Exhibit 10.2
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SHARED SERVICES AGREEMENT
THIS SHARED SERVICES AGREEMENT, dated as of November 1, 2001 (this
"Agreement"), by and between HOWARD JOHNSON & COMPANY, a Delaware corporation
("Howard Johnson"), and EBENX, INC., a Minnesota corporation ("eBenX"). All
capitalized terms used herein but not otherwise defined shall have the meanings
ascribed thereto in the Asset Purchase Agreement (as defined below).
WHEREAS, Howard Johnson and eBenX are parties to an Asset Purchase
Agreement dated as of October 19, 2001 between Howard Johnson and eBenX (the
"Asset Purchase Agreement") pursuant to which Howard Johnson has transferred to
eBenX substantially all of its assets and liabilities relating to Howard
Johnson's health and welfare services business (the "Transfer") pursuant to the
Asset Purchase Agreement;
WHEREAS, in conjunction with the Transfer, certain systems
administration, desktop administration, data administration, hardware support,
software support, network support, application support, programming, help desk
and other systems support (consistent with current Howard Johnson operations)
services that were utilized by Howard Johnson in the operation of the health and
welfare services business are required by eBenX;
WHEREAS, eBenX has requested the continuation of the Services by Howard
Johnson, from and after the date of Closing; and
WHEREAS, subsequent to the date of this Agreement, Howard Johnson is
willing to provide, or to cause one or more of its Affiliates to provide, the
Services to eBenX, each upon the terms and subject to the conditions set forth
herein;
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
THE SERVICES
SECTION 1.01 Provision of Services. (a) Set forth in Exhibit A are the
systems administration, desktop administration, data administration, hardware
support, software support, network support, application support, programming,
help desk and other transferred and terminated systems support services relating
to the Business to be rendered by Howard Johnson to eBenX (each, a "Service"
and, collectively, the "Services") and certain functions and services relating
to the Business that shall be the responsibility of eBenX (each, a "Function"
and, collectively, the "Functions") from the Closing Date to the Conversion
Period (as defined below). Subject to the terms of this Agreement, Howard
Johnson shall use reasonable commercial efforts to provide, or cause to be
provided, Services to eBenX until the end of the Conversion Period (as defined
below) in a manner consistent with the manner and level of care
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with which such Services were performed by Howard Johnson or its Affiliates in
the conduct of the Business prior to the Closing Date; provided, however, that
with respect to system developments/modifications in web, IVR and Multiplan
related Services, including, but not limited to, those as set forth in Exhibit B
hereof, eBenX acknowledges that the above standard shall be proportionately
reduced with the reduction from 10 employees to 5 employees in staffing and the
reduction of other resources agreed to by eBenX.
(b) Howard Johnson shall, and shall cause its appropriate
Affiliates to, use reasonable commercial efforts to assist in the
transfer of responsibility, from Howard Johnson to eBenX, of the
Services set out in Exhibit A as soon as reasonably practicable
following 60 days after Closing, and, in any event, prior to the end of
the Conversion Period or such later time as agreed to by Howard
Johnson. eBenX shall notify Howard Johnson in writing when eBenX is
prepared to transfer responsibility for providing the Services to a
specific Client from Howard Johnson to eBenX. eBenX shall terminate the
use of each Service set out in Exhibit A prior to the expiration of the
Conversion Period. Except as provided in the Asset Purchase Agreement
and the Ancillary Agreements, Howard Johnson shall have no obligation
with respect to the Health and Welfare Services relating to the conduct
of the Business (including but not limited to the Functions), other
than the provision of the Services before the end of the Conversion
Period.
(c) Notwithstanding the foregoing, nothing contained in this
Agreement shall be construed as restricting Howard Johnson from
operating any of its businesses or services in any manner they
respectively determine to be proper or advisable; provided, however,
that in the event the foregoing construction prevents or impairs (other
than immaterially) the provision of any Service, Howard Johnson and
eBenX shall cooperate with one another regarding the provision of such
Service and Howard Johnson shall use reasonable commercial efforts to
arrange for the provision of such Service.
(d) eBenX shall follow the policies, procedures and practices
in effect before the date of this Agreement of which eBenX has
knowledge (as defined herein), including, without limitation, providing
information and documentation reasonably sufficient for Howard Johnson
and/or its Affiliates to perform the Services in the manner provided as
of the Closing, and making available, as reasonably requested by Howard
Johnson and/or its Affiliates, sufficient resources and timely
decisions, approvals and acceptances in order that Howard Johnson may
perform its obligations under this Agreement in a timely and efficient
manner. In addition, for the period that eBenX employees shall be
utilizing the workspace of Howard Johnson, all such eBenX employees
shall follow all codes relating to dress and behavior, as well as all
workplace policies, of Howard Johnson in effect at such time. As used
in this subsection (d), eBenX shall be deemed to have knowledge of (i)
that information which has been presented to it in writing and (ii)
after due inquiry, the actual knowledge of the Transferred Employees.
(e) The parties shall use good faith efforts to cooperate with
each other in all matters relating to the provision and receipt of
Services. Such cooperation shall include obtaining all consents,
licenses or approvals necessary or required to permit each party to
perform its obligations; provided, however, that Howard Johnson shall
not be required to pay any amounts to any third parties or to grant any
accommodation, financial or otherwise, to secure the same.
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(f) Each party shall appoint a representative to facilitate
communications and performance under this Agreement, who shall have the
authority to act for and bind such party in connection with all aspects
of this Agreement. Each party shall have the right at any time and from
time to time to replace its representative by giving notice to the
other party setting forth the name of the replacement.
SECTION 1.02 Term and Termination. (a) Howard Johnson shall continue to
make each Service available after Closing and through the end of 24 months from
Closing (the "Conversion Period").
(b) Notwithstanding the foregoing, this Agreement (or any
portion of the Services rendered hereunder) may be terminated prior to
the expiration of the Conversion Period by (i) eBenX, at any time upon
not less than ninety (90) calendar days, prior written notice to Howard
Johnson; or (ii) either party, at any time upon not less than 60
calendar days after delivery of notice to the other party, in the event
that the other party shall have defaulted on or breached any material
term of this Agreement and shall not have cured such breach within 30
calendar days after receiving notice from the party specifying the
nature of such default or breach.
(c) This Agreement shall terminate at the end of the
Conversion Period (or as otherwise earlier terminated pursuant to
Section 2(b) above), and thereafter shall be of no further force and
effect, except (i) Sections 1.06, 3.01 through 3.05, 4.02, 6.01 and
7.03 shall survive the termination of this Agreement, (ii) nothing
herein shall relieve either party hereto from liability for any gross
negligence or willful breach hereof and (iii) any obligation to pay for
the Services hereunder shall survive the termination of this Agreement.
SECTION 1.03 Reimbursement and Payment for Services. (a) From the
Closing Date through to the end of the Conversion Period, eBenX will be
obligated to pay Howard Johnson for the Services a monthly fee equal to the
aggregate of all client costs, as set forth in Exhibit C, for all Transferred
Clients and all Terminated Clients whose termination is not effective until
after Closing for whom a Multiplan account is maintained by Howard Johnson. The
monthly fee shall be reduced, as of the first month following the month in which
responsibility for provision of Services to a specific Transferred Client has
been transferred to eBenX, by an amount equal to the variable costs allocated to
that Transferred Client as set forth in Exhibit C. Howard Johnson will present,
within 30 calendar days of the first Friday of each month, eBenX with monthly
invoices for the amount due in such month. eBenX shall pay (or cause to be paid)
each invoice within twenty Business Days of receipt. If responsibility for
provision of the Services has not been transferred to eBenX with respect to all
Transferred Clients by the end of the Conversion Period, Howard Johnson, at its
sole and absolute discretion, may choose to extend the term of this Agreement.
If Howard Johnson decides to extend the term of this Agreement, Howard Johnson
and eBenX shall, in good faith, enter into negotiations to determine the rates
for the Services to be provided during the period of such extension. If after a
reasonable period of time Howard Johnson and eBenX are unable to reach an
agreement on such rates, the parties hereby agree that the rate that eBenX shall
pay to Howard Johnson for such an extension shall be 150% of the fees set forth
above.
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(b) If Howard Johnson retains responsibility for provision of
the Services with respect to: (i) 14 Transferred Clients as of the date
that is 12 months after Closing, eBenX shall pay Howard Johnson
$250,000; (ii) 10 Transferred Clients as of the date that is 20 months
after Closing, eBenX shall pay Howard Johnson $250,000; or (iii) any of
the Transferred Clients as of the date that is 24 months after Closing
(the "Termination Date"), eBenX shall pay Howard Johnson $500,000 (the
"Termination Penalty"); provided, however, that if, on the Termination
Date, Howard Johnson has agreed in writing to continue to provide
Services to all Transferred Clients for which it retains responsibility
as of the Termination Date, Howard Johnson shall waive the Termination
Penalty and, in its sole and absolute discretion, may negotiate with
eBenX to enter into a limited extension of this Agreement with respect
to such Transferred Clients. Any amounts owed to Howard Johnson by
eBenX hereunder shall be paid within 30 days of the respective target
date set forth above. If Services are suspended as a result of an
occurrence under Section 3.01 or Howard Johnson's failure to provide
Services in accordance with this Agreement (unless as a result of eBenX
being unable to perform its Purchaser Functions hereunder), the dates
set forth above shall all be extended by the amount of time such
Services are suspended as a result of such occurrence.
(c) In addition to the payments set forth herein, eBenX shall
be liable for, and shall indemnify Howard Johnson or its Affiliates, as
applicable, for any sales and/or use tax, VAT, transfer tax, excise
tax, tariff, duty or any other similar tax or payment in lieu thereof
imposed by any governmental authority arising from the Services
provided hereunder, or arising out of this Agreement. eBenX shall not
be responsible for payment of any income, franchise, gross receipts or
personal property taxes paid by Howard Johnson or its Affiliates as a
result of this Agreement.
(d) If, at any time during the term of this Agreement, any Law
or Governmental Order, rule, regulation or direction of any
Governmental Authority, whether domestic or foreign, relating to the
administration of the Services should be changed in a manner requiring
modifications or updates to the systems being used by Howard Johnson to
provide Services hereunder, which modifications or updates would not
have been required but for Howard Johnson's obligation to provide
Services hereunder (each a "Regulatory Charge"), in each such case,
eBenX shall be obligated to pay Howard Johnson a fee based on the
reasonable time expended (charged at Howard Johnson's standard hourly
rates for the personnel involved) and expenses actually incurred by
Howard Johnson for the modifications or updates made to the system in
order to comply with each such Regulatory Change. As soon as
commercially reasonable following the promulgation of any Regulatory
Change, eBenX shall notify Howard Johnson in writing of the Regulatory
Change, the effective date thereof and the proposed system
modifications or updates. As soon as commercially reasonable after
receipt of the eBenX notice, Howard Johnson shall provide to eBenX
written notice of an estimate of the expected costs for such
modifications or updates. eBenX may at its option either authorize
Howard Johnson to effect the modification or notify Howard Johnson that
it will terminate the Service in question on or before the effective
date of the Regulatory Change. Any such authorization or notification
by eBenx will be made in writing, and any failure to provide such
authorization or notification within 7 days prior to the effective date
of the Regulatory Change will be deemed to be an election by eBenx to
terminate the Services in question on the effective date. Any such
authorization to make modifications shall be provided to Howard Johnson
promptly in order to afford Howard Johnson sufficient time to make such
modifications or updates prior to the
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effective date of the Regulatory Change. Howard Johnson shall bear no
responsibility for any consequences stemming from eBenX's failure to
provide timely authorization.
SECTION 1.04 Employees. From time to time, Howard Johnson shall
designate up to 5 employees or qualified consultants to perform the Services
during normal Howard Johnson operating hours; provided, however, that Howard
Johnson exercises reasonable care in the selection of personnel and monitoring
of the provision of Services and the employees so designated have sufficient
skills and training to provide the Services as required by this Agreement.
SECTION 1.05 Employee Termination. (a) If, within a period of 12 months
from the date of this Agreement, eBenX cancels any Service provided by Howard
Johnson in accordance with Section 1.02 and, as a direct result of such
cancellation, Howard Johnson terminates the employment of any employee(s) or
consultant(s) providing such Service, then eBenX shall reimburse Howard Johnson
for one-half of the costs, including, without limitations, any claims by such
employee(s) or consultant(s) arising out of such termination, incurred by Howard
Johnson relating to such termination; provided, however, that (i) each employee
involved in the termination must have directly performed the Services cancelled;
and (ii) eBenX shall have the right to employ the affected employee(s) in a
comparable position with eBenX and, in such event, shall not be responsible for
any portion of the costs incurred by Howard Johnson relating to the termination
of any employees that it so employs.
(b) If, at any time during the Term, Howard Johnson cancels
any Service in accordance with Section 1.02, other than pursuant to a
breach of this Agreement by eBenX, eBenX shall have the right to offer
employment to and, as applicable, to employ any individual that
directly performed such Service immediately prior to its cancellation.
SECTION 1.06 Records. (a) During the term of this Agreement, and for a
period of 90 days thereafter, each party shall maintain complete and accurate
books and records relating to the Services and shall provide to the other party
copies of such records as may be reasonably requested by the other party. The
books and records of Howard Johnson shall contain an accurate record of all data
necessary for the proper computation of all costs to be paid to Howard Johnson
by eBenX under the terms of this Agreement.
(b) In the event that any Service is terminated pursuant to
Section 1.02 of this Agreement, eBenX shall, within 30 days of such
termination, return to Howard Johnson all documents, materials
(including copies of all software provided to eBenX) and records
relating to such terminated Services (and not used in connection with
any continuing provision of Services by eBenX) and certify to eBenX
that it has complied with this Section 1.06 in all respects.
ARTICLE II
ACCESS RIGHTS
SECTION 2.01 Grant of Access. Subject to the terms and conditions of
this Agreement, Howard Johnson grants to eBenX a non-exclusive, limited right
during the Conversion Period to
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access the file services and Multiplan areas of Howard Johnson's proprietary
network system (the "Network") solely in connection with the provision of
Services by Howard Johnson. eBenX shall access the Network from its desktops
through a secure bridge or interface ("Interface") provided by Howard Johnson.
SECTION 2.02 Scope of Access; Monitoring. eBenX shall ensure that only
its employees on a need-to-know basis shall access authorized portions of the
Network, in each case, solely in connection with the Services. eBenX shall not,
and shall ensure that no third party will, attempt to access the Network without
the express written permission of Howard Johnson. Howard Johnson shall have the
right, but not the obligation, to have any of its personnel, including any of
its database administrators, (i) audit and monitor eBenX's access to the Network
through any means available internally to Howard Johnson, and (ii) otherwise
ensure that eBenX complies with the terms and conditions of this Agreement.
SECTION 2.03 Restrictions. Nothing herein shall limit the right of
Howard Johnson to limit eBenX's access to authorized areas of the Network or
deny access to unauthorized areas of the Network. Nothing herein shall be
construed as granting eBenX any right to access the Network for purposes other
than in connection with the Services, or in any manner other than as expressly
set forth herein. Except to the extent expressly permitted herein, or by prior
written permission of Howard Johnson, eBenX shall not, and shall not allow any
third party to: (a) sublicense, transfer, assign, rent, lease, or otherwise
convey any right of access, or any right with respect thereto, to any third
party; (b) disassemble, decompile or otherwise reverse engineer all or any
portion of any software provided by Howard Johnson in connection with the
Services; or (c) reproduce any such software on any media without the written
permission of Howard Johnson. eBenX shall ensure the security of access to the
Network from any unauthorized access or use.
SECTION 2.04 Access Protections. All interconnectivity by either party
to the computing systems and/or networks of the other party, and all attempts at
such interconnectivity, shall be only through the security gateways/firewalls of
the other party and through other security systems, protocols or devices as
agreed to by the parties. Neither party shall access, and will not permit
unauthorized persons to access, the computing systems and/or networks of the
other party without the other party's express written authorization, and any
such actual or attempted access shall be consistent with any such authorization.
SECTION 2.05 Viruses. eBenX shall use the latest Virus definition
updates available of a mutually agreed Virus detection/scanning program in
connection with the access of the Network, and transmission of data or software
to eBenX systems will be performed from Virus protected systems and computers.
Howard Johnson shall, in accordance with its customary practices, use a Virus
detection/scanning program in connection with performing its Service obligations
hereunder. Upon detecting a Virus that is not immediately eliminated, all
attempts to access the other party's computing systems and/or networks shall
immediately cease and shall not resume until any such Virus has been eliminated.
Without limiting the foregoing, each party shall use reasonable commercial
efforts to avoid the transmission of any Virus from its own systems to the other
party's systems. In the event that a party determines that a Virus has been
transmitted to the systems or computers of the other party, such party shall
promptly notify such other party of the transmission and the nature of the
Virus. For purposes hereof, "Virus" means
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any computer instructions, devices or techniques that can or were designed to
threaten, infect, assault, vandalize, defraud, disrupt, damage, disable, alter,
inhibit or shut down software and/or a processing environment.
SECTION 2.06 Disabling Access. Each party shall have the right to
disable the other party's access to such party's computing systems and/or
networks to protect such party's computing systems and/or networks from a Virus
or Disabling Device on the other party's computing systems and/or networks. In
the event of such disabling access, the party disabling such access shall give
the other party notice of such disabling access as soon as possible thereafter.
For the purposes hereof, "Disabling Device" means any computer software or
device maliciously intended to or capable of causing software to cease
functioning after a specific period of time or on a specific date or event.
SECTION 2.07 Access to Source Code. In the event that eBenX reasonably
determines that it requires specific information concerning the functions and
operations relating to specific reports, information or other service provided
to a Client that is generated by Howard Johnson's Multiplan software, and eBenX
is not in the possession of or cannot acquire such information using reasonable
efforts and Howard Johnson is unable to provide such information promptly upon
request, Howard Johnson shall provide designated representatives of eBenX with
temporary access to relevant portions of the Multiplan source code for a
specific report or service for the limited purpose of acquiring the necessary
information. eBenX shall use the information provided through such disclosure
only for the purpose of providing services to Clients and the disclosure shall
be governed by all of the provisions of Article III below. eBenX shall not
reproduce or make copies of any such disclosure. Following such access, eBenX
shall promptly return to Howard Johnson all copies of the disclosed source code.
Nothing herein shall be construed as a license of such source code from Howard
Johnson to eBenX.
ARTICLE III
CONFIDENTIALITY; SECURITY
SECTION 3.01 Confidentiality Obligations. The parties acknowledge that
each party (in this capacity, a "Disclosing Party") has disclosed or will
disclose certain Confidential Information to the other party (in this capacity,
a "Receiving Party"). The Receiving Party acknowledges the confidential and
proprietary nature of the Confidential Information of the Disclosing Party and
agrees not to reveal or disclose any Confidential Information of the Disclosing
Party for any purpose to any other person, or to use any Confidential
Information of the Disclosing Party for any purpose other than as contemplated
under this Agreement, in each case, without the prior written consent of the
Disclosing Party. The Receiving Party agrees to maintain adequate security
procedures and take reasonable precautions (no less rigorous than what the
Receiving Party takes with respect to its own comparable Confidential
Information) to prevent misuse, unauthorized or inadvertent disclosure or loss
of the Confidential Information of the Disclosing Party. For purposes hereof,
"Confidential Information" means any information, oral or written, relating to
or disclosed in the course of the performance of this Agreement, that is not
generally known to the public or in the trade and is or should be reasonably
understood to be confidential or proprietary to the Disclosing Party, including
without limitation, compilations, data, studies or other documents incorporating
or developed from Confidential Information.
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"Confidential Information" of Howard Johnson includes all software and data
accessed by eBenX hereunder and access codes or other security devices used in
connection with such access. "Confidential Information" does not include
information that: (a) is, or becomes, known to the Receiving Party by lawful
means; (b) is generally available to the public through no act or omission by
the Receiving Party; (c) is developed by Receiving Party independent of any
Confidential Information it receives from the Disclosing Party; or (d) is
obtained by the Receiving Party from a Third Party free to make such a
disclosure without breach of any legal obligation.
SECTION 3.02 Disclosure. Notwithstanding the provisions of Section
3.01, Confidential Information may be disclosed pursuant to any statute,
regulation, order, lawful subpoena or lawful document discovery request,
provided that prior written notice of such disclosure obligation or request is
furnished to the Disclosing Party as soon as practicable in order to afford the
Disclosing Party a reasonable opportunity to seek a protective order. If the
Disclosing Party is unable to obtain or does not seek a protective order and the
Receiving Party is legally compelled to disclose Confidential Information,
disclosure of such information, to the extent compelled or required under the
applicable statute, regulation, order, lawful subpoena or lawful document
discovery request, may be made without liability.
SECTION 3.03 Unauthorized Disclosure. The Receiving Party shall
immediately notify the Disclosing Party upon discovery of any prohibited use or
disclosure of the Confidential Information, or any other breach of this Article
III by the Receiving Party, and shall fully cooperate with the Disclosing Party
to help the Disclosing Party regain possession of the Confidential Information
and prevent the further prohibited use or disclosure of the Confidential
Information.
SECTION 3.04 Irreparable Injury. The Receiving Party acknowledges that
unauthorized disclosure of any Confidential Information will cause irreparable
injury to the Disclosing Party, and the Receiving Party hereby agrees that in
addition to monetary damages therefor, the Disclosing Party will be entitled to
an injunction or other equitable and provisional remedies to prevent or limit
that disclosure, without any obligation to post bond or other undertakings.
SECTION 3.05 Privacy and Security. Without limiting the generality of
the foregoing confidentiality obligations, eBenX shall comply with all privacy
and security procedure and policies set forth by Howard Johnson regarding any
access to the Network.
ARTICLE IV
RESPONSIBILITY
SECTION 4.01 Relationship of the Parties. The parties hereto are
independent contractors and no party is an employee, partner or joint venturer
of the other party. Under no circumstances shall any of the employees of either
party hereto be deemed to be employees of the other party for any purpose. No
party shall have the right to bind the other party to any agreement with a third
party or to represent itself as a partner or joint venturer of the other party.
Nothing in this Agreement shall be construed as: (a) an assumption by Howard
Johnson of any
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obligation to maintain or increase the sales or profits of eBenX, or otherwise
to assume responsibility for eBenX's operations; (b) an assumption by Howard
Johnson of any financial obligation of eBenX; (c) the creation of any
relationship of employment or agency between eBenX and employees or consultants
of Howard Johnson, its subsidiaries or associated companies; (d) an assumption
by Howard Johnson of any responsibility for the work performed by outside
suppliers employed by eBenX at the suggestion or recommendation of Howard
Johnson; or (e) the delegation of any function or authority of eBenX to Howard
Johnson. In all matters relating to this Agreement, each party hereto shall be
solely responsible for the acts of its own employees, and employees of one party
shall not be considered employees of the other party. Except as specifically
permitted by this Agreement, no party hereto or any of its employees shall have
any authority to negotiate, enter into any contract or incur any obligation, on
behalf of the other party.
SECTION 4.02 Limitation on Liability. (a) (i) Neither Howard Johnson
nor any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates shall be liable for any action taken or omitted to be taken by it or
such person under or in connection with this Agreement, except that Howard
Johnson shall be liable for direct losses incurred by eBenX arising out of the
gross negligence, willful misconduct or bad faith of Howard Johnson or any third
party retained by it or their respective officers, directors, employees, agents
or attorneys-in-fact in the performance of the Services; provided, however,
that, except as expressly limited in Article VI, with respect to the Transferred
Clients and those Terminated Clients whose termination is not effective until
after Closing who are receiving services under agreements originally executed by
Howard Johnson (the "Retained Clients"), Howard Johnson shall be liable for
direct losses incurred by eBenX relating to any claims by such Transferred
Clients and such Terminated Clients against eBenX arising out of the negligence,
willful misconduct or bad faith of Howard Johnson or any third party retained by
it or their respective officers, directors, employees, agents or
attorneys-in-fact in the performance of the Services. Neither Howard Johnson nor
its Affiliates nor any of their respective officers, directors, employees,
agents or attorneys-in-fact shall be liable for any action taken or omitted to
be taken by any third party, other than such third parties retained by Howard
Johnson or any of its Affiliates to perform any of the Services.
(ii) Notwithstanding the foregoing, if Howard
Johnson, without good cause, intentionally refuses to provide
the Services which Howard Johnson is obligated to provide
under this Agreement, Howard Johnson will be liable to eBenX
for an amount equal to 150% of the amount by which the
expenses actually and reasonably incurred by eBenX to obtain
the Services that Howard Johnson refused to provide exceed the
amount eBenX reasonably expected Howard Johnson to charge for
such Services.
(b) Notwithstanding anything to the contrary herein, in the
event that Howard Johnson commits an error with respect to or
incorrectly performs or fails to perform any Service, at eBenX's
request, Howard Johnson shall use reasonable commercial efforts to
correct such error, re-perform or perform such Service.
(c) Notwithstanding anything to the contrary herein, neither
Howard Johnson nor its Affiliates or any of their respective officers,
directors, employees, agents or attorneys-in-fact shall be liable for
losses incurred by eBenX for any action taken or omitted to be taken by
Howard Johnson or such person under or in connection with this
Agreement to the extent such
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action or omission directly arises from actions or inactions of eBenX,
including, without limitation, the failure of eBenX to perform any
Function or any other function not included in the Services.
(d) EXCEPT AS EXPRESSLY PROVIDED HEREIN, howard johnson MAKES
NO REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE SERVICES OF ANY
KIND, NATURE OR DESCRIPTION, EXPRESS OR IMPLIED, INCLUDING, WITHOUT
LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR ANY
PARTICULAR PURPOSE, AND HOWARD JOHNSON HEREBY DISCLAIMS THE SAME.
HOWARD JOHNSON HEREBY DISCLAIMS ANY REPRESENTATION OR WARRANTY THAT
ACCESS TO THE NETWORK AND THE TRANSMISSION OF DATA THERETO AND
THEREFROM WILL BE UNINTERRUPTED OR ERROR FREE.
(e) EXCEPT AS EXPRESSLY PROVIDED HEREIN, NEITHER PARTY SHALL
IN ANY EVENT HAVE ANY LIABILITY TO THE OTHER PARTY FOR CONSEQUENTIAL,
SPECIAL OR PUNITIVE DAMAGES ARISING OUT OF THE PERFORMANCE OF THE
SERVICES OR THIS AGREEMENT.
ARTICLE V
FORCE MAJEURE
SECTION 5.01 Force Majeure. The obligations of Howard Johnson to
provide Services shall be suspended during the period and to the extent that
Howard Johnson is prevented or hindered from complying therewith by any Law or
Governmental Order, rule, regulation or direction of any Governmental Authority,
whether domestic or foreign, or by any cause beyond the reasonable control of
Howard Johnson, including acts of God, civil disturbances, accidents, acts of
war or conditions arising out of or attributable to war (whether declared or
undeclared), shortage of necessary equipment, materials or labor, or
restrictions thereon or limitations upon the use thereof ("Event of Force
Majeure"). In such event, Howard Johnson shall give notice of suspension as soon
as reasonably practicable to eBenX stating the date and extent of such
suspension and the cause thereof, and Howard Johnson shall resume the
performance of such obligations as soon as reasonably practicable after the
removal of the cause, and Howard Johnson shall so notify eBenX. In no event
shall eBenX be obligated to pay for any Services which are not being provided to
eBenX pursuant to this Section 5.01.
SECTION 5.02 Written Notice. Howard Johnson can only claim an Event of
Force Majeure as an excuse from its performance hereunder if Howard Johnson has
given written notice to eBenX of such claim and if Howard Johnson makes a
continuing and good faith effort to lessen or avoid the effects of such Event of
Force Majeure on eBenX. Notwithstanding any other provision of this Agreement,
Howard Johnson shall be liable for such failure or delay in the performance of
its obligations to the extent that such failure or delay was caused by the fault
or negligence of Howard Johnson.
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ARTICLE VI
INDEMNIFICATION
SECTION 6.01 Indemnification. (a) Howard Johnson hereby agrees to
defend, indemnify and hold harmless eBenX and its Affiliates and their
respective officers, directors, employees and agents (collectively, "eBenX
Indemnitees") from and against any and all liabilities, losses, claims, damages,
and expenses of any nature, including reasonable attorneys' fees, arising out of
or resulting from any default or breach by Howard Johnson in the performance of
its obligations under this Agreement or any failure by Howard Johnson to perform
its covenants hereunder or any third party claim against any eBenX Indemnitee.
(b) eBenX hereby agrees to defend, indemnify and hold harmless
Howard Johnson and its Affiliates and their respective officers,
directors, employees and agents (collectively, "Howard Johnson
Indemnitees," and together with eBenX Indemnitees, the "Indemnities")
from and against any and all liabilities, losses, claims, damages, and
expenses of any nature, including reasonable attorneys' fees, arising
out of or resulting from any default or breach by eBenX in the
performance of its obligations under this Agreement or any failure by
eBenX to perform its covenants hereunder or any third party claim
against any Howard Johnson Indemnitee or in the provision of services
by eBenX to its customers, including, without limitation, any and all
loss, liability, damage, cost or expense of a customer of eBenX.
(c) Claims for indemnification under Sections 6.01(a) and
6.01(b) shall be made pursuant to the procedures set forth in Sections
9.02(b) or 9.03(b), respectively, of the Asset Purchase Agreement.
Nothing herein shall limit the rights to indemnification, or the
obligations to indemnify, of the parties under the Asset Purchase
Agreement.
(d) Notwithstanding anything to the contrary contained in this
Agreement, the maximum amount of indemnifiable Losses which may be
recovered from an Indemnitee arising out of or resulting from the
causes set forth in (i) Section 6.01(a) shall be an amount equal to
100% of the total annual charges to eBenX by Howard Johnson for the
related Services provided pursuant to this Agreement, except that with
respect to claims by Retained Clients arising out of, other than as set
forth in this Article VI, the direct actions of Howard Johnson pursuant
to this Agreement, such claims shall also be covered by the Insurance
Policy described in subsection (e) hereof in addition to the amount set
forth in this subsection (d), and (ii) Section 6.01(b) shall be amount
equal to 100% of annual revenues from Client Agreements with Clients
transferred from Howard Johnson.
(e) eBenX shall amend the current insurance policy of eBenX or
purchase a new indemnification insurance policy from a third-party
provider (the "Insurance Policy") to cover all claims by Retained
Clients arising out of, other than as set forth in this Article VI, the
direct actions of Howard Johnson. The fees, if any, for the Insurance
Policy shall be divided equally between eBenX and Howard Johnson. In
the event of a claim under the Insurance Policy, Howard Johnson will
pay any deductible charges required by the Insurance Policy up to a
maximum amount of $50,000 per claim.
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(f) eBenX acknowledges and agrees that (i) Howard Johnson and
its personnel shall not be responsible in any way whatsoever for any
actions or omissions by eBenX made at the request, initiation or under
the direction of eBenX, including, without limitation, any errors or
omissions arising out of or related to processes or programming, or
modifications thereof, requested, initiated or directed by eBenX that
have not been reasonably verified by eBenX, and (ii) for the avoidance
of any doubt, the indemnity obligations of Howard Johnson hereunder
shall not apply to any liabilities, losses, claims, including third
party claims, damages, expenses of any nature, including attorney's
fees, arising out of or relating to such actions or omissions set forth
in clause (i) above.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01 Expenses. Except as otherwise specified in this Agreement,
all costs and expenses, including, without limitation, fees and disbursements of
counsel, financial advisors and accountants, incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such costs and expenses.
SECTION 7.02 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by an internationally recognized overnight courier service, by telecopy
or by registered or certified mail (postage prepaid, return receipt requested)
to the respective parties at the following addresses (or at such other address
for a party as shall be specified in a notice given in accordance with this
Section 7.02):
(a) if to Howard Johnson:
Howard Johnson & Company
c/o Merrill Lynch & Co.
222 Broadway
17th Floor
New York, NY 10019
Telecopy: (212) 670-4819
Attention: Mark B. Goldfus, Esq.
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022-6069
Telecopy: (212) 848-7179
Attention: John A. Marzulli, Jr., Esq.
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(b) if to eBenX:
eBenX, Inc.
605 North Highway 169
Suite 1200
Minneapolis, MN 55441
Telecopy: (763) 614-2025
Attention: Chief Financial Officer
with a copy to:
Klehr, Harrison, Harvey, Branzburg & Ellers LLP
260 South Broad Street
Philadelphia, PA 19102
Telecopy: (215) 568-6603
Attention: Lawrence D. Rovin, Esq.
SECTION 7.03 Public Announcements; Confidentiality. Each party agrees
to comply with Section 11.03 of the Asset Purchase Agreement and each will use
reasonable best efforts, including notifying their respective employees, to keep
confidential the contents of the other party's respective information systems to
which such party's employees may have access.
SECTION 7.04 Headings. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
SECTION 7.05 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
SECTION 7.06 Entire Agreement. This Agreement constitutes the entire
agreement of the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and undertakings, both written and oral, with
respect to the subject matter hereof.
SECTION 7.07 Assignment. This Agreement may not be assigned by
operation of law or otherwise without the express written consent of Howard
Johnson and eBenX (which consent may be granted or withheld in the sole
discretion of Howard Johnson or eBenX); provided, however, that eBenX may assign
this Agreement or any of its rights and obligations hereunder to one or more
Affiliates of eBenX without the consent of Howard Johnson, however, eBenX
remains liable hereunder; provided further that this Agreement may, due to the
sale of all or substantially all the assets of a party to a third party
purchaser, be assigned to such third party
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purchaser without the written consent of the other party hereto. Any attempted
assignment in violation of this provision is void.
SECTION 7.08 No Third Party Beneficiaries. This Agreement shall be
binding upon and inure solely to the benefit of the parties hereto and their
permitted assigns and nothing herein, express or implied, is intended to or
shall confer upon any other Person, including, without limitation, any union or
any employee or former employee of Howard Johnson, any legal or equitable right,
benefit or remedy of any nature whatsoever, including, without limitation, any
rights of employment for any specified period, under or by reason of this
Agreement.
SECTION 7.09 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York applicable to
contracts executed in and to be performed in that State.
SECTION 7.10 Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
SECTION 7.11 Waiver of Jury Trial. Each of the parties hereto hereby
waives to the fullest extent permitted by applicable law any right it may have
to a trial by jury with respect to any litigation directly or indirectly arising
out of, under or in connection with this Agreement or the transactions
contemplated by this Agreement. Each of the parties hereto (a) certifies that no
representative, agent or attorney of any other party has represented, expressly
or otherwise, that such other party would not, in the event of litigation, seek
to enforce that foregoing waiver and (b) acknowledges that it and the other
party hereto have been induced to enter into this Agreement and the transactions
contemplated by this Agreement, as applicable, by, among other things, the
mutual waivers and certifications in this Section 7.11.
SECTION 7.12 Arbitration. Except for the right to injunctive relief
under Section 6 of this Agreement, for which judicial relief shall remain
available, any dispute, controversy or claim (a "Claim") that cannot be resolved
by the parties arising out of or relating to this Agreement or the services
covered by this Agreement shall be settled by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association ("AAA")
upon notice (the "Arbitration Notice") of submission given by either Howard
Johnson or eBenx to the other in accordance with subsection (i) hereof, and
judgment upon the award rendered by the arbitrators may be entered in any court
having jurisdiction thereof. The arbitration shall be held Philadelphia,
Pennsylvania, if a claim is brought by Howard Johnson or in New York County, New
York, if a claim is brought by eBenX or in such other location as the parties
may mutually agree upon. The arbitration will be conducted before a panel of
three arbitrators, with one arbitrator named by each party within 15 days of
receipt of Arbitration Notice by the non-initiating party and the third named by
the two party-appointed arbitrators, or (if they should fail to agree on the
third within 15 days after the two party-appointed arbitrators have been named)
by the AAA. The arbitrators may not award non-monetary or equitable relief of
any sort. They shall have no power to award punitive damages or any other
damages not measured by the prevailing party's actual damages. The decision of
the arbitrators made in writing shall be final and binding upon the parties
hereto; provided, however, that the award and judgment of the
14
arbitrators shall have no binding or precedential effect with respect to any
other controversy not before the arbitrators, whether or not similar to or
related to the specific controversy decided by the arbitrators. All aspects of
the arbitration shall be treated as confidential. Neither the parties nor the
arbitrators may disclose the existence, content or results of the arbitration,
except as necessary to comply with legal or regulatory requirements. Before
making any such disclosure, a party shall give written notice to all other
parties and shall afford such parties a reasonable opportunity to protect their
interests. The expenses of arbitration, including reasonable compensation to the
arbitrators, shall be borne equally by the parties hereto, except that each
party shall bear the compensation and expenses of its own counsel and employees.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective authorized signatory thereunto duly authorized as
of the date first above written.
HOWARD JOHNSON & COMPANY
By: /s/ Paul T. Dully
--------------------
Paul T. Dully
Chief Financial Officer
EBENX, INC.
By: /s/ John J. Davis
--------------------
John J. Davis
President and Chief Financial Officer