: ActaMed Corporation Suite 600 7000 Central Parkway Atlanta, Georgia 30328 Attention: Chief Financial Officer Telephone: (770)352-1600 Telecopy: (770)352-1815 [*] CONFIDENTIAL TREATMENT REQUESTED -39- with a copy to: Alston & Bird One Atlantic Center 1201 West Peachtree Street Atlanta, Georgia 30309-3424 Attention: John C. Weitnauer, Esquire Telephone: (404) 881-7780 Telecopy Number: (404) 881-7777 F. SEVERABILITY. In the event one or more of the provisions of this Agreement are found to be invalid, illegal or unenforceable by a court with jurisdiction, the remaining provisions shall continue in full force and effect. G. FORCE MAJEURE. The obligations of the parties under this Agreement (other than the obligation to make payments) shall be suspended to the extent a party is hindered or prevented from complying therewith because of labor disturbances (including strikes or lockouts), war, acts of God, fires, storms, accidents, governmental regulations, failure of vendors or suppliers or any other cause whatsoever beyond a party's control. For so long as such circumstances prevail, the party whose performance is delayed or hindered shall continue to use all commercially reasonable efforts to recommence performance without delay. H. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION THAT MAY BE ENFORCED BY THE PARTIES. -40- IN WITNESS WHEREOF, the parties have executed this Services Agreement as of the date set forth above. ACTAMED CORPORATION By: /s/ --------------------------------------- Its: President -------------------------------------- SMITHKLINE BEECHAM CLINICAL LABORATORIES, INC. By: /s/ --------------------------------------- Its: President -------------------------------------- EXHIBITS Exhibit A -- Definitions- Exhibit II.B.2(a) -- Automated Provider Contract Amendment Provisions* Exhibit II.B.2(b) -- Automated Provider New Contract* Exhibit III.B.7 -- Reports- Exhibit III.C-1 -- Network Standards- Exhibit III.C-2 -- Customer Support Standards- Exhibit IV.G -- Average Revenue/Requisition & Monthly Average Number of Requisitions* Exhibit V.A. -- Required Maintenance Exhibit V.B. -- Year 2000 Warranties Exhibit VII.C-1 -- Current Connectivity Arrangements** Exhibit VII.C-2 -- Exclusions to Preferred Vendor Status
* TO BE DELIVERED BY JANUARY 31, 1998. ** TO BE DELIVERED BY JANUARY 15, 1998. EXHIBIT A DEFINITIONS "AAA" means the American Arbitration Association. "ActaLab Software" means the ActaLab Software as defined under the License Agreement. [*] has the meaning set forth in Section XII.E.6 of the Services Agreement. "ActaMed" means ActaMed Corporation, a Georgia corporation. "ActaMed Gateway shall have the meaning set forth in Section II.A.1. "ActaMed Indemnitee" means ActaMed and its directors, officers, employees, affiliates and permitted assigns. "ActaMed Network" means the EDI system and network for electronic Transmissions, which includes the Network Software and ActaMed's gateway and hardware and computer systems needed to operate that software. "ActaMed President" shall mean the President of ActaMed, presently Michael K. Hoover, or should ActaMed be restructured in any manner, the officer of ActaMed having top authority over ActaMed's operations. "ActaMed Relationship Manager" shall have the meaning set forth in Section XI. "ActaMed Site" means an Automated Provider utilizing the Network for Lab EDI Services located in a transferred Region that was an SBCL Site on the Transfer Date of the Region or is a New Site or [*]. "Agreed Services" means all services to be rendered by ActaMed under this Services Agreement, including without limitation Lab EDI Services. "Anniversary" shall mean the anniversary date of the Region One Transfer Date. "Audit Rights" means the right to, or to have representatives, (1) examine all books of account, records, reports and other papers except to the extent that such action would, in the reasonable opinion of counsel, constitute a waiver of the attorney/client privilege or violate obligations of confidentiality to third parties, [*] CONFIDENTIAL TREATMENT REQUESTED A-1 (2) make copies and take extracts from any thereof, except for information which is subject to a written confidentiality agreement with a third party, (3) discuss the affairs, finances and accounts of the party being audited with such party's officers and independent certified public accountants (and by this provision such audited party hereby authorizes said accountants to discuss with the auditing party and its representatives, the finances and accounts of such entity) and (4) visit and inspect, at reasonable times and on reasonable notice during normal business hours, the properties of the other party; PROVIDED THAT, the foregoing audit rights are in addition to any rights of a party under the Georgia Business Corporation Code in the case of ActaMed, or the Delaware General Corporation Law in the case of SBCL, and shall in no way limit such rights; and PROVIDED FURTHER THAT, the expenses incurred in connection with any such inspection shall be for the account of the auditing party, except that all reasonable expenses incurred by the audited party, or any of its officers, employees, agents or independent certified public accountants, shall be expenses payable by the audited party and shall not be expenses of the auditing party. "Automated Provider" means a Provider [*] who or which, on or after the Transfer Date of the Region in which the Provider [*] is located, uses the Network to send clinical laboratory test orders to an SBCL Lab or to receive test result reports from an SBCL Lab. "Changes" means any improvements, changes or additions to application software and documentation that improve existing functions, add new functions, or improve performance through changes in the software or system design or coding. "Claim" means any claim for indemnification under Section XIV of the Services Agreement. "Claims Notice" means a written notice of an indemnification claim delivered pursuant to Section XIV of the Services Agreement. "Confidential Information" means information that is (1) confidential to the business of a party, including without limitation, data regarding the extent of the Agreed Services provided hereunder to, or Transaction Fees, Fixed Fees or PIFs paid hereunder by, SBCL, (2) is designated and identified as such by such party, and (3) is not a Trade Secret; provided, however, that Confidential Information does not include any information which is or becomes generally known to the public without any breach by the Receiving Party of its duties to the Disclosing Party. Assuming that the foregoing criteria are met, Confidential Information also includes information which has been disclosed to a Receiving Party by another person and which the Receiving Party is obligated to treat as confidential. [*] CONFIDENTIAL TREATMENT REQUESTED A-2 "Customer Support Standards" has the meaning set forth in Section III.C of the Services Agreement. "Development Agreement" means the Development Agreement between SBCL and ActaMed dated October 31, 1997 for the initial development of the ActaLab Software. "Disclosing Party" has the meaning set forth in Section X.C of the Services Agreement. "Disease Management Business" shall have the meaning set forth in Section VIII.D. "Dispute Notice" means a written notice by one party hereto notifying the other of the existence of a dispute, which notice shall delineate the disputed items and the factual basis for the dispute. "Disputing Party" has the meaning given in Section XV.B of the Services Agreement. "EDI" means electronic data interchange. "Exclusive Developments" has the meaning set forth in Section V.E.1.a of the Services Agreement. "First Variable Fee" has the meaning set forth in Section IV.C.1 of the Services Agreement. "Fixed Fee" means the amounts payable by SBCL pursuant to Section IV.A of the Services Agreement. "Fixed Fee Sites" has the meaning set forth in Section IV.G of the Services Agreement. "FTE" means "full time equivalent," i.e., the equivalent number of work hours that would be worked by one person working on a full time basis, treating eight (8) hours worked per day as a full work day. "Indemnifying Party" means the Party obligated to provide indemnification pursuant to Section XIV of the Services Agreement. "Indemnitee" means an ActaMed Indemnitee or an SBCL Indemnitee. "Integrity Agreement" means SBCL's Corporate Integrity Agreement with the OIG. "Intellectual Property" means copyrights, trademarks, service marks, trade names, patents, applications therefor, technology rights and licenses, computer software (including, without limitation, any source or object codes therefor or documentation relating thereto), computer software licenses, trade secrets, franchises, know-how, inventions and intellectual property rights. A-3 "Key Performance Standards" shall mean the Performance Standards under the headings of [*] "Lab EDI Services " means electronic connectivity services enabling an Automated Provider to send Transmittal Information electronically to an SBCL Lab and/or to receive electronically Transmittal Information from an SBCL Lab utilizing the Network. "Liability" means any direct or indirect liability, indebtedness, obligation, expense, claim, deficiency, guaranty or endorsement of or by any person (other than endorsements of notes, bills and checks presented to banks for collection or deposit in the ordinary course of business) of any type, whether accrued, absolute, contingent, matured, unmatured or other. "License Agreement" means the License Agreement between SBCL and ActaMed dated the date of the Services Agreement and described in the Preamble to the Services Agreement. "Licensed Materials" means the software licensed pursuant to the License Agreement. [*] has the meaning set forth in Section XII.E.4 of the Services Agreement. "Losses" means any and all demands, claims, actions or causes of action, assessments, losses, diminution in value, damages (including special and consequential damages), liabilities, costs, and expenses, including without limitation, interest, penalties, cost of investigation and defense, and reasonable attorneys' and other professional fees and expenses. [*] has the meaning set forth in Section XII.F of the Services Agreement. "Network" means the SCAN Network and/or the ActaMed Network. "Network Software" means ActaMed's personal computer version of the ProviderLink and ActaLink presentation and network software programs, under whatever name marketed, and the SCAN Software and the ActaLab Software, and all Changes to them, which are licensed to Automated Providers and which allow access to the Network for the transmission of laboratory test order entries and reception of test result information, or other software program for use by ActaMed in the transmission of test order entries and reception of test result information which is licensed to Automated Providers. "Network Standards" shall have the meaning set forth in Section III.C of the Services Agreement. "New Business Plan" shall mean the ActaMed business plan delivered pursuant to Section 5.1.8 of the Purchase Agreement. [*] CONFIDENTIAL TREATMENT REQUESTED A-4 "New Site" shall mean an ActaMed Site added to the Network on or after the Transfer Date of the Region in which the ActaMed Site is located and which is not a Fixed Fee Site. "Office Space" has the meaning set forth in Section II.B.5 of the Services Agreement. "OIG" means the Office of Inspector General, U.S. Department of Health and Human Services. "Other Lab" means a commercial laboratory other than an SBCL Lab. "Oversight Committee" has the meaning set forth in Section III.A of the Services Agreement. "Panel" has the meaning given it in Section XV.B of the Services Agreement. "PC System" means the personal computer, modem, bar code readers, bar code label printers, requisition and results printers and other hardware peripherals required for a Provider to become an Automated Provider. [*] means an SBCL [*] or other [*]. "Performance Standards" shall have the meaning set forth in Section III.C of the Services Agreement. "PIF Amount" has the meaning given it in Section IV.C.2 of the Services Agreement. "PIF Number" has the meaning given it in Section III.B.3 of the Services Agreement. "PIF Sites" has the meaning given it in Section III.B.3 of the Services Agreement. [*] or "PIF" has the meaning given it in Section IV.M.1 of the Services Agreement. "Provider" means a physician, clinic, hospital, or other provider of clinical health care services other than [*]. "Purchase Agreement" means the Asset Purchase Agreement between ActaMed and SBCL dated the date of the Services Agreement and described in the Preamble to the Services Agreement. "Receiving Party" has the meaning given it in Section X.C of the Services Agreement. "Region" means any one of Region One, Region Two, Region Three, or Region Four. [*] CONFIDENTIAL TREATMENT REQUESTED A-5 "Region Four" means the Region described on Schedule 2.2(d) to the Purchase Agreement. "Region Four Transfer Date" has the meaning given in Section 2.3.4 of the Purchase Agreement. "Region One" means the Region described on Schedule 2.2(a) to the Purchase Agreement. "Region One Transfer Date" means the date on which Region One is transferred to ActaMed pursuant to the Purchase Agreement. "Region Three" means the Region described on Schedule 2.2(c) to the Assets Purchase Agreement. "Region Three Transfer Date" has the meaning given in Section 2.3.3 of the Purchase Agreement. "Region Two" means the Region described on Schedule 2.2(b) to the Purchase Agreement. "Region Two Transfer Date" has the meaning given in Section 2.3.2 of the Purchase Agreement. "Regulation" means any statute, law, ordinance, regulation, requirement, order or rule of any federal, state, local government or other governmental agency or body or of any other type of regulatory body, or any governmental or administrative interpretation of any thereof, including, without limitation, (i) those covering health, safety, environmental, energy, transportation, bribery, record keeping, zoning, antidiscrimination, antitrust, wage and hour, and price and wage control matters, (ii) requirements imposed by any governmental or regulatory body which must be satisfied to qualify for Medicare reimbursements, and (iii) any and all federal, state and local health care laws relating to or covering the methods and ways in which Lab EDI Services and other related or incidental services or benefits, if any, are provided to the Automated Providers, including, but not limited to, the Stark law (42 U.S.C. Section 1395nn) and the Clinical Laboratory Improvements Act of 1988, as amended. [*] has the meaning set forth in Section IV.G of the Services Agreement. [*] has the meaning set forth in Section IV.G.2 of the Services Agreement. "Representatives" means the ActaMed Relationship Manager and the SBCL Relationship Manager. [*] CONFIDENTIAL TREATMENT REQUESTED A-6 "Requisition" shall mean an electronically transmitted clinical laboratory test order from an Automated Provider to SBCL which is entered utilizing SCAN Software, the ActaLab Software or other program for electronic lab order entry and results reporting and utilizing the Network, for one or more clinical laboratory tests for a single patient transmitted electronically at one time and the corresponding test results delivered electronically to an Automated Provider from SBCL at one or more times. The term "Requisition" shall include patient eligibility for third party payor benefits or reimbursement or claim status checking related to such order and available to ActaMed. "SBCL" means SmithKline Beecham Clinical Laboratories, Inc., a Delaware corporation. "SBCL Access" has the meaning set forth in Section X.B.2 of the Services Agreement. "SBCL Indemnitee" means SBCL and its directors, officers, employees, affiliates and permitted assigns. "SBCL Lab" means any location at which SBCL or its affiliates provide, or may in the future provide, clinical laboratory testing services, regardless of the computer systems or software, if any, used by such lab for lab order entry and results reporting. "SBCL President" shall mean the President of SBCL, presently John B. Okkerse, Jr., Ph.D., or should SBCL be restructured in any manner, the officer of SBCL having top authority over SBCL's operations. "SBCL Relationship Manager" has the meaning set forth in Section XI of the Services Agreement. "SBCL Site" means an Automated Provider utilizing the SCAN Network for Lab EDI Services on the Transfer Date of the Region in which such Automated Provider is located. "SCAN Assets" has the meaning set forth in the Purchase Agreement. "SCAN Developments" has the meaning set forth in the License Agreement. "SCAN Network" means the SCAN Software and SBCL's gateway and hardware and computer systems needed to operate the SCAN Software, excluding [*] which enables Providers or [*] to place laboratory test orders electronically to an SBCL Lab and/or to receive test result reports electronically from an SBCL Lab. "SCAN PSC" means a PSC which utilizes the Network to enter laboratory test orders electronically and/or to receive test result reports electronically. [*] CONFIDENTIAL TREATMENT REQUESTED A-7 "SCAN Site" means either an SBCL Site or an ActaMed Site that has installed and is using SCAN Software for Lab EDI Services. "SCAN Software" means the SBCL SCAN-TM- software licensed to ActaMed pursuant to the License Agreement, and all Changes thereto after the date hereof. "Second Variable Fee" has the meaning set forth in Section IV.C.2 of the Services Agreement. [*] has the meaning set forth in Section XII.E.5 of the Services Agreement. "SOP" means a standard operating procedure. "Termination Transition" has the meaning given it in Section XII.D of the Services Agreement. "Third Party Claim" means any claim, suit or proceeding (including, without limitation, a binding arbitration or an audit by any taxing authority) that is instituted against an Indemnitee by a person or entity other than an Indemnitor and which, if prosecuted successful, would result in a Loss for which such Indemnitee is entitled to indemnification hereunder. "TopLab" means SBCL's proprietary laboratory systems which facilitate SBCL's internal automated laboratory test processing and reporting, including but not limited to SBCL's Total Order Processing Laboratory system. "Trade Secrets" means information related to the Disclosing Party (1) which derives economic value, actual or potential, from not being generally known to or readily ascertainable by other persons who can obtain economic value from its disclosure or use, and (2) which is the subject of efforts by the Disclosing Party that are reasonable under the circumstances to maintain its secrecy. Without limitation, for ActaMed, ProviderLink and the ActaLab Software are Trade Secrets, and for SBCL, the SBCL Software, SCAN Developments and TopLab are Trade Secrets. "Transaction Fee Amount" has the meaning set forth in Section IV.C.1 of the Services Agreement. "Transaction Fees" has the meaning set forth in Section IV.B of the Services Agreement. "Transfer Date" shall mean any one of, and "Transfer Dates" shall mean more than one of the Region One Transfer Date, the Region Two Transfer Date, the Region Three Transfer Date, and the Region Four Transfer Date. "Transferred Employees" shall have the meaning given such term in the Purchase Agreement. [*] CONFIDENTIAL TREATMENT REQUESTED A-8 "Transmission" means the electronic transmittal over the Network of Transmittal Information in an approved document format. "Transmittal Information" means information which an Automated Provider gives ActaMed for communication to SBCL over the Network, or which SBCL gives ActaMed for communication to an Automated Provider over the Network, including all copies of same, and including without limitation, data relating to laboratory records, clinical data, encounter data, test information, test codes and provider identification numbers (other than UPINs) "Variable Fees" has the meaning given it in Section IV.C.2 of the Services Agreement. A-9 EXHIBIT II.B.2(a) LAB EDI SERVICE AGREEMENT AMENDMENT PROVISIONS III.B.2-1 EXHIBIT II.B.2(b) LAB EDI SERVICE AGREEMENT III.B.7-1 EXHIBIT III.B.7 REPORTS A. REPORTS ACTAMED WILL PROVIDE TO SBCL The following reports will be provided to SBCL by ActaMed on the indicated schedule. 1. BILLING REPORTS a. [*] SUMMARY REPORTS (POST-ACTAMED GATEWAY): (1) Fixed Fee Sites (a) Total Sites (b) Total Requisitions (c) Average Requisitions per Site (2) Transaction Fee Sites (a) Total Sites (b) Total Requisitions (c) Average Requisitions per Site (3) PIF Sites (a) Total Sites charged for the [*] that [*] (with appropriate supporting detail) (4) Label Printer Fees (a) Total Sites charged for the Label printer equipment fee (with appropriate supporting detail) b. [*] DETAILED FEES: (1) List of Fixed Fee sites by lab (2) List of Transaction Fee sites by lab III.B.7-1 [*] CONFIDENTIAL TREATMENT REQUESTED (3) List of PIF Sites by lab (4) List of sites with bar code printer paid by SBCL by lab c. CUSTOM DEVELOPMENT: (1) Monthly itemization and accounting for the hours worked for any projects active under a Custom Development Fee, and a project status report on each item worked d. MONTHLY EXPENSE BILLINGS: (1) Personnel in non-transferred regions, with supporting detail 2. PERFORMANCE REPORTS a. All reports necessary to verify and measure the Performance Standards, including, but not limited to, the following: (i) [*] help desk REPORTS, as set forth in Exhibit III.C-2 - Customer Support Standards showing performance statistics against the Performance Standards and the number of calls received by type of problem (detail problem coded); (ii) [*] network reports, as set forth in Exhibit III.C-1 - Network Standards; (iii) Performance Metrics reports against the Performance Standards described in Exhibit III.C-1 & 2, including comparison of actuals to standard for current month and rolling prior 12 months. b. Transfer BENCHMARK reports, as set forth in Exhibit 2.3.1(a) of the Assets Purchase Agreement. c. Monthly Gateway reports (format to be mutually determined once the ActaMed GATEWAY is active, but intended to be generally similar to the SBCL November 1997 Gateway Report). d. As APPROPRIATE from time to time, in light of technological advances, market conditions or industry standards or other facts and circumstances, a report describing ActaMed's plans to increase the performance and capabilities of the Network and to improve Customer Service beyond the minimum levels specified in Exhibits III.C-1 and III.C-2. e. Monthly report of SBCL clients that have deinstalled (discontinued to use) Lab EDI Services. [*] CONFIDENTIAL TREATMENT REQUESTED III.B.7-2 f. An ongoing data base (to be created, kept current and available for reporting) report of the current list of clients approved for installation including date received, Lab, Client ID, Client demographics and expected date of installation. 3. SAS 70 REPORT ActaMed will provide a report produced in accordance with standards established by the American Institute of Certified Public Accountants' Statement on Auditing Standards Number 70: Reports on the Processing of Transactions by Service Organizations. ActaMed shall submit the first such report to SBCL by the end of 1998. B. REPORTS SBCL WILL PROVIDE TO ACTAMED 1. BILLING REPORTS A. SBCL WILL MAKE AVAILABLE TO ACTAMED ACCESS TO DATA RELATING TO: (1) Fixed Fee Sites (2) Total Sites (list of Fixed Fee Sites by Lab active that month) (3) List of Transaction Fee sites by Lab B. FOLLOWING ACTAMED GATEWAY, MONTHLY EXPENSE BILLINGS (with appropriate SUPPORTING detail): (1) Gateway 1-800 charges to ActaMed (2) Non-transferred local line charges (3) Service Fees for ongoing support of ActaMed Gateway, if any (4) Service Fees for SBCL Gateway Services for Transferred Sites, if any 2. PERFORMANCE REPORTS a. Prior to the ActaMed Gateway, SBCL will continue to provide ActaMed with copies of its standard monthly Gateway report. b. Timely reports on changes in SBCL that affect ActaMed and its PERFORMANCE hereunder, as set forth in Section IX. III.B.7-3 3. STRATEGIC INFORMATION Quarterly information on major trends within SBCL as appropriate that are relevant to ActaMed and its performance hereunder, such as new customers, lost customers, trends in lab requisition and result volumes, compliance related issues, etc. III.B.7-4 EXHIBIT III.C-1 NETWORK SUPPORT STANDARDS ACTAMED NETWORK AVAILABILITY The ActaMed Network will be available 24 hours a day, 7 days a week with the exception of Planned Down Hours. "Planned Down Hours" means that time which is reasonably required for maintenance and problem resolution as reasonably required and notwithstanding any other provision herein shall only occur during the hours of [*] or on Federally recognized holidays. HARDWARE AND MODEM AVAILABILITY For each month, ActaMed shall maintain an "Availability Percentage" of at least [*]. Hardware systems and modems are operational and available for receiving/accepting calls as measured by an ActaMed systems management and monitoring tool [*]. Hardware specifically includes the ActaMed host machines required to process Lab EDI Services transactions, ActaMed provisioned modems and circuit termination equipment servicing Automated Providers using the ActaMed Network, and other third party provisioned dial-in access service and devices relevant to the Lab EDI Services. The "Availability Percentage" for Lab EDI Services shall be calculated on [*] and will be based on data gathered through an automated Systems Management and Reporting tool [*]. Similar automated measurement and reporting will be implemented as soon as is practical for SCAN Sites transferred to the ActaMed Gateway, but not later than 180 days following such transfer of the first SCAN Site to the ActaMed Gateway. The Availability Percentage is calculated as set forth below: - Defined Hours are the total days in the month multiplied by 24 hours. - Unplanned Hours are the hours experienced during the month in which the ActaMed Network is not operable or otherwise not properly transmitting valid Transmission as provided in the Agreement excluding Planned Down Hours. - Actual Hours are the Defined Hours minus the Unplanned Hours. - Availability Percentage is determined by dividing the Actual Hours by Defined Hours and multiplying the result by 100. [*] CONFIDENTIAL TREATMENT REQUESTED III.C-1-1 SUCCESSFULLY DELIVERED CALLS For each month, ActaMed shall maintain a "Successfully Delivered Call Percentage" of at least [*]. The "Successfully Delivered Call Percentage" is the total of all Successfully Delivered Calls divided by the total of attempted calls from all sources and multiplying the result by 100. A Successfully Delivered Call shall mean a call made to ActaMed's premise equipment from any source for the purpose of processing Lab EDI Services. as to which ActaMed's equipment successfully offers service, to be measured by the call service provider's equipment facilities including: - calls delivered by an Interexchange Carrier ("IXC"), such as Sprint, AT&T, Worldcom, etc., using toll-free dial-in service to will be measured by the IXC carrier switch; - calls delivered by a third party dial-in access provider will be measured by the management capabilities of that provider's modem pool; and - calls delivered by a local service provider or by dedicated toll-free dial-in service will be measured by ActaMed's terminating premise equipment. MODEM CONNECTIVITY For each month, ActaMed shall maintain a "Modem Connectivity Percentage" of at least [*]. The "Modem Connectivity Percentage" is determined by dividing the total number of Successfully Connected Calls by the total of Successfully Delivered Calls and multiplying the result by 100. A Successfully Connected Call is a Successfully Delivered Call that establishes and maintains successful modem connection as determined by the statistics generated by the management and reporting functionality of the ActaMed terminating modem bank and/or third party dial-in access equipment. TRANSACTION PROCESSING ActaMed acknowledges and agrees that all Transactions meeting the requirements set forth next to one or both of the bullet points below ("Proposed Transaction") will be processed by the ActaMed Network. If Proposed Transactions are not being processed by the ActaMed Network, it will be treated as a Severity 1 problem. It is expected by the Parties that [*] of connected and Proposed Transactions will be successfully processed within ActaMed Network. [*] CONFIDENTIAL TREATMENT REQUESTED III.C-1-2 - - Any order transactions that are entered according to the applicable specifications and edits of the Lab EDI software such as SCAN Software or ActaLab Software or any other ordering software module approved by ActaMed and SBCL that is connected to the ActaMed Network for the purposes of entering lab orders and upon completion of the order entry indicates to the operator that the order has been accepted for Transmission to SBCL; and - - Any result transactions transmitted by SBCL systems in accordance with applicable specifications and containing sufficient information to allow the ActaMed Network to determine the approved system to which the transaction is to be delivered. [*] [*] The Parties agree that this is not a currently automated measurement and is not included as a requirement of Section III.B.7, Reports. HISTORICAL DATA FOR RE-TRANSMISSION ActaMed will store all result transmission data on, and make it available in accordance with the Services Agreement via, the ActaMed Gateway for a minimum of [*]. [*] CONFIDENTIAL TREATMENT REQUESTED III.C-1-3 EXHIBIT III.C-2 CUSTOMER SUPPORT STANDARDS ACTAMED HELP DESK The ActaMed Help Desk for all Lab EDI Services will be staffed Monday through Friday 8:00 AM to 8:00 PM EST excluding federally recognized holidays. Issues of any severity level can be reported during this time via any one of the following methods: - Telephone via ActaMed toll-free service (800 line); - FAX; - Internet e-mail to ActaMed help desk personnel; or - Internet e-mail directly into the ActaMed Help Desk call tracking system. In addition, - Internet web pages are being constructed to answer frequently asked questions; - By special arrangement, limited direct access to the ActaMed Help Desk call tracking system is possible; and - Using Internet e-mail and the assigned tracking number, the status of calls can be retrieved at any time. There shall be after hours support, which is typically limited to issues that are defined as Severity 1 or Severity 2 as further defined below. These are either issues that involve multiple users and major communications or systems failures, or problems involving an outage of a single Automated Provider (i.e. non-critical issues such as training questions, enhancement requests and usage questions are usually handled during normal help desk hours.) Service is initiated by calling the main Help Desk 800 number and leaving a detailed message. Voice mail left after hours or on holidays will result in a page to the appropriate on call analyst who will retrieve the message and return the call and immediately initiate investigatory and corrective actions as appropriate in accordance with Severity Levels. III.C-2-1 CALL TRACKING Beginning at such time as the ActaMed SCAN help desk begins to accept client calls from ActaMed Sites, which shall occur at a date mutually agreed upon by the parties, all calls made to the ActaMed SCAN Help Desk will be logged into ActaMed's "Support Magic" call tracking system, and will include at a minimum the following information: - Site ID (Machine ID) - Site Name - Caller Name - Phone Number - Local Lab - Date of Call - Time of Call - Problem Code / Description - Call Recipient / Analyst - Problem Definition - Call Status - Solution Code / Clear Description of final resolution - Severity Code - Date and time of final resolution ActaMed shall be responsible only for calls related to ActaMed Sites. Calls from all other SCAN sites will continue to be supported by SBCL and will continue to be tracked by SBCL processes as in force at that time. SEVERITY CODES Help Desk calls will be logged and appropriate escalations will be made based upon severity codes assigned to each call. It is the responsibility of the analyst handling the call to assign the severity level in accordance with the severity level definitions described below. The definition of each III.C-2-2 severity level and the classification of call types into severity levels will initially be as set forth below, with more specific definitions to be determined through negotiation between ActaMed and SBCL. The definitions may be reassessed and are subject to change by mutual consent of the Parties. The ActaMed Help Desk's method of classifying calls into priority levels will be reviewed periodically with the Oversight Committee. SBCL will be responsible for defining additional situations and communicating to ActaMed any requests on how to classify particular call situations. SEVERITY 1 DEFINITION: A critical system or component is down or experiencing degraded service causing SBCL or a customer's business functions to be halted. Severity I issues will typically involve major system outages that affect the service provided to many users. REQUIRED ACTION: Immediate notification to those persons identified in the Crisis Management document. [*] of Severity 1 issues should be resolved within [*] with [*] updates between ActaMed and SBCL. SEVERITY 2 DEFINITION: A single user is down; a component is experiencing degraded service; consumable supplies are unavailable and does not have a critical impact on the business, but may restrict function to some users and may impact normal business operations. REQUIRED ACTION: The help desk will asses the situation and verify that setup or configuration problems are not the cause. After the original assessment has been made, an ActaMed CIS representative will normally be dispatched to correct or replace the failing component. In remote areas where localized support is not available, a replacement component will be shipped for next day delivery, and arrangements will be made to provide assistance setting up or installing that component. Arrangements will also be made to remove or arrange for the removal of the failed component. [*] of Severity 2 calls should be resolved within [*] with updates to the affected user every [*] or less. SEVERITY 3 DEFINITION: A user's system is still operating but is experiencing difficulties or a specially requested deliverable is unavailable. REQUIRED ACTION: The Help Desk will make every attempt to resolve the issue over the phone or using the tools available to them. If those attempts are not successful, a ActaMed CIS representative might be called upon to resolve the issue on site, but these issues will typically have a lower priority than the Severity 2 issues listed above. [*] of Severity 3 calls will be resolved within [*] with updates to the affected user every [*] or less. [*] CONFIDENTIAL TREATMENT REQUESTED III.C-2-3 NEW SITE INSTALLATION In accordance with the agreed upon procedures for installing New Sites (or [*] Sites) that SBCL requests or approves for Lab EDI Services, ActaMed will: - If required, phone line installation and new service will be ordered on behalf of the Provider or SBCL on average within [*] of receipt of new site notification and, - Provide installation and training, including any hardware required under Section IV.L of the Services Agreement, to properly prepare and set up the new client to use Lab EDI Services within [*] of receipt of new site notification and phone line availability; or - PIF Sites will be installed within [*] from the time the notification is received and phone service is available. except that, (i) delays caused by the practice management system vendor or the Provider, shall not be the responsibility of ActaMed; and (ii) SBCL and ActaMed will, when necessary, cooperate in the development of site installation schedules to reflect periods of high volumes of new installations and remote installations (usually requiring air travel). DE-INSTALLATIONS When required by the Assets Purchase Agreement or this Agreement, ActaMed will deinstall any Automated Provider within [*] of receipt of SBCL's deinstallation request. Re-deployment of the deinstalled PC System for Lab EDI Services will be in accordance with Section IV of the Services Agreement and in accordance with the performance metrics of a New Site. RETAINING ActaMed will provide ongoing training support in a manner and at such frequency as is reasonably required to maintain client satisfaction and ability to continue to use Lab EDI Services effectively to process laboratory transactions. SCAN CONSUMABLE SUPPLIES ActaMed will provide, [*] consumable supplies required by all ActaMed Sites for use of Lab EDI Services including printer paper, toner cartridges, backup tape cartridges and labels that meet SBCL label specifications. ActaMed will deliver or arrange for delivery of these as required for uninterrupted use of Lab EDI Services. Client requests for such supplies that prevent use of Lab EDI Services will be considered a Severity [*] problem. [*] CONFIDENTIAL TREATMENT REQUESTED II.C-2-4 MEASUREMENTS AND REPORTING Measurement will begin when the problem is received by the ActaMed Help Desk at which time it will be recorded into the computerized on-line problem management tool. Measurement will end when the call is resolved satisfactorily and closed by the ActaMed Help Desk representative. In the case of calls that have been forwarded to an SBCL facility for questions or issues not covered by the ActaMed Help Desk, the ActaMed Analyst will, except in those cases where the problem determination or resolution is clearly the responsibility of SBCL because of the nature of the call, take ownership of that call and follow it through any other path it may take. So long as SBCL provides the information needed to resolve such a call, ActaMed will also be made to document that call and close it out with a detailed explanation of the final resolution. Where it is not possible for the ActaMed Analyst to remain "on the call", it is the responsibility of the SBCL personnel to notify the ActaMed Help Desk if the outcome is to be documented in the help desk system. Other measurements that will be made available on a monthly basis will come from the ACD system. The variety of reports available based upon the call tracking system and the ACD statistics will include:
REPORT TARGET SERVICE LEVEL ------ -------------------- Number of calls by category N/A, will vary Calls by region N/A, will vary Abandoned call rate * Average hold time [*]
* since there is no currently available SBCL baseline to be used to set reasonable standards, ActaMed will record these metrics from the beginning of its operations of the help desk. After the first four months of help desk operation, ActaMed and SBCL will evaluate performance and set mutually-agreeable metrics based on SBCL's actual performance and generally accepted performance standards for similar services. In no case shall such metrics result in standards lower than those generally found in the industry for similar services. The percent of calls closed within the time frame objectives will be measured by calculating, by priority level, the volume of calls closed within the time frame objectives as a percentage of total calls opened. The ActaMed Help Desk will use best efforts to accommodate any requests for additional information as long as the collection of the information does not add significant time and effort in logging the call. The ActaMed Help Desk statistics will be reported to SBCL on a monthly basis. The means of distribution is yet to be determined. [*] CONFIDENTIAL TREATMENT REQUESTED III.C-2-5 SATISFACTION LEVELS For each year during the term of the Services Agreement, ActaMed will perform client satisfaction surveys assessing Automated Providers' satisfaction with ActaMed's Lab EDI Services. The format and content of the annual surveys shall be determined by ActaMed except that ActaMed will afford SBCL reasonable opportunity to review and comment thereon prior to its use. The annual survey will be conducted at annual intervals. III.C-2-6 EXHIBIT IV.I AVERAGE REVENUE/REQUISITION & MONTHLY AVERAGE NUMBER OF REQUISITIONS IV.I-1 EXHIBIT V.A MAINTENANCE ActaMed will provide SBCL with the following hardware, network and application (product) maintenance services which will be performed by ActaMed staff not dedicated to SBCL enhancements. The cost of these maintenance services are provided as a part of the annual Fixed Fee and Transaction Fees, and include the following: PRODUCT MAINTENANCE - - Maintenance of the Network through both emergency and routine bug fixes and scheduled maintenance releases; - - Such changes and modifications to the Network required to manage scalability and capacity issues associated with increased transaction volumes; - - Provision of routine, updated application documentation and training materials; - - Provision of periodic product updates to improve usability and to improve existing features and functionality. PERFORMANCE - - Maintenance, monitoring and reporting of hardware, network and communication systems regarding stability and performance as specified in Exhibit III.C-1 Network Standards; - - Changes required to maintain above service level commitments, including changes and modifications required to manage scalability and capacity issues associated with increased transaction volumes; - - Technology upgrades to the Network (to include such things as fault tolerance produces and services) will be included as part of ongoing maintenance; and - - Maintenance of appropriate connectivity to SBCL host systems to maintain security provisions and the data integrity of Transmissions. IV.I-2 EXHIBIT V.B YEAR 2000 WARRANTIES ActaMed warrants that the SCAN Software and ActaLab Software as compiled on any hardware and operating system platform designated in its documentation ("Platforms") will satisfy all of the following: (a) Such software will properly process date-related information from different centuries (19th through 21st). Results utilizing such software will be consistent and correct whether or not dates being processed span different centuries and will be given with the proper indication of century. (b) Data involving date information which will be generated from use of the software will be coded in a manner that captures, stores and displays date-related information so that the software will properly access and process the data regardless of the century involved. (c) The software will properly process date-related data which had been generated by previous versions of thereof regardless of the century involved. (d) The software interfaces with the operating system and other software, and with devices, will properly exchange and use date-related information regardless of the century involved, so long as such other software, systems and devices provide date-related information in a compatible format. (e) The software will check any date-related information provided by the user, and by any devices, systems or software with which the software interfaces, and will reject any date-related information which is not provided in a format which the software will properly process. When data is rejected, the software will generate an explanatory error message. (f) The software will not have a feature which will cause it to stop operating or to limit or alter its functions or performance because of a date or time extending beyond 11:59:59 p.m. on December 31, 1999. (g) The software will process information relating to years beginning with 2000 properly, including recognizing that the year 2000 and every fourth year thereafter is a leap year. (h) The software (including but not limited to, runtime systems) will function correctly if executing at the moment when the year changes from 1999 to 2000. The software setup and updates will not be affected by the century change. V.B-1 EXHIBIT VII.C-1 CURRENT CONNECTIVITY ARRANGEMENTS VII.C-1-1 EXHIBIT VII.C-2 EXCLUSIONS TO PREFERRED VENDOR STATUS The SBCL covenants and restrictions contained in Section VII of the Services Agreement (Preferred LAB EDI Vendor) do not apply to any arrangements, relationships or initiatives by or between SBCL and any of the following parties or for any of the following relationships: [*] [*] [*] [*] [*] [*] [*] [*] CONFIDENTIAL TREATMENT REQUESTED VII.C-2-1 AMENDMENT NO. 1 TO SERVICES AGREEMENT This AMENDMENT NO. 1 TO SERVICES AGREEMENT ("Amendment No. 1") is made and entered into this 15th day of May, 1998 by and between ACTAMED CORPORATION, a Georgia Corporation ("ActaMed") and SMITHKLINE BEECHAM CLINICAL LABORATORIES, INC., a Delaware Corporation ("SBCL"). WHEREAS, ActaMed and SBCL entered into a Services Agreement on December 31, 1997 ("Services Agreement") and desire to amend same in connection with the merger a subsidiary of Healtheon Corporation with and into ActaMed, with the result that ActaMed will become a wholly-owned subsidiary of Healtheon. NOW THEREFORE, in consideration of the premises and the mutual promises contained herein, the parties, intending to be legally bound, agree as follows: 1 DEFINITIONS. Capitalized terms used in this Amendment No. 1 and not otherwise defined herein have the meanings set forth in the Services Agreement. 2 AMENDMENTS. 2.1 [*] REMOVED FROM [*]. Section IV.C is replaced in its entirety as follows: "1. An amount (the "FIRST VARIABLE FEE") equal to (i) [*] minus the aggregate of the amount billed to SBCL pursuant to Section IV.B. above, excluding amounts attributable to any Provider office with ProviderLink that is subsequently installed with the Scan Software or ActaLab Software (the "FIRST TRANSACTION FEE AMOUNT") prior to the [*] (ii) [*] minus the sum of (A) the First Transaction Fee Amount for the period from the date hereof to the [*] and (B) the amount paid pursuant to clause (i) above; and (iii) [*] minus the sum of (A) the First Transaction Fee Amount for the period from the date hereof to the [*] and (B) the amount paid pursuant to clauses (i) and (ii) above. 2. An amount (the "SECOND VARIABLE FEE") equal to (i) [*] minus the aggregate of the amount paid plus amounts owed (whether or not billed) pursuant to Section IV.M.1 below (the [*] CONFIDENTIAL TREATMENT REQUESTED "PIF AMOUNT") prior to the [*]; (ii) [*] minus the sum of (A) the PIF Amount for the period from the date hereof to the [*] and (B) the amount paid pursuant to clause (i) above; and (iii) [*] minus the sum of (A) the PIF Amount for the period from the date hereof to the [*] and (B) the amount paid pursuant to clauses (i) and (ii) above; PROVIDED THAT if the PIF Amount with respect to an annual period (other than the last such annual period) is at least [*] of the aforementioned dollar amount for that annual period, no payment shall be due under this Section IV.C.2 for such annual period. 3. An amount (the "THIRD VARIABLE FEE" and together with the First Variable Fee and Second Variable Fee, the "VARIABLE FEES") equal to (i) [*] minus the aggregate of the amount billed to SBCL attributable to any Provider office with ProviderLink that is subsequently installed with the Scan Software or ActaLab Software (the "THIRD TRANSACTION FEE AMOUNT") prior to the [*]; (ii) [*] minus the sum of (A) the Third Transaction Fee Amount for the period from the date hereof to the [*] and (B) the amount paid pursuant to clause (i) above; and (iii) [*] minus the sum of (A) the Third Transaction Fee Amount for the period from the date hereof to the [*] and (B) the amount paid pursuant to clauses (i) and (ii) above. 4. Subject to Section IV.D, the Variable Fees shall be paid annually within thirty (30) days after invoice therefor from ActaMed or Healtheon, which shall be (i) submitted to SBCL within [*] (ii) detail the calculation thereof, and (iii) reflect the Variable Fees payable in respect of the most recently completed annual period only. SBCL shall have Audit Rights with respect to any disputed amount of the Variable Fees." 2.2 CONDITIONS TO BUSINESS ASSURANCE PAYMENTS. Section IV.D.1 is hereby replaced in its entirety as follows: "1. With respect to all Variable Fees, (i) such fees shall cease to be payable if ActaMed shall fail to satisfy any of the Key Performance Standards, or (ii) such fees (excluding the portion of the First Variable Fee attributable to Transaction Fees generated from PIF Sites) for the applicable year shall not be payable (but shall be treated as paid for purposes of calculation of any amount payable in the following year) if any of the following shall occur: a. As of [*] ActaMed shall fail to have at least [*] ActaMed Sites; [*] CONFIDENTIAL TREATMENT REQUESTED -2- b. As of [*] ActaMed shall fail to have at least [*] ActaMed Sites; and c. As of [*] ActaMed shall fail to have at least [*] ActaMed Sites. 2.3 CONDITIONS TO BUSINESS ASSURANCE PAYMENTS. Section IV.D is hereby further amended by adding the following Subsection 3 at the end of such Section: "3. With respect to the Third Variable Fee, such fees also shall not be payable (but shall be treated as paid for purposes of calculating any amount payable in the following year) if any of the following shall occur: a. As of [*] ActaMed shall fail to have at least [*] ActaMed Sites; b. As of [*] ActaMed shall fail to have at least [*] ActaMed Sites; and c. As of [*] ActaMed shall fail to have at least [*] ActaMed Sites. 2.4 [*] COSTS. Section IV.J is amended to insert at the end thereof: "SBCL is not responsible for paying any [*] incurred by ActaMed or a Provider relating to the provision of Lab EDI Services, including without limitation, any [*], [*] and [*]." 2.5 REMOVAL OF [*] HARDWARE PURCHASES. Section IV.K.2.b is replaced in its entirety as follows: "b. In addition, ActaMed shall provide, prior to the [*] up to [*] PC Systems for New Sites or Replacement Fixed Fee Sites in excess of the [*] set forth in (a) above. Notwithstanding the above, this obligation shall be reduced by each PC System the cost of which is reimbursed to SBCL subject to Section IV.K.1 above." [*] CONFIDENTIAL TREATMENT REQUESTED -3- 2.6 EXCLUSIVE DEVELOPMENTS AMENDED. Section V.E is replaced in its entirety as follows: "E. DEVELOPMENT WORK REQUESTED BY SBCL. 1. SBCL may at any time request that ActaMed perform additional development work. Subject to the terms of this Section V.E, SBCL shall pay ActaMed for development services the work product from which constitutes an Exclusive Development at no higher than the then industry standard rates for similar services. a. SBCL shall be entitled to request in writing that ActaMed perform development services the resulting work from which shall be for the exclusive benefit of SBCL (an "EXCLUSIVE DEVELOPMENT"); provided that, except as provided in Section V.E.1.b, SBCL shall not be entitled to more than [*] Exclusive Development [*]. If ActaMed, before 9:00 AM (EST) of the [*] after the date on which such request is received by ActaMed, delivers to SBCL [*] then, notwithstanding that SBCL's request specified that the work would be an Exclusive Development, the work so requested by SBCL shall be a "COMMON DEVELOPMENT." Under no circumstances shall any SBCL requested development work that is required for purposes of complying with Applicable Laws, Regulations or any Regulatory Change constitute an Exclusive Development. Any SBCL requested work that is (i) classified as a Common Development in accordance with this Section V.E.1.a, or (ii) required to comply with Applicable Laws, Regulations or any Regulatory Change, shall not be counted for purposes of applying the limit on Exclusive Developments under this Section V.E.1.a. b. SBCL may request in writing that ActaMed provide additional development work at any time. Such work shall result in either a Common Development or Exclusive Development pursuant to price and terms agreed to by the parties in accordance with Section V.E.1.e below. Any work classified as an Exclusive Development in accordance with this Section V.E.1.b shall not be counted for purposes of applying the limit on Exclusive Developments under this Section V.E.1.a. c. ActaMed will not use or license the use of any Exclusive Development (without regard to whether it constitutes a SCAN Development or ActaLab Software) other than in support of Lab EDI Services. Subject to the ownership and license rights under the License Agreement, both [*] CONFIDENTIAL TREATMENT REQUESTED -4- ActaMed and SBCL shall be entitled to make any use of a Common Development. The terms of the foregoing two sentences shall survive termination of this Agreement for any reason. ActaMed may charge SBCL [*] the work product from which constitutes a Common Development. Any such charge shall be [*] and shall be separately stated on invoices sent to SBCL. d. For purposes of this Section V.E, Exclusive Developments shall include any Changes made pursuant to Section V.C and paid for by SBCL by reason of Section V.C.4, to be designated as Exclusive Developments in accordance with the procedures set forth in this Section V.E.1. e. Within [*] days after receiving SBCL's request pursuant to Sections V.E.1.a or V.E.1.b, ActaMed shall notify SBCL of ActaMed's prices and terms (including estimated completion date) for performing such development work, which prices and terms SBCL shall not unreasonably reject. Within twenty (20) days after receiving ActaMed's notice, SBCL shall accept or reject ActaMed's prices and terms for performing the development work. If SBCL provides notice accepting (i) in respect of requests under Section V.E.1.a, ActaMed's prices and terms, or (ii) in respect of requests under Section V.E.1.b (A) ActaMed's prices and terms, and (B) ActaMed's designation of the work as an Exclusive Development or Common Development, then ActaMed shall perform such work (or cause such work to be performed) on the accepted terms, and shall integrate the developed work into the ActaLab Software or SCAN Developments, as applicable, and offer it as an additional feature or function of Lab EDI Services, as soon as is reasonably practicable. If SBCL provides notice that it does not accept ActaMed's prices and terms, SBCL and ActaMed shall negotiate in good faith an alternative arrangement to the mutual satisfaction of the parties. If within [*] SBCL and ActaMed cannot reasonably agree upon such an alternative arrangement, then SBCL may engage a third party to perform the development services for such work, subject to Section V.E.1.f. Work performed by such a third party shall be (i) an Exclusive Development without regard to the frequency limitation of Section V.E.1.a, subject to Section V.E.1.f below, (ii) integrated by ActaMed into the ActaLab Software or SCAN Developments, as applicable, as soon as is reasonably practicable, and (iii) offered by ActaMed as an additional feature or function of Lab EDI Services, as soon as is reasonably practicable. SBCL and ActaMed shall cooperate in developing acceptance standards and processes (the "ACCEPTANCE PROCESS") pursuant to which work prepared by a third party, in accordance with industry standard practices, shall be (i) reviewed, tested and modified, as necessary, to conform with ActaMed's professional standards, [*] CONFIDENTIAL TREATMENT REQUESTED -5- the Performance Standards and ActaMed's compliance obligations under Article VI, (ii) integrated into the ActaLab Software or SCAN Developments, as applicable, and (iii) offered by ActaMed as an additional feature or function of Lab EDI Services; provided, SBCL shall reimburse ActaMed (at no higher than the then industry standard rates for similar services) for any costs or expenses incurred by ActaMed in any such testing, integration and offering of an additional feature or function of Lab EDI Services under this Section V.E.1.e. f. Any contract between ActaMed and SBCL (or a third party developer and SBCL) for development of an Exclusive Development shall allocate ownership of and other rights with respect to the Exclusive Development, as between ActaMed and SBCL, in the manner contemplated by the License Agreement and Development Agreement, including, without limitation, Sections 2.1.4 and 2.3.2 of the License Agreement. 2. If, at any time, SBCL chooses to contract with ActaMed for a dedicated services team from ActaMed to handle development of Changes to the Network, the Licensed Materials, or SBCL's proprietary systems which are not required to be performed by ActaMed pursuant to Section V.C and which are not requested pursuant to Section V.E, ActaMed may elect whether to provide the dedicated team and, if it so elects, shall do so only on terms and conditions agreed to in advance by SBCL." 2.7 EXCLUSIVITY PERIOD. Section XIII.C.2 is hereby replaced in its entirety as follows: 2. At any time prior to [*] ActaMed shall not provide services to any Other Lab at the SBCL Sites transferred to ActaMed pursuant to the Purchase Agreement, including without limitation, to install or be instrumental in [*] located at such sites which [*] for services [*] or otherwise provide [*]. A full calendar month shall be added to the date set forth in the preceding sentence for each month after [*] in which ActaMed, determined as of the first day of each succeeding month, has failed to complete the development of a fully functional ActaLab Software (as described in the Development Agreement) and deploy a fully tested, accepted and operating version of such software at one or more ActaMed Sites. 3 MISCELLANEOUS. 3.1 ENTIRE AGREEMENT. This Amendment No. 1 constitutes the entire understanding between the parties with respect to amendment to the Services Agreement and supersedes all proposals, communications and agreements between the parties relating to such subject matter. [*] CONFIDENTIAL TREATMENT REQUESTED -6- No amendment, change, or waiver of any provision of this Amendment No. 1 will be binding unless in writing and signed by both parties. 3.2 GOVERNING LAW. This Amendment No. 1 will be governed by and construed in accordance with the laws of the State of Georgia applicable to contracts made and performed therein. 3.3 SERVICES AGREEMENT PROVISIONS. All provisions of the Services Agreement not modified by this Amendment No. 1 shall remain in full force and effect. Subsections D, E and F of Section XVI of the Services Agreement shall apply to this Amendment No. 1 as if fully set forth herein. 3.4 COUNTERPARTS. This Amendment No. 1 may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. [INTENTIONALLY LEFT BLANK] -7- IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 to the Services Agreement as of the date set forth above. ACTAMED CORPORATION By: /s/ --------------------------------------- Its: President & CEO -------------------------------------- SMITHKLINE BEECHAM CLINICAL LABORATORIES, INC. By: /s/ --------------------------------------- Its: President -------------------------------------- -8- EX-10.15 7 EXHIBIT 10.15 ASSETS PURCHASE AGREEMENT between SMITHKLINE BEECHAM CLINICAL LABORATORIES, INC. and ACTAMED CORPORATION DATED DECEMBER 31, 1997 TABLE OF CONTENTS
PAGE ---- ARTICLE 1 PURCHASE AND SALE ........................................................2 Section 1.1 Agreement to Sell ..............................................2 Section 1.2 Other Software .................................................2 Section 1.3 Excluded Assets ................................................3 Section 1.4 Agreement to Purchase ..........................................3 Section 1.5 The Purchase Price .............................................3 Section 1.6 Series D Price .................................................4 Section 1.7 Purchase Price Adjustment ......................................5 Section 1.8 Number of Sites Adjustment .....................................5 ARTICLE 2 CLOSINGS .................................................................6 Section 2.1 Initial Closing ................................................6 Section 2.2 Staging of the Transactions ....................................6 Section 2.3 Regions to be Transferred ......................................7 Section 2.4 Procedures Applicable if Transfer Benchmarks Are Not Met .......8 Section 2.5 Deliveries by SBCL at Each of the Transfer Dates ...............9 Section 2.6 Deliveries by ActaMed at Each of the Transfer Dates ............9 Section 2.7 Prorations ....................................................10 Section 2.8 Non-Transferable Assets .......................................10 ARTICLE 3 REPRESENTATIONS AND WARRANTIES ..........................................11 Section 3.1 By SBCL .......................................................11 Section 3.2 By ActaMed ....................................................16 ARTICLE 4 TRANSITION MATTERS ......................................................26 Section 4.1 Prior to Region Transfer ......................................26 Section 4.2 Region Transition Matters .....................................26 Section 4.3 General Covenants .............................................27 Section 4.4 Confidentiality of Trade Secrets ..............................29 Section 4.5 Efforts to Satisfy Conditions .................................30 Section 4.6 Expenses ......................................................31 Section 4.7 Antitrust Notification ........................................31 ARTICLE 5 ACTAMED COVENANTS TO SBCL ...............................................31 Section 5.1 Additional Covenants Of ActaMed ...............................31 Section 5.2 Informational Covenants Of ActaMed ............................35 -i- ARTICLE 6 EMPLOYEE MATTERS ........................................................38 Section 6.1 Termination of Employment by SBCL and Offer of Employment by ActaMed ..............................38 Section 6.2 Transitional Employee Leasing Arrangement .....................38 Section 6.3 ActaMed Compensation and Benefits .............................39 Section 6.4 Past Service Credit ...........................................39 Section 6.5 Termination of Employment; Nonsolicitation; Termination of Agreement ................................................39 Section 6.6 Payment of Wage and Benefit Costs .............................39 Section 6.7 Taxes, Unemployment Insurance and Related Items ...............40 Section 6.8 Examination and Audit .........................................41 ARTICLE 7 CONDITIONS PRECEDENT TO OBLIGATIONS OF ACTAMED ..........................41 Section 7.1 Conditions Precedent To Obligations Of ActaMed ................41 Section 7.2 Conditions Precedent To The Obligations Of SBCL ...............42 ARTICLE 8 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS ...................43 Section 8.1 Survival Of Representations, Warranties and Covenants .........43 Section 8.2 Obligation to Indemnify .......................................44 ARTICLE 9 DISPUTE RESOLUTION ......................................................49 Section 9.1 Informal Dispute Resolution ...................................49 Section 9.2 Arbitration ...................................................50 Section 9.3 Litigation ....................................................51 ARTICLE 10 TERMINATION ............................................................51 Section 10.1 Termination ...................................................51 Section 10.2 Risk of Loss ..................................................52 ARTICLE 11 MISCELLANEOUS ..........................................................53 Section 11.1 General Provisions ............................................53
-ii- CONFIDENTIAL TREATMENT REQUESTED ASSETS PURCHASE AGREEMENT This Assets Purchase Agreement (this "ASSETS PURCHASE AGREEMENT" or "AGREEMENT"), dated as of December 31, 1997, is an agreement by and between SMITHKLINE BEECHAM CLINICAL LABORATORIES, INC., a corporation organized and existing under the laws of Delaware ("SBCL") and ACTAMED CORPORATION, a corporation organized and existing under the laws of Georgia ("ACTAMED"). Capitalized terms used in this Assets Purchase Agreement and not otherwise defined herein are defined in EXHIBIT A attached to this Assets Purchase Agreement. PREAMBLE ActaMed is in the business of providing electronic data interchange products and services to the health care industry, including its ProviderLink software, and desires to develop business involving automated laboratory order entry and results reporting services. SBCL provides laboratory testing services to certain Providers who use SBCL Software for electronic clinical laboratory test order entry and/or test result reporting between an SBCL Lab and such Provider. In addition, SBCL uses the SBCL Software to allow certain [*] to send laboratory test orders entered electronically to an SBCL Lab and/or to have the test results reported electronically back to [*] or the Provider ordering the test. The Parties previously entered into a Development Agreement dated October 31, 1997 pursuant to which ActaMed and SBCL are jointly developing the ActaLab Software. ActaMed desires to purchase and SBCL desires to sell certain assets associated with SBCL's provision of Lab EDI Services, as more fully set forth herein. Concurrently with the execution and delivery of this Purchase Agreement, SBCL and ActaMed are entering into (i) a License Agreement whereby, among other things, SBCL grants ActaMed an irrevocable non-exclusive license to the SBCL Software (as defined therein); and (ii) a Services Agreement whereby ActaMed agrees, among other things, to provide Lab EDI Services to Automated Providers and SBCL agrees to pay certain compensation to ActaMed in connection therewith. This Assets Purchase Agreement states the parties' agreements relating to the purchase and sale of the SCAN Assets and certain transition matters. The Parties contemplate that there will be a staged transfer to ActaMed of the SCAN Assets. The transfer of Region One SCAN Assets is to occur on the Region One Transfer Date. The transfer of the other Regions will occur sequentially when the Transfer Benchmarks for transfer of such Regions have been met. AGREEMENT In consideration of the recitals and of the respective covenants, representations, warranties and agreements herein contained, and intending to be legally bound hereby, the parties hereto hereby agree as follows: [*] CONFIDENTIAL TREATMENT REQUESTED ARTICLE 1 PURCHASE AND SALE SECTION 1.1 AGREEMENT TO SELL. SBCL hereby agrees to sell, convey, assign, transfer and deliver to ActaMed, upon and subject to the terms and conditions of this Assets Purchase Agreement, all right, title and interest of SBCL in and to the following assets located in Region One, and, subject in addition to fulfillment of the conditions precedent set forth in Section 2.3, the following assets in Regions Two, Three, and Four, in every case free and clear of all Liens: 1.1.1 The personal computers, modems, bar code readers, bar code label printers, requisition and results printers and other peripherals (not including [*]) and spare parts owned by SBCL and provided by SBCL to Automated Providers for Lab EDI Services (or which comprised all or part of such items located at an SBCL Site before the Applicable Transfer Date, but not located at an SBCL Site on the Applicable Transfer Date), including all documentation supplied to Automated Providers for purposes of utilizing SBCL Software; 1.1.2 SBCL's contractual right to use the telephone lines that are installed at an SBCL Site and are used by SBCL in providing Lab EDI Services to the extent assignable and assumed by ActaMed; 1.1.3 The letter agreements, as amended, between SBCL and Automated Providers relating to Automated Providers' use of SBCL's Lab EDI Services; 1.1.4 The vendor contracts between SBCL and various vendors who provide products or services to Automated Providers in connection with SBCL's provision of Lab EDI Services to SBCL Sites to the extent assignable and assumed by ActaMed; 1.1.5 All personal computers, peripherals, spare parts and other fixed assets not located at an SBCL Site on the Applicable Transfer Date, but used solely by the Transferred Employees and exclusively in connection with SBCL's provision of software development, field or remote support for SBCL Sites; and 1.1.6 SBCL's rights to the ActaLab Software. SECTION 1.2 OTHER SOFTWARE. 1.2.1 In conjunction with the sale of each PC System and each personal computer described in Section 1.1.5 (an "Employee Computer") to ActaMed in accordance herewith, SBCL shall assign to ActaMed all of SBCL's rights in the copies of Third Party Software (excluding any office software used by the Employees, including without limitation, cc:mail) that, as of the Applicable Transfer Date, are (i) installed by, or in accordance with the [*] CONFIDENTIAL TREATMENT REQUESTED -2- instructions of, SBCL and (ii) is resident on such PC System or Employee Computer, which rights shall be sufficient to permit ActaMed to: (a) continue using such copy of the Third Party Software on the applicable PC System or Employee Computer, (b) move such copy to a replacement computer so long as the copy is deleted from the PC System or Employee Computer on which it resides on the Applicable Transfer Date or subsequent transferee computer system, and (c) assign ActaMed's rights in such copy to a purchaser of the applicable components of the PC System (but not to a purchaser of any Employee Computer) on which it resides at the Applicable Transfer Date, or replacement computer with respect to any PC System; PROVIDED, that (A) ActaMed agrees to comply with any applicable terms and conditions imposed by the supplier of such Third Party Software, (B) except as expressly set forth herein, nothing in this Section 1.2 shall be construed as assigning to ActaMed, or granting to ActaMed, any rights under any agreements between SBCL and the vendors of such Third Party Software, and (C) nothing in this Agreement shall be construed as conveying to ActaMed or any other party any software installed on any PC System or Employee Computer other than by SBCL or pursuant to SBCL's instructions. 1.2.2 SBCL shall transfer to ActaMed, proportionately with the number of SBCL Sites transferred to ActaMed from time to time in accordance with this Agreement, all of SBCL's rights in, including the single-site licenses for, any copy of Microsoft Windows which was resident on a PC System when it was delivered to SBCL by the manufacturer or other supplier for installation at an SBCL Site, and subsequently removed by SBCL. SBCL shall deliver the licenses to ActaMed. SECTION 1.3 EXCLUDED ASSETS. The SCAN Assets shall not include computers, modems, bar code readers, bar code label printers, requisition and results printers and other peripherals and fixed assets acquired by SBCL for use in providing Lab EDI Services, but which have never been so used. SECTION 1.4 AGREEMENT TO PURCHASE. ActaMed hereby agrees to purchase the SCAN Assets from SBCL, upon and subject to the terms and conditions of this Assets Purchase Agreement and in reliance on the representations, warranties and covenants of SBCL contained herein, for the Purchase Price and the execution and delivery of the Assumption Agreement. ActaMed shall not assume or be responsible for any liabilities or obligations of SBCL other than the Liabilities assumed by virtue of the Assumption Agreement. SECTION 1.5 THE PURCHASE PRICE. Subject to any adjustment pursuant to Sections 1.7 or 1.8 hereof, the purchase price for the SCAN Assets and the rights granted to ActaMed -3- pursuant to the License Agreement shall be [*]. The Purchase Price shall be allocated among the SCAN Assets in the different Regions and the License granted pursuant to the License Agreement as set forth in Schedule 1.5 hereto (the "Purchase Price"). The Purchase Price shall be payable as follows: 1.5.1 on the Region One Transfer Date, in consideration for the grant of rights pursuant to the License Agreement, ActaMed will pay or issue to SBCL (A) [*] by wire transfer of immediately available funds to an account designated by SBCL prior to the Region One Transfer Date, and (B) [*] shares of ActaMed's Series D Preferred Stock; 1.5.2 on the Region One Transfer Date, in consideration of the transfer to ActaMed of the SCAN Assets located in Region One, ActaMed will issue to SBCL [*] shares of ActaMed's Series D Preferred Stock; 1.5.3 on the Region Two Transfer Date, in further consideration of the grant to ActaMed of rights under the License Agreement, and in consideration of the transfer to ActaMed of the SCAN Assets located in Region Two, ActaMed will issue to SBCL the number of shares of ActaMed's Series D Preferred Stock determined by dividing [*] plus [*] respectively, by the Series D Price on such date; 1.5.4 on the Region Three Transfer Date, in further consideration of the grant to ActaMed of rights under the License Agreement, and in consideration of the transfer to ActaMed of the SCAN Assets located in Region Three, ActaMed will issue to SBCL the number of shares of ActaMed's Series D Preferred Stock determined by dividing [*] plus [*] respectively, by the Series D Price on such date; and 1.5.5 on the Region Four Transfer Date, in further consideration of the grant to ActaMed of rights under the License Agreement, and in consideration of the transfer to ActaMed of the SCAN Assets located in Region Four, ActaMed will issue to SBCL the number of shares of ActaMed's Series D Preferred Stock determined by dividing [*] plus [*] respectively, by the Series D Price on such date. SECTION 1.6 SERIES D PRICE. For purposes hereof, the "Series D Price" shall mean: 1.6.1 prior to ActaMed's initial Public Offering: (a) [*] on the Region One Transfer Date and the Region Two Transfer Date, [*] on the Region Three Transfer Date, and [*] on the Region Four Transfer Date, subject to the provisions of subparagraphs (b) and (c) below; (b) if prior to any Transfer Date after the Region One Transfer Date, ActaMed issues Qualified Preferred Stock, the Series D Price on such Transfer Date shall be the Per Share Issue Price of such Qualified Preferred Stock, and the Series D Price shall [*] CONFIDENTIAL TREATMENT REQUESTED -4- thereafter remain constant for all subsequent Transfer Dates unless adjusted (i) in accordance with this provision, upon a subsequent issuance of Qualified Preferred Stock or (ii) in accordance with subparagraph (c) below; or (c) notwithstanding anything to the contrary in this Section 1.6.1, if, on any Applicable Transfer Date, ActaMed has achieved less than [*] of the revenues for the cumulative months or quarters (as may be applicable based on the detail required for the New Business Plan) prior to such Applicable Transfer Date as set forth in the New Business Plan, then the Series D Price shall revert to [*] and 1.6.2 after ActaMed's initial Public Offering, if a Transfer Date occurs at least thirty (30) trading days after the effective date of such Public Offering, the average for such 30 days of (i) the mean between the reported high and low sales prices for ActaMed Common Stock on each such trading day, or (ii) if no sales are reported on any such trading day, the mean between the bid and offered prices for ActaMed Common Stock on such trading day; or, if the Transfer Date occurs prior to the 30th day following such initial Public Offering (including the initial day of trading when computing the number of days), the initial offering price for ActaMed Common Stock in such initial Public Offering less the amount of any underwriters' discounts or commissions on a per share basis, as set forth in the effective registration statement. 1.6.3 For purposes of Section 1.6, "Qualified Preferred Stock" shall mean shares of ActaMed's preferred stock issued in an arm's length transaction to one or more purchasers who are not ActaMed stockholders as of the Region One Transfer Date for an aggregate purchase price of not less than $7,000,000; and the "Per Share Issue Price" of such Qualified Preferred Stock shall be the consideration per equivalent share of Common Stock received by ActaMed for the Qualified Preferred Stock, adjusted backwards to the Region One Transfer Date for any subdivision or combination of shares of ActaMed capital stock or similar change in ActaMed's capital structure (whether by stock split, stock dividend, merger, share exchange, consolidation or otherwise) since the Region One Transfer Date. SECTION 1.7 PURCHASE PRICE ADJUSTMENT. SBCL shall transfer all of the SCAN Assets located in Region Three on the Region Three Transfer Date. In the event that, by [*] SBCL has not provided [*] to ActaMed [*] described in [*] of the Services Agreement, [*] to [*] by [*]. In such case, if, subsequent to [*] SBCL provides [*] ActaMed shall [*] that SBCL [*] pursuant to this provision [*]. SECTION 1.8 NUMBER OF SITES ADJUSTMENT. On any Transfer Date other than the Region One Transfer Date, if the aggregate number of SBCL Sites located in the Regions which were previously transferred to ActaMed in accordance herewith, plus the aggregate number of SBCL Sites located in Regions then being or subsequently to be transferred to ActaMed, is less than [*] then the portion of the Purchase Price [*] CONFIDENTIAL TREATMENT REQUESTED -5- otherwise payable on such Transfer Date shall be reduced to an amount equal to the portion of the Purchase Price otherwise then payable times a fraction the numerator of which shall be the number of SBCL Sites to be transferred on such Transfer Date, and the denominator of which shall be [*] MINUS the number of SBCL Sites transferred on previous Transfer Dates, and MINUS the number of SBCL Sites located in Regions subsequently to be transferred; PROVIDED that no such adjustment shall be made if such fraction is [*] or more. ARTICLE 2 CLOSINGS SECTION 2.1 INITIAL CLOSING. Conveyance of SCAN Assets in each of the Regions by SBCL to ActaMed shall take place as set forth in this Article Two. Concurrently with the execution and delivery of this Assets Purchase Agreement, SBCL and ActaMed have executed and delivered the License Agreement, the First Amendment to the Development Agreement, the Services Agreement, the Third Amendment to the Stockholders Agreement, the Third Amendment to the Registration Rights Agreement, the Standstill Agreement, and such other documents as the parties have reasonably requested, each of which shall be effective as of the Region One Transfer Date. In addition, effective on or before such date, ActaMed shall file in the office of the Secretary of State of Georgia its Fourth Amended Articles. SECTION 2.2 STAGING OF THE TRANSACTIONS. 2.2.1 The parties shall effect the transfer of the SCAN Assets in as orderly a manner as possible and with minimal disruption to Automated Providers. This Assets Purchase Agreement provides benchmarks that will be used by the parties to measure the degree to which the transfer is orderly and without disruption and provides steps the parties will take if the benchmarks are not met to improve the transition process. Provided the benchmarks are satisfied, the parties intend that all of the transfers be completed as quickly as possible and that targeted transfer dates may be accelerated in such circumstances. 2.2.2 At any time, upon not less than fifteen (15) days written notice by SBCL to ActaMed, except to the extent a shorter period is provided for in Section 2.2.3 hereof, SBCL shall in its sole discretion have the right to accelerate the Region Two Transfer Date, the Region Three Transfer Date or the Region Four Transfer Date to a date immediately after expiration of such notice period (the "ACCELERATED TRANSFER DATE"). In such case, the transactions contemplated by Sections 1.5.3, 1.5.4 and 1.5.5 above shall take place on such Accelerated Transfer Date, in the manner specified in Sections 2.5 and 2.6 below, subject to the other terms and conditions of this Assets Purchase Agreement. 2.2.3 In the event of any proposed issuance of Qualified Preferred Stock, ActaMed shall provide SBCL with notice of its intent to consummate such a transaction not less [*] CONFIDENTIAL TREATMENT REQUESTED -6- than forty-five (45) days prior to doing so, and shall provide SBCL notice of an affirmative obligation to issue Qualified Preferred Stock not less than fifteen (15) days prior to issuance. In such event, SBCL shall in its sole discretion have the right to notify ActaMed and cause one or more Accelerated Transfer Dates to occur thirty (30) days after the giving of such notice, and, if SBCL so designates, conditioned upon the occurrence of the proposed sale of Qualified Preferred Stock. The number of shares Series D Preferred Stock issued to SBCL on any such Accelerated Transfer Date(s) shall be calculated as if such Accelerated Transfer Date(s) occurred prior to the closing of the sale of such Qualified Preferred Stock. SECTION 2.3 REGIONS TO BE TRANSFERRED. 2.3.1 The SCAN Assets located in Region One will be transferred to ActaMed on the Region One Transfer Date. The parties will cooperate to identify and resolve any problems that arise after the transfer of such SCAN Assets to ActaMed. 2.3.2 Provided that the applicable Transfer Benchmarks have been met for Region One Sites, and subject to SBCL's rights under Section 2.2.2 hereof, the SCAN Assets located in Region Two will be transferred to ActaMed three (3) months after the Region One Transfer Date (the "REGION TWO TRANSFER DATE"). ActaMed shall notify SBCL's Relationship Manager that it is in compliance with the Transfer Benchmarks and wishes to close the transfer of the SCAN Assets located in Region Two fifteen (15) days prior to the scheduled Region Two Transfer Date. SBCL shall have seven (7) days to respond to ActaMed's notice, indicating that SBCL either (i) will close the transfer on the scheduled Region Two Transfer Date or (ii) that ActaMed's operations relative to the Region One Sites fail to meet the Transfer Benchmarks. If SBCL determines that ActaMed's operations relative to the Region One Sites fail to meet the Transfer Benchmarks to allow for the transfer of SCAN Assets located in Region Two, the provisions of Section 2.4 will apply. The parties will cooperate to identify and resolve any problems that arise after the transfer of the SCAN Assets located at Region Two Sites to ActaMed. 2.3.3 Provided that the applicable Transfer Benchmarks have been met for Region One Sites and Region Two Sites on and after the Region Two Transfer Date, and subject to SBCL's rights under Section 2.2.2 hereof, the SCAN Assets located in Region Three will be transferred to ActaMed three (3) months after the Region Two Transfer Date (the "REGION THREE TRANSFER DATE"). ActaMed shall notify SBCL's Relationship Manager that it is in compliance with the Transfer Benchmarks and wishes to close the transfer of the SCAN Assets located in Region Three fifteen (15) days prior to the scheduled Region Three Transfer Date. SBCL shall have seven (7) days to respond to ActaMed's notice, indicating that SBCL either (i) will close the transfer on the scheduled Region Three Transfer Date or (ii) that ActaMed's operations relative to the Region One Sites and Region Two Sites fail to meet the Transfer Benchmarks. If SBCL determines that ActaMed's operations relative to the Region One Sites and Region Two Sites fail to meet the Transfer Benchmarks to allow for the transfer of SCAN Assets located in Region Three, the provisions of Section 2.4 will apply. The parties will -7- cooperate to identify and resolve any problems that arise after the transfer of the SCAN Assets located at Region Three Sites to ActaMed. 2.3.4 Provided that the applicable Transfer Benchmarks have been met for Region One Sites, Region Two Sites and Region Three Sites on and after the Region Three Transfer Date, and subject to SBCL's rights under Section 2.2.2 hereof, the SCAN Assets located in Region Four will be transferred to ActaMed three (3) months after the Region Three Transfer Date (the "REGION FOUR TRANSFER DATE"). ActaMed shall notify SBCL's Relationship Manager that it is in compliance with the Transfer Benchmarks and wishes to close the transfer of the SCAN Assets located in Region Four fifteen (15) days prior to the scheduled Region Four Transfer Date. SBCL shall have seven (7) days to respond to ActaMed's notice, indicating that SBCL either (i) will close the transfer on the scheduled Region Four Transfer Date or (ii) that ActaMed's operations relative to the Region One Sites, Region Two Sites and Region Three Sites fail to meet the Transfer Benchmarks. If SBCL determines that ActaMed's operations relative to the Region One Sites, Region Two Sites and Region Three Sites fail to meet the Transfer Benchmarks to allow for the transfer of SCAN Assets located in Region Four, the provisions of Section 2.4 will apply. The parties will cooperate to identify and resolve any problems that arise after the transfer of the SCAN Assets located at Region Four Sites to ActaMed. SECTION 2.4 PROCEDURES APPLICABLE IF TRANSFER BENCHMARKS ARE NOT MET. If, prior to any scheduled Transfer Date after the Region One Transfer Date, SBCL determines that ActaMed has failed to meet the requisite Transfer Benchmarks, ActaMed shall, on or prior to five (5) business days following the scheduled Transfer Date, either (i) submit a written remediation plan to SBCL detailing the steps required to accomplish such Transfer Benchmarks and the means to achieving such steps, or (ii) notify SBCL, in writing, that ActaMed believes the failure to meet such Transfer Benchmarks is for reasons beyond the control of ActaMed, including without limitation, a failure by SBCL to perform in accordance with the terms and conditions of the Services Agreement. Within ten (10) business days following receipt of such a remediation plan or notice, SBCL shall make a determination, considering available resources and the contents of the plan or notice, as to whether the problem is remediable within a reasonable period of time. If SBCL determines that the problem is remediable as aforesaid, it shall set a date not less than thirty (30) nor more than ninety (90) days from the scheduled Transfer Date as a measurement date (the "Measurement Date") for satisfaction of the applicable Transfer Benchmarks. If SBCL determines that the applicable Transfer Benchmarks are met on or before the Measurement Date, then the original Transfer Date shall be reset for a date immediately following the date which is ten (10) days after such applicable Transfer Benchmarks were met, and on which date such applicable Transfer Benchmarks continue to be met. If ActaMed disagrees with SBCL's determination as to whether the problem is remediable, the dispute shall be resolved pursuant to the provisions of Article IX hereof. If a Transfer Date is extended or reset hereunder, all subsequent Transfer Dates will be rescheduled, subject to this Section 2.4, at three (3) month intervals after the extended or reset Transfer Date. -8- SECTION 2.5 DELIVERIES BY SBCL AT EACH OF THE TRANSFER DATES. At each of the Transfer Dates, SBCL shall execute and deliver to ActaMed the following documents to the extent relating to the SCAN Assets in the Region being transferred: 2.5.1 a Bill of Sale and Assignment (in the form attached as EXHIBIT 2.5.1) covering the SCAN Assets for the Region being transferred; 2.5.2 an SBCL Compliance Certificate (in the form attached as EXHIBIT 2.5.2) pursuant to which SBCL will make the representations and warranties as to itself and the SCAN Assets in the Region being transferred contained in Section 3.1 hereof (other than the representations and warranties contained in Sections 3.1.3, 3.1.4(a)-(e), 3.1.6(d) and 3.1.7(b), which shall be made only on the Region One Transfer Date), which certificate shall attach revised Disclosure Schedules to the extent necessary to make the representations and warranties made on such Transfer Date (with the exceptions noted above) true and correct in all material respects; PROVIDED that to the extent that any such representation and warranty is dependent upon information provided by Transferred Employee or other people employed by ActaMed, such representations and warranties shall be given only to the best of SBCL's knowledge; 2.5.3 an SBCL Secretary's Certificate (in the form attached as EXHIBIT 2.5.3); 2.5.4 any other consents or waivers obtained pursuant to Section 7.1.5 covering the Region transferred, including consents to the assignment and assumption of each of the Vendor Contracts applicable to the SCAN Assets in the Region that ActaMed is assuming; 2.5.5 all of the books and records, including but not limited to, books of account, leases, contracts, and customer lists, of SBCL relating exclusively to the SCAN Assets for the Region transferred; and 2.5.6 such other documents or certificates as may be reasonably requested by ActaMed. SECTION 2.6 DELIVERIES BY ACTAMED AT EACH OF THE TRANSFER DATES. At each of the Transfer Dates, ActaMed shall execute and deliver to SBCL the following documents to the extent relating to the Region being transferred: 2.6.1 the applicable number of shares of Series D Preferred Stock, as determined in accordance with Sections 1.5, 1.6 and 1.8 of this Assets Purchase Agreement; 2.6.2 an Assumption Agreement (in the form attached hereto as EXHIBIT 2.6.2) covering, for the Region transferred, (i) the Vendor Contracts for the Region transferred, (ii) the Phone Lines and (iii) the Provider Agreements for the Region transferred; -9- 2.6.3 an ActaMed Compliance Certificate (in the form attached hereto as EXHIBIT 2.6.3), pursuant to which ActaMed will make the representations and warranties contained in Section 3.2 hereof, which certificate shall attach revised Disclosure Schedules to the extent necessary to make the representations and warranties made on such Transfer Date true and correct in all material respects; 2.6.4 an ActaMed Secretary's Certificate (in the form attached hereto as EXHIBIT 2.6.4); and 2.6.5 such other documents or certificates as may be reasonably requested by SBCL. SECTION 2.7 PRORATIONS. All amounts previously paid or payable with respect to the items identified on Schedule 2.7, or for any other items reflecting actual costs incurred solely in connection with the provision of Lab EDI Services which are to be prorated on the basis of days, for or in respect of periods which straddle any Transfer Date shall be apportioned on a pro rata basis based on the respective number of days in the pre-Transfer Date and post-Transfer Date periods. SECTION 2.8 NON-TRANSFERABLE ASSETS. 2.8.1 To the extent that any SCAN Asset which would otherwise be transferred on an Applicable Transfer Date (a "TRANSFERRED ASSET") is not capable of being sold, assigned, transferred, conveyed or delivered without obtaining a Required Consent, or if such sale, assignment, transfer, conveyance or delivery or attempted sale, assignment, transfer, conveyance or delivery would constitute a violation of any Contract or License constituting or relating specifically to a Transferred Asset, or a violation of any Regulation, or would result in the imposition of any significant additional Liability or obligation on SBCL or ActaMed, or a substantial diminution in the value or use of such Transferred Asset, this Assets Purchase Agreement shall not constitute a sale, assignment, transfer, conveyance or delivery of such Transferred Asset or an attempted sale, assignment, transfer, conveyance or delivery thereof, nor shall it constitute an assumption of any Liability under any Contract or License constituting or relating specifically to such Transferred Asset. Any such Transferred Asset and any Contract or License which constitutes or relates exclusively to any such Transferred Asset or Assets shall be a "NON-TRANSFERABLE ASSET". SBCL shall use its best efforts, and ActaMed shall reasonably cooperate therein, to provide ActaMed with the benefit of any such Non-Transferable Asset. 2.8.2 Anything in this Assets Purchase Agreement to the contrary notwithstanding, SBCL shall not be obligated to sell, assign, transfer, convey or deliver, or cause to be sold, assigned, transferred, conveyed or delivered to ActaMed, and ActaMed shall not be obligated to purchase or assume, any Non-Transferable Asset without first having obtained all Required Consents or prevented the imposition of such Liability or obligation or diminution in value or use. Both before and after the Applicable Transfer Date, SBCL and ActaMed shall use their collective best efforts to obtain any Required Consents or to prevent the imposition of any -10- such Liability or obligation or any such diminution in value or use so as to transfer each such Non-Transferable Asset to ActaMed without adversely modifying, amending or burdening such Non-Transferable Asset. Any costs associated with such efforts shall be borne by SBCL. 2.8.3 To the extent that on a given Transfer Date, there is any Non-Transferable Asset, SBCL shall, from and after such Transfer Date, cooperate with ActaMed in any reasonable and lawful arrangement designed to provide the benefit of such Non-Transferable Asset to ActaMed, and ActaMed, so long as such benefit is so provided, shall satisfy or perform any Liability under or in connection with such Non-Transferable Asset which would be a Liability assumed by ActaMed if such Non-Transferable Asset were a Transferred Asset. Any costs associated with such efforts shall be borne by SBCL. 2.8.4 At any time after a given Transfer Date, if any Non-Transferable Asset becomes capable of being sold, assigned, transferred, conveyed or delivered to ActaMed without a violating any Contract, License or Regulation or resulting in the imposition of any significant additional Liability or obligation on SBCL or ActaMed or a substantial diminution in the value or use of such Asset, then, at such time, such Non-Transferable Asset shall be deemed to have been sold, assigned, transferred, conveyed and delivered to ActaMed effective as of the Applicable Transfer Date hereof pursuant to the execution and delivery of a Bill of Sale and Assignment and an Assumption Agreement with respect to the Transferred Assets on such Applicable Transfer Date; PROVIDED, HOWEVER, that if and to the extent that SBCL has theretofore provided ActaMed with comparable assets or compensation for such Asset, an equitable adjustment shall be made between SBCL and ActaMed to effectuate fully the intent of the foregoing provision. ARTICLE 3 REPRESENTATIONS AND WARRANTIES SECTION 3.1 BY SBCL. Except as set forth on a Disclosure Schedule hereto, SBCL hereby represents and warrants to ActaMed, and shall (except as contemplated by Section 2.5.2 hereof) represent and warrant to ActaMed on each Transfer Date as to itself and the SCAN Assets being transferred on such Transfer Date, as follows: 3.1.1 CAPACITY AND VALIDITY. SBCL has the full power and corporate authority necessary to enter into and perform its obligations under this Assets Purchase Agreement and the other documents to be executed and delivered by SBCL hereunder or in connection herewith (the "SBCL DOCUMENTS") and to consummate the transactions contemplated hereby and thereby. This Assets Purchase Agreement and all other SBCL Documents have been or will be duly executed and delivered by SBCL, and constitute or will constitute the legal, valid and binding obligations of SBCL, enforceable in accordance with their respective terms except as enforceability may be limited by applicable equitable principles, or by bankruptcy, insolvency, reorganization, moratorium or similar laws from time to time in effect -11- affecting the enforcement of creditors' rights generally. The execution, delivery and performance of this Assets Purchase Agreement or any other SBCL Document, and the consummation of the transactions contemplated hereby or thereby, will not violate any provisions of the articles of incorporation or bylaws of SBCL, or any Regulation or Court Order to which SBCL is subject. 3.1.2 ORGANIZATION, GOOD STANDING AND FOREIGN QUALIFICATION. SBCL is a corporation duly incorporated, validly existing and in good standing under the laws of Delaware, and has the corporate power and authority to carry on its business in such places as it has been and is now being conducted, and to own and lease the properties and assets which it now owns or leases, in each case in connection with its provision of Lab EDI Services. 3.1.3 PROJECTIONS. (a) The aggregate costs reflected by the line items [*] attached hereto as DISCLOSURE SCHEDULE 3.1.3 (the "PROJECTIONS") are accurate in all material respects and do not omit to state any material fact required to be stated therein to make such Projections not misleading; PROVIDED that such Projections are indicative only of general expenses (excluding one-time or transactional expenses, which include any expenses incurred with respect to this transaction) for [*] projected to be incurred in connection with SBCL's provision of Lab EDI Services to [*] SCAN Sites and assume that ActaMed will provide services to only such number of SCAN Sites and only in the same manner that SBCL did prior to transfer. (b) The Projections were prepared in accordance with the books and records of SBCL in all material respects, which books and records have been properly maintained and are complete and correct in all material respects. (c) SBCL has not received any advice or notification from its independent certified public accountants that SBCL has used any improper accounting practice that would have the effect of not reflecting or incorrectly reflecting in the Projections any expenses associated with SBCL's provision of Lab EDI Services. 3.1.4 ABSENCE OF CHANGES. Except as contemplated by this Assets Purchase Agreement, since December 1, 1997, SBCL's provision of Lab EDI Services has been carried on only in the ordinary course of SBCL's business, and there has not been any transaction or occurrence in which SBCL has: (a) suffered or experienced any event or condition materially increasing the expenses incurred by SBCL in the provision of Lab EDI Services; [*] CONFIDENTIAL TREATMENT REQUESTED -12- (b) increased the rate of compensation payable or to become payable by it to any of the Transferred Employees or agreed to do so, except general hourly rate increases, normal merit increases and increases due to promotions; (c) failed to provide notice to ActaMed that it hired or committed to hire any Person who will perform services directly relating to SBCL's provision of Lab EDI Services, or terminated or received the resignation of any Transferred Employee; (d) through negotiation or otherwise, made any commitment or incurred any Liability, whether or not enforceable, to any labor organization affecting Transferred Employees; (e) directly or indirectly paid or entered into a Contract to pay any severance or termination pay to any Transferred Employee; (f) experienced problems with the SCAN Network or [*] (as defined in the Services Agreement) (such as network operations, quality assurance or software development problems) which have materially and adversely affected SBCL's provision of Lab EDI Services to SBCL Sites in Regions not yet transferred to ActaMed pursuant to this Assets Purchase Agreement. 3.1.5 REAL PROPERTY. SBCL neither owns nor leases (either as lessee or lessor) any real property related exclusively to its provision of Lab EDI Services. 3.1.6 PERSONAL PROPERTY. (a) SBCL owns and has good title to the SCAN Assets, free and clear of any and all Liens of any kind or nature. (b) DISCLOSURE SCHEDULE 3.1.6 contains (i) a sample configuration of a PC System which is representative of PC Systems provided to Automated Providers by SBCL for the provision of Lab EDI Services, and (ii) a list of the SCAN Assets in the Region being transferred, which list is true and complete in all material respects to the best of SBCL's knowledge. (c) SBCL does not lease any equipment, machinery or other items of tangible personal property for use exclusively in the provision of Lab EDI Services. SBCL does not lease any personal property as lessor in connection with its provision of Lab EDI Services. (d) As of the Region One Transfer Date, there are not less than [*] SBCL Sites located in all Regions. [*] CONFIDENTIAL TREATMENT REQUESTED -13- 3.1.7 COMPLIANCE WITH LAWS. (a) To the best knowledge of SBCL, in its provision of Lab EDI Services, SBCL has complied in all material respects with all applicable Regulations relating to the provision of Lab EDI Services. (b) To the best knowledge of SBCL, the SCAN Software complies as of the Region One Transfer Date with all applicable Regulations relating to SBCL's provision of Lab EDI Services. (c) SBCL has obtained all consents or approvals required from, has made all necessary filings with, and has provided all required notices to, any governmental body or agency or any other third party in connection with the execution and delivery of this Assets Purchase Agreement or any of the SBCL Documents. 3.1.8 LITIGATION AND CLAIMS. There are no outstanding Court Orders or quasi-judicial or administrative decisions to which SBCL is subject relating to the SCAN Assets located at SBCL Sites and there is no Litigation pending or, to SBCL's knowledge, threatened relating to (i) the SCAN Assets located at SBCL Sites or (ii) SBCL's provision of Lab EDI Services. SBCL has not been advised by any attorney representing it that there are any "loss contingencies" (as defined in FASB 5), which would be required by FASB 5 to be disclosed or accrued in SBCL's financial statements by reason of the Lab EDI Services provided by SBCL. 3.1.9 CONTRACTS AND COMMITMENTS; WARRANTIES. (a) DISCLOSURE SCHEDULE 3.1.9 contains, to the best knowledge of SBCL, a list, which is true and correct in all material respects, of all Vendor Contracts and all Contracts to which SBCL is a party solely because it provides Lab EDI Services using the SCAN Network, except for Contracts (other than Vendor Contracts) that (i) are terminable on thirty (30) days or less notice by SBCL without any Liability, (ii) are described in any other Section of the Disclosure Schedule hereto, or (iii) do not require payments in excess of $5,000 in the aggregate following the date hereof (unless renewed which renewal is at the discretion of ActaMed). (b) Each of the Contracts listed in DISCLOSURE SCHEDULE 3.1.9, or described in this Section 3.1.9, is in full force and effect. No Default by SBCL under any of the terms or conditions set forth in any of the Contracts to which SBCL is a party or any document or instrument related thereto has occurred or been asserted by any party which could result in acceleration of any obligations under or termination of the Contract. The execution, delivery and performance of this Assets Purchase Agreement or any other SBCL Document, and the consummation of the transactions contemplated hereby or thereby, will not conflict with, result in a breach of, or constitute a Default under any Contract to which SBCL is a party or by which it is bound, affect the continuation, validity and effectiveness of any of such Contracts, or any terms thereof, or result in the creation of any Lien upon any of the SCAN Assets located at SBCL Sites, or result in the acceleration of the maturity of any payment date of any of SBCL's -14- obligations, or increase or adversely affect the obligations of SBCL thereunder. SBCL has provided, upon request, true, correct and complete copies of the Contracts referred to in DISCLOSURE SCHEDULE 3.1.9 to ActaMed for review. 3.1.10 CONDITION OF ASSETS. To the best of SBCL's knowledge, the PC Systems located at SBCL Sites in a Region to be transferred on an Applicable Transfer Date are in good operating condition so as to allow, in the aggregate, a level of connectivity with the SCAN Network which is consistent with SBCL's historically experienced level of connectivity. No representation or warranty is hereby given as to the condition or state of repair of any individual component of a PC System. 3.1.11 BROKERS AND FINDERS. No third party is entitled to receive any commission, fees or similar consideration in connection with the transactions contemplated by this Assets Purchase Agreement based on any arrangement or agreement made by or on behalf of SBCL. 3.1.12 INVESTMENT REPRESENTATIONS; LEGEND ON SHARES. (a) SBCL hereby acknowledges that (i) the shares of Series D Preferred Stock (or, if applicable, Conversion Shares) delivered pursuant to this Assets Purchase Agreement have not been registered under the Securities Act, and the resale of such shares is therefore subject to restrictions imposed by federal and state securities laws including without limitation that such shares cannot be sold or otherwise disposed of except in a transaction which is registered under the Securities Act or exempted from registration; (ii) ActaMed has advised SBCL, a reasonable time prior to the execution of this Assets Purchase Agreement, that the shares have not been registered under the Securities Act; and (iii) all certificates representing the shares delivered to SBCL shall be stamped or otherwise imprinted with a legend substantially in the following form (together with any other legend required by state law), and that stop transfer orders will be given to ActaMed's transfer agent: "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES ACTS AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THEY HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE SECURITIES ACTS OR EXEMPTIONS FROM SUCH REGISTRATIONS ARE AVAILABLE." (b) SBCL is an accredited investor (as such term is defined in Rule 506 of Regulation D promulgated by the SEC) and is acquiring the shares of Series D Preferred Stock (and, if applicable, Conversion Shares) for its own account for investment purposes only, and not with a view to the distribution, transfer, or assignment of the same in whole or in part. SBCL has been represented by counsel and advisers, each of whom has been -15- previously selected by SBCL, as SBCL has found necessary to consult concerning this Assets Purchase Agreement and the shares to be issued pursuant to this Assets Purchase Agreement. SBCL, either alone or with its representative(s), has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the prospective investment. SBCL and its counsel and other advisers have been provided with such information concerning ActaMed as they have deemed relevant with respect to SBCL's investment decision relating to the shares being delivered to it. SBCL has had a reasonable opportunity to ask questions and receive answers concerning the terms and conditions of the transactions contemplated by this Assets Purchase Agreement, to discuss ActaMed's business, management and financial affairs with the management of ActaMed, and to obtain any additional information which ActaMed possesses or can acquire without unreasonable effort or expense that is necessary to verify the accuracy of the information furnished. SBCL has received satisfactory responses from management of ActaMed to SBCL's inquiries. 3.1.13 THIRD PARTY SOFTWARE. SBCL has sufficient rights and licenses in Third Party Software to convey the rights contemplated by Section 1.2 hereof, free and clear of any liens, claims or encumbrances, in each case subject to the exclusions and limitations expressly set forth in Section 1.2 hereof. 3.1.14 SCHEDULES. All Sections of the Disclosure Schedule referenced in this Section 3.1 are true, correct and complete as of the date of this Assets Purchase Agreement, and will be true, correct and complete as of each Transfer Date. Matters disclosed in each such Section of the Disclosure Schedule shall be deemed disclosed for purposes of the matters to be disclosed in any Section of the Disclosure Schedule. SECTION 3.2 BY ACTAMED. Except as set forth on a Disclosure Schedule hereto, ActaMed hereby represents and warrants to SBCL, and will represent and warrant to SBCL on each Transfer Date, as follows: 3.2.1 ORGANIZATION, GOOD STANDING AND AUTHORITY. ActaMed is a duly organized and validly existing corporation in good standing under the laws of the State of Georgia and has full corporate power and authority to carry on its business, to own and operate its properties and assets, and to consummate the transactions contemplated by this Assets Purchase Agreement and the other documents to be executed and delivered by ActaMed hereunder (the "ACTAMED DOCUMENTS"). ActaMed is currently engaged in the ActaMed Business and is qualified to do business as a foreign corporation in each jurisdiction in which the failure to be so qualified would have a Material Adverse Effect. The Fourth Amended Articles have been duly filed and are currently in effect. ActaMed has delivered to SBCL true, correct and complete copies of the Fourth Amended Articles and the bylaws of ActaMed, including all amendments thereto, as presently in effect. ActaMed has all governmental licenses, authorizations, consents and approvals required to carry on the ActaMed Business as now conducted and as proposed to be conducted and to own, operate and lease its properties and -16- assets, except for those licenses, authorizations, consents and approvals the failure of which to have would not have a Material Adverse Effect. 3.2.2 AUTHORIZATION OF AGREEMENT, NO BREACH. The execution and delivery of this Assets Purchase Agreement have been duly authorized by all necessary corporate action on the part of ActaMed, and no further corporate action of any nature is required pursuant to the Articles or the bylaws of ActaMed. All Persons who have executed or will execute this Assets Purchase Agreement, or any other agreement or document called for by this Assets Purchase Agreement on behalf of ActaMed have been duly authorized to do so by all necessary corporate action. This Assets Purchase Agreement and the other ActaMed Documents have been duly executed and delivered by ActaMed and constitute legal, valid and binding obligations of ActaMed, enforceable against ActaMed in accordance with their respective terms, except as enforceability may be limited by applicable equitable principles, or by bankruptcy, insolvency, reorganization, moratorium or similar laws from time to time in effect affecting the enforcement of creditors' rights generally. The execution, delivery and performance of this Assets Purchase Agreement and the other ActaMed Documents and the consummation of the transactions contemplated hereby and thereby will not (1) violate or result in a breach of or Default or acceleration under the Articles or the bylaws of ActaMed or any material contract to which ActaMed is a party or is bound, (2) violate any Court Order, quasi-judicial or administrative decision or award of any court, arbitrator, mediator, tribunal, administrative agency or governmental body applicable to or binding upon ActaMed or upon the securities, property or business of ActaMed or (3) violate any Regulation relating to ActaMed, or to the securities, property, or business of ActaMed. 3.2.3 ACTAMED FINANCIAL STATEMENTS. (a) DISCLOSURE SCHEDULE 3.2.3 hereto contains a true and correct copy of (i) the balance sheets of ActaMed at December 31, 1995 and December 31, 1996 and the statements of operations, statements of stockholders equity and statements of cash flows of ActaMed for the years ended December 31, 1995 and December 31, 1996, which have been audited by Deloitte & Touche, LLP independent accountants (the "ACTAMED FINANCIAL STATEMENTS"), and (ii) the unaudited balance sheets of ActaMed at September 30, 1997 and the statements of operations, statements of stockholders equity and statements of cash flows of ActaMed for quarter ended September 30, 1997 (the "ACTAMED UNAUDITED STATEMENTS"). (b) The ActaMed Financial Statements have been prepared in accordance with GAAP applied on a consistent basis during the respective periods covered thereby. The ActaMed Financial Statements are correct and complete and present fairly in all material respects the financial position of ActaMed at the date of the balance sheets included therein and the results of operations and cash flows of ActaMed for the respective periods covered by the statements of operations and cash flows included therein. ActaMed has no material obligations or liabilities of any nature whatsoever (whether absolute, accrued, contingent or otherwise and whether due or not due) which would be required by GAAP to be -17- disclosed in the ActaMed Financial Statements and which, either individually or in the aggregate, would have a Material Adverse Effect and which are not disclosed by the ActaMed Financial Statements. (c) The ActaMed Unaudited Statements have been prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein (except as otherwise disclosed therein) and certified by the chief financial officer of ActaMed as presenting fairly the financial condition and results of operations of ActaMed and any of its Subsidiaries for the periods covered by the statements (subject to customary exceptions for interim unaudited financial statements). 3.2.4 CONSENTS. No consent, approval or authorization of, or qualification, designation, declaration or filing with, or notice to any governmental authority on the part of ActaMed is required in connection with (a) the valid execution and delivery of the ActaMed Documents and (b) the issuance of the shares of Series D Preferred Stock (and, if applicable, the Conversion Shares), except the filing of the Fourth Amended Articles in the office of the Secretary of State of the State of Georgia, which filing will be accomplished concurrently with the execution and delivery of this Assets Purchase Agreement. 3.2.5 CAPITALIZATION. (a) After giving effect to the authorization of the shares of Series D Preferred Stock, the capital stock of ActaMed, as authorized by its Articles consists of the authorized, issued and outstanding capital stock set forth on DISCLOSURE SCHEDULE 3.2.5. None of such issued shares is held in the treasury of ActaMed. ActaMed does not have outstanding any stock or securities convertible into or exchangeable for any shares of its capital stock and no Person has any right against ActaMed to subscribe for or to purchase, or any options for the purchase, or any agreements providing for the issuance, of any capital stock or any stock or securities convertible into capital stock of ActaMed. (b) All of the issued and outstanding shares of ActaMed capital stock have been validly issued and are fully paid and non-assessable. The shares of Series D Preferred Stock, when issued to SBCL pursuant to this Assets Purchase Agreement, will be validly issued, fully paid and nonassessable, will have the designations, preferences, limitations, and relative rights set forth in the Articles and will be free and clear of all liens, claims and encumbrances. Any and all of the Conversion Shares, when issued, will be validly issued, fully paid and nonassessable. 3.2.6 REGISTRATION RIGHTS. Except as set forth in the Registration Rights Agreement, ActaMed will not be under any obligation to register under the Securities Act any of its then outstanding securities or any of its securities which may thereafter be issued. 3.2.7 OFFERING. Subject to the accuracy of representations and warranties by SBCL in Section 3.1 hereof, the issuance of the shares of Series D Preferred Stock (and the -18- issuance of the Conversion Shares) on the Applicable Transfer Date constitutes a transaction exempt from the registration requirements of Section 5 of the Securities Act, and from the qualification requirements of any applicable state securities or "blue sky" laws. 3.2.8 CHANGES. Since the date of the latest ActaMed Unaudited Statements, there has not been (i) any adverse change in the assets, liabilities, financial condition or operations of the ActaMed Business from that reflected in the ActaMed Financial Statements, other than changes in the ordinary course of business, none of which individually or in the aggregate has had a Material Adverse Effect or (ii) any adverse change in the prospects of the ActaMed Business or any other event or condition (or events or conditions) of any character which, either individually or cumulatively, has had a Material Adverse Effect. 3.2.9 SUBSIDIARIES. Other than EDI Services Inc., ActaMed has no Subsidiaries. Except as set forth in this Assets Purchase Agreement, ActaMed does not own, or have the right to acquire, any securities or other equity or ownership interest in any corporation, association or other business entity or Person. 3.2.10 PENDING LITIGATION, ETC. There are no actions at law, suits in equity or other proceedings or, to the knowledge of ActaMed, investigations in any court, tribunal or by or before any other governmental or public authority or agency or any arbitrator or arbitration panel or any governmental or private third-party insurance agency, pending or, to the knowledge of ActaMed, threatened against or affecting ActaMed that either individually or in the aggregate, would have a Material Adverse Effect, or, would question the validity or enforceability of this Assets Purchase Agreement, the ActaMed Documents, or any of the transactions contemplated hereby and thereby. ActaMed is not in default with respect to any Court Order. 3.2.11 TITLE TO PROPERTIES. ActaMed has good and marketable title to its properties and assets and has good title to all its respective leasehold interests, in each case subject to no Lien, other than as set forth on DISCLOSURE SCHEDULE 3.2.11 hereto. DISCLOSURE SCHEDULE 3.2.11 accurately lists with respect to the personal property owned by ActaMed (i) each financing statement, deed, agreement or other instrument which has been filed, recorded or registered pursuant to any Regulation that names a business entity as debtor or lessee or as the grantor or the transferor of the interest created thereby, and (ii) as to each such financing statement, deed, agreement or other instrument, the names of the debtor, lessee, grantor or transferor and the secured party, lessor, grantee or transferee and the name of the jurisdiction in which such financing statement, deed, agreement or other instrument has been filed, recorded or registered. 3.2.12 INTELLECTUAL PROPERTY, ETC. ActaMed owns or possesses the rights to use, free from burdensome restrictions or conflicts with the rights of others, all Intellectual Property necessary for the conduct of the ActaMed Business as now conducted and as proposed to be conducted. All licenses constituting ActaMed's Intellectual Property are in full force and effect and constitute legal, valid and binding obligation of the respective parties thereto, and -19- there have not been and are not any Defaults thereunder by any party. There are no outstanding options, licenses, or material agreements of any kind relating to the foregoing, nor is ActaMed bound by or a party to any options, licenses or agreements of any kind with respect to such Intellectual Property. ActaMed has not received any communications alleging that it has violated or, by conducting its business as proposed, would violate any of the Intellectual Property rights of any other Person. To ActaMed's knowledge, none of its employees is obligated under any contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would interfere with the use of their best efforts to promote the interests of ActaMed or that would conflict with the ActaMed Business as proposed to be conducted. Neither the execution nor delivery of this Assets Purchase Agreement, nor the carrying on of the ActaMed Business by the employees of ActaMed, nor the conduct of the ActaMed Business as proposed, will, to ActaMed's knowledge, conflict with or result in a breach of the terms, conditions or provisions of, or constitute a Default under, any Contract under which any of such employees is now obligated. ActaMed does not believe it is or will be necessary to utilize any inventions of any of its employees (or people it currently intends to hire) made prior to their employment by ActaMed. 3.2.13 COMPLIANCE WITH OTHER INSTRUMENTS. ActaMed is not in violation of or in Default in any material respect under any term of its organizational documents, any term or provision of any mortgage, indenture, contract, agreement, instrument, judgment or decree, and is not in violation in any material respect of any applicable Regulation, and to ActaMed's knowledge, there is no state of facts which, with the passage of time or giving of notice or both, would constitute any such violation or Default that would in the aggregate have a Material Adverse Effect. The execution, delivery and performance of and compliance with the ActaMed Documents, the issuance of the shares of Series D Preferred Stock (and the Conversion Shares) and the consummation of any other transaction contemplated by the ActaMed Documents have not resulted and will not result in any such violation, or be in conflict with, or constitute a Default under any of the foregoing, or result in the creation of any Lien upon any of the properties or assets of ActaMed. 3.2.14 COMPLIANCE WITH LAW. ActaMed is in compliance with all Regulations to which it is subject, the violation of which, either individually or in the aggregate, would have a Material Adverse Effect. The execution, delivery or performance of this Assets Purchase Agreement or any of the other ActaMed Documents, and the consummation of the transactions contemplated by the ActaMed Documents, will not cause ActaMed to be in violation of any Regulation. 3.2.15 EMPLOYEES. To the knowledge of ActaMed, no employee of ActaMed is in violation of any term of any employment contract, patent disclosure agreement or any other Contract relating to the Intellectual Property of ActaMed or the relationship of any such employee with such entity or any other party. -20- 3.2.16 EMPLOYEE BENEFIT PLANS. (a) DISCLOSURE SCHEDULE 3.2.16 contains a current, correct and complete list of all the Employee Benefit Plans. (b) All Employee Benefit Plans conform (and at all times have conformed) in all material respects to, and are being administered and operated (and have at all times been administered and operated) in material compliance with, the requirements of ERISA, the Code and all other applicable Regulations. All returns, reports and disclosure statements required to be made under ERISA and the Code with respect to all such Employee Benefit Plans have been timely filed or delivered. There have not been any "prohibited transactions," as such term is defined in Section 4975 of the Code or Section 406 of ERISA, involving any of the Employee Benefit Plans, that could subject ActaMed to any material penalty or tax imposed under the Code or ERISA. (c) Any Employee Benefit Plan intended to be qualified under Section 401(a) of the Code and exempt from tax under Section 501(a) of the Code has been determined by the Internal Revenue Service to be so qualified or an application for such determination is pending. Any such determination that has been obtained remains in effect and has not been revoked, and with respect to any application that is pending, ActaMed has no reason to suspect that such application for determination will be denied. Nothing has occurred since the date of any such determination that is reasonably likely to affect adversely such qualification or exemption, or result in the imposition of excise taxes or income taxes or unrelated business income under the Code or ERISA with respect to any such Employee Benefit Plan. (d) ActaMed and the ERISA Affiliates do not sponsor or contribute to, and have not in the past sponsored or contributed to, and have no Liability with respect to, any defined benefit plan subject to Title IV of ERISA or any multi-employer plan (as defined in Section 3(37) of ERISA). Neither ActaMed nor any ERISA Affiliate has any current or contingent obligation to any multi-employer plan (as defined in Section 3(37) of ERISA). ActaMed does not have any Liability with respect to any employee benefit plan or arrangement other than with respect to the Employee Benefit Plans listed in DISCLOSURE SCHEDULE 3.2.16. (e) There are no pending or, to the knowledge of ActaMed, threatened claims by or on behalf of any such Employee Benefit Plans, or by or on behalf of any individual participants or beneficiaries of any such Employee Benefit Plans, alleging any violation of ERISA or any other Applicable Regulations, or claiming benefit payments (other than those made in the ordinary operation of such plans), nor is there, to the knowledge of ActaMed, any basis for such claim. Such Employee Benefit Plans are not the subject of any pending (or to the knowledge of ActaMed, any threatened) investigation or audit by the Internal Revenue Service, the U.S. Department of Labor or the Pension Benefit Guaranty Corporation or any similar regulatory agency, foreign or domestic. -21- (f) ActaMed has timely made all required payments and contributions under the Employee Benefit Plans including the payment of all insurance premiums. All such payments and contributions have been deducted fully by ActaMed for federal income tax purposes. Such deductions have not been challenged or disallowed by any governmental entity and ActaMed has no reason to believe that such deductions are not properly allowable. ActaMed has not incurred any Liability for any tax, excise tax, penalty or fee with respect to any Employee Benefit Plan, and, to the best of ActaMed's knowledge, no event has occurred and no circumstance exists or has existed that could give rise to any such Liability. (g) The execution of and performance of the transactions contemplated by this Assets Purchase Agreement will not (either alone or upon the occurrence of any additional or subsequent events) result in any payment, acceleration, vesting or increase in benefits with respect to any employee or former employee of ActaMed, including one that would be an "excess parachute payment" under Section 280G of the Code. (h) ActaMed does not maintain any plan or arrangement that provides post retirement medical benefits, post retirement death benefits or other post retirement welfare benefits, other than to the extent required by Part 6 of Title I of ERISA. (i) ActaMed does not maintain or contribute to, nor has it in the past maintained or contributed to, any "welfare benefit fund" (within the meaning of Section 419 of the Code). (j) Any Employee Benefit Plan that is a group health plan (within the meaning of Section 4980B(g)(2) of the Code) complies and has been administered in material respects in accordance with all of the applicable requirements of Section 4980B of the Code, Part 6 of Title I of ERISA, Title XXII of the Public Health Service Act, the Social Security Act and all other applicable Regulations. (k) Any Employee Benefit Plan that is a group health plan (within the meaning of Section 4980D(f)(1) of the Code) complies and has been administered in material respects in accordance with all of the applicable requirements of Subtitle K of the Code, Part 7 of Title I of ERISA, the Public Health Service Act and all other applicable Regulations, and (l) Neither ActaMed nor any ERISA Affiliate has contributed to a non-conforming group health plan (as that term is defined in Code section 5000(c)) or incurred any tax liability under Code section 5000(a). 3.2.17 COMPLIANCE WITH ENVIRONMENTAL LAWS. (a) ActaMed is in compliance with all applicable environmental Regulations applicable to the ActaMed Business with respect to all discharges into the ground and surface water, emissions into the ambient air and generation, accumulation, -22- storage, treatment, recycling, transportation, labeling or disposal of waste materials or process by-products, except violations which, either individually or in the aggregate, would not have a Material Adverse Effect. ActaMed is not liable for any material penalties, fines or forfeitures for failure to comply with any of the foregoing. All licenses, permits or registrations required for the ActaMed Business as presently conducted and proposed to be conducted, under any environmental Regulations have been or will, in a timely manner, be obtained or made, other than such licenses, permits or registrations as to which the failure to obtain or make, either individually or in the aggregate, will not have a Material Adverse Effect, and ActaMed is in compliance therewith in all material respects. (b) No release, emission or discharge into the environment of hazardous substances, as defined under the Comprehensive Environmental Response, Compensation, and Liability Act, as amended, or hazardous waste, as defined under the Resource Conservation and Recovery Act, or air pollutants as defined under the Clean Air Act, or pollutants, as defined under the Clean Water Act, by ActaMed has occurred or is presently occurring on or from any property owned or leased by ActaMed in excess of federal, state or local permitted releases or reportable quantities, or other concentrations, standards or limitations under the foregoing Regulations governing the protection of health and the environment or under any other Regulations (then or now applicable, as the case may be) other than such releases, emissions or discharges, either individually or in the aggregate, would not have a Material Adverse Effect. (c) To its knowledge, ActaMed has never (1) owned, occupied or operated a site or structure on or in which any hazardous substance was or is stored, transported or disposed of in violation of any environmental Regulations at such time as such site or structure was owned, occupied or operated by ActaMed or at any other time, or (2) transported or arranged for the transportation of any hazardous substance other than in full compliance with all applicable environmental Regulations governing the ActaMed Business or the storage, transportation or disposal of hazardous substances except for such violations as, either individually or in the aggregate, would not have a Material Adverse Effect. ActaMed has never caused or been held legally responsible for any release or threatened release of any hazardous substance, or received notification from any federal, state or other governmental authority of any such release or threatened release, or that ActaMed may be required to pay any costs or expenses incurred or to be incurred in connection with any efforts to mitigate the environmental impact of any release or threatened release, of any hazardous substance from any site or structure owned, occupied or operated by ActaMed, except such releases or threatened releases as, either individually or in the aggregate, would not have a Material Adverse Effect. 3.2.18 INSURANCE. The ActaMed Business has fire, casualty, liability, and business interruption insurance policies with recognized insurers, in such amounts and with such coverage as set forth on DISCLOSURE SCHEDULE 3.2.18. -23- 3.2.19 MATERIAL CONTRACTS AND AGREEMENTS. DISCLOSURE SCHEDULE 3.2.19 lists the parties to, and subject matter of, all material Contracts of the ActaMed Business, including without limitation, all employment or labor contracts, leases or compensation plans. Except as set forth on such Schedule, all Contracts set forth on such list are valid, binding, and in full force and effect, without any breach by ActaMed or, to ActaMed's knowledge, any other party thereto. 3.2.20 TAXES. All federal, state and other tax returns of ActaMed required by law to be filed have been duly filed and all federal, state and other Taxes, assessments, fees and other federal governmental charges upon ActaMed or any of the properties, incomes or assets of ActaMed that are due and payable have been paid. No extensions of the time for the assessment of deficiencies have been granted to ActaMed in connection with any federal tax, assessment, fee or other federal governmental charge. There are no Liens, on any properties or assets of the ActaMed Business imposed or arising as a result of the delinquent payment or the non-payment of any tax, assessment, fee or other governmental charge that, either individually or in the aggregate, would have a Material Adverse Effect. (a) ActaMed has not assumed and is not liable for any Tax liability of any other Person, including any predecessor corporation, as a result of any purchase of assets or other business acquisition transaction; (b) ActaMed has not indemnified or agreed to indemnify any other Person or otherwise agreed to pay on behalf of any other Person tax liability growing out of or which may be asserted on the basis of any tax treatment adopted with respect to all or any aspect of such a business acquisition transaction; (c) The charges, accruals and reserves, if any, on the books of ActaMed in respect of all Taxes for all fiscal periods to date are adequate in accordance with GAAP, and ActaMed knows of no additional unpaid assessments for such periods or other governmental charges payable by ActaMed in connection with the execution and delivery of this Assets Purchase Agreement, the ActaMed Documents or the issuance of the Shares of Series D Preferred Stock by ActaMed, other than stock transfer taxes, recording fees and filing fees in connection with state securities or "blue sky" filings. 3.2.21 INVESTMENT COMPANY. ActaMed is not an "investment company", or an "affiliated person" of an "investment company", or a company "controlled" by an "investment company" as such terms are defined in the Investment Company Act of 1940, as amended, and ActaMed is not an "investment adviser" or an "affiliated person" of an "investment adviser" as such terms are defined in the Investment Advisers Act of 1940, as amended. -24- 3.2.22 LABOR RELATIONS. ActaMed is not engaged in any unfair labor practices. There is: (a) no unfair labor practice complaint pending or, to the best of ActaMed's knowledge, threatened against ActaMed before the National Labor Relations Board or any court or labor board, and no grievance or arbitration proceedings arising out of or under collective bargaining agreements is so pending or, to the best of ActaMed's knowledge, threatened, (b) no strike, lock-out, labor dispute, slowdown or work stoppage pending or, to the best of ActaMed's knowledge, threatened against ActaMed, and (c) no union representation or certification question existing or pending with respect to the employees of ActaMed, and, to the best knowledge of ActaMed, no union organization activity taking place, other than such actions or proceedings as, either individually or in the aggregate, would not have a Material Adverse Effect. 3.2.23 NO CONFLICT OF INTEREST. ActaMed is not indebted, directly or indirectly, to any Substantial Holder, or, to ActaMed's knowledge, to any Affiliate of a Substantial Holder, in any amount whatsoever. To the best knowledge of ActaMed, no Substantial Holders, or any of their Affiliates, are indebted to any firm or corporation with which ActaMed is affiliated or with which ActaMed has a business relationship, or any firm or corporation which competes with ActaMed. Except as contemplated by the ActaMed Documents, no Substantial Holder, or, to ActaMed's knowledge, any Affiliate of a Substantial Holder, is directly or indirectly interested in any contract with ActaMed or any of its Subsidiaries. 3.2.24 BROKERS OR FINDERS. No broker, agent, finder or consultant or other Person has been retained by or on behalf of ActaMed (other than legal or accounting advisors), or is or may be entitled to be paid based upon any agreements or understandings made by ActaMed in connection with the transactions contemplated hereby. 3.2.25 FULL DISCLOSURE. This Assets Purchase Agreement, the other ActaMed Documents, and any report or financial statement referred to in this Section 3.2 hereof and any certificate, report, statement or other writing furnished to SBCL by or on behalf of ActaMed in connection with the negotiation of this Assets Purchase Agreement and the other ActaMed Documents and the sale of the shares of Series D Preferred Stock, taken as a whole, do not contain any untrue statement of a material fact or omit to state a material fact with respect to which disclosure has been requested and which is necessary to make the statements contained herein or therein not misleading. -25- ARTICLE 4 TRANSITION MATTERS SECTION 4.1 PRIOR TO REGION TRANSFER. 4.1.1 SBCL CONTINUED OPERATION. Except (i) as contemplated by the Implementation Plan, (ii) with the prior written consent of ActaMed, or (iii) as necessary to effect the transactions contemplated by this Assets Purchase Agreement, SBCL shall, with respect to all SBCL Sites in each Region which has not been transferred, until the Applicable Transfer Date for the Region: (a) provide Lab EDI Services using the SCAN Network in substantially the same manner as presently being conducted; (b) use its best efforts to preserve its present relationships with Automated Providers and vendors; and (c) notify ActaMed of any development materially and adversely affecting its ability to provide Lab EDI Services, and of any governmental complaints, investigations or hearings (or written communications indicating that the same is contemplated) or administrative proceedings, involving its ability to provide Lab EDI Services, and permit its representatives prompt access to all materials prepared in connection therewith. 4.1.2 SCAN EXPENSE STATEMENTS. SBCL will cooperate with ActaMed and Ernst & Young, or another of the "Big 6" national accounting firms chosen by ActaMed and approved by SBCL ("CPA"), and provide CPA access to SBCL's business and accounting records relating to SBCL's provision of Lab EDI Services so that CPA may prepare audited financial statements, as of December 31, 1995, December 31, 1996, and December 31, 1997, with respect to SBCL's provision of such services, to the extent required for ActaMed to complete a registration of the ActaMed Common Stock with the Securities Exchange Commission. ActaMed will be responsible for, and pay, the expense of said audit, and ActaMed and SBCL shall use their collective best efforts to cause said audit to be completed on or prior to April 30, 1998. SECTION 4.2 REGION TRANSITION MATTERS. 4.2.1 IMPLEMENTATION PLAN. (a) As a further condition precedent to the occurrence of the Region One Transfer Date, the parties have prepared a detailed plan regarding the transition of SBCL Sites into ActaMed Sites (the "IMPLEMENTATION PLAN"), a copy of which is attached hereto as SCHEDULE 4.2.1. SBCL's nominees to the Implementation Committee shall review the Implementation Plan and shall notify ActaMed as to any proposed changes to the Implementation Plan on or prior to January 15, 1998. ActaMed shall implement all such -26- changes, except to the extent its designees to the Implementation Committee reasonably believe that any such change would materially impact ActaMed's ability to meet the Transfer Benchmarks or the Performance Standards (as defined in the Services Agreement), or would have a Material Adverse Effect on ActaMed. If SBCL's designees to the Implementation Committee disagree with ActaMed's assessment of a proposed change, the dispute shall be resolved in accordance with the provisions of Article IX hereof. The Implementation Plan shall continue in force, without any modification in respect of the disputed change, until resolution of the matter. (b) In the event of any conflict between the terms of the Implementation Plan, on the one hand, and this Assets Purchase Agreement, the Services Agreement, the License or the Development Agreement, on the other, the terms of the relevant Transaction Document shall govern and control over those of the Implementation Plan. 4.2.2 IMPLEMENTATION COMMITTEE. ActaMed and SBCL shall form an implementation committee, consisting of an equal number of representatives of ActaMed and SBCL (the "IMPLEMENTATION COMMITTEE"), authorized and directed to (i) apply the Implementation Plan to each Region prior to it being transferred to ActaMed, (ii) oversee, manage and implement the transition of SBCL Sites into ActaMed Sites in accordance with the Implementation Plan; (iii) revise and adapt the Implementation Plan to changing circumstances; and (iv) determine the steps to be taken by the parties in those instances where the Implementation Plan does not address an issue or problem presented. The Implementation Committee shall initially be comprised of the people named on SCHEDULE 4.2.2 hereto. From such list, ActaMed and SBCL shall each designate one person (each an "RELATIONSHIP MANAGER") who together will manage the Implementation Committee. 4.2.3 ASSISTANCE FROM SBCL. SBCL will provide resources to assist ActaMed in the transition of SBCL Sites to ActaMed Sites as more fully provided in the Services Agreement. SECTION 4.3 GENERAL COVENANTS. 4.3.1 ACCESS TO PROPERTIES. At all times prior to the last Transfer Date, the Transferred Employees, attorneys, accountants, agents and other authorized and designated representatives of ActaMed will be allowed upon reasonable advance notice and with minimal disruption to SBCL's business operations, reasonable access to the properties, books and records of SBCL relating to the SCAN Assets located at SBCL Sites, including without limitation, title documents, leases, customer lists, and other data that, in the reasonable opinion of both ActaMed and SBCL, are required for ActaMed to obtain such information as it may reasonably request about the Transferred Employees or such SCAN Assets. ActaMed shall also be allowed reasonable opportunity to consult with the officers, employees, accountants, counsel and agents of SBCL in connection with such investigation. -27- 4.3.2 OTHER OFFERS AND EXCLUSIVE DEALING. Unless and until notice of termination of this Assets Purchase Agreement prior to the last Transfer Date pursuant to Article X hereof, SBCL shall not, acting in any capacity, directly or indirectly, through any officer, director, employee, agent, affiliate or otherwise of SBCL, (a) solicit, initiate or encourage submission of proposals or offers from any Person, corporation or other entity for the primary or specific purpose of selling the SCAN Assets located at SBCL Sites, or relating to the provision of Lab EDI Services to Automated Providers, (b) participate in any discussions or negotiations regarding, or, except as required by a legal or judicial process, furnish to any other Person, corporation or other entity any information with respect to, or otherwise cooperate in any way with, or assist or participate in, facilitate or encourage, any effort or attempt by any other Person to purchase the SCAN Assets located at SBCL Sites or to obtain the right to provide Lab EDI Services to Automated Providers, or (c) approve or undertake any such transaction. Nothing in this Section 4.3.2 shall restrict what SBCL may otherwise do under the Services Agreement. 4.3.3 CONSENTS AND APPROVALS. SBCL will use its best efforts to obtain the waiver, consent and approval of all Persons whose waiver, consent or approval (a) is required in order to consummate the transactions contemplated by this Assets Purchase Agreement, or (b) is required by any Contract to be assumed by ActaMed, or by any Court Order or License to which SBCL is a party or subject on any Transfer Date in connection with the provision of Lab EDI Services, and which would prohibit, or require the waiver, consent or approval of such transactions, or under which such transactions would, without such waiver, consent or approval, constitute a Default under the provisions thereof, result in the acceleration of any obligation thereunder, or give rise to a right of any party thereto to terminate its obligations thereunder. All written waivers, consents and approvals obtained by SBCL relating to a Region shall be provided to ActaMed on the Transfer Date relating to such Region in form and content reasonably satisfactory to ActaMed. Without limiting the generality of the foregoing, SBCL shall cause the [*] to sell to ActaMed in accordance with the terms and conditions of this Agreement the SCAN Assets located in Region Two on or prior to December 31, 1998. To the extent that SBCL's rights under any Contract or other SCAN Asset to be assigned to ActaMed hereunder may not be assigned without the consent of another Person which has not been obtained, this Assets Purchase Agreement shall not constitute an agreement to assign the same if an attempted assignment would constitute a breach thereof or be unlawful. If notwithstanding the best efforts of SBCL described above any such consent shall not be obtained, or if any attempted assignment would be ineffective or would impair ActaMed's rights under the SCAN Asset in question so that ActaMed would not in effect acquire the benefit of all such rights, ActaMed to the maximum extent permitted by law, shall act after the Applicable Transfer Date as SBCL's agent in order to obtain for it the benefits thereunder and shall cooperate, to the maximum extent permitted by law, with SBCL in any other reasonable arrangement designed to provide such benefits to ActaMed. 4.3.4 PUBLIC ANNOUNCEMENTS. The parties hereto are in the process of jointly developing a plan (the "COMMUNICATION PLAN") for communicating the transactions [*] CONFIDENTIAL TREATMENT REQUESTED -28- contemplated by this Assets Purchase Agreement and the Services Agreement to Automated Providers, Transferred Employees and the public, a draft of which attached as SCHEDULE 4.3.4 hereto. The parties agree to use their collective best efforts to complete the Communication Plan by January 6, 1998, and each party agrees to abide by such Communication Plan. Without limiting the foregoing, neither party shall send any communication to any Automated Providers or Transferred Employee describing, or otherwise in connection with, the transactions and relationships contemplated by this Agreement (and such other agreements) unless the form and content of such communication shall have been approved in advance by the other unless required by law or judicial process, in which case notification shall be given to the other party hereto prior to such disclosure. 4.3.5 STANDSTILL. At all times prior to the last Transfer Date, ActaMed shall not consummate, or enter into any agreement with respect to a Sale of Assets (as that term is defined in the Articles), without the prior written consent of SBCL. If, at any time prior to the last Transfer Date, (i) ActaMed consummates any Merger, Share Exchange or Consolidation (as such terms are defined in the Articles) (a "Combination"); (ii) the holders of ActaMed stock immediately prior to the Combination are not the holders of a majority of the voting stock of the surviving company of the Combination, (iii) Michael K. Hoover no longer has (or has diminished) responsibility for overseeing and, directly or indirectly, managing the transfer of the Regions under Section 2.3, and (iv) the Transfer Date of any remaining Region does not occur as scheduled under Section 2.3, then SBCL may withhold [*] of the Fixed Fee (as defined in the Services Agreement) due on or after such scheduled date or dates until such time as all Regions have been transferred. SECTION 4.4 CONFIDENTIALITY OF TRADE SECRETS. Each party hereto agrees not to use, copy or disclose the Trade Secrets of the other party, except as permitted by this Assets Purchase Agreement and the other Transaction Documents. Each party shall treat the other's Trade Secrets with at least that degree of care it uses with respect to its own such Trade Secrets. SBCL will give access to its Trade Secrets relating to its provision of Lab EDI Services to those ActaMed personnel who have a need for such access and to no other Person whatsoever. ActaMed will give access to its Trade Secrets relating to the provision of Lab EDI Services to those SBCL personnel who have a need for such access and to no other Person whatsoever. The requirements herein contained with respect to non-disclosure and non-use and protection of each party's Trade Secrets shall permanently survive termination of any other provisions of this Assets Purchase Agreement or the other Transaction Documents. If any party is ordered by a court, administrative agency, or other governmental body of competent jurisdiction to disclose Trade Secrets, or if it is served with or otherwise becomes aware of a motion or similar request that such an order be issued, then such party will not be liable to the other party for disclosure of Trade Secrets required by such order if the disclosing party complies with the following requirements: (1) if an already issued order calls for immediate disclosure, then the disclosing party shall immediately move for or otherwise request a stay of such order to permit the other [*] CONFIDENTIAL TREATMENT REQUESTED -29- party to respond; (2) the disclosing party promptly notifies the other party of the motion or order; and (3) the disclosing party does not oppose a motion or similar request by the other party for an order protecting the Trade Secrets including joining or agreeing to (or non-opposition to) a motion for leave to intervene by such other party. Notwithstanding anything to the contrary contained in this Assets Purchase Agreement, SBCL may disclose to the Office of Inspector General of the Department of Health and Human Services (the "OIG") as part of the disclosure SBCL makes under its Integrity Agreement the fact that SBCL and ActaMed have entered into the transactions contemplated by the parties and any information relating to such transaction or this Assets Purchase Agreement which SBCL determines, in good faith upon advice of counsel, is required or, in light of SBCL's obligations under the Integrity Agreement, appropriate for SBCL to make, or SBCL proposes to make in response to a request for such information from the OIG, provided that ActaMed shall be given opportunity (which shall be reasonable in light of all facts and circumstances) to review and comment upon the information SBCL intends to include in any such submission. In the event that any such disclosure that SBCL intends to make includes any information that constitutes Trade Secrets of ActaMed, SBCL will provide reasonable (in light of all facts and circumstances, including the time frame in which such disclosure is required to be made) assistance to ActaMed to take reasonable steps to assure that such Trade Secrets of ActaMed are maintained in confidence, including, but not limited to, (i) requesting that the OIG treat such information as trade secrets within the meaning of the Freedom of Information Act, 5 U.S.C. Section 552(b)(4), (ii) requesting of the OIG that SBCL and ActaMed be given prior notice of an proposed release of such information to Persons or entities outside of the OIG; (iii) requesting that the OIG otherwise assure the confidentiality of the information provided by ActaMed as if such information was a Trade Secret of SBCL [*] and taking other reasonable steps that may be requested by ActaMed and to which SBCL may, in its sole discretion, agree to assure that the OIG honors its confidentiality obligations in that section; (iv) where such information is to be provided in response to a request by the OIG, take reasonable steps to narrow the request from the OIG in an appropriate manner in order to limit the amount of information, if any, that constitutes Trade Secrets of ActaMed covered by such request; and (v) make reasonable efforts to permit ActaMed, with the concurrence of the OIG, to disclose such information directly to the OIG, provided that in any such case, ActaMed shall give SBCL a timely opportunity to review, comment upon and approv the information ActaMed intends to include in such submission. The additional safeguards described in subsections (i) through (v) above are designed to help assure the confidentiality of the Trade Secrets, the disclosure of which would have a material adverse impact on ActaMed. These additional provisions are not intended to interfere with SBCL's ability to meet its disclosure obligations under the Integrity Agreement. Each party shall promptly notify the other in the event it receives an inquiry, investigation or request for information from the OIG or other governmental agency into the matters relating to the proposed transactions. The provisions of this Section 4.4 shall apply in addition to similar provisions in the Services Agreement. SECTION 4.5 EFFORTS TO SATISFY CONDITIONS. SBCL and ActaMed each agree to use their respective best efforts to cause the Transfer Dates to occur as currently scheduled. In [*] CONFIDENTIAL TREATMENT REQUESTED -30- addition, SBCL agrees to use its best efforts to satisfy the conditions set forth in Section 7.1 hereof, and ActaMed agrees to use its best efforts to satisfy the conditions set forth in Section 7.2 hereof. In furtherance of the foregoing, each party will use its best efforts to take all commercially reasonable steps necessary or desirable and proceed diligently and in good faith to satisfy each condition to the obligations of the other party contained in this Assets Purchase Agreement and will not take or fail to take any commercially reasonable action that could reasonably be expected to result in the nonfulfillment of any such condition. Each of ActaMed and SBCL further agrees to use its best efforts to (i) satisfy any conditions to the transfer of a Region set forth in Section 2.3, and (ii) deliver any and all documents to be delivered upon the transfer of a Region, as set forth in Sections 2.5 and 2.6. SECTION 4.6 EXPENSES. Except as otherwise provided herein, each of the parties to this Assets Purchase Agreement shall bear its respective expenses incurred in connection with the preparation, execution and performance of this Assets Purchase Agreement and the transactions contemplated hereby, including, without limitation, all fees and expenses of agents, representatives, counsel and accountants. SECTION 4.7 ANTITRUST NOTIFICATION. The parties have filed with the United States Federal Trade Commission and the United States Department of Justice the notification and report form required for the transactions contemplated hereby and any supplemental or additional information which was requested in connection therewith pursuant to the HSR Act. The filing fee relating to such notification and report form will be borne equally. ARTICLE 5 ACTAMED COVENANTS TO SBCL SECTION 5.1 ADDITIONAL COVENANTS OF ACTAMED. ActaMed covenants and agrees that: 5.1.1 SECURITIES LAW FILINGS. From and after consummation of a Public Offering and for so long as a Permitted Owner holds any Conversion Shares, ActaMed will timely file the reports required to be filed by it under the Securities Act and the Exchange Act and the Regulations adopted by the SEC thereunder, to the extent required from time to time to enable the Permitted Owner to sell Conversion Shares without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 under the Securities Act, as such rule may be amended from time to time, or (b) any similar Regulation hereafter adopted by the SEC. Upon the request of the Permitted Owner, ActaMed will deliver to the Permitted Owner a written statement as to whether it has complied with such requirements. 5.1.2 TRANSACTIONS WITH SUBSTANTIAL HOLDERS. ActaMed shall not, directly or indirectly, knowingly enter into any material transaction or agreement with any of its Substantial Holders or any Affiliate or officer of ActaMed or a Substantial Holder, or a material -31- transaction or agreement in which a Substantial Holder or Affiliate or officer of ActaMed or a Substantial Holder has a direct or indirect interest, unless such transaction or agreement is on terms and conditions no less favorable to ActaMed or any of its Subsidiaries than could be obtained at the time in an arm's length transaction with a third Person that is not such a Substantial Holder or Affiliate or officer of ActaMed or a Substantial Holder, and such transaction or agreement has been reviewed and approved by a majority of those members of ActaMed's Board of Directors who have no such interest in the transaction. Except as provided in Section 11.1.4, this Section shall not be enforceable against ActaMed by (i) any Person other than a Permitted Owner or (ii) any Person not a party to this Assets Purchase Agreement. 5.1.3 BUSINESS AND FINANCIAL COVENANTS. ActaMed covenants that: (a) Except for shares issued (i) upon exercise of options granted in accordance with the Stock Option Plans, the Articles and the Stockholders Agreement, (ii) upon conversion of shares of Preferred Stock, (iii) in connection with a Public Offering, (iv) upon exercise of the Warrant, or (v) as permitted under the Articles and the Stockholders Agreement, ActaMed will not, and will not permit any of its Subsidiaries, to hereafter issue or sell any shares or any securities convertible into, or any warrants, rights, or options to purchase shares of, the capital stock of ActaMed or such Subsidiary to any Person other than ActaMed, and ActaMed will not pledge any of the capital stock of any Subsidiary to any Person. ActaMed will not, in any event, issue or sell any shares of Series D Preferred Stock to any Person other than SBCL or its Affiliates. (b) Except as expressly permitted by the Articles or the Stockholders Agreement, ActaMed shall not (except for the advancement of money for expenses in the ordinary course of business) make, or permit any of its Subsidiaries to make, any loans or advances to any Person or have outstanding any investment in any Person, whether by way of loan or advance to, or by the acquisition of the capital stock, assets or obligations of, or any other interest in, any Person. (c) Except as expressly permitted herein or by the Articles or the Stockholders Agreement, neither ActaMed nor any of its Subsidiaries shall declare or make (i) any payment or the incurrence of any Liability to make any payment in cash, property or other assets as a dividend or other distribution in respect of any shares of capital stock of ActaMed or any Subsidiary, excluding, however, any dividends payable to ActaMed by a Subsidiary or dividends which may be payable solely in ActaMed Common Stock or the common stock of any Subsidiary and (ii) except as otherwise permitted by the Transaction Documents or a stock option agreement under the Stock Option Plans, any payment or the incurrence of any Liability to make any payment in cash, property or other assets for the purposes of purchasing, retiring or redeeming any shares of any class of capital stock of ActaMed or any Subsidiary or any warrants, options or other rights to purchase any such shares. (d) Neither ActaMed nor any of its Subsidiaries will amend or change its articles of incorporation or bylaws, or violate or breach any of the provisions thereof. -32- (e) Without the consent of a majority of the Board of Directors: (i) Other than debt in an amount no greater than $2,000,000 incurred to fund the cash portion of the Purchase Price, ActaMed shall not create, incur or suffer to exist, or permit any Subsidiary to create, incur or suffer to exist, any debt other than: (a) debt existing on the date hereof and included in the ActaMed Financial Statements or incurred in the ordinary course of business between the date of the ActaMed Financial Statements and the date hereof, and any renewals or replacements of such debt not exceeding the principal amount of the debt being replaced or renewed; and (b) debt not in excess of $1,000,000 in the aggregate in any one calendar year. (ii) ActaMed shall not create or suffer to exist, or permit any Subsidiary to create or suffer to exist, any obligations for the payment of rent for any property under leases or agreements to lease, other than obligations for (a) the payment of rent which, in the aggregate, do not exceed $1,000,000 annually and (b) payments under leases set forth on DISCLOSURE SCHEDULE 3.2.19. (iii) ActaMed shall not acquire, or permit any Subsidiary to acquire, directly or indirectly, the assets of or equity interests in any other business or entity, whether by purchase, merger consolidation or otherwise in excess of $1,000,000. (iv) ActaMed shall not effect an initial Public Offering of any equity securities, other than equity securities issued in a merger, totaling less than $15,000,000 (before discounts and commissions) in gross proceeds to ActaMed, and at a per share price of less than 2.5 times the then existing conversion price of the Series A Preferred Stock. 5.1.4 CORPORATE EXISTENCE, BUSINESS, MAINTENANCE, INSURANCE. (a) ActaMed will at all times preserve and keep in full force and effect its corporate existence and rights and franchises deemed material to its business and those of its Subsidiaries, except any Subsidiary of ActaMed may be merged into ActaMed or another Subsidiary. (b) ActaMed shall engage solely in the business of developing healthcare information networks (with a principle focus on the provision of lab order entry and results reporting services) and businesses closely related thereto. ActaMed (and any Subsidiary) will not purchase or acquire any property other than property useful in and related to such business. (c) ActaMed will maintain or cause to be maintained in good repair, working order and condition all properties used or useful in the business of ActaMed and any Subsidiary and from time to time will make or cause to be made all appropriate repairs, -33- renewals and replacements thereof. ActaMed and any Subsidiary will at all times comply in all material respects with the provisions of all material leases to which it is a party or under which it occupies property so as to prevent any loss or forfeiture thereof or thereunder. (d) ActaMed will maintain or cause to be maintained, with financially sound and reputable insurers, appropriate insurance with respect to its properties and business and the properties and business of any Subsidiary against loss or damage. 5.1.5 REPURCHASE OF SHARES OF PREFERRED STOCK. Except as provided in Article Three, Section 5.1 of the Fourth Amended Articles, ActaMed shall not, and shall not permit any of its Subsidiaries or any Affiliate of ActaMed to, directly or indirectly, redeem or repurchase or make any offer to redeem or repurchase any shares of (i) Preferred Stock other than Series D Preferred Stock, unless ActaMed, such Subsidiary or such Affiliate has offered to repurchase shares of Preferred Stock PRO RATA, from all holders of outstanding shares of Preferred Stock, including without limitation the Series D Preferred Stock, upon the same terms, or (ii) Series D Preferred Stock unless ActaMed, such Subsidiary or such Affiliate has offered to repurchase shares of Series D Preferred Stock PRO RATA, from all holders of outstanding shares of Series D Preferred Stock upon the same terms. 5.1.6 COMPENSATION. All awards of compensation, including, but not limited to, salary, bonus and awards of stock options made to executive officers and/or directors of ActaMed shall be determined by ActaMed in accordance with the terms of the Stockholders' Agreement and the Articles. 5.1.7 SFA AMENDMENT. ActaMed shall deliver to SBCL, within five (5) business days of the Region One Transfer Date, a duly executed and delivered Amendment to that certain Amended and Restated Development Agreement, dated the 21st day of November, 1996, but effective as of the 3rd day of December, 1993, by and between ActaMed and The SFA Limited Partnership, which Amendment shall provide, on terms satisfactory to SBCL and its counsel, that the SBCL Software, the ActaLab Software and any Intellectual Property developed under the Development Agreement shall not constitute "ActaMed Technology," as defined in such Amended and Restated Development Agreement with The SFA Limited Partnership. 5.1.8 NEW BUSINESS PLAN. Within thirty days after the Region One Transfer Date, the Board of Directors of ActaMed will approve and adopt a new business plan (the "NEW BUSINESS PLAN") for ActaMed covering the years 1998 and 1999, which shall include projected financial data, including statements of operations, and operational data, including number of sites and transactions per site. The new business plan shall provide monthly data for 1998 and quarterly data for 1999. By June 30, 1999, the Board of Directors of ActaMed will approve and adopt an addendum to the plan, covering the same items of financial and operational data, for the year 2000, presented on a monthly basis. The nominal values set forth in the New Business Plan shall not deviate from analogous figures presented in ActaMed's existing business plan, a copy of which was forwarded to SBCL prior to December 1, 1997, by more than seven percent (7%). -34- Section 5.2 INFORMATIONAL COVENANTS OF ACTAMED. ActaMed covenants and agrees that it shall deliver the following information to any Permitted Owner for so long as (except as set forth in Section 5.2.6) such Permitted Owner shall hold [*] of the aggregate outstanding shares of Preferred Stock or Conversion Shares (considered as a single class) or until such time as ActaMed shall have consummated a Public Offering: 5.2.1 AUDITED ANNUAL FINANCIAL STATEMENTS. As soon as practicable and, in any case, within one hundred and twenty (120) days after the end of each fiscal year, financial statements of ActaMed, consisting of the balance sheet of ActaMed as of the end of such fiscal year and the statements of operations, statements of stockholders equity and statements of cash flows of ActaMed for such fiscal year, setting forth in each case, in comparative form, the figures for the preceding fiscal year, all in reasonable detail and fairly presented in accordance with GAAP applied on a consistent basis throughout the periods reflected therein, except as stated therein, and accompanied by an opinion thereon of Ernst & Young, or other independent certified public accountants selected by ActaMed of good and recognized national standing in the United States. 5.2.2 QUARTERLY UNAUDITED FINANCIAL STATEMENTS. As soon as practicable and, in any case, within forty-five (45) days after the end of each of the first three fiscal quarters in each fiscal year, unaudited financial statements of ActaMed setting forth the balance sheet of ActaMed at the end of each such fiscal quarter and the statements of operations and statements of cash flows of ActaMed for each such fiscal quarter and for the year to date, and setting forth in comparative form figures as of the corresponding date and for the corresponding periods of the preceding fiscal year, all in reasonable detail and certified by an accounting officer of ActaMed as complete and correct, as having been prepared in accordance with GAAP consistently applied (except as otherwise disclosed therein) and as presenting fairly, in all material respects, the financial position of ActaMed and any of its Subsidiaries and results of operations and cash flows thereof subject, in each case, to customary exceptions for interim unaudited financial statements. 5.2.3 MONTHLY UNAUDITED FINANCIAL STATEMENTS. As soon as available, but in any event within thirty (30) days after the end of each calendar month, copies of the unaudited balance sheet of ActaMed as at the end of such calendar month and the related unaudited statements of operations and cash flows for such calendar month and the portion of the calendar year through such calendar month, in each case setting forth in comparative form the figures for the corresponding periods of (a) the previous calendar year and (b) the budget for the current year, prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein (except as otherwise disclosed therein) and certified by the chief financial officer of ActaMed as presenting fairly the financial condition and results of operations of ActaMed and any of its Subsidiaries (subject to customary exceptions for interim unaudited financial statements). [*] CONFIDENTIAL TREATMENT REQUESTED -35- 5.2.4 MANAGEMENT'S ANALYSIS. All the financial statements delivered pursuant to Sections 5.2.2 and Section 5.2.3 shall be accompanied by an informal narrative description of material business and financial trends and developments and significant transactions that have occurred in the appropriate period or periods covered thereby. 5.2.5 BUDGETS. As soon as practicable, but in any event within thirty (30) days prior to the commencement of a fiscal year, an annual operating budget for such fiscal year, approved by the Board of Directors, including monthly income and cash flow projections and projected balance sheets as of the end of each quarter within such fiscal year. Extensions of such due date shall not be unreasonably withheld. 5.2.6 INSPECTION. Upon reasonable notice, ActaMed shall, and shall cause any of its Subsidiaries to, permit any Permitted Owner (so long as it owns [*] or more of the outstanding capital stock of ActaMed) by its representatives, agents or attorneys: (a) to examine all books of account, records, reports and other papers of ActaMed or such Subsidiary except to the extent that such action would, in the reasonable opinion of counsel, constitute a waiver of the attorney/client privilege, (b) to make copies and take extracts from any thereof, except for information which is confidential or proprietary, (c) to discuss the affairs, finances and accounts of ActaMed or such Subsidiary with ActaMed's or such Subsidiary's officers and independent certified public accountants (and by this provision ActaMed hereby authorizes said accountants to discuss with the Permitted Owner and its representatives, agents or attorneys the finances and accounts of ActaMed or such Subsidiary), and (d) to visit and inspect, at reasonable times and on reasonable notice during normal business hours, the properties of ActaMed and such Subsidiary. Notwithstanding any provision herein to the contrary, the provisions of this Section 5.2.6 are in addition to any rights of a Permitted Owner under the Georgia Business Corporation Code and shall in no way limit such rights. The expenses of the Permitted Owner in connection with any such inspection shall be for the account of the Permitted Owner. Notwithstanding the foregoing sentence, it is understood and agreed by ActaMed that all reasonable expenses incurred by ActaMed or such Subsidiary, any officers, employees or agents thereof or the independent certified public accountants therefor, shall be expenses payable by ActaMed and shall not be expenses of the Permitted Owner making the inspection. Notwithstanding anything to the contrary, SBCL shall be permitted access to any information of, or related to, any customer of ActaMed that is a competitor of SBCL only to the [*] CONFIDENTIAL TREATMENT REQUESTED -36- extent ActaMed is not subject to confidentiality undertakings with respect to such information; PROVIDED that such limitation shall not prevent SBCL or auditors retained by SBCL, or if ActaMed so requires for reasons of confidentiality only auditors retained by SBCL, from confirming the amount of royalties payable to it under the License Agreement or Services Agreement by reason of connectivity between Providers and commercial laboratories other than SBCL Labs. 5.2.7 OTHER INFORMATION. ActaMed shall deliver the following provided that in the reasonable opinion of counsel to ActaMed such disclosure will not constitute a waiver of the attorney/client privilege, the breach of any secrecy covenant or the release of information regarding competitors of the Permitted Owner: (a) promptly after the submission thereof to ActaMed, copies of any detailed reports (including the auditors' comment letter to management, if any such letter is prepared) submitted to ActaMed by its independent auditors in connection with each annual or interim audit of the accounts of ActaMed made by such accountants; (b) promptly, and in any event within ten (10) days after obtaining knowledge thereof, notice of the institution of any suit, action or proceeding (other than a proceeding of general application which is not directly against ActaMed or one or more of the Subsidiaries), the happening of any event or, to the best knowledge of ActaMed, the assertion or threat of any claim against ActaMed or any of the Subsidiaries which, either individually or in the aggregate, would have a Material Adverse Effect; (c) promptly upon, and in any event within thirty (30) days after obtaining knowledge thereof, notice of any breach of, Default under or failure to comply with any material term under this Article V or any material adverse change in ActaMed's relationship with its major customers, suppliers, employees or other entity with which ActaMed has a business relationship; (d) with reasonable promptness, a notice of any default by ActaMed or any of its Subsidiaries under any material agreement to which it is a party; (e) with reasonable promptness, copies of all written materials furnished to directors; (f) promptly (but in any event within ten (10) days) after the filing of any document or material with the SEC, a copy of such document or material; (g) promptly after the record date set by the Board of Directors to determine the stockholders entitled to vote at ActaMed's annual meeting of stockholders (but in any event ten (10) days prior to such meeting), a list of all stockholders of ActaMed and their respective holdings; and -37- (h) promptly upon request therefor, such other data, filings and information as the Permitted Owner may from time to time reasonably request. ARTICLE 6 EMPLOYEE MATTERS SECTION 6.1 TERMINATION OF EMPLOYMENT BY SBCL AND OFFER OF EMPLOYMENT BY ACTAMED. Effective as of the close of business on January 1, 1998 or such later date as mutually agreed by SBCL and ActaMed, but not later than January 29, 1998 (the "Termination Date"), SBCL will terminate the employment of the individuals listed on Schedule VI. As soon as practicable following the Region One Transfer Date, ActaMed will offer employment to each of the individuals listed on Schedule VI, which employment shall become effective as of the day following the Termination Date (the "Hire Date"). Each individual listed on Schedule VI who accepts ActaMed's offer of employment shall be referred to herein as a "Transferred Employee." In connection with the termination of employment of the individuals listed on Schedule VI, SBCL shall take such action with respect to compensation and benefits for such individuals as described in the SBCL undertakings section of Schedule VI. SECTION 6.2 TRANSITIONAL EMPLOYEE LEASING ARRANGEMENT. For each Transferred Employee, the "Transitional Employee Leasing Arrangement" shall extend for the period from the Hire Date until the earlier of: 6.2.1 the Transfer Date for the Region to which a Transferred Employee is assigned; or 6.2.2 five business days after the date SBCL provides written notice to ActaMed with respect to such Transferred Employee, if SBCL determines that it no longer wishes to have a Transferred Employee assigned to provide leased services to SBCL pursuant to this Agreement. During the Transitional Employee Leasing Arrangement period, ActaMed shall require, as a condition of the continued employment of each Transferred Employee, that each Transferred Employee report to SBCL, and continue to comply with SBCL's policies and procedures in the course of each such Transferred Employee's employment by ActaMed. Notwithstanding the foregoing, Transferred Employees shall be under ActaMed's supervision, direction and control, subject to the general oversight and guidance of SBCL. In performing services for SBCL pursuant to this Article VI, the Transferred Employees shall have the status of common law employees of ActaMed, and neither the Transferred Employees nor ActaMed shall act as or be employees or agents of SBCL. -38- SECTION 6.3 ACTAMED COMPENSATION AND BENEFITS. ActaMed shall, out of its own funds, provide each Transferred Employee with compensation and benefits as set forth on Schedule VI. SECTION 6.4 PAST SERVICE CREDIT. The service of each Transferred Employee with SBCL or any of its Affiliates shall be counted for purposes of determining eligibility to participate or to vest in benefits under any compensation or benefit plan, program or arrangement now or hereafter maintained by ActaMed to the same extent that such service was credited or otherwise counted under any Benefit Plan in which such Transferred Employee was eligible to participate with SBCL immediately prior to the Region One Transfer Date. SECTION 6.5 TERMINATION OF EMPLOYMENT; NONSOLICITATION; TERMINATION OF AGREEMENT. 6.5.1 ActaMed will not terminate without cause the employment of any Transferred Employee before the date determined under Section 6.2.1 or 6.2.2, without the advance written consent of SBCL. 6.5.2 ActaMed shall be responsible for assigning Transferred Employees to principal work locations, which shall be the same as the locations to which such Transferred Employees were assigned as of December 31, 1997. Except as may otherwise be agreed by SBCL and ActaMed in a writing signed by the parties, SBCL shall make the business facilities to which Transferred Employees are currently assigned available to ActaMed for the purpose of location assignments of Transferred Employees until not later than the [*] anniversary of the Transfer Date of the Region to which a Transferred Employee is assigned. 6.5.3 SBCL shall not solicit the employment of, hire or employ any Transferred Employee until after the earlier of (i) such Transferred Employee's termination of employment by ActaMed with cause, (ii) such Transferred Employee's voluntary resignation from ActaMed, [*] (iii) [*] or (iv) the termination of this Assets Purchase Agreement pursuant to Section 10.1, in which event ActaMed shall, at SBCL's request, use its best efforts to cooperate with SBCL in facilitating SBCL's solicitation to re-hire such Transferred Employees. SECTION 6.6 PAYMENT OF WAGE AND BENEFIT COSTS. 6.6.1 PERIOD FROM JANUARY 1, 1998 THROUGH THE HIRE DATE. For the period beginning January 1, 1998 and extending through the Hire Date, with respect to each individual identified on SCHEDULE VI as a Transferred Employee, ActaMed shall reimburse SBCL for such individuals' base salary, paid time off, the employer-paid portion of employment and unemployment insurance or taxes, the employer-paid portion of premiums payable with respect to all insured benefits, with respect to medical and dental benefits for individuals who participate in the self-insured medical and dental program sponsored by SBCL, the pro rated portion of the excess, if any, of a reasonable premium cost for such coverage, as determined by [*] CONFIDENTIAL TREATMENT REQUESTED -39- SBCL, over the amount paid by such individual for such coverage, the present value of additional accruals under the SmithKline Beecham Pension Plan, as determined by the Plan's actuary and employer contributions payable under the SmithKline Beecham Retirement Savings Plan. SBCL will bill such employee costs to ActaMed by or before January 31, 1998, and ActaMed will remit payment to SBCL for such employee costs within 30 days of receipt of the bill for such costs. 6.6.2 DURING TRANSITION. Except as otherwise provided in SCHEDULE VI, SBCL will reimburse ActaMed for certain direct compensation and benefit costs incurred by ActaMed with respect to each Transferred Employee during the Transitional Employee Leasing Arrangement period (as hereinafter defined, the "Employee Costs"). For purposes of this Article VI, Employee Costs will include base salary, paid time off pursuant to the paid time off policy described in SCHEDULE VI, the employer-paid portion of employment and unemployment insurance or taxes, the employer-paid portion of premiums payable with respect to the insured benefits set forth on SCHEDULE VI, employer contributions made under any ActaMed qualified defined contribution plan, and with respect to short term disability benefits for individuals who participate in the self-insured short term disability plan sponsored by ActaMed, the pro rated portion of the excess, if any, of a reasonable premium cost for such coverage, as determined by ActaMed, over the amount paid by such individual for such coverage. In addition, for each Transferred Employee, for each of 1998 and 1999, Employee Costs will include an amount equal to [*] of [*] to such Transferred Employee [*], the [*] is the [*] during which such Transferred Employee was [*], and the [*]. ActaMed will bill such Employee Costs to SBCL monthly, and SBCL will remit payment to ActaMed for such Employee Costs within 30 days of receipt of the bill for such costs. 6.6.3 STAY BONUS AND BONUS. (a) Stay Bonus. SBCL will reimburse ActaMed for [*] of the stay bonus payments described in SCHEDULE VI and actually made by ActaMed within thirty (30) days following SBCL's receipt of the bill for such costs. (b) Bonus. ActaMed will pay, and SBCL will reimburse ActaMed for, bonus payments as described in the bonus provisions of SCHEDULE VI. SECTION 6.7 TAXES, UNEMPLOYMENT INSURANCE AND RELATED ITEMS. ActaMed agrees to accept and hereby accepts full and exclusive responsibility for the payment of any and all contributions or taxes, or both, for any unemployment insurance or taxes, medical and old age retirement benefits, pensions or annuities now or hereafter imposed under any law of the United States or any State, which are measured by the wages, salaries or other remuneration paid to persons employed by ActaMed on the work covered by this Article VI or in any way connected [*] CONFIDENTIAL TREATMENT REQUESTED -40- therewith; and ActaMed shall reimburse SBCL for any of the contributions or taxes, or both, or any part thereof, if SBCL may be required by law to pay the same or any part thereof. SECTION 6.8 EXAMINATION AND AUDIT. For the Transitional Employee Leasing Arrangement period, and for three calendar years after final payment is made to ActaMed by SBCL pursuant to Section 6.6, ActaMed shall establish and maintain relevant books, records, payroll records, receipts, documents, papers and any other data or information which support and substantiate the charges made to and payments received from SBCL under Section 6.2. During such time, SBCL or its designated representative shall have access to and the right to examine any relevant books, records, documents, papers, receipts and any other data or information of ActaMed relating to ActaMed's obligations under this Article VI. ARTICLE 7 CONDITIONS PRECEDENT TO OBLIGATIONS OF ACTAMED SECTION 7.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF ACTAMED. The obligations of ActaMed to consummate the transactions contemplated by this Assets Purchase Agreement shall be subject to the satisfaction, on or before the Applicable Transfer Date, of each and every one of the following conditions, all or any of which may be waived, in whole or in part, by ActaMed for purposes of consummating such transactions, but without prejudice to any other right or remedy which ActaMed may have hereunder as a result of any misrepresentation by, or breach of any agreement, covenant or warranty of SBCL contained in this Assets Purchase Agreement or any Schedule, certificate or instrument furnished or caused to be furnished by SBCL hereunder. 7.1.1 REPRESENTATIONS TRUE. The representations and warranties made by SBCL in this Assets Purchase Agreement, with any exceptions set forth in the Disclosure Schedules attached to the Compliance Certificate, shall be true and correct in all material respects on the Applicable Transfer Date, with the same force and effect as if such representations and warranties had been made on and as of such Applicable Transfer Date. The Disclosure Schedules shall not identify any item indicating that the business or financial condition of SBCL or SBCL's provision of or ability to provide Lab EDI Services to SBCL Sites has been materially and adversely impacted, or which would impair SBCL's ability to perform its obligations hereunder, including its ability to deliver the SCAN Assets to ActaMed. 7.1.2 COVENANTS. All of the terms, covenants and conditions in this Assets Purchase Agreement and the other SBCL Documents to be complied with or performed by SBCL on or prior to the Region One Transfer Date shall have been complied with and performed in all material respects. 7.1.3 NO INJUNCTION, ETC. No action, proceeding, investigation or Regulation shall have been instituted, threatened or proposed before any court, governmental -41- agency or legislative body to enjoin, restrain, prohibit, or obtain substantial damages in respect of, or which is related to, or arises out of, this Assets Purchase Agreement or the consummation of the transactions contemplated hereby, or which is related to or arises out of the provision of Lab EDI Services, if such action, proceeding, investigation or Regulation, in the reasonable judgment of ActaMed, would make it inadvisable to consummate the transactions contemplated on such Transfer Date. 7.1.4 APPROVAL OF LEGAL MATTERS. All actions, proceedings, instruments and documents deemed necessary or appropriate by ActaMed or their counsel to effectuate this Assets Purchase Agreement and the consummation of the transactions contemplated hereby, or incidental thereto, and all other related legal matters, shall have been approved by such counsel. 7.1.5 GOVERNMENTAL APPROVALS. All governmental and other consents and approvals, if any, necessary to permit the consummation of the transactions contemplated by this Assets Purchase Agreement on such Transfer Date shall have been received by ActaMed. SECTION 7.2 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SBCL. The obligations of SBCL to consummate the transactions contemplated by this Assets Purchase Agreement shall be subject to the satisfaction, on or before each Transfer Date, of each and every one of the following conditions, all or any of which may be waived, in whole or in part, by SBCL for purposes of consummating such transactions, but without prejudice to any other right or remedy which SBCL may have hereunder as a result of any misrepresentation by, or breach of any agreement, covenant or warranty of ActaMed contained in this Assets Purchase Agreement, or any certificate or instrument furnished by it hereunder. 7.2.1 REPRESENTATIONS TRUE. The representations and warranties made by ActaMed in this Assets Purchase Agreement, with any exceptions set forth in the Disclosure Schedules attached to the Compliance Certificate, shall be true and correct in all material respects on the Applicable Transfer Date, with the same force and effect as if such representations and warranties had been made on and as of such Applicable Transfer Date. The Disclosure Schedules shall not identify any item indicating that the business or financial condition of ActaMed has been materially and adversely impacted, or which would impair ActaMed's ability to perform its obligations hereunder. 7.2.2 COVENANTS. All of the terms, covenants and conditions in the ActaMed Documents to be complied with or performed by ActaMed on or prior to the Transfer Date shall have been complied with and performed in all material respects. 7.2.3 NO INJUNCTION, ETC. No action, proceeding, investigation or Regulation shall have been instituted, threatened or proposed before any court, governmental agency or legislative body to enjoin, restrain, prohibit, or obtain substantial damages in respect of, or which is related to, or arises out of, this Assets Purchase Agreement or the consummation of the transactions contemplated hereby, or which is related to or arises out of the business of ActaMed, if such action, proceeding, investigation or Regulation, in the reasonable judgment of -42- SBCL, would make it inadvisable to consummate the transactions contemplated on such Transfer Date. 7.2.4 APPROVAL OF LEGAL MATTERS. All actions, proceedings, instruments and documents deemed necessary or appropriate by SBCL or its counsel to effectuate this Assets Purchase Agreement and the consummation of the transactions contemplated hereby, or incidental hereto, and all other related legal matters, shall have been approved by such counsel. 7.2.5 GOVERNMENTAL APPROVALS. All governmental and other consents and approvals, if any, necessary to permit the consummation of the transactions contemplated by this Assets Purchase Agreement shall have been received by SBCL. ARTICLE 8 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS AND INDEMNIFICATION SECTION 8.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. 8.1.1 SURVIVAL OF SBCL REPRESENTATIONS, WARRANTIES AND COVENANTS. ActaMed and SBCL acknowledge and agree that, as contemplated by Section 4.3.1, prior to each of the Transfer Dates, ActaMed intends to perform such investigation of the SCAN Assets to be transferred on such Transfer Date and related Lab EDI Services provided by SBCL as ActaMed may deem appropriate; PROVIDED, HOWEVER, no investigation by ActaMed shall diminish or otherwise affect any of the representations, warranties, covenants or agreements made or to be performed by SBCL pursuant to this Assets Purchase Agreement or ActaMed's right to rely fully upon such representations, warranties, covenants and agreements. All such representations, warranties, covenants and agreements made or to be performed by SBCL pursuant to this Assets Purchase Agreement shall survive the execution and delivery hereof and each of the Transfer Dates hereunder indefinitely except to the extent limited by this Section 8.1.1. The representations and warranties shall terminate and expire, (a) with respect to any General Claim based on a breach thereof (other than one based on a breach of Section 3.1.3 hereof) with respect to which a Claims Notice has not been given, after [*] from the Transfer Date of the SCAN Assets as to which the representation and warranty was made, (b) with respect to any General Claim based upon a breach of Section 3.1.3 hereof, after the earlier of (i) [*] or (ii) [*] days after the Region Four Transfer Date, and (c) with respect to a Tax Claim, on the later of (i) the [*] after the date upon which the Liability to which any such Tax Claim may relate is barred by all applicable statutes of limitation and (ii) the [*] after the date upon which any claim for refund or credit related to such Tax Claim is barred by all applicable statutes of limitation. A Claims Notice for a General Claim based on a breach of covenant may be given at any time up to the [*] of the date on which the breach of such covenant occurred. With respect to any Ownership Claim, Undisclosed Liability Claim or any type of claim not specifically addressed [*] CONFIDENTIAL TREATMENT REQUESTED -43- above, such representations, warranties, covenants and agreements shall survive without limit of time. 8.1.2 SURVIVAL OF ACTAMED REPRESENTATIONS, WARRANTIES AND COVENANTS. All the representations, warranties, covenants and agreements, made or to be performed by ActaMed pursuant to this Assets Purchase Agreement shall survive the execution and delivery hereof indefinitely except to the extent limited by this Section 8.1.2. No investigation by SBCL shall diminish or otherwise affect any of the representations, warranties, covenants or agreements made or to be performed by ActaMed pursuant to this Assets Purchase Agreement or SBCL's right to rely fully upon such representations, warranties, covenants and agreements. All such representations, warranties, covenants and agreements shall be considered to have been relied upon by SBCL and shall survive the delivery to SBCL of the shares of Series D Preferred Stock (and the Conversion Shares). The representations and warranties shall terminate and expire (a) with respect to a General Claim based on a breach thereof for which a Claims Notice has not been given, after [*] from the Transfer Date with respect to which such representation and warranty was made, (b) with respect to a Tax Claim, on the later of (i) the [*] after the date upon which the Liability to which any such Tax Claim may relate is barred by all applicable statutes of limitation and (ii) the [*] after the date upon which any claim for refund or credit related to such Tax Claim is barred by all applicable statutes of limitation and (c) with respect to the covenants of ActaMed set forth in Sections 5.1.3 and 5.1.6 hereof, upon the closing of a Public Offering. A Claims Notice for a General Claim based on a breach of covenant may be given at any time up to the [*] of the date on which the breach of such covenant occurred. With respect to any Ownership Claim, Undisclosed Liability Claim or any type of claim not specifically addressed above, such representations, warranties, covenants and agreements shall survive without limit of time. SECTION 8.2 OBLIGATION TO INDEMNIFY. 8.2.1 OBLIGATIONS OF SBCL TO INDEMNIFY. Subject to the limitations of Sections 8.1.1, 8.2.6 and 8.2.9, SBCL agrees to indemnify and hold harmless each ActaMed Indemnitee against and in respect of: (a) all Losses imposed upon or incurred by any ActaMed Indemnitee by reason of or resulting from: (i) a breach of any representation or warranty of SBCL contained in or made pursuant to this Assets Purchase Agreement other than the representation contained in Section 3.1.3(a); or (ii) any nonfulfillment of any covenant or agreement of SBCL contained in or made pursuant to this Assets Purchase Agreement; or (iii) any Liability of SBCL not assumed by ActaMed hereunder, including without limitation any Liability for any Taxes attributable to ownership of [*] CONFIDENTIAL TREATMENT REQUESTED -44- SCAN Assets or SBCL's provision of Lab EDI Services in a Region prior to its Transfer Date in accordance herewith. (b) any and all actions, suits, claims, proceedings, investigations, demands, assessments, audits, fines, judgments, costs and other expenses (including, without limitation, reasonable legal fees and expenses) incident to any Loss in connection with Section 8.2.1(a) or to the enforcement of this Section 8.2.1; (c) all Losses imposed upon or incurred by any ActaMed Indemnitee by reason of or resulting from any Litigation pending or threatened, arising out of or relating to the provision of Lab EDI Services at an SBCL Site hereunder, regardless of whether it is disclosed in any Section of the Disclosure Schedule called for by Section 3.1 or Section 2.5.2 hereof; PROVIDED, HOWEVER that, to the extent that any such Loss arises out of the actions of a Transferred Employee, SBCL shall only be obligated to indemnify and hold harmless an ActaMed Indemnitee hereunder if such Transferred Employee was acting subject to SBCL's general oversight and guidance pursuant to Section 6.2 hereof. 8.2.2 OBLIGATION OF ACTAMED TO INDEMNIFY. Subject to the limitations of Section 8.1.2 and Section 8.2.6, ActaMed agrees to indemnify and hold harmless each SBCL Indemnitee against and in respect of: (a) all Losses imposed upon or incurred by any SBCL Indemnitee by reason of or resulting from: (i) a breach of any representation or warranty of ActaMed contained in or made pursuant to this Assets Purchase Agreement; or (ii) any nonfulfillment of any covenant or agreement of ActaMed contained in or made pursuant to this Assets Purchase Agreement; and (iii) any Liability of ActaMed (other than a Liability indemnified by SBCL pursuant to Section 8.2.1) attributable to ownership of SCAN Assets or ActaMed's provision of Lab EDI Services in a Region after its Transfer Date in accordance herewith; PROVIDED that if the Services Agreement provides for indemnification for any such Liability, then no such claim shall be brought hereunder. (b) any and all actions, suits, claims, proceedings, investigations, demands, assessments, audits, fines, judgments, costs and other expenses (including, without limitation, reasonable legal fees and expenses) incident to any Loss in connection with Section 8.2.2(a) or to the enforcement of this Section 8.2.2. (c) all Losses imposed upon or incurred by any SBCL Indemnitee by reason of or resulting from any Litigation pending or threatened, arising out of or relating to use of SCAN Assets at an ActaMed Site -45- after such site became an ActaMed Site hereunder, regardless of whether it is disclosed in the Disclosure Schedule by reason of Section 3.2 or Section 2.6.3 hereof. (d) all Losses imposed upon or incurred by SBCL by reason of SBCL premises being used by Transferred Employees on or after the Hire Date. 8.2.3 CLAIMS NOTICE. A Claim shall be made by any Indemnitee by delivery of a Claims Notice to the Indemnifying Party requesting indemnification and specifying the basis on which indemnification is sought and the amount of asserted Losses and, in the case of a Third Party Claim, containing (by attachment or otherwise) such other information as such Indemnitee shall have concerning such Third Party Claim. 8.2.4 PROCEDURES INVOLVING NON-THIRD PARTY CLAIMS. If the Claim involves a matter other than a Third Party Claim, the Indemnifying Party shall have forty-five (45) days to object to such Claim by delivery of a written notice of such objection to such Indemnitee specifying in reasonable detail the basis for such objection. If an objection is timely made by the Indemnifying Party, the Indemnifying Party and the Indemnitee shall cooperate in the compromise of the Claim with ultimate resolution of the validity of such Claim to be determined under Article IX. Failure to object in a timely manner shall constitute a final and binding acceptance of the Claim by the Indemnifying Party on behalf of all Indemnitors, and the Claim shall be paid in accordance with Section 8.2.8 hereof. 8.2.5 PROCEDURES INVOLVING THIRD PARTY CLAIMS. The obligations and liabilities of the parties hereunder with respect to a Third Party Claim shall be subject to the following terms and conditions: (a) The Indemnitee shall give the Indemnifying Party written notice of a Third Party Claim promptly after receipt by the Indemnitee of notice thereof, and the Indemnifying Party may undertake the defense, compromise and settlement thereof by representatives of its own choosing reasonably acceptable to the Indemnitee. The failure of the Indemnitee to notify the Indemnifying Party of such claim shall not relieve the Indemnifying Party of any liability that it may have with respect to such claim except to the extent the Indemnifying Party demonstrates that the defense of such claim is prejudiced by such failure. The assumption of the defense, compromise and settlement of any such Third Party Claim by the Indemnifying Party shall be an acknowledgment of the obligation of the Indemnifying Party to indemnify the Indemnitee with respect to such claim hereunder. If the Indemnitee desires to participate in, but not control, any such defense, compromise and settlement, it may do so at its sole cost and expense. If, however, the Indemnifying Party fails or refuses to undertake the defense of such Third Party Claim within ten (10) days after written notice of such claim has been given to the Indemnifying Party by the Indemnitee, the Indemnitee shall have the right to undertake the defense, compromise and settlement of such claim with counsel of its own choosing. In the circumstances described in the preceding sentence, the Indemnitee shall, promptly upon its assumption of the defense of such claim, make a Claim as specified in -46- Section 8.2.1(b) or 8.2.2(b) which shall be deemed a Claim that is not a Third Party Claim for the purposes of the procedures set forth herein. (b) If, in the reasonable opinion of the Indemnitee, any Third Party Claim or the litigation or resolution thereof involves an issue or matter which could have a material adverse effect on the business, operations, assets, properties or prospects of the Indemnitee (including, without limitation, the administration of the tax returns and responsibilities under the tax laws of the Indemnitee), the Indemnitee shall have the right to control the defense, compromise and settlement of such Third Party Claim undertaken by the Indemnifying Party, and the reasonable costs and expenses of the Indemnitee in connection therewith shall be included as part of the indemnification obligations of the Indemnifying Party hereunder. If the Indemnitee shall elect to exercise such right, the Indemnifying Party shall have the right to participate in, but not control, the defense, compromise and settlement of such Third Party Claim at its sole cost and expense. (c) No settlement of a Third Party Claim involving the asserted liability of the Indemnifying Party under this Article shall be made without the prior written consent by or on behalf of the Indemnifying Party, which consent shall not be unreasonably withheld or delayed. If the Indemnifying Party assumes the defense of such a Third Party Claim, (1) no compromise or settlement thereof may be effected by the Indemnifying Party without the Indemnitee's consent unless (a) there is no finding or admission of any violation of law or any violation of the rights of any Person and no effect on any other claim that may be made against the Indemnitee (b) the sole relief provided is monetary damages that are paid in full by the Indemnifying Party and (c) the compromise or settlement includes, as an unconditional term thereof, the giving by the claimant or the plaintiff to the Indemnitee of a release, in form and substance reasonably satisfactory to the Indemnitee, from all liability in respect of such Third Party Claim, and (2) the Indemnitee shall have no liability with respect to any compromise or settlement thereof effected without its consent. 8.2.6 LIMITATIONS ON INDEMNIFICATION. (a) No Party to this Assets Purchase Agreement shall be entitled to indemnification under this Assets Purchase Agreement to the extent that such Party's Losses are increased or extended by the willful misconduct, violation of law or bad faith of such Party. (b) No Indemnifying Party shall be required to indemnify an Indemnitee with respect to any Loss arising out of or with respect to a Claim unless the amount of such Loss, when aggregated with all other such Losses, shall (i) exceed [*], at which time Claims may be asserted to the extent that all Losses or Asserted Liabilities are in excess of such threshold amount; PROVIDED, however, that such threshold amount shall not apply to any (a) Loss which results from or arises out of an Ownership Claim, a Tax Claim or Undisclosed Liability Claim, (b) Loss which results from or arises out of fraud or intentional misrepresentation or an intentional breach of a representation, [*] CONFIDENTIAL TREATMENT REQUESTED -47- warranty, covenant or agreement in this Assets Purchase Agreement; (c) Claim which is based upon Section 8.2.1(a)(iii) or 8.2.2(a)(iii) or (d) Loss which results from or arises out of any Litigation incident to any of the matters referred to in the foregoing clauses (a) and (b); and (ii) be less than [*], PROVIDED that such cap shall not apply to (a) a General Claim which is based upon a breach by SBCL of its representations and warranties set forth in Sections 3.1.7(a) or (b) hereof or a breach of its covenant set forth in Section 4.4 hereof, (b) a General Claim which is based upon a breach by ActaMed of its representation and warranty set forth in Section 3.2.14 or a breach of its covenant set forth in Section 4.4 hereof, or (c) a Claim which is based upon Section 8.2.1(a)(iii) or 8.2.2(a)(iii). Notwithstanding the foregoing, for any breach of Section 3.1.6(a)-(c), SBCL shall indemnify each ActaMed Indemnitee for any individual Loss in excess of [*] per item of tangible personal property and any aggregate Loss exceeding [*] for items of tangible personal property. 8.2.7 NO RELEASE FOR FRAUD. Nothing contained in this Assets Purchase Agreement shall relieve or limit the liability of any Party or any officer or director of such Party from any Liability arising out of or resulting from common law fraud or intentional misrepresentation in connection with the transactions contemplated by this Assets Purchase Agreement or in connection with the delivery of any of the Transaction Documents. Each Party shall have a right to indemnification for any Loss incurred as the result of any common law fraud or intentional misrepresentation by any other Party or any officer or director of such other Party without regard to the Threshold Amount, the maximum liability or any period of limitation. 8.2.8 PAYMENT. (a) If any Party is required to make any payment under this Article, such Party shall promptly pay the Indemnified Party the amount so determined. If there is a dispute as to the amount or manner of determination of any indemnity obligation owed under this Article, the Indemnifying Party shall nevertheless pay when due such portion, if any, of the obligation as shall not be subject to dispute. The difference, if any, between the amount of the obligation ultimately determined as properly payable under this Article and the portion, if any, theretofore paid shall bear interest as provided in Section 8.2.8(c). (b) Any items as to which an Indemnified Party is entitled to payment under this Article may be paid by set-off against amounts payable to the Indemnifying Party to the extent that such amounts are sufficient to pay such items. (c) If all or part of any indemnification obligation under this Assets Purchase Agreement is not paid when due, then the Indemnifying Party shall pay the Indemnified Party interest on the unpaid principal amount of the obligation from the date the amount became due until payment in full, at the per annum rate of interest announced from time to time by NationsBank South, N.A., to be its "prime rate." [*] CONFIDENTIAL TREATMENT REQUESTED -48- 8.2.9 SPECIAL INDEMNITY AS TO PROJECTIONS. Notwithstanding Section 8.2.6(b), SBCL shall pay to ActaMed any amount by which (x) the aggregate general expenses incurred by ActaMed for goods and services reflected on SCHEDULE 3.1.3 under the Subtotals [*] in connection with ActaMed's provision of Lab EDI Services to the Fixed Fee Sites (as defined in the Services Agreement), taking into account that the Projections are based on [*] SCAN Sites, the number of SCAN Sites actually transferred to ActaMed and the staging of their transfer, excluding one-time or transactional expenses (which amount shall include any expenses incurred with respect to this transaction), and less any increased expenses incurred as a result of providing the Agreed Services (as defined in the Services Agreement) in a different manner than SBCL did prior to the transfer of such SCAN Sites exceeds (y) [*] of the Projections. 8.2.10 EXCLUSIVE REMEDY. Except for equitable remedies and any action for common law fraud, the remedies provided in this Article constitute the sole and exclusive remedies for recovery against the Indemnifying Party based upon this Assets Purchase Agreement. ARTICLE 9 DISPUTE RESOLUTION SECTION 9.1 INFORMAL DISPUTE RESOLUTION. Any dispute between the parties arising out of or with respect to this Assets Purchase Agreement, either with respect to the interpretation of any provision of this Assets Purchase Agreement or with respect to the performance by ActaMed or SBCL, shall be resolved as provided in this Article. 9.1.1 INFORMAL DISPUTE RESOLUTION. Prior to the initiation of formal dispute resolution procedures, the parties shall first attempt to resolve their dispute informally, as follows: (a) The Relationship Managers for each Party shall meet for the purpose of endeavoring to resolve such dispute. They shall meet as often as the parties reasonably deem necessary in order to gather and furnish to the other all information with respect to the matter in issue which the parties believe to be appropriate and germane in connection with its resolution. The Relationship Managers shall discuss the problem and negotiate in good faith in an effort to resolve the dispute without the necessity of any formal proceeding. During the course of negotiations, all reasonable requests made by one Party to another for nonprivileged information, reasonably related to this Assets Purchase Agreement, shall be honored in order that each of the parties may be fully advised of the other's position. (b) If, within fifteen (15) days after a matter has been identified for resolution pursuant to this Article, either of the Relationship Managers concludes in good faith that amicable resolution through continued negotiation in this forum does not appear likely, [*] CONFIDENTIAL TREATMENT REQUESTED -49- the matter will be escalated by formal written notification to the SBCL President and the ActaMed President. The Parties will use their respective best efforts to cause the SBCL President and the ActaMed President to meet to attempt to resolve the dispute. (c) Formal proceedings for the resolution of a dispute may not be commenced until the earlier of: (i) the date on which the SBCL President and the ActaMed President conclude in good faith that amicable resolution through continued negotiation of the matter does not appear likely; or (ii) thirty (30) days after the dispute has been referred to the SBCL President and the ActaMed President. 9.1.2 FORMAL PROCEEDINGS PERMITTED. The provisions of this Section 9.1 shall not be construed to prevent a party from instituting, and a party being authorized to institute, formal proceedings earlier to avoid the expiration of any applicable limitations period or any period provided for in Section 8.1. SECTION 9.2 ARBITRATION. If the parties are unable to resolve any controversy arising under this Assets Purchase Agreement as contemplated by Section 9.1 and if such controversy is not subject to Article VIII or Section 9.3, then such controversy shall be submitted to mandatory and binding arbitration at the election of either party (the "Disputing Party") pursuant to the following conditions: 9.2.1 SELECTION AND REPLACEMENT OF ARBITRATORS. The Disputing Party shall notify the AAA and the other party in writing describing in reasonable detail the nature of the dispute (the "DISPUTE NOTICE"). Each of the parties shall select a neutral arbitrator in accordance with the rules of AAA, and the two arbitrators so selected shall select a third neutral arbitrator (the three arbitrators referred to in this Section being hereinafter referred to as the "PANEL"). 9.2.2 CONDUCT OF ARBITRATION. The Panel shall allow reasonable discovery as permitted by the Federal Rules of Civil Procedure, to the extent consistent with the purpose of the arbitration. The panel shall have no power or authority to amend or disregard any provision of this Section. The arbitration hearing shall be commenced promptly and conducted expeditiously, with each of ActaMed and SBCL being allocated one-half of the time for the presentation of its case. Unless otherwise agreed to by the parties, an arbitration hearing shall be conducted on consecutive days. 9.2.3 REPLACEMENT OF ARBITRATOR. Should an arbitrator refuse or be unable to proceed with arbitration proceedings as called for by this Section, such arbitrator shall be replaced by an arbitrator selected in accordance with the rules of the AAA. 9.2.4 FINDINGS AND CONCLUSIONS. The Panel rendering judgment upon disputes between parties as provided in this Section shall, after reaching judgment and award, prepare and distribute to the parties a writing describing the findings of fact and conclusions of law relevant to such judgment and award and containing an opinion setting forth the reasons for -50- the giving or denial of any award. The award of the Panel shall be final and binding on the parties, and judgment thereon may be entered in a court of competent jurisdiction. 9.2.5 PLACE OF ARBITRATION HEARINGS. Arbitration hearings hereunder shall be held in Washington, D.C. 9.2.6 TIME OF THE ESSENCE. The Panel is instructed that time is of the essence in the arbitration proceeding. The Panel shall render its judgment or award within fifteen (15) days following the conclusion of the hearing. Recognizing the express desire of the parties for an expeditious means of dispute resolution, the Panel shall limit or allow the parties to expand the scope of discovery as may be reasonable under the circumstances. SECTION 9.3 LITIGATION. 9.3.1 IMMEDIATE INJUNCTIVE RELIEF. In the event of a breach of the confidentiality obligations set forth in this Assets Purchase Agreement, or in the event a party makes a good faith determination that a breach of the terms of this Assets Purchase Agreement by the other party is such that the damages to such party resulting from the breach will be so immediate, so large or severe, and so incapable of adequate redress after the fact that a temporary restraining order or other immediate injunctive relief is a necessary remedy, then such party may file a pleading with a court seeking immediate injunctive relief. If a party files a pleading with a court seeking immediate injunctive relief and this pleading is challenged by the other party and the injunctive relief sought is not awarded in substantial part (or in the event of a temporary restraining order is vacated upon challenge by the other party), the party filing the pleading seeking immediate injunctive relief shall pay all of the costs and attorneys' fees of the party successfully challenging the pleading. 9.3.2 JURISDICTION. ActaMed and SBCL each consent to venue in Philadelphia, Pennsylvania and to the nonexclusive jurisdiction of competent Pennsylvania state courts or federal courts located in Philadelphia for all litigation which may be brought, subject to the requirement for arbitration hereunder, with respect to the terms of, and the transactions and relationships contemplated by, this Assets Purchase Agreement. ARTICLE 10 TERMINATION SECTION 10.1 TERMINATION. 10.1.1 METHOD OF TERMINATION. This Assets Purchase Agreement and the transactions contemplated hereby may be terminated at any time prior to a Transfer Date: (a) by the mutual consent of SBCL and ActaMed; -51- (b) by SBCL by written notice of termination to ActaMed given after ActaMed shall have failed to meet the Transfer Benchmarks with respect to a Region by any applicable Measurement Date; (c) by ActaMed, if SBCL shall (1) fail to perform in any material respect its agreements contained herein required to be performed by it on or prior to such Transfer Date, or (2) materially breach any of its representations, warranties or covenants contained herein; (d) by SBCL, if ActaMed shall (1) fail to perform in any material respect its agreements contained herein required to be performed by it on or prior to such Transfer Date, or (2) materially breach any of its representations, warranties or covenants contained herein; (e) by either SBCL or ActaMed if there shall be any order, writ, injunction or decree of any court or governmental or regulatory agency binding on ActaMed or SBCL which prohibits or restrains ActaMed or SBCL from consummating the transactions contemplated by this Assets Purchase Agreement, provided that ActaMed and SBCL shall have used their best efforts to have any such order, writ, injunction or decree lifted and the same shall not have been lifted within thirty (30) days after entry; (f) by SBCL if SBCL terminates the Services Agreement; or (g) by ActaMed if ActaMed terminates the Services Agreement. 10.1.2 NOTICE OF TERMINATION. Notice of termination of this Assets Purchase Agreement, as provided for in this Article, shall be given by the party so terminating to the other party in accordance with Section 11.1.1 of this Assets Purchase Agreement. Any such termination shall be effective as of the date of such notice, unless otherwise provided in such notice. 10.1.3 EFFECT OF TERMINATION. If this Assets Purchase Agreement is terminated pursuant to Section 10.1 then, with respect to all transactions contemplated by this Assets Purchase Agreement as to which no Transfer Date has occurred (the "Future Transfers"), the obligations of the parties as to such Future Transfers shall become void and of no further force and effect, and each party shall pay the costs and expenses incurred by it in connection with this Assets Purchase Agreement as set forth herein and no party (nor any of its officers, directors, employees, agents, representatives or stockholders) shall be liable to any other party for any costs, expenses, damages (direct or indirect) or loss of anticipated profits for Future Transfers. SECTION 10.2 RISK OF LOSS. SBCL assumes all risk of destruction, loss or damage due to fire or other casualty to the SCAN Assets located at SBCL Sites. SBCL shall remit all insurance proceeds relating to SCAN Assets not transferred by reason of such destruction, loss or -52- damage to ActaMed. If ActaMed and SBCL are unable to agree upon the amount of such insurance proceeds applicable to the affected SCAN Assets, the dispute shall be resolved jointly by the independent accounting firms then employed by ActaMed and SBCL, and if said accounting firms do not agree, they shall appoint a nationally recognized accounting firm, whose determination of the dispute shall be final and binding. ARTICLE 11 MISCELLANEOUS SECTION 11.1 GENERAL PROVISIONS. 11.1.1 NOTICES. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been given if (1) delivered by hand or if mailed by United States registered or certified mail, return receipt requested, first class postage prepaid, (2) sent by Federal Express or similar overnight courier service to the parties or their assignees, or (3) sent by telecopy to the number set forth below and promptly followed by a written copy sent by any other means specified herein, addressed as follows: If to SBCL: SmithKline Beecham Clinical Laboratories, Inc. 1201 South Collegeville Road Collegeville, PA 19426 Attention: John B. Okkerse, Jr., PhD, President Telephone: [*] Telecopy: [*] with a copy to: SmithKline Beecham Corporation One Franklin Plaza 16th and Race Streets Philadelphia, PA 19103 Attention: General Counsel-U.S. Telephone: [*] Telecopy: [*] [*] CONFIDENTIAL TREATMENT REQUESTED -53- If to ActaMed: ActaMed Corporation Suite 600 7000 Central Parkway Atlanta, Georgia 30328 Attention: Chief Financial Officer Telephone: (770) 352-1600 Telecopy: (770) 352-1815 with a copy to: Alston & Bird One Atlantic Center 1201 West Peachtree Street Atlanta, Georgia 30309-3424 Attention: John C. Weitnauer, Esq. Telephone: (404) 881-7780 Telecopy Number: (404) 881-7777 (a) If delivered personally, the date on which a notice, request, instruction or document is delivered shall be the date on which such delivery is made and, if delivered by mail, telecopy, Federal Express or other overnight courier, the date on which such notice, request, instruction or document is first received shall be the date of delivery. (b) Any party hereto may change its address specified for notices herein by designating a new address by notice in accordance with this Section 11.1. (c) Failure of any party to send a copy of any notice to counsel for the other Party shall not affect in any way the validity of such notice to other party. 11.1.2 FURTHER ASSURANCES. Each party covenants that at any time, and from time to time, after any Transfer Date, it will execute such additional instruments and take such actions as may be reasonably requested by the other party to confirm or perfect or otherwise to carry out the intent and purposes of this Assets Purchase Agreement. 11.1.3 WAIVER. Any failure on the part of any party hereto to comply with any of its obligations, agreements or conditions hereunder may be waived by any other party to whom such compliance is owed. No waiver of any provision of this Assets Purchase Agreement shall be deemed, or shall constitute, a waiver of any other provision, whether or not similar, nor shall any waiver constitute a continuing waiver. 11.1.4 ASSIGNMENT. This Assets Purchase Agreement shall not be assignable by any of the parties hereto without the written consent of the other party hereto, and -54- no rights under this Assets Purchase Agreement may be transferred without the consent of the non-transferring party, except that: (a) the rights of ActaMed under this Assets Purchase Agreement may be transferred to any Person that acquires all or substantially all of the business or assets of ActaMed related to the ActaLab Software and the Network (whether by purchase of assets, merger or other corporate reorganization), [*]; (b) the rights of SBCL under this Assets Purchase Agreement may be transferred before or after the last Transfer Date in connection with a transfer of shares of Series D Preferred Stock made in accordance with the provisions of the Stockholders' Agreement; and (c) all the rights of SBCL may be transferred to an Affiliate of SBCL or an acquiror of substantially all of its assets (whether by purchase of assets, merger or other corporate reorganization). Any attempted assignment without such consent shall be void. If the parties cannot agree upon whether a company competes with SBCL, the parties shall resolve the dispute pursuant to Article IX. Any assignment with consent does not release the assigning party from any of its obligations under this Assets Purchase Agreement unless the consent so states. Any transferee of SBCL permitted pursuant to clause (b) above shall execute and deliver to ActaMed an instrument satisfactory to it agreeing to be bound by the provisions hereof and of the Stockholders' Agreement and the Registration Rights Agreement. 11.1.5 BINDING EFFECT. Subject to the limitations on transfer set forth in Section 11.1.4, this Assets Purchase Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, legal representatives, executors, administrators, successors and assigns. 11.1.6 KNOWLEDGE. The use of the terms "to ActaMed's knowledge" or words of similar import shall refer to the facts known to [*] Michael K. Hoover and [*] after reasonable inquiry. The use of the terms "to SBCL's knowledge" or words of similar import shall refer to the facts known to [*] after reasonable inquiry. 11.1.7 HEADINGS. The section and other headings in this Assets Purchase Agreement are inserted solely as a matter of convenience and for reference, and are not a part of this Assets Purchase Agreement. 11.1.8 ENTIRE AGREEMENT. This Assets Purchase Agreement and the Exhibits, Schedules, certificates and other documents delivered pursuant hereto or incorporated [*] CONFIDENTIAL TREATMENT REQUESTED -55- herein by reference, contain and constitute the entire agreement among the parties hereto and supersede and cancel any prior agreements, representations, warranties, or communications, whether oral or written, among the parties hereto relating to the transactions contemplated hereby or the subject matter herein. This Assets Purchase Agreement may be changed, waived, discharged or terminated only by an agreement in writing signed by (a) ActaMed and (b) SBCL or, after the last of the Transfer Dates, the holder(s) of a majority of the Shares of Series D Preferred Stock and any Conversion Shares considered as a single class. 11.1.9 GOVERNING LAW. Except for the matters referred to by Section 9.3, this Assets Purchase Agreement shall be governed by and construed in accordance with the laws of the State of Georgia. 11.1.10 COUNTERPARTS. This Assets Purchase Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 11.1.11 PRONOUNS. All pronouns used herein shall be deemed to refer to the masculine, feminine or neutral gender as the context requires. 11.1.12 TIME OF ESSENCE. Time is of the essence in this Assets Purchase Agreement. 11.1.13 SCHEDULES AND EXHIBITS. All Schedules and Exhibits attached to this Assets Purchase Agreement are by this reference made a part hereof. [SPACE INTENTIONALLY LEFT BLANK] -56- IN WITNESS WHEREOF, the parties hereto have executed this Assets Purchase Agreement under seal as of the day and year first above written. ActaMed Corporation /s/ ----------------------------------- By: Michael K. Hoover Its: President SmithKline Beecham Clinical Laboratories, Inc. /s/ ----------------------------------- By: John B. Okkerse Jr. Its: President -57- EXHIBIT A DEFINITIONS "AAA" means the American Arbitration Association. "ActaLab Software" means the ActaLab Software, as defined under the License Agreement. "ActaMed" means ActaMed Corporation, a Georgia corporation. "ActaMed Business" means the business of developing and selling information systems and related technology for the healthcare industry. "ActaMed Common Stock" means the $.01 par value common stock of ActaMed. "ActaMed Documents" has the meaning given in Section 3.2.1 of the Assets Purchase Agreement. "ActaMed Financial Statements" has the meaning given in Section 3.2.3(a) of the Assets Purchase Agreement. "ActaMed Indemnitee" means ActaMed and its directors, officers, employees, affiliates and permitted assigns. "ActaMed Network" means the EDI system and network operated by ActaMed for electronic laboratory test order entry and/or results reporting, which includes the Network Software and ActaMed's gateway and hardware and computer systems needed to operate that software. "ActaMed President" means the President of ActaMed, presently Michael Hoover, or should ActaMed be restructured in any manner, the officer of ActaMed having top authority over ActaMed's operations. "ActaMed Site" means a Provider [*] utilizing the Network for Lab EDI Services that was an SBCL Site on the Transfer Date of the Region in which such Provider [*] is located. "ActaMed Unaudited Statements" has the meaning given in Section 3.2.3(a) of the Assets Purchase Agreement. "Affiliate" means, with respect to any Person, any other Person controlling, controlled by or under common control with such Person. [*] CONFIDENTIAL TREATMENT REQUESTED A-1 "Applicable Transfer Date" means, with respect to an SBCL Site, the Transfer Date of the Region in which the SBCL Site is located. "Articles" means the Fourth Amended and Restated Articles of Incorporation of ActaMed, as the same may be hereafter amended from time to time. "Assumption Agreement" the agreement attached as EXHIBIT 2.6.2 to the Assets Purchase Agreement. "Automated Provider" means a Provider [*] who or which, on the Transfer Date of the Region in which the Provider [*] is located, uses the SCAN Network to send clinical laboratory test orders to an SBCL Lab or to receive test result reports from an SBCL Lab. "Claim" means any claim for indemnification under Article VIII of the Assets Purchase Agreement, including but not limited to a General Claim, a Tax Claim or an Ownership Claim. "Claims Notice" means a written notice of an indemnification claim delivered pursuant to Section 8.2.3 of the Assets Purchase Agreement. "Code" means the Internal Revenue Code of 1986, as amended. "Communication Plan" shall have the meaning assigned in Section 4.3.4. "Contract" means any written contract, agreement, lease, plan, instrument or other document, commitment, arrangement, undertaking, practice or authorization that is or may be binding on any Person or its property under applicable law. "Conversion Shares" means the shares of ActaMed Common Stock issued or issuable upon the conversion of, unless specified otherwise, all of the Preferred Shares. "Court Order" means any judgment, decree, writ, injunction, order or ruling of any federal, state or local court or governmental or regulatory body or authority that is binding on any Person or its property under applicable law. "Default" means (a) a breach of or default under any Contract or License, (b) the occurrence of an event that with the passage of time or the giving of notice or both would constitute a breach of or default under any Contract or License or (c) the occurrence of an event that with or without the passage of time or the giving of notice or both would give rise to a right of termination, renegotiation or acceleration under any Contract or License. "Development Agreement" means the Development Agreement between SBCL and ActaMed dated October 31, 1997 for the initial development of the ActaLab Software. [*] CONFIDENTIAL TREATMENT REQUESTED A-2 "Dispute Notice" has the meaning given in Section 9.2.1 of the Assets Purchase Agreement. "Disputing Party" has the meaning given in Section 9.2 of the Assets Purchase Agreement. "EDI" means electronic data interchange. "Employee Benefit Plan" means any pension, retirement profit-sharing, deferred compensation, bonus, incentive, performance, stock option, phantom stock, stock purchase, restricted stock, medical, hospitalization, vision, dental or other health, life, disability, severance, termination or other employee benefit plan, program, arrangement, agreement or policy, whether written or unwritten, to which ActaMed contributes or is obligated to contribute, is a party to or is otherwise bound, or with respect to which ActaMed may have any Liability. "Employee Computer" shall have the meaning assigned in Section 1.2.1 of this Assets Purchase Agreement. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "ERISA Affiliate" means (i) a member of any "controlled group," as defined in Section 414(b) of the Code, of which ActaMed is a member, (ii) a trade or business, whether or not incorporated, under common control (within the meaning of Section 414(c) of the Code) with ActaMed, or (iii) a member of any affiliated service groups (within the meaning of Section 414(m) of the Code) of which ActaMed is a member. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "FASB 5" means Statement of Financing Accounting Standards No. 5 issued by the Financial Accounting Standards Board in March 1975. "Fourth Amended Articles" means the Fourth Amended and Restated Articles of Incorporation of ActaMed. "GAAP" means generally accepted accounting principles. "General Claim" means any claim other than a Tax Claim, Ownership Claim or Undisclosed Liability Claim based upon, arising out of or otherwise in respect of any inaccuracy in any representation or warranty or any breach of any covenant or agreement made or to be performed by a Party pursuant to this Assets Purchase Agreement. "HSR Act" means Section 7A of the Clayton Act, as added by Title II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the Regulations promulgated thereunder. A-3 "Implementation Committee" has the meaning given in Section 4.2.2 of the Assets Purchase Agreement. "Implementation Plan" has the meaning given in Section 4.2.1 of the Assets Purchase Agreement. "Indemnifying Party" means the Party obligated to provide indemnification pursuant to Sections 8.2.1 or 8.2.2 of the Assets Purchase Agreement. "Indemnitee" means a Party seeking indemnification under Sections 8.2.1 or 8.2.2 of the Assets Purchase Agreement. "Integrity Agreement" shall have the meaning given in the Services Agreement. "Intellectual Property" means copyrights, trademarks, service marks, trade names, patents, applications therefor, technology rights and licenses, computer software (including, without limitation, any source or object codes therefor or documentation relating thereto), computer software licenses, trade secrets, franchises, know-how, inventions and intellectual property rights. "Lab EDI Services" means electronic connectivity services enabling an Automated Provider to send Transmittal Information electronically to an SBCL Lab and/or to receive electronically Transmittal Information from an SBCL Lab utilizing the Network. "Liability" means any direct or indirect liability, indebtedness, obligation, expense, claim, deficiency, guaranty or endorsement of or by any Person (other than endorsements of notes, bills and checks presented to banks for collection or deposit in the ordinary course of business) of any type, whether accrued, absolute, contingent, matured, unmatured or other. "License Agreement" means the License Agreement between SBCL and ActaMed dated the date of the Assets Purchase Agreement and described in the preamble to the Assets Purchase Agreement. "License" means any license, franchise, notice, permit, easement, right, authorization or filing. "Lien" means any mortgage, lien, security interest, pledge, encumbrance, restriction on transferability, defect of title, charge or claim of any nature whatsoever on any property or property interest. "Litigation" means any lawsuit, action, claim, arbitration, administrative or other proceeding, criminal prosecution or governmental investigation or inquiry involving or affecting a Party or its business, assets or Contracts to which it is a party or by which it or its business, assets or Contracts may be bound or affected. A-4 "Losses" means any and all demands, claims, actions or causes of action, assessments, losses, diminution in value, damages (including special and consequential damages), liabilities, costs, and expenses, including without limitation, interest, penalties, cost of investigation and defense, and reasonable attorneys' and other professional fees and expenses. "Material Adverse Effect" means a material adverse effect on the business or financial condition of ActaMed or on the ability of ActaMed to conduct the ActaMed Business or the impairment of ActaMed's ability to perform its obligations under the ActaMed Documents. "Network" means the SCAN Network and/or the ActaMed Network. "Network Software" means ActaMed's personal computer version of the ProviderLink and ActaLink presentation and network software programs, under whatever name marketed, and the SBCL Software and the ActaLab Software, and all Changes to them, which are licensed to Automated Providers and which allow access to the Network for the transmission of laboratory test order entries and reception of test result information. "New Business Plan" means the New Business Plan for ActaMed prepared in accordance with Section 5.1.8 of this Assets Purchase Agreement. "OIG" shall have the meaning assigned in Section 4.4 of this Assets Purchase Agreement. "Ownership Claim" means any claim arising out of or otherwise in respect of any inaccuracy in the representations and warranties set forth in Sections 3.1.1, 3.1.2, 3.1.6 or 3.1.13, or 3.2.1, 3.2.2, 3.2.11, or 3.2.12 of the Assets Purchase Agreement. "Panel" has the meaning set forth in Section 9.2.1. "PC Systems" means the assets described in Section 1.1.1 of the Assets Purchase Agreement. "Performance Standards" has the meaning given such term in the Services Agreement. "Permitted Owner" means SBCL or a successor owner of SBCL's Series D Preferred Stock or Conversion Shares permitted under the Stockholders Agreement among ActaMed and its stockholders, as amended from time to time. "Person" means any individual, corporation, trust, estate, business trust, general or limited partnership, limited liability company, limited liability partnership, unincorporated association or other legal entity. "Phone Lines" means SBCL's contractual right to use certain phone lines, as more fully described in Section 1.1.2 of this Assets Purchase Agreement. A-5 "Preferred Stock" means the Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock and the Series D Preferred Stock. [*] means an [*]. "Projections" shall have the meaning assigned in Section 3.1.3 of this Assets Purchase Agreement. "Provider" means a physician, clinic, hospital, patient service center (other than [*]) or other provider of clinical health care services. "Provider Agreements" means the contracts described in Section 1.1.3 of this Assets Purchase Agreement. "Public Offering" means a bona fide firm commitment underwritten offering of ActaMed Common Stock pursuant to a registration statement filed with and declared effective by the Securities and Exchange Commission pursuant to the Securities Act. "Region" means any one of Region One, Region Two, Region Three, or Region Four. "Region Four" means the Region described on SCHEDULE 2.2(d) "Region Four Sites" are the SCAN Sites located in Region Four. "Region Four Transfer Date" has the meaning given in Section 2.3.4 of the Assets Purchase Agreement. "Region One" means the Region described on SCHEDULE 2.2(a) "Region One Sites" are the SCAN Sites located in Region One. "Region One Transfer Date" means December 31, 1997. "Region Three" means the Region described on SCHEDULE 2.2(c). "Region Three Sites" are the SCAN Sites located in Region Three. "Region Three Transfer Date" has the meaning given in Section 2.3.3 of the Assets Purchase Agreement. "Region Two" means the Region described on SCHEDULE 2.2(b). "Region Two Sites" are the SCAN Sites located in Region Two. [*] CONFIDENTIAL TREATMENT REQUESTED A-6 "Region Two Transfer Date" has the meaning given in Section 2.3.2 of the Assets Purchase Agreement. "Registration Rights Agreement" means the Registration Rights Agreement dated May 3, 1994, as amended as of the date hereof and as the same may be amended from time to time, by and among ActaMed and the stockholders of ActaMed signatory thereto. "Regulation" means any statute, law, ordinance, regulation, requirement, order or rule of any federal, state, or local government or other governmental agency or body or of any other type of regulatory body, or any governmental or administrative interpretation of any thereof, including, without limitation, (i) those covering health, safety, environmental, energy, transportation, bribery, record keeping, zoning, antidiscrimination, antitrust, wage and hour, and price and wage control matters, (ii) requirements imposed by any governmental or regulatory body which must be satisfied to qualify for Medicare reimbursements, and (iii) any and all federal, state and local health care laws relating to or covering the methods and ways in which Lab EDI Services and other related or incidental services or benefits, if any, are provided to the Automated Providers, including, but not limited to, 42 U.S.C. Section 1395nn and the Clinical Laboratory Improvements Act of 1988, as amended. "Relationship Manager" has the meaning given in Section 4.2.2 of the Assets Purchase Agreement. "Required Consents" means any and all licenses, waivers, consents or approvals from other parties to Contracts necessary to consummate the transactions contemplated hereby and by any Exhibit hereto. "SBCL" means SmithKline Beecham Clinical Laboratories, Inc., a Delaware corporation. "SBCL Documents" has the meaning given in Section 3.1.1 of the Assets Purchase Agreement. "SBCL Lab" means any location at which SBCL or its Affiliates provide, or may in the future provide, clinical laboratory testing services, regardless of the computer systems or software, if any, used by such lab for lab order entry and results reporting. "SBCL President" shall mean the President of SBCL, presently John B. Okkerse, Jr., Ph.D., or should SBCL be restructured in any manner, the officer of SBCL having top authority over SBCL's operations. "SBCL Site" means an Automated Provider utilizing the SCAN Network for Lab EDI Services on the Transfer Date of the Region in which such Automated Provider is located. "SBCL Software" means SBCL Software, as defined in the License Agreement. A-7 "SCAN Assets" means the assets described in subsections 1.1.1 through 1.1.6 of the Assets Purchase Agreement. "SCAN Network" means the SBCL Software and SBCL's hardware and computer systems needed to operate the SBCL Software which enables Automated Providers to place laboratory test orders electronically to an SBCL Lab and/or to receive test result reports electronically from an SBCL Lab. "SCAN Site" means either an SBCL Site or an ActaMed Site. "SCAN Software" means the SBCL SCAN-TM- software licensed to ActaMed pursuant to the License Agreement. "Schedule" means any of the lists or disclosure schedules referred to herein. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended. "Series A Preferred Stock" means the Series A Convertible Preferred Stock of ActaMed. "Series B Preferred Stock" means the Series B Convertible Preferred Stock of ActaMed. "Series C Preferred Stock" means the Series C Convertible Preferred Stock of ActaMed. "Series D Preferred Stock" means the Series D Convertible Preferred Stock of ActaMed. "Services Agreement" means the Services Agreement, made and entered into as of the date hereof, between ActaMed and SBCL. "Standstill Agreement" means the Standstill Agreement, dated the date hereof between SBCL and ActaMed. "Stockholders Agreement" means the Stockholders Agreement, dated as of May 3, 1994, as amended as of the date hereof and as the same may be amended from time to time, between ActaMed and the stockholders of ActaMed who are signatories thereto. "Stock Option Plans" means ActaMed's 1997 Stock Option Plan, 1996 Directors Stock Option Plan, 1995 Stock Option Plan, 1994 Stock Option Plan, 1993 Stock Option Plan and 1992 Stock Option Plan. A-8 "Subsidiary" means a corporation, limited liability company, partnership, association, trust, joint venture or other entity in which ActaMed or SBCL, as the case may be, has, directly or indirectly, an equity, ownership or proprietary interest of greater than ten percent (10%). "Substantial Holder" means an officer or employee of ActaMed who is the beneficial owner of one percent (1%) or more of the outstanding voting power or the outstanding equity (on a fully diluted basis) of ActaMed. "Tax Claim" means any claim based upon, arising out of or otherwise in respect of any inaccuracy in any representation or warranty or breach of any covenant or agreement made or to be performed by a Party pursuant to this Assets Purchase Agreement related to any Taxes. "Taxes" means any federal, state, county, local and other taxes, including without limitation, income taxes, estimated taxes, excise taxes, sales taxes, use taxes, gross receipts taxes, franchise taxes, taxes on earnings and profits, employment and payroll related taxes, property taxes, real property transfer taxes, Federal Insurance Contributions Act taxes, taxes on value added and import duties, whether or not measured in whole or in part by net income, imposed by the United States or any political subdivision thereof or by any Jurisdiction other than the United States or any political subdivision thereof. "Third Party Claim" means any claim, suit or proceeding (including, without limitation, a binding arbitration or an audit by any taxing authority) that is instituted against an Indemnitee by a Person other than an Indemnitor and which, if prosecuted successful, would result in a Loss for which such Indemnitee is entitled to indemnification hereunder. "Third Party Software" means software that SBCL licensed from third parties for use in delivery of Lab EDI Services, including without limitation software known as pkZip and pkUnzip, ProCom, and Reach Out. "Trade Secrets" means information related to a Party (1) which derives economic value, actual or potential, from not being generally known to or readily ascertainable by other Persons who can obtain economic value from its disclosure or use, and (2) which is the subject of efforts by said Person that are reasonable under the circumstances to maintain its secrecy. Without limitation, for ActaMed, ProviderLink and the ActaLab Software are Trade Secrets, and for SBCL, the SBCL Software is a Trade Secret. "Transaction Documents" means the Assets Purchase Agreement, the Development Agreement, the License Agreement, the Services Agreement and all documents executed or delivered in connection with the foregoing. "Transfer Benchmarks" means the criteria set forth on EXHIBIT 2.3.1, timely achievement of which shall determine whether the SCAN Assets relating to SCAN Sites in the A-9 next Region to be transferred shall be transferred by SBCL to ActaMed pursuant to the Assets Purchase Agreement. "Transferred Employees" means the employees listed on SCHEDULE VI hereto. "Transfer Date" shall mean any one of and "Transfer Dates" shall mean more than one of the Region One Transfer Date, the Region Two Transfer Date, the Region Three Transfer Date, and the Region Four Transfer Date. "Transmittal Information" means information which an Automated Provider gives ActaMed for communication to SBCL over the Network, or which SBCL gives ActaMed for communication to an Automated Provider over the Network, including all copies of same, and including without limitation, data relating to laboratory records, clinical data, encounter data, test information, test codes and provider identification numbers (other than UPINs) "Undisclosed Liability Claim" means any claim arising out of or otherwise in respect of any inaccuracy in the representations and warranties set forth in Sections 3.2.3 or 3.2.8 of the Assets Purchase Agreement. "Vendor Contracts" means the Contracts described in Section 1.1.4 of the Assets Purchase Agreement. "Warrant" means the Warrant to purchase 450,450 shares of ActaMed Common Stock at an exercise price of $5.00 issued by ActaMed to International Business Machines Corporation in December 1996. A-10 Exhibit 2.3.1 TRANSFER BENCHMARKS CLIENT SATISFACTION MEASUREMENTS ActaMed will provide such level of satisfactory Agreed Services (as defined in the Services Agreement) measured as set forth below. The following "Transfer Benchmarks" will be used as the measurement for proceeding to the transfer of Region Two Sites, Region Three Sites and Region Four Sites. REQUISITION VOLUME The first Transfer Benchmark shall be sustaining the monthly average number of Requisitions on a per-Site basis. More specifically, ActaMed shall measure each month the volume of Requisitions for the ActaMed Sites in each Transferred Region. It shall then calculate the average monthly per-Site Requisition volume. This calculated average shall then be compared (i) to the mean of the average monthly per-Site Requisition volumes for the same Region for the twelve months immediately preceding the month for which the measurement was made and (ii) to the mean of the average monthly per-Site Requisition volumes for all non-Transferred Regions during the same time period. If ActaMed's average monthly per-Site Requisition volume for the measured period, as adjusted for seasonality, is within 90% of each of (i) and (ii), above, then ActaMed will have met this benchmark. For Region One, SBCL shall provide within thirty (30) days after the Region One Transfer Date the monthly Requisitions and Sites for January-December 1997. For all other Regions, the monthly Requisitions and Sites for the twelve months prior to the Applicable Transfer Date shall be provided on the Applicable Transfer Date. CUSTOMER SURVEYS The second Transfer Benchmark shall be sustaining levels of support and client acceptance satisfactory to SBCL, in its reasonable discretion, determined by comparing Transfer Surveys of the Automated Providers in each Transferred Region to a corresponding Initial Survey for such Automated Providers. The Initial Survey shall be a survey, in a format and with content approved by SBCL in advance, which shall be performed by ActaMed within thirty (30) days after each Transfer Date. Such survey shall solicity performance and service-related comments from the Automated Providers about SBCL's provision of Lab EDI Services for that Region. The initial survey shall be sent to ten percent (10%) of the Sites in each Region, selected at random by ActaMed. The Transfer Surveys for each Region shall be identical to the Initial Survey for such Region and shall be sent to the same Automated Providers, to the greatest extent possible, as the Initial Survey (and to replacement Automated Providers where not possible). The Transfer Surveys shall solicit performance and service-related comments from the Automated Providers about ActaMed's provision of Lab EDI Services for each Region. The Transfer Surveys shall be performed for each applicable Region within thirty (30) days prior to the each scheduled Transfer Date; provided, that a Transfer Survey for a given Region shall only solicit information pertaining to the period between the last Transfer Date and the next scheduled Transfer Date. CUSTOMER COMPLAINTS The third and final Transfer Benchmark will be the absence of a material number (materiality to be determined by SBCL in its reasonable discretion relative to the frequency and severity of complaints) of documented problems and Automated Providers ceasing to do business with SBCL Labs citing issues related to Lab EDI Services provided by ActaMed. SBCL will provide ActaMed with copies of any such documented problems within fifteen (15) days of their receipt. -2- Exhibit 2.5.1 BILL OF SALE AND ASSIGNMENT This is a Bill of Sale and Assignment from SmithKline Beecham Clinical Laboratories, Inc., a Delaware corporation ("SBCL"), to ActaMed Corporation, a Georgia corporation ("ActaMed"), pursuant to a certain Assets Purchase Agreement dated as of December ___, 1997 between SBCL and ActaMed (the "Assets Purchase Agreement"). Capitalized terms used and not defined herein shall have the meanings set forth in the Assets Purchase Agreement. 1. For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, SBCL hereby sells, assigns, transfers, conveys and delivers to ActaMed, its successors and assigns, to have and to hold forever: (a) all of its right, title and interest in and to the SCAN Assets located at SCAN Sites in Region ___, listed on Exhibit A attached hereto, free and clear of all mortgages, liens, pledges, security interests, charges, claims and other encumbrances of any nature whatsoever other than those disclosed in the Assets Purchase Agreement or any Schedule thereto; and (b) all of its rights in the single-copy licenses granting the right to use the Third Party Software (i) installed by, or in accordance with the instructions of, SBCL and (ii) resident on a PC System conveyed to ActaMed in accordance with the preceding subparagraph (a), which rights are in accordance with the provisions of Section 1.2.1 of the Assets Purchase Agreement; and (c) all of its rights in the single-site licenses for Microsoft Windows to the extent contemplated by Section 1.2.2 of the Assets Purchase Agreement. The assets described in the foregoing subparagraphs (a) -- (c) are hereinafter referred to as the "Transferred Assets." 2. From and after the Region ___ Transfer Date, upon request of ActaMed, SBCL shall duly execute, acknowledge and deliver all such further assignments, documents of transfer or conveyance, powers of attorney and assurances and do such further acts as may be reasonably required to convey to and vest in ActaMed and protect its rights, title and interest in enjoyment of all the Transferred Assets and as may be appropriate otherwise to carry out the transactions contemplated by the Assets Purchase Agreement and this Bill of Sale and Assignment. 3. In the event of a conflict between the terms and conditions of this Bill of Sale and Assignment and the terms and conditions of the Assets Purchase Agreement, the terms of the Assets Purchase Agreement shall govern, supersede and prevail. 4. Notwithstanding anything herein to the contrary, the terms and conditions of the Assets Purchase Agreement shall survive the execution and delivery of this Bill of Sale and Assignment. 5. This instrument shall be governed by and construed in accordance with the laws of the State of Georgia. 6. This instrument shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. IN WITNESS WHEREOF, and intending to be legally bound, the undersigned have duly executed and delivered this Bill of Sale and Assignment as of this ___ day of _______________, 199_. SMITHKLINE BEECHAM CLINICAL LABORATORIES, INC. By:_____________________________________ Title: Acknowledged and agreed: ACTAMED CORPORATION By: _____________________________ Title: -2- Exhibit 2.5.2 SMITHKLINE BEECHAM CLINICAL LABORATORIES, INC. COMPLIANCE CERTIFICATE The undersigned certifies that he is a __________________________ of SmithKline Beecham Clinical Laboratories, Inc., a Delaware corporation ("SBCL"), and that as such he is authorized to execute this certificate by and on behalf of the SBCL and, pursuant to Section 2.5.2 of the Assets Purchase Agreement, dated as of December __, 1997 (the "Asset Purchase Agreement"), between SBCL and ActaMed Corporation, a Georgia corporation ("ActaMed"), and further certifies that: a. The representations and warranties of SBCL, [other than the representations and warranties contained in Sections 3.1.3, 3.1.4(a) - (e), 3.1.6(d) and 3.1.7(b),] contained in the Assets Purchase Agreement, as supplemented by the Disclosure Schedule attached hereto, are true and correct in all material respects at and as of the date hereof as though such representation and warranties were made at and as of the date hereof. b. SBCL has duly performed and complied with each covenant and condition required by the Assets Purchase Agreement to be performed or complied with before or on the date hereof. IN WITNESS WHEREOF, I have hereunto set my hand as of this ___ day of ____________, 199_. By: ____________________________________ Name: Title: ** Bracketed text to be included on Region Two Transfer Date, Region Three Transfer Date, and Region Four Transfer Date only. Exhibit 2.5.3 SMITHKLINE BEECHAM CLINICAL LABORATORIES, INC. CERTIFICATE OF THE ASSISTANT SECRETARY The undersigned certifies that he is the Secretary of SmithKline Beecham Clinical Laboratories, Inc., a Delaware corporation (the "Company"), and that as such he is authorized to execute and deliver this certificate by and on behalf of the Company, and further certifies that: a. Attached hereto as Exhibit "A" is a true, correct and complete copy of the Company's Certificate of Incorporation, as certified by the Secretary of State of the State of Delaware; said Certificate of Incorporation is in full force and effect as of the date hereof; since the date of certification by the Secretary of State of the State of Delaware there have been no amendments, alterations or modifications of such Certificate of Incorporation; and no action has been taken by the Company in contemplation of any such amendment or the dissolution, merger or consolidation of the Company. b. Attached hereto as Exhibit "B" is a true, correct and complete copy of the Bylaws of the Company as in effect on the date hereof, and there have been no additional amendments authorized with respect thereto. c. Attached hereto as Exhibit "C" is a copy of the resolutions duly adopted by the Board of Directors of the Company on December 29, 1997, with respect to the Asset Purchase Agreement and the transactions contemplated hereby, and such resolutions have not been rescinded or amended in any respect and are in full force and effect on the date hereof. d. Each of the following persons now is, and at all times including and since ___________________, 199_, has been a duly elected officer or employee of the Company, holding the office or position in the Company set forth opposite his name below, and the signature of each such person appearing opposite his name below is his genuine signature: [Name and title] _______________________________________ [Name and title] _______________________________________ IN WITNESS WHEREOF, I have hereunto set my hand this ___ day of ____________, 199_. By: _________________________________ Assistant Secretary I, __________________________, ________________________ of SmithKline Beecham Clinical Laboratories, Inc., a Delaware corporation, do hereby certify that ____________________ is the duly elected Assistant Secretary of the Company, and that the signature appearing above is his genuine signature. IN WITNESS WHEREOF, I have herewith set my hand this ___ day of _____________, 199_. __________________________________________ [Title] -2- Exhibit 2.6.2 ASSUMPTION AGREEMENT This is an Assumption Agreement by ActaMed Corporation, a Georgia Corporation ("ActaMed"), in favor of SmithKline Beecham Clinical Laboratories, Inc., a Delaware corporation ("SBCL"), pursuant to and in accordance with Section 2.6.2 of the Assets Purchase Agreement, dated as of December ___, 199_ (the "Assets Purchase Agreement") between SBCL and ActaMed. Capitalized terms used and not defined herein shall have the meanings set forth in the Assets Purchase Agreement. 1. For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, ActaMed hereby assumes: (a) all of SBCL's contractual liabilities arising on or after the date hereof with respect to the Phone Lines installed at SCAN Sites in Region ___; (b) all of SBCL's duties and obligations arising on or after the date hereof under such Provider Agreements as relate to Automated Providers located in Region ___; and (c) all of SBCL's duties and obligations arising on or after the date hereof pursuant to the Vendor Contracts relating to the provision of products or services in connection with SBCL's provision of Lab EDI Services in Region ________. ActaMed undertakes to perform the liabilities set forth in the preceding subparagraphs (the "Liabilities") in accordance with their respective terms, effective as of the date hereof. 2. From and after the Region ___ Transfer Date, ActaMed will, from time to time, at the reasonable request of SBCL, duly execute, acknowledge and deliver all such additional instruments, notices, releases, certificates, powers of attorney, assurances and other documents and do all such further acts as SBCL may reasonably require in order to effectively assume the Liabilities and as may be appropriate otherwise to carry out the transactions contemplated by the Assets Purchase Agreement and this Assumption Agreement. 3. In the event of any conflict between the terms and conditions of this Assumption Agreement and the terms of the Assets Purchase Agreement, the terms of the Assets Purchase Agreement shall govern, supersede and prevail. 4. If the assumption by ActaMed of any Liability is invalid or unenforceable in any jurisdiction, it shall be ineffective to the extent of such invalidity or unenforceability without invalidating or rendering unenforceable the assumption by Purchaser of the remaining Liabilities. 5. Notwithstanding anything herein to the contrary, the terms and conditions of the Assets Purchase Agreement shall survive the execution and delivery of this Assumption of Liabilities. 6. This instrument shall be governed by and construed in accordance with the laws of the State of Georgia. 7. This instrument shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. IN WITNESS WHEREOF, the undersigned have caused this Assumption Agreement to be executed this ___ day of ________________, ______. ACTAMED CORPORATION By: _________________________________ Name: Title: Acknowledged and agreed: SMITHKLINE BEECHAM CLINICAL LABORATORIES, INC. By: ____________________________ Name: Title: -2- Exhibit 2.6.3 ACTAMED CORPORATION COMPLIANCE CERTIFICATE The undersigned certifies that he or she is a _______________________________ of ActaMed Corporation, a Georgia corporation ("ActaMed"), and that as such he or she is authorized to execute this certificate by and on behalf of ActaMed and, pursuant to Section 2.6.3 of the Assets Purchase Agreement, dated as of December ___, 1997 (the "Asset Purchase Agreement"), between SmithKline Beecham Clinical Laboratories, Inc. ("SBCL") and ActaMed, and further certifies that: a. The representations and warranties of ActaMed contained in the Assets Purchase Agreement, as supplemented by the Disclosure Schedule attached hereto are true and correct in all material respects at and as of the date hereof as though such representation and warranties were made at and as of the date hereof. b. ActaMed has duly performed and complied with each covenant and condition required by the Assets Purchase Agreement to be performed or complied with before or on the date hereof. IN WITNESS WHEREOF, I have hereunto set my hand as of this ___ day of ____________, 199_. By: ______________________________ Name: Title: Exhibit 2.6.4 ACTAMED CORPORATION CERTIFICATE OF THE SECRETARY The undersigned certifies that he is the Secretary of ActaMed Corporation, a Georgia corporation (the "Company"), and that as such he is authorized to execute and deliver this certificate by and on behalf of the Company, and further certifies that: a. Attached hereto as Exhibit "A" is a true, correct and complete copy of the Company's Articles of Incorporation, as certified by the Secretary of State of the State of Georgia; said Articles of Incorporation are in full force and effect as of the date hereof; since the date of certification by the Secretary of State of the State of Georgia there have been no amendments, alterations or modifications of such Articles of Incorporation; and no action has been taken by the Company in contemplation of any such amendment or the dissolution, merger or consolidation of the Company. b. Attached hereto as Exhibit "B" is a true, correct and complete copy of the Bylaws of the Company as in effect on the date hereof, and there have been no additional amendments authorized with respect thereto. c. Attached hereto as Exhibit "C" is a copy of the resolutions duly adopted by the Board of Directors of the Company on December __, 1997, with respect to the Assets Purchase Agreement and the transactions contemplated hereby, and such resolutions have not been rescinded or amended in any respect and are in full force and effect on the date hereof. d. Each of the following persons now is, and at all times including and since ___________________, 199_, has been a duly elected officer or employee of the Company, holding the office or position in the Company set forth opposite his or her name below, and the signature of each such person appearing opposite his or her name below is his or her genuine signature: [Name and title] _______________________________________ [Name and title] _______________________________________ IN WITNESS WHEREOF, I have hereunto set my hand this ___ day of ________________, 199_. By: ________________________________ Secretary I, _________________________, _________________________ of ActaMed Corporation, a Georgia corporation, do hereby certify that _________________ is the duly elected Secretary of the Company, and that the signature appearing above is his genuine signature. IN WITNESS WHEREOF, I have herewith set my hand this ___ day of _______________, 199_. _______________________________________ [Title] -2- ACTAMED CORPORATION CERTIFICATE OF THE SECRETARY The undersigned certifies that he is the Secretary of ActaMed Corporation, a Georgia corporation (the "Company"), and that as such he is authorized to execute and deliver this certificate by and on behalf of the Company, and further certifies that: a. Attached hereto as Exhibit "A" is a true, correct and complete copy of the Company's Articles of Incorporation, as certified by the Secretary of State of the State of Georgia; said Articles of Incorporation are in full force and effect as of the date hereof; since the date of certification by the Secretary of State of the State of Georgia there have been no amendments, alterations or modifications of such Articles of Incorporation; and no action has been taken by the Company in contemplation of any such amendment or the dissolution, merger or consolidation of the Company. b. Attached hereto as Exhibit "B" is a true, correct and complete copy of the Bylaws of the Company as in effect on the date hereof, and there have been no additional amendments authorized with respect thereto. c. Attached hereto as Exhibit "C" is a copy of the resolutions duly adopted by the Board of Directors of the Company on December 19, 1997, with respect to the Assets Purchase Agreement and the transactions contemplated hereby, and such resolutions have not been rescinded or amended in any respect and are in full force and effect on the date hereof. d. Each of the following persons now is, and at all times including and since January 1, 1997, has been a duly elected officer or employee of the Company, holding the office or position in the Company set forth opposite his or her name below, and the signature of each such person appearing opposite his or her name below is his or her genuine signature: Michael K. Hoover, President and CEO /s/ _________________________________________ Nancy J. Ham, Sr. Vice President /s/ _________________________________________ IN WITNESS WHEREOF, I have hereunto set my hand this 31st day of December, 1997. By: /s/ _________________________________________ Lewis R. Belote Secretary I, Nancy J. Ham, Senior Vice President of ActaMed Corporation, a Georgia corporation, do hereby certify that Lewis R. Belote is the duly elected Secretary of the Company, and that the signature appearing above is his genuine signature. IN WITNESS WHEREOF, I have herewith set my hand this 31st day of December, 1997. /s/ _________________________________________ Nancy J. Ham Senior Vice President -2- AMENDMENT NO. 1 TO ASSETS PURCHASE AGREEMENT This AMENDMENT NO. 1 TO ASSETS PURCHASE AGREEMENT ("Amendment No. 1") is made and entered into this 18th day of May, 1998 by and between HEALTHEON CORPORATION, a Delaware corporation ("Healtheon"), ACTAMED CORPORATION, a Georgia corporation ("ActaMed") and SMITHKLINE BEECHAM CLINICAL LABORATORIES, INC., a Delaware corporation ("SBCL"). WHEREAS, ActaMed and SBCL entered into an Assets Purchase Agreement on December 31, 1997 ("Purchase Agreement"); and WHEREAS, ActaMed has entered into that certain "Agreement and Plan of Reorganization by and among Healtheon Corporation, MedNet Acquisition Corp. and ActaMed Corporation dated as of February 24, 1998, (the "Healtheon Merger Agreement"), and, in order to permit the closing of the Healtheon Merger Agreement, the parties wish to amend the Purchase Agreement as set forth below. NOW THEREFORE, in consideration of the premises and the mutual promises contained herein, the parties, intending to be legally bound, agree as follows: 1. DEFINITIONS. Capitalized terms used in this Amendment No.1 and not otherwise defined herein have the meanings set forth in the Purchase Agreement. 2. AMENDMENTS. 2.1 ACTAMED REFERENCES. Except as the context may require otherwise or this Amendment specifies otherwise, the term "ActaMed" shall be deemed to refer to Healtheon wherever it appears in the Purchase Agreement. 2.2 PURCHASE PRICE. Sections 1.5.4. and 1.5.5 are each amended by substituting the phrase "Common Stock of Healtheon" for the phrase "ActaMed's Series D Preferred" and by substituting the term "Healtheon Stock Price" for the term "Series D Price." 2.3 HEALTHEON STOCK PRICE. Section 1.6 is amended as follows: 2.3.1 The caption shall be changed to "HEALTHEON STOCK PRICE" and the term "Series D Price" in the lead-in clause shall be replaced with the term "Healtheon Stock Price". -1- 2.3.2 Section 1.6.1 (a) is amended by inserting the phrase "divided by the Exchange Ratio" after "[*]" and "[*]". 2.3.3 Section 1.6.1 (c) is amended by inserting the phrase "divided by the Exchange Ratio on the Region Three Transfer Date or the Region Four Transfer Date, as applicable" after "[*]". 2.3.4 Section 1.6.3 is replaced in its entirety as follows: "1.6.3 For purposes of Section 1.6, "Qualified Preferred Stock" shall mean shares of Healtheon's preferred stock issued in an arm's length transaction to one or more purchasers who are not ActaMed or Healtheon's stockholders as of the Merger Effective Date for an aggregate purchase price of not less than $7,000,000; and the "Per Share Issue Price" of such Qualified Preferred Stock shall be the consideration per equivalent share of Common Stock received by Healtheon for the Qualified Preferred Stock multiplied by the Exchange Ratio, adjusted backwards to the Merger Effective Date for any subdivision or combination of shares of Healtheon capital stock or similar change in Healtheon's capital structure (whether by stock split, stock dividend, merger, share exchange, consolidation or otherwise) since the Merger Effective Date." 2.4 DELIVERIES AT EACH OF THE TRANSFER DATES. Section 2.6 is replaced in its entirety as follows: "SECTION 2.6. DELIVERIES AT EACH OF THE TRANSFER DATES. At each of the Transfer Dates, the following documents shall be executed and delivered to SBCL to the extent relating to the region transferred: 2.6.1. by Healtheon, the applicable number of shares of Common Stock of Healtheon, as determined in accordance with Sections 1.5, 1.6 and 1.8 of this Assets Purchase Agreement; 2.6.2. by either Healtheon or ActaMed, an Assumption Agreement (in the form attached hereto as EXHIBIT 2.6.2) covering, for the Region transferred, (i) the Vendor Contracts for the Region transferred, (ii) the Phone Lines and (iii) the Provider Agreements for the Region transferred; 2.6.3 by Healtheon and ActaMed, a Compliance Certificate (in the form attached hereto as EXHIBIT 2.6.3), pursuant to which Healtheon and ActaMed will jointly and severally make the representations and warranties contained in Section 3.2 hereof, which certificate shall attach revised Disclosure Schedules to the [*] CONFIDENTIAL TREATMENT REQUESTED -2- extent necessary to make the representations and warranties made on such Transfer Date true and correct in all material respects; 2.6.4 by Healtheon, a Secretary's Certificate (in the form attached hereto as EXHIBIT 2.6.4); and 2.6.5 by either Healtheon or ActaMed, such other documents or certificates as may be reasonably requested by SBCL." 2.5 REPRESENTATIONS AND WARRANTIES. 2.5.1 INVESTMENT REPRESENTATIONS OF SBCL. Section 3.1.12 is amended by deleting the parentheticals referencing the "Conversion Shares" in each of subsections (a) and (b), and by adding the words "or Common Stock of Healtheon" after the term "Series D Preferred Stock" in each of subsections (a) and (b). 2.5.2 BY ACTAMED AND HEALTHEON. The lead-in paragraph of Section 3.2 is replaced in its entirety as follows: "SECTION 3.2. BY ACTAMED AND HEALTHEON. Except as set forth on a Disclosure Schedule hereto, for representations to be made on any Transfer Date after the Merger Effective Date, ActaMed and Healtheon hereby jointly and severally represent and warrant to SBCL, and will jointly and severally represent and warrant to SBCL on each such Transfer Date, as follows:" Other than as specifically set forth in Sections 2.5.3 through 2.5.9 of this Amendment No. 1, each of the representations and warranties set forth in Sections 3.2.1 through 3.2.25 of the Purchase Agreement are amended as necessary to the effect that such representations and warranties shall be made on any Transfer Date after the Merger Effective Date by both ActaMed and Healtheon. 2.5.3 FINANCIAL STATEMENTS. Section 3.2.3 is amended as follows: 2.5.3.1 Subsection (a) is amended by adding the following text at the end of such subsection: "DISCLOSURE SCHEDULE 3.2.3 hereto also contains a true and correct copy of (i) the balance sheets of Healtheon at December 31, 1996 and December 31, 1997 and the statements of operations, statements of stockholders equity and statements of cash flows of Healtheon for the years ended December 31, 1996 and December 31, 1997, which have been audited by Ernst & Young, independent accountants (the "HEALTHEON FINANCIAL STATEMENTS"), and (ii) the -3- unaudited balance sheets of Healtheon at March 31, 1998 and the statements of operations, statements of stockholders equity and statements of cash flows of Healtheon for quarter ended March 31, 1998 (the "HEALTHEON UNAUDITED STATEMENTS")." 2.5.3.2 Subsection (b) is amended by adding the phrase "and the Healtheon Financial Statements" after the term "ActaMed Financial Statements" wherever such term appears in such subsection, by inserting the word "respective" prior to the phrase "financial position", by inserting the phrase "and Healtheon" after the term "ActaMed" wherever such term appears in such subsection, and by replacing the introduction to the final sentence, "ActaMed has" with the introduction "ActaMed and Healtheon have". 2.5.3.3 Subsection (c) is amended by adding the phrase "and the Healtheon Unaudited Statements after the term "ActaMed Unaudited Statements", by inserting the word "respective" prior to the term "chief financial officer", by inserting the phrase "and Healtheon" after the phase "chief financial officer of ActaMed" and by inserting the phrase "and Healtheon and its Subsidiaries" after the phrase "ActaMed and its Subsidiaries". 2.5.4 CONSENTS. Section 3.2.4 is amended by inserting the words "or Healtheon" after the word "ActaMed" in the third line thereof, by substituting the term "Common Stock of Healtheon" for the term "Series D Preferred Stock" in item (b), and by deleting the parenthetical in item (b) and the remainder of the Section following such parenthetical. 2.5.5 CAPITALIZATION. Section 3.2.5 is amended by substituting the term "Common Stock of Healtheon" for the term "Series D Preferred Stock" throughout the Section. Section 3.2.5 shall be further amended by deleting the phrase "will have the designations, preferences, limitations and relative rights set forth in the Articles" from subsection (b) and by deleting the final sentence of subsection (b). 2.5.6 REGISTRATION RIGHTS. Section 3.2.6 is amended by substituting the term "Investors' Rights Agreement" for "Registration Rights Agreement," and by adding the clause "except for such securities which may be granted registration rights pursuant to the terms of the Investors' Rights Agreement" at the end of such Section. 2.5.7 OFFERING. Section 3.2.7 is amended by substituting the term "Common Stock of Healtheon" for "Series D Preferred Stock" and by deleting the parenthetical. 2.5.8 CHANGES. Section 3.2.8 is amended by adding the subsection designation "(a)" at the beginning of such Section and by adding a new subsection (b) as follows: "Since the date of the latest Healtheon Unaudited Statements, there has not been (i) any adverse change in the assets, liabilities, financial condition or operations of Healtheon from that reflected in the Healtheon Financial Statements, other than changes in the ordinary course of business, none of which individually or in the -4- aggregate has had a Material Adverse Effect or (ii) any adverse change in the prospects of the business of Healtheon or any other event or condition (or events or conditions) of any character which, either individually or cumulatively, has had a Material Adverse Effect." 2.5.9 FULL DISCLOSURE. Section 3.2.25 is amended by inserting the words "and Common Stock of Healtheon" after the term "Series D Preferred Stock." 2.6 AUDIT. Section 4.1.2 is amended by replacing the term "ActaMed Common Stock" with "Common Stock of Healtheon" and by deleting the clause "on or prior to April 30, 1998" and replacing it with the clause "in an expedient fashion as required." 2.7 STANDSTILL. Section 4.3.5 is replaced in its entirety by the following: "4.3.5. STANDSTILL. At all times prior to the last Transfer Date, neither Healtheon nor ActaMed shall consummate, or enter into any agreement with respect to, any merger, share exchange or consolidation or sale of substantially all of its assets, nor shall Healtheon dispose of the capital stock of ActaMed, without the prior written consent of SBCL." 2.8 COVENANTS TO SBCL. Article V is replaced in its entirety by the following: "ARTICLE V COVENANTS TO SBCL SECTION 5.1 ADDITIONAL COVENANTS. ActaMed and Healtheon, as applicable, covenant and agree as follows: 5.1.1 TRANSACTIONS WITH AFFILIATES. For so long as either (i) SBCL is a stockholder of Healtheon or any successor to this agreement or (ii) the Services Agreement (or any successor agreement for Lab EDI Services), including all extensions and renewals thereof, remains in effect, Healtheon shall not, directly or indirectly, knowingly enter into any material transaction or agreement with any of its Affiliates, or a material transaction or agreement in which an Affiliate of Healtheon has a direct or indirect interest, unless such transaction or agreement is on terms and conditions no less favorable to Healtheon or any of its Subsidiaries than could be obtained at the time in an arm's length transaction with a third Person that is not such an Affiliate, or unless such transaction or agreement has been reviewed and approved by either a majority of those members of Healtheon's -5- Board of Directors who have no such interest in the transaction or a majority of the shareholders, voting in good faith. This Section is in furtherance and not in limitation of Healtheon's obligations under Section 144 of the Delaware Corporation Law. 5.1.2 CORPORATE EXISTENCE, BUSINESS, MAINTENANCE, INSURANCE. For so long as the Services Agreement (or any successor agreement for Lab EDI Services), including all extensions and renewals thereof, remains in effect: (a) Neither Healtheon nor ActaMed will enter into any agreement for the disposition of all or substantially all of the assets used in the provision of Lab EDI Services, including by way of a merger, consolidation, share exchange, or, in the case of Healtheon, sale of the capital stock of ActaMed, if such a sale will have a material impact on the provision of Lab EDI Services. (b) Healtheon, either independently or through ActaMed, shall continue to engage in the business of developing information networks (with a meaningful focus on the provision of lab order entry and results reporting services as one of Healtheon's core businesses) and businesses related thereto. (c) ActaMed and Healtheon will maintain or cause to be maintained in good repair, working order and condition all properties used in the business of Healtheon and any Subsidiary related to the provision of Lab EDI Services and from time to time will make or cause to be made all appropriate repairs, renewals and replacements thereof. Healtheon and any such Subsidiary will at all times comply in all material respects with the provisions of all material leases to which it is a party or under which it occupies property related to the provision of Lab EDI Services so as to prevent any loss or forfeiture thereof or thereunder. (d) Healtheon will maintain or cause to be maintained, with financially sound and reputable insurers, insurance in amounts approved by Healtheon's Board of Directors with respect to its properties and business and the properties and business of any Subsidiary against loss or damage. SECTION 5.2. INFORMATIONAL COVENANTS OF HEALTHEON. Healtheon covenants and agrees that it shall deliver the following information to SBCL so long as the Services Agreement remains in effect (including any extensions or renewal thereof) or until such time as Healtheon shall have consummated a Public Offering. -6- 5.2.1. MANAGEMENT'S ANALYSIS. All the financial statements delivered pursuant to the Investor Rights Agreement shall be accompanied by an informal narrative description of material business and financial trends and developments and significant transactions that have occurred in the appropriate period or periods covered thereby. 5.2.2. BUDGETS. As soon as practicable, but in any event within thirty (30) days prior to the commencement of a fiscal year, an annual operating budget for such fiscal year, approved by the Board of Directors, including monthly income and cash flow projections and projected balance sheets as of the end of each quarter within such fiscal year. Extensions of such due date shall not be unreasonably withheld. 5.2.3. INSPECTION. Except as provided in Section 5.2.5, below, upon reasonable notice, and no more frequently than two (2) times per year, Healtheon shall, and shall cause its Subsidiaries to, permit SBCL by its representatives, agents or attorneys: (a) to examine all books of account, records, reports and other papers of Healtheon or such Subsidiary, (b) to make copies and take extracts from any thereof, (c) to discuss the affairs, finances and accounts of Healtheon or such Subsidiary with Healtheon's or such Subsidiary's officers and independent certified public accountants (and by this provision Healtheon hereby authorizes said accountants to discuss with SBCL and its representatives, agents or attorneys the finances and accounts of Healtheon or such Subsidiary), and (d) to visit and inspect, at reasonable times and on reasonable notice during normal business hours, the properties of Healtheon and any Subsidiary. Notwithstanding any provision herein to the contrary, the provisions of this Section 5.2.3 are in addition to any rights which SBCL may have as a Healtheon stockholder under the Delaware Corporation Law and shall in no way limit such rights. The expenses of SBCL in connection with any such inspection shall be for the account of SBCL. Notwithstanding the foregoing -7- sentence, it is understood and agreed by Healtheon that all reasonable expenses incurred by Healtheon or such Subsidiary, any officers, employees or agents thereof or the independent certified public accountants therefor, shall be expenses payable by Healtheon and shall not be expenses of SBCL. 5.2.4 OTHER INFORMATION Except as provided in Section 5.2.5 below, for so long as SBCL continues to own at least [*] of the aggregate number of shares of Healtheon Common Stock now or hereafter acquired by it as a direct result of the Region transfers completed under this Agreement, Healtheon shall deliver courtesy copies of the following information, as requested by and furnished to the SBCL-nominated board member, or, if there is no such SBCL-nominated board member, as requested by the President of SBCL, to up to three employees of, or in-house counsel to, SBCL designated by SBCL in writing (and who initially shall be [*]): (a) promptly after the submission thereof to Healtheon, copies of any detailed reports (including the auditors' comment letter to management, if any such letter is prepared) submitted to Healtheon by its independent auditors in connection with each annual or interim audit of the accounts of Healtheon made by such accountants; (b) promptly, and in any event within ten (10) days after obtaining knowledge thereof, notice of the institution of any suit, action or proceeding (other than a proceeding of general application which is not directly against Healtheon or one or more of its Subsidiaries), the happening of any event or, to the best knowledge of Healtheon, the assertion or threat of any claim against Healtheon or any of its Subsidiaries which, either individually or in the aggregate, would have a Material Adverse Effect; (c) promptly upon, and in any event within thirty (30) days after, obtaining knowledge thereof, notice of any material breach of, Default under or failure to comply with any material term under this Article V of this Agreement or any change in Healtheon's relationship with its major customers, suppliers, employees or other entity with which Healtheon has a business relationship if such breach would have a Material Adverse Effect; [*] CONFIDENTIAL TREATMENT REQUESTED -8- (d) with reasonable promptness, a notice of any material default by Healtheon or any of its Subsidiaries under any agreement to which it is a party if such breach would have a Material Adverse Effect; (e) with reasonable promptness, copies of all written materials furnished to directors; (f) promptly (but in any event within ten (10) days) after the filing of any document or material with the SEC, a copy of such document or material; (g) promptly after the record date set by the Board of Directors to determine the stockholders entitled to vote at Healtheon's annual meeting of stockholders (but in any event ten (10) days prior to such meeting), a list of all stockholders of Healtheon and their respective holdings; and (h) promptly upon request therefor, such other data, filings and information as the SBCL-nominated Healtheon Board representative may from time to time reasonably request, or, if there is no such SBCL-nominated board member, as the President of SBCL may from time to time reasonably request, in either case to the extent consistent with Section 220 of the Delaware Corporation Law. 5.2.5 EXCLUDED INFORMATION. Notwithstanding the provisions of Sections 5.2.3 and 5.2.4, SBCL shall not have the right to inspect, receive, review or otherwise have access to any information or documents which, in the reasonable opinion of Healtheon's counsel would constitute any of the following: (i) a waiver of the attorney-client privilege; (ii) the disclosure of any third-party confidential or proprietary information, disclosure of which is restricted by a written non-disclosure agreement or applicable law; or (iii) the disclosure of any confidential or proprietary information of Healtheon or any of its affiliated entities which relates to any areas of Healtheon's business, with which, in the reasonable opinion of the Board of Directors of Healtheon, SBCL or its affiliates compete (collectively, the "Excluded Information"). Notwithstanding Section 5.2.4 above, in the event of a Change of Control of Healtheon by an Acquirer that has a class of securities registered under the Exchange Act (a "Public Company"), SBCL shall no longer have the information rights set forth in this Section -9- 5.25. In the event of a Change in Control of Healtheon by an Acquirer (other than a Public Company) that is a direct competitor of SBCL, SBCL shall continue to have the information rights set forth in Section 5.2.4, but only insofar as the information to be obtained upon the exercise of such rights relates to Lab EDI Services provided, to be provided, or alleged by SBCL to have been required to be provided, by ActaMed or Healtheon. For purposes of this Section 5.2.5, a "Change of Control" shall mean the sale or other transfer in a single transaction or series of related transactions to a person or group of affiliated persons (the "Acquiror") of shares of Healtheon Common Stock representing more than 50% of the voting power of all Healtheon Common Stock then outstanding. Notwithstanding the foregoing limitations of this Section 5.2.5, independent auditors retained by SBCL shall have the right to review any Excluded Information which, in their reasonable opinion, is necessary to determine or confirm (i) the amount of royalties payable to SBCL under the License Agreement by reason of connectivity between Providers and commercial laboratories other than SBCL Labs or (ii) the revenues of ActaMed for purposes of Section 1.6 hereof. 5.2.6 CONFIDENTIALITY OBLIGATIONS. Subject to Section 4.4, all information disclosed to or obtained by SBCL pursuant to this Section 5.2 (including any Excluded Information which may be inadvertently disclosed to or obtained by SBCL hereunder) shall be deemed to be the confidential information of Healtheon and SBCL agrees that it shall treat such information with the same degree of care that it uses to protect its own confidential information of a similar nature and shall only disclose such information to those employees of SBCL who have a need to know such information in order to enforce SBCL's rights under this Agreement and the License Agreement. In the event that SBCL obtains any copies of any Excluded Information, SBCL shall promptly return all copies of such information to Healtheon upon request or promptly after the SBCL employees in possession of Excluded Information gain actual knowledge that it is Excluded Information." 2.9 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Section 8.1.2 is amended by deleting the word "ActaMed" from the caption, by replacing the word "ActaMed" with the words "ActaMed or Healtheon" throughout the Section and by replacing the term "Series D Preferred Stock" with the term "Common Stock of Healtheon." -10- 2.10 INDEMNITY OF SBCL. Section 8.2.1 is amended by adding the clause "including, without limitation, Section 5.2.6 hereof" at the end of subsection (a)(ii). 2.11 INDEMNITY OF ACTAMED AND HEALTHEON. Section 8.2.2 is amended by (i) deleting the word "ActaMed" in the caption and replacing it with the words "ActaMed and Healtheon", (ii) by replacing the words "ActaMed agrees" in the lead-in paragraph with the words "ActaMed and Healtheon, jointly and severally agree," (iii) by replacing the word "ActaMed" in subsections (a)(i), (ii) and (iii) with the words "ActaMed or Healtheon", and (iv) by adding the clause "including, without limitation, representations and warranties made by ActaMed prior to the Merger Effective Date" at the end of subsection (a)(i). 2.12 SPECIAL INDEMNITY AS TO PROJECTIONS. Section 8.2.9 is amended by inserting the clause "as such Lab EDI Services are presently provided, without regard to any additional expenses incurred as a result of the acquisition of ActaMed by Healtheon" after the parenthetical "(as defined in the Services Agreement)". 2.13 NOTICES. Section 11.1.1 is amended by adding the following: "If to Healtheon: Healtheon Corp. 4600 Patrick Henry Drive Santa Clara, CA 95054 Attention: General Counsel Telephone: (408) 876-5000 Telecopy: (408) 876-5175" 2.14 ASSIGNMENT. Section 11.1.4(b) is amended by replacing the term "Series D Preferred Stock" with the term "Common Stock of Healtheon" and by replacing the term "Stockholders' Agreement" with the term "Affiliate Agreement prior to a Public Offering." 2.15 ENTIRE AGREEMENT. Section 11.1.8 is amended by deleting the text after the term "SBCL." 2.16 ADDED DEFINITIONS. The following definitions are added to Exhibit A to the Purchase Agreement. If such terms are defined in said Exhibit A, the existing definitions shall be deleted in their entirety and the following shall replace the existing definitions: "Affiliate Agreement" means the ActaMed Corporation Affiliate Agreement, dated as of May , 1998, between Healtheon and SBCL. "Common Stock of Healtheon" means the common stock, $.0001 par value, of Healtheon. -11- "Exchange Ratio" shall have the meaning given to such term in the Healtheon Merger Agreement. "Healtheon Merger Agreement" means the Agreement and Plan of Reorganization, dated February 24, 1998, by and among Healtheon Corporation, MedNet Acquisition Corp. and ActaMed Corporation. "Investors' Rights Agreement" means the Amended and Restated Investors' Rights Agreement, dated as of May __, 1998, between Healtheon and the persons and entities listed on Schedules A and B thereto. "Material Adverse Effect" means a material adverse effect on the business or financial condition of either Healtheon or ActaMed or on the ability of either Healtheon or ActaMed to conduct the ActaMed Business, including to provide Lab EDI Services, or the impairment of the ability of either Healtheon or ActaMed to perform its respective obligations under the ActaMed Documents. "Merger Effective Date" means the date on which the transactions contemplated by the Healtheon Merger Agreement become effective. "New Business Plan" means for the business plan of ActaMed presented to SBCL on April 29, 1998, approved by the ActaMed board of directors on May 5, 1998 and in the form approved by the Healtheon board of directors on May 14, 1998, covering (i) for the years 1998 and 1999, projected financial data, including statements of operations, and operational data, including number of sites and transactions per site and (ii) for the year 2000, number of sites. "Public Offering" means a bona fide firm commitment underwritten offering of the Common Stock of Healtheon or the ActaMed Common Stock, as the case may be, pursuant to a registration statement filed with and declared effective by the Securities and Exchange Commission pursuant to the Securities Act. 2.17 DELETED DEFINITIONS. The definitions for the following terms set forth in Exhibit A to the Purchase Agreement are deleted in their entirety: "Conversion Shares" "Permitted Owner" -12- "Preferred Stock" and "Series A Preferred Stock," "Series B Preferred Stock" and "Series C Preferred Stock" "Stock Option Plans" 3. MISCELLANEOUS. 3.1 ENTIRE AGREEMENT. This Amendment No.1 constitutes the entire understanding between the parties with respect to amendment of the Purchase Agreement and supersedes all proposals, communications and agreements between the parties relating to such subject matter. No amendment, change, or waiver of any provision of this Amendment No.1 will be binding unless in writing and signed by all parties. 3.2 GOVERNING LAW. This Amendment No.1 will be governed by and construed in accordance with the laws of the State of Georgia applicable to contracts made and performed therein. 3.3 PURCHASE AGREEMENT PROVISIONS. Except as otherwise provided, all provisions of the Purchase Agreement not modified by this Amendment No. 1 shall remain in full force and effect. 3.4 COUNTERPARTS. This Amendment No. 1 may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. [INTENTIONALLY LEFT BLANK] -13- IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 to the Purchase Agreement as of the date set forth above. HEALTHEON CORPORATION By: /s/ W. Michael Long ------------------------------------- Its: CEO ------------------------------------ ACTAMED CORPORATION By: /s/ Michael K. Hoover ------------------------------------- Its: President & CEO ------------------------------------ SMITHKLINE BEECHAM CLINICAL LABORATORIES, INC. By: /s/ John B. Okkersee Jr. ------------------------------------- Its: President ------------------------------------ -14- EX-10.16 8 EXHIBIT 10.16 EXECUTION LICENSE AGREEMENT between SMITHKLINE BEECHAM CLINICAL LABORATORIES, INC. and ACTAMED CORPORATION December 31, 1997 TABLE OF CONTENTS
PAGE ---- ARTICLE 1 - DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.1 ActaLab Software . . . . . . . . . . . . . . . . . . . . . . . . 1 1.2 Affiliate. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.3 Confidential Information . . . . . . . . . . . . . . . . . . . . 2 1.4 Derivative Work. . . . . . . . . . . . . . . . . . . . . . . . . 2 1.5 Documentation. . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.6 Exclusive Developments . . . . . . . . . . . . . . . . . . . . . 2 1.7 Health Care Field. . . . . . . . . . . . . . . . . . . . . . . . 2 1.8 Information Services . . . . . . . . . . . . . . . . . . . . . . 3 1.9 Object Code. . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.10 Other Lab. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.11 ProviderLink . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.12 [*]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.13 Providers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.14 Related Entity . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.15 SBCL Software. . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.16 SBCL Trademark . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.17 SCAN Agreements. . . . . . . . . . . . . . . . . . . . . . . . . 3 1.18 SCAN Developments. . . . . . . . . . . . . . . . . . . . . . . . 4 1.19 Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1.20 Source Code. . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1.21 Specifications . . . . . . . . . . . . . . . . . . . . . . . . . 4 1.22 Territory. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1.23 Third Party Software . . . . . . . . . . . . . . . . . . . . . . 4 1.24 Trigger Date . . . . . . . . . . . . . . . . . . . . . . . . . . 4 ARTICLE 2 - LICENSE GRANTS; RELATED PROVISIONS . . . . . . . . . . . . . . . 4 2.1 SCAN Development License . . . . . . . . . . . . . . . . . . . . 4 2.2 ActaLab Development License. . . . . . . . . . . . . . . . . . . 5 2.3 Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.4 Technology Transfer. . . . . . . . . . . . . . . . . . . . . . . 6 2.5 Royalties. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 ARTICLE 3 - SCAN DEVELOPMENTS OWNERSHIP; RELATED PROVISIONS. . . . . . . . . 6 3.1 Ownership. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 3.2 Limitations. . . . . . . . . . . . . . . . . . . . . . . . . . . 7 ARTICLE 4 - LICENSE BACK . . . . . . . . . . . . . . . . . . . . . . . . . . 8 4.1 License Grant. . . . . . . . . . . . . . . . . . . . . . . . . . 8 4.2 Term of License. . . . . . . . . . . . . . . . . . . . . . . . . 8 [*] CONFIDENTIAL TREATMENT REQUESTED -i- 4.3 Sublicenses. . . . . . . . . . . . . . . . . . . . . . . . . . . 8 4.4 Usage Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.5 ActaLab Software Escrow. . . . . . . . . . . . . . . . . . . . . 9 ARTICLE 5 - MARKINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 5.1 By ActaMed . . . . . . . . . . . . . . . . . . . . . . . . . . .10 5.2 By SBCL. . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 ARTICLE 6 - DEVELOPMENT AGREEMENT AMENDMENTS . . . . . . . . . . . . . . . .11 ARTICLE 7 - WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . .11 7.1 Warranty of Title and Noninfringement. . . . . . . . . . . . . .11 7.2 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . .12 7.3 Disclaimers. . . . . . . . . . . . . . . . . . . . . . . . . . .12 ARTICLE 8 - INDEMNITY. . . . . . . . . . . . . . . . . . . . . . . . . . . .12 8.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 8.2 Services . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 8.3 Infringement . . . . . . . . . . . . . . . . . . . . . . . . . .13 8.4 Claims Notice. . . . . . . . . . . . . . . . . . . . . . . . . .13 8.5 Procedures Involving Non-Third Party Claims. . . . . . . . . . .13 8.6 Procedures Involving Third Party Claims. . . . . . . . . . . . .14 8.7 No Release for Fraud . . . . . . . . . . . . . . . . . . . . . .15 8.8 Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . .15 8.9 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . .15 ARTICLE 9 - LIMITATION OF LIABILITY. . . . . . . . . . . . . . . . . . . . .16 ARTICLE 10 - CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . . .16 ARTICLE 11 - ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . . .16 11.1 By SBCL. . . . . . . . . . . . . . . . . . . . . . . . . . . . .16 11.2 By ActaMed . . . . . . . . . . . . . . . . . . . . . . . . . . .17 11.3 Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 ARTICLE 12 - DISPUTE RESOLUTION. . . . . . . . . . . . . . . . . . . . . . .17 12.1 Informal Dispute Resolution. . . . . . . . . . . . . . . . . . .17 12.2 Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . .18 12.3 Immediate Injunctive Relief. . . . . . . . . . . . . . . . . . .19 12.4 Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . .19 12.5 Continued Performance; Continuation of Licenses. . . . . . . . .19 ARTICLE 13 - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . .20 13.1 Further Assurances . . . . . . . . . . . . . . . . . . . . . . .20 13.2 Integration. . . . . . . . . . . . . . . . . . . . . . . . . . .20 -ii- 13.3 Force Majeure. . . . . . . . . . . . . . . . . . . . . . . . . .20 13.4 No Agency. . . . . . . . . . . . . . . . . . . . . . . . . . . .20 13.5 No Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . .20 13.6 Severability . . . . . . . . . . . . . . . . . . . . . . . . . .21 13.7 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 13.8 Governing Law; Interpretation. . . . . . . . . . . . . . . . . .21
SCHEDULES Schedule A SBCL Software Schedule B Amendments to Development Agreement -iii- CONFIDENTIAL TREATMENT REQUESTED LICENSE AGREEMENT THIS LICENSE AGREEMENT ("License Agreement") dated December 31, 1997 (the "Effective Date") is by and between SMITHKLINE BEECHAM CLINICAL LABORATORIES, INC., a Delaware corporation ("SBCL") and ACTAMED CORPORATION, a Georgia corporation ("ActaMed"). WHEREAS, SBCL and ActaMed have entered into an Assets Purchase Agreement dated of even date herewith (the "Purchase Agreement") pursuant to which ActaMed has agreed to purchase certain assets owned by SBCL and used to provide certain services to health care service providers; WHEREAS, the Purchase Agreement contemplates that the parties will enter into a license agreement substantially on the terms set forth herein, as well as a Services Agreement (the "Services Agreement") pursuant to which ActaMed shall provide certain services to SBCL and to health care service providers; WHEREAS, SBCL and ActaMed have previously entered into a Development Agreement dated October 31, 1997 (the "Development Agreement") pursuant to which ActaMed agreed to perform certain development services; and WHEREAS, the parties desire to amend the provisions of the Development Agreement pursuant to which SBCL authorized ActaMed to use SBCL software and related materials in the performance of work under the Development Agreement, and pursuant to which the parties allocated ownership of deliverables created under the Development Agreement and intellectual property rights therein; NOW THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, SBCL and ActaMed agree as follows: ARTICLE 1 - DEFINITIONS 1.1 "ACTALAB SOFTWARE" means (i) any updated, upgraded, corrected, modified, or enhanced version of ProviderLink created by or for ActaMed, and any Derivative Works made from ProviderLink by or for ActaMed, and any other Software owned and employed by ActaMed in providing Information Services or related services in accordance with the terms of the Services Agreement, in each case embodying, incorporating or practicing the SBCL Software or any portion thereof, (ii) any compiler or other program reasonably required to create Object Code from the Source Code of the foregoing or use any of the foregoing in the provision of Information Services, and (iii) any Documentation relating to any of the foregoing created by or for ActaMed. Without limiting the foregoing, "ActaLab Software" shall include [*] (as the term is defined in the Services Agreement). 1.2 "AFFILIATE" of an entity means a company or other person controlling, controlled by or under common control with such entity. 1.3 "CONFIDENTIAL INFORMATION" means any and all proprietary information disclosed or made available by a party hereto to the other party pursuant to this License Agreement, whether in written, oral, magnetic, photographic, optical or other form and whether now existing or hereafter created, including, without limitation, all trade secrets, know-how, information systems, technology, data, computer programs, processes, methods, operational procedures, plans, strategies or results, and other information of a similar nature that is not generally disclosed by such party to the public. Without limiting the foregoing, ActaMed's Confidential Information shall include the Source Code and Documentation for the ProviderLink Software and ActaLab Software, and SBCL's Confidential Information shall include the Source Code and Documentation for the SBCL Software and the SCAN Developments. Confidential Information shall not include any information which (a) is proven by written evidence to have been in the receiving party's possession prior to disclosure by the other party; (b) is received from a third party having the right to disclose such information; (c) is or hereafter becomes public knowledge through no act or fault of the receiving party; or (d) is proven by written evidence to have been independently developed by the receiving party without access to the Confidential Information of the other party. 1.4 "DERIVATIVE WORK" means a work that is based upon one or more preexisting works, such as a revision, modification, translation, abridgment, condensation, expansion, or any other form in which such preexisting works may be recast, transformed, translated or adapted, and that, if prepared without authorization of the owner of the copyright in such preexisting work, would constitute a copyright infringement. 1.5 "DOCUMENTATION" means manuals (e.g., user, utility reference and language reference) and other written materials that relate to particular Software, including materials useful for the operation of the Software by a user (collectively, "USER DOCUMENTATION"), and information (e.g., data flows, data structures, control logic, flow diagrams, and principles of operation) useful for design, modification and maintenance of the Source Code by a programmer (collectively, "PROGRAMMER DOCUMENTATION"). 1.6 "EXCLUSIVE DEVELOPMENTS" shall have the meaning ascribed to it by Section V.E of the Services Agreement. 1.7 "HEALTH CARE FIELD" means the provision of electronic data interchange technology relating to patients, patient-related services or the practice of medicine, to Providers, Healthcare Payors and Healthcare Administrators. "Healthcare Payor," for the purposes of this definition, means any person or entity that pays for the provision of healthcare services, [*] CONFIDENTIAL TREATMENT REQUESTED -2- including without limitation employers, insurance companies, regional healthcare alliances, and federal, state and local governmental agencies. "Healthcare Administrator" means those entities engaged in the administration of healthcare services, including without limitation managed care companies, utilization review companies and third party administrators. Notwithstanding the foregoing, "Health Care Field" shall exclude services relating to or provided to [*]. 1.8 "INFORMATION SERVICES" means the transmission of orders for laboratory tests and/or laboratory test results and reports. 1.9 "OBJECT CODE" means the form of Software resulting from the translation or processing of the Source Code by a computer into machine language or intermediate code in a form that is not convenient to human understanding but which is appropriate for execution or interpretation by a computer, together with related User Documentation. 1.10 "OTHER LAB" shall have the meaning ascribed to it by the Services Agreement. 1.11 "PROVIDERLINK" means the ActaMed proprietary Software known as ProviderLink as it exists on the Effective Date, together with any updates, upgrades, enhancements, modifications or Derivative Works made thereto or therefrom by or for ActaMed other than under the licenses granted by this License Agreement, and the Specifications and Documentation relating to and of the foregoing prepared by or for ActaMed. 1.12 [*]. 1.13 "PROVIDERS" means physicians, clinics, hospitals and other providers of clinical health care services other than [*]. 1.14 "RELATED ENTITY" means an entity that is engaged in the laboratory testing business and in which SBCL or an SBCL affiliate has a legal or beneficial ownership of ten percent (10%) or more. 1.15 "SBCL SOFTWARE" means the Software described in Schedule A hereto. "SBCL Software" shall in no event be construed to include [*] or Third Party Software. 1.16 "SBCL TRADEMARK" means SBCL's trade names, logos, trademarks, trade devices, product names and/or service marks. 1.17 "SCAN AGREEMENTS" means the Development Agreement, Purchase Agreement, Services Agreement and this License Agreement. [*] CONFIDENTIAL TREATMENT REQUESTED -3- 1.18 "SCAN DEVELOPMENTS" means (i) any updated, upgraded, corrected, modified, or enhanced version of the SBCL Software created by or for ActaMed under the rights granted by this License Agreement, and (ii) any Documentation relating to any of the foregoing created by or for ActaMed, provided, that SCAN Developments shall in no event be construed to include the ActaLab Software. 1.19 "SOFTWARE" means computer programming code consisting of Object Code and/or Source Code and/or associated procedural code, as applicable, including updates and revisions thereto. 1.20 "SOURCE CODE" means program instructions and codes written by humans with the intention that the instructions and codes be compiled and interpreted by a computer, including all existing commentary, explanations, control procedures, record layouts for all files and program listings-source codes, design documentation, user manuals, programmers' guides, system guides, current compilation instructions, and all other User Documentation and Programmer Documentation. 1.21 "SPECIFICATIONS" means a description of the design, operating procedures, performance, functions and other requirements for Software. 1.22 "TERRITORY" means the United States of America, including all territories and possessions thereof. 1.23 "THIRD PARTY SOFTWARE" means Software that SBCL prior to the Effective Date licensed from third parties for use in delivery of automated order entry and results reporting services, including without limitation Software known as [*] and [*]. 1.24 "TRIGGER DATE" shall have the meaning ascribed to it by Section 4.4.1 hereof. ARTICLE 2 - LICENSE GRANTS; RELATED PROVISIONS 2.1 SCAN DEVELOPMENT LICENSE. Subject to the terms and conditions of this License Agreement, SBCL hereby grants ActaMed a perpetual, irrevocable, nonexclusive, non-transferable (except as otherwise expressly set forth herein) right and license in the Health Care Field in the Territory to: 2.1.1 possess and use the SBCL Software to update, upgrade, enhance, modify and create Derivative Works from the SBCL Software and otherwise create SCAN Developments; and 2.1.2 possess and use, update, upgrade, enhance, modify and create Derivative Works from the SBCL Software, SCAN Developments and ActaLab Software; [*] CONFIDENTIAL TREATMENT REQUESTED -4- 2.1.3 possess and use the SBCL Software and SCAN Developments for the purposes of performing ActaMed's obligations under the SCAN Agreements; and 2.1.4 possess and use the SCAN Developments for the purpose of providing Information Services in support of the laboratory testing services offered by Other Labs only to the extent such SCAN Developments do not constitute Exclusive Developments under the Service Agreement. The foregoing license shall include the right to (i) sublicense the SBCL Software and/or SCAN Developments to one or more contractors performing the activities described in Sections 2.1.1 or 2.1.2 hereof for ActaMed's benefit and for ActaMed's account, and (ii) sublicense Providers, [*] and Other Labs to use the Object Code version of the SBCL Software and/or the SCAN Developments as ActaMed reasonably determines necessary or appropriate in connection with its provision of the services contemplated by Section 2.1.3, in each case provided that each sublicensee executes a written agreement (x) prohibiting such sublicensee from disclosing SBCL Confidential Information or using the same other than as contemplated by this Section 2.1, and (y) precluding the sublicensee or any of its employees or agents from gaining or holding any right or interest in the SBCL Software. 2.2 ACTALAB DEVELOPMENT LICENSE 2.2.1 GRANT. Subject to the terms and conditions of this License Agreement, SBCL hereby grants ActaMed a perpetual, irrevocable, nonexclusive, non-transferable (except as otherwise expressly set forth herein) right and license to possess and use the SBCL Software to update, upgrade, enhance, modify and create Derivative Works from ProviderLink and otherwise create ActaLab Software pursuant to the Development Agreement and otherwise. The license granted by this Section 2.2.1 shall survive the termination of this License Agreement. 2.2.2 OWNERSHIP. Ownership of Deliverables (as defined by the Development Agreement) relative to the ActaLab Software shall be governed by Section 5 of the Development Agreement, as amended. Ownership of all other ActaLab Software and all intellectual property rights therein (including but not limited to copyrights and all renewals and extensions thereof) shall vest in ActaMed, except that nothing in this Agreement shall be construed to transfer to ActaMed, or otherwise divest SBCL of SBCL's ownership of, the SBCL Software or SCAN Developments or the patents, copyrights, trade secrets and other intellectual property rights therein. ActaMed shall own the ActaLab Software Exclusive Developments. 2.3 CONDITIONS. 2.3.1 As a material inducement for SBCL's grant of the licenses contemplated by this Agreement and the amendments to the Development Agreement contemplated by [*] CONFIDENTIAL TREATMENT REQUESTED -5- Article 6 of this Agreement, ActaMed hereby covenants and agrees that, except as SBCL may authorize in writing, ActaMed (and any sublicensee of ActaMed) shall use the ActaLab Software solely within the Territory and solely in the Health Care Field. 2.3.2 ActaMed further covenants and agrees that, except as SBCL may otherwise agree in writing, ActaMed shall not use or license the use of the ActaLab Software Exclusive Developments for the benefit of any party other than in support of SBCL's laboratory testing services. 2.4 TECHNOLOGY TRANSFER. SBCL, within thirty (30) days following the Effective Date, shall provide ActaMed with one copy of all currently existing SBCL Software not previously provided in connection with the Development Agreement or otherwise. Thereafter, during the term of the Services Agreement, SBCL shall promptly provide ActaMed with such updates, upgrades and enhancements to the SBCL Software as SBCL, in its sole discretion, may make or have made during the term of the Services Agreement. 2.5 ROYALTIES. 2.5.1 If ActaMed uses the SBCL Software, SCAN Developments or ActaLab Software in the provision of Information Services to [*] ActaMed shall agree to pay SBCL a royalty equal to [*] of Royalty Revenues for the Royalty Period applicable to such [*]. "Royalty Revenues," for these purposes, means the [*] ActaMed collects for such Information Services. The "Royalty Period," with respect to Software or services provided in support of a given [*] means the [*] period commencing on the date [*]. 2.5.2 The royalties accruing pursuant to this Section 2.4 shall be payable on a [*] basis, and shall be due within [*] days following the end of the [*] in which they accrue. Each such royalty payment shall be accompanied by a report showing, by each [*] the total Royalty Revenue collected during the applicable [*] and the royalty amount due in respect of such Royalty Revenue. ARTICLE 3 - SCAN DEVELOPMENTS OWNERSHIP; RELATED PROVISIONS 3.1 OWNERSHIP. 3.1.1 Subject to the provisions of Section 3.2 hereof, SBCL, as between ActaMed and SBCL, shall have sole and exclusive ownership in and title to the SBCL Software and SCAN Developments, including all intellectual property rights therein. Without limiting the foregoing, the SCAN Developments shall be "works made for hire" for [*] CONFIDENTIAL TREATMENT REQUESTED -6- the benefit of SBCL. To the extent that any of the SCAN Developments, by operation of law, may not be works made for hire, or to the extent ActaMed otherwise would retain any rights in the SCAN Developments, ActaMed, subject to the provisions of Section 3.2.2 hereof, hereby assigns to SBCL the ownership of any patent or copyright in the SCAN Developments and SBCL shall have the right to obtain and hold in its own name copyrights, patents, registrations and similar protections which may be available with respect to the SCAN Developments. 3.1.2 Nothing in this Agreement shall be construed to transfer to SBCL, or otherwise divest ActaMed of ActaMed's ownership of, ProviderLink, the ActaLab Software or the patents, copyrights, trade secrets and other intellectual property rights therein, provided, that, subject to the provisions of Section 3.2.1 hereof, ActaMed hereby grants SBCL a perpetual, nonexclusive, royalty-free license (with right of sublicense) under such intellectual property rights to use, possess, update, upgrade, enhance, modify, reproduce, market, distribute and sell the SCAN Developments. 3.1.3 ActaMed shall provide SBCL with the Source Code for the SCAN Developments on or before the first release of the same to a commercial customer or the use of the same in providing a commercial service (the "Release Date") and, thereafter, on or before the Release Date of any updates, upgrades, enhancements or modifications thereto and, in any event, [*] during the term of the Services Agreement (including any renewal terms thereof). 3.2 LIMITATIONS. 3.2.1 SBCL covenants and agrees that, prior to the expiration or termination of the Services Agreement, it shall not use, or sublicense any other party to use, the SCAN Developments except (i) in the Territory solely for the purpose of performing Information Services in support of the laboratory testing services offered [*] that has not been transferred to ActaMed pursuant to the Purchase Agreement, and (ii) outside of the Territory. In the event SBCL uses the SCAN Developments to provide Information Services in support of [*] within the Territory, SBCL shall pay ActaMed a usage fee to be negotiated by the parties, such usage fee to be determined in accordance with the provisions, and during the term, of the Services Agreement. 3.2.2 Except to the extent such SCAN Developments constitute Exclusive Developments, nothing in this Agreement shall be construed to (i) grant SBCL or any other party ownership of such portions of the SCAN Developments as are devoted solely to the process of checking patient eligibility for third party payor benefits or reimbursement, or claim status checking (collectively, "Eligibility Services"), or (ii) grant SBCL any right or license to use the SCAN Developments for the purposes of performing or providing Eligibility Services, except that SBCL shall not be required to delete or [*] CONFIDENTIAL TREATMENT REQUESTED -7- remove the Eligibility Code from the SCAN Developments prior to exercising the rights and licenses granted by this Article 3. ARTICLE 4 - LICENSE BACK 4.1 LICENSE GRANT. Subject to the provisions of this Article 4, ActaMed hereby grants SBCL an irrevocable, nonexclusive, non-transferable (except as expressly set forth herein) right and license in the Territory in the Health Care Field to: 4.1.1 possess and use the ActaLab Software to create [*] and update, upgrade, modify, enhance and create Derivative Works from [*] (such Derivative Works being referred to herein as the [*]) as SBCL reasonably determines necessary to perform Information Services in support of laboratory test services offered by SBCL and/or Related Entities, including without limitation to ensure compliance with laws and regulations applicable to the business of SBCL and Related Entities, PROVIDED, that SBCL covenants and agrees that it shall not exercise the licenses granted by this Section 4.1.1 prior to the earlier of [*] (the "Trigger Date"); and 4.1.2 possess and use [*] and [*] for internal business purposes of SBCL and Related Entities, including without limitation the provision of Information Services to Providers in support of their respective laboratory testing services, PROVIDED, that SBCL covenants and agrees that it shall not exercise the licenses granted by this Section 4.1.2 prior to the date on which the Services Agreement expires as a result of ActaMed's notice of nonrenewal or the date on which the Services Agreement terminates for ActaMed's breach, as applicable. 4.2 TERM OF LICENSE. The licenses granted by this Article 4 shall expire on [*] on which SBCL first uses ActaLabSB on a commercial basis in support of SBCLs laboratory testing services. 4.3 SUBLICENSES. The licenses granted by Section 4.1 shall include the right to (a) sublicense the ActaLab Software, and [*] to one or more contractors performing any of the foregoing for the benefit and account of SBCL or a Related Entity, and (b) sublicense Providers to use the Object Code version of [*] as reasonably may be required to provide the services contemplated by Section 4.1.2, in each case provided that each sublicensee executes a written agreement (x) prohibiting such sublicensee from disclosing ActaMed Confidential Information or using the same other than as contemplated [*] CONFIDENTIAL TREATMENT REQUESTED -8- by this Article 4, and (y) precluding the sublicensee or any of its employees or agents from gaining or holding any right or interest in the ActaLab Software. 4.4 USAGE FEES. 4.4.1 SBCL, in addition to the other consideration contemplated by the SCAN Agreements, agrees to pay, as a royalty, a Usage Fee on each Royalty Transaction. For the purposes of this Section 4.4.1: (i) "Royalty Transaction" means a Requisition (as defined in the Services Agreement) entered [*] (pursuant to Sections XII.E.1.b or XII.E.3.c. of the Services Agreement) to or for a site other than one of the Permitted Number of sites. (ii) "Usage Fee" means the lesser of (i) [*] per Requisition and [*] of the Transaction Fee then prevailing under Article IV of the Services Agreement or (ii) [*] of an amount competitive with the market for Information Services, such amount [*] to be calculated in accordance with the principles established by Section IV of the Services Agreement. (iii) "Permitted Number" means [*] the number of sites [*] the largest number of sites with respect to which [*]. 4.4.2 The royalties accruing pursuant to this Section 4.4 shall be payable on a [*] and shall be due within [*] days following the end of the [*] in which they accrue. Each such royalty payment shall be accompanied by a report showing the manner in which the payment amount was calculated. 4.5 ACTALAB SOFTWARE ESCROW. 4.5.1 Promptly upon the execution of this License Agreement, ActaMed shall give written notice to Fort Knox Escrow Services, Inc. ("Fort Knox") instructing Fort Knox to add SBCL to the list of Licensees maintained pursuant to that certain Master Escrow Agreement dated February 20, 1995 (the "Escrow Agreement"). ActaMed shall deposit the Source Code for all ActaLab Software in accordance with the terms of the Escrow Agreement on or before the first release of the same to a commercial customer or the use of the same in providing a commercial service (the "Release Date") and, thereafter, on or before the Release Date of any updates, upgrades, [*] CONFIDENTIAL TREATMENT REQUESTED -9- enhancements or modifications thereto and, in any event, no less often than once [*] during the term of the Services Agreement (including any renewal terms thereof). 4.5.2 ActaMed, within thirty (30) days of the date of this Agreement shall enter into an amendment to the Escrow Agreement with Fort Knox, reasonably acceptable to SBCL in form and substance, to the effect that Fort Knox, at SBCL's request and expense, agrees to inspect the deposit materials supplied by ActaMed for the purpose of confirming their identity and completeness. 4.5.3 ActaMed, promptly upon SBCL's demand made at any time following the Trigger Date, shall notify Fort Knox in accordance with Section 4.1(a) of the Escrow Agreement to deliver the Source Code for the ActaLab Software to SBCL, which notice shall be accompanied by the fees specified in such Section 4.1(a). 4.5.4 ActaMed covenants and agrees to maintain the Escrow Agreement in full force and effect during the term of the Services Agreement, and acknowledges that its failure to do so will constitute a material breach of this License Agreement and the Services Agreement. 4.5.5 ActaLab hereby appoints SBCL as its attorney in fact for the limited purpose of providing to Fort Knox the notices contemplated by this Section 4.4.1 and 4.4.3. ARTICLE 5 - MARKINGS 5.1 BY ACTAMED. ActaMed shall reproduce SBCLs copyright notice on all SBCL Software and SCAN Developments in accordance with the practice prevailing in the software industry. Subject to the foregoing sentence: 5.1.1 ActaMed, on or before the date on which ActaMed switches any site from the SBCL gateway to the ActaMed gateway (as described in Section II.B of the Services Agreement), shall remove SBCL Trademarks from the sign-on screen for the ActaLab Software and SCAN Developments resident on the computer at such site, and from any other screens that might reasonably suggest that SBCL, rather than ActaMed, is the source of the Information Services provided using such Software; and 5.1.2 ActaMed, with the reasonable assistance of SBCL's Distribution Service Representatives in accordance with Section II.B.4 of the Services Agreement, shall remove SBCL Trademarks from any equipment owned or controlled by ActaMed and located at a given site within three (3) months of the Transfer Date for such site, but in any event prior to the date on which ActaMed transfers ownership of such equipment to any other party. [*] CONFIDENTIAL TREATMENT REQUESTED -10- 5.2 BY SBCL. SBCL shall reproduce ActaMeds copyright notice on all copies of the ActaLab Software in accordance with the practice prevailing in the software industry. ARTICLE 6 - DEVELOPMENT AGREEMENT AMENDMENTS The parties hereby agree to amend the Development Agreement as set forth in Schedule B hereto. ARTICLE 7 - WARRANTIES 7.1 WARRANTY OF TITLE AND NONINFRINGEMENT. 7.1.1 ActaMed represents and warrants to SBCL that: (i) Unless ActaMed provides SBCL with advance written notice to the contrary in accordance with Section 5.2(b) of the Development Agreement, ActaMed is and will be the sole author of all works used by ActaMed in preparing the ActaLab Software and SCAN Developments; (ii) ActaMed shall require all officers, employees, contractors, representatives and agents who provide services with respect to the ActaLab Software, SBCL Software or SCAN Developments under the SCAN Agreements to assign to ActaMed all intellectual property rights created or arising therein; (iii) Subject to the provisions of Section 7.1.2 hereof, ActaMed has and will have full and sufficient right in the ActaLab Software to grant the licenses and rights contemplated by Article 4 of this License Agreement, free and clear of any liens, claims or encumbrances; (iv) Subject to the provisions of Section 7.1.2 hereof, the terms and conditions set forth in Article 3 hereof are sufficient to convey to SBCL all right, title and interest in and to the SCAN Developments, and following such conveyance neither ActaMed nor any third party shall retain any right, title or interest in the SCAN Developments other than the licenses expressly set forth herein; and (v) Subject to the provisions of Section 7.1.2 hereof, none of the ActaLab Software or SCAN Developments infringes any patents, copyrights, trademarks, or other intellectual property rights (including trade secrets), privacy or similar rights of any third party, nor has any claim of such infringement been threatened or asserted. -11- 7.1.2 SBCL represents and warrants to ActaMed that: (i) SBCL is the sole author of the SBCL Software; (ii) SBCL has required all officers, employees, contractors, representatives and agents who prior to the date of this Agreement provided services with respect to the Software to assign to SBCL all intellectual property rights created or arising therein; (iii) SBCL has and will have full and sufficient right in the SBCL Software to grant the licenses and rights contemplated by Article 2 of this License Agreement, free and clear of any liens, claims or encumbrances; and (iv) none of the SBCL Software provided to ActaMed by SBCL hereunder infringes any patents, copyrights, trademarks, or other intellectual property rights (including trade secrets), privacy or similar rights of any third party, nor has any claim of such infringement been threatened or asserted. 7.2 AUTHORIZATION. Each of ActaMed and SBCL represents and warrants that, as of the Effective Date of this License Agreement (i) it is duly authorized to enter into this License Agreement, and (ii) it is free of any obligation or restriction that would prevent it either from entering into or performing this License Agreement. 7.3 DISCLAIMERS. THE FOREGOING WARRANTY IS IN LIEU OF ANY OTHER WARRANTY, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WHICH ARE HEREBY SPECIFICALLY EXCLUDED AND DISCLAIMED. WITHOUT LIMITING THE FOREGOING, (i) NOTHING IN THIS LICENSE AGREEMENT SHALL BE CONSTRUED TO EXPAND OR EXTEND THE WARRANTIES ACTAMED GRANTS IN THE OTHER SCAN AGREEMENTS WITH RESPECT TO THE ACTALAB SOFTWARE OR SCAN DEVELOPMENTS, AND (ii) SUBJECT TO SUCH WARRANTIES AND REPRESENTATIONS AS ARE CONTAINED IN THE OTHER SCAN AGREEMENTS, ACTAMED ACKNOWLEDGES THAT SBCL IS LICENSING THE SBCL SOFTWARE TO ACTAMED ON AN AS IS BASIS, AND HEREBY DISCLAIMS ANY WARRANTIES WITH RESPECT TO THE OPERATION THEREOF. ARTICLE 8 - INDEMNITY 8.1 GENERAL. Each party hereto shall indemnify, defend and hold harmless the other party and its officers, employees, representatives and agents against any and all damages, losses, or expenses suffered or paid as a result of any claims, demands, suits, causes of action, -12- proceedings, awards, judgments, and liabilities (including reasonable attorneys fees) incurred in litigation, arbitration or otherwise, assessed, incurred, or sustained (each, a Claim) with respect to or arising out of the breach by the Indemnifying Party of any representation, warranty, covenant or agreement made herein. 8.2 SERVICES. ActaMed shall indemnify, defend and hold harmless SBCL and its officers, employees, representatives and agents against any Claim arising from or relating to ActaMeds provision of the ActaLab Software, SCAN Developments or any services, in each case in support of any Other Lab pursuant to this License Agreement. SBCL shall indemnify, defend and hold harmless ActaMed and its officers, employees, representatives and agents against any Claim arising from or relating to SBCLs provision of the SCAN Developments or any services outside the Territory or to [*] as contemplated by Section 3.2 hereof. 8.3 INFRINGEMENT. 8.3.1 ActaMed, subject to the provisions of Section 8.3.2 hereof, shall indemnify, defend and hold harmless SBCL and the Related Entities and their respective officers, employees, representatives and agents against any Claim alleging the ActaLab Software or any SCAN Development infringes or constitutes misappropriation of any U.S. or foreign patent or any other U.S. or foreign proprietary right of a third party. 8.3.2 SBCL shall indemnify, defend and hold harmless ActaMed and its Affiliates and their respective officers, employees, representatives and agents against any Claim alleging the SBCL Software infringes or constitutes misappropriation of any U.S. or foreign patent or any other U.S. or foreign proprietary right of a third party. 8.4 CLAIMS NOTICE. A Claim shall be made by any entity or individual eligible for indemnification pursuant to this Article 8 (an Indemnitee) by delivery of a Claims Notice to the party owing a duty of indemnification under this Article 8 (the Indemnifying Party) requesting indemnification and specifying the basis on which indemnification is sought and the amount of asserted Losses (as defined in the Services Agreement) and, in the case of a Third Party Claim (as defined in the Services Agreement), containing (by attachment or otherwise) such other information as such Indemnitee shall have concerning such Third Party Claim. 8.5 PROCEDURES INVOLVING NON-THIRD PARTY CLAIMS. If the Claim involves a matter other than a Third Party Claim, the Indemnifying Party shall raise any objection to such Claim within a reasonable period of time by delivery of a written notice of such objection to such Indemnitee specifying in reasonable detail the basis for such objection. If an objection is timely interposed by the Indemnifying Party, the Indemnifying Party and the Indemnitee shall cooperate in the compromise of the Claim or resolve any disagreement in accordance with Article 12 hereof. [*] CONFIDENTIAL TREATMENT REQUESTED -13- 8.6 PROCEDURES INVOLVING THIRD PARTY CLAIMS. The obligations and liabilities of the parties hereunder with respect to a Third Party Claim shall be subject to the following terms and conditions: 8.6.1 The Indemnitee shall give the Indemnifying Party written notice of a Third Party Claim promptly after receipt by the Indemnitee of notice thereof, and the Indemnifying Party may undertake the defense, compromise and settlement thereof by representatives of its own choosing reasonably acceptable to the Indemnitee. The failure of the Indemnitee to notify the Indemnifying Party of such claim shall not relieve the Indemnifying Party of any liability that they may have with respect to such claim except to the extent the Indemnifying Party demonstrates that the defense of such claim is prejudiced by such failure. The assumption of the defense, compromise and settlement of any such Third Party Claim by the Indemnifying Party shall be an acknowledgment of the obligation of the Indemnifying Party to indemnify the Indemnitee with respect to such claim hereunder. If the Indemnitee desires to participate in, but not control, any such defense, compromise and settlement, it may do so at its sole cost and expense. If, however, the Indemnifying Party fails or refuses to undertake the defense of such Third Party Claim within ten (10) days after written notice of such claim has been given to the Indemnifying Party by the Indemnitee, the Indemnitee shall have the right to undertake the defense, compromise and settlement of such claim with counsel of its own choosing. In the circumstances described in the preceding sentence, the Indemnitee shall, promptly upon its assumption of the defense of such claim, make a Claim as specified in Section 8.3 which shall be deemed a Claim that is not a Third Party Claim for the purposes of the procedures set forth herein. 8.6.2 If, in the reasonable opinion of the Indemnitee, any Third Party Claim or the litigation or resolution thereof involves an issue or matter which could have a material adverse effect on the business, operations, assets, properties or prospects of the Indemnitee, the Indemnitee shall have the right to control the defense, compromise and settlement of such Third Party Claim undertaken by the Indemnifying Party, and the reasonable costs and expenses of the Indemnitee in connection therewith shall be included as part of the indemnification obligations of the Indemnifying Party hereunder. If the Indemnitee shall elect to exercise such right, the Indemnifying Party shall have the right to participate in, but not control, the defense, compromise and settlement of such Third Party Claim at its sole cost and expense. 8.6.3 No settlement of a Third Party Claim involving the asserted liability of the Indemnifying Party under this Article shall be made without the prior written consent by or on behalf of the Indemnifying Party, which consent shall not be unreasonably withheld or delayed. If the Indemnifying Party assumes the defense of such a Third Party Claim, (1) no compromise or settlement thereof may be effected by the Indemnifying Party without the Indemnitee's consent unless (a) there is no finding or -14- admission of any violation of law or any violation of the rights of any person and no effect on any other claim that may be made against the Indemnitee (b) the sole relief provided is monetary damages that are paid in full by the Indemnifying Party and (c) the compromise or settlement includes, as an unconditional term thereof, the giving by the claimant or the plaintiff to the Indemnitee of a release, in form and substance satisfactory to the Indemnitee, from all liability in respect of such Third Party Claim, and (2) the Indemnitee shall have no liability with respect to any compromise or settlement thereof effected without its consent. 8.7 NO RELEASE FOR FRAUD. Nothing contained in this Agreement shall relieve or limit the liability of a party or any officer or director of such party from any Liability arising out of or resulting from common law fraud or intentional misrepresentation in connection with the transactions contemplated by this Agreement or in connection with the delivery of this Agreement. Each ActaMed Indemnitee or SBCL Indemnitee, as the case may be, shall have a right to indemnification for any Loss incurred as the result of any common law fraud or intentional misrepresentation by SBCL or ActaMed, respectively, or any officer or director thereof. 8.8 PAYMENT. 8.8.1 If any party is required to make any payment under this Article 8, such party shall promptly pay the Indemnified Party the amount so determined. If there is a dispute as to the amount or manner of determination of any indemnity obligation owed under this Article 8, the Indemnifying Party shall nevertheless pay when due such portion, if any, of the obligation as shall not be subject to dispute. The difference, if any, between the amount of the obligation ultimately determined as properly payable under this Article 8 and the portion, if any, theretofore paid shall bear interest as set forth in Section 8.8.3 hereof. 8.8.2 Any items as to which an Indemnified Party is entitled to payment under this Article may be paid by set off against amounts payable to the Indemnifying Party to the extent that such amounts are sufficient to pay such items. 8.8.3 If all or part of any indemnification obligation under this Agreement is not paid when due, then the Indemnifying Party shall pay the Indemnified Party interest on the unpaid principal amount of the obligation from the date the amount became due until payment in full, at the per annum rate of interest announced from time to time by NationsBank South, N.A., to be its "prime rate." 8.9 SURVIVAL. The provisions of this Article 8 shall survive the termination of this License Agreement. -15- ARTICLE 9 - LIMITATION OF LIABILITY NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY IN TORT, CONTRACT OR OTHERWISE FOR ANY LOST PROFITS, SPECIAL, INDIRECT, INCIDENTAL, PUNITIVE OR CONSEQUENTIAL DAMAGES ARISING OUT OF, OR IN CONNECTION WITH THIS LICENSE AGREEMENT THAT THE OTHER PARTY, OR ANY THIRD PARTY, MAY INCUR, EXPERIENCE OR CLAIM, EVEN IF THE PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH CLAIM. ARTICLE 10 - CONFIDENTIALITY In the course of exercising this License Agreement each party will likely obtain Confidential Information of the other party. The parties agree to safeguard against the unauthorized use and disclosure of any Confidential Information and to use the same degree of care that each uses to protect its own information of a similar nature, but in no event less than a reasonable degree of care under the circumstances. Neither party to this License Agreement will disclose the other party's Confidential Information to any third person, except (i) with the prior written consent of the other party; (ii) to the extent necessary to comply with law or legal process, in which event the party making the disclosure will, subject to applicable law, notify the other party as promptly as practicable prior to making any disclosure and seek confidential treatment of the information; (iii) to the extent necessary, as a part of its normal reporting or review procedure to its parent company, or its auditors and attorneys on a confidential basis; or (iv) in connection with the enforcement of the party's rights hereunder or under any related agreements. The parties hereto agree to restrict disclosure of the Confidential Information solely to its employees or others under its control who have a need to know the same in furtherance of the purposes of this License Agreement and who have been directed and contractually or legally restricted from disclosing the Confidential Information at least to the degree required under this License Agreement. Each party shall be liable to the other for any breach of the covenants of confidentiality contained herein by its agents or employees. The provisions of this section shall survive the expiration or termination of this License Agreement. ARTICLE 11 - ASSIGNMENT 11.1 BY SBCL. SBCL may assign all of its rights and obligations under this License Agreement or any license granted hereunder to any Affiliate, or to any corporation or other entity pursuant to a merger, consolidation, or other reorganization. SBCL agrees to notify ActaMed of any such assignment, in writing, specifying the name and address of the other entity. -16- 11.2 BY ACTAMED. ActaMed may assign all of its rights and obligations under this License Agreement or any license granted hereunder to any Affiliate or to any other corporation or other entity pursuant to a merger, consolidation, or other reorganization. ActaMed agrees to notify SBCL at least thirty (30) days prior to the date of any such assignment, in writing, specifying the name and address of the assignee. Notwithstanding the foregoing: (i) Nothing in this License Agreement shall be construed to authorize ActaMed to assign this License Agreement to any assignee if such assignee or any Affiliate of the assignee is engaged in the business of performing laboratory services similar to those performed by SBCL as of the date of the assignment, and (ii) SBCL shall have the right to require ActaMed to void the assignment if the assignee or any Affiliate of the assignee enters the business of performing laboratory services similar to those performed by SBCL as of the date of this Agreement or the date of the assignment. 11.3 OTHER. Except as expressly set forth in this Article 11 and except as the other party may consent in writing, neither party may assign or transfer this License Agreement or any right or obligation hereunder to any third party, and any attempt to do so in contravention of this Article 11 shall be void and shall have no force or effect. ARTICLE 12 - DISPUTE RESOLUTION 12.1 INFORMAL DISPUTE RESOLUTION. Any dispute between the parties arising out of or with respect to this License Agreement, either with respect to the interpretation of any provision of this Agreement or with respect to the performance by ActaMed or SBCL, shall be resolved as provided in this Article. 12.1.1 Prior to the initiation of formal dispute resolution procedures, the parties shall first attempt to resolve their dispute informally, as follows: (i) The Representatives (as defined in the Services Agreement) for each party shall meet for the purpose of endeavoring to resolve such dispute. They shall meet as often as the parties reasonably deem necessary in order to gather and furnish to the other all information with respect to the matter in issue which the parties believe to be appropriate and germane in connection with its resolution. The Representatives shall discuss the problem and negotiate in good faith in an effort to resolve the dispute without the necessity of any formal proceeding. During the course of negotiations, all reasonable requests made by one party to another for nonprivileged information, reasonably -17- related to this Agreement, shall be honored in order that each of the parties may be fully advised of the other's position. (ii) If, within fifteen (15) days after a matter has been identified for resolution pursuant to this Article, either of the Representatives concludes in good faith that amicable resolution through continued negotiation in this forum does not appear likely, the matter will be escalated by formal written notification to the SBCL President and the ActaMed President (both as defined in the Services Agreement). The parties will use their respective best efforts to cause the SBCL President and the ActaMed President to meet to attempt to resolve the dispute. (iii) Formal proceedings for the resolution of a dispute may not be commenced until the earlier of: (i) the date on which the SBCL President and the ActaMed President conclude in good faith that amicable resolution through continued negotiation of the matter does not appear likely; or (ii) thirty (30) days after the dispute has been referred to the SBCL President and the ActaMed President. 12.1.2 The provisions of this Article 12 shall not be construed to prevent a party from instituting, and a party is authorized to institute, formal proceedings earlier to avoid the expiration of any applicable limitations period. 12.2 ARBITRATION. If the parties are unable to resolve any controversy arising under this Agreement as contemplated by Section 12.1 and if such controversy is not subject to Section 12.3 or Section 12.4, then such controversy shall be submitted to mandatory and binding arbitration at the election of either Party (the Disputing Party) pursuant to the following conditions: 12.2.1 The Disputing Party shall notify the AAA and the other Party in writing describing in reasonable detail the nature of the dispute (the "DISPUTE NOTICE"). The parties shall each select a neutral arbitrator in accordance with the rules of AAA and the two (2) arbitrators selected shall select a third neutral arbitrator. The three (3) arbitrators so selected are herein referred to as the "PANEL." 12.2.2 The Panel shall allow reasonable discovery as permitted by the Federal Rules of Civil Procedure, to the extent consistent with the purpose of the arbitration. The Panel shall have no power or authority to amend or disregard any provision of this Article 12. The arbitration hearing shall be commenced promptly and conducted expeditiously, with each of ActaMed and SBCL being allocated one-half of the time for the presentation of its case. Unless otherwise agreed to by the parties, an arbitration hearing shall be conducted on consecutive days. -18- 12.2.3 Should any arbitrator refuse or be unable to proceed with arbitration proceedings as called for by this Section, such arbitrator shall be replaced by an arbitrator selected in accordance with the rules of the AAA and consistent with this Article 12. 12.2.4 The Panel rendering judgment upon disputes between parties as provided in this Article 12 shall, after reaching judgment and award, prepare and distribute to the parties a writing describing the findings of fact and conclusions of law relevant to such judgment and award and containing an opinion setting forth the reasons for the giving or denial of any award. The award of the arbitrator shall be final and binding on the parties, and judgment thereon may be entered in a court of competent jurisdiction. 12.2.5 Arbitration hearings hereunder shall be held in Washington D.C. or another mutually agreeable location. 12.2.6 The Panel shall be instructed that time is of the essence in the arbitration proceeding. The Panel shall render its judgment or award within fifteen (15) days following the conclusion of the hearing. Recognizing the express desire of the parties for an expeditious means of dispute resolution, the arbitrator shall limit or allow the parties to expand the scope of discovery as may be reasonable under the circumstances. 12.3 IMMEDIATE INJUNCTIVE RELIEF. The nonbreaching party may file a pleading with a court seeking immediate injunctive relief in the event the other party commits a breach of the confidentiality obligations set forth in this Agreement, SBCL violates the limitations imposed by Section 3.2 hereof, ActaMed violates the limitations imposed by Section 2.2 or 2.3 hereof, or in the event a party makes a good faith determination that a breach of the terms of this Agreement by the other party is such that the damages to such party resulting from the breach will be so immediate, so large or severe, and so incapable of adequate redress after the fact that a temporary restraining order or other immediate injunctive relief is a necessary remedy. If a party files a pleading with a court seeking immediate injunctive relief and this pleading is challenged by the other party and the injunctive relief sought is not awarded in substantial part (or in the event of a temporary restraining order is vacated upon challenge by the other party), the party filing the pleading seeking immediate injunctive relief shall pay all of the costs and attorneys fees of the party successfully challenging the pleading. 12.4 JURISDICTION. ActaMed and SBCL each consent to venue in Philadelphia, Pennsylvania and to the nonexclusive jurisdiction of competent Pennsylvania state courts or federal courts located in Philadelphia for all litigation which may be brought, subject to the requirement for arbitration hereunder, with respect to the terms of, and the transactions and relationships contemplated by, this Agreement. 12.5 CONTINUED PERFORMANCE; CONTINUATION OF LICENSES. Each party agrees to continue performing its obligations under this Agreement while any dispute is being resolved unless -19- and until such obligations are terminated or expire in accordance with the provisions by the termination or expiration of this Agreement not in dispute. Nothing in this Agreement shall be construed as altering the perpetual and irrevocable nature of the licenses granted by this Agreement or as authorizing any arbitrator or court in any way to enjoin or otherwise interfere with the proper exercise of such licenses by either party hereto. ARTICLE 13 - MISCELLANEOUS 13.1 FURTHER ASSURANCES. From time to time SBCL and ActaMed and their respective officers, employees, contractors, representatives and agents, shall confirm the provisions of this Agreement by execution and delivery of such assignments, confirmations or other written instruments as may be reasonably requested by the other party in order to vest each party with the rights mentioned in this Agreement. ActaMed and SBCL shall obtain appropriate assignments, covenants and obligations from its officers, employees, representatives, agents and any contractors hired to carry out its obligations under the SCAN Agreements prior to their performance thereof to ensure SBCL or ActaMed, as the case may be, may own the rights specified in this Agreement. 13.2 INTEGRATION. This License Agreement (including all of the Schedules hereto) supersedes all prior agreements and understandings between the parties with respect to the subject matter of this License Agreement, and is intended by the parties as the complete and exclusive statement of their agreement, and supersedes all prior understandings and agreements, whether oral or written, between the parties with respect to the same subject matter. 13.3 FORCE MAJEURE. Each party shall be excused from delays in performing or from its failure to perform hereunder to the extent that such delays or failures result from causes beyond the reasonable control of such party; PROVIDED that, in order to be excused from delay or failure to perform, such party must act diligently to remedy the cause of such delay or failure. 13.4 NO AGENCY. Each party hereto, is acting solely as an independent contractor. In no way is either party to be construed as the agent or to be acting as the agent of the other party in any respect. Each party has the sole obligation to supervise, manage, contract, direct, procure, perform, or cause to be performed all work to be carried out by such party under any SCAN Agreement. 13.5 NO WAIVER. No delay or omission by either party to exercise any right arising upon any noncompliance with, or breach of, any covenant, condition or agreement to be performed by the other party shall impair any such right or be construed to be a waiver thereof. A waiver by either of the parties hereto of any noncompliance with, or breach of, any covenant, condition or agreement to be performed by the other party must be in writing and signed by both parties. No waiver of any right upon any one occurrence of noncompliance or breach -20- shall be construed to be a waiver of any succeeding noncompliance or breach. Unless stated otherwise, all remedies provided for in this License Agreement shall be cumulative and in addition to and not in lieu of any other remedies available to either party at law, in equity, or otherwise. 13.6 SEVERABILITY. If any term, covenant, condition or provision of this License Agreement or the application thereof to any circumstance shall be invalid or unenforceable to any extent, the remaining terms, covenants, conditions and provisions of this License Agreement shall not be affected thereby and each remaining term, covenant, condition and provision of this License Agreement shall be valid and enforceable to the fullest extent permitted by law. If any provision of this License Agreement is so broad as to be unenforceable, such provision shall be interpreted to be only as broad as is enforceable. 13.7 NOTICES. If one party is required or desires to give notice to the other, such notice shall be deemed given if mailed by U.S. mail, first class, postage prepaid, or via a nationally recognized overnight carrier, with all freight charges prepaid, and addressed as follows (or as subsequently noticed to the other party): If to SBCL: SmithKline Beecham Clinical Laboratories, Inc. 1201 S. Collegeville Road Collegeville, PA 19426 ATTN: [*] If to ActaMed: ActaMed Corporation 7000 Central Parkway Suite 600 Atlanta, GA 30328 ATTN: MIKE HOOVER 13.8 GOVERNING LAW; INTERPRETATION. This License Agreement shall be construed, interpreted and enforced under the laws of the Commonwealth of Pennsylvania, excluding its provisions regarding conflicts of law. The section and subsection headings used herein are for reference and convenience only, and shall not enter into the interpretation hereof. [*] CONFIDENTIAL TREATMENT REQUESTED -21- IN WITNESS WHEREOF, the parties have caused this License Agreement to be executed on the date set forth below. SMITHKLINE BEECHAM CLINICAL ACTAMED CORPORATION LABORATORIES, INC. BY: /s/ John B. Okkerse, Jr. BY: /s/ Michael K. Hoover --------------------------- ------------------------- NAME: John B. Okkerse, Jr. NAME: Michael K. Hoover --------------------------- ------------------------- TITLE: President TITLE: President --------------------------- ------------------------- DATE: 12-31-97 DATE: 12-31-97 --------------------------- ------------------------- SCHEDULE A SBCL SOFTWARE - - SBCL proprietary Software known as [*] (including without limitation the [*]) and [*]. - - Download programs and routines and other SBCL proprietary Software reasonably required to perform Information Services as SBCL is performing them as of the date of the License Agreement. - - Documentation owned by SBCL and related to any of the foregoing. - - Specifications owned and possessed by SBCL with respect to the foregoing. - - Such Specifications for the Software known as [*] and [*] as SBCL determines reasonably necessary for the SBCL Software, SCAN Developments and ActaLab Software [*] and [*]. - - Such updates, upgrades, corrections, modifications, and enhancements to any of the foregoing created during the term of the Services Agreement. - - All patents, patent applications, copyrights, trade secrets, know-how, information and other intellectual property rights that are currently owned or controlled by SBCL and that are embodied or practiced in the foregoing. [*] CONFIDENTIAL TREATMENT REQUESTED SCHEDULE B AMENDMENTS TO DEVELOPMENT AGREEMENT SBCL and ActaMed hereby agree this day of December, 1997, to amend their Development Agreement October 31, 1997, as set forth herein as of the effective dates set forth herein. 1. Effective as of the date of the Development Agreement, Article I of the Development Agreement is hereby amended to include the following additional or revised definitions: "ActaLab Software" has the meaning ascribed to it by the License Agreement. "Deliverable" means all Software, Documentation and other materials developed by ActaMed under this Agreement and described in a Statement of Work. "License Agreement" means that certain License Agreement between SBCL and ActaMed dated December 22, 1997. "SBCL Software" has the meaning ascribed to it by the License Agreement. "SOW No. 1" shall mean the Statement of Work dated October 31, 1997. 2. The second "Whereas" clause is hereby deleted. 3. The fourth "Whereas" clause is hereby revised to delete the words "to SBCL." 4. Section 5.1(a) of the Development Agreement is hereby revised as of the date of the Development Agreement to read as follows: (a) The parties hereby acknowledge and agree that: (i) The Deliverables under SOW No. 1 do not [*] the SBCL Software, but instead [*] which will be used in conjunction with and/or will be integrated into ActaMed's ProviderLink software. All Deliverables (including but not limited to, the ActaLab Software) under SOW No. 1, and all intellectual property rights (including but not limited to copyrights and all renewals and extensions thereof) in such Deliverables, shall be [*]. Subject to the provisions of Section 5(a)(iv) hereof, SBCL hereby grants, transfers and assigns all of its right, title and interest in such Deliverables, including patents, copyrights, trade secrets and other intellectual property developed or acquired in the course of creating such Deliverables, to ActaMed and ActaMed shall have the right to obtain and hold in its own name copyrights, [*] CONFIDENTIAL TREATMENT REQUESTED patents, registrations and similar protections which may be available with respect to such Deliverables. (ii) The parties contemplate that additional SOWs may be entered into from time to time for the purpose of enhancing, modifying or upgrading the ActaLab Software (an "ActaLab SOW"). All Deliverables under an ActaLab SOW and all intellectual property rights (including but not limited to copyrights and all renewals and extensions thereof) in such Deliverables, shall be [*]. Subject to the provisions of Section 5(a)(iv) hereof, SBCL hereby grants, transfers and assigns all of its right, title and interest in such Deliverables, including patents, copyrights, trade secrets and other intellectual property developed or acquired in the course of creating such Deliverables, to ActaMed and ActaMed shall have the right to obtain and hold in its own name copyrights, patents, registrations and similar protections which may be available with respect to such Deliverables. (iii) The parties contemplate that additional SOWs may be entered into from time to time for the purpose of enhancing, modifying or upgrading the SBCL Software (a "SCAN Development SOW"). Ownership of any Deliverables under a SCAN Development SOW, and ownership of any intellectual property rights therein (including but not limited to copyrights and all renewals and extensions thereof), shall be governed in all respects by Article 3 of the License Agreement. Subject to the provisions of Section 5(a)(iv) hereof, ActaMed hereby grants, transfers and assigns all of its right, title and interest in such Deliverables, including patents, copyrights, trade secrets and other intellectual property developed or acquired in the course of creating such Deliverables, to SBCL. (iv) Nothing in this Section 5(a) shall be construed to transfer to ActaMed, or otherwise divest SBCL of SBCL's ownership of, the SBCL Software and, subject to the licenses granted by the License Agreement, SBCL (as between SBCL and ActaMed) shall be the sole owner of the patents, copyrights, trade secrets and other intellectual property rights therein. Nothing in this Section 5(a) shall be construed to transfer to SBCL, or otherwise divest ActaMed of ActaMed's ownership of, any software or work of authorship owned by ActaMed as of the effective date of the Development Agreement and, subject to the licenses granted by the License Agreement, ActaMed (as between SBCL and ActaMed) shall be the sole owner of any patent, copyright, trade secret right or other intellectual property right therein. (v) Any Statement of Work, by mutual agreement of the parties, may include limitations and restrictions on ActaMed's use of the applicable Deliverables in support of laboratory testing services of commercial laboratories other than SBCL. 6. Sections 5.1(d) and (e) and Section 5.2(a) as of the date of this Amendment are hereby deleted from the Development Agreement. [*] CONFIDENTIAL TREATMENT REQUESTED 7. In the event of conflict between the Development Agreement and the License Agreement, the License Agreement shall control. 9. Except as expressly set forth herein, the Development Agreement shall continue in full force and effect as originally executed by the parties. 10. Nothing in this Agreement shall be construed to modify or change in any respect the ownership and use rights with respect to Exclusive Developments (as defined in the Services Agreement between SBCL and ActaMed dated the date hereof) pursuant to the License Agreement and Section V of said Services Agreement. In witness whereof, the parties have caused this Amendment to be signed this day of December, 1997. SMITHKLINE BEECHAM CLINICAL ACTAMED CORPORATION LABORATORIES, INC. BY: /s/ BY: /s/ ---------------------------- --------------------------- NAME: John B. Okkersee Jr. NAME: Michael K. Hoover -------------------------- ------------------------- TITLE: President TITLE: President ------------------------- ------------------------ DATE: DATE: -------------------------- ------------------------- EX-10.17 9 EXHIBIT 10.17 CONFIDENTIAL TREATMENT REQUESTED DEVELOPMENT AGREEMENT THIS AGREEMENT is made as of this 31 day of October, 1997, by and between SmithKline Beecham Clinical Laboratories, Inc., a Delaware corporation with offices located at 1201 S. Collegeville Road, Collegeville, PA 19426 ("SBCL"), and ActaMed Corporation, a Georgia corporation with offices located at 7000 Central Parkway, Suite 600, Atlanta, GA 30328 ("ACTAMED"). WHEREAS, ACTAMED has expertise in software development, installation and implementation, systems analysis and design, data processing and computer programming; WHEREAS, ACTAMED employs a staff of qualified technical personnel whose services ACTAMED is willing to provide to SBCL on a temporary or project basis; WHEREAS, SBCL desires to have ACTAMED provide certain services and personnel to SBCL for the project described in the attached Statement of Work; and WHEREAS, the parties desire to agree upon the terms and conditions under which ACTAMED may provide such services and personnel to SBCL. NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and agreements contained herein, the parties hereto agree as follows: ARTICLE I DEFINITIONS For purposes of this Agreement, the following terms shall have the following meanings and shall include the plural as well as the singular: "Affiliate" means any corporation or other entity which controls, is controlled by, or is under common control with SBCL, and any joint venture or partnership in which SBCL is a partner or joint venturer, or any other entity in which SBCL has an interest and to which it supplies or receives information processing services. A corporation or other entity shall be deemed to control another corporation or entity if it owns, directly or indirectly, more than fifty percent (50%) of the voting shares or other interest, or has the power to elect more than half the directors, of such other corporation or entity. "Confidential Information" means any and all proprietary information disclosed or made available by a party hereto to the other party in the course of performing hereunder, whether in written, oral, magnetic, photographic, optical or other form and whether now existing or hereafter created, including, without limitation, all trade secrets, know-how, information systems, technology, data, computer programs, processes, methods, operational procedures, plans, strategies or results, and other information of a similar nature that is not generally disclosed by such party to the public. Confidential Information shall not include any information which (a) is proven by written evidence to have been in a receiving party's possession prior to disclosure by the other party; (b) is received from a third party having the right to disclose such information; (c) is or hereafter becomes public knowledge through no act or fault of a receiving party; or (d) is proven by written evidence to have been independently developed by a receiving party without access to the Confidential Information of the other party. "Deliverables" means all Software, Documentation and other materials developed for or delivered to SBCL by ACTAMED under this Agreement and described in a Statement of Work. "Derivative Work" means a work that is based upon one or more preexisting works, such as a revision, modification, translation, abridgment, condensation, expansion, or any other form in which such preexisting works may be recast, transformed, translated or adapted, and that, if prepared without authorization of the owner of the copyright in such preexisting work, would constitute a copyright infringement. "Documentation" means manuals (e.g., user, utility reference and language reference) and other written materials that relate to particular Software, including materials useful for the operation of the Software by a user, and information (e.g., data flows, data structures, control logic, flow diagrams, and principles of operation) useful for design, modification and maintenance of the source code by a programmer. Documentation also shall include any Maintenance Modifications or Enhancements thereto created by ACTAMED from time to time, and such additional materials as may be described in a Statement of Work. "Enhancements" means changes or additions, other than Maintenance Modifications, to Software and related Documentation, including all new releases, that improve functions, add new functions, or significantly improve performance by changes in system design or coding. "Error" means any error, problem, or defect resulting from (a) an incorrect functioning of Software, or (b) an incorrect or incomplete statement of diagram in Documentation, if such an error, problem or defect renders the Software inoperable, causes the Software to fail to meet the Specifications thereof, causes the Documentation to be inaccurate or incomplete in any material respect, causes incorrect results or causes incorrect functions to occur when any such materials are used. "Maintenance Modifications" means any modifications or revisions, other than Enhancements, to Software or Documentation that correct Errors, support new releases of the operating systems with which the Software is designed to operate, support new input/output devices or provide other incidental updates and corrections. "Services" means the software development, design, analysis, data processing, computer programming, consulting, training and/or such other services and duties to be provided to SBCL under this Agreement and described in a Statement of Work. -2- "Software" means computer programming code, including updates and revisions thereto, which conform to the Specifications and includes both object code (i.e., machine-readable) and source code (i.e., human-readable), and associated procedural code, all as more fully described in a Statement of Work. Software also shall include any Maintenance Modifications and Enhancements thereto created by ACTAMED from time to time. "Specifications" means the description of the design, operating procedures, performance, functions and other requirements for the Software set forth in a Statement of Work. "Statement of Work" or "SOW" means a written instrument in substantially the form of Exhibit A attached hereto which is signed on behalf of both parties by their authorized representatives. ARTICLE II SERVICES 2.1 SERVICES. SBCL hereby retains ACTAMED to provide the Services and Deliverables, and ACTAMED hereby agrees to provide the Services and Deliverables, in the manner described in this Agreement and in Statements of Work issued from time to time hereunder. The Services and Deliverables shall conform to the Specifications set forth in the applicable SOW. 2.2 SCHEDULE; LOCATION. SBCL, at its own expense, shall furnish to ACTAMED access to appropriate computer personnel, as well as all relevant Documentation, Specifications and source code in its possession and necessary for ACTAMED to provide the Services and Deliverables. ACTAMED will provide the Services and deliver the Deliverables on or before the dates (the "Schedule") and at the location(s) set forth in a SOW. Delivery of any intermediate Deliverables, or status reports thereon, also shall be on the dates specified in the Schedule. No variation or modification shall be made to the Schedule without the prior written consent of SBCL and ACTAMED. 2.3 Personnel. (a) ACTAMED shall provide fully trained, competent and skilled personnel for performance of the Services. (b) Promptly upon execution of this Agreement, each party shall notify the other party of the name, business address and telephone number of its Contract Administrator. The Contract Administrators of each party shall be responsible for arranging all meetings, visits and consultations between the parties that are of a nontechnical nature. The Contract Administrator also shall be responsible for receiving all notices under this Agreement and for all administrative matters such as invoices, payments and amendments. (c) Each SOW shall state the name, business address and telephone number of the Project Managers for each party. The Project Managers of each party designated for a particular -3- SOW shall, with respect to such SOW, be responsible for technical and performance matters, and the delivery, receipt and acceptance of the Deliverables and technical information. 2.4 PROGRESS REPORTS AND MEETINGS. At either party's reasonable written request from time to time during the performance of this Agreement, but at least once each month, and at no additional cost, the Project Managers and any other personnel either party may designate shall meet to review the progress of the project described in a particular SOW. At each such meeting, ACTAMED shall provide SBCL with a written status report, which shall include but not be limited to, any problem that, in ACTAMED's reasonable judgment, might cause any increase in the budgeted costs for such project or adversely affect ACTAMED's ability to meet the Schedule or the Specifications. 2.5 Change Order Procedures. (a) REQUIREMENT OF CHANGE ORDERS. All changes, modifications and additions to the obligations of either party under this Agreement or any SOW requires a written change order (a "Change Order"). Either party may initiate a Change Order by submitting a written request for a Change Order to the other party along with an explanation of reasons as to why such a modification is desirable or necessary. (b) CHANGE ORDER CONTENTS. All Change Orders must contain: (i) a description of any additional work to be performed and/or changes to the performance required of either party, including the estimated number and skill level of personnel necessary to make such changes and/or additions and the availability of such personnel over the ensuing period; (ii) a statement of the impact of the work or changes on the Services, Deliverables, Schedule, costs or other requirements of this Agreement or a SOW; (iii) acceptance test procedures for such work, if applicable; and (iv) signatures of duly authorized individuals of each party. (c) ACCEPTANCE OF CHANGE ORDER. Within ten (10) days of the submission of a Change Order request from one party to the other, the receiving party shall notify the other party of its acceptance or rejection. SBCL may, in its sole discretion, reject any Change Order requested by ACTAMED. ACTAMED may not decline to accept any Change Order requested by SBCL that, together with any prior accepted Change Orders, do not substantially affect the nature of the Deliverables, their performance or functionality, and does not change the Schedule by more than two man day or dollar amounts by more than 2%. 2.6 CONTROLLING DOCUMENT. In the event any provision contained in this Agreement conflicts with any part of a SOW, the provision set forth in the SOW shall take precedence. -4- ARTICLE III COMPENSATION; PAYMENT AND EXPENSES 3.1 COMPENSATION. Amounts and method of payment for all Services and Deliverables to be provided under this Agreement shall be set forth in each SOW. 3.2 PAYMENT. Unless otherwise specified in the applicable SOW, (a) ACTAMED shall submit invoices to SBCL for payment for Services and Deliverables within thirty (30) calendar days after the close of each month during which Services were rendered and/or Deliverables were delivered to SBCL; and (b) all undisputed invoices shall be due and payable within [*] days of SBCL's receipt of such invoice and acceptance of the Services and/or Deliverables. All invoices shall specifically refer to the applicable SOW, indicate the period of performance and provide reasonable detail with respect to the Services and Deliverables to which they relate, including, if applicable, time and labor spent in providing the Services, cost of materials and travel and living expenses. Supporting documentation called for by SBCL's standard reimbursement policies shall accompany any such invoice. Payment in accordance with these terms shall represent full and complete compensation for all Services and Deliverables provided pursuant hereto, and for any inventions, improvements, copyrights, patent rights and other intellectual property rights assigned, as more fully set forth below. 3.3 RECORDS AND AUDITS. ACTAMED shall maintain complete and accurate accounting records in accordance with sound accounting practices to substantiate ACTAMED's charges and shall preserve such records for a period of at least [*] after completion of the pertinent work. SBCL shall have access to such records for purposes of audit, either through its own representatives or through an accounting firm selected and paid by SBCL. Any such review of ACTAMED's records shall be conducted at reasonable times during business hours, and no more than twice annually. 3.4 TAXES. ACTAMED assumes all responsibility and liability for the payment of any federal, state, or local income taxes due on money received from SBCL hereunder, and shall be responsible for all employment taxes and withholding with respect to its employees and contractors. 3.5 EXPENSES. Except as otherwise agreed by SBCL in writing, ACTAMED shall bear all of its own expenses arising from performance of its obligations under this Agreement and each SOW, including, without limitation, expenses for transportation, living facilities, work spaces, utilities, management, clerical and reproduction services, supplies, and the like. ARTICLE IV DELIVERY; ACCEPTANCE AND MAINTENANCE 4.1 DELIVERY. ACTAMED shall deliver all Deliverables for testing and acceptance in the manner set forth in the applicable SOW. [*] Confidential Treatment Requested -5- 4.2 TESTING. (a) Upon receipt of the Deliverables, SBCL shall test the Deliverables to determine whether they meet the Specifications and any other requirements set forth in the SOW. (b) Unless otherwise specified in the applicable SOW, such testing shall be conducted in accordance with the following testing procedures and criteria: (i) SBCL will notify ACTAMED, in writing, that it is accepting or rejecting the Deliverables within thirty (30) days after receipt. Any notice of rejection shall set forth the grounds for rejection. ACTAMED shall use its best efforts to remedy any failures of the Deliverables to meet the Specifications, and shall deliver corrected Deliverables to SBCL as soon as possible. (ii) Upon receipt of corrected Deliverables, SBCL shall have [*] within which to test them and inform ACTAMED of its acceptance or rejection. This procedure may be repeated any number of times; PROVIDED, HOWEVER, that if SBCL detects errors in the Deliverables or the Deliverables fail to meet the Specifications, SBCL may withhold payment under the applicable SOW until the errors in the Deliverables are corrected or the Deliverables meet the Specifications. (c) If SBCL detects errors in the Deliverables or the Deliverables fail to meet the Specifications after it has tested them twice, SBCL shall thereafter have, until it accepts the Deliverables, the right to terminate this Agreement or the applicable SOW upon written notice to ACTAMED. Upon such termination, ACTAMED shall retain all payments SBCL has made to it up to the date of termination, SBCL shall retain all Deliverables received by such date, and SBCL shall have no further obligations to pay any amounts to ACTAMED under this Agreement. 4.3 ACCEPTANCE. If SBCL does not detect any Errors or any failure of the Deliverables to meet the Specifications after a performance of the tests described in Section 4.2, SBCL shall accept the Deliverables by issuing a written confirmation of acceptance to ACTAMED, which shall be effective as of the date of successful completion of the tests. ARTICLE V OWNERSHIP AND CONFIDENTIALITY 5.1 OWNERSHIP OF WORK PRODUCT BY SBCL. (a) SBCL and ACTAMED agree that any Deliverables prepared under this Agreement, including modifications to software owned by ACTAMED, and ownership of all intellectual property rights, including but not limited to copyrights and all renewals and extensions thereof, in such works shall [*]. SBCL and ACTAMED agree to and hereby grant, transfer and assign such right, title and interest in the Deliverables, including patents, copyrights and trade secrets for purposes of, and to the extent necessary and [*] Confidential Treatment Requested -6- consistent with this Section 5.1(a). From time to time SBCL and ACTAMED, and their respective officers, employees, contractors, representatives and agents, shall confirm the foregoing assignment by execution and delivery of such assignments, confirmations or other written instruments as may be reasonably requested by the other party in order to vest each party with the rights mentioned in this Section 5.1(a). ACTAMED shall obtain appropriate assignments, covenants and obligations from its officers, employees, representatives, agents and any contractors hired to carry out its obligations under this Agreement prior to their performance under any SOW to ensure SBCL and ACTAMED may own the rights specified in this Section 5.1(a). (b) ACTAMED agrees that it shall not, directly or indirectly, produce, develop or participate in the production or development of any work, materials documentation or software similar to any Deliverable or Specification, or utilize any techniques, methods or know-how relating to the aforementioned items, for the period beginning as of the date hereof and ending on the date on which the last phase any Deliverable was scheduled under an SOW to be delivered to SBCL for testing and acceptance, or the date the last phase any such Deliverable was actually delivered to SBCL for testing and acceptance, whichever is later; PROVIDED, HOWEVER, nothing contained in this Section 5.1(b) shall prohibit ACTAMED from purchasing any work, documentation or software similar in function or purpose to any of the Deliverables or Specifications that is produced or developed independently by a third party without access, reference or knowledge of the Deliverables, Specifications or any other SBCL Confidential Information. SBCL reserves the right to audit and inspect any work, materials, documentation or software developed or purchased by ACTAMED at any time that is similar to any Deliverable or Specification for purposes of ensuring compliance with the confidentiality provisions of this Agreement. (c) ACTAMED agrees that if, during [*] beginning with the date on which the last phase of any Deliverable was scheduled under SOW No. 1 to be delivered to SBCL for testing and acceptance, or the date the last phase of any such Deliverable was actually delivered to SBCL for testing and acceptance, whichever is later, ACTAMED, directly or indirectly, produces, develops or participates in the production or development of any laboratory test ordering and result reporting software, ACTAMED will not permit any software engineer, designer or similar person (whether an employee or independent contractor) that participated in the production or development of the Services or Deliverables or who otherwise had access to SBCL Confidential Information to participate, directly or indirectly, in such production or development. (d) Notwithstanding anything to the contrary in this Agreement, both SBCL and ACTAMED agree not to exercise or to authorize any other party to exercise any of SBCL's or ACTAMED's ownership rights or privileges with respect to any of the Deliverables, including without limitation, the right to use, license, sell, deliver, transfer or incorporate such Deliverables into any other product for any reason without the prior written consent of the other party. Neither party shall have any obligation to give their consent for purposes of this Section 5.1(d). (e) SBCL and ACTAMED agree not to reveal any Deliverable, in whole or in part, to anyone outside of ACTAMED or SBCL without the prior written consent of the other party, or to any officer, employee, contractor, representative or agent of ACTAMED or SBCL who is not [*] Confidential Treatment Requested -7- covered by the restrictions on confidentiality and use contained herein. ACTAMED further agrees not to use, sell, deliver, transfer or reveal any Specification, in whole or in part, to anyone outside of ACTAMED without SBCL's prior written consent, or to any officer, employee, contractor, representative or agent of ACTAMED who is not covered by the restrictions on confidentiality and use contained herein. 5.2 PREEXISTING WORKS. (a) In the event that any Deliverable or part thereof constitutes a Derivative Work of any preexisting works owned by either party, or in the event either party requires the other party's preexisting works in order to perform under this Agreement, each party hereby grants to the other party and its Affiliates a non-exclusive, worldwide, royalty-free right and license to use, execute, reproduce, display, perform and distribute internally such preexisting works for the sole and limited purpose of developing the Deliverables and performing the Services in accordance with this Agreement. All rights not granted herein are specifically reserved. For purposes of this Section 5.2, "preexisting works" shall include, but not be limited to, the Specifications (including the specifications for the [*] and [*] systems) and "SBCL SCAN" software, in the case of SBCL, and the "Provider Link" software, in the case of ACTAMED. (b) In the event that any Deliverable or part thereof constitutes a Derivative Work of preexisting works not owned by SBCL or ACTAMED, SBCL or ACTAMED, as the case may be, shall ensure that the other party and its Affiliates have a non-exclusive, worldwide, royalty-free right and license to use, execute, reproduce, display, perform and distribute internally such preexisting works for the sole and limited purpose of developing the Deliverables and performing the Services in accordance with this Agreement. SBCL and ACTAMED each agree to notify the other party in writing of any pre-existing work, or portion thereof, which either or them does not own prior to the incorporation of such pre-existing work in the Deliverables. Such notice shall identify: (i) the pre-existing work which is not owned, (ii) the owner of such pre-existing work, (iii) SBCL's or ACTAMED's, as the case may be, right to use such pre-existing work, (iv) the nature of SBCL's or ACTAMED's right to grant to the other party the license contemplated herein, and (v) it shall grant the other party the aforesaid rights and license. 5.3 OBLIGATION OF CONFIDENTIALITY. (a) SBCL and ACTAMED each acknowledge and agree that during the term of this Agreement, they shall have access to certain Confidential Information of the other party. SBCL and ACTAMED each agree to keep such Confidential Information in strict confidence and shall not disclose it to any person, firm, partnership or corporation other than to its officers, employees, contractors, representatives and agents who have a need to know such information in order to perform hereunder or under a SOW, nor use the same for any purpose other than performance hereunder or under a SOW. SBCL and ACTAMED, respectively, shall advise all officers, employees, contractors, representatives and agents with access to the other party's Confidential Information of the confidentiality obligations with respect thereto under this Agreement. Notwithstanding the foregoing, SBCL and ACTAMED shall be and remain liable and responsible [*] Confidential Treatment Requested -8- for the confidentiality obligations of their respective officers, employees, contractors, representatives and agents. In addition to the foregoing, SBCL and ACTAMED shall protect and safeguard the other party's Confidential Information by using the same degree of care, but no less than a reasonable degree of care to prevent the unauthorized use, dissemination or publication of such Confidential Information as they each use to protect their own confidential or proprietary information of a like nature. Upon request by the other party, SBCL and ACTAMED shall require any or all of its officers, employees, contractors, representatives and agents to sign a confidentiality agreement prepared by the other party and approved by SBCL or ACTAMED, as the case may be, which affirms such officers, employees, contractors, representatives or agents obligations in regards to the Confidential Information. (b) SBCL and ACTAMED each acknowledge and agree that the terms and conditions with respect to confidentiality are reasonable and necessary for the protection of each of the party's Confidential Information and to prevent damage or loss to the other party. SBCL and ACTAMED further agree that any breach or threatened breach of such provisions will cause the other party irreparable harm for which there is no adequate remedy at law. Therefore, SBCL and ACTAMED each agree that the nondisclosing party shall be entitled, in addition to any other remedies available, to injunctive or other equitable relief to require specific performance or to prevent a breach of the foregoing confidentiality provisions. (c) Upon the breach of any provision, early termination or completion of this Agreement or any SOW, SBCL and ACTAMED each agree to cease all use and make no further use of the Confidential Information disclosed to it by the other party and shall, upon the written request of the other party, promptly return all such Confidential Information, including any copies used or distributed to any of its officers, employees, contractors, representatives and agents, and retain no copies. (d) The confidentiality obligations of this Section 5.3 shall survive termination of this Agreement. ARTICLE VI REPRESENTATIONS AND WARRANTIES 6.1 WARRANTY OF TITLE AND NONINFRINGEMENT. (a) ACTAMED represents and warrants to SBCL that: (i) unless ACTAMED provides SBCL with advance written notice to the contrary in accordance with Section 5.2(b), ACTAMED is and will be the sole author of all works used by ACTAMED in preparing any and all Deliverables; (ii) ACTAMED shall require all officers, employees, contractors, representatives and agents who provide Services or Deliverables hereunder to assign to ACTAMED all intellectual property rights created or arising in the performance of the Services and Deliverables for purposes consistent with Article V; -9- (iii) ACTAMED has and will have full and sufficient right to assign or grant the rights granted pursuant to this Agreement, free and clear of any liens, claims or encumbrances; and (iv) none of the Deliverables infringe any patents, copyrights, trademarks, or other intellectual property rights (including trade secrets), privacy or similar rights of any third party, nor has any claim of such infringement been threatened or asserted. (b) SBCL represents and warrants to ACTAMED that: (i) SBCL has and will have full and sufficient right to assign or grant the rights granted pursuant to this Agreement, free and clear of any liens, claims or encumbrances; and (ii) none of the Specifications, software and any other materials provided to ActaMed by SBCL hereunder infringe any patents, copyrights, trademarks, or other intellectual property rights (including trade secrets), privacy or similar rights of any third party, nor has any claim of such infringement been threatened or asserted. 6.2 WARRANTIES OF CONFORMITY, PERFORMANCE AND COMPLIANCE. ACTAMED represents and warrants to SBCL that: (a) all Services and Deliverables shall be performed or provided in a workmanlike manner and with professional diligence and skill; (b) no portion of the Software contains any unauthorized code such as a virus, Trojan horse, worm or other software routine or hardware component designed to permit unauthorized access to disable, erase or otherwise harm the Software, hardware, or data automatically, with the passage of time or under the control of a person other than SBCL; and (c) the Software includes acceptable Specifications so that any or all such Software and any related hardware will not abruptly end or provide invalid or incorrect results during the operation of SBCL's business due to issues related to Year 2000 compliance. "Year 2000 compliance" requires that the Specifications of the Software and related hardware include, but not be limited to: date data century recognition, calculations that accommodate same century and multi-century formulas and date values, and date data interface values that reflect the century. The Software and related hardware shall be used by SBCL prior to, during and after the calendar year 2000. The Specifications of the Software and related hardware to ensure Year 2000 compliance shall be supplied by ACTAMED at no additional cost to SBCL. 6.3 AVOIDANCE OF INFRINGEMENT. In performing Services under this Agreement, ACTAMED agrees to avoid designing or developing any items that infringe any patents, copyrights or other intellectual property rights of any third party. If SBCL or ACTAMED becomes aware of any such possible infringement in the course of performing work under any SOW issued hereunder, SBCL or ACTAMED, as the case may be, shall immediately so notify the other party in writing. -10- 6.4 INDEMNIFICATION. (a) SBCL and ACTAMED, respectively, shall indemnify and hold the other party harmless from and against all loss, liability, costs, charges, claims or damages to any persons or property, arising out of this Agreement, a SOW or the provision of the Services or Deliverables where caused by its own fault or negligence, or the fault or negligence of its officers, employees, contractors, representatives or agents. SBCL and ACTAMED also shall indemnify and hold the other party harmless from and against all loss, liability, costs, charges, claims or damages which may arise as a consequence of or grow out of any injury, illness or death of its officers, employees, contractors, representatives or agents who are engaged in the performance of the Services under this Agreement or a SOW. (b) ACTAMED shall defend or settle, at its own expense, any and all suits, actions, proceedings or claims against SBCL charging that any part of the Services infringes any patent, trademark, trade secret, copyright or other intellectual property right of any person or entity. SBCL and ACTAMED shall defend or settle, each at its own expense, any and all suits, actions, proceedings or claims against the other party charging that the use, copying, modification, disclosure or distribution of any part of the Deliverables or Documentation provided by SBCL or ACTAMED, as the case may be, infringes any patent, trademark, trade secret, copyright or other intellectual property right of any person or entity not a party hereto. Each party will pay actual costs of the other party, including all legal fees and any damages awarded in any such suit or proceeding, and will indemnify and hold that other party harmless from all other liability incurred in connection with such action. (c) SBCL and ACTAMED each agree to (i) promptly notify the other party in writing of any claim for which it is seeking indemnification; (ii) at the other party's request and expense, give assistance reasonably required for the defense of any such claim; and (iii) give the other party control of the defense and/or settlement of such claim; PROVIDED, HOWEVER, that the other party may participate in such defense and/or settlement at its option and expense. (d) If any part of the Services or Deliverables is or is likely to become the subject of such a suit, action or claim, at no expense to the other party, SBCL or ACTAMED may: (i) obtain sufficient rights to allow the other party to use the Services or Deliverables as contemplated hereunder; or (ii) substitute non-infringing services or deliverables acceptable to the other party and substantially similar to the Services and Deliverables described in the SOW. Any such replacement services and deliverables shall be subject to all of the terms and conditions of this Agreement, including without limitation, the foregoing indemnification provisions. 6.5 SURVIVAL. The provisions of this Section shall survive the termination of this Agreement. -11- ARTICLE VII TERM AND TERMINATION 7.1 TERM. This Agreement shall commence on the date hereof and shall remain in force for a period of [*] unless sooner terminated as provided herein; PROVIDED, HOWEVER, this Agreement shall remain in effect with respect to any Statements of Work already issued hereunder at the time of such termination until such Statements of Work are themselves terminated and/or performance thereunder is completed. 7.2 TERMINATION OF SOWS. SBCL may terminate any or all SOWs outstanding, or any portion thereof, upon fifteen (15) business days' written notice in the event that SBCL reasonably determines that ActaMed has failed to meet any of the milestone dates for completing a phase of work, as set forth in the project plan for the applicable SOW; provided however, that SBCL acknowledges that ActaMed's timely performance may be dependent upon SBCL's timely performance, and therefore SBCL may not so terminate if ActaMed's failure to meet a milestone date is (i) the result of SBCL's failure to timely perform, or (ii) because the parties are still engaged in the testing and acceptance process for that milestone. Upon receipt of notice of such termination, ACTAMED shall inform SBCL of the extent to which performance has been completed through such date, and collect and deliver to SBCL whatever work product then exists in the manner prescribed by SBCL. Subject to Section 4.2(c), ACTAMED shall be paid for all work performed and accepted through the date of termination, provided that such payment shall not be greater than the payment that would have become due if the work had been completed. ACTAMED may not terminate any SOW once ACTAMED has entered into such SOW. 7.3 TERMINATION OF AGREEMENT. SBCL or ACTAMED may terminate this Agreement for cause, as provided below, upon [*] prior written notice. SBCL and ACTAMED may terminate this Agreement or any SOW at any time upon mutually written agreement. This Agreement shall continue to remain in effect with respect to any SOW already issued hereunder until such SOW is itself terminated and/or performance thereunder is completed. 7.4 TERMINATION IN THE EVENT OF BREACH. In the event of any material breach of this Agreement or a SOW by either party, the other party may terminate this Agreement or the applicable SOW without waiving any remedies or rights available to such other party at law or in equity. Such termination shall be in writing upon at least [*] prior written notice to the party in breach specifying the nature of the breach. The party in breach shall have the opportunity to cure such breach during such [*] period. If the breach has been cured by the end of such period, this Agreement and the applicable SOW will not terminate. 7.5 INSOLVENCY. Either party may immediately terminate this Agreement if the other party is declared insolvent or bankrupt; the property of the other party is assigned for the benefit of creditors, levied upon under execution, or seized by virtue of any writ of any court of law; a petition for declaration of bankruptcy or reorganization is filed against the other party in any court and not dismissed in ninety (90) days; or a trustee or receiver is appointed for the other party. In the event of any such insolvency or bankruptcy, all licenses granted hereunder shall be considered licenses to [*] Confidential Treatment Requested -12- intellectual property, and SBCL shall be entitled to retain the licenses granted herein, subject to ACTAMED's right to terminate this Agreement for reasons other than bankruptcy or insolvency as expressly provided in this Agreement. In the event that a court or other legal or administrative tribunal, directly or through an appointed master, trustee or receiver, assumes partial or complete control over the assets of a party to this Agreement based on the insolvency or bankruptcy of such party, the bankrupt or insolvent party shall promptly notify the court or other tribunal of the confidentiality obligations under this Agreement, and that Confidential Information received from the other party under this Agreement remains the property of the other party. In addition, the bankrupt or insolvent party shall, to the extent permitted by law, take all steps necessary or desirable to maintain the confidentiality of the other party's Confidential Information and to insure that the court, other tribunal or appointee maintains such information in confidence in accordance with the terms of this Agreement. 7.6 CONSEQUENCES OF TERMINATION. Upon termination of this Agreement, ACTAMED shall: (a) immediately cease work as provided in the notice of termination, and shall cease to represent itself as providing services to SBCL; and (b) deliver to SBCL (i) a report describing the current state of the Services and Deliverables to be provided by ACTAMED under this Agreement and any applicable SOWs at the date of termination; (ii) all SBCL Confidential Information in its possession; and (iii) all work product, Software, materials and Documentation related to the Services and Deliverables in whatever state of development they may exist on the date of termination. ARTICLE VIII MISCELLANEOUS 8.1 FORCE MAJEURE. Each party shall be excused from delays in performing or from its failure to perform hereunder to the extent that such delays or failures result from causes beyond the reasonable control of such party; PROVIDED that, in order to be excused from delay or failure to perform, such party must act diligently to remedy the cause of such delay or failure. 8.2 NO AGENCY. ACTAMED, in rendering performance under this Agreement and any SOW, is acting solely as an independent contractor. SBCL does not undertake by this Agreement or otherwise to perform any obligation of ACTAMED, whether by regulation or contract. In no way is ACTAMED to be construed as the agent or to be acting as the agent of SBCL in any respect. ACTAMED has the sole obligation to supervise, manage, contract, direct, procure, perform, or cause to be performed all work to be carried out by ACTAMED hereunder. 8.3 NO WAIVER. No delay or omission by either party to exercise any right arising upon any noncompliance with, or breach of, any covenant, condition or agreement to be performed by the other party shall impair any such right or be construed to be a waiver thereof. A waiver by either of the parties hereto of any noncompliance with, or breach of, any covenant, condition or agreement to be performed by the other party must be in writing and signed by both parties. No waiver of any -13- right upon any one occurrence of noncompliance or breach shall be construed to be a waiver of any succeeding noncompliance or breach. Unless stated otherwise, all remedies provided for in this Agreement shall be cumulative and in addition to and not in lieu of any other remedies available to either party at law, in equity, or otherwise. 8.4 SEVERABILITY. If any term, covenant, condition or provision of this Agreement or the application thereof to any circumstance shall be invalid or unenforceable to any extent, the remaining terms, covenants, conditions and provisions of this Agreement shall not be affected thereby and each remaining term, covenant, condition and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law. If any provision of this Agreement is so broad as to be unenforceable, such provision shall be interpreted to be only as broad as is enforceable. 8.5 NOTICES. If one party is required or desires to give notice to the other, such notice shall be deemed given if mailed by U.S. mail, first class, postage prepaid, or via a nationally recognized overnight carrier, with all freight charges prepaid, and addressed as follows (or as subsequently noticed to the other party): If to SBCL: SmithKline Beecham Clinical Laboratories, Inc. 1201 S. Collegeville Road Collegeville, PA 19426 ATTN: [*] ---------------------------- If to ACTAMED: ActaMed Corporation 7000 Central Parkway Suite 600 Atlanta, GA 30328 ATTN: Mike Hoover ---------------------------- 8.6 ASSIGNMENT. SBCL may assign all of its rights and obligations under this Agreement, SOWs or any license granted hereunder to any Affiliate, or to any corporation or other entity pursuant to a merger, consolidation, or other reorganization. SBCL agrees to notify ACTAMED of any such assignment, in writing, specifying the name and address of the other entity. ACTAMED may not, without the prior written consent of SBCL, assign or transfer this Agreement or any right or obligation hereunder, and any attempt to do so in contravention of this Section 8.6 shall be void and of no force and effect. 8.7 GOVERNING LAW; INTERPRETATION. This Agreement and all SOWs shall be construed, interpreted and enforced under the laws of the Commonwealth of Pennsylvania, excluding its provisions regarding conflicts of law. The section and subsection headings used herein are for reference and convenience only, and shall not enter into the interpretation hereof. [*] Confidential Treatment Requested -14- 8.8 ENTIRE AGREEMENT. This Agreement, the SOWs issued from time to time hereunder and the schedules and exhibits attached hereto or thereto, constitute the entire agreement concerning the subject matter covered herein and supersede all prior oral or written agreements, understandings and promises relating thereto. This Agreement may not be modified or amended except by an instrument in writing declared to be an amendment hereto and executed by both parties. This Agreement may be executed in several counterparts, all of which taken together shall constitute one single agreement between the parties. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in the manner appropriate to each as of the day and year first above written. ACTAMED CORPORATION SMITHKLINE BEECHAM CLINICAL LABORATORIES, INC. By: /s/ By: /s/ ------------------------ -------------------------------- Mike Hoover Rich Davis President Vice President Information Resources Dated: 10/31/97 Dated: 10/30/97 --------------------- ----------------------------- -15- EXHIBIT A STATEMENT OF WORK This is a Statement of Work entered into on this 31st day of October, 1997, between SmithKline Beecham Clinical Laboratories, Inc., a Delaware corporation with offices located at 1201 S. Collegeville Road, Collegeville, PA 19426 ("SBCL"), and ActaMed Corporation, a Georgia corporation with offices located at 7000 Central Parkway, Suite 600, Atlanta, GA 30328 ("ACTAMED"), under the Development Agreement, dated as of October 31, 1997. 1. PROJECT MANAGERS: for SB: [*] 1201 So. Collegeville Rd. Collegeville, PA 19426 VOICE: [*] FAX: [*] E-MAIL: [*] for ACTAMED: [*] 7000 Central Parkway Suite 600 Atlanta, Georgia 30328 VOICE: [*] FAX: [*] E-MAIL: [*] 2. GENERAL DESCRIPTION OF PROJECT: ACTAMED will "port" the SBCL Scan system to its ActaLink architecture, substantially re-engineering the system by re-writing most if not all of the source code, thereby creating a new product, "ACTALAB," which incorporates all of the requirements and functionality [*] of SBCL SCAN as depicted by the actual SBCL SCAN system and its associated documentation. This re-engineering will also incorporate ActaLink architecture, functionality and components as appropriate to create a fully integrated product that benefits from the functionality of the ActaLink product. This will include functionality to perform an eligibility check at the time of order entry and to associate the resulting billing and eligibility information with each order for all payers available to ACTAMED. A complete description and overview of the project is provided as Attachment 1 to this Statement of Work, which includes: [*] Confidential Treatment Requested -16- - Description of Specifications - Description of Deliverables - Description and Location of Services - Project Schedule and Resources - Testing procedures and Acceptance Criteria 3. PAYMENT SCHEDULE For the Services and Deliverables to be provided hereunder, SBCL will pay ACTAMED the aggregate sum of [*] in accordance with the following schedule. The payment for each Deliverable shown below is due within [*] of receipt of the corresponding sign-off from SBCL, as set forth in more detail in Attachment 1, Section 5. The amount payable to ACTAMED by SBCL under this SOW is based on the estimates outlined in Attachment 2.
% OF TOTAL AMOUNT DELIVERABLE/MILESTONE ---------- ------ --------------------- [*] [*] [*] [*] [*] [*] [*] [*] [*] [*] [*] [*] [*] [*] [*]
ACTAMED CORPORATION SMITHKLINE BEECHAM CLINICAL LABORATORIES, INC. By: /s/ By: /s/ ------------------------ -------------------------------- Mike Hoover Rich Davis President Vice President Information Resources Dated: 10/31/97 Dated: 10/30/97 --------------------- ----------------------------- [*] Confidential Treatment Requested -17- AMENDMENT TO DEVELOPMENT AGREEMENT SBCL and ActaMed hereby agree this 31st day of December, 1997, to amend their Development Agreement October 31, 1997, as set forth herein as of the effective dates set forth herein. 1. Effective as of the date of the Development Agreement, Article I of the Development Agreement is hereby amended to include the following additional or revised definitions: "ActaLab Software" has the meaning ascribed to it by the License Agreement. "Deliverable" means all Software, Documentation and other materials developed by ActaMed under this Agreement and described in a Statement of Work. "License Agreement" means that certain License Agreement between SBCL and ActaMed dated December 31, 1997. "SBCL Software" has the meaning ascribed to it by the License Agreement. "SOW No. 1" shall mean the Statement of Work dated October 31, 1997. 2. The second "Whereas" clause is hereby deleted. 3. The fourth "Whereas" clause is hereby revised to delete the words "to SBCL." 4. Section 5.1(a) of the Development Agreement is hereby revised as of the date of the Development Agreement to read as follows: (a) the parties hereby acknowledge and agree that: (i) The Deliverables under SOW No. 1 do not constitute modifications or enhancements to the SBCL Software, but instead constitute a new Windows- and JAVA-based product which will be used in conjunction with and/or will be integrated into ActaMed's ProviderLink software. All Deliverables (including but not limited to, the ActaLab Software) under SOW No. 1, and all intellectual property rights (including but not limited to copyrights and all renewals and extensions thereof) in such Deliverables, shall be owned solely and exclusively by ActaMed. Subject to the provisions of Section 5(a)(iv) hereof, SBCL hereby grants, transfers and assigns all of its right, title and interest in such Deliverables, including patents, copyrights, trade secrets and other intellectual property developed or acquired in the course of creating such Deliverables, to ActaMed and ActaMed shall have the right to obtain and hold in its own name copyrights, patents, registrations and similar protections which may be available with respect to such Deliverables. (ii) The parties contemplate that additional SOWs may be entered into from time to time for the purpose of enhancing, modifying or upgrading the ActaLab Software (an "ActaLab SOW"). All Deliverables under an ActaLab SOW and all intellectual property rights (including but not limited to copyrights and all renewals and extensions thereof) in such Deliverables, shall be owned solely and exclusively by ActaMed. Subject to the provisions of Section 5(a)(iv) hereof, SBCL hereby grants, transfers and assigns all of its right, title and interest in such Deliverables, including patents, copyrights, trade secrets and other intellectual property developed or acquired in the course of creating such Deliverables, to ActaMed and ActaMed shall have the right to obtain and hold in its own name copyrights, patents, registrations and similar protections which may be available with respect to such Deliverables. (iii) The parties contemplate that additional SOWs may be entered into from time to time for the purpose of enhancing, modifying or upgrading the SBCL Software (a "SCAN Development SOW"). Ownership of any Deliverables under a SCAN Development SOW, and ownership of any intellectual property rights therein (including but not limited to copyrights and all renewals and extensions thereof). shall be governed in all respects by Article 3 of the License Agreement. Subject to the provisions of Section 5(a)(iv) hereof, ActaMed hereby grants, transfers and assigns all of its right, title and interest in such Deliverables, including patents, copyrights, trade secrets and other intellectual property developed or acquired in the course of creating such Deliverables, to SBCL. (iv) Nothing in this Section 5(a) shall be construed to transfer to ActaMed, or otherwise divest SBCL of SBCL's ownership of, the SBCL Software and, subject to the licenses granted by the License Agreement, SBCL (as between SBCL and actaMed) shall be the sole owner of the patents, copyrights, trade secrets and other intellectual property rights therein. Nothing in this Section 5(a) shall be construed to transfer to SBCL, or otherwise divest ActaMed of ActaMed's ownership of, any software or work of authorship owned by ActaMed as of the effective date of the Development Agreement and, subject to the licenses granted by the License Agreement, ActaMed (as between SBCL and ActaMed) shall be the sole owner of any patent, copyright, trade secret right or other intellectual property right therein. (v) Any Statement of Work, by mutual agreement of the parties, may include limitations and restrictions on ActaMed's use of the applicable 2 Deliverables in support of laboratory testing services of commercial laboratories other than SBCL. 6. Sections 5.1(d) and (e) and Section 5.2(a) as of the date of this Amendment are hereby deleted from the Development Agreement. 7. In the event of conflict between the Development Agreement and the License Agreement, the License Agreement shall control. 9. Except as expressly set forth herein, the Development Agreement shall continue in full force and effect as originally executed by the parties. 10. Nothing in this Agreement shall be construed to modify or change in any respect the ownership and use rights with respect to Exclusive Developments (as defined in the Services Agreement between SBCL and ActaMed dated the date hereof) pursuant to the License Agreement and Section V of said Services Agreement. In witness whereof, the parties have caused this Amendment to be signed this 31st day of December, 1997. SMITHKLINE BEECHAM CLINICAL ACTAMED CORPORATION LABORATORIES, INC. BY: /s/ John B. Okkenele Jr. BY: /s/ Michael K. Hoover ---------------------------- --------------------------- NAME: John B. Okkenele Jr. NAME: Michael K. Hoover ------------------------- ------------------------ TITLE: President TITLE: President ------------------------ ----------------------- DATE: 12-31-97 DATE: 12-31-97 ------------------------ ----------------------- 3 EX-10.18 10 EXHIBIT 10.18 CONFIDENTIAL TREATMENT REQUESTED SERVICES, DEVELOPMENT AND LICENSE AGREEMENT This Agreement made this 15th day of December, 1997 (the "Effective Date"), is by and between Healtheon Corporation, a Delaware corporation with offices at 87 Encina Ave., Palo Alto, CA 94301 ("Healtheon") and Beech Street Corporation, a Georgia Corporation with offices at 173 Technology, Irvine, California 92618 ("BSC"). WHEREAS, the parties have agreed to form an alliance to address the information technology needs of BSC, develop new applications designed to address the information service needs of companies providing managed care and other administrative services and pursue other ventures which may be of mutual interest to the parties. The parties hereby agree as follows: 1. DEFINITIONS. 1.1 "ADDITIONAL APPLICATIONS" shall mean those applications which are developed by Healtheon, but excluding the Developed Applications and the Healtheon Platform Software, which are designed to run on the Healtheon Platform. 1.2 "BSH DIVISION" shall mean the division of Healtheon which shall be organized to perform the Services hereunder. 1.3 "BSC CLIENT" shall mean those clients of BSC including but not limited to, health care medical providers (E.G., physicians, hospitals, other care facilities, and ancillary providers), third party administrators, preferred provider organizations, health maintenance organizations, employers, unions, governmental entities, credit card companies, reinsurance companies, health benefit or workers' compensation software vendors, and medical management vendors, which use BSC Managed Care Services or as to which BSC has incorporated such entities' services into BSC Managed Care Services. 1.4 "BSC MANAGED CARE SERVICES" shall mean the following types of services provided by BSC to BSC Clients: personal health management (demand management), workers' compensation medical bill review, case management, pre-admission review, concurrent review, discharge planning, hospital bill audit, retrospective non-network bill review and fee negotiation, health care provider contracting and management, data reporting, computer operations, service bureau services, consulting and other support services and such other related new products/services that BSC shall develop subsequent to the execution of this Agreement. Notwithstanding the foregoing, Managed Care Services shall not include any service where the primary service provided by BSC is either (i) access to and/or use of the BSC On-Line Service to obtain repricing services or (ii) other repricing services offered by BSC to BSC Clients which use all or a portion of the repricing functionality of the Developed Applications The Management Committee shall determine whether services based upon other functionality of the Developed Applications shall be excluded from the definition of "BSC Managed Care Services" at the time that the relevant specifications for such Developed Applications are being developed. Notwithstanding the foregoing, workers' compensation medical bill review services shall be included as part of the BSC Managed Care Services regardless of whether such services are offered alone or in conjunction with other BSC Managed Care Services. 1.5 "BSC ON-LINE SERVICE" shall mean the on-line service provided by BSC to BSC Clients which incorporates all or a portion of the Developed Applications and any derivative works thereof. 1.6 "DEVELOPED APPLICATIONS" shall mean those applications and any improvements thereto which are developed by Healtheon hereunder and which are designed to run on the Healtheon Platform, as more fully described on Exhibit B. 1.7 "DEVELOPMENT WORK" shall mean the work to be performed hereunder by Healtheon to develop the Developed Applications. 1.8 "END USER" shall mean any employee, partner, agent or other representative of (i) BSC, or (ii) a BSC Client; who is authorized to access the BSC On-Line Service in conjunction with obtaining BSC Managed Care Services. 1.9 "HEALTHEON PLATFORM" shall mean the Healtheon Platform Software, as well as certain industry standard software applications, tools, and processes which provide the operating environment which enables the use of Healtheon developed applications as part of an on-line service which is accessible through the Internet by using industry standard web browsers. 1.10 "HEALTHEON PLATFORM SOFTWARE" shall mean the proprietary operating system and other software which has been developed by Healtheon (but excluding the Developed Applications and the Additional Applications) which is part of the operating system of the Healtheon Platform. 1.11 "SERVICES" shall mean those information technology services described on Exhibit A. 2. PERFORMANCE OF THE SERVICES AND THE DEVELOPMENT WORK 2.1 PERFORMANCE OF THE SERVICES. Healtheon, through personnel assigned to its BSH Division, shall perform the Services at certain sites controlled by BSC and/or Healtheon. The initial scope of the Services is set forth as Exhibit A. Exhibit A may be amended with the written consent of the parties. 2.2 PERFORMANCE OF THE DEVELOPMENT WORK. Healtheon shall design, develop, test, and complete the Developed Applications. The specifications for each Developed Application shall be developed jointly and mutually approved by the parties. In conjunction with the development of each set of specifications, the parties shall jointly develop a mutually agreeable detailed project plan, which shall be attached hereto as Exhibit B. Such project plan shall describe, in a degree of detail reasonably satisfactory to the parties, all tasks and responsibilities required for the successful and timely completion of the development and delivery of the applicable Developed Applications, including the projected costs. 3. PROJECT MANAGEMENT 3.1 PERSONNEL RESOURCES. Healtheon and BSC shall each commit the number of qualified and experienced personnel which are reasonably necessary to perform their respective obligations under this Agreement and as further outlined in the project plan(s). Healtheon shall have the sole right and obligation to hire, supervise, manage, contract, direct, procure, perform or cause to be performed all work to be performed by Healtheon and its personnel hereunder. Healtheon, at its option, may engage third parties to render services in connection with the performance of the Services and/or Development Work contemplated hereunder, which may include engaging the services of certain BSC employees to 2 provide certain information technology services. All Healtheon employees utilized to provide the Services shall have entered into Healtheon's standard form of employee nondisclosure agreement. 3.2 PROJECT MANAGEMENT. Each party shall designate a project manager (the "Project Managers") and appropriate technical resource persons to coordinate the development and implementation of the project plan(s). The Project Managers shall be responsible for resolving any matters arising under this Agreement and the Services and Development Work contemplated hereunder. In the event that the Project Managers are not able to resolve a dispute, such dispute shall be resolved by the Management Committee, as described in Section 3.3. 3.3 MANAGEMENT COMMITTEE. The parties shall each designate an equal number of management-level personnel to serve on the Management Committee. The Management Committee shall conduct status meetings on a monthly basis detailing the performance of the Services and Development Work during the prior four (4) week period and the work planned to be performed during the upcoming four (4) week period. The Management Committee shall be responsible for resolving any disputes which have not been resolved by the Project Managers. The Management Committee shall be responsible for determining whether services based upon the Developed Applications shall be included or excluded from the definition of "BSC Managed Care Services" for the purposes of this Agreement. If such services are not excluded, then the Management Committee shall be responsible for establishing the applicable financial arrangements, if any, pursuant to which such services may be offered by BSC. 3.4 CHANGES TO SERVICES, DEVELOPMENT WORK AND PROJECT PLAN. The scope of the Services, the Development Work and the project plans shall not be changed in any material respect without the prior written agreement of the parties, which agreement shall not be unreasonably withheld. 4. OWNERSHIP AND LICENSE RIGHTS. 4.1 OWNERSHIP. BSC acknowledges and agrees that all of the work product produced or developed by Healtheon in connection with Healtheon's performance of the Services and/or Development Work to be provided hereunder, including, but not limited to, all technology of any nature whatsoever, all notes, records, drawings, designs, inventions, improvements, developments, discoveries, trade secrets and any copyrightable material, including but not limited, to the Developed Applications, and all patentable inventions, conceived, made or discovered by Healtheon, solely or in collaboration with others, during the period of this Agreement and which relate in any manner to the Services and/or Development Work to be performed hereunder or which Healtheon may be directed to undertake or investigate in performing the Services and/or the Development Work, including any derivative works of any of the foregoing (collectively the "Work Product"), is the sole property of Healtheon, but excluding BSC's contracts and contracted rates with BSC's providers, which may be incorporated into the Work Product. Subject only to the license rights to be granted by Healtheon to BSC in Section 5.1, below, BSC acknowledges and agrees that Healtheon shall have all proprietary rights in and to the Work Product, including, without limitation, all copyrights, patents and trade secret rights, all moral rights, all contract and licensing rights, and all claims and causes of action of any kind with respect to any of the foregoing, whether now known or hereafter to become known, and that Healtheon shall have the sole and exclusive right to use, modify and exploit the Work Product in any manner that Healtheon may choose. 4.2 PROPRIETARY NOTICES. BSC shall not remove or alter any trademark, trade name, copyright, or other proprietary notices, legends, symbols, or labels appearing on or in materials pertaining to the Work Product. Each portion of the Healtheon documentation reproduced by BSC shall include the 3 intellectual property notice or notices appearing in or on the corresponding portion of such materials as delivered by Healtheon hereunder. 5. LICENSE AND SERVICE RIGHTS. 5.1 LICENSE RIGHTS. In consideration for the development fees paid to Healtheon pursuant to Section 7.1, Healtheon hereby grants to BSC a nonexclusive and nontransferable, fully-paid, perpetual right and license, exercisable at BSC's primary operations site, to: (i) install, use, copy, modify, create derivative works and maintain the Developed Applications, in object code and source code form, solely as (a) part of the BSC On-Line Services which are offered to BSC Clients in conjunction with the BSC Managed Care Services obtained by such BSC Clients and to enable world-wide remote access by End Users in conjunction with the BSC On-Line Service and (b) for BSC's internal use in providing BSC Managed Care Services to BSC Clients, and (ii) use the Work Product (excluding the Developed Applications and any derivative works thereof) delivered to BSC by Healtheon hereunder in conjunction with the operations of BSC's Managed Care Services. BSC shall not use, sublicense or otherwise distribute the Healtheon Platform Software or the Work Product, including the Developed Applications and any derivative works thereof, in any other manner except as expressly stated herein. The BSC's primary operations site is anticipated to be in Irvine, California. BSC may from time to time designate another site to be its primary operations site by providing Healtheon with thirty (30) days' prior written notice of such redesignation. Notwithstanding the foregoing, BSC shall make no more than two (2) copies of the source code relating to the Developed Applications (the "Source Code") and shall restrict access to such Source Code to only those employees who require such access to enable BSC to use the Source Code as in the manner contemplated herein and otherwise secure and protect such Source Code consistent with its own practices regarding its most highly confidential information. 5.2 OPTION TO LICENSE ADDITIONAL APPLICATIONS. Healtheon hereby agrees to grant to BSC a nonexclusive and nontransferable, right and license, to use the Additional Applications as may be licensed at the option of BSC, as part of the services to be offered to BSC Clients in conjunction with the BSC Managed Care Services, and to enable worldwide access to End Users in conjunction with the BSC On-Line Service. The fee for such license shall be [ * ] each such Additional Application as may be licensed by BSC, net of any third-party royalty obligations. Each such license agreement for Additional Applications shall be on commercially reasonable terms and conditions. BSC shall not use, sublicense or otherwise distribute the Additional Applications in any other manner except as expressly stated herein. 5.3 OPTION TO LICENSE HEALTHEON PLATFORM SOFTWARE. Subject to the payment of the license fee set forth below, Healtheon hereby grants to BSC a nonexclusive and nontransferable, right and license, exercisable at BSC's primary operational site, to use the Healtheon Platform Software as part of the Healtheon Platform to be deployed at BSC's primary operational site to run the Developed Applications and such Additional Applications which may be licensed from Healtheon, as part of the BSC On-Line service or other BSC Managed Care Service to be offered to BSC Clients in conjunction with the BSC Managed Care Services obtained by such BSC Client, and to enable world-wide access and use by End Users at remote locations in conjunction with the use of the BSC On-Line Service and to make a single back-up copy. The applicable one-time, up front fee for such license shall be [ * ] payable upon such commercially reasonable terms as the parties may agree to at the time of BSC's exercise of its rights hereunder. BSC shall not have the right to use, sublicense or otherwise distribute the Healtheon Platform Software in any other manner except as [ * ] CONFIDENTIAL TREATMENT REQUESTED 4 expressly stated herein. BSC shall be solely responsible for the costs associated with acquiring all third-party hardware and software and implementation services necessary to deploy the Healtheon Platform at BSC's site. In the event the BSC exercises its rights hereunder, Healtheon shall make available to BSC maintenance services on such commercially reasonable terms and conditions as may be agreed to by the parties. 5.4 OPTION TO USE HEALTHEON SERVICE. If, following the completion of the Developed Applications, BSC declines to use its licensed rights under Section 5.1, Healtheon hereby agrees to enter into a Healtheon Service Agreement with BSC containing Healtheon's standard terms and conditions whereby Healtheon shall provide BSC and BSC Clients with access to an on-line service which includes the Developed Applications. Healtheon shall offer such service to BSC and the BSC Clients at a rate [ * ] as may be mutually agreed to by the parties, based upon the actual margins of the on-line service. 6. THIRD-PARTY TECHNOLOGY AND LICENSE RIGHTS 6.1 THIRD-PARTY TECHNOLOGY AND LICENSE RIGHTS. In order to perform the Services contemplated hereunder (but excluding Services relating solely to the Developed Applications), BSC represents that Healtheon will need to have access only to the third-party technology and software listed on Exhibit C which is licensed and/or deployed by BSC (the "Third-Party Technology and Software"). BSC hereby agrees to use commercially reasonable efforts to obtain, at its own expense, all necessary consents, licenses and/or assignments which may be necessary in order for Healtheon to perform the such Services. Healtheon shall use commercially reasonable efforts to cooperate with BSC to assist BSC in obtaining any necessary consents, licenses and/or assignments to Third-Party Technology and Software. In the event that any Development Work requires access to or use of any other third-party technology or software, the Management Committee shall be responsible for obtaining any necessary rights. 6.2 BSC TECHNOLOGY AND LICENSE RIGHTS. During the term of this Agreement, BSC hereby grants to Healtheon a nonexclusive and nontransferable right and license to use, modify and copy all technology and software owned by BSC which is necessary for Healtheon to perform the Services and Development Work. 7. FEES AND PAYMENT; GAIN SHARING 7.1 FEES AND EXPENSES, PAYMENT. BSC shall pay Healtheon the Fees and Expenses, as set forth in Exhibit D for the Services and the Development Work to be performed hereunder (the "Fees"). Healtheon shall submit invoices to BSC on a bi-weekly basis for the Fees when due, corresponding to applicable payroll cycles. Invoices shall be due and payable within ten (10) days after receipt. 7.2 OTHER EXPENSES. Healtheon shall have sole responsibility for payment of compensation to its personnel and shall pay and report, for all personnel assigned to perform services hereunder, federal and state income tax withholding, social security taxes, and unemployment insurance applicable to such personnel. Healtheon shall bear sole responsibility for any health or disability insurance, retirement benefits, or other welfare or pension benefits (if any) to which its own personnel may be entitled. 7.3 REVENUE SHARING. In the event that BSC declines to use its licensed rights under Section 5.1 and Healtheon provides services in accordance with Section 5.4 for any current or future BSC Client [ * ] CONFIDENTIAL TREATMENT REQUESTED 5 which (i) utilizes any of the Developed Applications and (ii) such BSC Client has entered into a written contract for one or more of BSC's Managed Care Services (a "Qualified BSC Client"), then BSC shall pay to Healtheon the Applicable Percentage (as defined below) of Net Revenues (as defined below with respect to repricing services) with respect to each such Qualified BSC Client. "Net Revenues" shall mean the revenues received by BSC from a Qualified BSC Client for BSC Managed Care Services less any fees paid by BSC to any third party which facilitates the sale or delivery of BSC's Managed Care Services, including but not limited to leased network fees, broker fees, commissions paid to outside third parties, fees payable to Healtheon pursuant to Section 5.4, subcontractor vendor fees and other such reasonable and customary fees as may apply from time to time. The "Applicable Percentage" with respect to BSC's repricing services shall be as follows: [ * ] The revenue sharing described above will be reviewed by the Management Committee periodically, and at least on an annual basis, to determine that the cost savings objectives are being achieved and to determine the appropriate applicable percentage for other BSC Managed Care Services which are performed through the Healtheon service as the applicable Developed Applications are deployed as part of the Healtheon service. Additionally if other significant cost savings are identified they will be reviewed by the Management Committee to determine appropriate sharing. 7.4 THIRD-PARTY HARDWARE AND SOFTWARE. In the event that it is reasonably necessary for Healtheon to purchase or license any third-party hardware and/or software in order to perform the Services and/or the Development Work, the Project Managers shall determine whether such third-party hardware and/or software should be purchased and/or licensed by BSC or Healtheon and how the costs and ownership shall be allocated between the parties. 7.5 TAXES. All Fees and payments are exclusive of all taxes, duties or levies, however designated or computed. BSC shall be responsible for and pay all taxes upon payments due under this Agreement including, but not limited to, sales, use, or value-added taxes, duties, withholding taxes and other assessments now or hereafter imposed on or in connection with this Agreement, exclusive of taxes based upon Healtheon's net income. 7.6 AUDIT RIGHTS. Each of the parties shall have the right, exercisable no more frequently than once per calendar quarter and exercisable upon thirty (30) days prior written notice, to audit the appropriate books and records of the other party during regular business hours to review the calculations of the amounts payable pursuant to Section 7. The costs of such audit shall be borne by the auditing party, unless the results of such audit reveal an underpayment (or overpayment) of more than ten percent (10%) for a twelve month period, in which case the reasonable expenses of the auditing party shall be reimbursed by the other party. The parties shall promptly pay (or refund) to the other, the amounts of any underpayments (or overpayments). 8. CONFIDENTIALITY 8.1 CONFIDENTIAL INFORMATION. The parties acknowledge that in the course of performing under this Agreement, each party may be exposed to or acquire information which is proprietary to or confidential to the other party, its suppliers or customers ("Confidential Information"). Any and all such Confidential Information of one party in any form obtained by the other party or its employees, agents, [ * ] CONFIDENTIAL TREATMENT REQUESTED 6 or representatives in the performance of this Agreement shall be deemed to be confidential and proprietary information of such party. The parties agree to hold such Confidential Information in strict confidence, to only permit use of such Confidential Information by its employees and agents having a need to know in connection with performance under this Agreement, and not to copy, reproduce, sell, assign, license, market, transfer, give or otherwise disclose the Confidential Information of the other party to third parties or to use such Confidential Information for any purposes whatsoever, except as expressly contemplated by this Agreement, without the express written permission of the other party and to advise each of their employees, agents, and representatives of their obligations to keep such information confidential. Work Product shall be deemed to be the Confidential Information of Healtheon. 8.2 EXCEPTIONS TO CONFIDENTIAL INFORMATION. Confidential Information shall not include information that (i) was, as of the time of its disclosure, or thereafter becomes part of the public domain through a source other than the receiving party; (ii) the receiving party can demonstrate was known to the receiving party as of the time of its disclosure; (iii) the receiving party can demonstrate was independently developed by the receiving party without use of the Confidential Information; or (iv) the receiving party can demonstrate was subsequently learned from a third party not under a confidentiality obligation to the providing party. In the event that a receiving party is required to disclose certain Confidential Information of a disclosing party pursuant to applicable law, court order or government authority, the receiving party shall provide reasonable notice to the disclosing party prior to such disclosure and shall cooperate with the disclosing party to obtain protection from such disclosure. 9. REPRESENTATIONS AND WARRANTIES 9.1 WARRANTIES FOR SERVICES AND THE DEVELOPMENT WORK. Healtheon hereby represents and warrants that (i) each person assigned to perform the Services and/or the Development Work shall have the proper skill, training and background so as to be able to perform the such Services and/or Development Work in a competent and professional manner and (ii) all Services and/or Development Work and any Work Product and other materials or documentation delivered under this Agreement shall have been completed in a thorough and professional manner. In the event of a breach of Healtheon's representations and warranties under this Section 9.1, Healtheon's sole obligation shall be to promptly correct any defects identified by BSC, provided that BSC provides Healtheon with written notice within thirty (30) days of becoming aware of the defective work. 9.2 THIRD-PARTY TECHNOLOGY. BSC hereby represents and warrants that it has obtained all necessary consents, licenses and/or assignments with respect to the Third-Party Technology and Software which is licensed and/or deployed by BSC and which are necessary in order for Healtheon to perform the Services and Development Work to be performed hereunder. 9.3 AUTHORITY. Healtheon and BSC each hereby represents and warrants to the other that it is duly organized and validly existing under the laws of the jurisdiction in which it is organized, in good standing therein, and has the power to enter into this Agreement and to perform its obligations hereunder and, furthermore, that the performance by it of its obligations under this Agreement has been duly authorized by all necessary corporate or other action and will not violate any provision of law or regulation or of any corporate charter or bylaws. 9.4 INFRINGEMENT. Healtheon and BSC each hereby represents and warrants to the other that any information or technology provided by it to the other party in order to define the specifications or to accomplish the development objectives of this Agreement does not infringe, violate, misappropriate, or 7 in any manner contravene or breach any U.S. patent or any trademark, copyright, trade secret right, license or other property, or proprietary right of any third party. 9.5 NO IMPLIED WARRANTIES. THE WARRANTIES STATED ABOVE IN THIS SECTION 9 ARE THE ONLY WARRANTIES MADE BY EITHER PARTY. THE PARTIES DO NOT MAKE AND HEREBY DISCLAIM ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. THE PARTIES ACKNOWLEDGES THAT COMPLEX COMPUTER SOFTWARE AND SERVICES, SUCH AS THE DEVELOPED APPLICATIONS AND THE SERVICES, ARE RARELY FREE OF DEFECTS OR ERRORS AND HEALTHEON DOES NOT WARRANT THE SAME. 10. LIMITATION OF LIABILITY EXCLUSION OF CERTAIN DAMAGES. [ * ] UNDER NO CIRCUMSTANCES AND UNDER NO LEGAL THEORY SHALL EITHER PARTY HAVE ANY LIABILITY FOR LOSS OF PROFITS, CONSEQUENTIAL, EXEMPLARY, INCIDENTAL OR PUNITIVE DAMAGES, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. 10.2 LIMITATION OF LIABILITY. [ * ] IN NO EVENT SHALL EITHER PARTY'S AGGREGATE LIABILITY FOR ALL MATTERS ARISING OUT OF THE SUBJECT MATTER OF THIS AGREEMENT, WHETHER IN CONTRACT, TORT OR OTHERWISE [ * ]. The remedies provided herein are the parties' sole and exclusive remedies. 11. INDEMNIFICATION 11.1 INDEMNIFICATION. Healtheon agrees to hold harmless and defend BSC from and against any and all claims, demands, suits, actions, or proceedings, arising out of any actual or alleged infringement by Healtheon of any copyright or any U.S. patent, trademark, or trade secret right or other proprietary right, with respect to the Work Product and Healtheon Platform Software, as delivered by Healtheon hereunder and used by BSC in accordance with the terms of this Agreement. BSC agrees to hold harmless and defend Healtheon from and against any and all claims, demands, suits, actions, or proceedings, arising out of any actual or alleged infringement by Healtheon of any copyright or any U.S. patent, trademark, or trade secret right or other proprietary right which arises out of BSC's failure to obtain any necessary consents, licenses, or assignments with respect to any Third-Party Technology or Software which has been licensed and/or deployed by BSC and which is necessary in order for Healtheon to perform the Services (but excluding Services relating solely to the Developed Applications). 11.2 LIMITATIONS. Healtheon shall have no indemnity obligation for claims resulting from or alleged to result from (i) development work performed by Healtheon in compliance with BSC's specifications where Healtheon's method of compliance has been specifically compelled by the terms of BSC's specifications; or (ii) BSC's use of the Work Product in combination with any hardware or software not furnished by or authorized by Healtheon hereunder, if such combination is the cause of such claim and the Work Product is not material to the claim, or any modifications which have been made by BSC if such modification is the cause of the claim. In addition, Healtheon shall have no indemnity [ * ] CONFIDENTIAL TREATMENT REQUESTED 8 obligation for claims of infringement resulting or alleged to result from BSC's failure within a reasonable time frame to implement any replacement or modification which conforms to the requirements of Section 11.4 herein. BSC shall have no indemnity obligations for claims resulting from or alleged to result from Healtheon's breach of any Third-Party Technology or Software rights where appropriate consents, licenses and/or assignments were obtained and provided to Healtheon and Healtheon failed to adhere to the terms of applicable consents, licenses and/or assignments. 11.3 PAYMENT AND COOPERATION. Subject to the limitations set forth in Section 11.2 above, the indemnifying party shall pay all losses, damages, damages, settlements, expenses, costs and reasonable attorney's fees, incurred by the indemnified party arising out of the matters set forth in Section 11.1 provided that such payment shall be contingent on: (i) cooperation by the indemnified party with the indemnifying party in the defense and or settlement thereof, at the indemnifying party's expense; and (ii) allowing the Indemnifying Party to control the defense and all related settlement negotiations. The indemnified party shall give the indemnifying party prompt written notice of any such claim to enable the indemnifying party to defend or mitigate the claim. 11.4 REMEDY. If, in the event of an infringement action pertaining to the Work Product, including the Developed Applications, and/or Healtheon Platform Software and BSC's use of the such Work Product and/or Healtheon Platform Software is disrupted, Healtheon shall, at its option, (i) provide BSC with access to software which is functionally equivalent to the infringing elements of the Work Product and/or Healtheon Platform Software as applicable, without additional charge; (ii) modify the infringing portions of the Work Product and/or Healtheon Platform Software, as applicable, to avoid the infringement; or (iii) obtain a license for BSC to continue use of such Work Product and/or Healtheon Platform Software, as applicable, for the term of the applicable license and pay, on an annual basis, if Healtheon elects not to acquire a perpetual license, the additional fee required for such license(s). 11.5 LIMITATIONS. SECTION 11 SETS FORTH THE PARTIES' SOLE OBLIGATION, AND THE SOLE RECOURSE AGAINST THE OTHER PARTY IN THE EVENT OF ANY CLAIM OF INFRINGEMENT OF THIRD PARTY INTELLECTUAL PROPERTY RIGHTS. 12. TERM AND TERMINATION 12.1. TERM. This Agreement shall continue for a fixed term of five (5) years from the date hereof (the "Term") unless terminated earlier under the provisions of this Section 12 or by the mutual agreement of the parties. Notwithstanding the foregoing, (i) the license granted in Section 5.1 shall have a perpetual term unless terminated earlier pursuant to Section 12.3 or 12.4, or by the mutual consent of the parties; and (ii) the license granted in Section 5.3, if exercised, shall continue for a term of [ * ] from the Effective Date and shall renew automatically for successive additional [ * ] terms unless terminated earlier pursuant to Section 12.3 or 12.4, or by the mutual consent of the parties. 12.2 TERMINATION FOR CONVENIENCE. Either party may terminate this Agreement upon one hundred-eighty (180) days prior written notice to the other for any reason. Promptly following the notice of termination the parties shall use good faith efforts to agree to a commercially reasonable transition plan which will enable the parties' to mitigate to on-going expenses during the notice period. 12.3 TERMINATION BY EITHER PARTY FOR DEFAULT. If either party defaults in the performance of any material provision of this Agreement, then the non-defaulting party may give written notice to the defaulting party that if the default is not cured within thirty (30) days of such notice the Agreement will be terminated. If the non-defaulting party gives such notice and the default is not cured during the thirty [ * ] CONFIDENTIAL TREATMENT REQUESTED 9 (30) day period, then the Agreement shall automatically terminate at the end of that thirty (30) day period. 12.4 INSOLVENCY. Either party may terminate this Agreement by written notice to the other, and may regard the defaulting party as in default of this Agreement, if the defaulting party becomes insolvent, makes a general assignment for the benefit of creditors, suffers or permits the appointment of a receiver for its business or assets, becomes subject to any proceeding under any bankruptcy or insolvency law whether domestic or foreign, or has wound up or liquidated, voluntarily or otherwise. 12.5 EFFECT OF TERMINATION. The provisions of Sections 7 (solely with respect to Fees and other payments which were due and payable as of the date of termination), 4, 8, 10, 11, and 13 (to the extent applicable) shall survive the termination of this Agreement for any reason. All other rights and obligations of the parties shall cease upon termination of this Agreement. In the event of a termination, neither party shall be entitled to any refund of the fees paid or cost incurred for the development performed hereunder. Provided that this Agreement is not terminated by Healtheon pursuant to either Section 12.3 or 12.4 or by BSC pursuant to Section 12.2, upon termination, Healtheon shall deliver to BSC a copy of each Developed Application which has been completed as of the date of termination, in source and object code form, and the related user documentation, and, in the event of the exercise of BSC's option pursuant to Section 5.3, Healtheon shall deliver to BSC a copy of Healtheon Platform Software in object code form. 12.6 RETURN OF MATERIALS. Within thirty (30) days after the termination of this Agreement, each party shall return to the other, all Confidential Information, and other material of any kind which is the property of the other party. 13. GENERAL 13.1 NO EXCLUSIVITY OR RESTRICTION ON OTHER ACTIVITY. Except as expressly set forth in this Agreement, nothing herein shall preclude either party from entering into agreements to obtain similar services or development work from third parties or from providing similar services or development work to third parties. 13.2 RELATIONSHIP OF PARTIES. The relationship of the parties shall be that of independent contractors. Neither party will represent that it has any authority to assume or create any obligation, express or implied, on behalf of the other party, or to represent the other party as agent, employee, or in any other capacity, except as specifically provided herein. 13.3 BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding on and inure to the benefit of the respective parties and their permitted successors and assigns. Neither party shall not transfer, assign, sublicense or subcontract any right or obligation hereunder, except as expressly provided herein. In the event of a change in control of BSC, BSC shall be permitted to assign this Agreement to the surviving or new corporation acquiring all or substantially all of the business and assets of BSC by merger, acquisition, consolidation or otherwise, with the prior written consent of Healtheon, which consent shall not be unreasonably withheld. BSC may assign its rights under this Agreement to an entity which is controlled by BSC with the prior written consent of Healtheon, which consent shall not be unreasonably withheld. It shall not be unreasonable for Healtheon to withhold its consent if any proposed assignment would materially increase Healtheon's obligations under this Agreement or materially increase the scope of BSC's rights (including but not limited to the grant of rights contained in Section 5) or if such proposed assignee is a competitor of Healtheon. 10 13.4 NO WAIVER. Either party's failure to exercise any right under this Agreement shall not constitute a waiver of any other terms or conditions of this Agreement with respect to any other or subsequent breach, nor a waiver by such party of its right at any time thereafter to require exact and strict compliance with the terms of this Agreement. 13.5 NOTICES. All notices or other communications which are required or permitted to be given hereunder shall be in writing and shall be sent to the address of the recipient set forth below or such other address as the recipient may designate by notice given in accordance with the provisions of this Section with copies to: In the case of Healtheon: In the case of BSC: Healtheon Corporation Beech Street Corporation 87 Encina Avenue 173 Technology Palo Alto, California 94301 Irvine, California 92618 Attn: President Attn: President and COO Copy to: General Counsel Copy to: Chief Financial Officer Any such notice shall be delivered by either (i) first class registered or certified airmail, postage prepaid, and shall be deemed to have been served forty-eight (48) hours after posting; or (ii) express courier service, service fee prepaid, and shall be effective upon delivery. 13.6 APPLICABLE LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of California. 13.7 SEVERABILITY. The invalidity of one or more phrases, sentences, clauses or articles contained in this Agreement shall not affect the remaining portions of this Agreement or any part thereof; and in the event that one or more phrases, sentences, clauses or articles shall be declared void or unenforceable this Agreement shall be amended to include only such portions of such phrases, sentences, clauses or articles that are not invalid, void or unenforceable. 13.8 ENTIRE AGREEMENT; AMENDMENTS. This Agreement, along with the Exhibits attached hereto, sets forth the entire agreement between the parties and supersedes any other prior proposals, agreements and representations between them related to its subject matter, whether written or oral, including but not limited to the Letter of Intent between the parties. No modifications or amendments to this Agreement shall be binding upon the parties unless made in writing and duly executed by authorized officials of both parties. 13.9 ATTORNEYS FEES. The prevailing party in any dispute shall be entitled to collect from the other party the prevailing party's reasonable attorneys' fees and costs in connection with the enforcement of this Agreement. 13.10 NON-SOLICITATION OF EMPLOYEES. Neither party shall solicit the services or employment of any employee or agent of the other party for a period beginning at the Effective Date and ending on the termination date of this Agreement, without the prior written consent of the other party. The soliciting party, who violates this Section 13.10, shall pay to the other party an amount equal to one (1) year's salary for any solicited employee of the other party, as liquidated damages and not as a penalty. The amount of annual salary shall be the annual salary in effect at the date the employee was solicited. For 11 purposes of this Section, the term "employee" means current or former employees of the other party who were employed by the other party at any time during the period beginning on the Effective Date and ending on the date on which the nonsolicitation period above terminates. Initiation by an individual of contact regarding employment or response by an individual to an advertisement or other generally available notice, shall not constitute solicitation. 13.11 BANKRUPTCY. The parties agree that the Agreement and any related agreements are contracts under which Healtheon is a licensor of rights to intellectual property within the scope of Section 101 of the United States Bankruptcy Code and that BSC shall have all the rights of a licensee set forth in Section 365(n) of the Bankruptcy Code. Upon the commencement of a bankruptcy petition involving either party, the other party shall be entitled to retain and may fully exercise all rights and licenses available under the Bankruptcy Code. 13.12 USE OF NAME. Neither party shall use the name of the other party, or refer to the other party, directly or indirectly, in any advertising, sales presentation, news release, information provided to any profession or trade publication, or any other promotional or informational material, for any purpose whatsoever, or in any manner indicate any endorsement or support of any product, without such party's prior written approval. 13.13 RESIDUAL INFORMATION. Without prejudice to either party's proprietary rights, neither party shall be liable for using general ideas, concepts and know-how that may be gained as a result of exposure to or contact with the other party or its materials. 13.14 ESCROW. Healtheon agrees that it will put the Healtheon Platform Software and the Developed Applications, as they are developed, in escrow with an independent escrow agent. The escrow agreement will be on terms and conditions which are mutually agreeable to parties. IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first written above. Healtheon Corporation Beech Street Corporation By: /s/ By: /s/ -------------------------------- -------------------------------- Title: President & CEO Title: President & CEO ----------------------------- ----------------------------- Date: 12/15/97 Date: 12/15/97 -------------------------------- -------------------------------- 12 EXHIBIT A SERVICES Healtheon will operate and maintain BSC's information technology infrastructure and data processing functionality and related services, including the following types of services, as necessary and agreed to by the parties: - maintain hardware operations - maintain software infrastructure - maintain data network(s) - desktop computing - provide internal and external technical support - provide project planning and management - software installation - hardware installation - provide user technical support - provide user training - provide IT personnel management services - provide IT consulting services - provide custom software solution design and development services 13 EXHIBIT B DEVELOPMENT WORK OVERVIEW Healtheon shall provide an engineering team staffed with up to forty engineers by December 31, 1998 to perform the general development tasks set forth below ( the "Development Team"). The Development Team will begin staffing during January, 1998 and is anticipated to be fully staffed by December 31, 1998. Unless otherwise agreed to by the parties, the Development Team will remain fully staffed during calendar years 1999, 2000 and 2001 and will reduce its staffing during calendar year 2002, depending upon the resources need to fulfill the Development Work in accordance with the project plans which are developed by the parties pursuant to Section 2.2. In the event that the applicable project plans, as they are agreed to by the parties pursuant to Section 2.2, require additional personnel resources, the parties will revise the Development Team staffing commitments hereunder. The Development Team will develop the following types of internet-based solutions, but not limited to, with the objective of creating a Network Computing PPO/Managed Care capability: - - Claims Repricing - - Integrated Provider Management System - - Demand Management(Personal Health Management) - - Interfaces to internal and external systems (which are not "custom development") Phase 1 of the Development Work will consist of developing appropriate Project Plans and related design specifications and cost estimates to be approved by Management Committee. The work products of this phase will consist of: 1. An overall Project Plan; 2. Specific Project Plans and general specifications for Claims Repricing and Integrated Provider Management; and 3. General specifications for the Demand Management service and internet integration of the Demand Management service. Phase 1 is anticipated to take approximately sixty work days to complete with interim deliverables as tasks are completed and submitted to the Management Committee for approval. 14 XHIBIT C THIRD-PARTY TECHNOLOGY AND SOFTWARE 15 EXHIBIT D FEES AND EXPENSES 1. FEES AND EXPENSE FOR SERVICES AND "CUSTOM DEVELOPMENT" WORK. [ * ] of the "costs" incurred by Healtheon which are associated with performing the Services and any "custom" development work performed on behalf of BSC. For the purposes of this Agreement, "Custom" development work shall mean any development work performed to meet BSC's own specifications which is not anticipated to be reusable for other Healtheon clients. 2. FEES AND EXPENSE FOR DEVELOPMENT WORK FOR THE DEVELOPED APPLICATIONS [ * ] of the "costs" incurred by Healtheon which are associated with developing the Developed Applications. 3. DEFINITION OF "COST." For the purposes of this Agreement "cost" shall be defined as follows: A. For employees/contractors assigned to perform the Services and/or Development Work on a full-time basis, "cost" will include direct expenses (such as salary, benefits, recruiting, consulting, travel, etc.), support expenses (rent, phone, computing, office expenses) and allocated expenses (such as management, administration, other overhead cost, etc.). The average hourly loaded cost per employee is currently approximately [ * ] per hour. B. For Healtheon's employees that are not assigned to perform the Services and/or Development Work on a full-time basis, they will charge their time performing or supporting the Services and/or Development Work based on a set rate, which is subject to change based on the cost structure of Healtheon. The initial rates are :- Level 1 [ * ] per hour Level 2 [ * ] per hour Level 3 [ * ] per hour C. For Healtheon's employees that are not generally assigned to perform the Services and/or Development Work on a regular basis, they will charge their time providing short term consulting services to this project based on a reduced standard consulting rate. The current rates, [ * ] are :- Level 1 [ * ] per hour Level 2 [ * ] per hour Level 3 [ * ] per hour Cost for additional capital equipment or computer processing needed to perform the Services or Development Work will be invoiced separately. [ * ] CONFIDENTIAL TREATMENT REQUESTED 16 EX-10.19 11 EXHIBIT 10.19 CONFIDENTIAL TREATMENT REQUESTED SERVICES, DEVELOPMENT AND LICENSE AGREEMENT This Agreement made this 30th day of September, 1997 (the "Effective Date"), is by and between Healtheon Corporation, a Delaware corporation with offices at 87 Encina Ave., Palo Alto, CA 94301 ("Healtheon") and Brown & Toland Physician Services Organization, with offices at 1388 Sutter Street, Suite 400, San Francisco, CA 94109 ("B&T"). WHEREAS, the parties have agreed to form an alliance to address the information technology needs of B&T, develop new applications designed to address the needs of physician practice groups, and pursue other ventures which may be of mutual interest to the parties. The parties hereby agree as follows: 1. DEFINITIONS. 1.1 "ADDITIONAL APPLICATIONS" shall mean those applications which are developed by Healtheon, but excluding the Developed Applications, which are designed to run on the Healtheon Platform. 1.2 "BTH DIVISION" shall mean the division of Healtheon which shall be organized to perform the Services hereunder. 1.3 "B&T SERVICE" shall mean B&T's physician practice management services, including the practice management services listed on Exhibit A. 1.4 "DEVELOPED APPLICATIONS" shall mean those applications and any improvements thereto which are developed by Healtheon hereunder and which are designed to run on the Healtheon Platform. 1.5 "DEVELOPMENT WORK" shall mean the work to be performed hereunder by Healtheon to develop the Developed Applications. 1.6 "END USER" shall mean any employee, partner, agent or other representative of a Physician Group who is authorized to access and use the B&T Service. 1.7 "HEALTHEON PLATFORM" shall mean the Healtheon Platform Software, as well as certain industry standard software applications, tools, and processes which provides the operating environment which enables the use of Healtheon developed applications as part of an on-line service which is accessible through the Internet by using industry standard web browsers. 1.8 "HEALTHEON PLATFORM SOFTWARE" shall mean the proprietary operating system and other software which has been developed by Healtheon which is part of the operating system of the Healtheon Platform. 1.9 "PHYSICIAN GROUPS" shall mean those physician practice groups for which B&T provides the B&T Service. 1.10 "SERVICES" shall mean those information technology services described on Exhibit B. -1- 2. PERFORMANCE OF THE SERVICES AND THE DEVELOPMENT WORK 2.1 PERFORMANCE OF THE SERVICES. Healtheon, through personnel assigned to its BTH Division, shall perform the Services at certain sites controlled by B&T and/or Healtheon. The initial scope of the Services is set forth as Exhibit B. Exhibit B may be amended with the written consent of the parties. Healtheon shall perform the Services in accordance with the guidelines set forth in Exhibit B. 2.2 PERFORMANCE OF THE DEVELOPMENT WORK. Healtheon shall design, develop and complete the Developed Applications. The specifications for each Developed Application shall be developed jointly and mutually approved by the parties. In conjunction with the development of each set of specifications, the parties shall jointly develop a mutually agreeable detailed project plan. Such project plan shall describe, in a degree of detail reasonably satisfactory to the parties, all tasks and responsibilities required for the successful and timely completion of the development and delivery of the applicable Developed Applications. 3. PROJECT MANAGEMENT 3.1 PERSONNEL RESOURCES. Healtheon shall commit the number of qualified and experienced personnel which are necessary to perform its obligations under this Agreement and as further outlined in the project plan(s). Healtheon shall have the sole right and obligation to hire, supervise, manage, contract, direct, procure, perform or cause to be performed all work to be performed by Healtheon and its personnel hereunder. Healtheon may engage third parties to render services in connection with the performance of the Services and/or Development Work contemplated hereunder. 3.2 MANAGEMENT BOARD. The parties shall establish a project executive committee consisting of three (3) senior level employees from each party (the "Management Board"). The Management Board shall have overall project oversight responsibility and management, shall establish appropriate project leadership, and shall be responsible for resolving any matters arising under this Agreement and the Services and Development Work contemplated hereunder. 3.3 STATUS MEETINGS. The parties shall conduct status meetings on a monthly basis detailing the performance of the Services and Development Work during the period and the work planned to be performed during the upcoming four (4) week period. 3.4 CHANGES TO SERVICES, DEVELOPMENT WORK AND PROJECT PLAN. The scope of the Services, the Development Work and the project plans shall not be changed in any material respect without the mutual written agreement of the parties, which agreement shall not be unreasonably withheld. 4. OWNERSHIP AND LICENSE RIGHTS. 4.1 OWNERSHIP. B&T acknowledges and agrees that all of the work product produced or developed by Healtheon in connection with Healtheon's performance of the Services and/or Development Work to be provided hereunder, including, but not limited to, all technology of any nature whatsoever, all notes, records, drawings, designs, inventions, improvements, developments, discoveries, trade secrets and any copyrightable material, including but not limited, to the Developed Applications, and all patentable inventions, conceived, made or discovered by Healtheon, solely or in collaboration with others, during the period of this Agreement and which relate in any manner to the Services and/or Development Work to be performed hereunder or which Healtheon may be directed to undertake or investigate, or which Healtheon may become associated with in performing the Services and/or the -2- Development Work, including any derivative works of any of the foregoing (collectively the "Work Product"), is the sole property of Healtheon. Subject only to the license rights to be granted by Healtheon to B&T in Section 5.1, below, B&T acknowledges and agrees that Healtheon shall have all proprietary rights in and to the Work Product, including, without limitation, all copyrights, patents and trade secret rights, all moral rights, all contract and licensing rights, and all claims and causes of action of any kind with respect to any of the foregoing, whether now known or hereafter to become known, and that Healtheon shall have the sole and exclusive right to use, modify and exploit the Work Product in any manner that Healtheon may choose. 4.2 PROPRIETARY NOTICES. B&T shall not remove or alter any trademark, trade name, copyright, or other proprietary notices, legends, symbols, or labels appearing on or in materials pertaining to the Work Product. Each portion of the Healtheon documentation reproduced by B&T shall include the intellectual property notice or notices appearing in or on the corresponding portion of such materials as delivered by Healtheon hereunder. 5. LICENSE AND SERVICE RIGHTS. 5.1 LICENSE RIGHTS. Healtheon grants to B&T a nonexclusive and nontransferable, fully-paid, right and license, exercisable at B&T's operational site(s), to: (i) use the Developed Applications, in object code form, as part of B&T's physician practice management services which are offered to the Physician Groups; and (ii) use the Work Product (excluding the Developed Applications) delivered to B&T hereunder in conjunction with the operations of B&T's physician practice management services. B&T shall not use, sublicense or otherwise distribute the Work Product, including the Developed Applications, in any other manner except as expressly stated herein. Notwithstanding the foregoing, nothing herein shall be construed so as to limit or interfere with B&T's ability to use the Developed Applications as part of the B&T Service to be offered to Physician Groups, and to enable access and use by End Users in conjunction with the B&T Service. 5.2 OPTION TO LICENSE HEALTHEON PLATFORM SOFTWARE. Healtheon hereby agrees to grant to B&T a nonexclusive and nontransferable, right and license, exercisable at B&T's operational site(s), to use the Healtheon Platform Software as part of the Healtheon Platform to be deployed at B&T's primary operational site(s) to run the Developed Applications (and any Additional Applications which may be licensed from Healtheon), as part of the B&T Service to be offered to Physician Groups, and to enable access and use by End Users in conjunction with the B&T Service. The applicable one-time, up-front fees for such license(s) shall be [*] net of any third-party royalty obligations. B&T shall not have the right to use, sublicense or otherwise distribute the Healtheon Platform Software in any other manner except as expressly stated herein. Notwithstanding the foregoing, nothing herein shall be construed so as to limit or interfere with B&T's ability to use the Developed Applications (and any Additional Applications which may be licensed from Healtheon) as part of the B&T Service to be offered to Physician Groups, and to enable access and use by End Users in conjunction with the B&T Service. B&T shall be solely responsible for the costs associated with acquiring all third-party hardware and software and implementation services necessary to deploy the Healtheon Platform at B&T's sites. 5.3 OPTION TO LICENSE ADDITIONAL APPLICATIONS. Healtheon hereby agrees to grant to B&T a nonexclusive and nontransferable, right and license, exercisable at B&T's primary operational site(s), to use the Additional Applications as may be licensed at the option of B&T, as part of the B&T Service to be offered to Physician Groups, and to enable access to End Users in conjunction with the B&T Service. [*] CONFIDENTIAL TREATMENT REQUESTED -3- The one-time up-front fee(s) for such license(s) shall be [*] to each such Additional Application as may be licensed by B&T, net of any third-party royalty obligations. B&T shall not use, sublicense or otherwise distribute the Additional Applications in any other manner except as expressly stated herein. Notwithstanding the foregoing, nothing herein shall be construed so as to limit or interfere with B&T's ability to use the Additional Applications which may be licensed from Healtheon as part of the B&T Service to be offered to Physician Groups, and to enable access and use by End Users in conjunction with the B&T Service. 5.4 OPTION TO USE HEALTHEON SERVICE. If, following the completion of the Developed Applications, B&T does not elect to exercise its license rights under Section 5.1, Healtheon hereby agrees to enter into a Healtheon Service Agreement with B&T whereby Healtheon shall provide B&T and its Physician Groups with access to an on-line service which includes the Developed Applications. Healtheon shall offer such service to B&T and its Physician Groups at [*]. 6. THIRD-PARTY TECHNOLOGY AND LICENSE RIGHTS 6.1 THIRD-PARTY TECHNOLOGY AND LICENSE RIGHTS. In order to perform the Services and/or Development Work contemplated hereunder, Healtheon may need to have access to the third-party technology and software listed on Exhibit C (the "Third-Party Technology and Software") which is licensed and/or deployed by B&T. B&T hereby agrees to use its best efforts to obtain, at its own expense, all necessary consents, licenses and/or assignment which may be necessary in order for Healtheon to perform the Services and/or Development Work, as contemplated hereunder. In the event that B&T fails to obtain any such necessary consent, license or assignment, B&T shall promptly notify Healtheon in writing and the parties will work together to attempt to find a reasonable accommodation to allow Healtheon to proceed with the work contemplated hereunder without violating any third party rights. In the event that the parties cannot find a reasonable accommodation, neither party shall have any obligation to proceed with any work which would infringe any third-party proprietary rights. Healtheon shall use reasonable efforts to cooperate with B&T to assist B&T in obtain any necessary consents, licenses and/or assignments. 6.2 B&T TECHNOLOGY AND LICENSE RIGHTS. B&T hereby grants to Healtheon a right and license to use, modify and copy all technology and software owned by B&T which is necessary for Healtheon to perform its obligations hereunder. 7. FEES AND PAYMENT 7.1 FEES AND EXPENSES, PAYMENT. B&T shall pay Healtheon the Fees and Expenses, as set forth in Exhibit D for the Services and the Development Work to be performed hereunder (the "Fees"). Healtheon shall submit invoices to B&T on a monthly basis for the Fees when due. Invoices shall be due and payable within ten (10) days after receipt. The Fees may be changed with the written consent of the parties. 7.2 OTHER EXPENSES. Healtheon shall have sole responsibility for payment of compensation to its personnel and shall pay and report, for all personnel assigned to perform services hereunder, federal and state income tax withholding, social security taxes, and unemployment insurance applicable to such personnel. Healtheon shall bear sole responsibility for any health or disability insurance, retirement benefits, or other welfare or pension benefits (if any) to which its own personnel may be entitled. [*] CONFIDENTIAL TREATMENT REQUESTED -4- 7.3 THIRD-PARTY HARDWARE AND SOFTWARE. In the event that it is reasonably necessary for Healtheon to purchase or license any third-party hardware and/or software in order to perform the Services and/or the Development Work, the Management Board shall determine whether such third-party hardware and/or software should be purchased and/or licensed by B&T or Healtheon and how the cost shall be allocated between the parties. 7.4 TAXES. All Fees and payments are exclusive of all taxes, duties or levies, however designated or computed. B&T shall be responsible for and pay all taxes upon payments due under this Agreement including, but not limited to, sales, use, or value-added taxes, duties, withholding taxes and other assessments now or hereafter imposed on or in connection with this Agreement, exclusive of taxes based upon Healtheon's net income, except as noted in Section 7.2. 8. CONFIDENTIALITY 8.1 CONFIDENTIAL INFORMATION. The parties acknowledge that in the course of performing under this Agreement, each party may be exposed to or acquire information which is proprietary to or confidential to the other party, its suppliers or customers. Any and all such information of one party in any form obtained by the other party or its employees, agents, or representatives in the performance of this Agreement shall be deemed to be confidential and proprietary information of such party. The parties agree to hold such information in strict confidence, to only permit use of such information by its employees and agents having a need to know in connection with performance under this Agreement, and not to copy, reproduce, sell, assign, license, market, transfer, give or otherwise disclose the confidential information of the other party to third parties or to use such information for any purposes whatsoever, without the express written permission of the other party and to advise each of their employees, agents, and representatives of their obligations to keep such information confidential. All such confidential and proprietary information described herein in whatever form, including but not limited to the Work Product, is hereinafter collectively referred to as "Confidential Information." Work Product shall be deemed to be the Confidential Information of Healtheon. B&T hereby agrees that it will not disclose any Confidential Information of Healtheon to any person or entity who is not an employee of B&T, without Healtheon's prior written consent and subject to such third party entering into a confidentiality agreement with Healtheon in a form acceptable to Healtheon. 8.2 EXCEPTIONS TO CONFIDENTIAL INFORMATION. Notwithstanding the obligations set forth in Section 8.1 above, the confidentiality obligations of Healtheon and B&T shall not extend to information that (i) was, as of the time of its disclosure, or thereafter becomes part of the public domain through a source other than receiving party; (ii) the receiving party can demonstrate was known to the receiving party as of the time of its disclosure; (iii) the receiving party can demonstrate was independently developed by the receiving party without use of the Confidential Information; or (iv) the receiving party can demonstrate was subsequently learned from a third party not under a confidentiality obligation to the providing party. In the event that a receiving party is required to disclose certain Confidential Information of a disclosing party pursuant to court order or government authority, the receiving party shall provide reasonable notice to the disclosing party prior to such disclosure and shall cooperate with the disclosing party to obtain protection from such disclosure. 9. REPRESENTATIONS AND WARRANTIES 9.1 WARRANTIES FOR SERVICES AND THE DEVELOPMENT WORK. Healtheon hereby represents and warrants that (i) each person assigned to perform the Services and/or the Development Work shall have -5- the proper skill, training and background so as to be able to perform the such Services and/or Development Work in a competent and professional manner and (ii) all Services and/or Development Work and any work product and other materials or documentation delivered under this Agreement shall have been completed in a thorough and professional manner. In the event of a breach of Healtheon's representations and warranties under this Section 9.1, Healtheon's sole obligation shall be to promptly correct any defects identified by B&T, provided that B&T provides Healtheon with written notice within thirty (30) days of becoming aware of the defective work. 9.2 THIRD-PARTY TECHNOLOGY. B&T hereby represents and warrants that it will use its best effort to obtain all necessary consents, licenses and/or assignments with respect to the third-party technology software which is licensed and/or deployed by B&T and which are necessary in order for Healtheon to perform the Services and Development Work to be performed hereunder. In the event that B&T has failed to obtain any necessary consent, license or assignment, B&T shall have notified Healtheon in writing. 9.3 AUTHORITY. Healtheon and B&T each hereby represents and warrants to the other that it is duly organized and validly existing under the laws of the jurisdiction in which it is organized, in good standing therein, and has the power to enter into this Agreement and to perform its obligations hereunder and, furthermore, that the performance by it of its obligations under this Agreement has been duly authorized by all necessary corporate or other action and will not violate any provision of law or regulation or of any corporate charter or bylaws. 9.4 NO IMPLIED WARRANTIES. THE WARRANTIES STATED ABOVE IN THIS SECTION 9 ARE THE ONLY WARRANTIES MADE BY EITHER PARTY. HEALTHEON DOES NOT MAKE AND HEREBY DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. B&T ACKNOWLEDGES THAT COMPLEX COMPUTER SOFTWARE AND SERVICES, SUCH AS THE DEVELOPED APPLICATIONS AND THE SERVICES, ARE RARELY FREE OF DEFECTS OR ERRORS AND HEALTHEON DOES NOT WARRANT THE SAME. 10. LIMITATION OF LIABILITY 10.1 EXCLUSION OF CERTAIN DAMAGES. [*] UNDER NO CIRCUMSTANCES AND UNDER NO LEGAL THEORY SHALL EITHER PARTY HAVE ANY LIABILITY FOR LOSS OF PROFITS, CONSEQUENTIAL, EXEMPLARY, INCIDENTAL OR PUNITIVE DAMAGES, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. 10.2 LIMITATION OF LIABILITY. [*] IN NO EVENT SHALL EITHER PARTY'S AGGREGATE LIABILITY FOR ANY MATTER ARISING OUT OF THE SUBJECT MATTER OF THIS AGREEMENT, WHETHER IN CONTRACT, TORT OR OTHERWISE, EXCEED THE AMOUNT OF THE FEES PAID FOR THE PARTICULAR SERVICES OR DEVELOPMENT WORK WHICH GAVE RISE TO SUCH CLAIM UNDER THIS AGREEMENT. The remedies provided herein are the parties' sole and exclusive remedies. [*] CONFIDENTIAL TREATMENT REQUESTED -6- 11. INDEMNIFICATION 11.1 INDEMNIFICATION. Healtheon agrees to hold harmless and defend B&T from and against any and all claims, actions, or proceedings, arising out of any actual or alleged infringement by Healtheon of any copyright or any U.S. patent, trademark, or trade secret right or other proprietary right, with respect to the Work Product, as delivered by Healtheon hereunder and used by B&T in accordance with the terms of this Agreement. B&T agrees to hold harmless and defend Healtheon from and against any and all claims, actions, or proceedings, arising out of any actual or alleged infringement by Healtheon of any copyright or any U.S. patent, trademark, or trade secret right or other proprietary right which arises out of B&T's failure to obtain any necessary consents, licenses, or assignments with respect to any third-party technology or software which has been licensed and/or deployed by B&T and which is necessary in order for Healtheon to perform its obligations hereunder ("B&T Third-Party Technology Rights"). 11.2 LIMITATIONS. Healtheon shall have no indemnity obligation for claims resulting from or alleged to result from (i) development work performed by Healtheon in compliance with B&T's specifications where Healtheon's method of compliance has been compelled by the terms of B&T's specifications; or (ii) B&T's use of the Work Product in combination with any hardware or software not furnished by or authorized by Healtheon hereunder, if such combination is the cause of such claim, or any modifications which have been made by B&T. In addition, Healtheon shall have no indemnity obligation for claims of infringement resulting or alleged to result from B&T's failure within a reasonable time frame to implement any replacement or modification which conforms to the requirements of Section 11.4 herein. B&T shall have no indemnity obligations for claims resulting from or alleged to result from Healtheon's breach of any B&T Third-Party Technology Rights where appropriate consents, licenses and/or assignments were obtained and Healtheon failed to adhere to the terms of applicable consents, licenses and/or assignments. 11.3 PAYMENT AND COOPERATION. Subject to the limitations set forth in Section 11.2 above, the Indemnifying Party shall pay all damages settlements, expenses, costs and reasonable attorney's fees, incurred by the Indemnified Party arising out of the matters set forth in Section 11.1 provided that such payment shall be contingent on: (i) prompt notice to the Indemnifying Party in writing of such claim to enable it to defend or mitigate the same; (ii) cooperation by the Indemnified Party with the Indemnifying Party in the defense and or settlement thereof, at the Indemnifying Party's expense; and (iii) allowing the Indemnifying Party to control the defense and all related settlement negotiations. 11.4 REMEDY. If, in the event of an infringement action pertaining to the Work Product and B&T's use of the Work Product is disrupted, Healtheon shall, at its option, (i) provide B&T with access to software which is functionally equivalent to the infringing elements of the Work Product, without additional charge; (ii) modify the infringing portions of the Work Product to avoid the infringement; or (iii) obtain a license for B&T to continue use of the Work Product for the term of this Agreement and pay for any additional fee required for such license, subject to B&T's approval, which shall not be unreasonably withheld. 11.5 LIMITATIONS. SECTION 11 SETS FORTH THE PARTIES' SOLE OBLIGATION, AND THE SOLE RECOURSE AGAINST THE OTHER PARTY IN THE EVENT OF ANY CLAIM OF INFRINGEMENT OF THIRD PARTY INTELLECTUAL PROPERTY RIGHTS. -7- 12. TERM AND TERMINATION 12.1. TERM. This Agreement shall continue for a fixed term of three (3) years from the date hereof unless terminated earlier under the provisions of this Section 12 or by the mutual written agreement of the parties. Notwithstanding the foregoing, the licenses granted in Section 5.1 shall continue for a term of [*] from the Effective Date and shall renew automatically for successive additional [*] terms unless terminated earlier pursuant to Section 12.3 or 12.4, or by the mutual written consent of the parties. 12.2 TERMINATION FOR CONVENIENCE. Either party may terminate this Agreement upon one hundred twenty days (120) prior written notice to the other for any reason. 12.3 TERMINATION BY EITHER PARTY FOR DEFAULT. If either party defaults in the performance of any material provision of this Agreement, then the non-defaulting party may give written notice to the defaulting party that if the default is not cured within thirty (30) days of such notice the Agreement will be terminated. If the non-defaulting party gives such notice and the default is not cured during the thirty (30) day period, then the Agreement shall automatically terminate at the end of that period. 12.4 INSOLVENCY. Either party may terminate this Agreement by written notice to the other, and may regard the defaulting party as in default of this Agreement, if the defaulting party becomes insolvent, makes a general assignment for the benefit of creditors, suffers or permits the appointment of a receiver for its business or assets, becomes subject to any proceeding under any bankruptcy or insolvency law whether domestic or foreign, or has wound up or liquidated, voluntarily or otherwise. 12.5 EFFECT OF TERMINATION. The provisions of Sections 7(with respect to Fees and other payments which were due and payable as of the date of termination), 4, 8, 10, 11, and 13 (to the extent applicable) shall survive the termination of this Agreement for any reason. All other rights and obligations of the parties shall cease upon termination of this Agreement. In the event of a termination, neither party shall be entitled to any refund of the fees paid or cost incurred for the development performed hereunder. Provided that this Agreement is not terminated pursuant to Section 12.4 pursuant to B&T's insolvency, upon termination, Healtheon shall deliver to B&T a copy of (i) each Developed Application which has been completed as of the date of termination, in object code form, and the related user documentation, and (ii) all portions of Developed Applications which were under development but not yet completed as of the date of termination, in object code form, and the related user documentation, if any. Materials delivered pursuant to Section 12.5(ii) shall be delivered on an "as-is" basis. 12.6 RETURN OF MATERIALS. Within thirty (30) days after the termination of this Agreement, each party shall return to the other, all Confidential Information, and other material of any kind which is the property of the other party. 13. GENERAL 13.1 NO EXCLUSIVITY OR RESTRICTION ON OTHER ACTIVITY. Except as expressly set forth in this Agreement, nothing herein shall preclude either party from entering into agreements to obtain similar services or development work from third parties or from providing similar services or development work to third parties. [*] CONFIDENTIAL TREATMENT REQUESTED -8- 13.2 RELATIONSHIP OF PARTIES. The relationship of the parties shall be that of independent contractors. Neither party will represent that it has any authority to assume or create any obligation, express or implied, on behalf of the other party, or to represent the other party as agent, employee, or in any other capacity, except as specifically provided herein. 13.3 BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding on and inure to the benefit of the respective parties and their permitted successors and assigns. Neither party shall not transfer, assign, sublicense or subcontract any right or obligation hereunder, except as expressly provided herein. 13.4 NO WAIVER. Either party's failure to exercise any right under this Agreement shall not constitute a waiver of any other terms or conditions of this Agreement with respect to any other or subsequent breach, nor a waiver by such party of its right at any time thereafter to require exact and strict compliance with the terms of this Agreement. 13.5 NOTICES. All notices or other communications which are required or permitted to be given hereunder shall be in writing and shall be sent to the address of the recipient set forth below or such other address as the recipient may designate by notice given in accordance with the provisions of this Section with copies to: In the case of Healtheon: In the case of B&T: Healtheon Corporation Brown & Toland 87 Encina Avenue 1388 Sutter Street, Suite 400 Palo Alto, California 94302 San Francisco, CA 94109 Attn: President Attn: President Copy to: General Counsel Copy to: General Counsel Any such notice shall be delivered by either (i) first class registered or certified airmail, postage prepaid, and shall be deemed to have been served forty-eight (48) hours after posting; or (ii) express courier service, service fee prepaid, and shall be effective upon delivery. 13.6 APPLICABLE LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of California. 13.7 SEVERABILITY. The invalidity of one or more phrases, sentences, clauses or articles contained in this Agreement shall not affect the remaining portions of this Agreement or any part thereof; and in the event that one or more phrases, sentences, clauses or articles shall be declared void or unenforceable this Agreement shall be amended to include only such portions of such phrases, sentences, clauses or articles that are not invalid, void or unenforceable. 13.8 ENTIRE AGREEMENT; AMENDMENTS. This Agreement, along with the Exhibits attached hereto, sets forth the entire agreement between the parties and supersedes any other prior proposals, agreements and representations between them related to its subject matter, whether written or oral. No modifications or amendments to this Agreement shall be binding upon the parties unless made in writing and duly executed by authorized officials of both parties. -9- IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first written above. Healtheon Corporation Brown & Toland Physician Services Organization By: /s/ By: /s/ --------------------------------- ------------------------------- Title: President and CEO Title: President ------------------------------ ---------------------------- Date: Date: ------------------------------ ---------------------------- -10- EXHIBIT A B&T SERVICE "B & T Services" shall mean B & T's physician practice, physician group practice, and IPA management services which include, but not be limited to, the following services: - - Claims processing, adjudication, eligibility, and encounter data - - Risk pool management - - Utilization management - - Authorization and referral management - - Care management including inpatient and outpatient case management - - Inpatient physician program management - - Disease management and wellness programs - - Provider credentialling - - Health plan member marketing - - Provider relations - - Health plan and provider contracting - - Quality management - - Practice management including office management, billing and collections - - Financial services including accounting, audit, budget, financial reporting, and taxes - - Medical group and IPA administration - - Capitation management - - Health Plan Member services which are offered to "Physician Groups. -11- EXHIBIT B SERVICES - - Operate, maintain and enhance B&T applications - - Operate and maintain B&T hardware and software infrastructure, network and desktop environment - - Provide technical support to internal and external B&T users - - Provide support for B&T new site implementations - project planning and management - solution design - installation of hardware and software - user technical support and training -12- EXHIBIT C Third-Party Technology and Software -13- EXHIBIT D FEES AND EXPENSES 1. Fee and Expenses for Services B&T will pay [*] of all "cost" (as defined below) incurred by Healtheon in performing the Services. 2. Fee and Expenses for Development Work B&T will pay [*] of all "cost" (as defined below) incurred by Healtheon in performing the Development Work. DEFINITION OF COST Cost will include Healtheon's "fully loaded" cost (which include payroll, benefit, support services, corporate overhead and other appropriate expenses) for all full time employees assigned to the BTH Division, and all direct expenses (consultants, contractors, recruiting expenses and fees, outside services, travel, etc.). For Healtheon's employees that are not assigned full time to the Division, they will charged their time performing or supporting the Services based on a set rate, which is subject to change based on the cost structure of Healtheon. The initial rates are:- Level 1 [*] per hour Level 2 [*] per hour Level 3 [*] per hour For Healtheon's employees that are not involved in this project, they will charge their time providing short term consulting services to this project or B&T based on [*]. The current rates are :- Level 1 [*] per hour Level 2 [*] per hour Level 3 [*] per hour Cost for additional capital equipment or computer processing needed to perform the Services or Development Work will be paid by B&T. [*] CONFIDENTIAL TREATMENT REQUESTED -14- EX-10.27 12 EXHIBIT 10.27 EXHIBIT 10.27 July 2, 1997 PERSONAL AND CONFIDENTIAL - ------------------------- Mike Long 3 Stegner Lane Austin, Texas 78746 Dear Mike: The Board of Directors of the Company has approved an agreement for your services upon the terms set forth in this offer. On behalf of the Board of Directors, I am pleased to submit to you the following offer: 1. TITLE AND POSITION. You will have the position of President and Chief Executive Officer and you will report to the Board of Directors. We will elect you to the Board of Directors promptly upon your acceptance of this offer; and, upon your request, you will be elected as Chairman of the Board. The position shall be located at the offices of the Company, except as travel to other locations may be necessary to fulfill your responsibilities. 2. DUTIES AND OBLIGATIONS. During your employment, you shall devote your full time, interest and effort to the performance of the duties of the position. 3. COMMENCEMENT. It is anticipated that you will commence employment no later than July __, 1997. 4. COMPENSATION AND BENEFITS. (a) SALARY. The Company shall pay you for all services to be performed by you at a monthly salary of $ 41,667, adjusted as provided in Section 4(g) below, payable in periodic semi-monthly installments according to the Company's practice, subject to any applicable withholding taxes. Your base salary will be reviewed on an annual basis by the Board of Directors or its Compensation Committee. The first such review will occur no later than February, 1999. (b) STOCK PURCHASE RIGHT. At the Company's Board of Directors meeting following the start of your employment, the Board will grant you a stock award to purchase two million five hundred thousand (2,500,000) shares of the Company Common Stock under the Company's 1996 Stock Plan (the "Shares"). The purchase and/or exercise price for this right will be the then-current fair market value of the Company Common Stock at the date of grant or such other price as is consistent with the terms of the Company's 1996 Stock Plan. The vesting of the options to purchase Shares (and the lapsing of the Company's repurchase right, in the case of Shares purchased pursuant to a "restricted stock purchase agreement) will commence on the date of your full time employment with the Company. In the case of an option(s), twenty-five percent (25%) of the options to purchase Shares will be fully vested upon the date of grant, Shares issued pursuant to any options will not be subject to any right of repurchase, other than the right of first refusal as provided under the terms of the 1996 Stock Plan and/or the agreements issued thereunder. In the case of Shares purchased pursuant to a restricted stock agreement, 625,000 Shares will not be subject to any right of repurchase (other than the right of first refusal, as provided under the terms of the 1996 Stock Plan and/or the agreements issued thereunder). The balance of the options to purchase Shares will begin vesting and/or the repurchase right will lapse, in the case of a restricted stock purchase agreement, one (1) year after your start date at the rate of 1/36th of the aggregate number of options to purchase Shares (or Shares in the case of a restricted stock purchase) per month at the close of each month while you remain employed with the Company, over the remainder of the four (4) year vesting term. Upon the fourth anniversary of your start date, all of the options to purchase Shares shall be fully vested and, in the case of a restricted stock purchase, the Company's repurchase right will have lapsed in its entirety. The Board will respect your decision as to what portion of the Shares you wish to obtain in the form of: (i) an immediate purchase, subject to the Company's right of repurchase which lapses over time, with the right to make an election under Section 83 (b) of the Internal Revenue Code; (ii) an Incentive Stock Option, subject to the applicable rules and limitations under the Internal Revenue Code; and (iii) a Non-Qualified Option. An attorney from the Company's outside law firm of Wilson, Sonsini will be available to assist you in evaluating the tax benefits of these different stock and option programs. You have indicated that you want the above option in the form of an Incentive Stock Option to the extent of the annual limitation contained in section 422(d) of the Code, and to the extent the options exceed such limit in a calendar year the excess will be a Non-Qualified Option and subject to all terms of Non-Qualified Options, including price and time of exercise. The Company will cooperate with you in this allocation. Your stock award will be evidenced by Stock Option Agreement(s) (and/or a Restricted Stock Purchase Agreement, in the event that you decide to have a portion of your stock grant pursuant to a restricted stock purchase arrangement) subject to the terms of the Company's 1996 Stock Plan and consistent with the forms of agreements issued under the Company's 1996 Stock Plan. The terms of the Stock Option agreements shall be amended by the Board at such meeting to provide that Stock Option Agreements issued under the 1996 Stock Plan shall be exercisable for a period of ninety (90) days following the date of termination of employment rather than the Company's current thirty (30) day period. The terms of these agreements permit you to transfer the Shares which are not subject to a repurchase right or for which such right has lapsed, to a trust for the benefit of your immediate family or to a member of your immediate family. You shall have the right to exercise your options for any consideration which is permissible under the terms of the 1996 Stock Plan, including for shares of the Company's stock. (c) ADDITIONAL STOCK PURCHASE RIGHT. The Company has granted you the right to purchase up to one million (1,000,000) shares of the Company's Series B Preferred Stock (the "Series B Shares") and upon such purchase you shall become a party to the Company's Investors' Rights Agreement which shall grant you registration rights with respect to your Series B Shares. The 2 purchase price for such shares will be two dollars ($2.00) per share. The Company shall allow you to purchase two hundred and fifty thousand (250,000) of the Series B Shares, on the same terms and conditions as the Company's Series B investors, in exchange for a non-interest bearing promissory note payable in twelve (12) equal monthly installments. The Company shall apply the net amount of your compensation pursuant to Section 4(a) above to the payment of this Note and you shall pay the balance of any monthly installments to the Company. The Note shall be in a form and on terms which are acceptable to the Company and to you. The Company shall allow you to purchase seven hundred and fifty thousand (750,000) shares of the Series B Shares (the "Restricted Series B Shares") pursuant to, at your option: (i) a restricted stock purchase agreement in consideration for a full recourse note which is adequately secured by the collateral of your choice, which may include the Series B Shares; or (ii) a warrant with an exercise price of two dollars ($2.00) per share and a term of three (3) years. At your option, following the first anniversary of your employment with the Company, the second note can be repaid or the warrant can be exercised in periodic installments by applying your net compensation to make periodic payments to such Note or exercises of the Warrant, in accordance with terms and conditions which are acceptable to you and the Company. The Restricted Series B Shares will be subject to the Company's assignable repurchase right which shall lapse with respect to 1/24th of the Restricted Series B Shares per month during the period in which you continue to be employed by the Company, commencing upon the start date of your employment. In the event that that your employment is terminated for any reason, the note shall become due and payable. The Company's outside counsel shall be made available to discuss with you the legal and tax issues with respect to these options in order to assist you in deciding which option to select. (d) BENEFITS. Commencing with full time employment, you will be entitled to all medical, life insurance, disability insurance and other benefits as are provided to the Company's employees. Medical benefits will provide coverage with health care providers located in Austin, Texas. In your position, we would expect you to review and design the Company's benefits packages. (e) BUSINESS EXPENSES. The Company will reimburse you for all reasonable business expenses incurred on behalf of the Company upon submission of appropriate documentation in accordance with the Company's general policies, as they may be amended from time to time during the course of your employment. (f) MOVING EXPENSES. The Company acknowledges that neither you nor your family will be able to move to the San Francisco Bay area at any time prior to June 1998. Notwithstanding the foregoing, the Company will reimburse you for your reasonable and customary moving expenses incurred with respect to your move to the San Francisco bay area whether prior to June 1998 or otherwise. You agree that you will repay such reimbursed expenses in the event that you voluntarily terminate your employment prior to the one (1) year anniversary date of your family's move to California. (g) LIVING AND COMMUTING EXPENSES. The Company will pay all of the reasonable and customary living expenses incurred with respect to your living accommodations in the San Francisco bay area, including housing, meals and automobile expenses. The Company will also pay all commuting expenses for weekend trips to visit your family in Austin, Texas. In the event any of the 3 expenses advanced under this provision result in additional taxable income to you, the Company will "gross up" your salary to compensate you for additional state and Federal taxes and taxes on the increased salary. (h) 83(b) ELECTION. With respect to any Shares issued pursuant to this letter, to the extent allowable by law, upon your request, the Company will assist you in preparing an election under section 83(b) of the Internal Revenue Code of 1986. 5. CHANGE OF CONTROL. In the event that the Company is acquired by or merged into another company, if you are not offered a position with similar responsibility in the surviving company and if you decide to voluntarily terminate your employment with Healtheon at any time prior to the effective time of any such merger or acquisition, options to purchase 625,000 Shares shall immediately vest or in the case of Shares subject to repurchase, the Company will waive the Company's right of repurchase with respect to an aggregate of 625,000 of the Shares, and 500,000 of the Restricted Series B Shares. This provision shall not be applicable in the event of your termination for any reason other than in connection with a change of control and this waiver and/or vesting shall be in addition to any Shares or options to purchase Shares which have already vested and/or the Company's repurchase right has lapsed. 6. EMPLOYMENT RELATIONSHIP. Should you decide to accept our offer, you will be an at-will employee of the Company, which means the employment relationship can be terminated by either of us for any reason at any time. Further, your participation in any stock incentive or benefit program is not to be regarded as assuring you of continuing employment for any particular period of time. However, in the event of the Company's termination of your employment without cause, you would receive six (6) months base salary, payable in semi-monthly installments and options to purchase 625,000 Shares would immediately vest and the Company would waive the Company's right of repurchase with respect to 625,000 of the Shares (if Shares are issued subject to a repurchase right) and 500,000 of the Restricted Series B Shares. This vesting and waiver shall be in addition to any options and/or Shares which have already vested and/or the Company's repurchase right has lapsed. Any assignment of the Company's Repurchase rights shall be subject to the waivers of such rights described in Sections 5 and 6 so that all assignees shall be bound by such waivers. For purposes of this Agreement, the term "cause" shall mean (i) willful and repeated failure to comply with the lawful directions of the Board of Directors, (ii) gross negligence or willful misconduct in the performance of duties to the Company, (iii) commission of any act of fraud with respect to the Company, or (iv) conviction of a felony or a crime causing material harm to the standing and reputation of the Company, in each case as determined in good faith by the Board of Directors. The number of Shares and Restricted Shares shall be subject to adjustment, in accordance with the terms of the Company's 1996 Stock Plan and/or Certificate of Incorporation, as applicable, in the event of certain "dilutive" issuances of stock and the Share and Restricted Share numbers set forth herein and in Sections 4 and 5, above shall be adjusted accordingly in the event of any such "dilutive" stock issuance. 7. PROPRIETARY INFORMATION. As an employee of the Company, you will have access to Company confidential information and you may during the course of your employment develop certain information or inventions which will be the Company's property. As a condition of your employment, 4 you will be required to enter into the Company's Employee Inventions and Confidentiality Agreement. This agreement exists to assure the Company and its investors that the Company's valuable intellectual property is protected. We wish to impress upon you that we do not want you to bring with you any confidential or proprietary material of any former employer or third party or to violate any other obligation which you may have to any of your former employers or any third parties. 8. ENTIRE AGREEMENT. This Letter Agreement sets forth the entire understanding of the parties and supersedes all prior agreements, arrangements, and communications, whether oral or written, between the parties, including all prior employment agreements. No amendment to this Letter Agreement may be made except by a writing signed by the Company and you. If you find this offer acceptable, please sign the enclosed copy of this letter in the space indicated and return it to us. Very truly yours, __________________________________ John Doerr On behalf of the Board of Directors Healtheon Corporation Accepted and Agreed: ______________________________ Dated: _______________________ 5 EX-10.28 13 EXHIBIT 10.28 EMPLOYMENT AGREEMENT THE AGREEMENT, entered into as of this 23rd day of September, 1992, by and between ACTAMED CORP., a Georgia corporation (the "Company") and MICHAEL K. HOOVER ("Employee"). W I T N E S S E T H : WHEREAS, the Company and Employee desire to enter into an employment agreement on the terms stated herein; NOW, THEREFORE, in consideration of the mutual promises contained herein, the parties hereto agree as follows: 1. DEFINITIONS. For purposes of this Agreement the following capitalized terms shall have the definition set forth below. (a) "CAUSE" means: (i) conviction of Employee of a felony; or (ii) Employee's use of alcohol or drugs to an extent that materially interferes with Employee's performance of his duties or employment; or (iii) Employee has engaged in fraud, misappropriation, embezzlement, or other acts involving moral turpitude; or (iv) Employee has committed a willful act of dishonesty in the course of his duties which injures the Company; or (v) Employee has repeatedly disregarded policy directives from the Company's Chief Executive Officer, President or Board of Directors; or (vi) Employee violates his covenants under paragraph 7(a) or breaches the nondisclosure agreement executed pursuant to paragraph 6. (b) "DISABILITY" means incapacity due to physical or mental illness or injury that is permanent in nature and prevents Employee from performing the substantial and material duties of his employment hereunder. Any such disability shall be deemed to be permanent in nature if any physician designated by the Company certifies in writing to the Company that such disability can be expected to last for a period of at least six (6) continuous months. 2. EMPLOYMENT AND DUTIES. Employee shall perform such duties and responsibilities as are assigned to him from time to time by the Chairman of the Board of the Company. Employee agrees that during the term of his employment, he will devote his full productive time to the Company, not work for anyone else, or engage in any activity in competition with or detrimental to the Company; provided, however, that Employee at the direction of the Chairman of the Board of the Company shall perform duties and services for Actamed Development Corp. 3. BASE COMPENSATION. (a) In consideration of the services rendered by Employee, the Company will pay Employee during the term of this Agreement an annual base salary of $85,000.00 or such other amount as determined from time to time by the Board of Directors of the Company ("Base Compensation"). Such Base Compensation shall be payable in accordance with the regular payroll practices of the Company. (b) The Company's Board of Directors may review the then-current level of Employee's annual base salary for potential adjustment and shall advise Employee, in writing, of such adjustment, if any, or may state, in writing, that no adjustment will be made. 4. STOCK OPTIONS. Simultaneously with the execution of this Agreement, Employee will be granted an option to purchase 10,000 shares of Company common stock pursuant to that certain Nonstatutory Stock Option Agreement of even date herewith between the Company and Employee (the "Option Agreement"). 5. TERM AND SEVERANCE PAY. (a) Employee's employment hereunder shall be effective as of the date of this Agreement and shall continue in force until terminated as set forth in paragraph 5(b) below. (b) Employee's employment hereunder may be terminated only: (i) by mutual agreement of the Company and Employee; (ii) by the Company immediately for Cause; (iii) by Employee, upon not less than ninety (90) days prior written notice to the Company; (iv) by the Company without Cause or without any reason upon not less than ninety (90) days prior written notice; provided, however, that the Company may, at its option, terminate Employee prior to the expiration of such ninety (90) day period subject to the obligation of paying Employee for the remainder of such period; (v) by the Company upon the Disability of Employee; or (vi) Upon the death of Employee. 2 (c) In the event of Employee's termination of employment with the Company in accordance with subparagraphs 5(b)(i), 5(b)(ii) or 5(b)(iii) above, then: (i) Employee's right to exercise any outstanding options pursuant to the Option Agreement shall terminate immediately upon such event; and (ii) If the common stock of the Company is not publicly traded (as described in Section 6(a) or 6(b) of the 1992 Stock Option Plan of the Company) ("Publicly Traded"), then, for a period of ninety (90) days following the occurrence of any event described in 5(b)(i), 5(b)(ii) or 5(b)(iii), the Company shall have an option to purchase any or all of the Option Shares acquired by Employee pursuant to the Option Agreement. The terms and conditions of such option to purchase shall be as provided in subparagraph 9(a)(i) of the Option Agreement. (d) If at a time when the common stock of the Company is not Publicly Traded, Employee's employment with the Company is terminated in accordance with subparagraphs 5(b)(iv), 5(b)(v) or 5(b)(vi) herein: (i) then Employee or his personal representative shall elect (hereinafter referred to as the "Severance Election") to: (A) Retain all of his Option Shares (as defined in the Option Agreement) subject to the terms and conditions of the Option Agreement, and to retain the option to purchase any remaining vested Option Shares pursuant to the terms of the Option Agreement (hereinafter the rights under this subparagraph 5(d)(i)(A) may be referred to as the "Option Feature"); or (B) Receive severance pay equal to the aggregate Base Compensation which Employee had received from the Company in the three (3) years (or such lesser period which Employee was employed by the Company) immediately prior to the event occurring which entitled Employee to elect such severance pay (hereinafter referred to as the "Severance Pay Feature"). If Employee or his personal representative elects to receive such Severance Pay Feature, such amount shall be paid to Employee or his personal representative in the same method as Employee was receiving Base Compensation while employed by the Company. By way of example, if Employee was paid Base Compensation in the amount of $30,000 in his first year of employment with the Company (paid in weekly installments), and was paid $20,000 over the following six (6) month period (in weekly installments) before being terminated by the Company without Cause; then, upon Employee or his personal representative electing to receive the Severance Pay Feature, Employee or his personal representative would be entitled to receive $30,000 paid over a one (1) year period in weekly installments, followed by $20,000 to be paid over the following six (6) month period in weekly installments. 3 The Severance Election must be exercised in writing by Employee or his personal representative within ten (10) days of Employee or his personal representative receiving written notification from the Company of such right to make such Severance Election. If Employee or his personal representative does not make such Severance Election in accordance with such requirements, the Company, and not Employee, shall have the right to make such Severance Election. In the event Employee or his personal representative makes the severance Election (or the Company elects, in the event Employee fails to elect as provided herein) to receive the Severance Pay Feature, all of Employee's option privileges under the Option Agreement shall expire as of the date of the event occurring which entitled Employee to make the Severance Election. Thereafter, neither Employee or his personal representative shall have the right to purchase any Option Shares and Employee or his personal representative shall promptly endorse in blank and deliver to the Company all Option Shares then owned by Employee. All such Option Shares shall be deemed canceled as of the date of such election. Neither Employee nor his personal representative shall be entitled to receive any consideration for the return of such Option Shares or the termination of the right to purchase any additional Option Shares under the Option Agreement. (ii) For a period of one hundred eighty (180) days following the date of exercise of the Severance Election by Employee to retain the Option Feature, the Company shall have an option to terminate all of Employee's option privileges under the Option Agreement and to purchase all of the Option Shares acquired by Employee pursuant to the Option Agreement. The terms and conditions of such option shall be as provided in subparagraph 9(a)(ii) of the Option Agreement. (e) If at a time when the Common Stock of the Company is Publicly Traded, Employee's employment with the Company is terminated in accordance with subparagraphs 5(b)(iv), 5(b)(v) or 5(b)(vi), then: (i) Employee shall not have any right to make the Severance Election; (ii) Employee's right to exercise any options for unvested Option Shares pursuant to the Option Agreement shall terminate immediately upon such event; (iii) Employee may retain all of his Option Shares subject to the terms and conditions of the Option Agreement; and (iv) Employee's right to exercise any options for Option Shares which are vested in accordance with paragraph 1(b) of the Option Agreement at the time of Employee's termination of employment shall continue to be effective until the termination of the options in accordance with the terms of the Option Agreement. 4 (f) Employee shall be entitled to be reimbursed in accordance with the policies of the Company, as adopted from time to time, for all reasonable and necessary expenses incurred by Employee in connection with the performance of Employee's duties of employment hereunder. (g) The obligations of the parties under subparagraphs 5(c), 5(d) and 5(e) shall survive the termination of Employee's employment hereunder and shall not be extinguished thereby. 6. CONFIDENTIAL RELATIONSHIP AND PROTECTION OF TRADE SECRETS AND CONFIDENTIAL INFORMATION. At the time of execution hereof, Employee shall execute a nondisclosure agreement in the form which is executed by other employees of the Company. 7. COVENANT NOT-TO-COMPETE. (a) During the term of his employment with the Company, Employee owes a duty of good faith and loyalty to the Company. (b) Employee agrees that, in the event of a termination of Employee's employment. Employee will not, for a period of one (1) year after such termination, without the prior written consent of the Company, (i) either directly or indirectly, on his own behalf or on the service of on behalf of others, solicit, divert or appropriate, or attempt to solicit, divert or appropriate, to any Competing Business, as hereinafter defined, any customer or prospective customer of the Company or Actamed Development Corp. with whom Employee had contact on behalf of the Company or Actamed Development Corp. within one (1) year prior to such termination of employment or (ii) perform similar services for a Competing Business as those which he performed for the Company or Actamed Development Corp. during the one (1) year period prior to such termination of employment. (c) Employee agrees that, in the event of a termination of Employee's employment hereunder, Employee will not, for a period of one year after such termination, without the prior written consent of the Company, either directly or indirectly, on his own behalf or on the service of or on behalf of others, solicit, divert or hire away, or attempt to solicit, divert or hire away, to any Competing Business, as hereinafter defined, any person employed by the Company or Actamed Development Corp., whether or not such person is a full-time employee or a temporary employee of the Company or Actamed Development Corp. and whether or not such employment is pursuant to a written agreement and whether or not such employment is for a determined period or is at will. (d) As used in this Agreement, "Competing Business" means any person or entity that is principally engaged in a business substantially the same as the business of the Company or Actamed Development Corp. 5 (e) Each of the covenants and agreements of Employee set forth in this paragraph 7 hereof shall be deemed separate and severable, each from the other, and should any such separate and severable covenant or agreement, or any part thereof, be declared invalid or unenforceable by a court of competent jurisdiction from which no appeal is timely taken, such declaration of invalidity or enforceability shall not in any way affect or limit the validity or enforceability of any other covenant or agreement, or part thereof, not also declared invalid or unenforceable, each of which shall remain binding on Employee in accordance with its respective terms. Further, if any such covenant or agreement is so declared to be invalid or unenforceable, Employee shall, as soon as possible, execute a supplemental agreement with the Company granting to the Company, to the extent legally permissible, the protection intended to be afforded to the Company and Actamed Development Corp. by the covenant or agreement so declared invalid or unenforceable. 8. SPECIFIC ENFORCEMENT. The Company and Employee agree a violation of paragraph 7 of this Agreement will cause irreparable injury to the Company and its affiliates and that, accordingly, the Company will be entitled, in addition to any other rights and remedies it may have at law or in equity, to seek an injunction enjoining and restraining Employee from doing or planning to do any such act and any other violation or threatened violation of paragraph 7. 9. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Georgia. Any action in law or equity regarding this Agreement or Employee's rights hereunder may only be brought in the State of Georgia. 10. SEVERABILITY. In the event that any provision or portion of this Agreement shall be determined to be valid or unenforceable for any reason by final judgment of a court of competent jurisdiction, the remaining provisions or portions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law. Failure to insist upon strict compliance with any provision of this Agreement shall not be deemed a waiver of such provision or any other provision of this Agreement. 11. NO SET-OFF. The existence of any claim, demand, action or cause of action of Employee against the Company, whether or not based upon this Agreement, will not constitute a defense to the enforcement by the Company of any covenant or agreement of Employee contained herein. 12. NO ATTACHMENT. Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge or hypothecation, or to execution, attachment, levy or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to effect any such action shall be null, void and of no effect; provided, however, that this provision shall not prevent Employee from designating one or more beneficiaries to receive any amount after his death and shall not preclude his executor or administrator from assigning any right hereunder. 6 to the person or persons entitled thereto, and in the event of Employee's death or a judicial determination of Employee's incompetence, Employee's rights under this Agreement shall survive and shall inure to the benefit of Employee's heirs, beneficiaries and legal representatives. 13. SOURCE OF PAYMENTS. All payments provided under this Agreement shall be paid in cash from the general funds of the Company, and no special or separate fund shall be established and no other segregation of assets shall be made to assure payment. 14. TAX WITHHOLDING. The Company may withhold from any benefits payable under this Agreement all federal, state, city or other taxes as shall be required pursuant to any law or governmental regulation or ruling. 15. NOTICES. Any notice or communication between the Company and Employee with respect to his Agreement or events covered thereby shall be performed or confirmed in writing and be deemed given when personally delivered or mailed by registered or certified mail, return receipt requested, postage prepaid or dispatched by any overnight delivery service as follows: If to the Company: Actamed Corp. 5 Concourse Parkway Suite 250 Atlanta, Georgia 30328 If to Employee: 5010 McPherson Drive Roswell, Georgia 30075 or at such other address as either party may have furnished to the other in accordance herewith except that notices of change of address shall be effective only upon receipt. 16. AMENDMENT, TERMINATION, WAIVER. No provision of this Agreement may be amended, modified or waived unless in writing executed by the Company and Employee. No waiver by either party hereto of any breach by the other party hereto of any condition or any provisions of this Agreement to be performed by such other party shall be deemed a waiver of a subsequent breach of such condition or provision or waiver of a similar or dissimilar condition or provision at the same time or any subsequent time. 17. SUCCESSORS. (a) This Agreement may not be assigned, transferred or conveyed by the Company except to a person or entity that acquires all or substantially all of the business of the 7 Company (whether such acquisition is by way of acquisition or assets, acquisition of stock, merger, consolidation or otherwise). (b) Employee may not assign, transfer or convey this Agreement. 18. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which will constitute an original but all of which together will constitute but a single document. 19. PRIOR AGREEMENTS. Except for the nondisclosure agreement executed pursuant to paragraph 6, this Agreement supersedes all previous agreements between the Company and Employee concerning terms and conditions of the employment of Employer by the Company, and all such previous agreements are hereby canceled by mutual consent. 20. BINDING EFFECT. This Agreement shall be binding on the parties to this Agreement and on their respective heirs, administrators, executors, successors and assigns. IN WITNESS WHEREOF, Employee has hereunder set his hand and seal, and the Company has caused this Agreement to be executed by its duly authorized officer as of the day and year first above written. EMPLOYEE: /s/ Michael K. Hoover ------------------------------------ Michael K. Hoover Witness: - ------------------------------------- ACTAMED CORP. By: /s/ P.E. Sadler ------------------------------- P.E. Sadler, Chairman of Board 8 FIRST AMENDMENT TO EMPLOYMENT AGREEMENT THIS AMENDMENT, entered into as of this 3rd day of December, 1993, by and between ACTAMED CORP., a Georgia corporation (the "Company") and MICHAEL K. HOOVER ("Employee") hereby amends that certain Employment Agreement, dated as of September 23, 1992, by and between the Company and Employee (the "Employment Agreement"). W I T N E S S E T H: WHEREAS, the Company and Employee entered into Nonstatutory Stock Option Agreements, dated September 23, 1992 (as amended March 23, 1993), March 23, 1993 and December 1, 1993, respectively (collectively the "Original Option Agreements"); and WHEREAS, the Company and Employee on the date hereof have amended and restated the Original Option Agreements and have entered into Amended and Restated Nonstatutory Stock Option Agreements of even date hereof (the "Restated Agreements"), which Restated Agreements replace and supersede the Original Option Agreements; and WHEREAS, the Company and Employee desire to amend the terms of the Employment Agreement on the terms stated herein, to conform with replacement of the Original Option Agreements with the Restated Agreements; NOW, THEREFORE, in consideration of the mutual promises contained herein, the parties hereto agree as follows: 1. Section 4 of the Employment Agreement is deleted in its entirety and replaced with the following new Section 4: "4. STOCK OPTIONS. Simultaneously with the execution of that certain Amendment to this Agreement, dated December 3, 1993, by and between the Company and Employee (the "Amendment"), the Company and Employee have terminated the Original Option Agreements (as defined in the Amendment) and have entered into the Restated Agreements (as defined in the Amendment)." 2. Paragraph (d) of Section 5 is deleted in its entirety and replaced with the following paragraph (d): "(d) Intentionally Deleted." 3. Paragraph (e) of Section 5 is deleted in its entirety and replaced with the following paragraph (e): "(e) Intentionally Deleted." 4. Paragraph (g) of Section 5 is deleted in its entirety and replaced with the following paragraph (g): "(g) The obligations of the parties under paragraph 5(c) shall survive the termination of Employee's employment hereunder and shall not be extinguished thereby." 5. Section 15 is changed by indicating the address of the Company as: ActaMed Corp. 7000 Central Parkway, Suite 620 Atlanta, Georgia 30328 6. this Amendment shall be governed by and construed in accordance with the laws of the State of Georgia. Any action in law or equity regarding this Amendment or Employee's rights hereunder may only be brought in the State of Georgia. 7. No provision of this Amendment may be amended, modified or waived unless in writing executed by the Company and Employee. 8. This Amendment may not be assigned, transferred or conveyed by the Company except to a person or entity that acquires all or substantially all of the business of the Company (whether such acquisition is by way of acquisition of assets, acquisition of stock, merger, consolidation or otherwise). Employee may not assign, transfer or convey this Amendment. 9. This Amendment may be executed in one or more counterparts, each of which will constitute an original but all of which together will constitute but a single document. 10. This Amendment shall be binding on the parties to this Amendment and on their respective heirs, administrators, executors, successors and assigns. 11. Except as specifically amended hereby, the Employment Agreement shall remain in full force and effect as in force and effect on the date hereof. IN WITNESS WHEREOF, Employee has hereunder set his hand and seal, and the Company has caused this Agreement to be executed by its duly authorized officer as of the day and year first above written. EMPLOYEE: /s/ Michael K. Hoover ------------------------------------ Michael K. Hoover Witness: /s/ Nancy J. Ham - ------------------------------------ ACTAMED CORP. By: /s/ PE Sadler --------------------------------- P. E. Sadler, Chairman of Board -----END PRIVACY-ENHANCED MESSAGE-----