Exhibit 10.18
JOINT VENTURE AGREEMENT
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THIS JOINT VENTURE AGREEMENT is made and entered into as of May 15,
1992, by and between HFN, Inc., an Illinois corporation ("HFN"), Integrated
Medical Systems, Inc., a Colorado corporation ("IMS"), IMS-NET of Illinois,
Inc., an Illinois corporation ("IMS-NET"), and HFN Information Systems, Inc., an
Illinois corporation ("HFN Info") (HFN, IMS-NET and HFN Info shall sometimes be
collectively referred to herein as the "Shareholders" and individually referred
to as a "Shareholder"), and Illinois Medical Information Network, Inc., an
Illinois corporation to be formed hereunder (the "Company").
W I T N E S S E T H:
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WHEREAS, HFN markets an array of health care services to members of
the health care community and has extensive contacts and good will with various
members of the health care community, including hospitals;
WHEREAS, IMS establishes and operates medical information networks
within health care communities using proprietary technology and business rights;
WHEREAS, IMS has established IMS-NET, a wholly-owned subsidiary of
IMS, and has transferred to IMS-NET the know-how and certain rights to enable
IMS-NET to establish and operate medical information networks in the State of
Illinois and certain contiguous areas (as defined herein); and
WHEREAS, HFN, IMS-NET and HFN Info (an affiliate of HFN) desire to
organize the Company under the laws of the State of Illinois for the purpose of
owning, operating and marketing a medical information network or networks in the
Exclusive Territory (as hereinafter defined), and to operate the Company in
accordance with the terms of this Agreement.
NOW, THEREFORE, in consideration of the recitals, covenants,
conditions and promises contained herein, the parties agree as follows:
1. Definitions. For purposes of this Agreement and in addition to
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the terms otherwise defined herein, the following terms shall have the meanings
set forth below:
1.1 Agreement. "Agreement" means this document dated on the day and
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year appearing in the opening paragraph hereof and all Exhibits attached hereto,
as amended from time to time.
1.2 Closing. "Closing" shall mean the closings of the various
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purchases and sales of the Stock, as hereafter defined, and related transactions
pursuant to Paragraphs 2 and 3 of this Agreement.
1.3 ComCenter Hardware. "ComCenter (Communications Center) Hardware"
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refers to the Network-owned, message switching computer(s) on which the
ComCenter Software runs. Such hardware is part of the Digital Equipment
Corporation ("DEC") VAX family of computers.
1.4 Com-Center(TM) Software. The "Com-Center(TM) Software" shall
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mean the computer software, as defined on Exhibit A attached to the Software
License Agreement (as hereafter defined), developed and owned by IMS, and which
shall be licensed to the Company pursuant to the covenants, terms and conditions
of the Software License Agreement, that supports and facilitates the
transmission of data, text, voice, clinical graphics and diagnostic images over
a telephone network which resides on and operates the ComCenter Hardware and
includes the Network Interface.
1.5 Exclusive Territory. "Exclusive Territory" shall mean (a) the
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State of Illinois with the exception of the counties in northwestern Illinois
which constitute the territory of the Northern Illinois Health Care Network
which operates pursuant to a nonexclusive license of the software to which the
Software License Agreement relates, provided that the Software License Agreement
grants a nonexclusive license in such counties, except as to certain hospitals
in such counties which hold exclusive rights thereto, (b) Lake and ▇▇▇▇▇▇
Counties in Indiana, and (c) certain collar cities to the State of Illinois,
including, without limitation, Dubuque and Quad cities, but excluding Saint
Louis.
1.6 IMS-Net(TM) Software. The "IMS-Net(TM) Software" is a series of
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independent but interrelated computer programs, which includes the PC-Com(TM)
Software, the Com-Center(TM) Software and Network Interface, which interacts
with a central processor and remotely located personal computers and their
operating systems to form a complete and functioning network by which medical
and other information and data, text, voice, clinical graphics and diagnostic
images can be transmitted, shared, stored and accessed randomly over a dial-up
telephone network. The IMS-Net(TM) Software includes, but is not limited to,
computer program listings, user manuals, functional specifications, technical
documentation, source code, object code, related procedure codes and tangible
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media upon which the computer programs are recorded. The IMS-Net(TM) Software
performs the functions described on Exhibit A attached to the Software License
Agreement and shall be licensed to the Company pursuant to the covenants, terms
and conditions of the Software License Agreement.
1.7 Local Sponsor. "Local Sponsor" shall mean any individual or
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entity desiring to use any portion of the Network, as hereafter defined, to
receive and/or disseminate information from or to Network users and who or which
agrees to pay fees to the Company for the right to use the Network.
1.8 National Sponsor. "National Sponsor" shall mean any health care
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related entity desiring to use the Network and any other network operated by an
affiliate of IMS or which uses IMS-Net(TM) Software to receive and/or
disseminate information from or to Network users, and which agrees to pay fees
to the Company for the right to use the Network.
1.9 Network. "Network" shall mean the electronic medical information
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network or networks to be owned and operated by the Company and/or sublicensees,
which utilizes IMS-Net(TM) Software to permit messages, data, voice, facsimile,
medical images and clinical graphics to be transmitted in an "open architecture"
format (i.e., all users can secure electronic access to the Network for a user
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fee--thus "open" architecture) between and among physicians, hospitals, clinical
laboratories, pharmacies, managed care organizations, insurance companies, other
payors, employers and other members of the health care community.
1.10 Network Interface. "Network Interface" refers to portions of
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IMS-Net(TM) Software which automate or partially automate message transmission
and which shall be used to interface the Company's computer system(s) to the
Network.
1.11 PC-Com(TM) Software. "PC Com Software" shall mean the computer
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software, as defined on Exhibit A attached to the Software License Agreement,
developed and owned by IMS, and which shall be licensed to the Company pursuant
to the covenants, terms and conditions of the Software License Agreement, that
supports and facilitates the transmission of data, text, voice, clinical
graphics and diagnostic images over a telephone network and which operates on
International Business Machine ("IBM") Personal Computers or IBM-compatible
Personal Computers.
1.12 Software License Agreement. "Software License Agreement" shall
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mean that certain Software License Agreement between IMS, as licensor, and HFN
Info and SwedishAmerican Corporation as licensees, which shall be assigned by
HFN Info and SwedishAmerican Corporation to the Company, and the license granted
thereunder.
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1.13 Stock. "Stock" shall mean the no par value common stock of the
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Company sold and purchased pursuant to this Agreement for the consideration set
forth herein.
1.14 Subscriber. "Subscriber" shall mean physicians and other members
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of the health care community who use the Network and with whom Local and
National Sponsors wish to communicate over one or more Networks.
1.15 Synergy Series(TM) Software. The "Synergy Series(TM) Software"
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shall mean the computer software, portions of which were developed and are owned
by IMS and portions of which IMS possesses and uses pursuant to one or more
perpetual licenses under which IMS has the right to use and to sub-license, and
includes practice support software intended primarily for use by persons or
entities who use the Network, including such capabilities as "Word-Pro(TM)" word
processing, "Clinical Manager(TM)" clinical data management "RX-Manager(TM)"
drug therapy manager, "CME-Manager(TM)" continuing medical education management
and others, as described in more detail on Exhibit B attached to the Software
License Agreement. The portions of such Software owned by IMS shall be licensed
to the Company pursuant to the covenants, terms and conditions of the Software
License Agreement.
2. Organization of the Company.
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2.1 Articles of Incorporation. The Articles of Incorporation of the
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Company are attached hereto as Exhibit A.
2.2 Sale of Stock to IMS-NET. At the Closing, the Company shall
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sell to IMS-NET, and IMS-NET shall purchase from the Company, fifty-one (51)
shares of the Stock for Fifty-One Thousand Dollars ($51,000), due and payable at
the Closing by delivery to the Company of a certified or cashier's check in that
amount.
2.3 Sale of Stock to HFN. At the Closing, the Company shall sell to
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HFN, and HFN shall purchase from the Company, twenty-five (25) shares of the
Stock for Forty-Nine Thousand Dollars ($49,000), due and payable at the Closing
by delivery to the Company of a certified or cashier's check in that amount.
2.4 Sale of Stock to HFN Info. At the Closing, the Company shall
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sell to HFN Info, and HFN Info shall purchase from the Company, nineteen (19)
shares of the Stock in consideration of HFN Info assigning all of its rights,
title and interest in and to the Software License Agreement to the Company.
2.5 Sale of Stock to SwedishAmerican Corporation. At the Closing, the
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Company shall sell Five (5) shares of Stock to SwedishAmerican Corporation
("Swedish") in consideration of
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Swedish assigning all of its rights, title and interest in and to the Software
License Agreement to the Company. To reflect that transaction and the
restrictions and requirements relative to the Stock to be acquired by Swedish,
Swedish will be required to sign a Stock Subscription Agreement in the form
attached hereto as Exhibit B.
2.6 The Closing. The Closing shall take place at a time and place
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agreed upon by IMS-NET and HFN. At the Closing, the Company will deliver to each
Shareholder a certificate evidencing the number of shares of the Stock purchased
by such Shareholder, against delivery of the consideration therefore. Also at
the Closing, the Company and HFN shall execute and deliver the Management
Services Agreement, and directors and officers shall be appointed and Bylaws
adopted for the Company, all as provided in Paragraph 3.
2.7 Post-Closing. Following consummation of the purchases and sales
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described in Paragraphs 2.2-2.5, shares of the Stock shall be held as follows:
Percentage Consideration
Shareholder Number of Shares Interest Paid
----------- ---------------- ---------- -------------
IMS-NET 51 51% $51,000
HFN 25 25% $49,000
HFN Info 19 19% Software
License
Agreement
Assignment
Swedish 5 5% Software
License
Agreement
Assignment
TOTAL 100 100%
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2.8 Potential Reductions in Purchase Prices. If at any time during
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the first five (5) years of the term of this Agreement, IMS or an IMS affiliate
offers ownership interests in an "open architecture" medical information network
in any of the ten (10) largest metropolitan markets in the United States
(excluding Los Angeles, Denver and Minneapolis) at a price less than Fifty
Thousand Dollars ($50,000.00) per One Percent (1%) ownership interest, then HFN
Info and Swedish each shall receive a credit equal to (a) Fifty Thousand Dollars
($50,000) per One Percent (1%) ownership interest times its
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percentage ownership interest in the Company, minus (b) the lower price offered
elsewhere per One Percent (1%) ownership interest times its percentage ownership
interest in the Company. Such credit shall be given through the preferential
distribution to HFN Info and Swedish, on a pro rata basis according to their
relative percentage ownership interests in the Company, of Fifty Percent (50%)
of any net after-tax profits otherwise payable to IMS-NET by the Company up to
the amount of such credits. Such preferential distributions shall be at fiscal
year end.
2.9 Additional Capital Contributions. If at any time (or from time
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to time) the Board of Directors of the Company determines that funds in excess
of the initial capital contributions of the Shareholders and Swedish and the
Company's revenues from operations are required by the Company for its business
or any of its obligations, expenses, costs, liabilities or expenditures, the
Board of Directors may require the Shareholders and Swedish to make additional
contributions to the Company as follows:
(a) For additional capital requirements up to Five Hundred
Thousand Dollars ($500,000) in the aggregate during the term hereof, each
Shareholder and Swedish shall make additional capital contributions to the
Company in proportion to its relative ownership interest in the Company, on such
date(s) set by the Board of Directors. Such contributions shall be made in cash,
provided, however, that HFN and IMS shall have the right, in their sole
discretion, to satisfy their additional contributions through the forgiveness of
fees due to them from the Company for services rendered (e.g., for HFN, fees due
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under the Management Services Agreement entered into pursuant to Paragraph 3.5).
If all of the Shareholders and Swedish satisfy the additional capital
contributions required of them, there shall be no change in Stock ownership. If
a Shareholder or Swedish fails to make an additional capital contribution (a
"Defaulting Shareholder"), each non-defaulting party (a "Non-Defaulting
Shareholder") shall be entitled, in its sole discretion, to contribute its pro
rata share of the additional capital contribution of the Defaulting Shareholder.
For purposes hereof, a Non-Defaulting Shareholder's "pro rata share" shall equal
the percentage which the number of shares of Stock owned by it bears to the
total number of shares of Stock owned by all of the NonDefaulting Shareholders
desiring to satisfy the Defaulting Shareholder's additional capital
contribution. Further, each Non-Defaulting Shareholder shall, in return for its
additional capital contribution (including any portion of a Defaulting
Shareholder's contribution made by it), be issued by the Company additional
shares of Stock at a value of $50,000 per share if the additional contribution
is made during the first two (2) years of the term of this Agreement and, for
contributions made thereafter, at fair market value per share on the date of the
contribution, as determined by the appraisal consultants of the Company's
regularly retained independent auditors (at the
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Company's expense), and relative Stock ownership shall be adjusted accordingly.
(b) The Company's additional capital requirements over Five
Hundred Thousand Dollars ($500,000) shall be met by loans to the Company from
any or all of the Shareholders and/or Swedish. Such loans shall be classified as
senior indebtedness, bear interest at the prime rate set by Northern Trust Bank,
Chicago, Illinois, and be repaid in full by the Company before any distributions
are made with respect to the Stock.
3. Governance of the Company.
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3.1 Bylaws. As of the Closing, the Company's Bylaws in the
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form attached hereto as Exhibit C shall be in full force and effect.
3.2 Board of Directors. From and after the Closing, each
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Shareholder shall vote all of its Stock and shall take all other necessary or
desirable actions within its control (whether in its capacity as a Shareholder,
through its representatives who are directors or officers of the Company or
otherwise, and including, without limitation, attendance at Shareholder meetings
in person or by proxy for purposes of obtaining a quorum and execution of
written consents in lieu of meetings), and the Company shall take all necessary
or desirable actions within its control (including, without limitation, calling
special board and shareholder meetings), so that:
(a) The authorized number of directors on the Company's Board
of Directors (the "Board") shall be established and maintained at six (6)
directors;
(b) The following persons shall be elected to the Board:
(i) three (3) representatives designated by IMS-NET;
(ii) two (2) representatives designated by HFN; provided,
however, that only one (1) HFN representative shall be
entitled to serve on the Board if, at any time following the
Closing, HFN and HFN Info, in the aggregate, own less than
twenty percent (20%) of the total issued and outstanding
shares of Stock; and
(iii) the President/CEO of HFN;
(c) Any committees of the Board shall be created only upon
the approval of a majority of the members of the Board and the composition of
each such committee (if any) shall be
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proportionately equivalent to that of the Board (including with respect to
voting rights of members);
(d) The removal from the Board (with or without cause) of
any representative designated hereunder by HFN or IMS-NET shall be at HFN's or
IMS-NET's written request, respectively, but only upon such written request and
under no other circumstances; and
(e) In the event that any representative designated hereunder
by HFN or by IMS-NET for any reason ceases to serve as a member of the Board
during his or her term of office, the resulting vacancy on the Board shall be
filled by a representative designated by HFN or IMS-NET, respectively, as
provided hereunder.
3.3 Unfilled Vacancy. If any party fails to designate a
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representative to fill a directorship pursuant to the terms of this Paragraph 3,
the election of a person to such directorship shall be accomplished in
accordance with the Company's Bylaws and applicable law.
3.4 Major Corporate Changes. From and after the Closing,
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the Shareholders agree that the affirmative vote of shares constituting at least
80% of all issued and outstanding shares of the Stock entitled to vote shall be
required to effectuate any of the following transactions:
(a) Amendment or restatement of the Company's Articles of
Incorporation or Bylaws attached hereto as Exhibits A and E, respectively;
(b) The issuance, sale or other distribution of, or the
issuance, sale, distribution or granting of any rights to subscribe for or
purchase or warrants or options for the purchase of, by the Company any
additional shares of the Stock or any other stock or security of the Company
(including any securities convertible into shares of the Stock), except as
expressly provided for herein; or
(c) Dissolution of the Company.
3.5 Management Services Agreement; Officers of the Company.
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At the Closing, the Company will enter into a Management Services Agreement with
HFN in the form attached hereto as Exhibit D whereby HFN will be given the
authority and responsibility to manage the day-to-day operations of the Company.
Also at the Closing, the Board shall elect individuals to fill the following
offices with the Company: (i) Chairman of the Board; (ii) vice Chairman of the
Board; (iii) President/CEO; (iv) Treasurer; (v) Secretary; and (vi) Assistant
Secretary. The parties agree that the President/CEO of the Company shall be the
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President/CEO of HFN for so long as the current President/CEO of HFN holds such
office at HFN and the Management Services Agreement is in effect. If the
Company's Board of Directors decides to separate the offices of President and
CEO during such time period, the current HFN President/CEO shall be the
Company's CEO. Upon the current HFN President/CEO ceasing to hold such office at
HFN or the Management Services Agreement being terminated, the Company will be
free to retain a President/CEO independent of HFN.
3.6 Resolution of Deadlocks. In the event of a deadlock of
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the Board on any issue which does or threatens to materially and adversely
affect the ability of the Company to conduct its business in the ordinary
course, and such deadlock continues for a period of sixty (60) days, HFN and/or
IMS-NET may submit the deadlocked issue to an independent, nationally recognized
management consultant for final, binding resolution. The management consultant
shall be selected by the Company's regularly retained independent auditors. The
management consultant shall submit his/her/its decision/recommendations to the
Board within thirty (30) days of the date of the submission of the dispute to
him/her/it, which shall be binding on the Board and all parties. The cost of the
management consultant's services shall be borne by the Company.
4. Warranties and Representations of Shareholders. Each Shareholder
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hereby represents and warrants to the Company that:
(a) Its officers and directors understand that the Stock is not
registered under the Securities Act of 1933, as amended, on the grounds that the
issuance thereof is exempt under the Securities Act of 1933 and applicable state
securities laws and that the reliance on such exemption is predicated in part on
the Shareholder's representations in this Agreement;
(b) Its officers and directors understand that the statutory
basis for the exemption claimed under the Securities Act of 1933 would not be
present if, notwithstanding each of these representations hereunder, any
investor has in mind merely acquiring any of the shares for resale upon the
occurrence or non-occurrence of some pre-determined event or if any Shareholder
is not financially responsible; and
(c) Its officers and directors understand that the Stock may not
be offered, sold, transferred, pledged or hypothecated in the absence of
registration or the availability of and exemption from registration under the
Securities Act of 1933. Furthermore, no offer, sale, transfer, pledge or
hypothecation is to take place unless the prior written approval of counsel for
the Company has been affixed to the certificate evidencing the Stock, the stock
transfer agent of the Company has
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been ordered to effectuate transfers of the Stock only in accordance with the
above instructions and the appropriate restrictive legend has been placed on all
certificates representing outstanding shares of the Stock (as described in
Paragraph 12.1).
5. HFN's Performance Obligation. HFN agrees, as a performance
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obligation, that it shall obtain Network planning and option agreements from at
least two (2) hospitals in the Exclusive Territory within one hundred twenty
(120) days of the date of this Agreement (the "Performance Obligation"). If HFN
fails to meet the Performance Obligation, at the election of IMSNET, this joint
venture shall unwind by automatic termination of this Agreement and all related
agreements and instruments involving HFN, IMS-NET, HFN Info, Swedish, the
Company and IMS, the pro rata return of the cash consideration paid by HFN for
its Stock (based on the total cash consideration for all of the Stock and the
Company's expenditures prior to termination hereof), the transfer of all of
HFN's, HFN Info's and Swedish's Stock to the Company and the resignation of all
HFN representatives as directors and officers of the Company. The provisions of
Subparagraphs 12.1(a)-(c) and Paragraph 12.3 shall not apply in the event of
dissolution of the Company hereunder.
6. Exclusive Territory; Rights of First Refusal. The Company shall
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own, operate and market the Network in the Exclusive Territory, as defined
herein. In addition, if IMS or an affiliate of IMS proposes to establish any
medical information network in the State of Wisconsin and/or any areas east of
Interstate 35 in Iowa, HFN shall have the right of first refusal to participate
with IMS or its affiliate, on an exclusive basis, in the establishment,
ownership and operation of such network(s), on such terms as the parties may
agree.
7. Preferential Pricing for HFN Hospitals and Affiliates. During
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the term of this Agreement, HFN-affiliated hospitals and hospital systems and
physicians on their medical staffs will be entitled to preferential pricing for
Network products and services, as set forth in Exhibit E attached hereto. Such
preferential pricing shall involve discounts of not less than twenty-five
percent (25%) from IMS' published charges. The form of agreement to be entered
into by the Company with HFN-affiliated hospitals and systems and other
hospitals and systems as Local Sponsors, and physicians as Subscribers, shall be
attached hereto as Exhibit F.
8. National Sponsors. IMS will, on behalf of the Company and the
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Network, market the Network to, contract with and be responsible for billing and
collecting charges due from National Sponsors. The terms of the relationship
between the Company and IMS with respect to National Sponsors shall be set
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forth in the National Sponsor Marketing Agreement entered into by the Company
and IMS, which shall be attached hereto as Exhibit G.
9. Share Transfer Restrictions. Except as expressly provided herein
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or in Paragraph 10, neither HFN nor HFN Info shall assign, sell, transfer,
pledge, hypothecate, gift or otherwise dispose of or encumber all or any portion
of its shares of the Stock or any interest therein. If at any time during the
term hereof, HFN or HFN Info desires to transfer any interest in Stock, such
transfer must be effectuated as follows:
(a) HFN or HFN Info (the "Selling Shareholders") shall first offer
to sell its Stock to the Company and the other Shareholders (including, for
purposes hereof, Swedish) by presenting to the Company and to the other
Shareholders an executed written offer (the "Offer Notice") to sell its Stock on
the same terms and conditions on which the Selling Shareholder proposes to
transfer its Stock and a copy of the bona fide written offer to sell or purchase
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(if any);
(b) Upon receipt of the Offer Notice, the Company, acting through
its Board of Directors (any director who is an HFN representative not voting),
shall have thirty (30) days in which to notify the Selling Shareholder in
writing of its desire to purchase the Selling Shareholder's Stock. If the
Company does not elect to purchase the Selling Shareholder's Stock as just
described or takes no action, the provisions of Subparagraph (c) below shall
become applicable;
(c) If the Company does not elect to purchase the Selling
Shareholder's Stock pursuant to Subparagraph (b) above, the other Shareholders
shall have thirty (30) days after expiration of the thirty (30) day period
referred to in Subparagraph (b) to notify the Selling Shareholder in writing of
their offer to purchase their pro rata share of the Selling Shareholder's Stock.
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For purposes of this Agreement, a Shareholder's "pro rata share" shall equal the
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percentage which the number of shares of Stock owned by it bears to the total
number of shares of Stock owned by all of the Shareholders desiring to accept
the Selling Shareholder's offer;
(d) If the Company and/or the other Shareholders do not elect to
purchase the Selling Shareholder's Stock as just described, the Selling
Shareholder shall be free to sell its Stock to the prospective purchaser at the
price and on the other terms and conditions described in the Offer Notice
delivered pursuant to Subparagraph (a) above; and
(e) The closing of any purchase by the Company or the other
Shareholders pursuant to this Paragraph 10 shall occur on a date designated by
the purchasing party(s) not more than sixty (60) nor less than fifteen (15) days
after exercising
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its/their option to purchase. Against payment of the purchase price at the
closing (by certified or cashier's check or wire transfer of immediately
available funds), the Selling Shareholder shall assign and deliver to the
Company or the purchasing Shareholders the share certificates and/or other
documents representing its interest in the Stock to be sold, free and clear of
all liens, claims or other encumbrances, in form ready for transfer and duly
endorsed for transfer or accompanied by stock powers duly executed by the
Selling Shareholder.
10. Participation in Sales and IMS Public Offering.
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10.1 Sale of the Company. Subject to the provisions hereof, if
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IMS-NET, as the holder of a majority of the shares of the Stock, approves a Sale
of the Company (an "Approved Sale"), the other Shareholders shall vote for,
consent to and raise no objections to the Approved Sale. If the Approved Sale is
structured as a merger or consolidation, the other Shareholders shall waive any
dissenter's rights, appraisal rights or similar rights in connection with such
merger or consolidation. If the Approved Sale is structured as a sale of Stock,
HFN shall have the option to: (a) sell all of its Stock, and require the other
Shareholders to sell all of their Stock, on the terms and conditions approved by
IMS-NET; (b) purchase all of IMS-NET's Stock at the approved price plus $1.00;
or (c) elect, on its own behalf and on behalf of the other Shareholders, not to
sell Stock in connection with the Sale of the Company. All of the other
Shareholders, including HFN Info and Swedish, shall be bound by HFN's election.
The obligations of HFN and the other Shareholders with respect to an Approved
Sale of the Company also are subject to the satisfaction of the following
conditions: (a) upon the consummation of the Approved Sale, each Shareholder
shall receive the same form of consideration and the same amount of
consideration for its Stock as all other Shareholders; (b) if any Shareholders
are given options as to the form and amount of consideration to be received,
each Shareholder shall be given the same options; and (c) HFN and the other
Shareholders, in the case of a Stock sale in which HFN has elected to
participate, shall have the right to sell the same proportion of their Stock as
IMS-NET and shall not be obligated to sell a greater proportion of their Stock
than IMS-NET.
10.2 Sale of IMS. In the event of a proposed Sale of IMS,
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immediately prior to such Sale, HFN will have the option to: (a) purchase all of
IMS-NET's Stock at a price based on the greater of the fair market value per
share, determined by the appraisal consultants of the Company's regularly
retained independent auditors (at the Company's expense), and Fifty
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Thousand Dollars ($50,000) per share; (b) sell all of its Stock, and require the
other Shareholders to sell all of their Stock, to IMS-NET at a price based on
the greater of the fair market value per share (determined as provided in
Subparagraph (a)), and Fifty Thousand Dollars ($50,000) per share; or (c)
retain, and require the other Shareholders to retain, the same interest in the
Company notwithstanding the Sale of IMS. HFN will have thirty (30) days from its
receipt of notice of the proposed Sale of IMS to make such election and, if no
affirmative election is made within such time period, HFN will be deemed to have
elected option (c). In the event IMS or HFN disputes the valuation placed on the
Company hereunder, either party may submit the dispute to binding arbitration in
Chicago, Illinois in accordance with the Commercial Arbitration Rules of the
American Arbitration Association. All of the other Shareholders, including HFN
Info and Swedish, will be bound by HFN's election hereunder.
10.3 Public Offering of IMS Stock. In the event of a proposed
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Public Offering of IMS common stock, neither HFN, HFN Info, Swedish nor any
future minority shareholder of the Company shall have the right to exchange
their shares of Stock for shares of IMS common stock prior to the Public
Offering. However, in the event that IMS, in its sole discretion, offers such
exchange rights to HFN Info, Swedish and any future minority shareholders, and
all of those parties agree to exchange all of their Stock, HFN shall be
obligated to exchange, on the same terms and conditions agreed upon by such
parties and IMS, an amount of its Stock equal to no more than the amount needed
to give IMS, following the exchange, ownership of eighty percent (80%) of all of
the issued and outstanding Stock. In such event, IMS also agrees that HFN, in
its sole discretion, shall have the option to exchange any additional amount or
all of its Stock for IMS common stock, on the same terms and conditions.
10.4 Definitions. For purposes hereof, a Sale of the Company or
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a Sale of IMS means the sale of the Company or IMS to an unrelated third party
or group of unrelated third parties pursuant to which such party or parties
acquire: (a) a majority of the Stock of the Company (whether by merger,
consolidation or sale of Stock) or the capital stock of IMS possessing the
voting power to elect a majority of IMS' board of directors (whether by merger,
consolidation or sale of stock); or (b) all or substantially all of the assets
of the Company, or of all or substantially all of the assets of IMS on a
consolidated basis. For purposed hereof, a Public Offering means any sale of IMS
common stock to the public pursuant to an offering registered under the
Securities Act of 1933, as amended, or through a broker, dealer or market maker
pursuant to the provisions of Rule 144 promulgated under the Securities Act of
1933, as amended.
11. Restrictive Legend; All Shares of Stock Subject to Restriction.
--------------------------------------------------------------
11.1 Restrictive Legend. Each certificate representing shares of
------------------
the Stock shall be endorsed with a legend in substantially the following form:
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"The sale, transfer, pledge, hypothecation, gift or other
disposition or encumbrance of the shares represented by this
certificate is subject to, and the shares are transferable only
in accordance with, the terms of a Joint Venture Agreement
between the Company and certain of its Shareholders dated
May 15, 1992, a copy of which is on file at the offices of the
Company. The securities represented by this certificate have
not been registered under the Securities Act of 1933. These
securities may not be offered, sold, transferred, pledged or
hypothecated in the absence of registration or the availability
of and exemption from registration under the Securities Act of
1933. Furthermore, no offer, sale, transfer, pledge or
hypothecation is to take place unless the prior written approval
of counsel for the Company has been affixed to this certificate.
The stock transfer agent of the Company has been ordered to
effectuate transfers of this certificate only in accordance with
the above instructions."
11.2 All Shares of Stock Subject to Restriction.
------------------------------------------
(a) Notwithstanding any provision hereof to the contrary, in the
case of any transfer or disposition of shares of the Stock or the issuance of
any new shares of the Stock, each transferee shall execute an appropriate
instrument agreeing to be bound by the restrictions set forth in this Agreement
(which shall be substantially in the form of the Stock Subscription Agreement
attached hereto as Exhibit B). The transferee or transferees shall receive and
hold such Stock subject to all of the restrictions, obligations and rights
created hereunder, and the Shareholders and each transferee shall be bound by
the restrictions contained in this Agreement with respect to each subsequent
transferee.
(b) The terms "Shareholder" or "Shareholders" as used in this
Agreement shall include any new shareholder or any transferee of a Shareholder
as just described.
12. Dissolution.
-----------
12.1 Voluntary Dissolution. In the event that the shareholders
---------------------
of the Company at any time and for any reason agree to a voluntary dissolution
and winding up of the business operations of the Company, the rights and
obligations of the Shareholders, as well as the procedures governing dissolution
and winding up, shall be as provided in the Illinois Business
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Corporation Act of 1983, as amended; provided, however, that the parties shall
have the following additional rights and obligations upon such dissolution
(except dissolution pursuant to Paragraph 5):
(a) Upon ninety (90) days prior written notice from HFN to IMS and
subject to payment of the consideration described below, the Software License
Agreement (along with the accompanying Escrow Agreement) will be assigned by the
Company to HFN, and consented to as necessary by IMS, without consideration.
IMS will thereafter abide by the then existing terms of the Software License
Agreement, except as those terms may be amended from time to time pursuant to
the provisions of said Agreement and further except that, upon such assignment,
the license granted thereunder shall convert to a non-exclusive license. Such
assignment is, however, subject to the prior payment of total cash consideration
to IMS for the license granted under the Software License Agreement of One
Million Two Hundred Thousand Dollars ($1,200,000), including amounts paid by HFN
Info and/or Swedish therefor;
(b) In the event the Software License Agreement is assigned to HFN
pursuant to Subparagraph (a), IMS will thereafter also provide such technical
and other maintenance, support and assistance (in addition to that required
under the Software License) which is available from IMS and requested by HFN, on
terms at least as favorable as those available to IMS' most favored clients. In
addition, National Sponsors and Local Sponsors which continue to do business
with IMS following dissolution of the Company shall continue to have access to
the Network pursuant to an assignment of the National Sponsor Marketing
Agreement attached hereto as Exhibit G to HFN or the creation of a substantially
comparable new arrangement between HFN and IMS using the same reimbursement
system then in effect. Participants in HFN's Network also will be given access
to the products and services offered by CSC Health Care Services, Inc. through
IMS, to the extent possible; and
(c) Also in the event the Software License Agreement is assigned
to HFN pursuant to Subparagraph (a), all of the Company's agreements with Local
Sponsors and Subscribers shall be assigned to HFN without consideration, subject
to the consent of the Local Sponsors and Subscribers, if necessary. In addition,
following dissolution of the Company, IMS hereby authorizes HFN to market the
Network to and to contract with any and all potential Local Sponsors and
Subscribers affiliated with HFN and located within the Exclusive Territory. For
purposes hereof, a Local Sponsor shall be considered affiliated with HFN" if it
is: (i) an HFN shareholder hospital/system, affiliate hospital/system or
participant hospital/system; (ii) a hospital for which HFN acts as a contracting
agent; or (iii) an affiliated entity of any of the foregoing hospitals. A
Subscriber shall be
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considered "affiliated with HFN" if he/she has medical staff privileges at any
of the foregoing hospitals or refers patients for admission to any of the
foregoing hospitals.
12.2 Involuntary Dissolution. Involuntary dissolution proceedings
-----------------------
commenced against the Company shall trigger and be governed by all of the same
rights, obligations and terms set forth in Paragraph 12.1 as to a voluntary
dissolution, subject to the requirements of the United States Bankruptcy laws,
if applicable.
12.3 Competition After Dissolution. For a period of three (3) years
-----------------------------
following dissolution and completion of the winding up of the affairs of the
Company pursuant to Paragraphs 12.1 or 12.2, HFN shall not, alone or with third
parties, establish, own, manage or operate a medical information network or
networks within the Exclusive Territory other than the Network as permitted
pursuant to this Paragraph 12, and further shall not solicit, market the Network
to or contract with any Local Sponsors or Subscribers which or who are not
affiliated with HFN (other than those unaffiliated Local Sponsors or Subscribers
under contract at the time of dissolution). Also for a period of three (3)
years following dissolution and completion of the winding up of the affairs of
the Corporation pursuant to Paragraphs 12.1 or 12.2, IMS shall not, alone or
with third parties, solicit, market or contract with any Local Sponsors or
Subscribers affiliated with HFN in the Exclusive Territory for the purposes of
offering a medical information network competitive with the Network owned and
operated by HFN within the Exclusive Territory.
13. Miscellaneous.
-------------
13.1 Notices. All notices required to be given hereunder shall be
-------
given in writing and shall be personally delivered or deemed delivered if
dispatched by certified mail, return receipt requested, postage prepaid,
addressed to the parties at its last known business address, or such other
addresses the party may designate in writing. A notice shall be deemed given on
the date it is personally delivered or deposited in the mail in accordance with
the foregoing.
13.2 Governing Law. This Agreement and all rights, duties and
-------------
obligations hereunder shall be construed and interpreted in accordance with the
internal laws (not the choice of law) of the State of Illinois.
13.3 Waiver. No waiver of any term, covenant or condition contained
------
in this Agreement or failure to exercise a right or remedy shall be deemed to
imply a further waiver of such term, covenant, right or remedy.
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13.4 Severability. Nothing contained in this Agreement shall be
------------
construed so as to require the commission of an act contrary to law and whenever
there is any conflict between any provision of this Agreement and any present
statute, law, ordinance or regulation contrary to which the parties have no
legal right to contract, the latter shall prevail, but in such event, the
provisions of the Agreement affected shall be curtailed and limited only to the
extent necessary to bring it within the requirements of the law and to carry out
the purposes of this Agreement.
13.5 Binding Agreement. Subject to the restrictions set forth herein,
-----------------
this Agreement shall inure to the benefit of and be binding upon all parties
hereto and their respective legal representatives, successors, transferees, and
assigns. Whenever a reference is herein made to any party such reference shall
be deemed to include a reference to the legal representatives, successors,
transferees, and assigns of such party.
13.6 Assignment. Except as provided herein, this Agreement shall
----------
not be assigned by any party without the express prior written consent of all of
the other parties.
13.7 Headings. All headings and captions used herein are for
--------
convenience of reference only, and shall not be a part or affect the
interpretation of this Agreement.
13.8 Entire Agreement. This Agreement supersedes all prior oral and
----------------
written understandings and agreements between the parties hereto with respect to
the subject matter hereof. The parties acknowledge and agree that this
Agreement, together with all Exhibits, documents and agreements referenced and
incorporated herein, contain the entire agreement between the parties. No
representations, promises, conditions or warranties with reference to the
execution of this Agreement have been made or entered into between the parties
hereto other than as herein expressly provided.
13.9 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
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13.10 Modification. This Agreement may be modified only upon
------------
execution of a written agreement signed by all of the parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
HFN, INC. INTEGRATED MEDICAL SYSTEMS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇ By: ^SIGNATURE TO COME^
-------------------------------- --------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇
Its: President Its: President
-------------------------------
HFN INFORMATION SYSTEMS, ILLINOIS MEDICAL INFORMATION
INC. NETWORK, INC.
By: ▇▇▇▇▇ ▇. ▇▇▇▇ By: ▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------------- --------------------------------
Its: President Its: President
------------------------------- -------------------------------
IMS-NET OF ILLINOIS, INC.
By: ^SIGNATURE TO COME^
--------------------------------
Its: Secretary/Treasurer
-------------------------------
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