AMENDMENT NO. 3 TO SOFTWARE LICENSE
AND CONSULTING AGREEMENT
This SECOND AMENDMENT TO SOFTWARE LICENSE AND CONSULTING AGREEMENT
(this "Amendment") is made as of this 31st day of May, 2001, by and among
Digital Insurance, Inc., a Delaware corporation ("Digital"), and ▇▇▇▇▇▇▇▇▇▇.▇▇▇,
Inc., a Pennsylvania corporation ("HealthAxis").
W I T N E S S E T H:
--------------------
WHEREAS, Digital and HealthAxis have previously entered into that
certain Software License and Consulting Agreement dated June 30, 2000, as
previously amended by that certain Amendment to Software Licensing and
Consulting Agreement dated September 15, 2000, and that certain Amendment No. 2
to Software License and Consulting Agreement dated March 31, 2001 (collectively,
the "License and Consulting Agreement"), and they now desire to further amend
the License and Consulting Agreement to reflect the modifications to such
agreement as provided in this Amendment.
NOW THEREFORE, in consideration of Ten Dollars ($10.00), and the mutual
covenants herein contained, and for other good and valuable consideration, the
receipt, adequacy and legal sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, do hereby agree to amend the
License and Consulting Agreement as follows:
1. Prepayment of License Fees by Digital. Notwithstanding Section 4.1 of the
License and Consulting Agreement, and subject to the provisions of Section 7 of
this Amendment, Digital has paid, and HealthAxis has accepted, a total aggregate
payment of $2,000,000.00 as payment in full of (i) all remaining amounts due to
HealthAxis for the License Fees and previously deferred Service Fees, including
interest on all such amounts, pursuant to Sections 4.1, 5.4 and 5.5 of the
License and Consulting Agreement, and (ii) certain other amounts due to
HealthAxis as described in that certain Second Amendment to Asset Purchase
Agreement which is being entered into simultaneously herewith by Digital and
HealthAxis. As a result, and except as expressly provided in Section 7 of this
Amendment, no further License Fee payments or previously deferred Service Fees
(or interest thereon) are or shall become due and payable by Digital.
2. Ongoing Fees; Revised Minimum Commitment. Upon payment by Digital of the
amount of $284,587.60 for the Service Fees (which amount includes dedicated
staff as well as rent, hosting fees, telecom charges and other costs and
expenses as shown on the invoice for May) payable for the month of May, 2001
(and resolution of payment of any disputed amounts from the April, 2001
invoice), Digital shall be deemed to have met its minimum commitment for
dedicated services as originally provided in the License and Consulting
Agreement through May 31, 2001 and, subject to Section 7 below, Digital shall be
deemed to have satisfied its obligations under Section 5.4(a) and (b) of the
License and Consulting Agreement. Digital agrees to resolve any disputes
regarding the April invoice and pay all of these amounts on or before June 10,
2001. Thereafter, effective June 1, 2001, and notwithstanding any provisions of
the License and Consulting Agreement to the contrary, Digital and HealthAxis
hereby agree to the following amended payment and Services provisions:
(a) Digital agrees to pay Healthaxis $100,000 per month effective June 1,
2001, and payable on the tenth (10th) day of each month, continuing
through the earlier to occur of either (i) May 31, 2002, or (ii) the
date Digital gives written notice to HealthAxis that Digital no longer
utilizes the Non-Retail Presentation Layer Software and Other Common
Modules as provided in Section 7 below. This $100,000 represents a
revised guaranteed monthly minimum commitment by Digital for the period
specified in the preceding sentence and will cover the following
expenses and Services:
(i) Dedicated technical staff (technical support and development) as
further described in Subsection (b) below;
(ii) Website Hosting Services as defined in Section 5.1(b) of the
original License and Consulting Agreement except for (x) the
hosting services for the California version 2.0 site which has
previously been discontinued and is no longer part of the
Services, and (y) the split screen/link from the ▇▇▇▇▇▇▇▇▇▇.▇▇▇
site to the ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ site which will no longer be
provided as part of the Services;
(iii) shared telecommunications costs as described in Section 5.6 of
the License and Consulting Agreement associated with the Website
Hosting Services; and
(iv) Rent and operating costs for the East Norriton, PA facility (as
long as Digital Insurance is a tenant) pursuant to that certain
Commercial Sublease Agreement between HealthAxis and Digital
dated July 1, 2000, including, but not limited to, office rent,
office operating costs and telecommunications costs (but
excluding local and long distance charges which shall be the
responsibility of, and paid directly by, Digital).
(b) The balance of the $100,000 per month after the other expenses
described above will cover approximately 5.5 FTEs (based on current
rent and operating expense run rates) who will be dedicated to Digital
support. This dedicated staff headcount may increase at such time as
Digital Insurance is no longer a tenant in the Healthaxis East Norriton
facility, and that portion of the $100,000 per month previously
allocated to rent and operating expense is freed up. The dedicated
staff headcount may also decrease if rent or other covered expenses
increase. The personnel rate applied to dedicated staff for purposes of
this Subsection 2(b) shall be $79.00 per dedicated person per hour.
(c) Healthaxis and Digital agree that the commitment of $100,000 per month
is a guaranteed minimum commitment by Digital for the period set forth
in Section 2(a) of this Amendment, and Digital shall have no right to
terminate the Services Term during such period pursuant to Section
7.2(b) of the License and Consulting Agreement. Healthaxis will invoice
Digital each month for this amount with an accounting of Healthaxis'
actual expenses (such as rent, operating expense, and
telecommunications costs) and the value (at the rates stated herein) of
Healthaxis professional services provided by the dedicated staff. In
each month that the sum of the actual expenses and the value of the
dedicated staff professional services exceed the $100,000 commitment,
the excess will be carried forward as a debit to the next month. In
each month that the sum of the actual expenses and the value of the
dedicated staff professional services is less than the $100,000
commitment, the remainder will be carried forward as a credit to the
next month. The detail amounts shown on each monthly invoice will be
deemed conclusive unless contested by Digital in writing within fifteen
(15) days of the invoice date. In addition, it is the intention of the
parties that any monthly variances between the invoice amounts and the
$100,000 will be minimal, and HealthAxis and Digital will reconcile all
debits and credits as shown on the monthly invoices before the end of
each calendar year (or any earlier termination of the License and
Consulting Agreement); provided that HealthAxis shall have received not
less than the guaranteed minimum amount for each month after all debits
and credits are reconciled. If HealthAxis fails to provide any of the
services specified in the Commercial Sublease Agreement or Schedule 1
thereto, Digital shall have the right, after giving notice to
HealthAxis, to supply such services and Digital's cost therefor shall
be included in the monthly reconciliation specified above.
(d) To the extent Digital requests Services which require resources in
excess of the dedicated staff provided pursuant to Subsection 2(b)
above, Healthaxis will provide such resources to Digital (subject to
availability of such resources) at a composite rate of $100.00 per hour
per person. These Services may include, but are not limited to, any
additional resources as may be requested by Digital to (i) perform the
ongoing support and carrier integration services at the same level and
speed with which the prior larger dedicated staff was able to perform,
(ii) develop new or enhanced functionality (except as provided in
Section 3 below), and (iii) install future releases and upgrades of the
Non-Retail Presentation Layer Software and Other Common Modules, the
Retail Presentation Layer Rights, and/or retrofit the Digital site for
purposes of such upgrades. HealthAxis and Digital agree that this
composite rate includes "bench time" built in and that HealthAxis will
▇▇▇▇ Digital only for actual production hours of its personnel which
excludes marketing, job estimation, internal communications, and other
similar activities which are not directly supportive of Digital
projects. These amounts (if any) will be billed separately from, and in
addition to, the $100,000 for dedicated staff as specified in
Subsections 2(a) and 2(b), and are in no way to be treated as part of
the debit/credit/reconciliation process as described in Subsection 2(c)
above. Payment for such charges is due monthly, within 30 days of the
invoice date.
(e) For so long as Digital remains a tenant in the HealthAxis East Norriton
facility, Digital will provide the services of ▇▇▇▇▇ ▇▇▇▇▇▇ (or a
person of equal skill if his employment with Digital terminates for any
reason) to the HealthAxis East Norriton, Pennsylvania employees at no
expense to HealthAxis.
(f) For so long as HealthAxis maintains a presence in the HealthAxis East
Norriton facility, Healthaxis will provide the services of ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ (or a person of equal skill if his employment with HealthAxis
terminates for any reason) to the Digital East Norriton employees at no
expense to Digital.
(g) Except for the shared telecommunications expenses and operating
expenses under the Lease as provided above, Digital shall be obligated
for any and all out-of-pocket expenses incurred by HealthAxis in
performing the Services as provided in Section 5.6 of the original
License and Consulting Agreement.
3. Agreements Regarding Remaining Completion Services. HealthAxis and Digital
hereby agree that HealthAxis has completed, and Digital has accepted, all
software design and development services originally required by HealthAxis to
complete the design, testing and implementation of version 3.0 of the Retail
Presentation Layer Rights and the specified functionalities of version 3.0 of
the Non-Retail Presentation Layer Software and Other Common Modules according to
the functionalities originally set forth in the License and Consulting Agreement
except for (i) On-Line Small Group and Employee Application, (ii) Small Group
Case Renewal, and (iii) Billing and Reconciliation. Digital agrees that
effective as of June 1, 2001, any and all remaining work to be performed by
HealthAxis at no charge to Digital on these deliverables will be limited to a
cumulative total of 2,500 hours of Healthaxis personnel time, including
requirements gathering, design, development, testing and implementation. These
hours must be used by Digital on or before December 31, 2001, at which time
HealthAxis' obligation under this Section 3 will be deemed fully satisfied and
discharged, regardless of whether the deliverables described herein have been
completed by HealthAxis or accepted by Digital, and regardless of whether or not
the 2,500 hours were fully utilized by Digital.
4. Sales and Marketing Assistance. Digital agrees to commit up to twenty-five
percent (25%) of the time of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇, its Sales Vice
Presidents, at no salary, commission or other personal compensation expense to
Healthaxis, to market the products and services of Healthaxis, until December
31, 2001. Digital will receive a commission on any sales, by Messrs. ▇▇▇▇▇▇▇▇
and ▇▇▇▇▇▇▇▇ (or otherwise by Digital), of any Healthaxis products or services,
in accordance with the Technology Brokerage Agreement dated June 30, 2000.
5. Source Code Release. Notwithstanding anything in this Amendment or otherwise
to the contrary, HealthAxis shall not be obligated to release any source code
for the Non-Retail Presentation Layer Software and Other Common Modules to
Digital pursuant to Section 3.3 of the License and Consulting Agreement unless
and until Digital has fully satisfied the Additional Funding Requirement as
specified in Section 7 of this Amendment, or if Digital fails to satisfy the
Additional Funding Requirement, then upon payment in full of all amounts which
will then become due to HealthAxis as provided in Section 7 below: provided,
however, that Digital shall remain entitled to such source code pursuant to the
terms and conditions of the Escrow Agreement and as specified in Section 3.2 of
the License and Consulting Agreement
6. Mutual Release. Except for the continuing obligations of both HealthAxis and
Digital as specified in this Amendment, HealthAxis and Digital do hereby release
and discharge the other from any and all payment obligations of Digital and all
delivery obligations of HealthAxis as contained in the License and Consulting
Agreement.
7. Additional Funding Requirement. HealthAxis has agreed to the terms and
conditions contained in this Amendment based upon Digital's representations that
the agreements contained herein would enhance Digital's ability to raise
additional funding. Accordingly, notwithstanding anything in this Amendment to
the contrary, in the event Digital has not completed an additional round of
funding by raising at least $4,000,000 on or before March 31, 2002 (the
"Additional Funding Requirement"), then HealthAxis shall be entitled to receive
the unpaid balance of the License Fee and all previously deferred Service Fees
(including accrued interest on all such amounts) which would have otherwise have
become due under the License and Consulting Agreement as if this Amendment had
never been entered into. The Additional Funding Requirement shall also be deemed
satisfied if Digital enters into a merger or other business combination
transaction which has the net effect of increasing Digital's cash position by at
least $4,000,000 (the surviving entity in the merger or other transaction has
cash equal to the cash position of Digital immediately prior to the merger or
other transaction plus at least $4,000,000) on or before March 31, 2002. If
Digital fails to satisfy the Additional Funding Requirement, Digital would be
entitled to credit for the $2,000,000.00 paid herewith against such unpaid
License Fee and previously deferred Service Fees (and interest thereon) that
would otherwise have become due under the License and Consulting Agreement and
unpaid amounts that would otherwise have become due under the Promissory Note
delivered under the Asset Purchase Agreement (as applicable). Except as
expressly provided in Section 2(c) above, nothing herein shall abrogate
Digital's rights to terminate the "Services Term" or the "Digital License Term"
as provided in the License and Software Consulting Agreement. Digital may, at
any time, give written notice to HealthAxis that Digital no longer utilizes the
Non-Retail Layer Presentation Software and Other Common Modules, and in such
case, no further payments shall be due under this Section regardless of whether
an Additional Funding Event occurs on or before March 31, 2002, and the license
granted to Digital in the License and Consulting Agreement shall be deemed
automatically terminated for all purposes.
8. Full Force and Effect. The Software License and Consulting Agreement, as
amended hereby, shall remain in full force and effect, and all capitalized terms
as used herein shall have the meaning as defined in the License and Consulting
Agreement. To the extent there are any inconsistencies between the terms of this
Amendment and the terms of the Software License and Consulting Agreement, the
terms of this Amendment shall prevail.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives effective as of the date first
above written.
DIGITAL INSURANCE, INC. ▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
--------------------------- ------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
PRESIDENT & CEO PRESIDENT & CEO
