Exhibit 10.55

 

PREMIER PURCHASING PARTNERS, L.P.

GROUP PURCHASING AGREEMENT

CLINICAL LABORATORY SERVICES

 

COVER SHEET

 

 

 

CONTRACT NUMBER:

PP-LA-146

 

 

 

1.

The “Parties” to this Group Purchasing

 

 

 

Agreement are:

 

 

 

Premier Purchasing Partners, L.P.

 

Specialty Laboratories

 

(“Purchasing Partners”)

 

(Seller)

 

 

 

 

 

2320 Cascade Pointe Boulevard

 

2211 Michigan Avenue

 

Charlotte, NC 28208

 

Santa Monica, CA 90404

 

Attention: Director, Contracting Services

 

 

Stephen Riendeau, Director of Integrated

 

 

 

 Attention:

Delivery Networks

 

704.357.0022

704.733.4166 (fax)

 

 

 

Contract Manager:

Brian Crowell

 

 800.421.7110

(phone)

310.828.1492

(fax)

 

Contract Director:

Barbara Maillet

 

 478.474.4440

 

478.474.4434

2.

Product Category:

 

 Clinical Reference Laboratory Testing Services

3.

Effective Date:

 

 1/1/05

 

4.

Expiration Date:

 

 9/30/07

5.

Term of Agreement (months):

 

 33 Months

 

6.

Delivery Time Period (days):

 

 Defined in Section 6.5

 (Section 6.5)

7.

Purchasing Partners Administrative Fee:

 

 [*]%

 (Section 10.1)

8.

Administrative Fee Payment Frequency:

 

 Monthly

 (Section 10.2)

9.

Early Payment Discount:

 

 [*]%/Net [*] days

 

 

 

 

 

10.

HIPAA CERTIFICATION

 

 

 

           Seller to initial here if Seller is NOT a Business Associate within
the meaning of 45 C.F.R. § 160.103, in which case the attached HIPAA Addendum is
NOT applicable.

 

 

 

 

This Group Purchasing Agreement (the “Agreement”) is comprised of the following
documents and is entered into by the Parties as of the effective Date set forth
in Item 3 above:

 

 

 

 

 

i.

This Cover Sheet;

 

 

ii.

The attached Purchasing Partners Standard Terms and Conditions;

 

 

iii.

The attached Additional Terms and Conditions (if any);

 

 

iv.

The attached HIPAA Addendum (if applicable); and

 

 

v.

The following attached exhibits:

 

 

 

 

 

 

Exhibit A: Products and Services

Exhibit E: Payment Instructions

 

 

Exhibit B: Membership Roster Access Instructions

Exhibit F: Minority, Woman-Owned and Small

 

 

Exhibit C: Distributors N/A

Businesses Policy

 

 

Exhibit D: Reporting Formats Access Instructions

 

 

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* Information for which confidential treatment has been requested pursuant to
Rule 24(b)(2) of the Securities Exchange Act of 1934, as amended.  The omitted
material has been filed separately with the Securities and Exchange Commission.

 

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PREMIER PURCHASING PARTNERS, L.P.

GROUP PURCHASING AGREEMENT-

CLINICAL LABORATORY PRODUCTS AND SERVICES

 

SELLER:

 

 

 

CONTRACT NUMBER:

 

 

 

Exhibit G: Seller Information Sheet

Exhibit H: Participating Member Connectivity Agreement(s)

 

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PREMIER PURCHASING PARTNERS, L.P.

SELLER:

Specialty Laboratories

 

 

 

 

 

By:

PREMIER PLANS, L.L.C., Its General Partner

 

 

 

By:

 /s/ Robert L. Hamon

 

By:

/s/ Cheryl Gallarda

 

Printed Name:

Robert L. Hamon

Printed Name:

Cheryl Gallarda

 

Title:

Senior Vice President, Group
Purchasing Services

Title:

Vice President Business Operations

 

 

 

 

By:

 /s/ John H. Biggers, Jr.

 

Printed Name:

John H. Biggers, Jr.

 

Title:

Group Vice President, Contract
Negotiations

 

 

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WHEREAS, Purchasing Partners is an affiliate of Premier, Inc. (“Premier”), and
an alliance of hospitals and health care organizations;

 

WHEREAS, Premier’s core objective is to improve the health of communities;

 

WHEREAS, such core objective as well as the objective of helping to assure that
patients receive safe and efficacious care can be accomplished, in part, by
achieving economies of scale and innovations through group strategies and shared
resources;

 

WHEREAS, group purchasing is a fundamental way hospitals and health systems
cooperate to reduce the costs of providing health services;

 

WHEREAS, Premier’s group purchasing program is operated by Purchasing Partners;

 

WHEREAS, Seller is a manufacturer and supplier of health care products and
services;

 

WHEREAS, Seller has offered to provide products and services to the Premier
membership consistent with the terms of this Agreement;

 

WHEREAS, Purchasing Partners has committed to comply with the Best Ethical
Practices for the Group Purchasing Industry, prepared by Professor Kirk O.
Hanson and released on October 23, 2002 (the “Best Ethical Practices”), the
requirements of the Health Industry Group Purchasing Association Code of
Conduct, adopted on July 24, 2002 (the “HIGPA Code”), and the additional
commitments made by Purchasing Partners to Senator Herb Kohl and Senator Mike
DeWine of the Subcommittee on Antitrust, Competition and Business and Consumer
Rights in a letter dated August 5, 2002, (the “Additional Commitments”).  The
Best Ethical Practices, HIGPA Code and Additional Commitments are referred to
collectively herein as the “Premier Ethical Standards”.

 

WHEREAS, by entering into this Agreement with Seller it is Purchasing Partners’
expectation that Seller, in its dealings with Purchasing Partners under this
Agreement, will respect Purchasing Partners’ commitment to comply with the
Premier Ethical Standards.

 

NOW THEREFORE, in consideration of the mutual promises contained herein and
other good and sufficient consideration, the receipt and adequacy of which is
hereby acknowledged, the Parties hereto agree as follows:

 

1.0  TERM OF AGREEMENT.  This Agreement will remain in effect for the period of
time set forth in Item 5 of the Cover Sheet.

 

2.0  SERVICES

 

2.1  Services Covered.  Seller hereby agrees to provide the reference laboratory
testing services set forth in Exhibit A hereto (the “Services”) pursuant to the
terms of this Agreement.  Seller shall provide Purchasing Partners with written
notice of any Services which are not performed by Seller (i.e., those Services
which are performed by a third party), setting forth the Test/Procedure name and
the name of the actual performer of the testing.  Any additions or deletions of
Services from Exhibit A shall not be effective unless evidenced by an amendment
signed by both Parties.

 

2.2  Supplies.  Seller will provide to Participating Members, at no charge, a
reasonable amount of supplies required to facilitate the collection, transfer
and transport of specimens from the Participating Member to Seller.  Seller will
also provide supplies required for specimen management and reporting such as
forms, labels, test directory, etc...

 

2.3  Couriers.  Seller will provide or cause to be provided courier service on a
daily basis (Monday through Saturday) to pick up specimens from the laboratory
facility of any Participating Member.  Seller will also provide STAT, On-Call
and Sunday pick-up as specified in Exhibit A.

 

2.4  Electronic Interfaces.  See Exhibit A

 

2.5  Repeat testing.  Seller will, upon request from any

 

Participating Member, perform repeat testing at no charge if based on an error
or negligence of Seller and the test results do not correlate with other patient
information, unless such repeat testing is necessitated as a result of the fault
of the Participating Member.

 

3.0  PARTICIPATING MEMBERS.  Set forth in Exhibit B of this Agreement are
instructions for accessing and downloading the list of Premier members
(“Participating Members”), who shall have the right to purchase Services in
accordance with this Agreement.  The list of Participating Members (the
“Membership Roster”) may be amended by Purchasing Partners from time to time and
Purchasing Partners reserves the right to provide the Membership Roster in other
suitable forms.  The Parties hereto acknowledge that Participating Members may
include

 

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PREMIER PURCHASING PARTNERS, L.P.

STANDARD TERMS AND CONDITIONS

GROUP PURCHASING AGREEMENT- CLINICAL LABORATORY PRODUCTS AND SERVICES

 

Seller:

 

 

 

Contract Number:

 

 

 

entities/facilities which are accessing the benefits of this Agreement through
participation in the group purchasing programs operated by Purchasing Partners’
affiliate, Provider Select, Inc. (“Provider Select”) rather than Purchasing
Partners itself.  Such entities/facilities shall nonetheless be deemed
Participating Members under this Agreement.  Seller shall be responsible for
routinely maintaining the current Membership Roster.  New Participating Members
added to the Membership Roster shall be eligible to participate under this
Agreement upon the relevant date set forth in the Membership Roster.  Seller
shall stop providing the pricing set forth herein to entities removed from the
Membership Roster within thirty (30) days following the applicable date of
removal set forth in the Membership Roster.

 

On a quarterly basis, Seller shall provide Purchasing Partners with written
notice of any Participating Members which are also members of group purchasing
organizations other than Purchasing Partners (such notice is referred to as the
“Dual Membership Notice”). Seller shall have no right to challenge or contest
its obligation to pay Purchasing Partners administrative fees in accordance with
Section 10.1, on the basis that such Participating Member is also a member of
another group purchasing organization, with respect to any Participating Members
which are not listed in the Dual Membership Notice for the applicable quarter.

 

The form of any agreement between Seller and a Participating Member and any
amendments thereto shall be approved in advance by Purchasing Partners.

 

4.0  REQUIREMENTS.

 

4.1  Participation.  In order to be entitled to the pricing terms (described in
Exhibit A hereto), Participating Members shall comply with the participation
requirements set forth in Exhibit A.

 

4.2  Exempt.  Participating Members that utilize another Premier Member’s
clinical reference laboratory for testing services are exempt from their
obligation to use a Premier contracted vendor

 

5.0  TERMINATION OF EXISTING CONTRACTS.  Any Participating Member desiring to
avail itself of the benefits of this Agreement may, at its option and without
liability, terminate any existing contract(s) or other arrangement(s) with
Seller for the purpose of participating in the group purchasing arrangement set
forth in this Agreement.  Existing clients, that are also Participating Members,
will be “rolled over” to the pricing set forth in Exhibit A hereto as of the
effective date of this Agreement or within sixty (60) days of the effective date
of this Agreement.

 

6.0  ORDERING; RESULT REPORTING; TURNAROUND TIME; REPORTS

 

6.1  Testing Laboratories.  It is the intent of the Seller to perform
substantially all of the Services.  To the extent that the Participating Member
requests a service not performed by the Seller, the Seller will refer the
specimen to the Seller affiliated laboratory listed in Exhibit A for the cost
designated in Exhibit A.  To the extent that the Participating Member requests
that Seller refer a specimen to a clinical laboratory unaffiliated with Seller
(not listed in Exhibit A), the Seller will be entitled to charge the fee set
forth in Exhibit A.

 

6.2  Payment Terms.  Participating Member will receive an additional [*] ([*] %)
off of the pricing set forth in Exhibit A if full payment is made to Seller
within [*] ([*]) days following either delivery of Service(s) to or receipt of
invoice by the Participating Member, whichever date is later.  In any event,
full payment must be made within forty-five (45) days following delivery of
Service(s) or receipt of invoice, whichever date is later.

 

6.3  Reporting of Results.  When any service is ordered, Seller will provide a
report to Participating Member, which will include patient demographics, test
name, test results, assay reference range and any appropriate and necessary
comments deemed essential by the Seller.

 

6.4  Minimum Order.  Seller shall have no minimum purchase order requirement
applicable to any or all Participating Members.

 

6.5  Guarantee of Turnaround Time.  Seller agrees that all Services ordered by
any Participating Member shall be delivered to such member within no more than
the published turnaround time in the Directory of Services.  If Seller fails to
deliver any Service(s) within the above-mentioned turnaround time period for a
period of two consecutive months, Participating Member may purchase any
substitute service(s) from another source(s), and Seller shall reimburse such
member for the difference between such member’s actual cost for such service(s)
and the price(s) such member would have paid for Seller’s Service(s) under this
Agreement., Seller will be subject to performance penalties as defined in
Exhibit A.  Upon the request of any Participating Member, Seller will assist any
such Participating Member in finding alternative acceptable sources for any
Service(s) which Seller cannot deliver according to the delivery time specified
above.

 

6.6  Guarantee of Turnaround Time under Emergency Conditions.  In the event of a
natural disaster or industry wide shortage of Services (“Emergency Condition”),
Seller agrees to use commercially reasonable efforts to continue uninterrupted
Service for the Participating Members for the duration of the Emergency
Condition.

 

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* Information for which confidential treatment has been requested pursuant to
Rule 24(b)(2) of the Securities Exchange Act of 1934, as amended.  The omitted
material has been filed separately with the Securities and Exchange Commission.

 

©2003 BY PREMIER PURCHASING PARTNERS, L.P.  THIS DOCUMENT MAY NOT BE REPRODUCED
IN ANY FORM WITHOUT THE EXPRESS PERMISSION OF PREMIER PURCHASING PARTNERS, L.P.

 

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6.7 Testing Services Utilization Reports.  Seller will deliver monthly to
Purchasing Partners and Participating Member, if requested for the extent of
time defined in Item 5 on the Cover Sheet, utilization reports that describe the
following by Participating Member: Client number, Test Name, Test Number/Code,
Test Volume, Test Charges and CPT code when available, on a monthly basis and a
year to date basis.  Seller and Purchasing Partners will consult and collaborate
to create reports that organize the above information by system, facility type,
facility size and other parameters as deemed reasonably necessary by Purchasing
Partners and Seller.

 

6.8 Laboratory Data.  During the period of time set forth in Item 5 of the Cover
Sheet, Seller will provide to Purchasing Partners on a monthly basis the raw
laboratory data (which includes tests ordered and test results) and associated
demographic information as received by Seller from Participating Members with
respect to all Services performed on specimens sent by each Participating
Member, but only to the extent authorized by such Participating Member and only
to the extent permitted by law.  For this purpose, Services include clinical
laboratory services and anatomic pathology services.  Seller will cooperate with
Purchasing Partners in good faith efforts to obtain consent of the Participating
Members as part of the participation agreement.  Notwithstanding the foregoing,
such data will not include any patient names, or other information that would
identify the patient (excluding specimen identification number) provided by the
Participating Member, which will be included unless and to the extent permitted
by applicable law.  The data will be provided in HL7 format or in any other
manner that is mutually agreed upon by Purchasing Partners and Seller.
 Purchasing Partners and Seller agree that, except to the extent limited by law,
there will be no limitation on the use of such data by Purchasing Partners
except that Purchasing Partners agrees that neither it nor any of its Affiliates
will disclose the data to any third party other than in an aggregated format
that does not indicate patient identification code or any other information that
could identify the patient and agrees to indemnify and hold harmless Seller from
and against any claims brought by any person with respect to any breach or
alleged breach of any patient confidentiality laws by reason of any disclosure
of laboratory data by Purchasing Partners and its affiliates.

 

7.0  PRICING TERMS.

 

7.1 Pricing.  Service pricing is set forth in Exhibit A hereto.  All pricing
will remain firm for thirty-six (36) months (from the effective date of this
agreement).

 

7.2 Competitive Pricing.  Subject to applicable law, Seller represents and
warrants that the prices, terms and conditions offered by Seller to Purchasing
Partners through this Agreement shall, at all times, be at least as good as
those offered to any other customer which purchases a comparable volume of
Services relative to the volume purchased by Participating Members hereunder. 
Further, Seller represents and warrants that the prices, terms and conditions
offered under this Agreement are proportionally better than the prices, terms
and conditions offered to any other customer which purchases a lower volume of
Services relative to the volume purchased by Participating Members hereunder. 
Seller also agrees to extend any terms or pricing offered to an individual
Participating Member to all Participating Members.  Notwithstanding any other
provision of this Agreement, upon obtaining the prior written consent of
Purchasing Partners (which may be withheld in Purchasing Partners’ sole
discretion), Seller may, under certain circumstances (e.g., Beta testing,
research and development related activities) and for a specified reasonable
period of time, offer special acquisition programs to certain designated
Participating Members, the terms of which shall be mutually agreed upon by
Seller, Purchasing Partners and such Participating Members.

 

7.3 Pricing of New Services.  Pricing for any additional and/or new services
which the Parties mutually agree to add to Exhibit A will be negotiated at
prices consistent with the prices of Services already covered by this
Agreement.  Seller agrees to notify via regular mail or electronic mail the
Purchasing Partners contract director/manager responsible for this Agreement (as
set forth on the Cover Sheet) of new services that Seller plans to introduce to
the market at least 60 days prior to the introduction of such new services to
the market.  Seller also agrees to provide to Purchasing Partners, as soon as
practical, a copy of the summary basis of approval or medical officer’s report
for new services approved by the FDA.

 

8.0  MARKETING; SALES SUPPORT; TRAINING.

 

8.1  Seller Representatives.  Seller will provide representatives to call upon
Participating Members on a periodic basis mutually agreed to by Seller and each
individual Participating Member.

 

8.2 In-Service/Clinical Training.  Included in the price of the Service(s),
Seller will provide to Participating Members in-service and clinical training
related to the Services as required or requested by each Participating Member.

 

9.0 SERVICE PRICING INFORMATION; SALES DOCUMENTATION; ADMINISTRATIVE FEE
REPORTING.

 

9.1  Service Pricing Information (Sales Catalogs).  Seller will provide to
Purchasing Partners service pricing information including list prices in the
ANSI X.12 v004010 format via EDI VAN Services as described on Purchasing
Partners’ web-site.  Instructions for accessing such reporting format
information on Purchasing Partners’ web-site are set forth in Exhibit D.  If
Seller cannot provide service pricing information in such format, Seller may
utilize the alternative format as detailed on Purchasing Partners’ web-site. 
Purchasing Partners shall have the right to update Exhibit D and the reporting
format guidelines on its web-site from time to time upon notice to Seller.
 Further, Purchasing Partners shall have the right to disclose all such pricing
information to Participating Members.  In the case of electronic transfer of
data, the file format described on Purchasing Partner’s web-site must be used.

 

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9.2  Sales Documentation.  Seller will provide to Purchasing Partners monthly
reports of all services of Seller delivered and invoiced to each Participating
Member during each calendar month of the term regardless of whether such
Services are provided directly by Seller or other sources.  Such reports shall
identify which Services have been sold directly by Seller and which Services
have been sold through another reference laboratory.  Seller shall provide
Purchasing Partners such reports no later than thirty (30) days after the last
day of the applicable calendar month.  Such reports shall be sent by Seller to
the attention of the “Analysis Department” at Purchasing Partners’ address set
forth on the Cover Sheet.  Reports will include, without limitation, reporting
period start and end dates, Participating Member name, city, state, and sales
volume per test (totaled per Participating Member).  Participating Members will
be identified by HIN number, DEA number, and/or, as noted in the Membership
Roster, the Premier Entity Code number.  Seller will provide such sales
information in the ANSI X.12 format as described on Purchasing Partners’
web-site.  Instructions for accessing such reporting format information on
Purchasing Partners’ web-site are set forth in Exhibit D.  If Seller cannot
provide such information in such format, Seller may utilize the alternative
format detailed on Purchasing Partners’ web-site.  Purchasing Partners shall
have the right to update Exhibit D and the reporting format guidelines on its
web-site from time to time upon notice to Seller.  In the case of electronic
transfer of data the file format described on Purchasing Partners’ web-site must
be used.

 

9.3  Administrative Fee Reporting.  Seller will provide Purchasing Partners with
monthly reports setting forth the Purchasing Partners Administrative Fee (as
defined in Article 10 below) amounts generated by each Participating Member
during each calendar month of the term.  Seller shall provide Purchasing
Partners such reports no later than thirty (30) days after the last day of the
applicable calendar month.  Participating Members will be identified by HIN
number, DEA number, and/or, as noted in the Membership Roster, the Premier
Entity Code.  Seller will provide such information in the ANSI X.12 v004010
format via EDI VAN Services as described on Purchasing Partners’ web-site.
 Instructions for accessing such reporting format information on Purchasing
Partners’ web-site are set forth in Exhibit D.  If Seller cannot provide such
information in this format, Seller may utilize the alternative format as
detailed on Purchasing Partners’ web-site.  Purchasing Partners shall have the
right to update Exhibit D and the reporting format guidelines on its web site
from time to time upon notice to Seller.  In the case of electronic transfer of
data, the file format described on Purchasing Partners’ web-site must be used.

 

9.4  Participating Members’ EDI Transaction Sets.  Seller shall use best efforts
to accommodate the requests of Participating Members with respect to Seller’s
use of Electronic Data Interchange ANSI X.12 Transaction Sets, including without
limitation, Transaction Sets 810 (invoice), 820 (payment order/remittance
advice), 832 (price/sales catalog), 850 (purchase order), 855 (purchase order
acknowledgment), 856 (ship notice/manifest), 844 (product transfer account
adjustment), and 849 (response to product transfer account adjustment [or charge
back or rebate]).

 

9.5  Supplier Qualification Review Process and Quality Standards Information.
 Seller shall comply with Purchasing Partners’ requests for information
necessary to assure the qualification of the Seller as an eligible Seller
consistent with the requirements of Purchasing Partners’ Supplier Qualification
Review Process.  Seller shall also comply with requests by Purchasing Partners’
or Participating Members for information necessary to assure the quality of
Services, to include responses to Contract Products/Supplier Experience Reports
as provided to Seller by Purchasing Partners.

 

9.6  Failure to Provide Reports.  Seller’s failure to provide the information
and reports described in Sections 9.1, 9.2 and/or 9.3 shall be deemed a material
breach of this Agreement.

 

9.7  Test Code Standardization Implementation.  Seller acknowledges that a
universal test code system for laboratory testing would enhance standardization
and supply chain efficiencies through common use of standard test code numbers
or symbols.  Seller supports Purchasing Partners’ efforts to implement a
universal test code system and Seller will use all reasonable efforts to
implement any universal test code system reasonably adopted by Purchasing
Partners.

 

10.0  FEES.

 

10.1  Purchasing Partners Administrative Fee.  Seller will pay Purchasing
Partners an administrative fee (the “Purchasing Partners Administrative Fee”)
equal to the percentage set forth in Item 7 of the Cover Sheet of the total
dollar volume of Services purchased (net of any credits) by Participating
Members through Seller during the term of this Agreement,

 

Seller shall also pay administrative fees on the total dollar volume of
reference laboratory services for Participating Member’s laboratories that are a
party to an outsourcing or management agreement with Seller or a third party
outsourcing or management agreement that is referring testing to Seller.

 

Notwithstanding the foregoing, Seller shall continue to pay the Purchasing
Partners Administrative Fee under this Article 10 with respect to sales of any
Services which occur after the expiration or termination of this Agreement
pursuant to a direct contract between Seller and a Participating Member (a
“Member Agreement”) which was entered into during the term of this Agreement. 
Seller’s obligation to pay such administrative fees shall continue until the
expiration or termination of the then-current term of the Member Agreement. 
Further, all other provisions relating to the Purchasing Partners Administrative
Fee, including without limitation, the obligation to provide sales documentation
and administrative fee reporting pursuant to Sections 9.2 and 9.3 above, shall
survive the expiration or termination of this Agreement and remain in effect
with respect

 

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to Services purchases under Member Agreements until the expiration or
termination of the then-current term of the applicable Member Agreement.

 

10.2  Manner of Payment.  Seller will pay to Purchasing Partners the Purchasing
Partners Administrative Fee monthly, without demand or notice, within thirty
(30) days after the end of each month during the term.  Seller’s first
Administrative Fee payment hereunder shall include amounts due with respect to
any “stub” period (i.e., the period of time from the Effective Date until the
first day of the first calendar month) and the entire first calendar month. 
Seller’s failure to timely pay the Purchasing Partners Administrative Fee shall
be deemed a material breach of this Agreement.

 

All payments shall be by wire or electronic transfer to the account of “Premier
Purchasing Partners, L.P.” in accordance with the written instructions set forth
as Exhibit E hereto or by a check payable to “Premier Purchasing Partners,
L.P.”. If paying by check, Seller shall send checks to the following address:

 

Premier Purchasing Partners, L.P.

Department 7650

Los Angeles, CA  90084-7650

 

Seller shall pay to Purchasing Partners interest on any past due amount owing
Purchasing Partners hereunder at the lesser of (a) one and one-half percent
(1-1/2%) per month or (b) the maximum interest rate legally permitted.

 

11.0  COMPLIANCE WITH LAWS AND REGULATIONS.

 

11.1  General.  Seller represents and warrants that throughout the term of this
Agreement and any extension hereof, Seller and all Services shall be and shall
remain in compliance with all applicable federal, state and local laws and
regulations, including without limitation all applicable “safe harbor”
regulations relating to group purchasing organizations and fees, discounts and
incentives paid and/or granted to group purchasing organizations and any
participants therein.  Seller shall disclose to Participating Members, per
applicable regulations, the specified dollar value of discounts or reductions in
price.  The Parties acknowledge and agree that for purposes of 42 C.F.R.
Section 1001.952(h), any reduction in the amount Seller charges a Participating
Member (excluding group purchasing organization fees, such as the Purchasing
Partners Administrative Fee) is a “discount or other reduction in price” to the
Participating Member.  Participating Members shall disclose the specified dollar
value of discounts or reductions in price under any state or federal program
which provides cost or charge-based reimbursement to such Participating Members
for the Services covered by this Agreement in accordance with applicable
regulations.

 

Seller agrees that, until the expiration of four (4) years after the furnishing
of any services pursuant to this Agreement, it will make available, upon written
request of the Secretary of Health and Human Services or the Comptroller General
of the United States or any of their duly authorized representatives, copies of
this Agreement and any books, documents, records and other data of Seller that
are necessary to certify the nature and extent of the costs incurred by
Participating Members in purchasing such services.  If Seller carries out any of
its duties under this Agreement through a subcontract with a related
organization involving a value or cost of ten thousand dollars ($10,000) or more
over a twelve-month period, Seller will cause such subcontract to contain a
clause to the effect that, until the expiration of four (4) years after the
furnishing of any service pursuant to said contract, the related organization
will make available upon written request of the Secretary of Health and Human
Services or the Comptroller General of the United States or any of their duly
authorized representatives, copies of this Agreement and any books, documents,
records and other data of said related organization that are necessary to
certify the nature and extent of costs incurred by Seller for such goods or
services.  Seller shall give Purchasing Partners notice immediately upon receipt
of any request from the Secretary of Health and Human Services or the
Comptroller General of the United States or any of their duly authorized
representatives for disclosure of such information.

 

Seller represents and warrants that as of the date of this Agreement, Seller has
not: (a) been listed by any federal or state agency as excluded, debarred,
suspended or otherwise ineligible to participate in federal and/or state
programs; or (b) been convicted of any crime relating to any federal and/or
state program.  Seller further agrees to immediately notify Purchasing Partners
in writing in the event Seller is listed by a federal or state agency as
excluded, debarred, suspended or otherwise ineligible to participate in any
federal and/or state programs or if Seller is convicted of any crime relating to
any such program.

 

11.2  HIPAA Compliance.  The U.S. Department of Health and Human Services issued
regulations on “Standards for Privacy of Individually Identifiable Health
Information,” which comprise 45 C.F.R. Parts 160 and 164 (the “Privacy Rule”),
and “Security Standards,” which comprise 45 C.F.R. Parts 160, 162, and 164 (the
“Security Rule”), promulgated pursuant to the Health Insurance Portability and
Accountability Act of 1996).  Seller shall comply with the Privacy Rule and
Security Rule, pursuant to the manner set forth in the HIPAA Addendum attached
hereto, if applicable.

 

12.0  INDEMNIFICATION; WARRANTIES; SPECIFICATIONS AND NOTICES.

 

12.1  Indemnification.  Seller hereby agrees to indemnify, defend and hold
harmless Purchasing Partners and each Participating Member and their respective
directors, officers, employees, agents and insurers from and against any and all
claims, demands, actions, losses, expenses, damages, liabilities, costs
(including, without limitation, interest, penalties and reasonable attorneys’
fees) and judgments to the extent arising out of: (a) alleged bodily injury,
property damage or any other damage or injury allegedly caused by, contributed
by or associated with any of the Services

 

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covered by this Agreement, and (b) alleged acts or omissions of Seller and its
employees and agents acting under its control or supervision.  Purchasing
Partners hereby agrees to indemnify, defend and hold harmless Seller and its
directors, officers, employees, agents and insurers from and against any and all
claims, demands, actions, losses, expenses, damages, liabilities, costs
(including, without limitation, interest, penalties and reasonable attorneys’
fees) and judgments to the extent arising out of the acts or omissions of
Purchasing Partners and its employees and agents acting under its control or
supervision.

 

12.2  Standards of Performance.  Seller hereby represents and warrants that in
connection with all Services hereunder, its performance under this agreement
shall be conducted with due diligence and in full compliance with the highest
professional standards of practice in the industry and Seller’s policies and
procedures. which shall not be materially altered without prior written notice
to Purchasing Partners.  Seller shall comply with all laws and safety rules in
the course of performing the Services.  If Seller’s work requires a license,
Seller has obtained that license, and the license is in full force and effect.

 

Seller will deliver monthly for the extent of time defined in Item 5 on the
Cover Sheet to Purchasing Partners and to Participating Member, Quality
Assurance reports of Seller’s performance regarding key customer service
metrics.  This report should include but is not limited to customer service
metrics such as lost specimens, telephone response time, billing errors, etc.
 If Seller fails to meet customer service metric thresholds as defined in
Exhibit A, Seller will be subject to non-performance penalties as defined in
Exhibit A.

 

12.3 Service Notices.   Seller agrees to send all Service notices (including
without limitation recall notices, service availability notices, reference range
and methodology change notices), as well as notices of any other changes
affecting the Services and notices of new Services, to each Participating Member
with copies to Purchasing Partners 60 days (60) days prior to institution. 
Seller shall provide Purchasing Partners written notice of any Class I FDA
recall affecting any of the Services within twenty-four (24) hours of Seller’s
receipt of any such recall.  Seller shall provide Purchasing Partners written
notice of any Class II or Class III FDA recall affecting any of the Services as
required under applicable law, as if Purchasing Partners was a user.  Further,
Seller agrees to immediately notify Purchasing Partners and each Participating
Member of any problems in the performance or reporting of Services and of any
situation that might affect Seller’s ability to meet Seller’s obligations under
this Agreement.  Except as prohibited by law, upon Purchasing Partners’ request,
Seller shall provide Purchasing Partners copies of any FDA Form 483, regulatory
letter, and/or warning letter relating to the Services and Seller’s response
thereto.

 

12.4  Insurance.  Seller shall maintain adequate Services liability, general
public liability, and property damage insurance against any claim or claims
which might or could arise regarding Services purchased by Participating Members
from it under the Agreement.  Seller shall make Purchasing Partners a named
additional insured in Seller’s insurance policy containing the required
coverage.  When requested by Purchasing Partners, an insurance certificate
indicating the foregoing coverage, issued by an insurance company licensed to do
business in the relevant state or states and signed by an authorized agent,
shall be furnished to Purchasing Partners.  Seller shall provide Purchasing
Partners with at least thirty (30) days prior written notice of any cancellation
or material modification of such insurance.

 

13.0  TERMINATION.

 

13.1  Termination for Breach.  In the event of breach of any provision of this
Agreement, the non-breaching party shall notify the breaching party in writing
of the specific nature of the breach and shall request that it be cured.  If the
breaching party does not cure the breach within thirty (30) days of such notice,
the non-breaching party may immediately terminate this Agreement on written
notice to the breaching party, and such termination shall not preclude the
non-breaching party from pursuing any and all remedies available to it at law or
in equity.

 

13.2  Orders Placed Prior to Termination.  Seller shall fulfill, in accordance
with the terms of this Agreement, all orders for Services submitted by
Participating Members and received by Seller prior to termination or expiration
of this Agreement.

 

13.3  Termination Without Cause.  Either party may terminate this Agreement at
any time without cause or penalty upon providing the other party with ninety
(90) days’ advance written notice.

 

13.4  Survival.  The following paragraphs of this Agreement shall survive
expiration or termination of this Agreement: (a) the payment of Administrative
Fees pursuant to Article 10.0 including, but not limited to, fees relating to
Services ordered prior to the effective date of expiration or termination and
delivered after expiration or termination, and fees related to sales of Services
under Member Agreements (as described in Section 10.1 above) which occur after
the expiration or termination of this Agreement; (b) the audit undertakings set
forth in Section 15.12; (c) the representations, warranties and covenants set
forth in Section 12.2; (d) the indemnification undertaking contained in
Section 12.1; (e) the designation of Participating Members as third party
beneficiaries pursuant to Section 15.7; (f) the undertaking to fill orders
submitted to and received by Seller prior to the date of expiration or
termination set forth in Section 13.2; (g) the confidentiality undertakings
contained in Article 14; (h) the rights and limitations on assignment contained
in Sections 15.4 and 15.10; (i) the governing law provisions contained in
Section 15.1; (j) reasonable attorney’s fees provided for in Section 15.9; and
(k) compliance with laws and regulations provided for in Article 11.0.

 

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14.0  CONFIDENTIALITY; OWNERSHIP AND USE OF DATA.

 

14.1  Confidential Information.  For the purposes of this Agreement,
confidential information (“Confidential Information”) shall mean all
proprietary, secret or confidential information or data relating to Purchasing
Partners, Participating Members, or Seller and their respective operations,
employees, services, patients or customers.

 

14.2  Protection of Confidential Information.  Seller and Purchasing Partners
acknowledge that Seller, Purchasing Partners, or Participating Members may
disclose Confidential Information to each other in connection with this
Agreement.  If Seller or Purchasing Partners receives Confidential Information,
it shall: (a) maintain the Confidential Information in strict confidence; (b)
use at least the same degree of care in maintaining the secrecy of the
Confidential Information as it uses in maintaining the secrecy of its own
proprietary, secret, or confidential information, but in no event less than a
reasonable degree of care; (c) use Confidential Information only to fulfill its
obligations under this Agreement; and (d) return or destroy all documents,
copies, notes, or other materials containing any portion of the Confidential
Information upon request by Purchasing Partners or Seller.  Notwithstanding the
foregoing, Purchasing Partners shall have the right to disclose Confidential
Information to outside consultants as necessary for Purchasing Partners to
provide support services for Participating Members in connection with this
Agreement, provided any such consultants agree to the same level of
confidentiality as described herein.

 

14.3  Agreement Confidentiality.  Neither Purchasing Partners nor Seller shall
disclose the terms of this Agreement to any other person or entity outside its
organization and affiliates other than to a Participating Member or as required
by law.  For purposes of this provision, an affiliate is an entity in which
Purchasing Partners or Seller, as appropriate, maintains an ownership position
in or a contractual relationship with, and the disclosure is required so that
the disclosing party may fulfill its obligations hereunder.  Neither party shall
make any public announcement concerning the existence of this Agreement or its
terms unless such party receives prior written approval by the other party.

 

14.4  Limitation on Obligation.  Seller and Purchasing Partners shall have no
obligation concerning any portion of the Confidential Information which: (a) was
known to it before receipt, directly or indirectly, from the disclosing party;
(b) is lawfully obtained, directly or indirectly, by it from a non-party which
was under no obligation of confidentiality; (c) is or becomes publicly available
other than as a result of an act or failure to act by the receiving party; (d)
is required to be disclosed by the receiving party by applicable law or legal
process; or (e) is developed by the receiving party independent of the
Confidential Information disclosed by the disclosing party.  The receiving party
shall not disclose any portion of the Confidential Information to any person
except those of its employees and affiliates having a need to know such portion
to accomplish the purposes contemplated by this Agreement.

 

14.5  License Granted to Seller.  Purchasing Partners has developed Confidential
Information (as defined in Section 14.1 above) and trade secrets relating to the
sale of goods to a large number of customers in the healthcare industry using
proprietary business processes.  Seller acknowledges that Purchasing Partners
and its affiliates have invested substantial money in the development and
maintenance of such processes and in the sourcing and sales of products and
services.  Seller will have a position of special trust and confidence for the
use of such Confidential Information (including without limitation the roster of
Participating Members set forth in Exhibit B hereto) to support the purposes of
this Agreement.  Accordingly, only for the term of this Agreement, Purchasing
Partners hereby grants to Seller a non-exclusive license to use Confidential
Information and such trade secrets for the limited purpose of providing the
Services to Purchasing Partners and Participating Members under this Agreement.

 

14.6  Data.  Seller hereby acknowledges and agrees that all information and data
generated or otherwise made available to Seller as a result of the participation
of Participating Members under this Agreement (“Participating Member Data”“) is
proprietary to and owned exclusively by the applicable Participating Member
and/or Purchasing Partners.  Seller shall not sell, market or commercialize
Participating Member Data, create derivative products or applications based on
Participating Member Data or otherwise use Participating Member Data in any
manner unrelated to the performance of Seller’s obligations under this
Agreement.  Participating Member Data shall be deemed Confidential Information
of Participating Members and/or Purchasing Partners and therefore subject to the
provisions of Article 14 hereof.  Seller hereby consents to the release to
Purchasing Partners of transactional data relating to purchasing activity by
Participating Members under this Agreement.  Such consent shall extend to the
release to Purchasing Partners of such data by any third party that operates an
electronic marketplace or exchange.

 

15.0  MISCELLANEOUS.

 

15.1  Governing Law and Venue.  This Agreement is being delivered and executed
in the State of Illinois.  In any action brought by or against Purchasing
Partners, the validity, construction and enforcement of this Agreement shall be
governed in all respects by the laws of the State of Illinois, and venue shall
be proper only in a court of competent jurisdiction located in the State of
Illinois in Cook County.  In the event of any dispute arising out of this
Agreement, whether at law or in equity, brought by or against a Premier
Participating Member, venue shall be proper only in a court of competent
jurisdiction located in the county and state in which such member is located. 
The parties agree to be subject to personal jurisdiction in and consent to
service of process issued by a court in which venue is proper as defined in this
Section 15.1.

 

15.2  Modification and Waiver.  No modification of this Agreement shall be
deemed effective unless in writing and signed by each of the parties hereto. 
Any waiver of a breach of any provision(s) of this Agreement shall not be deemed
effective unless in writing and signed by the party against whom enforcement of
the waiver is sought.

 

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15.3  Headings.  The descriptive headings of the sections of this Agreement are
inserted for convenience only and shall not control or affect the meaning or
construction of any provision hereof.

 

15.4  Assignment.   Purchasing Partners shall have the right, without Seller’s
consent, to assign Purchasing Partners’ rights, title and interest under this
Agreement to any entity owned or controlled by Premier, Premier Purchasing
Partners, L.P. (“Purchasing Partners”) and/or Purchasing Partners or under
common ownership or control with Premier, Purchasing Partners and/or Purchasing
Partners.  Except as set forth in the foregoing sentence, neither party may
assign, subcontract, delegate or otherwise transfer this Agreement or any of its
rights or obligations hereunder, nor may it contract with third parties to
perform any of its obligations hereunder except as contemplated in this
Agreement, without the other party’s prior writtenconsent which would not be
unreasonably withheld.

 

15.5  Severability.  If any part of this Agreement shall be determined to be
invalid, illegal or unenforceable by any valid Act of Congress or act of any
legislature or by any regulation duly promulgated by the United States or a
state acting in accordance with the law, or declared null and void by any court
of competent jurisdiction, then such part shall be reformed, if possible, to
conform to the law and, in any event, the remaining parts of this Agreement
shall be fully effective and operative insofar as reasonably possible.

 

15.6  Notices.  Any notice required to be given pursuant to the terms and
provisions hereof shall be in writing, postage and delivery charges pre-paid,
and shall be sent by telecopier, hand delivery, overnight mail service,
first-class mail or certified mail, return receipt requested, to Purchasing
Partners or Seller at the addresses and/or facsimile numbers set forth on the
Cover Sheet.  Any party may change the address to which notices are to be sent
by notice given in accordance with the provisions of this section.  Notices
hereunder shall be deemed to have been given, and shall be effective upon actual
receipt by the other party, or, if mailed, upon the earlier of the fifth (5th)
day after mailing or actual receipt by the other party.  Seller shall provide a
copy of any notice to Purchasing Partners provided under this Section to the
Premier Legal Department at the following address:

 

Premier Legal Department

12225 El Camino Real

San Diego, CA 92130-2099

Tel No.: (858) 509-6361

Fax No.: (858) 481-0538

Attn.:  General Counsel

 

Purchasing Partners shall provide a copy of any notice to Seller provided under
this Section to the Specialty Laboratories Legal Department at the following
address:

 

Office of the General Counsel

Specialty Laboratories

2211 Michigan Avenue

Santa Monica, CA 90404

Tel No.: (310) 828-6543

Fax No.: (310) 586-7235

 

15.7  Enforceability.  The parties hereto acknowledge and agree that (a) this
Agreement is entered into by Purchasing Partners for the express, intended
benefit of Participating Members, (b) each of the Participating Members shall be
and constitute an intended third-party beneficiary of the representations,
warranties, covenants and agreements of the Seller contained herein, and (c)
each of the Participating Members shall be entitled to enforce the terms and
provisions of this Agreement to the same extent as Purchasing Partners.

 

15.8  Independent Contractors.  The parties’ relationship hereunder is that of
independent contractors.  This Agreement does not create any employment, agency,
franchise, joint venture, partnership or other similar legal relationship
between Purchasing Partners and Seller.  Neither party has the authority to bind
or act on behalf of the other party except as otherwise specifically stated
herein.

 

15.9  Attorneys’ Fees.  Should any party engage an attorney for the purpose of
enforcing this Agreement or any judgment based hereon in any court, including
bankruptcy court, courts of appeal or arbitration proceedings, the prevailing
party shall be entitled to receive its reasonable attorneys’ fees and costs in
addition to any other relief granted.

 

15.10  Binding Effect.  This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and permitted
assigns.

 

15.11  Force Majeure.  The obligations of either party to perform under this
Agreement will be excused during each period of delay caused by acts of God or
by shortages of power or materials or government orders which are beyond the
reasonable control of the party obligated to perform (“Force Majeure Event”). 
In the event that either party ceases to perform its obligations under this
Agreement due to the occurrence of a Force Majeure Event, such party shall: (a)
immediately notify the other party in writing of such Force Majeure Event and
its expected duration; (b) take all reasonable steps to recommence performance
of its obligations under this Agreement as soon as possible.  In the event that
any Force Majeure Event delays a party’s performance for more than thirty (30)
days following notice by such party pursuant to this Agreement, the other party
may terminate this agreement immediately upon written notice to such party.

 

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15.12  Audit of Costs.  Seller shall permit Purchasing Partners or its agent to
conduct periodic audits of records relating to Seller’s performance under this
Agreement including without limitation relevant orders, invoices, volume reports
and administrative fees.  At a minimum, Seller shall maintain and have available
for review the following documents in connection with an audit: electronic
copies of volume and administrative fee files previously sent to Purchasing
Partners, copies of the Membership Rosters utilized by Seller in performing
under this Agreement, records of all sales made to Participating Members under
this Agreement (in a format that allows for re-querying of the data), an
electronic listing of all Products purchased during the term of this Agreement
(in a format that allows for re-querying of the data) which can be used as the
basis for confirming total Participating Member purchase volume and total
Purchasing Partners Administrative Fees due under this Agreement, and a cross
reference between Seller’s internal customer numbers and Purchasing
Partners-approved entity code numbers (in the event that Purchasing Partners’
entity code numbers are not loaded into Seller’s information system).  The
audits shall be conducted upon reasonable advance notice during regular business
hours at Seller’s principal office and in such a manner as not to unduly
interfere with Seller’s operations.  In the event any audit reveals an
underreporting of Purchasing Partners Administrative Fees in excess of the
lesser of $25,000 or 5% of the total Purchasing Partners Administrative Fees
paid in any reporting period, or in aggregate for the entire audit period, then
the costs of the audit, including reasonable labor, outside consultant fees,
out-of-pocket expenses and administrative charges to perform the review shall be
reimbursed to Purchasing Partners by Seller within thirty (30) days of Seller’s
receipt of an invoice therefore from Purchasing Partners.

 

15.13  Minority, Woman-Owned and Small Businesses.  On or before the Effective
Date, Seller shall provide to Purchasing Partners a copy of Seller’s current
supplier diversity policy.  Such policy shall set forth the manner in which
Seller intends to comply with Purchasing Partners Minority, Woman-Owned, and
Small Business Policy set forth in Exhibit F hereto.  In this regard, Seller
acknowledges that it will use commercially reasonable efforts to spend a minimum
of three percent (3%) of its annual production and raw material costs with
minority-owned businesses and a minimum of two percent (2%) of such costs with
women-owned businesses.

 

15.14  Entire Agreement.  This Agreement, including the Cover Sheet, the
Additional Terms and Conditions (if any) and all Exhibits hereto, constitutes
the entire understanding and agreement between Seller and Purchasing Partners
concerning the subject matter hereof, and supersedes all prior negotiations,
agreements and understandings between Seller and Purchasing Partners, whether
oral or in writing, concerning the subject matter hereof, including, but not
limited to, all prior agreements between Seller and either Purchasing Partners,
AmHS Purchasing Partners, L.P., American Healthcare Systems, Inc., Premier
Health Alliance, Inc., or SunHealth Alliance, Inc., whether or not assigned to
Purchasing Partners or Premier.

 

15.15  Labor and Employment Laws.  Seller represents and warrants that it
complies with applicable labor and employment laws and prohibits any form of
child labor or other exploitation of children in the delivery of Services,
consistent with provisions of the International Labor Organization’s Minimum Age
Convention of 1973.  A child is any person who is less than fourteen (14) years
of age or who is younger than the compulsory age to be in school in the country
in which Seller’s business is being conducted, if that age is higher than
fourteen (14).

 

15.16  No Additional Obligations Imposed by Seller.  Except as expressly set
forth herein, Seller shall not impose any obligations on Purchasing Partners
and/or Participating Members as a condition to receiving any of the benefits set
forth in this Agreement.

 

15.17                 Counterparts.  This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same agreement.

 

15.18  Data/Payment Exchange; Electronic Commerce.  Seller hereby acknowledges
that Purchasing Partners and/or its affiliates are currently developing
technology and electronic commerce (“e-commerce”) processes which may enable
Participating Members and Seller to more efficiently purchase and sell products,
supplies and equipment, exchange information and make payments (e.g., through
use of the Internet).  Seller shall implement any e-commerce system reasonably
adopted by Purchasing Partners and/or its affiliates for group purchasing
activities and shall cooperate in all reasonable respects with Purchasing
Partners and/or its affiliates in integrating any such e-commerce systems into
Seller’s systems.  Any such e-commerce system shall be owned by and proprietary
to Purchasing Partners and/or its affiliates.  Further, Seller agrees during the
term of this Agreement not to direct or otherwise encourage Participating
Members to use e-commerce systems other than the system promoted, developed
and/or operated by Purchasing Partners and/or its affiliates.

 

15.19  Technology Breakthroughs.   Purchasing Partners believes an essential
element of advancing the core objectives and mission of Premier is to encourage
the development of health care technology which significantly improves the
quality, process and/or outcome of care.  In support of this belief, the Parties
acknowledge that certain Services which incorporate breakthrough technologies
(“Breakthrough Technologies”) have the potential to significantly improve safety
to patients or hospital staff, significantly improve non-clinical operational
efficiency, or deliver dramatic process of care cost savings or improved
clinical outcomes when compared to the level of safety, operational efficiency,
process of care and/or outcomes delivered through use of the Services. 
Purchasing Partners therefore reserves the right to enter into agreements with
the supplier(s) of such Breakthrough Technologies in order to make such Services
available to Participating Members.  Seller hereby agrees that the purchase of
such Breakthrough Technologies by Participating Members shall not negatively
impact such members’ access to any favorable terms and conditions offered under
this Agreement.

 

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15.20  Controlling Document.  In the event of any conflict between this
Agreement and any document, instrument or agreement prepared by Seller
(including without limitation Seller’s purchase orders, invoices and
warranties), the terms of this Agreement shall control.

 

15.21  Seller Information Sheet.  Concurrent with the execution of this
Agreement, Seller shall complete and return to Purchasing Partners the Seller
Information Sheet set forth as Exhibit G.

 

End of Standard Terms and Conditions

 

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PREMIER PURCHASING PARTNERS, L.P.

HIPAA ADDENDUM

GROUP PURCHASING AGREEMENT

 

I.  GENERAL PROVISIONS

 

Section 1.  Effect.  This Addendum supplements, modifies and amends any and all
agreements, whether oral or written, between Purchasing Partners and Seller and
relates to the disclosure of protected health information (“PHI”) by
Participating Members to Seller, or the creation or receipt of PHI by Seller on
behalf of Participating Members (the “Agreement(s)”).  The terms and provisions
of this Addendum shall supercede any other conflicting or inconsistent terms and
provisions in any Agreement(s) between Purchasing Partners and Seller, including
all exhibits or other attachments thereto and all documents incorporated therein
by reference.  Without limitation of the foregoing, any limitation or exclusion
of damages provisions shall not be applicable to this Addendum.

 

Section 2.  Amendment.  Seller and Purchasing Partners agree to amend this
Addendum to the extent necessary to allow either Seller or Participating Members
to comply with the Privacy Rule, the Standards for Electronic Transactions (45
C.F.R. Parts 160 and 162) and the Security Rule (collectively, the “Standards”)
promulgated or to be promulgated by the Secretary or other regulations or
statutes.  Seller agrees that it will fully comply with all such Standards and
that it will agree to amend this Addendum to incorporate any material terms
required by the Standards.

 

Section 3.  Definitions.   Capitalized terms used herein without definition
shall have the respective meanings assigned to such terms in Part IV of this
Addendum.

 

II.  OBLIGATIONS OF SELLER

 

Section 1.  Use and Disclosure of Protected Health Information.  Seller may use
and disclose PHI only as required to satisfy its obligations under the
Agreement(s), as permitted herein, or as required by law, but shall not
otherwise use or disclose any PHI.  Seller shall not, and shall ensure that its
directors, officers, employees, contractors and agents do not, use or disclose
PHI received from a Participating Member in any manner that would constitute a
violation of the Privacy Standards if used by the Participating Member, except
that Seller may use PHI (i) for Seller’s proper management and administrative
services, (ii) to carry out the legal responsibilities of Seller or (iii) to
provide data aggregation services relating to the health care operations of
Participating Member if required under the Agreement(s).  Seller hereby
acknowledges that, as between Seller and Participating Members, all PHI shall be
and remain the sole property of Participating Members, including any and all
forms thereof developed by Seller in the course of its fulfillment of its
obligations pursuant to this Addendum.  Seller further represents that, to the
extent Seller requests that a Participating Member disclose PHI to Seller, such
a request is only for the minimum necessary PHI for the accomplishment of
Seller’s purpose.

 

Section 2.  Safeguards Against Misuse of Information.  Seller agrees that it
will implement appropriate administrative, technical and physical safeguards to
protect the confidentiality, integrity and availability of PHI and to prevent
the use or disclosure of PHI other than pursuant to the terms and conditions of
this Addendum.

 

Section 3.  Reporting of Disclosures of Protected Health Information.  Seller
shall, within thirty (30) days of becoming aware of any Security Incident (as
defined in the Security Rule) or any use or disclosure of PHI in violation of
this Addendum by Seller, its officers, directors, employees, contractors or
agents or by a third party to which Seller disclosed PHI pursuant to
Section II.4 of this Addendum, report any such disclosure to Purchasing Partners
and applicable Participating Members.

 

Section 4.  Agreements by Third Parties.  Seller shall obtain and maintain an
agreement with each agent or subcontractor that has or will have access to PHI,
which is received from, or created or received by Seller on behalf of
Participating Members, pursuant to which agreement such agent or subcontractor
agrees to be bound by the same restrictions, terms and conditions that apply to
Seller pursuant to this Addendum with respect to such PHI.

 

Section 5.  Access to Information.  Within five (5) days of a request by a
Participating Member for access to PHI about an individual contained in a
Designated Record Set, Seller shall make available to the Participating Member
such PHI for so long as such information is maintained in the Designated Record
Set.  In the event any individual requests access to PHI directly from Seller,
Seller shall within two (2) days forward such request to Participating Member. 
Any denials of access to the PHI requested shall be the responsibility of
Participating Member.

 

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Section 6.  Availability of Protected Health Information for Amendment.  Within
ten (10) days of receipt of a request from a Participating Member for the
amendment of an individual’s PHI or a record regarding an individual contained
in a Designated Record Set (for so long as the PHI is maintained in the
Designated Record Set), Seller shall provide such information to Participating
Member for amendment and incorporate any such amendments in the PHI as required
by 45 C.F.R. §164.526.

 

Section 7.  Accounting of Disclosures.  Within ten (10) days of notice by a
Participating Member to Seller that it has received a request for an accounting
of disclosures of PHI, other than related to the treatment of the patient, the
processing of payments related to such treatment, or the operation of a covered
entity or its business associate and not relating to disclosures made earlier
than six (6) years prior to the date on which the accounting was requested,
Seller shall make available to Participating Member such information as is in
Seller’s possession and is required for Participating Member to make the
accounting required by 45 C.F.R. §164.528.  At a minimum, Seller shall provide
Participating Member with the following information: (i) the date of the
disclosure, (ii) the name of the entity or person who received the PHI and, if
known, the address of such entity or person, (iii) a brief description of the
PHI disclosed, and (iv) a brief statement of the purpose of such disclosure
which includes an explanation of the basis for such disclosure.  In the event
the request for an accounting is delivered directly to Seller, Seller shall
within two (2) days forward such request to Participating Member.  Seller hereby
agrees to implement an appropriate recordkeeping process to enable it to comply
with the requirements of this Section.

 

Section 8.  Availability of Books and Records.  Seller hereby agrees to make its
internal practices, books and records relating to the use and disclosure of PHI
received from, or created or received by Seller on behalf of, a Participating
Member available to the Secretary for purposes of determining Participating
Member’s compliance with the Privacy Standards.

 

Section 9.  Indemnification.  Seller hereby agrees to indemnify and hold
Purchasing Partners and Participating Members harmless from and against any and
all liability and costs, including attorneys’ fees, created by a breach of this
Addendum by Seller, its agents or subcontractors, without regard to any
limitation or exclusion of damages provision otherwise set forth in the
Agreement(s).

 

Section 10.  Insurance.  Seller shall obtain and maintain during the term of
this Agreement liability insurance covering claims based on a violation of the
Standards or any applicable state law or regulation concerning the privacy of
patient information.  A copy of such policy or a certificate evidencing the
policy shall be provided to Purchasing Partners upon written request.

 

III.           TERMINATION OF AGREEMENT WITH SELLER

 

Section 1.  Term.  This Addendum shall become effective on the later of
April 14, 2003 or the effective date of the Agreement and, unless otherwise
terminated as provided herein, shall continue to be effective until superseded
by another agreement or until the relationship between Participating Members and
Seller ceases.

 

Section 2.   Termination Upon Breach of Provisions Applicable to Protected
Health Information.  Any other provision of the Agreement(s) notwithstanding,
this Addendum and the Agreement(s) may be terminated by Purchasing Partners upon
thirty (30) days written notice to Seller in the event that Seller breaches any
provision contained in this Addendum and such breach is not cured within such
thirty (30) day period.  Participating Member may terminate its relationship
with Seller in the event that Seller breaches any provision contained in this
Addendum with respect to such Participating Member; provided, however, that in
the event that termination of this Addendum with respect to such Participating
Member is not feasible, in Participating Member’s sole discretion, Seller hereby
acknowledges that Participating Member shall have the right to report the breach
to the Secretary, notwithstanding any other provision of this Addendum or any
Agreement(s) to the contrary.

 

Section 3.  Return or Destruction of Protected Health Information upon
Termination.  Upon termination of this Addendum with respect to a certain
Participating Member, Seller shall either return or destroy all PHI received
from such Participating Member or created or received by Seller on behalf of
such Participating Member and which Seller still maintains in any form.  Seller
shall not retain any copies of such PHI.  Notwithstanding the foregoing, to the
extent that Participating Member agrees that it is not feasible to return or

 

2

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destroy such PHI, the terms and provisions of this Addendum shall survive
termination and such PHI shall be used or disclosed solely for such purpose or
purposes which prevented the return or destruction of such PHI.

 

IV.                                DEFINITIONS FOR USE IN THIS ADDENDUM

 

“Data Aggregation” shall mean, with respect to PHI created or received by Seller
in its capacity as the business associate of a Participating Member, the
combining of such PHI by Seller with the PHI received by Seller in its capacity
as a business associate of another covered entity, to permit data analyses that
relate to the health care operations of the respective covered entities.

 

“Designated Record Set” shall mean a group of records maintained by or for a
Participating Member that is (i) the medical records and billing records about
individuals maintained by or for such Participating Member, (ii) the enrollment,
payment, claims adjudication, and case or medical management record systems
maintained by or for a health plan; or (iii) used, in whole or in part, by or
for such Participating Member to make decisions about individuals.  As used
herein the term “Record” means any item, collection, or grouping of information
that includes PHI and is maintained, collected, used, or disseminated by or for
Participating Member.

 

“Electronic Media” shall mean the mode of electronic transmissions.  It includes
the Internet, extranet (using Internet technology to link a business with
information only accessible to collaborating parties), leased lines, dial-up
lines, private networks, and those transmissions that are physically moved from
one location to another using magnetic tape, disk, or compact disk media.

 

“Individually Identifiable Health Information” shall mean information that is a
subset of health information, including demographic information collected from
an individual, and

 

(i)  is created or received by a health care provider, health plan, employer, or
health care clearinghouse; and

 

(ii) relates to the past, present, or future physical or mental health or
condition of an individual; the provision of health care to an individual; or
the past, present or future payment for the provision of health care to an
individual; and (a) identifies the individual, or (b) with respect to which
there is a reasonable basis to believe the information can be used to identify
the individual.

 

“Privacy Rule” shall mean the Standards for Privacy of Individually Identifiable
Health Information, 45 C.F.R. Parts 160 and 164.

 

“Protected Health Information” shall mean Individually Identifiable Health
Information that is (i) transmitted by electronic media, (ii) maintained in any
medium constituting Electronic Media; or (iii) transmitted or maintained in any
other form or medium.  “Protected Health Information” shall not include (i)
education records covered by the Family Educational Right and Privacy Act, as
amended, 20 U.S.C. §1232g and (ii) records described in 20
U.S.C.§1232g(a)(4)(B)(iv).

 

“Secretary” shall mean the Secretary of the U.S. Department of Health and Human
Services.

 

“Security Rule” shall mean the Security Standards, 45 C.F.R. Parts 160, 162 and
164.

 

3

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SELLER:

 

Specialty Laboratories

 

CONTRACT NUMBER:

 

PP-LA-146

 

SERVICE:

 

Clinical Reference Laboratory Testing Services

 

 

1.              Volume:  Pricing tiers for Services shall vary according to
total dollar volume of Services purchased per calendar year by Participating
Members according to the following:

 

VOLUME TIERS

 

TOTALSERVICES
PURCHASES
($ PER CALENDAR YEAR)

 

Hotlist
Discounting

 

ATB Discounts *

 

TIER 1

 

< [*]

 

n/a

 

[*]%

 

TIER 2

 

$[*] to < $[*]

 

[*] Tests

 

[*]%

 

TIER 3

 

$[*] to < $[*]

 

[*] Tests

 

[*]%

 

TIER 4

 

$[*] to < [*]

 

[*] Tests

 

[*]%

 

TIER 5

 

$[*] +

 

[*] Tests

 

[*]%

 

 

Pricing for tests that are unique to Specialty will be mutually negotiated per
terms of Section 7.3. * Across-The-Board (ATB) Discounts will initially apply to
new tests that are introduced by Specialty after the contract effective date.
 However, within 60 days of introduction, Seller and Purchasing Partners will
mutually negotiate contracted tier pricing.  Tests that are referred to another
laboratory for testing will be billed to Participating Member at Seller’s cost
per Exhibit A.

 

2.              Pricing:  The attached price list sets forth the net prices to
be offered to Participating Members.

 

3.              Price Protection:  Seller agrees to hold firm the Service prices
set forth in the attached price list throughout the term of this Agreement.

 

4.               Aggregation Pricing Option: Participating Members which operate
multi-facility systems and/or have established networks of facilities for
purposes of group purchasing and have the ability to influence the purchasing
decisions of such facilities shall be entitled to aggregate the purchasing
volume and participation levels within their respective systems and networks in
order to meet the desired volume tier and participation level.

 

5.               Market Checks:  Upon Purchasing Partners’ reasonable request,
Seller shall meet and confer in good faith with Purchasing Partners to determine
the on-going competitiveness of Service pricing under this Agreement.  To the
extent necessary to address competitive conditions, and upon the parties’ mutual
written consent, Service prices shall be reduced.  Examples of competitive
conditions requiring a price decrease include without limitation industry-wide
price decreases or situations where a group purchasing organization which
competes with Purchasing Partners enters into a contract with a competitor of
Seller for services which are competitive with the Services at prices
significantly below the prices charged for Services under this Agreement.

 

6.               Designation Form:  Attached hereto is a Designation Form which,
if reasonably deemed necessary by Seller, shall be used by Participating Members
to indicate their desired level of participation under the Volume Tiers and
designate whether they wish to invoke the Aggregation Pricing Option described
in Section 4 above.  The Designation Form shall not be required if Seller
already possesses sufficient information indicating Participating Members’
preferences with respect to these issues (“Member Preference Information”) or
Seller and Purchasing Partners mutually agree that the Designation Form will not
be utilized.  Purchasing Partners shall have the right to confirm the accuracy
of any such Member Preference Information prior to Seller’s reliance thereon. 
In instances where Seller reasonably determines that completion of the
Designation Form by Participating Members is necessary for the administration of
this Agreement, Seller hereby acknowledges that Participating Members which
purchase Services without completing and returning the Designation Form shall
nonetheless be deemed to have purchased Services under this Agreement at Volume
Tier 1 and without application of the Aggregation Pricing Option until such time
as a Designation Form is completed and returned which indicates a different
preference.  The Purchasing Partners Administrative Fees described in
Section 10.1 of the Agreement shall be due and payable by Seller with respect to
all purchases of Services by Participating Members whether

 

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* Information for which confidential treatment has been requested pursuant to
Rule 24(b)(2) of the Securities Exchange Act of 1934, as amended.  The omitted
material has been filed separately with the Securities and Exchange Commission.

Rev 01/04

 

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or not the applicable Participating Member has completed and returned the
Designation Form.  Seller and Purchasing Partners shall use their commercially
reasonable efforts to implement a system whereby Designation Forms  (or
Participating Members’ Volume Tier and Aggregation Pricing Option elections in
lieu of the Designation Form) may be transmitted electronically rather than in
paper form.  Seller reserves the right to perform bi-annual review of
Participating Member’s conformance to desired level of participation and
associated Volume Tier requirements.  In cases where conformance is not being
met, Seller shall provide sixty (60) days written notice of its intent to revise
Participating Member’s Tier Designation and associated pricing.

 

7.               Reporting:  Upon request, Seller shall provide Purchasing
Partners copies of Participating Members’ Designation Forms and any other
information in Seller’s possession indicating Participating Members’ Volume Tier
and Participation Levels.

 

8.               Priority Courier Pick-up Service Fees:  If a client requests
priority testing courier service, a pickup will be done to ensure it is included
in the next scheduled test set up at no additional charge.

 

9.               Electronic Interfaces: Specialty will cover the costs of
electronic interfaces in facilities that are designated as Tier 2 or higher. 
All costs will be covered with the exception of annual maintenance fees payable
to the LIS vendor and any facility in-house programming required.  Please note
that such interfaces and any associated equipment purchased by Specialty can be
used solely for inquiry, test ordering and resulting from Specialty
Laboratories.  During the course of transition planning, a test dictionary
building plan will be established.  Specialty will offer assistance in building
the client’s database and if desired by the facility, will provide the necessary
resources at no additional charge.  Offered resources may include sending
individuals on-site to assist in this process or in providing direct payment to
client employees for ancillary work performed to accomplish this task.

 

10.         Performance Standards and Penalties:

 

= Lost Specimens (For specimens lost after receipt into the laboratory):

Standard – Seller shall not lose a specimen from Participating Member.

Penalty - Specimens lost after receipt in the laboratory will be subject to a
$200 penalty per accession.

This penalty will be applied as a credit on the applicable Participating
Member’s monthly invoice.

 

= Billing Errors

Standard - Seller shall provide accurate invoices to Participating Member.

Penalty - If greater than 1 inaccurate invoice is received by Participating
Member, the following penalties
will apply to subsequent inaccurate invoices:

 

< or equal to 5 items in error

 

[*]% credit off entire invoice

6-10 items in error

 

[*]% credit off entire invoice

11-25 items in error

 

[*]% credit off entire invoice

26-50 items in error

 

[*]% credit off entire invoice

>50 items in error

 

[*]% credit off entire invoice

 

Each Participating Member shall report all suspected billing errors within 30
days of the Member’s receipt of Seller’s invoice.  Errors will be investigated
and corrected by Seller within 30 days of its receipt of any such report and any
credits, if due, will appear on the following month’s invoice.  If errors are
not corrected and credits applied in this timeframe, an additional [*]% penalty
will be applied to each monthly invoice sent by Seller to the Participating
Member until the appropriate credit is completed.

 

= Turnaround Time (TAT)

Standard – Seller shall complete all services of Participating Member, within
their published TAT.

Penalty – Seller shall reimburse Participating Member for the difference between
such member’s actual cost for the substitute service(s) from another source(s)
and the price(s) such member would have paid for Seller’s Service(s) under this
Agreement.

 

If the TAT does not return to stated TAT in the Directory of Services after 2
months or 3 occurrences (not accessions), the Seller will credit [*]% of the
cost of the service that is not meeting stated TAT to the Participating Member
in their next invoice.  For every week and/or occurrence that passes after the
original 2 months or 3 occurrences have been met, the credit will increase
another [*]%.

 

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* Information for which confidential treatment has been requested pursuant to
Rule 24(b)(2) of the Securities Exchange Act of 1934, as amended.  The omitted
material has been filed separately with the Securities and Exchange Commission.

 

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1-2 occurrences or < 2 months

 

Reimburse: $$ Substitute minus $$ Fee Schedule

3 occurrences or 2 months

 

Reimburse: $$ Substitute minus ($$ Fee Schedule – [*]%)

4 occurrences or 2 months, 1 week

 

Reimburse: $$ Substitute minus ($$ Fee Schedule – [*]%)

5 occurrences or 2 months, 2 weeks

 

Reimburse: $$ Substitute minus ($$ Fee Schedule – [*]%)

6 occurrences or 2 months, 3 weeks

 

Reimburse: $$ Substitute minus ($$ Fee Schedule – [*]%)

ETC

 

ETC

 

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* Information for which confidential treatment has been requested pursuant to
Rule 24(b)(2) of the Securities Exchange Act of 1934, as amended.  The omitted
material has been filed separately with the Securities and Exchange Commission.

 

--------------------------------------------------------------------------------

 

Exhibit A Pricing

Clinical Reference Laboratory Testing Services

 

Price List is attached.

 

[*]

 

--------------------------------------------------------------------------------

* Information for which confidential treatment has been requested pursuant to
Rule 24(b)(2) of the Securities Exchange Act of 1934, as amended. The omitted
material has been filed separately with the Securities and Exchange Commission.

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