Software License And Support Agreement

EXHIBIT 10.13


EMPIRE/IBM CONFIDENTIAL FINAL Version 13


SOFTWARE LICENSE AND SUPPORT AGREEMENT


BETWEEN


EMPIRE HEALTHCHOICE, INC.


AND


INTERNATIONAL BUSINESS MACHINES CORPORATION


DATED


JUNE 1, 2002


EMPIRE/IBM CONFIDENTIAL FINAL Version 13


TABLE OF CONTENTS


1. BACKGROUND ................................................................ 1


1.1 Background .......................................................... 1
1.2 Construction ........................................................ 1


2. DEFINITIONS ............................................................... 1


2.1 Certain Definitions ................................................. 1
2.2 Other Terms ......................................................... 5


3. SOFTWARE DEVELOPMENT AND SYSTEMS INTEGRATION .............................. 5


3.1 Overview ............................................................ 5
3.2 Development Responsibilities ........................................ 5
3.3 Project Management .................................................. 7
3.4 Testing and Initial Approval of the Licensed Works .................. 7
3.5 Migration Planning; Implementation and Systems Integration .......... 8
3.6 Completion of Development and Systems Integration ................... 8
3.7 Acceptance of the Licensed Works .................................... 8
3.8 "Grace Period"; Remedy for Delayed Completion of the
Development and Systems Integration ............................. 9
3.9 Training ............................................................ 10
3.10 Financial Commitment to Complete the Licensed Software .............. 11
3.11 Users Group ......................................................... 11
3.12 Subcontracting ...................................................... 11
3.13 IBM Contract Executive .............................................. 12


4. LICENSES AND RESTRICTIONS ................................................. 12


4.1 License Grant ....................................................... 12
4.2 Copies .............................................................. 12
4.3 Sublicenses ......................................................... 13
4.4 Usage Parameters .................................................... 13
4.5 Certain Restrictions ................................................ 13
4.6 Access to Systems 13
4.7 Patent Rights ....................................................... 14


5. OWNERSHIP; INTELLECTUAL PROPERTY RIGHTS ................................... 14


5.1 Ownership of Intellectual Property .................................. 14
5.2 Third Party Products ................................................ 14
5.3 Reporting ........................................................... 14
5.4 Residual Knowledge .................................................. 14


6. SUPPORT AND MAINTENANCE ................................................... 15


7. FEES; PAYMENT; AND TAXES .................................................. 15


7.1 Fees ................................................................ 15
7.2 Organic Growth; Growth by Merger .................................... 16
7.3 Future Discussion of Maintenance Fees ............................... 16


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7.4 Invoices .......................................................... 16
7.5 Payment Due ....................................................... 16
7.6 Set Off ........................................................... 17
7.7 Disputed Charges .................................................. 17
7.8 Taxes ............................................................. 18
7.9 Audit of Empire ................................................... 19
7.10 Audit of IBM (and deNovis) ........................................ 20


8. NO OTHER SERVICES ........................................................ 22


9. ESCROW OF SOURCE CODE .................................................... 22


10. LIMITED WARRANTIES AND DISCLAIMERS ....................................... 23


10.1 IBM represents and warrants to Empire that: ....................... 23
10.2 DISCLAIMER OF WARRANTIES .......................................... 24


11. LIABILITY ................................................................ 24


11.1 General Intent .................................................... 24
11.2 Liability Restrictions ............................................ 24


12. INDEMNIFICATION .......................................................... 26


12.1 Intellectual Property Indemnification ............................. 26
12.2 Subcontractor Indemnity ........................................... 26
12.3 Additional Indemnities ............................................ 26
12.4 Infringement: Injunctive Relief ................................... 26
12.5 Procedures With Respect to Indemnities ............................ 27
12.6 Indemnification Procedures ........................................ 27
12.7 Subrogation ....................................................... 28


13. SAFEGUARDING OF DATA; CONFIDENTIALITY .................................... 28


13.1 Empire Information ................................................ 28
13.2 Safeguarding Empire Data .......................................... 29
13.3 Confidentiality ................................................... 29
13.4 HIPAA Privacy and Security Requirements ........................... 31
13.5 HIPAA Transactions Rule ........................................... 34
13.6 HIPAA Security Rule ............................................... 34
13.7 Other HIPAA Administrative Simplification Regulations ............. 34


14. TERM AND TERMINATION ..................................................... 34


14.1 Term .............................................................. 34
14.2 Termination For Cause by Empire ................................... 34
14.3 Additional Termination Rights ..................................... 35
14.4 Termination Prior To The Acceptance Date .......................... 35
14.5 Termination of Maintenance and Support Services by Empire ......... 35
14.6 Termination Upon Change of Control ................................ 35
14.7 Due To IBM's Financial Inability To Perform ....................... 36
14.8 Termination by Empire Due To Force Majeure Event .................. 36
14.9 Termination by Empire for Convenience ............................. 36
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14.10 Termination related to Staten Island Sublease ..................... 36
14.11 Effect of Termination ............................................. 37
14.12 Survival .......................................................... 37


15. DISPUTE RESOLUTION ....................................................... 37


15.1 Informal Dispute Resolution ....................................... 37
15.2 Litigation ........................................................ 38
15.3 Continued Performance ............................................. 38
15.4 Waiver of Right to Jury Trial ..................................... 38


16. GENERAL PROVISIONS ....................................................... 38


16.1 Governing Law; Jurisdiction ....................................... 38
16.2 Assignment ........................................................ 38
16.3 Amendments; Waivers ............................................... 39
16.4 Complete Agreement ................................................ 39
16.5 Suspension of Performance ......................................... 39
16.6 Notices ........................................................... 40
16.7 Compliance with Laws .............................................. 40
16.8 No Third Party Beneficiaries ...................................... 41
16.9 Counterpart and Facsimile Signatures .............................. 41
16.10 Force Majeure ..................................................... 41
16.11 Revenue Sharing for Sales of the Licensed Software ................ 42
16.12 Most Favored Customer ............................................. 45
16.13 Public Disclosures ................................................ 45
16.14 Service Marks ..................................................... 45
16.15 Nonsolicitation of Employees ...................................... 46
16.16 Covenant of Good Faith ............................................ 46
16.17 Consents and Approval ............................................. 46
16.18 Severability ...................................................... 46
16.19 Relationship of the Parties ....................................... 46
16.20 Mutually Negotiated ............................................... 47
16.21 Effect of Headings ................................................ 47


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EMPIRE/IBM CONFIDENTIAL FINAL Version 13


ATTACHMENTS


Attachment A: Description of Licensed Works and Software Requirements
Document


Attachment A-1: Description of Licensed Software


Attachment A-2: Empire's Business Features and Function Requirements


Attachment A-3: Description of Licensed Software Features and
Functions


Attachment A-4: Empire's Technical Requirements (Including Specific
"Scalability" Requirements)


Attachment A-4-1: Empire's Technical Requirements for the
Licensed Software


Attachment A-4-2: Empire's "Scalability" Requirements for the
Licensed Software


Attachment A-5: Information Resource Management Requirements (Data
Access and Integration Requirements


Attachment B: Support and Maintenance


Attachment C: Development and License Fee and Maintenance Fees


Attachment D: Identification of Escrow Agreement


Attachment D-1: Preferred Escrow Agreement


Attachment E: Third Party Products


Attachment F: Development Project Management Guidelines


Attachment F-1: Project Management Process


Attachment G: Development Project Testing Procedures


Attachment H: [Not Used.]


Attachment I: Development Project Software Engineering Process


Attachment I-1: Details of Development Project Software Engineering
Process


Attachment J: Overall Project Plan


Attachment K: Development Project Plan


Attachment L: Development Project Disaster Recovery Plan Outline


Attachment M: DeNovis Statement Regarding Back-Up of Licensed Software


Attachment N: Empire Competitors


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EMPIRE/IBM CONFIDENTIAL FINAL Version 13


SOFTWARE LICENSE AND SUPPORT AGREEMENT


This Software License and Support Agreement, effective as of June 1, 2002 (the "Effective Date"), is entered into by and between International Business Machines Corp., a New York corporation, having a place of business at Route 100, Somers, New York 10589 ("IBM"), and Empire HealthChoice, Inc. doing business as Empire Blue Cross and Blue Shield, a New York corporation with its corporate headquarters located at 11 W. 42/nd/ Street, New York, New York 10036 ("Empire") an independent licensee of the Blue Cross and Blue Shield Association.


1. BACKGROUND


1.1 Background.


This Agreement is being made and entered into with reference to the following:


(a) Empire desires to outsource to IBM certain services currently
performed by Empire, in order to generate savings, which savings (a
key element of generating these savings to Empire is the utilization
of IBM Personnel in India) will be used in part in connection with the
Licensed Software, and modernization of Empire's other core
applications.


(b) IBM desires to license the new Claims Engine to Empire, and Empire
desires to utilize such Claims Engine as its primary insurance claims
processing product.


(c) Empire desires to license the Portal Toolkits and Framework Software
to IBM, in return for credits earned from IBM's sale of such software
and related products based on such software.


(d) The Parties desire to mutually enter into a structure allowing future
joint development of health care products.


(e) Having reached agreement on contract terms, the Parties are entering
into the following agreements to memorialize the terms and conditions
under which the foregoing shall be consummated and provided: (i) this
Agreement, (ii) the Licensing and Joint Development Agreement, and
(iii) the Master Services Agreement.


1.2 Construction.


The provisions of this Section 1 are intended to be a general introduction
to this Agreement and are not intended to expand the scope of the Parties'
obligations under this Agreement or to alter the plain meaning of the terms
and conditions of this Agreement. However, to the extent the terms and
conditions of this Agreement do not address a particular circumstance or
are otherwise unclear or ambiguous, such terms and conditions are to be
interpreted and construed so as to give full effect to the provisions in
this Section 1.


2. DEFINITIONS


2.1 Certain Definitions.


(a) "Acceptance Date" has the meaning specified in Section 3.7(d).


(b) "Affiliate" means, with respect to any entity, any other entity
Controlling, Controlled by or under common Control with such entity.


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(c) "Administrative Services Only Processing" or "ASO Processing" means
any processing for self-insured accounts of Empire for which Empire
administers, in whole or in part, health benefits and for which Empire
has no liability for the payment of claims (IBM is an example of an
ASO customer as of the Effective Date).


(d) "Agreement" means this Software License and Support Agreement,
including its schedules, exhibits, and appendices, as the same may be
amended by the Parties from time to time in accordance with Section
16.3.


(e) "Applicable Auditee" has the meaning specified in Section 7.10(a).


(f) "Commercially Reasonable Efforts" means taking such steps and
performing in such a manner as a well managed software development
company, in the case of IBM, or a well managed health insurance
company, in the case of Empire, would undertake under similar
circumstances where such company was acting in a determined, prudent
and reasonable manner to achieve a particular desired result.


(g) "Confidential Information" has the meaning specified in Section
13.3(a).


(h) "Control" and its derivatives means possessing, directly or
indirectly, the power to direct or cause the direction of the
management policies or operations of an entity, whether through
ownership of voting securities, by contract or otherwise.


(i) "CS-90" has the meaning specified in Section 3.2(f).


(j) "Deficiency Notice" has the meaning specified in Section 3.4(a).


(k) "Deliverables" has the meaning specified in Section 3.2.


(l) "deNovis" means deNovis, Inc., the entity from which IBM is licensing
the Licensed Works.


(m) "deNovis Revenue Sharing Credits" has the meaning specified in Section
16.11(d)(ii).


(n) "Development and License Fee" has the meaning specified in Section
7.1.


(o) "Development Project Plan" has the meaning specified in Section
3.2(a).


(p) "Disabling Code" means any code which would have the effect of
disabling or otherwise shutting down all or any portion of the
Licensed Software.


(q) "Dispute Date" has the meaning specified in Section 15.1(a)(i).


(r) "Divested Entity" means a divested line of business or entity of
Empire (no longer Controlled by Empire) acting either as an
independent entity or a part of another entity.


(s) "Documentation" means all written or electronic documentation
pertaining to the Licensed Software including manuals, user guides,
help screens which are provided by or for IBM to Empire hereunder.


(t) "Earned" has the meaning specified in Section 16.11(d)(iii).


(u) "Empire Auditors" has the meaning specified in Section 7.10(a).


(v) "Empire Confidential Information" has the meaning specified in Section
13.3(a).


(w) "Empire Data" has the meaning specified in Section 5.1(b).


(x) "Empire Information" means all information, in any form, furnished or
made available directly or indirectly to IBM by Empire or otherwise
obtained by IBM from Empire. Such information first provided by IBM or
its suppliers to Empire hereunder shall not be deemed to be Empire
Information.


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(y) "Empire's Processing" means the use of the Licensed Works for
Empire's business purposes, including processing being performed by
Empire as of the Effective Date and, in the case of Empire business
currently being processed by NASCO for Empire, to the extent such
processing is subsequently performed by Empire, but excluding
Empire's use of the Licensed Works as a Service Bureau. "Empire's
Processing" also includes (i) permitting third parties to access or
to interact with the Licensed Works in connection with Empire's
business, but excludes use of the Licensed Software by third party
service providers (such access is described in Section 4.3); and
(ii) the use of the Licensed Works by Empire to process work for
Divested Entities (to the same extent that such Divested Entity was
permitted to benefit from the License hereunder as an Affiliate of
Empire) for a period up to twelve (12) months after the date such
Divested Entity ceases to be an Affiliate. For the avoidance of
doubt the term "Empire's Processing" shall not limit the number of
users, number of locations, sites or instances of the Licensed Works
maintained by Empire.


(z) "Escrow Agent" has the meaning specified in Section 9.


(aa) "Escrow Agreement" has the meaning specified in Section 9.


(bb) "Escrow Cap" has the meaning specified in Section 7.7(b).


(cc) "Escrow Threshold" has the meaning specified in Section 7.7(b).


(dd) "Errors" has the meaning specified in Section 10.1(f).


(ee) "Export Act" has the meaning specified in Section 16.7(b).


(ff) "Grace Period" has the meaning specified in Section 3.8(a).


(gg) "Gross Revenues" has the meaning specified in Section 16.11(b).


(hh) "Harmful Code" means (i) program code or programming instruction or
set of instructions intentionally designed to disrupt, disable,
harm, interfere with or otherwise adversely affect computer
programs, data files or operations; or (ii) other code typically
described as a virus or by similar terms, including Trojan horse,
worm or backdoor. "Harmful Code" does not include Disabling Code.


(ii) "IBM Contract Executive" has the meaning specified in Section 3.13.


(jj) "Including" and its derivatives (such as "include" and "includes")
mean including without limitation. This term is as defined, whether
or not capitalized in this Agreement.


(kk) "Initial Approval Date" has the meaning specified in Section 3.4(c).


(ll) "License" has the meaning specified in Section 4.1.


(mm) "Licensed Software" means deNovis' eHD enterprise software platform
(including the Third Party Products) as described in Attachment A
and summarized in Attachment A-1 thereto, together with all
Modifications thereto. The Licensed Software is also referred to as
the "Claims Engine".


(nn) "Licensed Works" means collectively, the Licensed Software and the
Documentation.


(oo) "Licensing and Joint Development Agreement" means that certain
Licensing and Joint Development Agreement by and between the Parties
executed concurrently with this Agreement.


(pp) "Life" ("Lives") means any individual(s) covered by a benefit plan
insured or administered by Empire (including insurance companies,
self-insured employees, buying cooperatives, and unions) or any
Empire Affiliate.


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(qq) "Losses" means all losses, liabilities, damages and claims, and all
related costs and expenses (including reasonable legal fees and
disbursements and costs of investigation, litigation, settlement,
judgment, interest and penalties).


(rr) "Maintenance Fees" has the meaning specified in Section 7.1.


(ss) "Master Services Agreement" means that certain Master Services
Agreement by and between the Parties executed concurrently with this
Agreement.


(tt) "Merger Growth" has the meaning specified in Section 7.2(b).


(uu) "Modification" means any error correction, workaround, update,
revision, enhancement, modification or derivative work of the
Licensed Software (including Updates and Upgrades (as defined in
Attachment B)) which is provided by or on behalf of IBM to Empire
hereunder.


(vv) "NASCO" means National Accounts Services Company, LLC.


(ww) "Notice of Election" has the meaning specified in Section 12.6(a).


(xx) "Object Code Form" means a form of software code resulting from the
translation or processing of software in Source Code Form by a
computer into machine language, which thus is in a form that would
not be convenient to human understanding of the software.


(yy) "Organic Growth" has the meaning specified in Section 7.2(a).


(zz) "Out-of-Pocket Expenses" means reasonable, demonstrable and actual
out-of-pocket expenses incurred by IBM for equipment, materials,
supplies or services provided to or for Empire as identified in this
Agreement, but not including IBM's overhead costs (or allocations
thereof), administrative expenses or other mark-ups.


(aaa) "Overall Project Plan" means a high-level project plan attached
hereto as Attachment K describing the plan for completing the
development of the Licensed Works and the Systems Integration
Effort, which includes major milestones and dates by which such
milestones will be completed.


(bbb) "Party" means either Empire or IBM, as applicable; "Parties" means
both Empire and IBM.


(ccc) "Permitted Users" has the meaning specified in Section 12.4.


(ddd) "Project Plan" means, collectively, the Overall Project Plan, the
Development Project Plan and the Systems Integration Project Plan.


(eee) "Residuals" means those ideas, concepts, know-how, and techniques
related to information in non-tangible form which is retained in the
unaided memories of the employees of a Party and which such Party
individually or jointly, develops, learns or discloses under this
Agreement.


(fff) "Revenue Sharing" has the meaning specified in Section 16.11(a).


(ggg) "Revenue Sharing Escrow Threshold" has the meaning specified in
Section 16.11(f)(ii).


(hhh) "Security Rule" has the meaning specified in Section 13.6.


(iii) "Service Bureau" means a business offering whereby Empire or its
Affiliates processes health insurance claims utilizing the Licensed
Software for insurance companies or health plans without including a
material business offering other than such processing. Service
Bureau shall not include ASO Processing.


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(jjj) "Source Code Form" means a form of software code in which a computer
program's logic is easily deduced by a human being with reasonable
skill in the art.


(kkk) "Software Specifications" mean the specificati ...