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EXHIBIT 10.16
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.
SERVICES AGREEMENT
This agreement ("Agreement"), is made and entered into as of
the lst day of February, 1998 by and between VHA Inc., a Delaware corporation
("VHA"), and Specialty Laboratories, Inc., a California corporation ("Vendor").
PRELIMINARY STATEMENTS:
A. VHA is, among other things, in the business of providing
purchasing opportunities with respect to high quality products and services to
certain health care providers who have appointed VHA as their agent ("VHA
Members and Affiliates") or have appointed HealthCare Purchasing Partners, Inc.,
as their agent ("HPPI Members"), a current list of which has been provided to
Vendor by VHA;
B. Vendor is, among other things, the provider of the services
listed on Exhibit A ("Services"); and
C. Vendor and VHA desire to make the Services available for
purchase by VHA Members and Affiliates and HPPI Members from Vendor pursuant to
this Agreement;
In consideration of the premises, the representations and
warranties of the parties, and other good and valuable consideration, the
adequacy, receipt and sufficiency of which are acknowledged, the parties agree,
subject to the conditions, terms and provisions of this Agreement, as follows:
SECTION 1. OFFER, SALE AND PRICES.
During the term and for the duration of this Agreement, Vendor
agrees to offer to sell and to sell the Services to VHA Members and Affiliates
or HPPI Members at prices [***]*. Vendor agrees to provide written notice to VHA
of all price offers at price [***]*. Vendor agrees that the prices, quality and
value of these Services shall remain market competitive at all times during the
terms of this Agreement.
Vendor shall not offer to VHA Members and Affiliates or HPPI
Members other services and/or products in conjunction with the Services covered
by this Agreement under terms and conditions such that VHA Members and
Affiliates or HPPI Members have no real economic choice except to purchase
Services with such other services and/or products on a bundled basis, without
the prior written notice to VHA.
SECTION 2. PROMPT PERFORMANCE.
Vendor agrees to promptly perform Services ordered under this
Agreement by the VHA Members and Affiliates or HPPI Members in accordance with
any schedule agreed to between Vendor and the VHA Member or Affiliate or HPPI
Member.
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FOR CONFIDENTIAL TREATMENT AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.
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SECTION 3. BILLING BY AND PAYMENT TO VENDOR.
Vendor agrees to direct its invoices for Services ordered
under this Agreement to the VHA Members and Affiliates or HPPI Members. Payment
terms shall be Net 30 days. A [***]* late payment charge will be added for VHA
Members and Affiliates and HPPI Members whose accounts payable to Vendor are 60
days or more. However, Vendor and any VHA Member and Affiliate or HPPI Member
may mutually agree to other payment terms.
SECTION 4. TERM AND TERMINATION.
This Agreement shall commence on February 1, 1998 and shall
continue until December 31, 2000. This agreement may be renewed to continue
until terminated by the mutual agreement of the parties provided written notice
is signed by both parties at least sixty (60) days prior to December 31, 2000.
In addition, this Agreement may be terminated by either party at any time, at
will, and without cause upon not less than sixty (60) days prior written notice
to the other party.
SECTION 5. PERFORMANCE REVIEW.
The parties agree to meet, at the request of either party, no
less frequently than once in any one hundred-eighty day (180) period during the
term of this Agreement to discuss the performance under this Agreement.
SECTION 6. COMPLIANCE WITH LAWS.
Vendor represents, warrants and guarantees that all Services
performed under this Agreement are, as of the date of such performance, in
compliance with all federal, state and local laws, statutes, ordinances, rules,
regulations and orders.
SECTION 7. BOOKS AND RECORDS, AUDIT.
Vendor 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 Vendor's compliance under this Agreement. All such
books, records and accounts shall be available for inspection and audit by VHA
and its authorized representatives at any time during the term of this Agreement
and for two (2) years thereafter, but no more frequently than twice in any
consecutive twelve (12) month period and only during reasonable business hours
and upon reasonable notice. The exercise by VHA of the right to inspect and
audit is without prejudice to any other or additional rights or remedies of
either party.
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FOR CONFIDENTIAL TREATMENT AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.
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SECTION 8. INDEMNITY AND INSURANCE.
Vendor agrees to protect, defend, indemnify and to hold VHA,
VHA Members and Affiliates and HPPI Members and their respective subsidiaries,
affiliates, directors, officers and employees ("Indemnitees") harmless from any
loss, liability, damage, cost or expense (including attorneys' fees and other
expenses of litigation) because of (i) personal/bodily injury, including death
at any time resulting therefrom, or damage to property, including loss of use
thereof and downtime, caused by any Service, act or omission by Vendor, or any
of its employees, agents, or subcontractors or (ii) any material
misrepresentation, breach of warranty or covenant or other breach or default by
Vendor under this Agreement; provided, however, that Vendor shall not be
obligated under this Agreement to defend, indemnify or hold harmless any
Indemnitee from any such loss, liability, damage, cost or expense which results
solely from that Indemnitee's misconduct or negligence. Without limiting the
generality of the preceding sentence, Vendor agrees to obtain and maintain, at
its own expense, commercial general liability insurance including blanket
contractual liability coverage with minimum limits of $2,000,000 per occurrence
and $5,000,000 annual aggregate. Such insurance shall include all Indemnitees as
additional insureds. Within thirty (30) days from the date of this Agreement,
Vendor shall submit to VHA a certificate of insurance attested by a duly
authorized representative of the insurance carrier or carriers, evidencing that
the insurance required is in force and in effect and that such insurance will
not be canceled or materially changed without giving VHA at least thirty (30)
days prior written notice.
Furthermore, Vendor shall defend, indemnify and hold harmless
Indemnitees from and against any liability, damage, cost or expense arising out
of any claim of patent, trademark or copyright infringement made with respect to
any Service.
SECTION 9. DELETION.
Notwithstanding anything to the contrary contained in this
Agreement, VHA may delete any one or more of the Services from this Agreement at
any time, at will and without cause upon not less than sixty (60) days prior
written notice to Vendor.
SECTION 10. INDEPENDENT CONTRACTOR.
None of the provisions of this Agreement is intended to
create, nor shall any provision in this Agreement be deemed or construed to
create, any relationship between Vendor and VHA other than that of independent
entities contracting with each other under this Agreement solely for the purpose
of effecting the provisions of this Agreement. Neither of the parties, nor any
of their employees, shall be construed to be the agent, the employer or
representative of the other.
SECTION 11. MARKETING FEE.
Within thirty (30) days after the end of each full or partial
month during the term of the Agreement, Vendor will pay VHA a marketing fee
equal to [***]* of all net sales (as
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FOR CONFIDENTIAL TREATMENT AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.
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defined in this paragraph of Services pursuant to the Agreement during such
month. The term "net sales" means the price of each Service (determined in
accordance with the Agreement) delivered to each VHA Member and Affiliate less
the aggregate of credits and refunds allowed or paid VHA Members and Affiliates
under the Agreement; provided, however, that a refund paid shall be subtracted
to the extent representing a credit previously allowed. The term "all net sales"
means the sum of net sales.
SECTION 12. MONTHLY REPORT.
With each payment of a marketing fee, Vendor will
deliver to VHA a report ("Monthly Report"), in form and substance reasonably
satisfactory to VHA, which sets forth accurately:
(a) the name of Vendor, the month and year to
which the Monthly Report (and the enclosed marketing fee) relates and the
contract number (as provided Vendor by VHA),
(b) with respect to each VHA Member and
Affiliate (described by LIC number, full name, city, state and zip code as
provided Vendor by VHA), the sum of net sales and the associated marketing fees
for all Services sold to each such VHA Member and Affiliate during such month,
(c) the sum of the net sales and the associated
marketing fees for all Services provided to all VHA Members and Affiliates
during such month,
(d) the calculation used by Vendor to determine
the marketing fee, and
(e) such additional information as VHA may
reasonably request from time to time.
Monthly reports shall be delivered, with the marketing fee
enclosed, to:
VHA Inc.
220 East Las Colinas Boulevard
Irving, TX 75039-5500
(Mailing Address: P.O. Box 140909
Irving, TX 75014-0909)
Attn: Accounts Receivable
SECTION 13. REPORTING AND PAYMENT PENALTIES.
In the event Vendor fails to pay the marketing fee in
accordance with Section 12 and/or fails to provide the reports described in
Section 13 within the time and manner stated, VHA may invoice Vendor for the
marketing fees estimated by VHA to be due, payable within ten (10) days of the
date of such invoice. Invoice by VHA or payment by Vendor shall not relieve
Vendor of its payment obligations under Section 12 or the reporting obligations
of Section 13. In addition, upon the occasion of the first failure to receive a
payment or report when due, Vendor shall receive a written warning. Upon the
second and any subsequent failure
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to provide payment or a report when due, Vendor shall pay an administrative
penalty in accordance with the following schedule:
2nd Failure - [***]*
3rd Failure - [***]*
4th Failure - [***]*
5th Failure - [***]*
6th Failure - [***]*
SECTION 14. HEALTH CARE PROVIDER CONSIDERATION.
Vendor agrees to provide notice and give equal consideration
to VHA Members and Affiliates for the delivery of health care services to
Vendor's employees and their dependents directly or through Vendor's contracting
mechanism or insurer.
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FOR CONFIDENTIAL TREATMENT AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.
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The parties have caused this Agreement to be executed and
delivered by their respective authorized representatives as stated at the
beginning of this Agreement.
VHA Inc.
("VHA")
By: /s/ Mark McKenna
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Mark McKenna
Vice President
Specialty Laboratories, Inc.
("Vendor")
By: /s/
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Authorized Representative
