Exhibit 10
Subject to Competitive Bid Process
AUTHORIZED DISTRIBUTOR AGREEMENT
between
NOVATION, LLC
and
___OWENS & MINOR_____
("Authorized Distributor")
For the Members of
VHA and University HealthSystem Consortium
TABLE OF CONTENTS
PAGE
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1. INTRODUCTION...................................................1
a. Purchasing Opportunities for Members..................1
b. Authorized Distributor................................1
c. Participating Members.................................1
d. Supplier Agreements...................................2
e. Bid...................................................2
2. CONTRACT AWARD.................................................3
a. Letter of Award.......................................3
b. Optional Purchasing Arrangement.......................3
c. Market Competitive Terms..............................3
d. Changes in Distribution Fees..........................4
e. Notification of Changes in Pricing Terms..............4
f. Underutilized Businesses..............................4
3. TERM AND TERMINATION...........................................4
a. Term..................................................4
b. Termination by Novation...............................5
c. Termination by Authorized Distributor.................5
d. Effect of Termination.................................5
4. PRODUCT SUPPLY.................................................5
a. Delivery and Invoicing................................5
b. Purchase Orders.......................................5
c. Storage...............................................6
d. Computer Software.....................................6
e. Confirmation..........................................6
f. Product Fill Rates....................................6
g. Product Stocking......................................6
h. Notice of Physical Inventory..........................7
i. Product Substitution..................................7
j. Participating Member Services.........................7
k. Return of Products....................................7
l. Disaster Plan.........................................7
m. Additional Requirements...............................7
n. Failure to Supply.....................................7
5. PRODUCT QUALITY................................................8
a. Product Compliance....................................8
b. Product Condition.....................................8
c. Shelf Life............................................8
6. CENTURY COMPLIANCE.............................................9
a. Definitions...........................................9
b. Representations.......................................9
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c. Remedies.............................................10
d. Noncompliance Notice..................................9
e. Survival.............................................10
7. REPORTS AND OTHER INFORMATION REQUIREMENTS....................10
a. Report Content.......................................10
b. Report Format and Delivery...........................11
c. Reports to Participating Members.....................11
d. Other Information Requirements.......................11
8. OBLIGATIONS OF NOVATION.......................................11
a. Information to Participating Members.................11
b. Marketing Services...................................11
9. MARKETING FEES................................................12
a. Calculation..........................................12
b. Payment..............................................11
10. DAMAGES .....................................................13
a. Administrative Damages...............................13
b. Service Damages......................................14
11. NONPAYMENT OR INSOLVENCY OF A PARTICIPATING MEMBER............14
12. INSURANCE.....................................................14
a. Policy Requirements..................................14
b. Self-Insurance.......................................15
c. Amendments, Notices and Endorsements.................15
13. COMPLIANCE WITH LAW AND GOVERNMENT PROGRAM PARTICIPATION......15
a. Compliance With Law..................................15
b. Government Program Participation.....................15
14. LIMITATION OFLIABILITY; INDEMNIFICATION.......................16
15. BOOKS AND RECORDS; FACILITIES INSPECTIONS.....................17
16. USE OF NAMES, ETC.............................................17
17. CONFIDENTIAL INFORMATION......................................17
a. Nondisclosure........................................17
b. Definition...........................................18
18. MISCELLANEOUS.................................................18
a. Choice of Law........................................18
b. Not Responsible......................................18
c. Third Party Beneficiaries............................18
d. Notices..............................................19
e. No Assignment........................................19
f. Severability.........................................19
g. Entire Agreement.....................................19
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INDEX OF DEFINED TERMS
PAGE
Agreed Percentage......................................................11
Authorized Distributor.........................................title page
Award Letter............................................................3
Bid.....................................................................3
Calendar-Related........................................................8
Century Noncompliance...................................................8
Clients.................................................................2
Confidential Information...............................................16
Contract Products.......................................................2
Cost...................................................................10
Distribution Fees.......................................................3
Effective Date..........................................................5
Federal health care program............................................15
Gregorian calendar......................................................8
Guidebook..............................................................11
Indemnitees............................................................15
Legal Requirements.....................................................14
Marketing Fees.........................................................11
Members.................................................................2
Noncontract Products....................................................1
Non-Price Specifications................................................4
Novation................................................................1
Novation Database.......................................................1
Participating Members...................................................1
Prices.................................................................10
Primary Ordering Locations..............................................6
Private Label Products..................................................1
Products................................................................1
Reporting Month........................................................10
Services................................................................1
Supplier Agreement Data.................................................2
Supplier Agreements.....................................................2
Suppliers...............................................................2
Systems.................................................................8
Term....................................................................4
Timely..................................................................9
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NOVATION, LLC
AUTHORIZED DISTRIBUTOR AGREEMENT
1. INTRODUCTION.
a. Purchasing Opportunities for Members. Novation, LLC ("Novation") is engaged
in providing purchasing opportunities with respect to high quality products and
services to participating health care providers ("Members"). Members are
entitled to participate in Novation's programs through their membership or other
participatory status in either of the following client organizations: VHA Inc.
and University HealthSystem Consortium, (collectively, "Clients"). Novation is
acting as the exclusive agent for each of the Clients and certain of each
Client's subsidiaries and affiliates, respectively (and not collectively), with
respect to this Agreement.
b. Authorized Distributor. Authorized Distributor is engaged in the business of
providing distribution services with respect to the purchasing and reselling of:
(i) the products described on Exhibit A attached hereto which display the
NOVAPLUS(TM) or VHA PLUS(R) trademarks ("Private Label Products"); (ii) the
products described on Exhibit B attached hereto ("Contract Products"); and (iii)
all other products which may be distributed to Participating Members
("Noncontract Products") (Private Label Products, Contract Products and
Noncontract Products are collectively referred to as "Products"). Novation
reserves the right to modify Exhibits A and B from time to time for the purpose
of adding or deleting Private Label Products or Contract Products to or from
this Agreement. Such distribution services include the services of selling,
marketing, ordering, paying, order receiving, billing/invoicing, handling,
storing, receiving, inventorying, transporting, delivering, collecting funds,
cash application, cash management, receivables management, payables management,
handling Member and other inquiries, providing Member service, handling recalls
and market withdrawals, providing for returns permitted by law, handling
allowances and the services described on Exhibit C attached hereto
(collectively, "Services").
c. Participating Members. Certain Members have chosen to participate in
Novation's distribution program and will be given an opportunity to designate
Authorized Distributor as the distributor through which those Members will
purchase Products. After completion of the designation process, a current
listing of Members that have so designated Authorized Distributor
("Participating Members") will be attached hereto as Exhibit D and will be
updated periodically by Novation. Novation may replace Exhibit D with a listing
in the electronic database described in the Guidebook referred to in Reqirement
D.5. A Member will become a "Participating Member" for purposes of this
Agreement at the time Novation notifies Authorized Distributor of the addition
of the Member to Exhibit D or, if the Novation Database is utilized, at the time
Novation adds the Member to the Novation Database as a Participating Member. A
Member will cease to be a "Participating Member" for purposes of this Agreement
at the time Novation notifies Authorized Distributor of the deletion of the
Member from Exhibit D or, if the Novation Database is utilized, at the time
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Novation deletes the Member from the Novation Database as a Participating
Member.
d. Supplier Agreements. Novation and/or the Clients have entered and will, from
time to time, enter into agreements ("Supplier Agreements") with certain
manufacturers ("Suppliers") who agree to sell Contract Products or Private Label
Products to Members through distributors. Novation will provide Authorized
Distributor with a listing of Supplier Agreements and a description, for each
listed Supplier Agreement, of certain terms relevant to this Agreement
("Supplier Agreement Data") either by hard copy or, at Novation's option, by
maintaining the Supplier Agreement Data in the Novation Database. Novation will
use reasonable efforts to provide Supplier Agreement Data to Authorized
Distributor at least forty-five (45) days prior to the effective date of each
Supplier Agreement. Authorized Distributor agrees to load all new or changed
Supplier Agreement Data into Authorized Distributor's computer system within
fifteen (15) days after Authorized Distributor's receipt of the hard copy of the
Supplier Agreement Data or, if Novation maintains the Supplier Agreement Data in
the Novation Database, within fifteen (15) days of the posting of the Supplier
Agreement Data in the Novation Database. Not less than thirty (30) days prior to
the effective date of each Supplier Agreement, Authorized Distributor will
supply Novation and each Participating Member with a report by printout,
diskette or electronic transmission (or such other format as may be reasonably
requested by Novation or the Participating Member) setting forth Authorized
Distributor's order entry numbers and prices for all Contract Products and
Private Label Products covered by that Supplier Agreement. Thereafter,
Authorized Distributor will provide to Novation and each Participating Member an
updated report of order entry numbers and prices for each Supplier Agreement no
less frequently than annually and at any time upon request of a Participating
Member, provided that Authorized Distributor will not be required to respond to
more than one such request from the same Participating Member during any one
calendar quarter.
Novation shall provide Authorized Distributor with an electronic copy of all
distributed Supplier Agreement launch packages at least 45 days prior to the
effective date. Authorized Distributor agrees to notify Novation of any and all
situations where Authorized Distributor has received notification of a new
Supplier Agreement from Novation, but has not received contract / pricing
notification from the Contract Supplier at least 45 days prior to the effective
date. Such notification shall be made to Novation medical surgical distribution
no later than 45 days prior to the effective date of the Supplier Agreement.
e. Bid. Authorized Distributor has responded to Novation's Invitation to
Bid by submitting its written offer ("Bid") to Novation consisting of this
Agreement, the Exhibits to this Agreement, and any other materials required to
be submitted in accordance with the Bid Instructions.
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2. CONTRACT AWARD.
a. Letter of Award. By executing and delivering the Letter of Award attached
hereto as Exhibit E ("Award Letter") to Authorized Distributor, Novation will
have accepted the Bid, and Novation and Authorized Distributor therefore agree
that Authorized Distributor will make the Services available to the
Participating Members for the fees set forth in Exhibit F attached hereto
("Distribution Fees") in accordance with the terms of this Agreement; provided,
however, that Novation's award of this Agreement to Authorized Distributor will
not constitute a commitment by any person to obtain Services from, or purchase
any of the Products through, Authorized Distributor. No obligations of Novation
set forth in this Agreement will be valid or enforceable against Novation unless
and until the Award Letter has been duly executed by Novation and attached as an
exhibit hereto. Authorized Distributor acknowledges that, in making its award to
Authorized Distributor, Novation has materially relied on all representations,
warranties and agreements made by Authorized Distributor as part of the Bid and
that all such representations, warranties and agreements will survive acceptance
of the Bid.
b. Optional Purchasing Arrangement. Novation and Authorized Distributor agree
that each Participating Member will have the option of purchasing the Services
and Products under the terms of this Agreement or under the terms of any other
distribution, purchasing or pricing arrangement that may exist between such
Participating Member and Authorized Distributor at any time during the Term;
provided, however, that regardless of the arrangement, Authorized Distributor
will comply with Sections 7 and 9 below. If any Participating Member uses any
other distribution, purchasing or pricing arrangement when ordering products
from Authorized Distributor which are covered by any contract between Authorized
Distributor and Novation, Authorized Distributor will notify such Participating
Member of the pricing and other significant terms of the applicable Novation
distribution or purchasing contract.
c. Market Competitive Terms. Authorized Distributor agrees that the prices,
quality, value and technology of all Services provided under this Agreement will
remain market competitive at all times during the Term. If Authorized
Distributor extends any offers for the provision of the Services or the sale
and/or distribution of the Products during the Term [*], Authorized Distributor
agrees to promptly (i) provide notice to Novation with copies of all such offers
and (ii) provide Novation with copies of all responses to such offers. If such
offers or responses are not in written form, Authorized Distributor agrees to
promptly provide Novation with written summaries of all material terms thereof.
[*] If at any time during the Term Novation receives information from any source
suggesting that Authorized Distributor's prices, quality, value or technology
are not market competitive, Novation may provide written notice of such
information to Authorized Distributor, and Authorized Distributor will, within
five (5) business days after its receipt of such notice, advise Novation in
writing of [*].
*[This confidential information has been omitted and filed separately with
the Commission.]
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d. Changes in Distribution Fees. Except as provided in Subsection 2.c or in any
exhibit to this Agreement, the Distribution Fees will not be adjusted during the
Term.
e. Notification of Changes in Pricing Terms. Authorized Distributor will notify
all Participating Members and Novation at least thirty (30) days prior to any
change in pricing terms. For purposes of the foregoing notification
requirements, a change in pricing terms will mean any change that affects the
delivered price to the Participating Member, including, without limitation,
changes in Distribution Fees (if permitted or required by this Agreement),
Prices (as defined in Subsection 7.a(2)), Costs (as defined in Exhibit G
attached hereto), list prices, discounts or pricing tiers, schedules or any
matters set forth in Exhibit H attached hereto. Such notice will be provided in
such format and in such detail as may be required by Novation from time to time,
and will include, at a minimum, sufficient information to determine line item
pricing of the Products for all affected Participating Members.
Authorized Distributor and Participating Members may agree to forego the minimum
thirty (30) day price change notification in events where a Participating Member
requests the stocking of new product(s) or Participating Member is a new
participant on the Agreement and Authorized Distributor is able to stock
product(s) and load pricing in less than thirty (30) days.
f. Underutilized Businesses. Certain Participating Members may be required by
law, regulation and/or internal policy to do business with underutilized
businesses such as Minority Business Enterprises (MBE), Disadvantaged Business
Enterprises (DBE), Small Business Enterprises (SBE), Historically Underutilized
Businesses (HUB) and/or Women-owned Business Enterprises (WBE). To assist
Novation in helping Participating Members meet these requirements, Authorized
Distributor will comply with all Novation policies and programs with respect to
such businesses and will provide, on request, Novation or any Participating
Member with statistical or other information with respect to Authorized
Distributor's utilization of such businesses as a vendor, distributor,
contractor or subcontractor.
g. E-Commerce Business Certain Members have chosen to utilize the services of
the MARKETPLACE@NOVATION through Novation's relationship with ▇▇▇▇▇▇▇▇.▇▇▇, Inc.
("Neoforma"), to transact business associated with this Agreement with
Authorized Distributor. To assist Novation in helping Members meet those needs,
Authorized Distributor agrees to sign and comply with the Neoforma Master
Supplier Agreement and support Novation's programs with respect to E-commerce.
3. TERM AND TERMINATION.
a. Term. This Agreement will be effective as of the effective date set forth in
the Award Letter ("Effective Date"), and, unless sooner terminated, will
continue in full force and effect for the initial term set forth in the
specifications attached hereto as Exhibit I ("Non-Price Specifications") and
thereafter may be renewed at the option of Novation for any renewal terms set
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forth in the Non-Price Specifications by Novation's delivery of written notice
of renewal to Authorized Distributor not less than ten (10) days prior to the
end of the initial term or any renewal term, as applicable. The initial term,
together with the renewal terms, if any, are collectively referred to herein as
the "Term."
b. Termination by Novation. Novation may terminate this Agreement at any time
for any reason whatsoever by delivering not less than ninety (90) days' prior
written notice thereof to Authorized Distributor. In addition, Novation may
terminate this Agreement immediately by delivering written notice thereof to
Authorized Distributor upon the occurrence of either of the following events:
(1) Authorized Distributor breaches this Agreement; or
(2) Authorized Distributor becomes bankrupt or insolvent or
makes an unauthorized assignment or goes into liquidation or
proceedings are initiated for the purpose of having a receiving order
or winding up order made against Authorized Distributor, or Authorized
Distributor applies to the courts for protection from its creditors.
Novation's right to terminate this Agreement due to Authorized Distributor's
breach in accordance with this Subsection is in addition to any other rights and
remedies Novation, the Clients or the Participating Members may have resulting
from such breach, including, but not limited to, Novation's and the Clients'
right to recover all loss of Marketing Fees resulting from such breach through
the date of termination and for one hundred eighty (180) days thereafter.
c. Termination by Authorized Distributor. Authorized Distributor may terminate
this Agreement at any time for any reason whatsoever by delivering not less than
ninety (90) days' prior written notice thereof to Novation.
d. Effect of Termination. As of the effective date of termination of this
Agreement, neither party will have any further rights or obligations hereunder
except: (a) as otherwise provided herein; (b) for rights and obligations
accruing prior to such effective date of termination; or (c) for rights and
obligations arising as a result of any breach of this Agreement.
4. PRODUCT SUPPLY.
a. Delivery and Invoicing. On and after the Effective Date, Authorized
Distributor agrees to deliver Products ordered by Participating Members FOB
Participating Member freight prepaid and in accordance with Exhibit J attached
hereto unless otherwise requested by Participating Member, and will direct its
invoices to the Participating Members in accordance with this Agreement and
Exhibit K attached hereto. Authorized Distributor will make whatever
arrangements are reasonably necessary with the Participating Members to
implement the terms of this Agreement; provided, however, Authorized Distributor
will not impose any purchasing commitment on any Participating Member as a
condition to the Participating Member's purchase of any Services or Products
pursuant to this Agreement.
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b. Purchase Orders. Authorized Distributor will accept Participating Member
orders, order supplements and order modifications from Participating Members on
purchase orders delivered to Authorized Distributor via facsimile, telephone,
hard copy or through the preferred method of electronic order entry via computer
in accordance with Subsection 4.d below. Authorized Distributor will physically
check each order to assure the Products and quantities selected by Authorized
Distributor correspond to Participating Member's order.
Orders must be placed by Participating Member prior to the order cut-off time
communicated by applicable Primary Ordering Locations (POL) to be delivered on
the next regularly scheduled delivery. AUTHORIZED DISTRIBUTOR shall not require
a minimum dollar order amount for Contract Products or Noncontract Products
ordered by Participating Members provided products are ordered in Vendor's
standard packaging units or in low unit of measure (▇▇▇) for those hospitals
utilizing this service. Authorized Distributor shall maintain an "800" number
for electronic order entry and direct contact with the Primary Ordering Location
personnel by Participating Members and Novation.
c. Storage. Authorized Distributor will warehouse at the locations listed in
Exhibit L attached hereto ("Primary Ordering Locations") at its own cost such
quantities of Products, including such quantities of Private Label Products, as
Authorized Distributor reasonably determines, based on historical usage or data
provided by Participating Members, as necessary to satisfy the anticipated
requirements of all Participating Members served by each Primary Ordering
Location. Unless a Participating Member selects a different Primary Ordering
Location, the Primary Ordering Location in closest geographical proximity to the
Participating Member will serve that Participating Member. Authorized
Distributor will not change the geographical locations of the Primary Ordering
Locations without the prior written consent of Novation.
d. Computer Software. In addition to complying with the information requirements
set forth in Subsection 7.d below, Authorized Distributor agrees to have and
maintain during the Term all computer-based systems described in Exhibit M
attached hereto through which Participating Members may place orders in
accordance with Subsection 4.b above and receive confirmation in accordance with
Subsection 4.e below.
e. Confirmation. Authorized Distributor will provide confirmation of orders from
Participating Members via computer in accordance with Subsection 4.d above
within the time period specified in Exhibit M, subject to the last sentence of
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this Subsection. The confirmation will include: (i) a description of Products,
Distribution Fees, quantity ordered, and quantity to be shipped; (ii) the dollar
amount of the total order; (iii) the applicable identification codes such as
purchase order numbers and cost center designations if the Participating Member
requests such information; and (iv) such other information as specified in
Exhibit N attached hereto. If the Participating Member is not capable of
receiving the computer transmission, Authorized Distributor will provide
confirmation via purchase order print back at its own expense via facsimile. For
all orders, Participating Member shall receive the complete confirmation within
two (2) hours after the receipt of the order by Authorized Distributor during
normal business hours.
f. Product Fill Rates. Authorized Distributor agrees to provide product fill
rates to Participating Members in accordance with Exhibit O attached hereto.
g. Product Stocking. Authorized Distributor agrees to stock Products in
accordance with Exhibit P attached hereto.
h. Notice of Physical Inventory. Authorized Distributor will give Novation and
Participating Members notice of Authorized Distributor's intent to perform a
physical inventory in accordance with Exhibit Q attached hereto.
i. Product Substitution. Authorized Distributor will have no unilateral right to
substitute other products for any of the Contract Products or Private Label
Products ordered by Participating Members. Authorized Distributor may request a
Participating Member to agree to a substitution of other products for any of the
Contract Products or Private Label Products. Under no circumstances will any
substitution for a Contract Product or Private Label Product be permitted
without the Participating Member's agreement to the substitution prior to
shipment.
j. Participating Member Services. Authorized Distributor will consult with each
Participating Member to identify the Participating Member's policies relating to
access to facilities and personnel. Authorized Distributor will comply with such
policies and will establish a specific timetable for sales calls by sales
representatives to satisfy the needs of the Participating Member. Authorized
Distributor will promptly respond to Participating Members' reasonable requests
for verification of purchase history.
k. Return of Products. Any Participating Member, in addition to and not in
limitation of any other rights and remedies, will have the right to return
Products to Authorized Distributor in accordance with the terms set forth in
Exhibit R attached hereto.
l. Disaster Plan. Authorized Distributor will assist Participating Members in
developing a plan of action for delivery of Products in the event of a natural
disaster in the geographical area of each Participating Member. Exhibit S
attached hereto details Authorized Distributor's disaster plan, which will
be reviewed annually by Novation and Authorized Distributor and amended as
required.
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m. Additional Requirements. Authorized Distributor will comply with the
requirements set forth in Exhibit T attached hereto.
n. Failure to Supply. In the event of Authorized Distributor's failure to
perform its supply obligations in accordance with the terms of this Section 4,
the Participating Member may purchase products equivalent to the Products from
other sources and Authorized Distributor will be liable to the Participating
Member for all reasonable costs in excess of the Authorized Distributor's Prices
required by this Agreement plus any other damages which they may incur. In such
event, Authorized Distributor will also be liable to Novation and the Clients
for any loss of Marketing Fees resulting from such failure plus any other
damages which they may incur. Additional remedies are set forth in Exhibit U
attached hereto. The remedies set forth in this Subsection and Exhibit U are in
addition to any other rights and remedies Novation, the Clients or the
Participating Members may have resulting from such failure. Any such "failure to
perform" shall not include manufacturer backorders or any reasons constituting
force majeure. Authorized Distributor shall have 48 hours to find a reasonable
substitute or another source. "Force majeure" means that Authorized Distributor
shall be excused from performance hereunder and shall not be liable in damages
for failure to perform under this Agreement during each period of delay caused
by acts of God, strikes, government orders, acts of war, industrial
disturbances, fires, accidents to machinery, manufacturer's inability or failure
to supply products or other causes which are reasonably beyond the control of
Authorized Distributor.
5. PRODUCT QUALITY.
a. Product Compliance. Authorized Distributor represents and warrants to
Novation, the Clients and the Participating Members that the Products will not
be distributed, sold or priced by Authorized Distributor in violation of any
federal, state or local law. Authorized Distributor represents and warrants that
as of the date of delivery to the Participating Members all Products will not be
adulterated or misbranded within the meaning of the Federal Food, Drug and
Cosmetic Act and will not violate or cause a violation of any applicable law,
ordinance, rule, regulation or order. Authorized Distributor represents and
warrants that it will provide adequate warnings and instructions to inform users
of the Products of the risks, if any, associated with the use of the Products.
Authorized Distributor's representations, warranties and agreements in this
Subsection will survive the expiration or earlier termination of this Agreement.
b. Product Condition. Unless otherwise stated in the Non-Price Specifications or
unless agreed upon by a Participating Member in connection with Products it may
order, all Products will be new. Products that are demonstrators, used,
obsolete, seconds, or which have been discontinued are unacceptable unless
otherwise specified in the Non-Price Specifications or the Participating Member
accepts delivery after receiving notice of the condition of the Products.
c. Shelf Life. Sterile Products and other Products with a limited shelf life
sold under this Agreement will have the longest possible shelf life and the
latest possible expiration dates.
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6. CENTURY COMPLIANCE.
a. Definitions. For purposes of this Section, the following terms have the
respective meanings given below:
(1) "Systems" means any of the Products, systems of distribution for
Products and Product manufacturing systems that consist of or include
any computer software, computer firmware, computer hardware (whether
general or special purpose), documentation, data, and other similar or
related items of the automated, computerized, and/or software systems
that are provided by or through Authorized Distributor or utilized to
manufacture or distribute the Products provided by or through
Authorized Distributor pursuant to this Agreement, or any component
part thereof, and any services provided by or through Authorized
Distributor in connection therewith.
(2) "Calendar-Related" refers to date values based on the "Gregorian
calendar" (as defined in the Encyclopaedia Britannica, 15th edition,
1982, page 602) and to all uses in any manner of those date values,
including without limitation manipulations, calculations, conversions,
comparisons, and presentations.
(3) "Century Noncompliance" means any aspects of the Systems that fail
to satisfy the requirements set forth in Subsection 6.b below.
b. Representations. Authorized Distributor warrants, represents and agrees that
the Systems satisfy the following requirements:
(1) In connection with the use and processing of Calendar-Related data,
the Systems will not malfunction, will not cease to function, will not
generate incorrect data, and will not produce incorrect results.
(2) In connection with providing Calendar-Related data to and accepting
Calendar-Related data from other automated, computerized, and/or
software systems and users via user interfaces, electronic interfaces,
and data storage, the Systems represent dates without ambiguity as to
century.
(3) The year component of Calendar-Related data that is provided by the
Systems to or that is accepted by the Systems from other automated,
computerized, and/or software systems and user interfaces, electronic
interfaces, and data storage is represented in a four-digit CCYY
format, where CC represents the two digits expressing the century and
YY represents the two digits expressing the year within that century
(e.g., 1996 or 2003).
(4) Authorized Distributor has verified through testing that the
Systems satisfy the requirements of this Subsection including,
without limitation, testing of each of the following specific dates
and the transition to and from each such date: December 31, 2000;
January 1, 2001; December 31, 2004; and January 1, 2005.
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c. Remedies. In the event of any Century Noncompliance in the Systems in any
respect, in addition to any other remedies that may be available to Novation or
the Members, Authorized Distributor will, at no cost to the Members, promptly
under the circumstances (but, in all cases, within thirty (30) days after
receipt of a written request from any Member, unless otherwise agreed by the
Member in writing) eliminate the Century Noncompliance from the Systems.
d. Noncompliance Notice. In the event Authorized Distributor becomes aware of
(i) any possible or actual Century Noncompliance in the Systems or (ii) any
international, governmental, industrial, or other standard (proposed or adopted)
regarding Calendar-Related data and/or processing, or Authorized Distributor
begins any significant effort to conform the Systems to any such standard,
Authorized Distributor will promptly provide the Members with all relevant
information in writing and will timely provide the Members with updates to such
information. Authorized Distributor will respond promptly and fully to inquiries
by the Members, and timely provide updates to any responses provided to the
Members, with respect to (i) any possible or actual Century Noncompliance in the
Systems or (ii) any international, governmental, industrial, or other standards.
In the foregoing, the use of "timely" means promptly after the relevant
information becomes known to or is developed by or for Authorized Distributor.
e. Survival. Authorized Distributor's representations, warranties and agreements
in this Section will continue in effect throughout the Term and will survive the
expiration or earlier termination of this Agreement.
7. REPORTS AND OTHER INFORMATION REQUIREMENTS.
a. Report Content. Within ten (10) calendar days after the end of each full and
partial month during the Term ("Reporting Month"), Authorized Distributor will
submit to Novation a report in the form of a diskette containing the following
information in form and content reasonably satisfactory to Novation:
(1) the name of Authorized Distributor, the Reporting Month
and year and the Agreement number (as provided to Authorized
Distributor by Novation);
(2) with respect to each Participating Member (described by
LIC number as provided to Authorized Distributor by Novation), health
industry number (if applicable), full name, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇,
▇▇▇▇▇, zip code and, if applicable, tier and committed status), with
the information categorized by Product, on a line item basis, the
number of units sold, the Authorized Distributor's cost of the Products
calculated in accordance with Exhibit G ("Cost"), and Distribution
Fees, and for all Services and Products purchased by such Participating
Member from Authorized Distributor during the Reporting Month, the sum
of the Costs and associated Distribution Fees ("Prices") whether under
the pricing and other terms of this Agreement or under the terms of any
other purchasing, distribution or pricing arrangements that may exist
between the Participating Member and Authorized Distributor.
10
(3) the sum of the total Costs and Distribution Fees for all
Services and all Products sold to all Participating Members during
the Reporting Month and the associated Marketing Fees; and
(4) such additional information as required in accordance
with Exhibit V attached hereto and such further information as Novation
may reasonably request from time to time.
b. Report Format and Delivery. The reports required by this Section will be
submitted electronically in ASCII delimited and in accordance with other
specifications established by Novation from time to time and will be delivered
to:
Novation
Attn: SRIS Operations
▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
c. Reports to Participating Members. Authorized Distributor will provide
Participating Members with monthly reports in accordance with the requirements
set forth in Exhibit W attached hereto.
d. Other Information Requirements. In addition to the reporting requirements set
forth in Subsections 7.a, 7.b and 7.c above, the parties agree to facilitate the
administration of this Agreement by transmitting and receiving information
electronically and by complying with the information requirements set forth in
Exhibit X attached hereto. Authorized Distributor further agrees that, except to
the extent of any inconsistency with the provisions of this Agreement, it will
comply with all information requirements set forth in the Novation Information
Requirements Guidebook ("Guidebook"). On or about the Effective Date, Novation
will provide Authorized Distributor with a current copy of the Guidebook and
will thereafter provide /Authorized Distributor with updates and/or revisions to
the Guidebook from time to time.
8. OBLIGATIONS OF NOVATION.
a. Information to Participating Members. After issuing the Award Letter,
Novation, in conjunction with the Clients, will deliver a summary of the
Supplier arrangements covered by this Agreement to each Participating Member and
will, from time to time, at the request of Authorized Distributor, deliver to
each Participating Member reasonable and appropriate amounts and types of
materials supplied by Authorized Distributor to Novation which relate to the
purchase of the Products.
b. Marketing Services. Novation, in conjunction with the Clients, will market
the distribution arrangements covered by this Agreement to the Members. Such
promotional services may include, as appropriate, the use of direct mail,
contact by Novation's field service delivery team, member support services, and
regional and national meetings and conferences. As appropriate, Novation, in
conjunction with the Clients, may involve Authorized Distributor in these
promotional activities by inviting Authorized Distributor to participate in
meetings and other reasonable networking activities with Members.
11
9. MARKETING FEES.
a. Calculation. Authorized Distributor will pay to Novation, as the authorized
collection agent for each of the Clients and certain of each Client's
subsidiaries and affiliates, respectively (and not collectively), marketing fees
("Marketing Fees") belonging to any of the Clients or certain of their
subsidiaries or affiliates equal to the Agreed Percentage of the greater of the
aggregate Prices or aggregate Cost (as defined in Subsection 7.a(2) above)
associated with all purchases of the Products by the Participating Members,
whether under the pricing and other terms of this Agreement or under the terms
of any other purchasing or pricing arrangements that may exist between the
Participating Members and Authorized Distributor. The "Agreed Percentage" is
defined in Exhibit Y attached hereto. If based on aggregate Prices, the
Marketing Fees will be calculated without any deduction for uncollected
accounts.
b. Payment. On or about the Effective Date, Novation will advise Authorized
Distributor in writing of the amount determined by Novation to be Authorized
Distributor's monthly estimated Marketing Fees. Thereafter, Authorized
Distributor's monthly estimated Marketing Fees may be adjusted from time to time
upon written notice from Novation based on actual purchase data. No later than
the tenth (10th) day of each month, Authorized Distributor will remit the
monthly estimated Marketing Fees for such month to Novation. Such payment will
be adjusted to reflect the reconciliation between the actual Marketing Fees
payable for the second month prior to such month with the estimated Marketing
Fees actually paid during such prior month. Authorized Distributor will pay all
estimated and adjusted Marketing Fees by check made payable to "Novation, LLC."
All checks should reference the Agreement number. Authorized Distributor will
include with its check the reconciliation calculation used by Authorized
Distributor to determine the payment adjustment, with separate amounts shown for
each Client's component thereof. Checks sent by first class mail will be mailed
to the following address:
Novation, ▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Checks sent by courier (Federal Express, United Parcel Service or messenger)
will be addressed as follows:
NORTHERN TRUST COMPANY
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇
4TH FLOOR RECEIPT & DISPATCH
▇▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇
ATTN: NOVATION, SUITE 1420
TELEPHONE ▇▇▇-▇▇▇-▇▇▇▇, #9
12
10. DAMAGES.
a. Administrative Damages. Novation and Authorized Distributor agree
that Novation would incur additional administrative costs if Authorized
Distributor fails to provide notice of change in pricing terms as required in
Subsection 2.e above, fails to provide reports as required in Section 7 above,
or fails to pay Marketing Fees as required in Section 9 above, in each case
within the time and manner required by this Agreement. Novation and Authorized
Distributor further agree that the additional administrative costs incurred by
Novation by reason of any such failure by Authorized Distributor is uncertain,
and they therefore agree that the following schedule of administrative damages
constitutes a reasonable estimation of such costs and were determined according
to the principles of just compensation:
1st failure written warning
2nd failure: $[*]
3rd failure: $[*]
4th failure: $[*]
5th failure: $[*]
6th & each subsequent failure: $[*]
Novation's right to recover administrative damages in accordance with this
Subsection is in addition to any other rights and remedies Novation or the
Clients may have by reason of Authorized Distributor's failure to pay the
Marketing Fees or provide the reports or notices within the time and manner
required by this Agreement.
*[This confidential information has been omitted and filed separately with
the Commission.]
13
c. Service Damages. Novation and Authorized Distributor agree that
Novation and/or the Participating Members would suffer damages if
Authorized Distributor fails to perform certain of its obligations
under this Agreement. Novation and Authorized Distributor further
agree that the damages suffered by Novation and/or the Participating
Members by reason of any such failure by Authorized Distributor is
uncertain, and they therefore agree that the schedule of damages set
forth in Exhibit Z attached hereto constitutes a reasonable estimation
of such damages and were determined according to the principles of
just compensation. Novation's and/or a Participating Member's right to
recover damages in accordance with this Subsection is in addition to
any other rights and remedies Novation, the Clients or the
Participating Members may have by reason of Authorized Distributor's
failure to perform its obligations under this Agreement. Damages above
are only available if fill rates are below average when adjusted due
to manufacturer backorders or other events beyond Distributor control.
Remedies are only available if Novation, the Clients and Members are
in full compliance with this Agreement. "Beyond distributor control"
means verified manufacturer backorders or shipping delays, customer
order errors, inclement weather or natural disasters preventing
delivery or as in the section on "force majeure", as listed and
defined in this Agreement.
11. NONPAYMENT OR INSOLVENCY OF A PARTICIPATING MEMBER. If a Participating
Member fails to pay Authorized Distributor for Products, or if an Participating
Member becomes bankrupt or insolvent or makes an assignment for the benefit of
creditors or goes into liquidation, or if proceedings are initiated for the
purpose of having a receiving order or winding up order made against a
Participating Member, or if a Participating Member applies to the courts for
protection from its creditors, then, in any such case, this Agreement will not
terminate, but Authorized Distributor will have the right, upon prior written
notice to Novation and the Participating Member, to discontinue providing
Products to that Participating Member.
12. INSURANCE.
a. Policy Requirements. Authorized Distributor will maintain and keep in force
during the Term product liability, general public liability and property damage
insurance against any insurable claim or claims which might or could arise
regarding Services provided or Products sold by Authorized Distributor. Such
insurance will contain a minimum combined single limit of liability for bodily
injury and property damage in the amounts of not less than $2,000,000 per
occurrence and $10,000,000 in the aggregate; will name Novation, the Clients,
and the Participating Members, as their interests may appear, as additional
insureds, and will contain an endorsement providing that the carrier will
provide directly to all named insured copies of all notices and endorsements.
Authorized Distributor will provide to Novation in its Bid and thereafter within
fifteen (15) days after Novation's request, an insurance certificate indicating
the foregoing coverage, issued by an insurance company licensed to do business
in the relevant states and signed by an authorized agent.
14
b. Self-Insurance. Notwithstanding anything to the contrary in Subsection 12.a
above, Authorized Distributor may maintain a self-insurance program for all or
any part of the foregoing liability risks, provided that Novation, in its sole
discretion, determines that such self-insurance policy in all material respects
complies with the requirements applicable to the product liability, general
public liability and property damage insurance set forth in Subsection 12.a.
Authorized Distributor will provide Novation in its Bid, and thereafter within
fifteen (15) days after Novation's request: (1) the self-insurance policy; (2)
the name of the company managing the self-insurance program and providing
reinsurance, if any; (3) the most recent annual reports on claims and reserves
for the program; and (4) the most recent annual actuarial report on such
program.
c. Amendments, Notices and Endorsements. Authorized Distributor will not amend,
in any material respect that affects the interests of Novation, the Clients or
the Participating Members, or terminate said liability insurance or
self-insurance program except after thirty (30) days' prior written notice to
Novation and will provide to Novation copies of all notices and endorsements as
soon as practicable after it receives or gives them.
13. COMPLIANCE WITH LAW AND GOVERNMENT PROGRAM PARTICIPATION.
a. Compliance With Law. Authorized Distributor represents and warrants that to
the best of its knowledge, after due inquiry, it is in compliance with all
federal and state statutes, laws, ordinances and regulations applicable to it
("Legal Requirements") which are material to the operation of its business and
the conduct of its affairs, including Legal Requirements pertaining to the
safety of the Services and Products, occupational health and safety,
environmental protection, nondiscrimination, antitrust, and equal employment
opportunity. During the Term, Authorized Distributor will: (1) promptly notify
Novation of any lawsuits, claims, administrative actions or other proceedings
asserted or commenced against it which assert in whole or in part that
Authorized Distributor is in noncompliance with any Legal Requirement which is
material to the operation of its business and the conduct of its affairs and (2)
promptly provide Novation with true and correct copies of all written notices of
adverse findings from any federal, state or local governmental agency and all
written results of agency inspections which pertain to the Products or Services.
b. Government Program Participation. Authorized Distributor represents and
warrants that it is not excluded from participation, and is not otherwise
ineligible to participate, in a "Federal health care program" as defined in 42
U.S.C. ss. 1320a-7b(f) or in any other government payment program. In the event
Authorized Distributor is excluded from participation, or becomes otherwise
ineligible to participate in any such program during the Term, Authorized
Distributor will notify Novation in writing within three (3) days after such
event, and upon the occurrence of such event, whether or not such notice is
given to Novation, Novation may immediately terminate this Agreement upon
written notice to Authorized Distributor.
15
14. LIMITATION OF LIABILITY; INDEMNIFICATION
(a) Authorized Distributor will perform the services provided for in this
Agreement in material compliance with all applicable laws of which it has
knowledge or reasonably should have knowledge. Novation acknowledges that (i)
authorized Distributor is not the manufacturer of any of the products
distributed by it and makes no warranties (express or implied) with respect to
any products distributed hereunder and (ii) all products purchased by
Participating Members hereunder are selected by the Participating Members
without reliance upon Authorized Distributor.
NOTWITHSTANDING ANY PROVISION HEREIN TO THE CONTRARY, AUTHORIZED DISTRIBUTOR
DOES NOT MAKE ANY WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE PRODUCTS
PROVIDED HEREUNDER. CUSTOMERS SHALL LOOK TO THE MANUFACTURER OF PRODUCTS FOR ANY
WARRANTY THEREON. NO AGENT, REPRESENTATIVE OR EMPLOYEE OF AUTHORIZED DISTRIBUTOR
HAS ANY AUTHORITY TO MAKE ANY REPRESENTATION OR WARRANTY ABOUT PRODUCTS.
(b) Authorized Distributor agrees to indemnify and hold Novation, the
Participating Members, and their respective officers, directors and affiliates
harmless from any damage, loss, liability or expense (including reasonable
expenses of investigation and reasonable attorneys' fees) arising out of (i) the
performance of this Agreement which is caused in whole or in part by any
negligent or intentional act or omission of Authorized Distributor, its
employees, agents and subcontractors, except to the extent such liabilities
arise out of the fault of Novation, the Participating Members or other third
party; (ii) any asserted or actual violation of the Food, Drug and Cosmetic Act,
or any other federal, state or municipal law by virtue of which products sold,
supplied or delivered by Authorized Distributor shall be alleged or determined
to be adulterated, diverted, misbranded, mislabeled or otherwise not in full
compliance with any federal, state or municipal law and which violation is
caused by Authorized Distributor's negligent handling of products sold to
Participating Members and (iii) claims of bodily injury, death or property
damage arising out of Participating Members' possession, distribution, sale or
use of products distributed by Authorized Distributor hereunder and caused by
Authorized Distributor's negligent handling of such products. CUSTOMERS SHALL
NOT HOLD AUTHORIZED DISTRIBUTOR LIABLE FOR ANY DEFECT IN PRODUCTS DISTRIBUTED
HEREUNDER UNLESS SUCH DEFECT RESULTS FROM THE WILLFUL MISCONDUCT OR GROSS
NEGLIGENCE OF AUTHORIZED DISTRIBUTOR. CUSTOMERS AGREE TO LOOK SOLELY TO THE
MANUFACTURER OF PRODUCTS FOR ANY CLAIM ARISING DUE TO LOSS, INJURY, DAMAGE OR
DEATH RELATED TO THE USE OR SALE OF PRODUCTS.
AUTHORIZED DISTRIBUTOR SHALL NOT BE RESPONSIBLE TO NOVATION, PARTICIPATING
MEMBERS OR ANY THIRD PERSON OR ENTITY FOR ANY INDIRECT, SPECIAL, CONSEQUENTIAL,
INCIDENTAL OR PUNITIVE DAMAGES (INCLUDING LOST PROFITS) ARISING DIRECTLY OR
INDIRECTLY OUT OF THE PRODUCTS OR SERVICES PROVIDED UNDER THIS AGREEMENT.
16
(c) Novation agrees to indemnify and hold Authorized Distributor, its officers,
directors and affiliates harmless from any damage, loss, liability or expense
(including, without limitation, reasonable expenses of investigation and
reasonable attorneys' fees) arising out of (i) the performance of this Agreement
which is caused, in whole or in part, by any negligent or intentional act or
omission of Novation, its employees, agents and subcontractors, except to the
extent such liabilities arise out of the fault of Authorized Distributor or
other third party, (ii) any asserted or actual violation of the Food, Drug and
Cosmetic Act, or any other federal, state or municipal law by virtue of which
products sold, supplied or delivered by Authorized Distributor shall be alleged
or determined to be adulterated, diverted, misbranded, mislabeled or otherwise
not in full compliance with any federal, state or municipal law and which
violation is caused by Novation's negligent handling or use of such products and
(iii) claims of bodily injury, death or property damage arising out of
Novation's possession, distribution, sale or use of products and caused by
Novation's negligent handling or use of such products.
15. BOOKS AND RECORDS; FACILITIES INSPECTIONS. Authorized Distributor agrees to
keep, maintain and preserve complete, current and accurate books, records and
accounts of the transactions contemplated by this Agreement and such additional
books, records and accounts as are necessary to establish and verify Authorized
Distributor's compliance with this Agreement. All such books, records and
accounts will be available for inspection and audit by Novation representatives
at any time during the Term and for two (2) years thereafter, but only during
reasonable business hours and upon reasonable notice and provided that amounts
believed to by owed by Authorized Distributor may not be pursued for items
greater than 24 months maximum past the last manufacturer reports to Novation.
Novation agrees that its routine audits will not be conducted more frequently
than twice in any consecutive twelve (12) month period, subject to Novation's
right to conduct special audits whenever it deems it to be necessary. In
addition, Authorized Distributor will make its distribution and packaging
facilities available for inspection from time to time during the Term by
Novation representatives, but only during reasonable business hours and upon
reasonable notice. The exercise by Novation of the right to inspect and audit is
without prejudice to any other or additional rights or remedies of either party.
16. USE OF NAMES, ETC. Authorized Distributor agrees that it will not use in any
way in its promotional, informational or marketing activities or materials (i)
the names, trademarks, logos, symbols or a description of the business or
activities of Novation or any Client or Participating Member without in each
instance obtaining the prior written consent of the person owning the rights
thereto; or (ii) the award or the content of this Agreement without in each
instance obtaining the prior written consent of Novation.
17. CONFIDENTIAL INFORMATION.
a. Nondisclosure. Authorized Distributor agrees that it will:
(1) keep strictly confidential and hold in trust all Confidential
Information, as defined in Subsection 17.b below, of Novation, the
Clients and the Participating Members;
17
(2) not use the Confidential Information for any purpose other
than the performance of its obligations under this Agreement, without
the prior written consent of Novation;
(3) not disclose the Confidential Information to any third party
(unless required by law) without the prior written consent of
Novation; and
(4) not later than thirty (30) days after the expiration or
earlier termination of this Agreement, return to Novation, the Client
or the Participating Member, as the case may be, the Confidential
Information.
b. Definition. "Confidential Information", as used in Subsection 17.a above,
will consist of all information relating to the prices and usage of the Products
(including all information contained in the reports produced by Authorized
Distributor pursuant to Section 7 above) and all documents and other materials
of Novation, the Clients and the Participating Members containing information
relating to the programs of Novation, the Clients or the Participating Members
of a proprietary or sensitive nature not readily available through sources in
the public domain. In no event will Authorized Distributor provide to any person
any information relating to the prices it charges the Participating Members for
Products ordered pursuant to this Agreement without the prior written consent of
Novation.
18. MISCELLANEOUS.
a. Choice of Law. This Agreement will be governed by and construed in accordance
with the internal substantive laws of the State of Texas and the Texas courts
will have jurisdiction over all matters relating to this Agreement; provided,
however, the terms of any agreement between a Participating Member and
Authorized Distributor will be governed by and construed in accordance with the
choice of law and venue provisions set forth in such agreement.
b. Not Responsible. Novation and the Clients and their subsidiaries and
affiliates will not be responsible or liable for any Participating Member's
breach of any purchasing commitment or for any other actions of any
Participating Member. In addition, none of the Clients will be responsible or
liable for the obligations of another Client or its subsidiaries or affiliates
or the obligations of Novation or Authorized Distributor under this Agreement.
c. Third Party Beneficiaries. All Clients and Participating Members are intended
third party beneficiaries of this Agreement. All terms and conditions of this
Agreement which are applicable to the Clients will inure to the benefit of and
be enforceable by the Clients and their respective successors and assigns. All
terms and conditions of this Agreement which are applicable to the Participating
Members will inure to the benefit of and be enforceable by the Participating
Members and their respective successors and assigns.
18
d. Notices. Except as otherwise expressly provided herein, all notices or
other communications required or permitted under this Agreement will be in
writing and will be deemed sufficient when mailed by United States mail, or
delivered in person to the party to which it is to be given, at the address of
such party set forth below:
If to Authorized Distributor:
To the address set forth by Authorized Distributor in the Bid
If to Novation:
Novation
Attn: General Counsel
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇-▇▇▇▇
or to such other address as the party will have furnished in writing in
accordance with the provisions of this Subsection.
e. No Assignment. No assignment of all or any part of this Agreement may be made
without the prior written consent of the other party; except that Novation may
assign its rights and obligations to any affiliate of Novation. Any assignment
of all or any part of this Agreement by either party will not relieve that party
of the responsibility of performing its obligations hereunder to the extent that
such obligations are not satisfied in full by the assignee. This Agreement will
be binding upon and inure to the benefit of the parties' respective successors
and assigns.
f. Severability. Whenever possible, each provision of this Agreement will be
interpreted in such a manner as to be effective and valid under applicable law,
but if any provision of this Agreement will be prohibited by or invalid under
applicable law, such provision will be ineffective to the extent of such
prohibition or invalidity without invalidating the remainder of such provision
or the remaining provisions of this Agreement. Each party will, at its own
expense, take such action as is reasonably necessary to defend the validity and
enforceability of this Agreement and will cooperate with the other party as is
reasonably necessary in such defense.
g. Entire Agreement. This Agreement, together with the exhibits listed below,
will constitute the entire agreement between Novation and Authorized
Distributor. This Agreement, together with the exhibits listed below and each
Participating Member's purchase order will constitute the entire agreement
between each Participating Member and Authorized Distributor. In the event of
any inconsistency between this Agreement and a Participating Member's purchase
order, the terms of this Agreement will control. No other terms and conditions
in any document, acceptance, or acknowledgment will be effective or binding
unless expressly agreed to in writing. The following exhibits are incorporated
by reference in this Agreement:
Exhibit A Private Label Products
Exhibit B Contract Products
19
Exhibit C Services
Exhibit D Participating Members
Exhibit E Award Letter
Exhibit F Distribution Fees
Exhibit F-1 Additional Distribution Service Fee Menu and Definitions
Exhibit F-2 Medical Surgical Alternate Site Distribution
Exhibit F-3 System / Network Pricing
Exhibit F-4 Customized Distribution Solutions
Exhibit F-5 Payment Terms
Exhibit F-6 Fees for Other (Value-Added) Services
Exhibit F-7 Services for Alaska and Hawaii
Exhibit G Costs
Exhibit H Price Changes
Exhibit H-1 Initial Implementation
Exhibit I Non-Price Specifications
Exhibit J Product Delivery
Exhibit K Invoices
Exhibit L Primary Ordering Locations
Exhibit M Computer-Based System Requirements
Exhibit N Confirmation of Orders
Exhibit O Product Fill Rates
Exhibit P Product Stocking
Exhibit Q Physical Inventory
Exhibit R Product Return
Exhibit S Disaster Plan
Exhibit T Additional Requirements
Exhibit T-1 NOVAPLUS(TM)Pricing Policy and Protocol
Exhibit T-2 NOVAPLUS(TM)H.E.L.P. Form
Exhibit T-3 NOVAPLUS(TM)Stocking Request Form
Exhibit T-4 Consolidated Logistics Center Specifications
Exhibit U Additional Remedies
Exhibit V Additional Reporting Information
20
Exhibit W Reports to Participating Members
Exhibit X Additional Information Requirements
Exhibit Y Marketing Fees
Exhibit Y-1 Products on which Authorized Distributor Pays No
Marketing Fee
Exhibit Z Service Damages
Schedule 1 Authorized Distributor Selection / Change Form
Schedule 2 Distribution Fee Calculation Form
Schedule 3 Participating Members Verification of "A Item List
AUTHORIZED
DISTRIBUTOR:
--------------------------------------------------------
ADDRESS:
--------------------------------------------------------
--------------------------------------------------------
SIGNATURE:
--------------------------------------------------------
TITLE: DATE:
------------------------------ -------------------
21
Exhibit A
Private Label Products
All NOVAPLUS(TM)items (List to be provided by Novation upon Agreement
implementation)
22
Exhibit B
Contract Products
To be supplied by Novation upon bid award.
23
Exhibit C
Services
1. Base Services Available from Authorized Distributor. All services listed in
this Section shall be provided to Participating Members for the cost-plus
fee applicable from the Distribution Service Fee Volume Matrix in Exhibit
F. Exhibit F provides a Base Distribution Service Fee Volume Matrix which
determines a Participating Member's Base Distribution Service Fee for the
base services provided by its Authorized Distributor. Participating Members
may elect to have Base Distribution Service Fees billed separately or
included in the Price of the product. Authorized Distributor shall offer
additional services in accordance with Exhibit F-1. Additional service fees
stated, as a percent [*]. Distribution Service Fees for additional services
shall equal the actual cost of the service, provided Authorized Distributor
is capable of calculating actual cost. Otherwise, fees for additional
services will be determined in accordance with Exhibit F-1. The "Price" of
the product is determined by the definition of Cost as set forth in this
Agreement, Exhibit G, adjusted to reflect all credits, discounts, rebates,
returns, allowances and other adjustments granted by the Authorized
Distributor plus Cost multiplied by the applicable Base Distribution
Service Fee from Exhibit F. Volume to determine the Base Distribution
Service Fee is determined by the actual three-month purchase history of the
Participating Member from the Authorized Distributor, for the preceding
three months. Volume will be recalculated on a semiannual basis and, at the
Participating Member's election, the Base Distribution Service Fee will be
adjusted or the Participating Member will receive a credit in an amount
equal to the actual Base Distribution Service Fee and the billed Base
Distribution Service Fee for the next six (6) month period. There will be
no retroactive credit due Participating Member for the period being
reviewed.
Novation and/or Authorized Distributor may request reasonable
substantiation of purchase figures provided by any Participating Member.
Any Participating Member which fails or refuses to provide accurate
information in a timely manner as to its total volume of distributed
purchases shall be charged a Distribution Service Fee based on the smallest
volume distribution service fee.
2. Other Services Available from Authorized Distributor. The services listed
in this Section shall be available from Authorized Distributor at an
additional charge to the Participating Member in accordance with Exhibit
F-1.
A) JIT Program. Authorized Distributor shall offer Just-in-Time ("JIT")
delivery services upon request. JIT services shall include frequent
deliveries in cases or boxes; whatever is Vendor's standard unit of
packaging. JIT service fees are outlined in Exhibit F-1.
*[This confidential information has been omitted and filed separately with
the Commission.]
24
B) Stockless/▇▇▇ (Lowest Unit of Measure). Authorized Distributor shall
offer stockless/▇▇▇ services upon request. At a minimum, such
services shall include the ability to provide: frequent delivery to
meet agreed upon stocking levels, delivery in the lowest unit of
measure, pick and pack by area of use and delivery to area of use and
put stock away. Stockless/▇▇▇ services shall be provided with a fill
or kill calculation with
C) an approved substitution list as provided by the Participating
Member. Stockless service fees are outlined in Exhibit F-1.
D) Emergency Deliveries. Authorized Distributor shall have emergency
delivery services available twenty-four (24) hours a day, seven (7)
days a week. Authorized Distributor may charge [*] for providing
product by emergency deliveries.
E) Bar Coding. Authorized Distributor shall provide Bar Coding labels
to Participating Members upon request. Authorized Distributor may
charge [*] in providing bar coding labels.
F) Other Services. Exhibit F-1 details certain listed Authorized
Distributor services available and the charge structure, if any
associated with those services. Authorized Distributor and each
Participating Member may negotiate additional services as requested by
the Participating Member.
G) Selection and Change of Additional Services. Participating Members
shall identify additional services selected in accordance with Exhibit
F-1, and Participating Members may change additional services selected
in accordance with Exhibit F-1 at any time during the term of the
Agreement by notifying Authorized Distributor and Novation.
H) Customized Packing Slips and Invoices. Authorized Distributor shall
provide customized packing slips and invoices consistent with
Participating Member requirements in accordance with Exhibit F-1.
I) Customized Pallet Design. Authorized Distributor shall assist in
pallet design and arrangement and shall deliver goods in accordance
with such pallet design upon request of Participating Members as
defined in Exhibit F-1.
3. Authorized Distributor Representative. Each Authorized Distributor will
provide each Participating Member assigned to them with an Authorized
Distributor Representative. Authorized Distributor Representative will be
responsible for the following activities at each assigned Participating
Member:
*[This confidential information has been omitted and filed separately with
the Commission.]
25
A) Visit on at least monthly basis or at the frequency requested by
the Participating Member
B) Address and be empowered to solve the
following:
- Fill Rate Issues
- Invoice Accuracy
- Pricing issues
- Product stocking issues
- Scheduling issues
- DSO issues (Accounts Payable / Receivable issues)
- EOE issues
- EDI issues
- Contract / data file accuracy
- Delivery issues
- Review of backorder report
- Review of product return statues
- Monthly dollar per line ordered average issues
C) Review all sales data
D) Review product usage and "A" Items list
E) Assist with and suggest pre-approved substitute products for "A"
Items
F) Assist with customized distribution solutions in accordance
with Exhibit F-4
G) Logistical needs of the HCO
H) Product acquisition mix
I) Maximizing the value of the incentives offered under Exhibit F
J) Support HCO's initiatives for achieving the lowest total delivered
cost of product and services
4. Customer Service Representative. Authorized Distributor shall provide a
customer service representative during the hours specified in Exhibit C,
Section 6. The customer service representative should be familiar with the
Participating Member's account and shall, at a minimum, be able to assist
Participating Members with
A) Order placement and status of pending orders
B) Status and resolution of backorders
C) Status of all pertinent account information, including DSO
D) Suggested substitutions for backordered products.
E) Resolution of delivery issues
F) Expediting orders
G) Notification of potential backorders.
H) Participating Members usage of electronic order entry
5. Quarterly Business Review. Once each calendar quarter, Authorized Distributor
shall meet with Participating Member to discuss, at a minimum, the following
issues:
A) Review prior quarter's sales by:
1) Contract
2) NOVAPLUS(TM)
26
3) Noncontract
4) HUB Contract Sales
5) HUB Noncontract Sales
6) Low Velocity Manufacturer and SKUs
B) Review prior quarter's activity for:
1) EOE
2) EDI: 810, 832
3) DSO
4) Monthly Line Average Dollar Amount
C) Review prior quarter's service levels:
1) Fill Rates:
- "A" Items
- Overall Fill Rate
2) Invoice Accuracy
3) Pricing Errors
4) Return Goods
5) Product usage and stocking levels for "A" Items
6) Delivery issues, i.e. pallet configuration
D) Opportunity for Standardization and Utilization
E) OpportUNITY (R) Program Products and Manufacturer Utilization
Authorized Distributor shall notify the Novation Account Manager
of a scheduled quarterly business review at least 30-days prior to the
review. Authorized Distributor shall maintain a record of when each
quarterly business review was conducted at each Participating Member
and such record shall be readily available for Novation review upon
request.
6. Hours of Operation. Authorized Distributor shall staff the Primary Ordering
Location customer service function each business day continuously from
at least 7:00 a.m. through 6:00 p.m., local time. In case of an emergency,
Participating Members can call the Primary Ordering Location. Authorized
Distributor will provide a list of emergency telephone numbers at the
Primary Ordering Location for after-hours contact.
7. Information Services Representative. Authorized Distributor shall provide
each Participating Member with an Information Services Representative. Such
representative shall be able to assist Participating Members with resolution
of EDI issues.
27
Exhibit D
Participating Members
To be attached after completion of the Authorized Distributor selection process.
28
Exhibit E
Award Letter
To be completed upon bid award.
29
Exhibit F
Distribution Fees
-------------------------------------------------------------------------------------------------------------------
Monthly Volume Gross Fee for Weekly Deliveries Line Average [*]EOE Net Fee for
Distribution Incentive Incentive Distribution
Services Services
-------------------------------------------------------------------------------------------------------------------
$0 - 7,500 [*] 1 Delivery per week [*] [*] [*]
-------------------------------------------------------------------------------------------------------------------
$7,501 - 25,000 [*] 1 Delivery per week [*] [*] [*]
-------------------------------------------------------------------------------------------------------------------
$25,001 - 75,000 [*] 2 Deliveries per week [*] [*] [*]
-------------------------------------------------------------------------------------------------------------------
$75,001 - 150,000 [*] 2 Deliveries per week [*] [*] [*]
-------------------------------------------------------------------------------------------------------------------
$150,001 - 250,000 [*] 2 Deliveries per week [*] [*] [*]
-------------------------------------------------------------------------------------------------------------------
$250,001 - 400,000 [*] 2 Deliveries per week [*] [*] [*]
-------------------------------------------------------------------------------------------------------------------
$400,001 - 600,000 [*] 3 Deliveries per week [*] [*] [*]
-------------------------------------------------------------------------------------------------------------------
$600,001 - 800,000 [*] 4 Deliveries per week [*] [*] [*]
-------------------------------------------------------------------------------------------------------------------
$800,001-1,100,000 [*] 4 Deliveries per week [*] [*] [*]
-------------------------------------------------------------------------------------------------------------------
$1,100,001-1,500,000 [*] 5 Deliveries per week [*] [*] [*]
-------------------------------------------------------------------------------------------------------------------
greater than $1,500,000 [*] 5 Deliveries per week [*] [*] [*]
-------------------------------------------------------------------------------------------------------------------
Qualifiers: Base Bulk - Delivery to Dock in Manufacturer's Case Shipment
1) Initial Monthly Volume is determined by previous quarter's actual purchases
and reviewed semiannually thereafter
2) To qualify for EOE incentives, HCO must be [*] EOE for past quarter's
activity and reviewed semiannually thereafter
3) EOE is calculated by dividing the lines ordered initially electronically
by the total lines ordered and shall be measured each calendar quarter.
4) DSO is an add on based on past quarter's activity and reviewed semiannually
thereafter
5) All additional services are based on fees on Schedule F-1, Distribution
Service Fee Menu & Definitions
6) Line incentive is calculated by dividing the total monthly dollar volume
by the total number of lines shipped for month, reviewed semiannually
7) Exhibit F shall be used for all acute care facilities and stand-alone
ambulatory surgery centers.
*[This confidential information has been omitted and filed separately with
the Commission.]
30
Exhibit F-1
Additional Distribution Service Fee Menu and Definitions
-------------------------------------------------------------------------------------------------------------
Distribution Services Distribution Service Fee
-------------------------------------------------------------------------------------------------------------
1) Customized Invoices [*]
-------------------------------------------------------------------------------------------------------------
2) Customized Packing Slip [*]
-------------------------------------------------------------------------------------------------------------
3) Combined Packing Slip and Invoice [*]
-------------------------------------------------------------------------------------------------------------
4) Custom Pallet Architecture - Basic [*]
-------------------------------------------------------------------------------------------------------------
5) Custom Pallet Architecture - Expanded [*]
-------------------------------------------------------------------------------------------------------------
6) Add Delivery Monthly volume of
individual
facility
-------------------------------------------------------------------------------------------------------------
$0-75,000 [*]
-------------------------------------------------------------------------------------------------------------
$75,001-250,000 [*]
-------------------------------------------------------------------------------------------------------------
$250,000 and over [*]
-------------------------------------------------------------------------------------------------------------
7) Bulk Picked By Department Delivered to Dock 1-3 depts. [*]
-------------------------------------------------------------------------------------------------------------
4-10 depts. [*]
-------------------------------------------------------------------------------------------------------------
11-15 depts. [*]
-------------------------------------------------------------------------------------------------------------
16 greater than depts. [*]
-------------------------------------------------------------------------------------------------------------
8) Bulk Break to Manufacturer Next Packing Unit (if not usually broken down) [*]
-------------------------------------------------------------------------------------------------------------
9) ▇▇▇ Picked by Department Delivered to Dock* [*]
-------------------------------------------------------------------------------------------------------------
10) ▇▇▇ Picked by Department Delivered to Department* [*]
-------------------------------------------------------------------------------------------------------------
11) ▇▇▇ Picked by Department Put Stock Away* [*]
-------------------------------------------------------------------------------------------------------------
12) Affix Patient Label [*]
-------------------------------------------------------------------------------------------------------------
13) Bar Codes [*]
-------------------------------------------------------------------------------------------------------------
14) Emergency Deliveries [*]
-------------------------------------------------------------------------------------------------------------
15) Deliveries over 175 miles [*]
-------------------------------------------------------------------------------------------------------------
3) All Distribution Service Fees are additive to the effected activity.
3) * Distribution Service Fees # 9, 10 & 11 are compounded (additive).
3) Definition of all Distribution Services on Exhibit F-1 are with this
Schedule.
*[This confidential information has been omitted and filed separately with
the Commission.]
31
SERVICE DEFINITIONS:
1) Centralized Billing:
A health-care system is considered to have centralized billing if all
material products and services fees associated with each entity (i.e.,
HCO) of the system are applied to one "▇▇▇▇-to" number and all invoice
activity conducted by the supporting Authorized Distributor is
forwarded to one central accounting address location. Additionally,
payments are forwarded to the Authorized Distributor in a manner that
may reflect individual sub "▇▇▇▇-to" (HCO) purchase activity, but can
be processed against the one system wide "▇▇▇▇-to" number.
2) Centralized Ordering:
A health-care system is considered to have centralized ordering if all
product activity for each member HCO in the system is ultimately
consolidated through, as is often the case, one information system
collection point. This action occurs before any individual facility
purchase activity is forwarded to the Authorized Distributor in the
form of a purchase order. Although ordering activity at the individual
HCOs may take place on various MIS systems, all purchase activity is
funneled into one primary system prior to being released to the
Authorized Distributor.
3) Centralized Delivery Point:
A Participating Member is deemed to have one centralized delivery point
if all products on any given delivery are dropped off at one physical
location.
4) Customized Invoice:
An invoice is considered to be customized by the Authorized Distributor
when the creation of the invoice requires the Authorized Distributor to
perform actions other than what is considered standard operating
procedure (SOP) in the generation, delivery and/or processing of the
original invoice. An invoice is also considered to be customized when
any additional documentation that is not part of the Authorized
Distributor's SOP requirement must be created to accompany the invoice
for delivery to the HCO or health-care system. Traditionally, one
standard purchase order received from the customer will automatically
create one standard invoice. Additionally, any customization required
may necessitate an information system change/enhancement on the part of
the Authorized Distributor. Any changes to Authorized Distributor's SOP
during the term of this Agreement must be approved by Novation.
5) Customized Packing Slip:
A packing slip is considered to be customized by the Authorized
Distributor when the creation of the packing slip requires the
32
Authorized Distributor to perform actions other than what is considered
standard operating procedure (SOP) in the generation and/or delivery of
the packing slip created from an original purchase order. A packing
slip is also considered to be customized when any additional
documentation that is not part of the Authorized Distributor's SOP
requirement must be created to accompany the packing slip for delivery
to the HCO or health-care system. Traditionally, one standard purchase
order received from the customer will automatically create one standard
packing slip. Any changes to Authorized Distributor's SOP during the
term of this Agreement must be approved by Novation.
6) Customized Packing Slip and Invoice:
Combination of 4 and 5 above.
7) Extra Deliveries:
Participating Members' deliveries are included in their base cost-plus
price based on Exhibit F. All additional deliveries are added to the
base cost-plus price and priced according to the Service Fee Menu.
8) Bulk Picked by Department, Delivered to Dock:
Participating Members segment their orders by their departments, but
the product remains in the original manufacturer's case pack or normal
Authorized Distributor shipping quantity and is delivered to the
organization's dock.
9) ▇▇▇ Picked by Department, Delivered to Dock:
Same as bulk definition, but the product is broken into lowest unit of
measure from the manufacturer's original case pack.
10) ▇▇▇ Picked by Department, Delivered to Department:
Same as 9), but the Participating Member's Authorized Distributor
delivers the ▇▇▇ product directly to the VHA OR UHC organization's
department area.
11) ▇▇▇ Picked by Department, Put Stock Away:
Same as 8), but the Participating Member's Authorized Distributor
delivers the ▇▇▇ product directly to the Participating Members'
department area and actually puts the product away.
12) Affix Patient Charge Labels:
Covers the cost of the label and the labor to affix the patient charge
label to the product.
33
13) Bar-Coded Shelf Labels:
Authorized Distributor creates the bar-coded shelf label and provides
them to the Participating Member for use in central stores, warehouses
and departments.
14) Emergency Delivery:
Any delivery after normal business hours, or a delivery that requires
special attention such as use of a courier service, etc.
15) Line Incentive:
Monthly dollar average of lines ordered. Participating Member will be
eligible for incentive if for the previous quarter the lines ordered
average the amount indicated on Exhibit F.
16) Custom Pallet Architecture-Basic:
o items separated on pallet by purchase order
o items arranged in purchase order input sequence
17) Custom Pallet Architecture-Expanded:
o items palletized in reverse storeroom location
o separate pallet for nonstock items
o separate pallet for stock items
o pallet clearly marked with description and internal routing
information
The following services are provided free of charge and are not included
in custom pallet architecture:
o box/case labels facing out on pallet
o shrink-wrapped pallets
o pallets arranged to meet health-care organization weight and/or
dimension requirements
34
Exhibit F-2
Medical Surgical Alternate Site Distribution
Price Matrix
Physician Participants
--------------------------------------------------------------------------
Monthly Volume Monthly Volume Monthly Volume
--------------------------------------------------------------------------
$0 - $2,000 $2,001- $8,000 $8,000+
--------------------------------------------------------------------------
Cost Plus [*] [*] [*]
--------------------------------------------------------------------------
NOTES:
o Matrix applies to owned/controlled alternate site facilities credentialed
into VHA or UHC membership or VHA LaurusHealth Services participants.
o To avoid two costs in the Health Care Organization information system, the
difference in cost-plus between an acute care slot and care continuum slot
can be applied as a service charge to all care continuum sales.
o Delivery to dock, one shipment per week.
Home Care - Long-Term Care
-------------------------------------------------------------------------------
Monthly Volume Monthly Volume Monthly Volume Monthly Volume
-------------------------------------------------------------------------------
$0-9,999 $10,000-24,999 $25,000-39,999 $40,000+
-------------------------------------------------------------------------------
Cost Plus [*] [*] [*] [*]
-------------------------------------------------------------------------------
NOTES:
o Monthly purchase volumes will be combined for all sites utilizing a central
ordering, billing, selling and shipping point.
o Delivery to dock, two deliveries per week, standard.
o Matrix applies to owned/controlled alternate site facilities credentialed
into VHA or UHC member (other health care provider).
o To avoid two costs in the HCO information system, the difference in
cost-plus between an acute care slot and care continuum slot can be applied
as a service charge to all care continuum sales.
*[This confidential information has been omitted and filed separately with
the Commission.]
35
Exhibit F-3
System / Network Pricing
Participating Members shall be deemed to be part of a system or network if they
meet either of the following criteria:
1. Are listed in VHA or UHC membership as part of a system or network under
one "parent" member AND are owned, managed, controlled, or leased by
"parent" member
2. Have joined together with other Participating Members in local or regional
effort to reduce supply chain costs through standardization. Examples of
this might include consolidated logistics centers, local integrated
delivery systems (LIDS) or "Pods". Eligibility under this criterion will be
determined by Novation.
Pricing for systems / networks will be determined as below:
A. The following system and network price scenario is for acute-care-only
systems and networks. Systems cannot add their other health-care provider
sites' volume into the pricing equation.
1. If Participating Members form a system / network, and the Participating
Members provide one centralized ordering process, one centralized
billing process and one centralized delivery point the Participating
Members may combine their dollar volume and be slotted according to its
actual combined volume.
Pricing will be determined by using Exhibit F, Distribution Fees
Matrix. Additional services will be applied according to Exhibit F-1,
Additional Distribution Service Fee Menu and Definitions.
2. If Participating Members form a system / network and do not meet the
above criteria, the Participating Members' distribution fees shall be
determined by the dollar volume of the largest Participating Member
(defined as single ship-to) of the system / network.
Pricing will be determined by using Exhibit F, Distribution Fees
Matrix. Additional services will be applied according to Exhibit F-1,
Additional Distribution Service Fee Menu and Definitions. In cases
where the fees for additional service are volume dependant, the fee
will be determined using the individual volume.
3. The number of deliveries for each Participating Member of a system /
network shall be determined according to the individual volume of the
Participating Member. The number of deliveries will be determined using
Exhibit F, Distribution Fees Matrix.
36
B. The following are definitions of the criteria necessary for accessing
integrated delivery system pricing for acute and non-acute sites.
1. If Participating Members form a system/network, utilize one Authorized
Distributor for the entire system/network and provide one centralized
ordering process, one centralized billing process and one centralized
delivery point the Participating Members may combine their dollar
volume (acute and non-acute) and be slotted according to its actual
combined volume.
Pricing will be determined by using Exhibit F, Distribution Fees
Matrix. Additional services for all sites of care will be applied
according to Exhibit F-1, Additional Distribution Service Fee
Menu and Definitions. In cases where the fees for additional
service are volume dependant, the fee will be determined using the
individual volume.
2. If Participating Members form a system / network and do not meet the
above criteria, the Participating Members' distribution fees for each
class of trade shall be determined by the dollar volume of the largest
Participating Member of the system / network in each class of trade.
Participating Members must use one Authorized Distributor for entire
system/network, or one Authorized Distributor for all acute care sites
and one Authorized Distributor for non-acute care sites, to utilize
this pricing option.
Pricing will be determined by using Exhibit F, Distribution Fees Matrix
and Exhibit F-2, Care Continuum Distribution Fees Matrix. Additional
services for all sites of care will be applied according to Exhibit
F-1, Additional Distribution Service Fee Menu and Definitions, with the
exception of deliveries to the non-acute sites of care, where the
actual cost of delivery will be applied.
37
Exhibit F-4
Customized Distribution Solutions
1. For VHA and UHC members that need to develop a different type of
relationship with their Authorized Distributor, the Participating Member,
Authorized Distributor and Novation will work together to develop the
relationship outside of the existing matrix concept. Examples of this are
Fee-For-Service, Activity Based Costing, Cost Management programs. No
Authorized Distributor can enter into an off-matrix program pursuant to
this Agreement without prior approval from Novation. Programs that do not
bring additional value to Participating Members, or that are not market
competitive as defined in this Agreement, or that disadvantage Novation
contracts, NOVAPLUS(TM)or Novation OpportUNITY(R) products or programs are
not permitted under this schedule and/or Agreement. Marketing fees to
Novation for any off-matrix program other than O&M's CostTrack program,
agreed to by Novation, the member(s) and Authorized Distributor may not be
subject to Exhibit Y.
2. Authorized Distributors who receive a request for proposal or other such
request from a Participating Member requesting a customized distribution
solution shall notify Novation of such request immediately upon receipt of
such request provided the Participating Member issuing the request for
proposal or other such request for customized distribution solutions has
not prohibited Authorized Distributor from discussing with Novation or any
other outside agencies under terms of confidentiality. Notification shall
be to Novation's director of medical surgical distribution or his / her
designee. Authorized Distributor shall discuss with Novation any response
to such member request covered by the terms of this Agreement prior to
response to the Participating Member subject to the foregoing proviso.
38
Exhibit F-5
Payment Terms
(No Exceptions)
Each Participating Member shall select from the following payment options (all
deductions or additions are made to the Base Distribution Service Fee on the
price matrix for that Participating Member):
_______ 15-day prepay: [*] credit
_______ Net 0 days: [*] credit
_______ Standard terms:
[*] purchases due [*] of same month
[*] purchases due [*] of following month
_______ Net 30 days: Add [*]
_______ Net 45 days: Add [*]
_______ Net 60 days: Add [*]
_______ Over 60 days:
Add additional [*] for each 15 days beyond 60 days
All invoice terms run from the date of invoice. Credit for prepay shall
be no more than the percent of the amount on deposit with Authorized
Distributor, not the percent of the total monthly/quarterly purchases.
Taxes, where applicable, will be added to the invoice price of
products.
No Participating Member can be put on credit hold by their Authorized
Distributor without the Authorized Distributor notifying the Participating
Member and Novation in writing fifteen (15) days prior to credit hold. Novation
and the Authorized Distributor will work collectively to remedy the issue with
the Participating Member prior to loss of credit privileges. If credit
privileges are rescinded to the Participating Member, then the Participating
Member is entitled to continue to purchase their products and services from the
Authorized Distributor on a C.O.D. basis.
The Days Sales Outstanding (DSO) for a Participating Member is equal to
the receivable balance of the Participating Member divided by the Average Daily
Sales of the Participating Member:
DSO = Receivables / Average Daily Sales
Average Daily Sales (ADS) of a Participating Member is calculated as the Annual
Sales of the Participating Member divided by 360 days.
ADS = Annual Sales / 360
*[This confidential information has been omitted and filed separately with
the Commission.]
39
Therefore, DSO is calculated as
DSO = Receivables / (Annual Sales / 360)
DSO is reviewed semiannually, and all adjustments to the Base
Distribution Service Fee will be made only on a semiannual basis. The DSO will
be determined by the previous quarter's average DSO, excluding any disputed
portions of invoices noted by the Participating Member as in discrepancy. No
Participating Members will be charged a higher cost-plus for DSO due to invoices
that are in dispute. All invoice disputes need to be reported by Participating
Member to the Authorized Distributor within thirty (30) business days of receipt
of the invoice. Disputed invoices on which Participating Member notified
Authorized Distributor of item(s) in dispute are not subject to late fees or
penalties during the resolution of the dispute. At resolution of dispute, late
fees or penalties applicable may be applied if Participating Member was not
justified in disputing item(s) on invoice.
A service charge may be added by the Authorized Distributor to the
Participating Member's monthly outstanding balance of the lesser of 1.5% (18%
annually) or the maximum legally allowable rate by local law, on all invoices
not paid within the agreed-upon payment terms.
40
Exhibit F-6
Fees for Other (Value Added) Services.
Fees for Value Added Services requested by a member, and not specifically listed
within the language of this agreement, it's exhibits or attachments, shall be
locally negotiated between the member and Authorized Distributor and Novation.
41
Exhibit F-7
Services for Alaska and Hawaii
Bidder to describe any modifications to bid (including terms / conditions and
pricing) for service in Alaska and Hawaii.
In order to service Alaska, Hawaii and Puerto Rico, Authorized Distributor will
impose the contract terms of the pricing proposal plus actual freight. The
following divisions will service the areas in question:
Alaska - Seattle Division
Hawaii - Los Angeles Division
Puerto Rico - Fort Lauderdale Division
42
Exhibit G
(No Exceptions)
Definition of "Cost"
1. "Cost" refers to the lowest of (a) (in the case of a Contract Product) the
amount provided in the applicable Purchasing Agreement as the price to be
billed to the Designated Members without subtraction for cash discounts
allowed by Vendors for prompt payment and prior to the addition of any
distribution service fees, (b) Authorized Distributor's out-of-pocket
expense in obtaining the product, including actual inbound freight charges
not paid or credited by manufacturer and actually paid by Authorized
Distributor not reflected on invoices from manufacturers, distributors or
others or (c) the net distributor cost of any product pursuant to any
agreement between the Designated Member and the vendor of such products. In
addition to the foregoing, Cost for any product may be increased by the
amount equal to the decrease in prompt payment or cash payment discount
terms during the term of a Purchasing Agreement offered by a manufacturer
and actually taken on a consistent basis by Authorized Distributor. This
definition of cost shall apply to all products, regardless of any existing
or future relationship between Authorized Distributor and any Contract or
Noncontract manufacturer.
2. Freight: Authorized Distributor is required to forward to Participating
Member a list of manufacturers that charge freight (as allowed in section 1
above) and how that freight charge will be handled by Authorized
Distributor. Authorized Distributor can, if the information is available,
put the exact amount of the freight charge impacting a particular
Participating Member or determine a freight factor for each manufacturer
that charges freight that will be passed onto the Participating Member.
Authorized Distributor may not charge freight to Participating Members
unless Authorized Distributor has supplied the list of manufacturers that
charge freight to Participating Member in advance.
43
Exhibit H
Price Changes
a. Distribution Fees (Markup). The distribution fees (markups) as listed in
Exhibit F shall remain firm for the duration of this Agreement.
b. Ongoing Management. Novation shall manage the key elements of the program
on an ongoing basis. Specifically, Novation will conduct semiannual reviews
of the following elements:
o Each Participating Member's purchase volume and its effect
of the organization's base distribution service fee.
o Each Participating Member's usage of electronic order entry
and eligibility for the incentive
o Each Participating Member's line average incentive and eligibility
for the incentive
o Each Participating Member's DSO and the impact upon the
organization's base distribution service fee
o Each Participating Member's use of additional services and
the associated fees being charged
Novation will semiannually review and determine any changes to each
Participating Member's Schedule 2. Any changes will be sent to both the
Participating Member and Authorized Distributor for review.
If the Participating Member or Authorized Distributor submits no further
changes, the changes initiated by Novation shall go into effect thirty (30)
days after notification by Novation. If the Participating Member or
Authorized Distributor make revisions to the Schedule 2 sent by Novation,
and all three parties accept the revisions, Novation will adjust the
Schedule 2 and send it again by overnight courier to the Participating
Member and Authorized Distributor. These revisions will go into effect 30
days after the second notification from Novation.
No credits will be issued for positive or changed behavior that affects a
Participating Member's distribution service fees. If a Participating
Member's positive performance or behavior changes have reduced its base
distribution service fee, the Participating Member has two options
following a semiannual review period:
o Both the Participating Member and Authorized Distributor can
change their ordering systems to reflect the member's new
distribution service fees.
o The Participating Member can choose to receive a credit for the
difference between the old base distribution service fee and the
new base distribution fee for the next semiannual review period.
For Participating Members whose negative behavior has caused their base
distribution service fees to rise, both the Participating Member and
Authorized Distributor will change their systems to reflect the new higher
fees.
44
Participating Members may elect to change any additional distribution
services utilized (as per Exhibit F-1) at any time during this Agreement.
Changes in distribution fees (markup) as a result of changes in additional
distribution services utilized will be implemented immediately upon the
implementation of the change in services utilized and will not have to wait
for a semiannual review period. Participating Members requesting such a
change shall notify Authorized Distributor who shall notify Novation of
such request. Novation will revise the Participating Member's Schedule 2
and send the revised schedule to the Participating Member and Authorized
Distributor.
Authorized Distributor shall not change a member's distribution service
fees without prior consent from Novation.
Beginning with the end of the second six months of calendar year 2000 and
for each 6 months thereafter for the term of this Agreement Novation shall
conduct review periods according to the following schedule:
------------------------------------------------------------------------
Activity Period Review Period Revised Pricing Effective
------------------------------------------------------------------------
1/1-6/30 7/15-8/31 10/1
------------------------------------------------------------------------
7/1-12/31 1/15-2/28 4/1
------------------------------------------------------------------------
c. Notification of Member Price Changes: Authorized Distributor shall provide
participating members with thirty (30) day advance price change
notification for all Novation contract manufacturers and all other
manufacturers where the Authorized Distributor receives a minimum of
forty-five (45) day advance price / contract change notification. In any
event, Authorized Distributor shall load all manufacturer pricing within
fifteen 15 days of notification from said manufacturer. In the event
Authorized Distributor does not receive a minimum forty five (45) day price
change notification from a non-contract manufacturer and therefore cannot
provide thirty (30) day notification to the Participating Member,
Authorized Distributor shall give Participating Member as much advance
notice of said price change as possible, in any event, no later than
fifteen (15) days after receiving manufacturer notification. Price change
notification shall be on a line item specific basis (price catalog) as per
section 2E of the Agreement.
45
Exhibit H-1
Initial Implementation
1. Novation will send to each Participating Member a letter indicating the
terms of the Novation Medical Surgical Distribution Agreement that are
being implemented.
2. The letter will include a Novation Medical Surgical Distribution Agreement
Launch Package that will provide the details of the Agreement. Also
Included will be Schedule 1, Participating Member Authorized Distributor
Selection Form and Schedule 2, Participating Member Distribution Service
Fee Calculation Form.
3. Each Participating Member is to review all of the information provided
in steps 1 and 2 above and completely fill out Schedule 1 and Schedule 2.
4. Each Participating Member will mail or fax back Schedule 1 and Schedule 2
to Novation Medical Surgical Distribution, ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇-▇▇▇▇ or (▇▇▇) ▇▇▇-▇▇▇▇.
5. All data needs to be received by Novation at least 30-days prior to
Agreement implementation.
46
Exhibit I
Non-Price Specifications
The term of this Agreement shall be for a period of three (3) years with two (2)
optional renewal terms of one (1) year each.
47
Exhibit J
Product Delivery
Each Participating Member will be entitled to the appropriate number of
deliveries as determined by the Base Distribution Service Fee Matrix and
excluding the following holidays: New Year's Day, Memorial Day, July 4th, Labor
Day, Thanksgiving and Christmas. Holiday exclusions shall not apply to
just-in-time (JIT) hospitals unless mutually agreed upon by Authorized
Distributor and Participating Member. Each Participating Member may elect to
receive fewer than the number of deliveries available for their volume or buy
additional deliveries at their option. The cost of additional deliveries is
determined in accordance with Exhibit F-1. Authorized Distributor may provide
additional deliveries to Participating Members at no additional cost if doing so
would result in increased efficiency or lower costs for the Authorized
Distributor and Participating Member agrees to accept said additional
deliveries. "Delivery" is the physical delivery to each location specified by
the Participating Member of the products covered by all orders received by
Authorized Distributor prior to the standard order cut-off times.
The delivery of back ordered items (including items delivered through Backorder
Relay) does not constitute an additional delivery; however, Authorized
Distributor shall notify the affected Participating Member as soon as possible
after Authorized Distributor can reasonably anticipate that a delivery will be
made after the scheduled delivery time ("Delivery Time"). Such notification
shall include the anticipated date and time of delivery of the late shipment
("Revised Delivery Time") and the reason for the delay.
In order to minimize the frequency and length of delays, Authorized Distributor
shall establish a secondary delivery system, which shall be used in the event
that the primary delivery method is unavailable.
48
Exhibit K
Invoices
1. Participating Members may select from the four options listed below for the
invoice format in presenting Base Distribution Service Fees from Exhibit F
and Additional Distribution Service Fees from Exhibit F1, if any.
o Option 1 - Base Distribution Service Fees from Exhibit F and additional
services selected from Exhibit F-1 by the Participating Member, if any,
shall be added to Cost and billed as a total Price.
o Option 2 - Base Distribution Service Fees from Exhibit F shall be added
to Cost and billed as a total Price, and any additional service
selected from Exhibit F1 shall be billed as a separate line item, or on
a separate monthly invoice, at Participating Member's option.
o Option 3 - Base Distribution Service Fees from Exhibit F and the
charges for additional services selected from Exhibit F-1, if any,
shall each be billed as a separate line item, provided that Authorized
Distributor and the Participating Member are able to resolve any sales
tax or similar tax issues prescribed by this invoice option.
o Option 4 - Base Distribution Service Fees from Exhibit F and the
charges for additional services selected from Exhibit F-1, if any,
shall be billed as a separate line item, or on a separate monthly
invoice, provided that Authorized Distributor and the Participating
Member are able to resolve any sales tax or similar tax issues
prescribed by this invoice option.
Participating Member is obligated to use for at least one (1) year the
invoice option selected in accordance with Schedule 2. To initiate an
invoice format change, Participating Member must submit a revised Schedule
2, Participating Member Distribution Fee Calculation Form to Novation
Distribution Services and Authorized Distributor.
2. Invoice Reconciliation: Authorized Distributor is required to provide
all documentation necessary to resolve disputed invoices to Participating
Member within 30 days of notification by Participating Member that an
invoice is in dispute.
49
Exhibit L
Primary Ordering Locations
To be supplied by bidder.
50
Exhibit M
Computer-Based System Requirements
Authorized Distributor shall, at its own expense, make available a software
application capable of computer-to-computer on-line transmission (the
"Application") with each Participating Member, Novation Manufacturers and
Novation. The Application will use ANSI X12 EDI where possible. Where EDI is not
possible, Novation and Authorized Distributor must agree in writing to a
proprietary implementation of data transmission. Authorized Distributor shall
use the Application for the term of this Agreement. Authorized Distributor
represents that it has a computerized Automatic Product Substitution system. The
use of Automatic Product Substitutions will be done for individual line item
products upon the request of a Participating Member.
Authorized Distributor shall be fully capable of supporting the
following electronic data interchange (EDI) transaction sets in ANSI X 12
format:
To/From Manufacturer:
--------------------
850 Purchase Order Purchase Order to Supplier
855 PO Acknowledgment Purchase Order Acknowledgment
810 Invoice Supplier Invoice to Authorized
Distributor
844 Rebate Authorized Distributor Rebate Claim
to Supplier Containing Rebatable Sales
867 Sales Tracing/Rebate Distributor Sales to End Users
(rebatable and non-rebatable) for
submission of rebate claims and
marketing information
832 Price Catalog Supplier price catalog to distributor
845 Electronic Contract Notification Supplier contract notification to
distributor
856 Advance Shipment Notification Supplier notification of shipment
contents before delivery to distributor
867/849/810 Link Net Billing Distributor is invoiced at best
distributor cost less the rebate amount
867/852/855/861(CRP) Continuous Replenishment Planning
(CRP) of distributor inventory
820 Electronic Fund Transfer Electronic Fund Transfer
51
To/From the HCO:
---------------
850 Purchase Order
855 PO Acknowledgment
810 Invoice
820 Electronic Funds Transfer
832 Price Catalog
856 Advance Shipment Notification
To Novation:
-----------
867 Sales Tracing/Rebate Distribution Sales to End Users
(rebatable and non-rebatable) for
submission of rebate claims and
marketing information
52
Exhibit N
Confirmation of Orders
Order confirmations must identify items that take exception to the Participating
Members' purchase orders. Exceptions should include, but not be limited to;
price discrepancies and unit of measure or SKU variation and any other deviation
from Participating Members' purchase orders. Such exceptions shall be consistent
with the remainder of this Agreement, including, but not limited to, Section
18g.
53
Exhibit O
Product Fill Rates
Fill Rate. Authorized Distributor shall maintain for each Participating Member
an unadjusted Fill Rate for all "A" Items of [*]. "A" Items are defined as those
items that are stock items and are ordered by the Participating Member at least
twice every thirty (30) days. Authorized Distributor shall maintain an
unadjusted fill rate for all items ordered (overall fill rate) of [*].
The Fill Rate is determined by completed line items filled divided by line items
ordered, first truck.
Authorized Distributor shall maintain a [*] fill rate for all items ordered on a
low unit of measure (▇▇▇), just in time (JIT) basis.
Authorized Distributor will provide each Participating Member within sixty (60)
days of implementation of this Agreement the Participating Member's "A" Items
list, and the Authorized Distributor and Participating Member will mutually
agree to the "A" Items list within ninety (90) days or the implementation of
this Agreement. Authorized Distributor shall review the "A" Items list with
Participating Member no less than quarterly and shall, at Participating Member's
request, review such list with Participating Member on a monthly basis.
Participating Member will approve the first "A" Items list by signing Schedule
3. Authorized Distributor shall not delete any item from the "A" Items list
without prior written consent of Participating Member. Novation will take into
consideration a manufacturer's backorder impact if Authorized Distributor is
unable to meet the [*] unadjusted fill rates on "A" Items or [*] unadjusted on
all items only if manufacturer's backorder is of such nature that Authorized
Distributor under no circumstances can meet the fill rate obligation defined in
this Section.
All fill rates shall not include as items "ordered" in such calculations any
item that is unavailable because of manufacturer backorders or because of any
other reasons beyond Authorized Distributor's control, such as inclement weather
preventing receipt from manufacturer or delivery by Authorized Distributor.
"Beyond Authorized Distributor's control" means verified manufacturer backorders
or shipping delays, customer order errors, inclement weather or natural
disasters preventing delivery, or as in the section on "force majeure", as
listed and defined in this Agreement.
*[This confidential information has been omitted and filed separately with
the Commission.]
54
Exhibit P
Product Stocking
Authorized Distributor shall have the following stocking responsibilities with
respect to Contract Products, NOVAPLUS(TM) Products and Noncontract Products:
Authorized Distributor will maintain sufficient stock of Contract Products,
NOVAPLUS(TM) Products and Noncontract Products to support Participating Members
at the service level set forth in this Agreement.
Authorized Distributor stocking requirements are as follows:
1. Authorized Distributor must stock locally all Contract Products and
NOVAPLUS(TM) Products.
2. Authorized Distributor must stock locally all "A" items ("A" items are
products that are ordered at least two (2) times per month by a
Participating Member.)
3. Authorized Distributor, upon Participating Member's request, will stock
locally any other non-"A" Items that are ordered at least five (5) times
per month per POL (Novation Participating Member or not).
4. If Participating Member chooses not to have product stocked locally and
product is not stocked locally by Authorized Distributor, the Participating
Member can either access these products directly from the manufacturer
through the Authorized Distributor and pay all additional charges (i.e.,
in-bound transportation, drop shipping, etc.) or have Authorized
Distributor ship from another location and Participating Member will pay
transportation charges.
5. Upon request of a Participating Member to add items to stock, Authorized
Distributor will add the items to stock from any vendor which meets
industry standards of good manufacturing practices and has credit
worthiness comparable to other vendors with which the Authorized
Distributor does business, where the Participating Member's usage meets the
demand levels described in Exhibit P Section 2. Within thirty (30) days, or
industry standard lead-time, of receipt of usage data, Authorized
Distributor will have the items in stock and advise the requesting
Participating Member that the items are available at the Primary Ordering
Location. Authorized Distributor may refuse to stock a Noncontract Product.
6. Authorized Distributor will not remove from stock at the Primary Ordering
Location any product being purchased by a Participating Member unless
Authorized Distributor no longer distributes the product. Authorized
Distributor will review its stock on an appropriate basis to identify those
products that have generated sales of less than five (5) transactions per
month. Authorized Distributor may then contact any Participating Member
who was purchasing these products within the last one hundred eighty (180)
calendar days to ascertain continuing need. If no need is expressed,
Authorized Distributor may give written notice to all Participating
Members of Authorized Distributor's intent to remove the items from stock.
If a Participating Member provides Authorized Distributor, within ten
(10) business days after such notice, with the Participating Member usage
estimates in excess of five (5) transactions per month, Authorized
Distributor will maintain the items in stock. If Authorized Distributor
does not receive usage data, Authorized Distributor may discontinue the
items the written notice of intent to remove items from stock shall stand.
55
7. From time to time, Novation may advise Authorized Distributor that
specified Contract Products are to be stocked by Authorized Distributor
exclusively for Participating Members. Authorized Distributor shall use its
best efforts to restrict delivery of such specified Contract Products to
Participating Members, provided Authorized Distributor shall be free to
enter into agreements with any Vendor for distribution of any products,
including products which may be Contract Products under this Agreement.
8. If a Vendor advises Authorized Distributor that specific Contract Products
or Noncontract Products will be available in reduced quantities or will be
allocated, and that, therefore, Authorized Distributor may not be able to
honor all requests for such products, Authorized Distributor will allocate,
based on past purchasing history of the Participating Members, a portion of
such products to Participating Members and shall advise Novation and the
Participating Members of the quantity of products so allocated. Authorized
Distributor agrees that Participating Members shall receive [*] in the
event of limited product availability.
9. Stocking of NOVAPLUS(TM) Products: Authorized Distributor agrees to stock
such amount of NOVAPLUS(TM) Products as Authorized Distributor reasonably
determines is necessary to satisfy the usage requirements of the
Participating Members. Authorized Distributor will provide to Participating
Members for use the NOVAPLUS(TM) Stocking Request Form (Exhibit T-3). Any
individual Participating Member requesting a price change on a NOVAPLUS(TM)
Product shall follow the Pricing Protocol described in Exhibit T-2. All
NOVAPLUS(TM) Products that have a minimum of one transaction per month will
be identified in Authorized Distributor inventory as such and be subject to
appropriate inventory by Authorized Distributor. Authorized Distributor
will use its best efforts to market and promote NOVAPLUS(TM) Products when
such Products meet the needs of a Participating Member.
Notwithstanding the foregoing, Authorized Distributor shall not be required to
have in stock more than forty-five (45) days supply of any product, based on
purchasing history and usage data, unless manufacturing requirements dictate the
purchase and stocking of more than 45 days of inventory. Authorized Distributor
shall suffer no penalties or be considered in default or non-compliance with any
provision under this Agreement in the event a Participating Member orders more
than a forty-five (45) days supply of any product within a fifteen (15) day
period. If a Participating Member chooses not to have any item stocked locally,
pursuant to paragraph 4 above, Authorized Distributor is not liable for any
administrative penalties to Novation or the Clients for the procurement of such
items.
*[This confidential information has been omitted and filed separately with
the Commission.]
56
Exhibit Q
Physical Inventory
Authorized Distributor will give Novation and the Participating Members not less
than forty-five (45) day prior written notice of Authorized Distributor's intent
to perform a physical inventory at the Primary Ordering Location. Authorized
Distributor will accept saleable returns up to ten (10) days prior to such
inventory and, thereafter, Authorized Distributor will continue to authorize
returns, except such returns will be held at the Participating Member until the
first business day after completion of the physical inventory.
57
Exhibit R
Product Return
I. GENERAL
Authorized Distributor will accept, for full credit based on original
delivered cost, Contract and Noncontract Product(s) originally
purchased from Authorized Distributor and returned to Authorized
Distributor in original packaging and in saleable condition within
sixty (60) calendar days of the date delivered by Authorized
Distributor. Authorized Distributor may assess a 25% restocking charge
for returned product(s) which have stickers placed on them, assuming
that the stickers can be removed without compromising the external
packaging or sterility of the item.
Authorized Distributor will accept for return, saleable and Contract
and Noncontract Product(s) after sixty (60) calendar days, subject to a
15% restocking charge.
Authorized Distributor will accept for return, Contract and Noncontract
Product(s) with expired dating or which have been discontinued by the
Vendor, subject to the Vendor's policy . Authorized Distributor will
issue credit for this product based on the amount credited to
Authorized Distributor by the Vendor.
Authorized Distributor shall levy no other restocking or morgue
charges.
Authorized Distributor shall follow Vendor policy for returns in the
event of a product(s) recall. Authorized Distributor will provide each
Participating Member a copy of the Vendor's policy regarding the
recall, if requested.
Authorized Distributor will supply, upon request by Participating
Member, the following:
a) A current list of Vendor addresses for the purpose of
obtaining return goods authorization from the Vendor
b) The names and telephone numbers of the Vendor
representatives able to authorize the return of product by
Participating Member
c) A list of Vendors who levy a restocking charge on returned
product(s) and the amount of that charge
58
II. CREDITS
Authorized Distributor will process Participating Member credits on a
daily basis. All credits should appear on the next statement to
Participating Members, except for credits processed near the end of the
statement period where, because of cutoff dates, the credit will appear
on the following statement.
The Participating Member will receive a copy of the credit memo within
fifteen (15) days after receipt of the return by Authorized
Distributor's Primary Ordering Location.
Authorized Distributor will issue credit, within fifteen (15) days ,
for outdated or discontinued product(s) being recalled by the Vendor.
In the case of a Vendor recall(s), the Vendor must have authorized the
Authorized Distributor to issue credit.
Authorized Distributor will advise Participating Members, by the
fifteenth calendar day of each month, of any credits issued by
Authorized Distributor during the previous month which remain open.
III. FREIGHT CHARGE ON RETURNED GOODS
Authorized Distributor vehicles or other prepaid carriers will pick up
all product returns authorized by the Primary Ordering Location to be
returned.
Any freight charges incurred by Participating Members for product returns
shipped to the Vendor will be based on the Vendor's policies.
IV. RETURN OF SHIPPING ERRORS, OVERAGES AND DAMAGED PRODUCT
Authorized Distributor will authorize, via phone, the return of
product(s) shipped in error. Authorized Distributor will pick up the
product(s) on Authorized Distributor's next scheduled delivery to the
Participating Member. If Authorized Distributor utilizes a common
carrier to serve Participating Members, Authorized Distributor shall
assume the freight charges for the product(s) to be returned to
Authorized Distributor.
59
V. Authorized Distributor WILL NOT ACCEPT RETURNS ON THE FOLLOWING:
a) Any product(s) purchased on a "special order" basis or contrary to
the Vendor's policy;
b) Any sterile product(s) or refrigerants, unless properly protected;
c) Product(s), apparatus or equipment which has been used, or is
without original packaging, labeling or operating manuals;
d) Product(s) with labeling or packaging which is missing, damaged,
defaced or other non-saleable product(s), except as permitted by the
Vendor's policy;
e) Seasonal product(s), except according to Vendor's policy (available
on request);
f) Open bottles and partial packages of product(s) will not be accepted
for return, unless the Vendor has authorized the Authorized
Distributor to accept open bottles and partial packages;
g) Any product(s) purchased direct from the Vendor.
VI. RETURN PROCEDURE
Authorized Distributor will accept Contract and Noncontract Product(s)
returned from Participating Members based on the procedure outlined
herein.
a) To receive authorization for the return of product, Participating
Members shall contact the Authorized Distributor Primary Ordering
Location.
b) Participating Members provide Authorized Distributor with the
following information, if appropriate:
(1) Participating Member name and account number as they appear on
Authorized Distributor's invoice.
(2) Authorized Distributor invoice or order number and date.
(3) The quantity, product number, price paid, form/size,
description. Add lot number, serial number and expiration date
of the product, as appropriate. NOTE: A copy of Authorized
Distributor's invoice or packing slip will provide the required
information, as may the price stickers.
(4) Purchase order number, if applicable.
(5) The reason for return.
c) To assure proper credit and handling, product returns should be
written and packaged for shipment by the type of product being
returned as follows:
(1) Refrigerants
(2) Class II through Class V (items must meet DEA procedures)
(3) Saleable product(s)
(4) Outdated or discontinued product(s)
(5) Damaged product(s)
60
(6) Product(s) recalled by Vendor(s)
d) Authorized Distributor shall issue returned goods authorization
(RGA) and complete shipment of returned goods from Participating
Member within 30 days of Participating Member's initiation of
the return process. Credits will be handled as listed above.
61
VII. NOTIFICATION PROCEDURE
Authorized Distributor agrees to the following notification procedure:
a) Participating Member claims of product shortage, damage or overage,
product(s) with an expiration date earlier than six (6) months and
products delivered in error, will be reported to Authorized Distributor
within five (5) business days from date of delivery; scheduled drugs
will be reported within two (2) business days. No restocking charges
apply.
b) In the event of dispute regarding a delivery damage claim or a
product return not received by Authorized Distributor, a receipt may
be required by Authorized Distributor prior to issuing credit and to
enable Authorized Distributor to file a claim with the carrier.
No hazardous materials will be accepted for return with the exception
of shipping errors and defective merchandise. Opened, leaking or
damaged containers cannot be returned to the Authorized Distributor,
but should be disposed of in accordance with applicable laws and
regulations. To obtain proper credit, contact your Authorized
Distributor Customer Service Representative. Return shipments of
hazardous materials must be packed, marked, labeled and shipped in
accordance with DOT regulations governing the transportation of
hazardous materials.
62
Exhibit S
Authorized Distributor Disaster Plan
Authorized Distributor has submitted this information to Novation.
63
Exhibit T
Additional Requirements
1. Sale of Noncontract Products. Upon request by a Participating Member,
Authorized Distributor may offer to sell and, if any such offer is
accepted, to sell Noncontract Products to the Participating Members.
Participating Members may offer to buy, and if such offer is accepted, may
buy Noncontract Products from Authorized Distributor. In the event such
offers, sales or purchases are made, such offers, sales or purchases shall
be processed by Authorized Distributor in conformity with the provisions of
this Agreement.
2. Backorder Relay. If Authorized Distributor fails to have an "A" Item on
hand at a Primary Ordering Location when the "A" Item is available at an
Alternate Distribution Center, Authorized Distributor shall, at its own
expense, be able to deliver the "A" Item directly to the ordering
Participating Member by way of the Primary Ordering Location or from the
Alternate Distribution Center ("Backorder Relay"), whichever is fastest.
Contract and Noncontract products to be delivered via Back Order Relay
shall be delivered within 24 hours of the first delivery following initial
order placement. Backorder Relay is required only for "A" Items. Authorized
Distributor shall use Backorder Relay upon customer request whenever an
"A" Item is unavailable at a Primary Ordering Location, regardless of the
cause of such unavailability (for example, even if such unavailability is
caused by Vendor's backorder). Authorized Distributor shall use Backorder
Relay whenever one or more line items are unavailable at the Primary
Ordering Location. Authorized Distributor will notify Participating
Members by automatic order entry print back, customer service, sales
representative or other easonable means of a true backorder at the
Primary Ordering Location. Participating Members, at their option, will
select a desired means of resolution that may include product substitution,
maintaining backorder or order item cancellation. Each Participating Member
will also have the option to select a reasonable method of delivery to
meet the individual institution's service requirements. Participating
Members shall not be responsible for any delivery charges where such
Backorder was the responsibility of Authorized Distributor.
3. Backorder Notification Process. Authorized Distributor shall notify
Participating Members as soon as it becomes aware that one or more of the
Participating Member's "A" Items is or will be on backorder pursuant to
this Agreement or will otherwise be unavailable for shipment to
Participating Member. Authorized Distributor shall not wait until
Participating Member orders the "A" Item(s) before notifying the
Participating Member of such product unavailability.
4. Novation Quarterly Business Review. Authorized Distributor corporate staff
shall meet no less frequently than once each calendar quarter with Novation
to discuss Authorized Distributor's performance under this Agreement. This
quarterly business review will also be used to establish performance
targets and goals and to review progress towards such targets and goals.
64
5. Realignment of Supply Channel. Authorized Distributor will support the
efforts of Novation to realign the supply channel through efficient
activity behavior by contract manufacturers, distributors, Participating
Members and Novation. Novation has set standards of performance for the
aforementioned members of the supply channel, and the Authorized
Distributor will be responsible for collaborating with Novation to
determine the best ways for all members of the supply channel to perform in
an efficient manner.
A. Manufacturer. The standards of performance for contract manufacturers
are listed below:
Manufacturer to Authorized Distributor:
Standard Points
1) Cash Discount: 1.0% - 1.5% 3 points
1.6% - 2.0% 5 points
2) EDI:
850 100% 1 point
856 100% 1 point
832 100% 1 point
845/816 100% 1 point
810 100% 1 point
3) Price/Contract Change
Notification 45-60 Days 5 points
4) Fill Rates 95% greater than 5 points
90-94 % 3 points
85-89 % 2 points
Total Possible Points 20 points
Contract and potential contract manufacturers will be required to
achieve and maintain a minimum of 15 points to be considered in
compliance with Novation's standards of performance. Manufacturers will
be rated by and points will be averaged across all Authorized
Distributors.
Authorized Distributor will be responsible for assisting Novation in
monitoring all contract and potential contract manufacturers that they
distribute and their compliance with these standards of performance.
Authorized Distributor will provide NOVATION with a complete
manufacturer assessment of standards of performance compliance and
exactly how each contract and potential contract manufacturer complies
with each standard of performance.
Ongoing Management of Manufacturer Standards of Performance. Authorized
Distributor shall provide NOVATION quarterly a complete review of all
distributed contract manufacturers' adherence to the standards of
65
performance. Authorized Distributor shall provide Novation with a
complete assessment of potential contract manufacturer's compliance
with the standards of performance within five (5) business days of
request by Novation.
B. Distributor. The standards of performance for Authorized Distributors
are listed below. The Authorized Distributor will be responsible for
complying with all the standards of performance.
Authorized Distributor to Manufacturer: Standard
---------------------------------------
1) Adhere to all terms and conditions of the
Authorized Distributor Agreement
(i.e., stocking, ordering, etc.) 100%
2) EDI:
850 100%
844 100%
867 100%
820 100%
Authorized Distributor to Participating Member Standard
----------------------------------------------
1) [*] Unadjusted Fill Rate on "A" Items 100%
2) [*] Unadjusted Overall Fill Rate 100%
3) 30 Day Price and Contract Change Notification 100%
4) Participating Member Monthly Activity Report 100%
5) Participating Member QBR 100%
6) Support Participating Members Electronic Commerce
Needs 100%
Authorized Distributor to Novation: Standard
-----------------------------------
1) Support and adhere to all terms and conditions
of Authorized Distributor Agreement 100%
2) EDI 867 100%
Initial Implementation. Each Authorized Distributor will have a review
with NOVATION to determine their compliance level with the Authorized
Distributor standards of performance. NOVATION will keep record of all
levels of compliance to the standards of performance. For each
performance measure that is not met, NOVATION will work with the
Authorized Distributor to achieve full compliance.
Ongoing Management of Distributor Standards of Performance. At all
Authorized Distributor quarterly business reviews, NOVATION will review
the Authorized Distributor's compliance to the Distributor Standards of
Performance.
*[This confidential information has been omitted and filed separately with
the Commission.]
66
C. Participating Members. The standards of performance for all
Participating Members are listed below. The Authorized Distributor,
along with NOVATION will be responsible for managing the Participating
Member compliance to their standards of performance.
Participating Member to Authorized Distributor: Standard
-----------------------------------------------
1) Pay invoices per Exhibit F-5 100%
2) Support EDI 810/832 100%
3) Provide accurate product usage for all products,
"A" Items 100%
4) Sign off on "A" Item List at least quarterly 100%
Initial Implementation. Beginning with the setting of each
Participating Member's Distribution Service Fees, and based on each
Participating Member's compliance to their standards of performance,
compliance will be rewarded in the form of incentives that each
Participating Member can earn.
Ongoing Management of Participating Member Standards of Performance.
Each quarter NOVATION and Authorized Distributor will review
Participating Member compliance to their standards of performance.
NOVATION will adjust each Participating Member's Schedule 2 to reflect
Participating Member's compliance to their standards of performance.
D. Novation. The Standards of performance for Novation are listed below.
Novation to Authorized Distributor: Standard
-----------------------------------
1) 45-day price/contract change notification 100%
2) Support Authorized Distributor's electronic commerce
needs 100%
3) Support Authorized Distributor's initiatives to increase
supply chain efficiency 100%
Initial Implementation. Novation will require that distributed contract
and potential distributed contract manufacturers meet the standards
listed in section A and will serve as an active participant with all
supply chain stakeholders to implement supply chain efficiency.
Ongoing Management of Novation Standards of Performance. Novation will
solicit Authorized Distributor's assessment of distributed contract
manufacturer's compliance with manufacturer's standards of performance
on a quarterly basis. Novation will solicit Authorized Distributor's
assessment of potential distributed contract manufacturer's compliance
with manufacturer's standards of performance prior to awarding a
distributed Supplier Agreement to potential contract manufacturer.
6. Drop Shipments. If a Vendor ships Contract Products or Non contract
Products directly to a Participating Member (a "drop shipment") and the
Vendor bills through the Authorized Distributor, such transaction will be
subject to the terms of this Agreement. Use of Drop Shipments will be at
the discretion of the Participating Member.
67
Authorized Distributor may pass through to the Participating Member any
service charges levied by Vendor on Authorized Distributor for drop
shipments. Authorized Distributor will notify Participating Member of any
such service charges at time of order.
7. Support of Committed Programs: Authorized Distributor will provide
support for Novation's Committed Program(s) to include, but not be
limited to:
A. Appropriate product stocking
B. Training and education of Authorized Distributor's sales force
C. Identification of committed program products in the Authorized
Distributors product database and on price catalogs to Participating
Members.
D. Working with Novation and contract manufacturers to maximize the
value of these programs to the Participating Members.
Novation's Committed Programs reward members based upon their participation
and ensure lower prices, enhanced patronage dividends, and improved
operational and staffing efficiencies. Committed Programs are optional for
VHA and UHC members and include, but may not be limited to, OpportUNITY(R).
OpportUNITY represents $4.3 billion in annual purchases and is an
incentive-and-performance-based program with a proven approach to reducing
costs. It rewards members that achieve full compliance in designated
product categories with best contract pricing, financial incentives and the
potential for increased cooperative returns. Most importantly, it is the
platform for additional cost reduction through standardization and
utilization.
68
Exhibit T-1
NOVAPLUS(TM) Pricing Policy and Protocol
The objective of this policy/protocol is to achieve the following:
o Ensure accurate NOVAPLUS(TM) pricing to Participating Member in a timely
manner,
o Provide a record of and accountability of Participating Member pricing,
o Centralize NOVAPLUS(TM) pricing decisions and effectively communicate all
price revisions.
TIERED OR HOSPITAL EXCEPTION LEVEL PRICING
In the event that it becomes necessary to deviate from the published pricing for
any NOVAPLUS(TM) medical/surgical product, the following protocol is to be
observed:
1. The NOVAPLUS(TM) manufacturer, in conjunction with the appropriate Novation
Account Manager, will communicate a request for tier revision or hospital
exception level pricing to the Novation Medical/Surgical Product Manager on
a NOVAPLUS(TM) HOSPITAL EXCEPTION LEVEL PRICING (HELP) form (attached).
2. The NOVAPLUS(TM) Product Manager/Analyst will review requests.
3. The NOVAPLUS(TM) Product Manager/Analyst will approve/disapprove requests.
4. Novation medical surgical distribution analyst will fax the approved
NOVAPLUS(TM) HELP forms to the Authorized Distributor, and revised pricing
will be available to the HCO in compliance with price change protocol
listed in Exhibit H.
5. The Authorized Distributor will communicate back to the Novation medical
surgical distribution analyst in writing confirming the date entered into
the Authorized Distributor system.
6. All approved NOVAPLUS(TM) HELP requests will be on file with the Novation
medical surgical distribution analyst for future reference.
69
Exhibit T-2
NOVAPLUS(TM)
HOSPITAL EXCEPTION LEVEL PRICING
(H.E.L.P. FORM)
Participating Member:
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Address:
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City/State/Zip:
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Contract #:
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Current Price Tier: New Price Tier:
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Effective Date: Review Date:
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(For Office Use Only)
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CAT NO DESCRIPTION ADA HOSP USAGE USAGE
PRICE PRICE CS/YR $/YR
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Submitted By:
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SIGNATURE DATE
NOVAPLUS(TM) Product Management:
------------------------------------------------
SIGNATURE DATE
Authorized Distributor Contracts Personnel:
-------------------------------------
SIGNATURE DATE
Return copy to Medical Surgical Distribution Analyst-Novation
Fax (▇▇▇) ▇▇▇-▇▇▇▇
Note: 45-day price change notification is required to the Authorized
Distributor.
70
Exhibit T-3
NOVAPLUS(TM) Stocking Request Form
Date:
----------------------------------------
Health Care Organization:
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Name
---------------------------------------------------------------------------
Address
---------------------------------------------------------------------------
City, State, ZIP
Health Care Organization Representative:
--------------------------------------------- -------------------------
Signature Required Title
Effective immediately, please begin stocking the NOVAPLUS(TM) products listed
below.
--------------------------------------------------------------------------------------------------------
Current Item Current Item Unit of Current NOVAPLUS(TM)Item NOVAPLUS(TM)Product Unit of
Number Description Measure Monthly Usage Number Description Measure
--------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------
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Authorized Distributor (AD): Branch:
----------------- ---------------------
AD Inventory Coordinator:
--------------------------------------------------
Signature Required (AD Representative, please fax to Novation Distribution
Services, (▇▇▇) ▇▇▇-▇▇▇▇)
Novation Representative:
---------------------------------------------------
Signature Optional
Please follow the steps below to assure proper stocking:
1. Mail or fax a copy of the completed form to Novation Medical Surgical
Distribution Services at (▇▇▇) ▇▇▇-▇▇▇▇.
2. Mail or fax the same completed form to your AD inventory coordinator.
3. Please retain a copy for your records.
4. Please wait 30 days before placing orders with the AD.
ADs are contractually committed to stock all requested NOVAPLUS(TM)
products in local distribution centers. Please allow 30 days for AD to
deplete existing inventory and stock new products upon notification.
71
Exhibit T-4
Consolidated Logistic Center Specifications
1. Establish a warehouse/distribution service center in close geographic
vicinity to Participating Member facilities.
2. Establish a requisition control center for all stock and non-stock
requirements. Manage daily par servicing program at Participating
Members' facilities.
3. Manage and store all stock and non-stock materials for Participating
Member, specifically medical surgical supplies, IV solutions, disposable
products, forms, surgery linen packs and towels, patient house linen and
medical gases.
4. Perform total distribution activities, (deliver lowest unit of inventory
level to point of use or holding area) bar code patient charge supplies
and assemble the patient charge documents.
5. Maintain an emergency supply area within each component of Participating
Members' networks to accommodate any critical care or immediate (stat)
requirements.
6. Assist in developing critical supply pathways, supply bundling and case
cart programs for Participating Members' OR, anesthesia, cardiac
catheterization lab and general patient care areas.
7. Manage all linen processing and distribution including OR reusable surgery
linen packs.
8. Provide clinical assistance in product standardization and compliance with
Novation committed programs.
9. Establish capitated supply expense ratios based on revenue, patient day or
adjusted patient day for a minimum 5 year period.
10. Guarantee substantial initial cost savings to Participating Members to be
realized within 18 months after the service center becomes operational.
11. Purchase all current Participating Member asset and expended inventory
that will be distributed through the service center. This shall include all
par service inventory at nursing units or procedural areas.
12. Consider preferential hiring of displaced hospital personnel for service
center operations.
13. Provide integration or interface of service center operations software
with automated materials management systems in the Participating Member
facilities.
14. Invoice Participating Members at cost plus 0% for all purchases.
15. Product "cost" will be determined as per Exhibit G.
In the event of a conflict between this Exhibit and any other terms of this
Agreement, the Agreement terms shall apply.
72
Exhibit U
Additional Remedies
1. Change of Authorized Distributors. If, during the term of the Agreement,
a Participating Member requests a change of Authorized Distributors, the
following steps should be followed:
A. Indicate the reason-- service or strategic-- for the requested change
on Schedule 1.
B. Provide the necessary details regarding the request on Schedule 1. If
the requested change is service-related, indicate in the service area
that your current Authorized Distributor may not be performing
satisfactorily. If the request is strategic, please provide the details
in the space provided.
C. Fax the completed Schedule 1 to Novation. Novation will review the
request. If the request is being made for service reasons, the current
Authorized Distributor will have 30 days to address and remedy the
situation. After 30 days, the organization has three options:
1 Agree to the reassignment of the current Authorized Distributor,
provided the Authorized Distributor has satisfactorily addressed
the service issue.
2 Give additional time to the current Authorized Distributor to
resolve the problem, provided the Authorized Distributor is making
significant progress toward a complete remedy.
3 Finalize the request for a change of Authorized Distributors. If
this option is chosen, the Participating Member notifies Novation.
The organization's Novation account manager will manage the
transition to a new Authorized Distributor.
If the request is being made for strategic reasons, Novation will review
the details contained in the returned Schedule 1 and schedule a meeting
between the member, Novation and the current ADA to review the request and
reach agreement that a strategic reason for change exists and is agreed to
by all parties. Following this meeting, Novation can make an immediate
decision on the request. If it is denied, the participating member will
remain assigned to its current Authorized Distributor. If the request is
approved, your Novation account manager will manage the transition process.
o If the request is finalized, the Participating member, its Novation
account manager, the current Authorized Distributor and the new
Authorized Distributor will develop a written transition plan and begin
the change process. The Novation account manager will manage the
transition process.
73
2. Transition Process:
A. Novation will notify the Participating Member that its request to
change Authorized Distributors has been approved.
B. The Participating Member indicates on Schedule 1 the new Authorized
Distributor it is requesting. The new Authorized Distributor must be
selected from the list of distributors authorized to serve that
organization's market area.
C. The Participating Member, current Authorized Distributor, new
Authorized Distributor and local Novation account manager meet and
agree on a transition plan that will allow the new Authorized
Distributor to build inventory, change its system and plan to implement
the changes necessary to serve as the Participating Member's
distributor. The minimum time period should be 90 days unless all
parties agree to an alternate time period. The plan also should allow
the current Authorized Distributor to scale down its inventory
allocated for that Participating Member.
During the transition process, both the current Authorized Distributor and
new Authorized Distributor will charge the Participating Member its current
price for distribution services. The Participating Member also will receive
full credit for all purchases from both Authorized Distributors during the
transition.
At the conclusion of the transition process, the Participating Member, its
current Authorized Distributor, its new Authorized Distributor and Novation
account manager will meet to close the process. The process should include
satisfactory reduction of the current Authorized Distributor's inventory
for the health care organization. The Participating Member is responsible
for purchasing all inventory that the current Authorized Distributor
specifically ordered for that organization.
2. Loading of Supplier Agreements: Authorized Distributor shall load Novation
Supplier Agreements as described in Section 1, subsection d of the
Agreement. Failure to do so will subject Authorized Distributor to the
administrative damages outlined in Section 10 of the Agreement.
74
Exhibit V
Other Reporting Requirements
1. Vendor Reports: Authorized Distributor agrees to deliver all manufacturer
tracing and rebate reports for Contract Products no later than ten (10)
days after the end of the month in which the sales reported took place.
Upon request of a NOVAPLUS(TM) contract manufacturer, Authorized
Distributor agrees to provide sales tracings at no charge for all
NOVAPLUS(TM) products. Such tracings shall be in hardcopy or electronic
format at the request of the NOVAPLUS(TM) contract manufacturer.
2. Annual Reports: Authorized Distributor will supply to Novation upon
request, but at least annually, copies of Authorized Distributor's annual
audited financial reports. Such reports shall include, at a minimum, an
income statement, balance sheet, statement of equity, statement of cash
flows, all footnotes and such other information as Novation may reasonably
request.
3. Authorized Distributor Representation Compensation: Authorized Distributor
will supply to Novation upon request, at least annually no later than April
1, copies of Authorized Distributor's sales representation compensation
program.
75
Exhibit W
Reports to Participating Members
The following reports shall be delivered to each participating member by the
15th day of the month following the month's activities reflected in such
reports. A copy of each Participating Member's reports needs to be forwarded to
the appropriate Novation account manager by the 15th of each month.
o Velocity report (by volume and vendor) listing dollar amount and unit volume
for each and all products purchased
o Sales of each and all products purchased broken down as follows:
o Contract
o NOVAPLUS(TM)
o Non Contract
o EOE %
o EDI activity for 810 and 832
o DSO performance
o Number of deliveries
o Additional distribution services performed and the fees charged for these
services
o Service level report (by account, total hospital and by vendor). Must
specify:
o "A" item fill rate - unadjusted
o Overall fill rate - unadjusted
o Suggested Order Quantity / Economic Order Quantity report
o Service level report (manufacturer to distributor, by vendor)
o Contract/Price Change/Tier Change/Expiration report (Participating Member
specific report on all their
contract/pricing/tier/expiration activity for the next thirty (30) days.
o Summary reports for systems or networks
o Other reports available or special reports requested by the Participating
Members
Reports must be made available in hard copy as well as in commonly used
electronic format (such as Microsoft Excel) at Participating Members' request.
76
Exhibit X
Additional Information Requirements
See Novation Information Requirements Guidebook for Medical Surgical Authorized
Distributors (Diskette)
77
Exhibit Y
Marketing Fees
[*]
*[This confidential information has been omitted and filed separately with
the Commission.]
78
Exhibit Y-1
Products on Which Authorized Distributor Pays No Marketing Fee
[*]
*[This confidential information has been omitted and filed separately with
the Commission.]
79
Exhibit Z
Service Damages
1. Failure to maintain a minimum of [*] unadjusted fill rate for "A" items and
[*] unadjusted overall fill rate for each Participating Member or [*] for
Participating Members using JIT. Fill rate is defined as line items filled
first time first delivery / line items ordered. "A" items are stock items
that are ordered by Participating Member at least twice every 30 days.
Damages are paid to Participating Member:
1st failure written warning
2nd failure: [*]
3rd failure: [*]
4th failure: [*]
5th failure: [*]
6th & each subsequent failure: [*]
2. Failure to provide reports to Participating Members as per Exhibit W
(damages are paid to Participating Member):
1st failure written warning
2nd failure: [*]
3rd failure: [*]
4th failure: [*]
5th failure: [*]
6th & each subsequent failure: [*]
3. Failure to provide documentation to resolve outstanding invoices with
thirty (30) days (damages are paid to Participating Member):
1st failure written warning
2nd failure: [*]
3rd failure: [*]
4th failure: [*]
5th failure: [*]
6th & each subsequent failure: [*]
4. Failure to adhere to all other service level terms and conditions of
Agreement (damages are paid to Participating Member) :
1st failure written warning
2nd failure: [*]
3rd failure: [*]
4th failure: [*]
5th failure: [*]
6th & each subsequent failure: [*]
80
Notwithstanding the foregoing, damages related to fill rates are only available
if Distributor's fill-rates are below average-prescribed levels when adjusted
for unavailability due to Manufacturer back orders or because of other events
beyond Distributor's control. These remedies herein are exclusive of other
remedies, only available for failures described herein and only available if
Novation, the Clients and Participating Members are in full compliance of this
Agreement.
*[This confidential information has been omitted and filed separately with
the Commission.]
81
Authorized Distributor Service Level Penalty Form
Service Service Level Penalty Notification (check)
------- ------------- ----------------------------
Fill Rate [*] on "A" Items -------
Fill Rate [*] overall -------
Member Reports By 15th day of following month -------
Invoice Resolution Within 30 days of notification by HCO -------
Other Service Describe:
--------------------------- -------
Time frame (month) of substandard performance:
--------------------------------
Fill rates:
o "A" Items are those that are purchased two or more times per month
o HCO and Authorized Distributor must approve and sign-off on the "A" Item
list on a quarterly basis.
o All usage and changes to "A" Item list must be forwarded to Authorized
Distributor with 30 day notice.
o All usage provided must be within 10% of actual usage.
Participating Member:
---------------------------------------
Address
---------------------------------------
---------------------------------------
---------------------------------------
Director of Materials Management Signature:
-------------------------------
Director of Material Management Name (Print):
-------------------------------
Phone Number:
-------------------------------
Fax Number:
-------------------------------
Authorized Distributor Name and Branch Location
-------------------------------
-------------------------------
This form serves as official thirty (30) day notification that the Participating
Member intends to monitor the Authorized Distributor for possible service
performance issues. Specifically, the Participating Member is concerned with the
service checked on this form.
Damages may be assessed based upon the period for which the substandard activity
is measured, but no more frequently than monthly. For example, Authorized
Distributor may be assessed damages for each month for which fill rates are
substandard.
*[This confidential information has been omitted and filed separately with
the Commission.]
82
Schedule 1
Authorized Distributor Selection / Change Form
VHA and UHC members who desire to participate in the Medical Surgical Authorized
Distribution Agreement or who wish to change Authorized Distributors will be
required to complete this Authorized Distributor Selection / Change Form.
Participating Member:
----------------------------------------
Address:
----------------------------------------
----------------------------------------
----------------------------------------
Director of Materials Management/
Supply Administrator Name:
----------------------------------------
Phone Number:
----------------------------------------
Fax Number:
----------------------------------------
I hereby declare _____________________________ as Participating Member's acute
care Authorized Distributor. (A list of acute care Authorized Distributors can
be found in the Medical Surgical Authorized Distribution Agreement Launch
Package).
I hereby declare _____________________________ as Participating Member's care
continuum Authorized Distributor. (A list of care continuum Authorized
Distributors can be found in the Medical Surgical Authorized Distribution
Agreement Launch Package). Participating Members may select one Authorized
Distributor for both acute care and care continuum or may designate a separate
Authorized Distributor for care continuum.
I hereby declare that I would like to initiate a change of Authorized
Distributors. The reason for this change is: _____ Service _____ Strategic
Please describe:
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Other information:
Participating Member is declaring Novation as the GPO of choice for products and
distribution services.
Director of Materials Management /
Supply Administrator Signature
------------------------------
Date:
------------------------------
Please return to Novation Medical Surgical Distribution via fax: (▇▇▇) ▇▇▇-▇▇▇▇
83
Schedule 2
Distribution Fee Calculation Form
Participating Member:
-----------------------------------
Address:
-----------------------------------
-----------------------------------
Director of Materials Management/
Supply Administrator Name:
-----------------------------------
Phone Number:
-----------------------------------
Fax Number:
-----------------------------------
Authorized Distributor:
-----------------------------------
Distribution Markup Calculation
1. Previous Quarters Monthly Volume Average $_____________________
2. Base Markup from Exhibit F _____________________%
3. Incentives Earned
o EOE [*] -_____________________%
o Line Average -_____________________%
4. DSO Performance -/+_____________________%
5. Extra Services Required from Exhibit F-1
o Custom Pallet Architecture - Basic [*] +_____________________%
o Custom Pallet Architecture - Advanced [*] +_____________________%
o Reduced / Extra Weekly Deliveries -/+_____________________%
o Bulk Picked by Dept. Delivered to Dock
o 1-3 Departments [*] +_____________________%
o 4-10 Departments [*] +_____________________%
o 11-15 Departments [*] +_____________________%
o 16+ Departments [*] +_____________________%
o Bulk Break to Manufacturer Next Unit of
Measure [*] +_____________________%
▇ ▇▇▇ Picked by Dept. Del. to Dock [*] +_____________________%
▇ ▇▇▇ Picked by Dept. Del. to Dept. [*] +_____________________%
▇ ▇▇▇ Picked by Dept. Del. to Dept.
Put Stock Away [*] +_____________________%
6. Total Net Distribution Markup _____________________%
o New o Change
Director of Materials Management /
Supply Administrator ______________________ Date: __________
Authorized Distributor Representative ______________________ Date: __________
Novation Account Manager ______________________ Date: __________
Please return to Novation Medical Surgical Distribution via fax: (▇▇▇) ▇▇▇-▇▇▇▇
*[This confidential information has been omitted and filed separately with
the Commission.]
84
Schedule 3
Participating Members Verification of "A" Item List
Participating Member:
-----------------------------------
Address:
-----------------------------------
-----------------------------------
-----------------------------------
-----------------------------------
Lic #:
-----------------------------------
Phone #:
-----------------------------------
FAX #:
-----------------------------------
DMM / SA:
-----------------------------------
Participating Member hereby approves the "A" Item List (attached) as provided
by ___________________________________ (Authorized Distributor)
Date Reviewed and Approved:
------------------------------
Facility
Name:
------------------------------
Title:
------------------------------
Signature:
------------------------------
Authorized Distributor
Name:
------------------------------
Title:
------------------------------
Signature:
------------------------------
Copies are to be maintained by:
Participating Member
Authorized Distributor
Attach "A" Item list to this Schedule
85