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EXHIBIT 10.19
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR CERTAIN REDACTED PROVISIONS OF
THIS AGREEMENT. THE REDACTED PROVISIONS ARE IDENTIFIED BY THREE ASTERISKS
ENCLOSED BY BRACKETS AND UNDERLINED. THE CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Manufacturer Agreement between MHA
And Specialty Laboratories
AGREEMENT
BETWEEN
MANAGED HEALTHCARE ASSOCIATES, INC.
AND
SPECIALTY LABORATORIES, INC.
THIS AGREEMENT is made between Managed Healthcare Associates, Inc. of
Louisville, Kentucky (hereinafter collectively referred to as MHA) and Specialty
Laboratories of Santa Monica, CA, hereinafter called Manufacturer. MHA and
Specialty Laboratories agree as follows:
PRODUCT CATEGORY
Reference Laboratory
PRODUCTS COVERED
Reference Laboratory Services
Please include Tests and Pricing as Exhibit A.
PERIOD OF AGREEMENT
The initial term of the Agreement will be three (3) years beginning June 1, 2000
and expiring on May 31, 2003. An option to renew for a successive two (2) year
period (June 1, 2003 through May 31, 2005) will be considered upon mutual
written agreement by both parties.
TERMS AND CONDITIONS
1. PRICING (Check one or both if applicable)
/X/ Net price to an account
/ / Other
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The prevailing list price for the term of the agreement shall be
derived from the current Specialty Laboratories 2000 Directory of
Services.
2. PRICE PROTECTION AND ESCALATOR GUARANTEE
Price protection shall be firm for the duration of the initial
Agreement. If the Agreement is extended for the optional two (2)
year period, pricing will increase by no more than [***]* for the
subsequent period.
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LENGTH OF MAX % OF
PROTECTION ESCALATOR INCREASE
<S> <C> <C>
1st period of price protection [***]* [***]*
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2nd period of price protection [***]* [***]*
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3rd period of price protection [***]* [***]*
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3. CONTRACT IMPLEMENTATION
The Manufacturer will endeavor to implement this agreement
within forty-five (45) days of signing. This implementation
will include contacting MHA facilities and/or jointly
providing contract information to all of the MHA authorized
members listed on Attachment B, if indicated. Failure to
comply to this condition may result in the cancellation of the
agreement.
4. CONVERSION INCENTIVES
At this time, SPECIALTY reserves the right to not offer any
Conversion Incentives.
5. VOLUME INCENTIVES
/ / Improved pricing if group totals exceed projections
/ / Discounts for large users from individual facilities or
integrated groups.
/ / Improved pricing for teaching facilities
/X/ None of the above. However, in addition to the pricing
provided in Exhibit A, an [***]* reduction in standard list
price, as published in the Price List current at the time the
testing is ordered, will be granted for all tests not listed in
Attachment A. Tests that are unique to SPECIALTY are not included
in the [***]* reduction in standard list price. Further, the
[***]* reduction in standard list price does not apply to any
tests that are referred out and any new tests introduced by
SPECIALTY after the effective date of this Agreement. In
addition, SPECIALTY may, at its sole discretion, offer further
price reductions of up to [***]*, to MHA members that agree to
consistently commit at least [***]* of their total available
referral volume. The selection of these additional tests must be
made prior to executing SPECIALTY'S "Member Agreement" and the
pricing will remain fixed for
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* PORTIONS OF THIS PAGE HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.
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the term of the Agreement. No additional price reductions will be
considered during the term of the Agreement.
6. NEW PRODUCTS/TECHNOLOGY
All new procedures and technology will be added under the terms
and conditions of this agreement. Manufacturer is obligated to
maintain technological parity with other Manufacturers to insure
that MHA members are offered state of the art testing methods.
In the event SPECIALTY plans to make a change to a test
(methodology, specimen, reference ranges, etc.), we attempt to
give clients thirty (30) days advance notice. An assessment is
made concerning the necessity and advisability of the change in
terms of our client's needs and ease of use. The completion of a
TIF (Test Information Form) form sets off a series of activities
that result in: (1) the test performance and validation data
being comprehensively reviewed, (2) the test being changed in the
computer with a note appended which clearly announces the change,
(3) letters notifying clients of the change being sent via fax,
autodial printer and/or mail, (4) follow-up to insure that the
test is being performed and results reported as indicated in the
change letter.
Tests not previously listed in the Directory of Services (DOS) or
as sendouts, do not require lead-time for notification. We will
send out informational materials to clients and can send a sample
report to those clients who typically build the test in their own
computers for their sendouts.
7. RETURN GOODS POLICY
The Manufacturer must provide a formal policy to MHA members for
reporting of incorrect results or errors in testing. The policy
should include the contact person's name and phone number
responsible for maintaining this policy. In addition, full credit
will be issued for incorrectly reported tests. Please include
policy as Exhibit B.
8. ENVIRONMENTAL POLICY
The Manufacturer agrees to recognize and support environmental
policies and procedures of MHA members pursuant to local, state
and federal guidelines.
9. VALUE-ADDED SERVICES
If indicated, Manufacturer will provide educational programs to
MHA members at no charge. Please list services as separate
Exhibit C.
10. PRODUCT RECALL - NOT APPLICABLE
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11. MATERIAL SAFETY DATA SHEET (MSDS) - SPECIMEN HANDLING PROCEDURES
Manufacturer will provide MHA members Material Safety Data Sheets
and procedures relative to specimen handling and transportation,
as applicable. Submit as Exhibit D.
12. TESTING SITES
/ X / Primary Testing Site
Company Name Specialty Laboratories, Inc.
Address 2211 Michigan Avenue
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City/State/Zip Santa Monica, CA 90404
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Telephone (310) 828-1492
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Contact Name Michael K. Bond, Director, Contract
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Administration
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/ / Regional Sites-Supply a list - NOT APPLICABLE
13. MINIMUM ORDER
Direct: / X / None / / Other
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/ / Through distribution. Per servicing distributor's policy.
14. TESTING TURNAROUND AND FREQUENCY OF TESTING
Enclosed as Exhibit F, a copy of Manufacturers frequency of
testing and any other polices relating to special test batching
or turnaround time.
15. SAMPLES
Manufacturer will maintain a policy for rejecting unacceptable
specimen. Attach a copy of Manufacturers policy for specimen
rejection and a method of notification to members in Exhibit G.
16. PAYMENT TERMS
Direct: / X / Net 30 days / / Other
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Explain any exceptions to direct account billing as Exhibit K.
There are no exceptions to direct account billing, except when
required by regulatory guidelines.
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17. INSURANCE
Manufacturer will be required to maintain product liability
insurance for a minimum of $1,000,000. Please provide a statement
of coverage in Exhibit H.
18. INDEMNIFICATION, WARRANTIES, SPECIFICATIONS
Each party agrees to mutually indemnify and hold harmless, their
directors, officers, employees, and agents from and against any
and all claims, actions, or liabilities of any nature which may
be assessed against them by third parties in connection with the
performance of services under this Agreement.
19. SALES DEVELOPMENT PROGRAM
In consideration of the administrative and sales development
services provided by MHA, Manufacturer will pay MHA a sales
development fee in an amount equal to [***]* of the net purchases
made by members, as determined from distributor records. MHA
represents and warrants that fees or other amounts received from
manufacturers are disclosed in accordance with the requirements
of 42 CFR Part 1001.952(j). The purpose of this fee is to support
MHA sales and marketing efforts in connection with this
agreement. The fee will be computed and paid monthly within
thirty (30) days after the last day of the month (payment due
date). If fee cannot be reported and paid by payment due date, an
estimated payment equal to 100% of prior payment will be required
within 15 days after payment due date.
CHECKS FOR SALES DEVELOPMENT PAYMENTS SHOULD BE MADE PAYABLE AND
MAILED TO MHA, 25-A VREELAND ROAD, SUITE 203, FLORHAM PARKLAND NJ
07932.
In order to assist MHA and its representatives, Manufacturer
agrees that a qualified Manufacturer sales representative will
call on MHA members as needed. Furthermore, Manufacturer will
provide MHA monthly reports showing total purchases in units and
dollars by product code. These reports will be provided in an
electronic format as outlined on Attachment C, unless an
alternative format is mutually agreeable.
20. MANAGEMENT REPORTS
Manufacturer will be expected to submit on a monthly basis in the
format described in Attachment C. Further, the information data
must be provided as indicated below:
1) Combined sales for each facility. (Totaled for group)
2) Sales by product for each facility, subtotaled by facility.
(Totaled for group)
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* PORTIONS OF THIS PAGE HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.
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NOTE: IN AN EFFORT TO BETTER SERVE OUR HEALTHCARE FACILITIES AND
OUR CONTRACT VENDORS, MHA WILL UTILIZE THE "HEALTH INDUSTRY
NUMBER" (HIN) AS DESCRIBED BY THE HEALTH INDUSTRY BUSINESS
COMMUNICATION COUNCIL (HIBCC). MHA WILL USE THIS NUMBER SYSTEM
FOR ALL DATA INTERCHANGE WITH VENDORS AND MEMBERS.
Currently using the HIN? ( ) Yes ( X ) No
21. RECORDS
a. It is agreed that, in the event the value or cost of the
services rendered to the MHA member under this contract
equals or exceeds the sum of $10,000 in any twelve (12)
month period, Manufacturer shall maintain and preserve all
books, records and documents pertaining to its performance
of services for the MHA member for four (4) full years
following performance of those services and during that time
shall make available upon request of the Secretary of the
Department of Health and Human Services or the Comptroller
General of the United States or their duly authorized
representative this contract and all books, records and
documents necessary to verify the nature and extent of such
costs.
b. It is further agreed that should Manufacturer carry out any
of its obligations under this contract through a subcontract
having a value or cost equal to or exceeding S 10,000 over
any twelve (12) month period, with a related organization,
said subcontract shall require the related organization to
maintain and preserve all books, records and documents
pertaining to its performance and services for Manufacturer
for four (4) full years following performance of those
services and during that time, to make available upon
request of the Secretary of the Department of Health and
Human Services or the Comptroller General of the United
States or their duly authorized representative, the
subcontract and all books, records and documents necessary
to verify the nature and extent of such costs.
22. CANCELLATION
In the event that either Manufacturer or MHA believes that the
other is in default in performance of the terms of this
agreement, thirty (30) days written notice shall be given to such
party specifying the nature of the default and specifying that if
such default is not cured within thirty (30) days of the date of
notice, the other party shall have the right to cancel the
agreement by giving sixty (60) days written notice of its intent
to cancel.
23. ELIGIBILITY TO PARTICIPATE
This proposal is extended to all MHA members and to Veterans
Administration facilities on MHA membership listing with the exception
of those type or facilities you list below:
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Non eligible facilities: NO EXCEPTIONS
1) 4)
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2) 5)
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3) 6)
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IF YOU LISTED ANY TYPE OF FACILITY TO WHICH THIS PRICING WOULD NOT BE
EXTENDED, PLEASE SUBMIT AN ALTERNATE PROPOSAL FOR THOSE FACILITIES. BE
SURE TO CLEARLY IDENTIFY WITHIN YOUR PROPOSAL THE TYPES OF FACILITIES
(I.E., HMO, NURSING HOME) WHICH ARE ELIGIBLE FOR YOUR ALTERNATE
PRICING.
MHA reserves the right to add or delete members during the period of
this agreement by providing the Manufacturer THIRTY (30) DAYS WRITTEN
NOTICE.
SPECIALTY WILL NOT AUTOMATICALLY IMPLEMENT CONTRACT COVERAGE TO NEW
PARTICIPATING FACILITIES, BUT CONTACT THE NEW MEMBER(S) IN AN EFFORT
TO OBTAIN COMMITMENT.
NOTE: PROPOSAL/AGREEMENT ENCOMPASSES ALL MHA MEMBERS AND THE SELECTED VA
FACILITIES ON THE MHA MEMBERSHIP LISTING. NO EXCEPTIONS. SPECIALTY WILL NOT
ACCEPT PENALTY FOR INCORRECT INVOICES AFTER THE EFFECTIVE DATE OF
PARTICIPATION, CONTINGENT UPON CREDIT APPROVAL AND MHA MEMBER SIGNING
MEMBER AGREEMENT. A COPY OF THE MEMBER AGREEMENT IS ATTACHED AS EXHIBIT I.
24. REVIEW OF MANUFACTURER RECORDS
a. At any time while this agreement is in effect, MHA reserves the
right upon giving reasonable notice to review the records of the
Manufacturer for the purpose of verifying reported sales to
members and the calculation of the sales development fee outlined
in Paragraph 21. These records should be made available at the
Manufacturer's business office during normal business hours. The
cost associated with this review will be the responsibility of
MHA unless it is determined that the sales development fee
payment has been understated by twenty-five percent (25% ) or
more.
b. MHA acknowledges that records and information received during any
audit are confidential in nature, and MHA agrees not to disclose
same to persons or parties not participating in this or MHA
programs.
25. TRANSFERABILITY
In the event that MHA and/or Specialty Laboratories, Inc.
transfers ownership and/or marketing rights of products listed on
Exhibit A to another entity during the term of this agreement,
either party's rights and privileges as expressed by the terms
and conditions contained herein shall also be transferred upon
the agreement and consent of MHA and Specialty Laboratories Inc.
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26. SUBMISSION OF DOCUMENT
Submission of this document constitutes a legal offer. Therefore,
should any or all of said document be accepted and in exchange
for being designated as a contracted Manufacturer, said
Manufacturer hereby agrees to be legally bound to provide each
MHA facility, present and future on an as desired basis, any
items encompassed in said document pursuant to the terms of the
respective agreement. This will be subject to credit approval and
execution of Member Agreement.
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ACCEPTED BY: ACCEPTED FOR:
MANAGED HEALTHCARE ASSOCIATES SPECIALTY LABORATORIES
<S> <C> <C> <C>
By Kenneth L. Flood By Michael K. Bond
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Please Print Please Print
By /s/ KENNETH L. FLOOD By /s/ MICHAEL K. BOND
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Signature Signature
Title Vice President-Laboratory Services Title Director, Contract Administration
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Date 5/31/00 Date 6/7/00
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SIGNATURE BY BOTH PARTIES CONSTITUTES A LEGAL AND BINDING AGREEMENT
