Document:

Exhibit 10.46

 

Direct /Bid

 

 

SUPPLIER
AGREEMENT

 

between

 

NOVATION,
LLC

 

and

 

 

Specialty
Laboratories, Inc.

(Reference
Laboratory Testing)

LB40060

 

 

 

NOVATION, LLC

 

SUPPLIER
AGREEMENT

 

1.             INTRODUCTION.

 

a.             Purchasing
Opportunities for Members. 
Novation, LLC (“Novation”) is engaged in providing purchasing
opportunities with respect to high quality products and services to
participating health care providers (“Members”).  A list of Members entitled to participate in
Novation’s programs through their membership or other participatory status in
any of the following client organizations: 
VHA Inc., University HealthSystem Consortium, and HealthCare Purchasing
Partners International, LLC (collectively, “Clients”), is maintained in an
electronic database (“Novation Database”). 
Novation is acting as the exclusive agent for each of the Clients and
certain of each Client’s subsidiaries and affiliates, respectively (and not
collectively), with respect to this Agreement. 
Novation and the Clients and their subsidiaries and affiliates will not
be responsible or liable for any breach of any purchasing commitment or for any
other actions of any Member.  In
addition, none of the Clients will be responsible or liable for the obligations
of another Client or its subsidiaries or affiliates or the obligations of
Novation or Supplier under this Agreement. 
All Clients and Members are intended third party beneficiaries of this
Agreement.

 

b.             Supplier.  Supplier is the manufacturer of products
listed on Exhibit A, the provider of installation, training and maintenance
services for such products, the provider of any other services listed on
Exhibit A (such products and/or services are collectively referred to herein as
“Products”) and any specifications attached hereto as Exhibit B (“Non-Price
Specifications”). Unless otherwise stated, all Products will be new.

 

2.             CONTRACT
AWARD.

 

a.             Letter
of Award.  By executing and
delivering the Letter of Award attached hereto as Exhibit C (“Award Letter”) to
Supplier, Novation will have accepted your written offer to the Invitation to
Bid (“Bid”), and Novation and Supplier therefore agree that Supplier will make
the Products available for purchase to the Members as of the effective date (“Effective
Date”) in the Award Letter in accordance with the terms of this Agreement, for
the term (“Term”) stated in the Non-Price Specifications and for any renewal
terms set forth in the Non-Price Specifications; provided, however, that
Novation’s award of this Agreement to Supplier will not constitute a commitment
by any person to purchase any of the Products. 
Supplier will not impose any purchasing commitment on any Member as a
condition to the Member’s purchase of any Products pursuant to this
Agreement.  Supplier agrees to extend
pricing to all Members (VHA, UHC Members and HPPI Clients and Members) with the
exception of long term care facilities, home health agencies and any competitor
of Supplier which is a VHA, UHC Member or HPPI Client and/or Member that has a
current or will have a future Agreement with Novation, VHA, UHC or HPPI in its
capacity as a supplier, during the term of this Novation Agreement.  Supplier acknowledges that, in making its
award to Supplier, Novation has materially relied on all representations,
warranties and agreements 

 

1

 

made by Supplier as part
of the Bid and that all such representations, warranties and agreements will
survive acceptance of the Bid.

 

b.             Use
of Names, etc.  Supplier agrees
that it will not use in any way in its promotional, informational or marketing
activities or materials (i) the names, trademarks, logos, symbols or a
description of the business or activities of Novation or any Client or Member
without in each instance obtaining the prior written consent of the person
owning the rights thereto; or (ii) the award or the content of this
Agreement without in each instance obtaining the prior written consent of
Novation.

 

c.             Optional
Purchasing Arrangement.  Supplier
shall reserve the right to contract directly with each Member for Products
included in this Agreement in exceptional circumstances; provided, however,
Supplier shall give prior notice to Novation in writing of such exceptional
circumstances and the essential terms of such agreement.  Additional value required in such exceptional
cases will be defined in an individual contract that will, at Novation’s
discretion, be an exhibit to the Supplier Agreement.  Supplier shall maintain the Reporting
Requirements and fees (“Fees”) payable to Novation in Sections 5 and 7 for
Products purchased through such independent contracts in recognition of the
Novation contribution to and support for any such exceptional independent
arrangement required.  In addition,
Supplier agrees to give Novation prior written notice and must obtain Novation’s
prior consent to any proposed offer Supplier wishes to make to any Member to
sell products that are not covered by this Agreement in conjunction with
Products covered by this Agreement under circumstances where the Member has no
real economic choice other than to accept such terms.

 

d.             Market
Competitive Pricing and Terms.

 

•                  Pricing.  Supplier agrees that the prices, terms and
conditions offered by Supplier to Members through this Agreement shall, at all
times, be equal to or better than those offered to any other group purchasing
organization whose members collectively purchase a comparable volume of
Products.  Further, Supplier agrees that
the prices, terms and conditions offered under this Agreement will be better
than the prices, terms and conditions offered to any other customer that
purchases a lower volume of Services relative to the volume purchase by Members
hereunder, with the exception of the Federal government.

 

•                  In
the event that a significant amount of Supplier’s business is conducted with
any Member who collectively purchase a comparable volume of products, pursuant
to an arrangement with terms which, considered in the aggregate, are materially
more favorable than those extended to Novation hereunder, Supplier shall notify
Novation of such arrangement.  In the
event that Novation shall notify Supplier that maintaining market
competitiveness so requires, Supplier then shall further lower the award prices
or increase any applicable discount to Members as is necessary to ensure market
competitiveness.  Additionally, any
Member eligible for governmental pricing or research-related endeavors through
a university based project, shall have such pricing made available to them by
Supplier.

 

2

 

•                  Non-price Terms. 
Supplier will improve non-price terms, such as quality,
technology or other non-price financial value as necessary to assure market
competitiveness, and in addition Supplier agrees to adjust non-price terms for
a specific member or group of members at all times in the event Supplier offers
more favorable non-price terms to any competitor of such member or group of
members.

 

If at any time during the
Term Novation receives information from any source that indicates Supplier’s
pricing or non-price terms are not market competitive, Novation may provide
written notice of such information to Supplier, and Supplier will, within five
(5) business days for Novation’s private label Products and within ten (10)
business days for all other Products, advise Novation in writing of all
adjustments necessary to assure market competitiveness.

 

e.             Notification
of Changes in Pricing Terms. 
Supplier will provide not less than sixty (60) days’ prior written
notice to Novation and not less than forty-five (45) days’ prior written notice
to all Members of any change in pricing terms (such as list prices, discounts
or pricing tiers or schedules) permitted or required by this Agreement.

 

f.              Underutilized
Businesses.  Certain Members may be required by law,
regulation and/or internal policy to do business with underutilized businesses
and Supplier will assist Novation in helping Members meet these requirements by
complying with all Novation policies and programs with respect to such
businesses.  Novation, in its discretion,
may make an award and/or negotiate another agreement with a HUB in addition to
any sole or multi-source award.

 

g.             E-Commerce
Business.  Certain Members have
chosen to utilize the service of the Marketplace@NovationTM through Novation’s relationship
with Neoforma, Inc. (“Neoforma”), to transact business associated with this
Agreement with Supplier.  To assist
Novation in helping Members meet those needs, Supplier agrees to sign, prior to
the issuance of any Award Letter, and comply with the Novation E-Commerce
Agreement attached hereto as Exhibit D and support Novation’s programs with
respect to e-commerce.

 

3.             PRODUCT
SUPPLY.

 

a.             Delivery
and Invoicing.  On and after the
Effective Date, Supplier agrees to promptly deliver Products ordered by the
Members, FOB destination, and will direct its invoices to the Members in
accordance with this Agreement.  Supplier
agrees to prepay and absorb charges, if any, for transporting Products to the
Member.  Payment terms are Net 30 days.

 

b.             Return
or Recall of Products.  Any
Member, in addition to and not in limitation of any other rights and remedies,
will have the right to return Products to Supplier, in accordance with Supplier’s
return goods policy as agreed to by Novation.  
In addition, Supplier will reimburse Members for any cost associated
with any Product corrective action, withdrawal or recall requested by Supplier
or required by any governmental entity. 
In the event a product recall or a court action 

 

3

 

impacting supply occurs,
Supplier will notify Novation in writing within twenty-four (24) hours of any
such recall or action.  Supplier’s
obligations in this Subsection will survive the expiration or earlier
termination of this Agreement.

 

4.             PRODUCT
QUALITY.

 

a.             Free
From Defects.  Supplier warrants
the Products against defects in material, workmanship, design, and
manufacturing.  Supplier will make all
necessary arrangements to assign such warranty to the Members.  Supplier further represents and warrants that
the Products will conform to the specifications, drawings, and samples
furnished by Supplier or contained in the Non-Price Specifications and will be
safe for their intended use.  If any
Products are defective and a claim is made by a Member on account of such
defect, Supplier will, at the option of the Member; either replace the
defective Products or credit the Member. 
Supplier will bear all costs of returning and replacing the defective
Products, as well as all risk of loss or damage to the defective Products from
and after the time they leave the physical possession of the Member.  The warranties contained in this Subsection
will survive any inspection, delivery, acceptance, or payment by a Member.  In addition, if there is at any time widespread
failure of the Products, the Member may return all said Products for credit or
replacement, at its option.  This
Subsection and the obligations contained herein will survive the expiration or
earlier termination of this Agreement. 
The remedies set forth in this Subsection are in addition to and not a
limitation on any other rights or remedies that may be available against
Supplier.

 

b.             New Technology.

 

(i)            During
the Term, Supplier will disclose to Novation new technology developed by
Supplier which provides the same function as the Products.  Upon introduction of the new technology by
Supplier, each Member will be provided the option to exchange any Product
purchased hereunder for the new technology upon the terms and conditions set
forth in Exhibit B attached hereto.  In
the event Supplier fails to provide such option to the Members, (1) Novation
will have the right to terminate any or all of the Products which have been
superceded by such new technology providing the same function as the Products
or (2) Novation may elect at its discretion to contract with one or more
additional suppliers of comparatively similar new technology

 

(ii)           If
at any time during the Term new technology (as defined by a Novation Council)
for a product becomes available from any source which provides incremental
patient care benefits and/or incremental safety benefits over technology
currently available under this Agreement, Novation shall provide written notice
of such information to Supplier and may elect to contract with a third party
vendor, or terminate the Agreement and re-bid the category so Members have
access to New Technology at all times. 
Such action will not constitute a breach of this Agreement by Novation.

 

5.             REPORTS
AND OTHER INFORMATION REQUIREMENTS.  Within
twenty (20) days after the end of each full and partial month during the Term (“Reporting
Month”), Supplier will submit to 

 

4

 

Novation a report in form
and content reasonably satisfactory to Novation (“Net Sales Report”) and any
other information during the time period required as set forth in the
Information Requirements Guidebook.  Such
Guidebook may be found at the Novation website at www.novationco.com.

 

6.             OBLIGATIONS
OF NOVATION.

 

a.             Information
to Members.  After issuing the
Award Letter, Novation, in conjunction with the Clients, will deliver a summary
of the purchasing arrangements covered by this Agreement to each Member and
will, from time to time, at the request of Supplier, deliver to each Member
reasonable and appropriate amounts and types of materials supplied by Supplier
to Novation which relate to the purchase of the Products.

 

b.             Marketing
Services.  Novation, in
conjunction with the Clients, will market the purchasing arrangements covered by
this Agreement to the Members.  Such
promotional services may include, as appropriate, the use of direct mail,
contact by Novation’s field service delivery team, member support services, and
regional and national meetings and conferences. 
As appropriate, Novation, in conjunction with the Clients, will involve
Supplier in these promotional activities by inviting Supplier to participate in
meetings and other reasonable networking activities with Members.

 

7.             FEES.

 

a.             Calculation.  Supplier will pay to Novation, as the
authorized collection agent for each of the Clients and certain of each Client’s
subsidiaries and affiliates, respectively (and not collectively), Fees
belonging to any of the Clients or certain of their subsidiaries or affiliates
equal to the Agreed Percentage of all Net Sales of the Products to the Members
directly or indirectly from Supplier, whether under the pricing and other terms
of this Agreement or under the terms of any other purchasing or pricing
arrangements that may exist between the Members and Supplier.  As used herein, Net Sales shall mean invoiced
sales of Products less related Product returns. 
The “Agreed Percentage” will be defined in the Award Letter.

 

b.             Payment.  On or about the Effective Date, Novation will
advise Supplier in writing of the amount determined by Novation to be Supplier’s
monthly estimated Fees.  Thereafter,
Supplier’s monthly estimated Fees may be adjusted from time to time upon
written notice from Novation based on actual purchase data.  No later than the tenth (10th) day of each
month, Supplier will remit the monthly estimated Fees for such month to
Novation.  Such payment will be adjusted
quarterly to reflect the reconciliation between the actual Fees payable with the
estimated Fees actually paid during the previous quarter.

 

The
check amount should be reconcilable with the Fee calculation on the applicable
sales and revenue report.  The
reconciliation of the previous quarters’ estimated payments should be adjusted
against the appropriate monthly estimated payment.  Please also include this reconciliation
information on the check remittance advice.

 

The following is
an example of the reconciliation payment that would have been made for the
first quarter of the year 2003.  It shows
the information that a supplier must specify on the remittance

 

5

 

advice of a
quarterly Fee reconciliation check.  All
other non-reconciliation months would require only the first three columns of
information below to accompany payment.

 

 

	
  Agreement

  Number

  	
   

  	
  Estimated

  Payment

  	
   

  	
  Month /

  Year

  	
   

  	
  01/2003

  Reconciliation

  	
   

  	
  02/2003

  Reconciliation

  	
   

  	
  03/2003

  Reconciliation

  	
   

  	
  Total

  Payment

  	
   

  
	
  MS80019

  	
   

  	
  $

  	
  100,000

  	
   

  	
  05/2003

  	
   

  	
  $

  	
  2,145

  	
   

  	
  $

  	
  -1,820

  	
   

  	
  $

  	
  5,600

  	
   

  	
  $

  	
  105,925

  	
   

  
																			

 

Fee checks must be made
payable to Novation, LLC and sent to:

 

If Sent By First Class Mail:

 

Novation, LLC

75 Remittance Dr., Suite 1420

Chicago,
IL  60675-1420

 

If Sent Via Courier (i.e., Federal Express, United Parcel Service,
Messenger):

 

The
Northern Trust Company

350 North
Orleans Street

Receipt
& Dispatch 8th Floor

Chicago,
IL 60654

 

Attn:
Novation, LLC, Lockbox Number 1420

Telephone
No. (312) 444-3576

 

On the airbill please remember to list the bank’s
telephone number, as recipient at this location.  You should also include your telephone number
as the sender.

 

IMPORTANT REMINDER: ALL
checks for Fees should be made payable to Novation, LLC,
regardless of whether they are sent first-class mail or by courier.  Under no circumstances
should checks be made payable to The Northern Trust Company.

 

8.     COMPLIANCE
WITH LAW AND GOVERNMENT PROGRAM PARTICIPATION.

 

a.             Compliance
With Law.  Supplier represents
and warrants that, after due inquiry, it is, and for the Term shall be, in
compliance with all federal, state and local statutes, laws, ordinances and
regulations applicable to it (“Legal Requirements”) which are material to this
Agreement, including Legal Requirements pertaining to the safety and condition
of the Products, occupational health and safety, environmental protection,
nondiscrimination, antitrust, and equal employment opportunity.  In the event of Supplier’s failure to comply
with the foregoing, Novation will have the right to immediately terminate any
or all of the Product(s) subject to such failure, with notice to Supplier, or
to terminate this Agreement in its entirety pursuant to Section 12 (a).  During the Term,
Supplier will:  (1) promptly notify
Novation of any lawsuits, claims, administrative actions or other proceedings
asserted or commenced against it which assert in whole or in part that Supplier
is in noncompliance

 

6

 

with any Legal
Requirement which is material to this Agreement and (2) promptly provide
Novation with true and correct copies of all written notices of adverse
findings from the U.S. Food and Drug Administration (“FDA”) and all written
results of FDA inspections which pertain to the Products.

 

b.             Government
Program Participation.  Supplier
represents and warrants that it is not excluded from participation, and is not
otherwise ineligible to participate, in a “Federal health care program” as
defined in 42 U.S.C. § 1320a-7b(f) or
in any other government payment program. 
In the event Supplier is excluded from participation, or becomes
otherwise ineligible to participate in any such program during the Term,
Supplier will notify Novation in writing within three (3) days after such
event, and upon the occurrence of such event, whether or not such notice is
given to Novation, Novation may immediately terminate this Agreement upon
written notice to Supplier.

 

9.     INSURANCE.

 

a.             Policy
Requirements.  Supplier will
maintain and keep in force during the Term product liability, general public
liability, and property damage insurance against any insurable claim or claims,
which might or could arise regarding Products purchased from Supplier.  Such insurance will contain a minimum
combined single limit of liability for bodily injury and property damage in the
amounts of not less than $2,000,000 per occurrence and $10,000,000 in the
aggregate and will name Novation, the Clients, and the Members, as their
interests may appear, as additional insureds. 
Supplier will provide to Novation in its Bid and thereafter within
fifteen (15) days after Novation’s request, an insurance certificate indicating
the foregoing coverage, issued by an insurance company licensed to do business
in the relevant states and signed by an authorized agent.

 

b.             Self-Insurance.  Notwithstanding anything to the contrary in
Subsection a. above, Supplier may maintain a self-insurance program for
all or any part of the foregoing liability risks, provided such self-insurance
policy in all material respects complies with the requirements applicable to
the product liability, general public liability and property damage insurance
set forth in Subsection a.

 

c.             Amendments,
Notices and Endorsements. 
Supplier will not amend, in any material respect that affects the
interests of Novation, the Clients, and the Members, or terminate said
liability insurance or self-insurance program except after thirty (30) days’
prior written notice to Novation and will provide to Novation copies of all
notices and endorsements as soon as practicable after it receives or gives
them.

 

10. RELEASE AND INDEMNITY.  SUPPLIER WILL RELEASE, INDEMNIFY, HOLD
HARMLESS, AND, IF REQUESTED, DEFEND NOVATION, THE CLIENTS, AND THE MEMBERS, AND
THEIR RESPECTIVE OFFICERS, DIRECTORS, REGENTS, AGENTS, SUBSIDIARIES, AFFILIATES
AND EMPLOYEES (COLLECTIVELY, THE “INDEMNITEES”), FROM AND AGAINST ANY CLAIMS,
LIABILITIES, DAMAGES, ACTIONS, COSTS AND EXPENSES (INCLUDING, WITHOUT
LIMITATION, REASONABLE ATTORNEYS’ FEES, EXPERT FEES AND COURT COSTS) OF ANY
KIND OR NATURE, WHETHER AT LAW OR IN EQUITY, to the extent ARISING FROM OR
CAUSED IN ANY PART BY (1) THE BREACH OF ANY REPRESENTATION, WARRANTY, COVENANT
OR AGREEMENT OF SUPPLIER CONTAINED IN THIS AGREEMENT OR IN THE BID; (2) THE
CONDITION OF ANY PRODUCT, INCLUDING A DEFECT IN MATERIAL, WORKMANSHIP,

 

7

 

DESIGN OR MANUFACTURING; OR (3)
THE WARNINGS AND INSTRUCTIONS ASSOCIATED WITH ANY PRODUCT. SUCH
INDEMNIFICATION, HOLD HARMLESS AND RIGHT TO DEFENSE WILL NOT BE APPLICABLE TO
THE EXTENT THE CLAIM, LIABILITY, DAMAGE, ACTION, COST OR EXPENSE ARISES AS A
RESULT OF AN ACT OR FAILURE TO ACT OF INDEMNITEES.   IN
ADDITION, SUPPLIER REPRESENTS
AND WARRANTS THAT SALE OR USE OF THE PRODUCTS WILL NOT INFRINGE ANY UNITED
STATES PATENT AND WILL, AT ITS OWN EXPENSE, DEFEND EVERY SUIT WHICH WILL BE
BROUGHT AGAINST NOVATION OR A MEMBER FOR ANY ALLEGED INFRINGEMENT OF ANY PATENT
BY REASON OF THE SALE OR USE OF THE PRODUCTS AND WILL PAY ALL COSTS, DAMAGES
AND PROFITS RECOVERABLE IN ANY SUCH SUIT. 
THIS SECTION AND THE OBLIGATIONS CONTAINED HEREIN WILL SURVIVE
THE EXPIRATION OR EARLIER TERMINATION OF THIS AGREEMENT.  THE REMEDIES SET FORTH IN THIS SECTION ARE IN
ADDITION TO AND NOT A LIMITATION ON ANY OTHER RIGHTS OR REMEDIES THAT MAY BE
AVAILABLE AGAINST SUPPLIER.

 

11.          BOOKS
AND RECORDS; FACILITIES INSPECTIONS. 
Supplier 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 Supplier’s compliance with this Agreement.  All such books, records and accounts will be
available for inspection and audit by Novation representatives at any time
during the Term and for two (2) years thereafter, but only during reasonable
business hours and upon reasonable notice. 
Novation agrees that its routine audits will not be conducted more
frequently than twice in any consecutive twelve (12) month period, subject to
Novation’s right to conduct special audits whenever it deems it to be
necessary.  In addition, Supplier will
make its manufacturing and packaging facilities available for inspection from
time to time during the Term by Novation representatives, but only during
reasonable business hours and upon reasonable notice.  The exercise by Novation of the right to
inspect and audit is without prejudice to any other or additional rights or
remedies of either party.

 

12.          Termination.  Either party may terminate this Agreement at
any time for any reason whatsoever by delivering not less than ninety (90) days’
prior written notice thereof to the other. 
In addition, either party may terminate this Agreement immediately by
delivering written notice thereof to the other upon the occurrence of either of
the following events:

 

(a)               The
other party breaches this Agreement and does not cure such breach within thirty
(30) days of receipt of such notice, except for Supplier’s monetary breach or
breach of Compliance with Laws, for which a cure period shall not be allowed;
or

 

(b)               The
other party becomes bankrupt or insolvent or makes an unauthorized assignment or
goes into liquidation or proceedings are initiated for the purpose of having a
receiving order or winding up order made against it or the other party and
applies to the courts for protection from its creditors.

 

8

 

13.          CONFIDENTIAL
INFORMATION.

 

a.             Nondisclosure.  The parties agree that they will:

 

(1)           keep
strictly confidential and hold in trust all Confidential Information, as
defined in Subsection 13.b. below, of Novation, the Clients, and the Members and
of Supplier;

 

(2)           not
use the Confidential Information for any purpose other than the performance of
its obligations under this Agreement, without the prior written consent of the
other party;

 

(3)           not
disclose the Confidential Information to any third party (unless required by
law) without the prior written consent of the other party; and

 

(4)           not
later than thirty (30) days after the expiration or earlier termination of this
Agreement, return to Novation, the Client, or the Member or to Supplier, as the
case may be, the Confidential Information.

 

b.             Definition.  “Confidential Information,” as used in
Subsection 13.a. above, will consist of all information relating to the
prices and usage of the Products (including all information contained in the
reports produced by Supplier pursuant to Section 5 above) and all
documents and other materials of Novation, the Clients, and the Members and of
Supplier containing information relating to the programs of Novation, the
Clients, or the Members or of Supplier of a proprietary or sensitive nature not
readily available through sources in the public domain.

 

c.             HIPAA.    If a Member determines,
in its sole reasonable discretion, that Supplier is a “business associate,” as
that term is defined in the privacy rules promulgated pursuant to The Health
Insurance Portability and Accountability Act of 1996 (“HIPAA”) codified at 42
CFR Parts 160 and 164, Supplier will negotiate with Member a mutually
acceptable written agreement which will govern Supplier’s access to “protected
health information” as defined under HIPAA (a “Business Associate Contract”).

 

14.          MISCELLANEOUS.

 

a.             Choice
of Law.  This Agreement will be
governed by and construed in accordance with the internal substantive laws of
the State of Texas and the Texas courts will have jurisdiction over all matters
relating to this Agreement; provided, however, the terms of any agreement
between Supplier and a Member will be governed by and construed in accordance
with the choice of law and venue provisions set forth in such agreement.

 

b.             No
Assignment.  No assignment of all
or any part of this Agreement may be made without the prior written consent of
the other party, which consent will not be unreasonably withheld.  As used herein, “assignment” shall mean a
transfer by virtue of operation of law, under an order of any court, or
pursuant to any plan of merger, consolidation or sale of stock or assets.  Any assignment of all or any part of this
Agreement by either party will not relieve that party of the responsibility of

 

9

 

performing its
obligations hereunder to the extent that such obligations are not satisfied in
full by the assignee.  This Agreement
will be binding upon and inure to the benefit of the parties’ respective successors
and assigns.

 

c.             Notices.  Except as otherwise expressly provided
herein, all notices or other communications required or permitted under this
Agreement will be in writing and will be deemed sufficient when mailed by
United States mail, or delivered in person to the party to which it is to be
given, at the address of such party set forth below:

 

If to Supplier:

To the address set
forth by Supplier in the Bid

 

With a copy to:

The Office of the General Counsel

Specialty Laboratories, Inc.

2211 Michigan Avenue

Santa Monica, CA 90404

 

If to Novation:

Novation

Attn:  General Counsel

125 East John
Carpenter Freeway

Irving, TX  75062-2324

 

Or such other address as
the party will have furnished in writing in accordance with the provisions of
this Subsection.

 

d.             Severability.  Whenever possible, each provision of this
Agreement will be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Agreement will be prohibited
by or invalid under applicable law, such provision will be ineffective to the
extent of such prohibition or invalidity without invalidating the remainder of
such provision or the remaining provisions of this Agreement.  Each party will, at its own expense, take
such action as is reasonably necessary to defend the validity and
enforceability of this Agreement and will cooperate with the other party as is
reasonably necessary in such defense.

 

e.             Entire
Agreement.  This Agreement,
together with the exhibits listed below, will constitute the entire agreement
between Novation and Supplier.  In the
event of any inconsistency between this Agreement and a purchase order, the
terms of this Agreement will control, except that the purchase order will
supersede Sections 3 and 4 of this Agreement in the event of any inconsistency
with such Sections.  No other terms and
conditions in any document, acceptance, or acknowledgment will be effective or
binding unless expressly agreed to in writing. 
The following exhibits are incorporated by reference in this Agreement:

 

Exhibit A                Product
and Service Description and Pricing

 

10

 

	
  Exhibit B

  	
   

  	
  Non-Price
  Specifications

  
	
   

  	
   

  	
   

  
	
  Exhibit C

  	
   

  	
  Award Letter

  
	
   

  	
   

  	
   

  
	
  Exhibit D

  	
   

  	
  Novation
  E-Commerce Agreement

  

 

 

	
  SUPPLIER:

  	
  Specialty Laboratories, Inc.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ADDRESS:

  	
  2211 Michigan Avenue

  	
   

  	
   

  	
   

  
	
   

  	
  Santa Monica, CA 90404

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SIGNATURE:

  	
  /s/ Cheryl G. Gallarda

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  TITLE:

  	
  Vice President, Business Operations

  	
   

  	
  DATE:

  	
  9/8/04

  	
   

  
							

 

11

 

Exhibit
A

Product
and Service Description and Pricing

 

Reference
Laboratory Testing

 

Pricing:                 Prices listed on Exhibit A are hospital invoice price.  Tests referred to another laboratory may
include an additional handling charge, which is not included in the price on
Exhibit A.

 

Test pricing in Exhibit
A represents aggregate discounts from list price of [*]%, [*]%, and [*]% for
each tier respectively.

 

To maintain compliance
with current California regulations, Supplier is required to charged Members
for all testing referred to another laboratory at the price charged to
Supplier.  In the event a test currently
being performed by Supplier is discontinued and referred to another laboratory,
Supplier will be required to charge the Member the price Supplier is being charged.

 

All tests sent to
Specialty by a facility or system will be included in the calculation of the
average monthly volume.

 

Tier
Level Pricing Definitions:

 

Tier
1:               Up to
$[*] average monthly volume of tests sent to Specialty

Tier
2:               $[*]
average monthly volume of tests sent to Specialty

Tier 3:               $[*] average
monthly volume of tests sent to Specialty or any individual member that sends [*]%
or more of its eligible reference testing per month (measured by volume),
irregardless of average monthly volume.

 

* 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 separetely with the Securities and Exchange
Commission.

 

12

 

IDN 

Pricing:                 Facilities
belonging to an IDN which purchase in aggregate $[*] or more annually in
reference laboratory testing are eligible for additional test discounts in the
form of a member-specific “hotlist” of tests. 
The IDN and Supplier may mutually negotiate and mutually agree on up to
30 tests to receive additional discounts. 
Member and Supplier must mutually agree upon the selection of those
tests prior to pricing being implemented.

 

After
utilizing the Agreement for one year, Member and Supplier have the option to
review the list and make adjustments if necessary.

 

IDN

Commitment:                      Facilities belonging to an IDN
which purchase in aggregate $[*] or more annually in reference laboratory
testing that obtain commitment from all members of the IDN to utilize Supplier
as their primary reference laboratory (defined as sending Supplier [*]% of the
possible reference testing) and a commitment to convert such testing in a
timeframe not to exceed [*] days after implementation of required ordering
systems, will be offered a savings guarantee of [*].  This savings guarantee is not open to IDNs
that are currently [*]% committed to Specialty.

 

Participating Members
shall be deemed to be part of a system or network if they meet either of the
following criteria:

 

1.               Are listed in VHA
or UHC membership as part of a system or network under one “parent” member AND
are owned, managed, controlled or leased by “parent” member

 

2.               Have joined
together with other Participating Members in local or regional effort to reduce
supply chain costs through standardization. 
Examples of this might include consolidated logistics centers, local
integrated delivery networks (LIDN) or regional networks of unrelated VHA or
UHC facilities who agree to commit and standardize on one Supplier.  Eligibility under this criterion will be
determined by Novation.

 

Existing 

Contracts:             Members
who have existing independent (local) agreements with Supplier at the time of
execution of this Agreement shall have the option to retain their existing
agreement terms and conditions.  In all
such cases however, Supplier agrees to report sales and pay Fees on such
agreements.

 

 

* 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 separetely with the Securities and
Exchange Commission.

 

13

 

Referral

Testing:                 Tests
that Specialty does not run in-house and refers to another reference laboratory
will be priced to members at the price that Supplier pays for that test.  However, the following handling fee will be
added to tests referred to another reference laboratory.  Exhibit A pricing does not include the
handling fee in the price of the test.

 

Handling fees for
referral tests are as follows:

Tier 1      $[*] per test

Tier 2      $[*] per test

Tier 3      [*]

 

Price

Protection:            All
prices contained in Exhibit A will not increase for the length of this
Agreement, including the extension year, with the exception of the following:
tests referred to reference laboratories and discontinued tests which must be
referred outside Specialty.  If a
referral reference laboratory notifies Specialty of a price increase on a test,
Specialty will provide best efforts to notify Members 30 days in advance.

 

 

* 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 separetely with the Securities and
Exchange Commission.

 

14

 

 Exhibit A-1

Product
and Service Description and Pricing

 

Reference
Laboratory Testing – Letter of Participation

Specialty Labs -
Laboratory Testing Services (LB40060)

 

Attached.

 

 

15

 

Letter
of Participation

 

Specialty –
Reference Laboratory Testing (LB40060)

 

 

	
  Hospital
  Name

  	
   

  	
  Member ID

  	
   

  
	
  Address

  	
   

  
	
  City,
  State, ZIP

  	
   

  
	
  Contact

  	
   

  
	
  Phone

  	
   

  

 

Non-participating
facilities or facilities committing to use Specialty as the primary reference
laboratory (requires 90% commitment) should complete this letter of
participation to access pricing.

 

Specialty
will monitor usage levels two times per year. 
If our facility fails to meet the agreed upon average monthly volume or
commitment level, Specialty will meet with us to review our commitment
level.  If our facility cannot meet the
commitment level, Specialty will provide us with a 30-day written notice that
our pricing will change to a tier level based upon our average monthly testing
volume. Specialty will also notify Novation of the change.  Payment terms are net 30 days.

 

	
  For new
  participant only:

  	
   

  	
  To
  designate Specialty as your primary reference lab: 

  
	
  As
  an authorized representative of the facility listed above, I agree to the
  following usage level.

  	
   

  	
  As
  an authorized representative of the facility listed above, I agree to the [*]
  percent commitment usage level.  This
  signed letter will allow our facility full access to tier 3:

  
	
  o
  Tier 1: Up to $[*] average monthly volume

  o Tier 2: $[*] average
  monthly volume

  o Tier 3: $[*] average
  monthly volume

  o.IDN:    $[*] average annual volume

  	
   

  	
  Tier
  3:     Commits to send [*]% or more of
  its eligible reference testing per month (as measured by volume) regardless
  of the average dollar amount in monthly net revenue

  

 

 

Upon
our execution of this selection form and delivery to and acceptance by
Specialty, Specialty shall provide laboratory testing services to our facility
and tier contract pricing will become effective.  This selection form may be terminated with 30
days’ written notice to Novation. Novation will then notify Specialty to remove
the Novation pricing.  If there are
multiple facilities to be covered by this letter of commitment, please attach a
list of all facilities (include the name of each facility, member id, address,
city, state and ZIP code).

 

 

	
  Authorized
  Signature

  	
   

  
	
  Printed
  Name

  	
   

  
	
  Title

  	
   

  	
  Date

  

 

 

For
Specialty Laboratories’ Use Only

	
  Date Received:

  	
   

  	
  Assigned To:

  	
   

  
	
  Pricing Effective Date:

  	
   

  	
  Sales Rep:

  	
   

  

 

	
  Submitted By:

  	
   

  	
  Phone No.:

  	
   

  
	
  Member ID 

  	
   

  	
  Date:

  	
   

  
	
  No.:

  	
   

  	
   

  	
   

  
	
  Copy and fax to:
  Novation Contract Administration at 877/NOVAFRM (668-2376).

  Problems?
  Contact us at novafrm@novationco.com

  

 

* 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 separetely with the Securities and
Exchange Commission.

 

16

 

Exhibit
A-2

Product
and Service Description and Pricing

 

Reference
Laboratory Testing

 

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 separetely with the Securities and
Exchange Commission.

 

17

 

Exhibit
B

Non-Price
Specifications

 

	
  Term:

  	
   

  	
  Seven month agreement
  beginning on November 1, 2004 through April 30, 2005 with one one-year option
  year at Novation’s sole option.

  
	
   

  	
   

  	
   

  
	
  Fees:

  	
   

  	
  Fees listed below on
  all sales:

  

 

	
   

  	
  Annual Volume of all
  Tests of all Members

  	
   

  	
  Fee Percentage

  
	
   

  	
  Up to $[*] annual
  volume

  	
   

  	
  [*]%

  
	
   

  	
  Over $[*] annual volume

  	
   

  	
  [*]%

  

 

Every six (6) months from
the start date of this Agreement, Novation will review the annual volume run
rate.  At that time, if the annual run
rate does not reach $[*] as originally specified by Specialty Labs for that six
(6) month timeframe, Specialty Labs agrees to pay Novation fees to equal a
total of [*]% retroactive to the beginning of the 6 month period.

 

Information

Services:               Any
and all costs associated with system interfaces offered by Specialty will be
borne by Specialty.   The average length
of time to develop a new interface is 60-90 days, depending on the vendor.  Specialty has a number of interfaces already
written for LIS systems.  Specialty sends
a transition team on-site to train the hospital staff on the interface
(generally 2 – 3 days).

 

Coverage:              Supplier
will provide reference laboratory testing to all Members as defined in Section
2a of the Supplier Agreement.

 

Courier 

Service:                 Supplier
will provide specimen pick-up services to Members.  Supplier will work with Members to establish
pick up times that meet business and turn-around time needs.  Supplier will add additional services as
appropriate to properly service members that best optimizes its assay schedules
and sample preparation.  Supplier will
not charge any additional fees to Members for standard courier services of
specimens to Supplier.  All specimens
will be shipped by same day or overnight services to Supplier’s laboratory at
Supplier’s expense.  Pickups are
scheduled on weekends and holidays at customer request.  Specialty offers courier service 7 days/week
including all holidays.

 

Members will ship
specimens via same day or overnight services at no additional charge where a
courier service is not available.

 

* 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 separetely with the Securities and
Exchange Commission.

 

18

 

 

Supplier does not provide
STAT service or charge STAT fees due to the specialized nature of Supplier’s
standard testing services.

 

Supplies:               Supplier
will pay for all supplies required for the collection, processing, handling,
and transportation of specimens. 
Supplies can be ordered by calling client services at (800) 421-4449 or
by faxing a copy of the order form to (310) 828-5213.

 

Consultations:                     Supplier
provides consultative services as part of the service to Participating Members
through a team of expert physicians and doctoral level scientists.

 

Conversion

Assistance:           Supplier
will provide, but are not limited to, the following assistance to a
Participating Member that is converting from a competitive reference
laboratory:

 

1.         Test
Methodology Verification: Samples may be submitted to verify methodologies
and reference ranges.  While it is
generally acceptable that Supplier provides the “gold standard” for which other
reference laboratories verify their assays, Supplier shall provide up to ten
(10) comparison samples at no charge in order to provide comparison data to
each Participating Member.

 

2.         Sample
Reports: Most test procedures have standard report formats.  Some assays have multiple parameters and
customized reporting is necessary. 
Samples of these reports will be made available to the medical director
at each facility, if required.

 

3.         Information
Systems Conversion Reimbursement: In order to offset the cost incurred by
any Participating Member, Supplier will provide Supplier on-site assistance or
financial reimbursement for individuals to assist with the building of test
dictionaries.  In such cases, payment
will be made direct to a Member employee at an established hourly rate for an
agreed upon maximum number of hours   For
Meditech users, a “Test Building Utility” has been developed and this credit
will not apply.

 

4.         Physician
Education: As part of Supplier’s on-going efforts to transfer the
technological advances developed through research and development, physician
education programs will be made available. 
These may include but will not be limited to lectures, teleconferences,
technical notes, etc.

 

5.         Staff
Development: Each local Supplier sales representative will work with the
Technical Services department to insure that laboratory staff are sufficiently
trained in all aspects of specimen processing, report retrieval and other
functions associated with referral testing.

 

19

 

Cost 

Containment:       Supplier provides the following as part
of the service to Participating Members:

 

1.             Clinical
Consultation: Supplier’s Medical Directors and Scientific staff are
available for development of alternative clinical pathways, standing orders and
treatment monitoring.  As with all cost
reduction initiatives, these programs are available to all Participating
Members.  Cost savings vary from case to
case.

 

2.             Utilization
Review: Statistical review of physician orders and utilization can provide
each facility with information regarding any series of tests that may be
out-dated or non-contributory.

 

3.             Secondary
Lab Consolidation: For facilities that utilize several reference labs,
Supplier provides the opportunity to consolidate these sources for esoteric
testing.  Existing staff, dedicated to
specimen processing, shipping and report retrieval can be re-assigned.

 

4.             Advanced
Test Introduction: Participating Members receive information updates on new
tests on a regular basis.  These advances
in laboratory science lead to better patient management and cost reductions.

 

5.             Improved
Turn-around time: Supplier’s assay schedule is more aggressive than any
other laboratory.  Providing testing in
one unified location, complex tests are resulted faster, reducing the time
needed for clinical decision making by individual physicians.

 

6.             Test
Selection: With approximately 3,700 tests and panels in the active test
menu, fewer samples are referred to other laboratories.  This reduces overall processing time,
expedites result verification and reduces specimen shipping errors.

 

7.             On-Site
Lab Technical Support for Participating Members: Additional support will be
provided as deemed necessary on a case-by-case basis.  For those facilities that require on-site
technical support, staff will be available.

 

8.             CEU
Programs: Continuing education programs exist and are encouraged.  Every effort will be made to provide qualified
speakers and materials to meet existing CEU schedules.  These include seminars for CE programs, grand
rounds and Supplier’s Conferences.

 

9.             Training
Seminars and/or Training Implementation Teams: All necessary training and
education complete with documentation and test data will be provided at each
facility.

 

10.           Joint
Marketing Services: An entire menu of joint marketing services is available for
enhancing a hospital’s outreach program. Federal regulations require Supplier 

 

20

 

to charge the fair market
value for these services.  These include,
but are not limited to:

 

	
   

  	
  Market opportunity
  assessment

  	
   

  	
  Managed care program
  development

  
	
   

  	
  Joint directory of
  services

  	
   

  	
  Joint sales calls

  
	
   

  	
  Sales training

  	
   

  	
  Sales management
  training

  
	
   

  	
  Client service training

  	
   

  	
  Courier network
  development

  
	
   

  	
  Marketing materials
  development

  	
   

  	
  Laboratory operations
  assessment

  
	
   

  	
  Regulatory compliance
  services

  	
   

  	
  Billing consultation

  
	
   

  	
  Continuing education

  	
   

  	
  Consulting services

  
	
   

  	
  Inter-institutional
  connectivity

  	
   

  	
   

  

 

21

 

	
  Exhibit
  C

  	
  Novation®

  
	
   

  	
   

  	
  The Supply Company of VHA & UHC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  125 East John Carpenter Freeway

  
	
   

  	
   

  	
  Suite 1500

  
	
   

  	
   

  	
  Irving, TX
  75062-2324

  

 

September
2, 2004

 

Stephen
Riendeau

Director,
Corporate Accounts

Specialty
Laboratories

660
Monticlair Dr.

Macon,
GA  31210

 

Subject:                  Acceptance
of Bid (Supplier Agreement #LB40060)

 

Dear
Stephen,

 

Novation,
LLC (“Novation”), acting in its capacity as agent for VHA, UHC, and HPPI,
respectively (and not collectively) and certain of their respective
subsidiaries and affiliates, accepts your proposal (Bid Certification) for
Reference Laboratory testing in response to our Invitation to Bid for an
Additional Supplier, Reference Laboratory Testing dated May 12, 2004, which was
signed and dated by you on June 15, 2004. 
The Supplier Agreement, to which this letter will be attached as an
Exhibit, will represent the final agreement between the parties for Reference
Laboratory testing. You will sign and date that Supplier Agreement.

 

The
“Agreed Percentage” for the Fee will be defined below:

 

Fees
paid on all sales of Products on Exhibit A:

Up
to $[*]  annual volume   1.5% fee

Over
$[*] annual volume    3.0% fee

 

Every
six (6) months from the start date of this Agreement, Novation will review the
annual volume run rate.  At that time, if
the annual run rate does not reach $40,000,000 as originally specified by
Specialty Labs for the six (6) month timeframe, Specialty Labs agrees to pay
Novation fees to equal a total of 2.25% retroactive to the beginning of the 6
month period.

 

The
term of this Agreement will be for a period of 6 months, effective November 1,
2004, with one one-year renewal options at Novation’s discretion.  In addition, please be advised that Novation
may elect to contract with a HUB (Historically Underutilized Business)
manufacturer for such products.

 

Novation
looks forward to a successful implementation of this Agreement.

 

	
  Sincerely,

  
	
   

  
	
  /s/
  Eldon Peterson

  	
   

  
	
  Eldon
  Petersen

  
	
  Group
  Senior Vice President

  
	
  Novation,
  LLC

  

 

* 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 separetely with the Securities and
Exchange Commission.

 

22

 

Exhibit
D

Novation
E-Commerce Agreement

 

This Novation E-Commerce
Agreement (“Agreement”)
is entered into effective October 1, 2004 (“Effective Date”) between Specialty Laboratories, Inc., a
California corporation having its principal place of business at 2211 Michigan
Avenue, Santa Monica, CA 90404 (“Supplier”) and,
Novation, LLC, a Delaware limited liability company having its principal place
of business at 125 East John Carpenter Freeway, Irving, Texas 75062 (“Novation”). 
Novation is a contracting agent that develops and delivers supply chain
management agreements, programs and services on behalf of VHA Inc. (“VHA”), University HealthSystem Consortium (“UHC”) and their patrons.

 

Certain Members have
chosen to utilize the services of Marketplace@NovationTMthrough Novation’s relationship with Neoforma, Inc. to transact business
associated with this Agreement with Supplier. 
To assist Novation in helping Members meet those needs, Supplier agrees
to participate in Marketplace@Novation and utilize certain Marketplace@Novation
services by entering into this Agreement with Novation.

 

Novation and Supplier therefore agree as follows:

 

1.             DEFINITIONS

 

1.1           “Affiliate”
means a person or entity controlled by or under common control with another
person or entity.

 

1.2           “Content”
means any text, graphics, logos, button icons, images, audio clips, video
clips, HTML code, java programs and other material displayed at Marketplace@Novation,
but excluding Supply Chain Data.

 

1.3           “Contract
Portfolio” means a catalog of Products for which Novation has contracted
with Supplier
for the benefit of the members of VHA and UHC and the associated healthcare
organizations of HPPI.  For purposes of
clarification, a Product is purchased through a Contract Portfolio if the
Product is included in the contract between Novation and Supplier and is sold
to a VHA or UHC member, regardless of whether such sale is pursuant to a
separate contract between Supplier and the member and except when the Member
notifies Novation that the Product has been purchased pursuant to the terms of
another GPO’s contract.

 

1.4           “EDI Standards” means the standard
format for Electronic Data Interchange (EDI) generally accepted and used in
North America, as may change from time to time.

 

1.5           “Information”
means (i) any and all information and data collected, developed, and/or stored
by Marketplace@Novation relating to Members, (ii) any and all information
and data relating to use of or transactions at Marketplace@Novation by Members
and (iii) any and all Member Transaction Information collected, developed,
and/or stored by Marketplace@Novation.

 

1.6           “Marketplace@Novation”
means the e-commerce marketplaces created specifically for and accessible only
to the members of VHA and UHC and the associated healthcare organizations of
HPPI.

 

1.7           “Member Transaction Information”
means information delivered or received between Supplier and a Member through
Marketplace@Novation or Supply Chain Data delivered to Marketplace@Novation.

 

1.8           “Members”
means at any date those members of VHA and UHC and the associated healthcare
organizations of HPPI entitled to use the Marketplace@Novation pursuant to a
Marketplace@Novation participation agreement.

 

1.9           “NeoFormat”
means the format in which Product Data is to be sent to Marketplace@Novation.

 

23

 

1.10         “Non-Contract
Products” means any Product offered by Supplier other than through a
Contract Portfolio.  For purposes of
clarification, a Product may be offered by Supplier both
as a Non-Contract Product and through one or more Contract Portfolios, but will
be considered a Non-Contract Product when the Member notifies Novation that the
Product has been purchased pursuant to the terms of another group purchasing
organization’s contract.

 

1.11         “Products”
means all equipment, products, supplies and services, information and content
provided by Supplier and available for purchase, rental or lease by Members at
Marketplace@Novation or through the Services.

 

1.12         “Product
Data” means information describing the manufacturer and distributor product
numbers, features, functions and pricing of Supplier’s Products, including images,
specifications, shipping weight, shipping dimensions, associated products,
maintenance and warranty information, equivalent products and other
information, to be offered at Marketplace@Novation or through the Services.

 

1.13         “Services”
means those services provided by Novation, which are listed and described below
and mutually agreed to be provided to Supplier by Novation and Supplier.  Novation shall provide the following services
to Supplier at no charge:

 

Product
Catalog and Contract Viewing

 

Novation
shall publish Product Data and Contract Portfolio information to Members in
product catalog and contract viewing modules.

 

 

	
  Functionality

  	
   

  	
  Criteria

  
	
  Product Catalog

  

  Product Data shall include the information required to complete a
  transaction, including but not limited to: Product name, Product description,
  manufacturer number, UOM, price.

  Marketplace@Novation must receive this data from Supplier in
  Neoformat.  Supplier may include the
  following additional content: Hyperlinks, images, broader product
  descriptions and other rich content 

  	
   

  	
  Contract Portfolio Product Data

  
	
   

  	
   

  	
   

  
	
  Contract Viewing

  

  Any Novation Supplier Agreement between Supplier and Novation shall be
  displayed to VHA and UHC members through the Contract Viewing module within
  the Contract Management Solution 

  	
   

  	
  Novation Contract

  

 

 

1.14         “Supply Chain Data” means the
following data for any purchase made by a Member from Supplier through any
means: Supplier identification, buyer identification, buyer account number, GPO
(e.g., Novation) contract identifier, invoice number, invoice date, purchase
order number, Supplier product number, product description, manufacturer,
manufacturer part number, quantity, unit of measure, unit price, taxes,
freight, price adjustments, and total cost, in electronic form in accordance
with EDI Standards or such other standards as mutually agreed to by the
parties.

 

2.             SERVICES

 

Subject to the terms and
conditions of this Agreement and supplier’s prompt response to providing
product catalog content, Novation shall use commercially reasonable efforts to make available
to Supplier
the Services within sixty (60) days of the Effective Date.  Supplier shall negotiate in good faith with
Neoforma, Inc. for the purchase of additional supply chain solutions, including
Neoforma securing data rights from supplier in connection with services
offered.

 

24

 

3.             OWNERSHIP
AND LICENSE

 

3.1           Novation.  Novation owns and
will continue to own the compilation or “look and feel” of all Content as it
appears on Marketplace@Novation (“Content
Compilation”), subject to Section 3.4.  Any reproduction, transmission or display of
the Content Compilation by any Supplier or any third party is strictly
prohibited.

 

3.2           For
the term of this Agreement, Novation grants Supplier permission to access and
use the Services in accordance with the terms of this Agreement.

 

3.3           Supplier.  For the term of this Agreement, Supplier
grants a non-exclusive license to Novation, with a right to sublicense to
Novation’s Affiliates, including Neoforma Inc., to use, copy, modify, display,
perform and create derivative works of Supplier’s Product Data solely for the purpose
of digitizing, categorizing and formatting such information for placement at
Marketplace@Novation and for the purpose of enabling Members to participate in
Marketplace@Novation, in accordance with the terms of this Agreement.

 

3.4           Each
party owns and shall retain all right, title to and interest in its names,
logos, trademarks, service marks, trade dress, copyrights and proprietary
technology, including, without limitation, those names, logos, trademarks,
service marks, trade dress, copyrights and proprietary technology currently
used or which may be developed and/or used by it in the future (“Marks”).  Novation and its Affiliates are authorized to
use Supplier’s
Marks as necessary to provide the Services under this Agreement. To the extent
that Novation modifies Product Data or other Content provided by Supplier
pursuant to this Agreement, Supplier hereby acknowledges that Novation will be
the copyright owner of the derivative works that it creates pursuant to and
subject to the license granted in Section 3.3 (whether in graphical,
narrative or any other form), and subject in all respects to Supplier ownership
of the underlying information and to the copyright of third parties.  Upon termination or expiration of this
Agreement, all such rights of Novation and its Affiliates to use such
derivative works for any purpose shall cease, unless such rights are extended in
writing by Supplier.

 

4.             SUPPLIER
DATA

 

4.1           Supplier is solely responsible for all
Product Data and any other Content it supplies to Novation for inclusion at
Marketplace@Novation, including maintenance of such Product Data and
Content.  Novation will not be responsible
for the accuracy or legality of information provided by Supplier for
publication at Marketplace@Novation or through the Services, and Novation may
at any time at its sole discretion, remove such information from
Marketplace@Novation if Novation reasonably believes that the information may
cause liability for it. Product Data must not (a) infringe any third party
rights, including, but not limited to intellectual property, publicity or
privacy, (b) be defamatory, trade libelous, threatening or harassing nor
(c) be obscene, indecent or contain pornography.

 

4.2           Supplier
may make its Product Data available to Novation for listing at
Marketplace@Novation provided that Supplier provides the Product Data for all
Products in the manner and format set forth in the NeoFormat specifications.  Novation may digitize, categorize and format
the Product Data and post such Product Data at Marketplace@Novation in
accordance with Novation’s standard
practices for digitization, categorization and formatting of Product Data.

 

4.3           The
Product Data provided by Supplier shall
include, as applicable, the manufacturer and distributor Product numbers,
manufacturer, extended units of measure, Product descriptions and the specific
terms and conditions of Supplier’s sale of Products to Members, subject to
the terms and conditions of any contract between Supplier and a Member or
Novation with respect to any Product (“Supplier
Terms and Conditions”). 
Novation does not set, approve, control or endorse the Supplier Terms and Conditions.

 

4.4           If at any
time during the term of this Agreement and any renewals or extensions thereof,
distributed sales of Supplier’s Products changes and Supplier now ships direct,
either through Marketplace@Novation or through other means, Supplier shall upon
request from Novation and within ninety (90) days of such request, provide
Novation with its Supply Chain Data on a daily basis or at least as often as
provided to Members (in electronic form or otherwise) but in no event less than
on a monthly basis.  Novation may use
Supply Chain Data only in accordance with the Marketplace@Novation Data
Confidentiality and Privacy Statement (“Privacy
Policy”), a current copy of which shall be provided to Supplier upon
request and posted at http://novation.neoforma.com.

 

25

 

4.5           Supplier
shall update Product Data from time to time and at least quarterly in
accordance with Novation’s then current policies and procedures for accessing
and updating Product Data.  Supplier
shall update Product Data, including pricing information, hospital-specific
pricing information for Non-Contract Products, Product identifications, Product
numbers, extended units of measure, names and descriptions, and the Supplier
Terms and Conditions, as required to ensure that at all times such Product Data
is accurate, including removal of any discontinued or recalled Products.

 

4.6           Novation
may use Information to facilitate transactions conducted through
Marketplace@Novation, to allow access to and fulfill contractual obligations to
Novation and Members, to conduct its business as outlined in the Privacy Policy
and to create and sell aggregated reports on Marketplace@Novation activities,
provided that such reports do not contain data that has been combined or
compiled in such a way that an individual, either by name or by other
designation, can be identified.

 

4.7           Novation
and Supplier agree to comply at all times with all applicable requirements of
The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”)
codified at 45 CFR Parts 160 and 164.

 

5.             SYSTEM
INTEGRITY

 

5.1           Supplier
and Novation shall use then current industry standard state of the art
anti-virus software and procedures to prevent any software routine or any other
device including but not limited to any viruses, Trojan horses, worms, time
bombs, or cancelbots, from interfering or attempting to interfere with the
proper working of Marketplace@Novation.

 

6.             CONFIDENTIALITY

 

6.1           Except
as expressly set forth in the Privacy Policy, Novation and Supplier shall
regard and preserve as confidential all information related to the business of
each other disclosed pursuant to this Agreement.  This confidentiality obligation does not
apply to (a) information that is publicly known prior to the disclosure or
becomes publicly known through no wrongful act of the receiving party;
(b) information that was in lawful possession of the receiving party prior
to disclosure and was not received as a result of any breach of
confidentiality; (c) information that was independently developed by the
receiving party outside the scope of this Agreement; (d) information which
the receiving party is required to disclose pursuant to a court order or
regulatory agency request; or (e) the existence, but not the terms or
conditions, of this Agreement.  In the
event of a request for disclosure pursuant to subsection (d), immediate
notice of such request shall be provided by the party receiving the request to
the party whose information is subject to the request to provide an opportunity
to oppose such request for disclosure. 
Notwithstanding the foregoing and except as otherwise limited, Novation shall be entitled to share (1) with its
Affiliates any and all Information and (2) Information, except pricing
Information, regarding the sale of Products distributed but not manufactured by
Supplier to Members with the manufacturer of such Product if such manufacturer
is a party to a Marketplace@Novation Supplier Agreement.

 

7.             REPRESENTATIONS
AND WARRANTIES

 

7.1           Novation
represents and warrants that (i) it has all rights, titles, licenses,
permissions and approvals necessary to perform its obligations under this
Agreement and to grant to Supplier all licenses and rights granted hereunder,
and that such licenses do not and will not infringe or otherwise violate any
copyright, trade secret, trademark, patent or other proprietary right of any
third party, (ii) that it has and will maintain the capability to provide
the Services and to create and host Marketplace@Novation during the term of
this Agreement , and (iii) it has complied and shall continue to comply with
all applicable legislation, laws, statutes, ordinances, rules and regulations
regarding Marketplace@Novation and the Services.

 

7.2           Supplier
represents and warrants that  (i) it has
full power and authority to sell the Products to be sold by it at
Marketplace@Novation and will not offer for sale counterfeit or stolen items,
(ii) it is the sole owner or is a valid licensee of all Content provided
by or on behalf of Supplier for inclusion at Marketplace@Novation and has
secured all 

 

26

 

necessary licenses,
consents and authorizations with respect to use of such Content and all
elements thereof to the full extent contemplated herein, (iii) no part of any
Content provided by or on behalf of Supplier for inclusion at
Marketplace@Novation violates or infringes upon the patent rights, copyrights,
trade secrets, trademarks or other proprietary rights of any person or entity
or constitutes defamation, invasion of privacy or the violation of the rights
of  any person or entity, and
(iv) it has complied and shall continue to comply with all applicable
legislation, laws, statutes, ordinances, rules and regulations regarding the Products
and their sale or transfer, and its actions in relation to Marketplace@Novation
and the Services.

 

7.3           EXCEPT
AS OTHERWISE SPECIFICALLY PROVIDED HEREIN, NOVATION SUPPLIES
MARKETPLACE@NOVATION AND THE SERVICES “AS IS” AND WITHOUT ANY WARRANTY OR
CONDITION, EXPRESS OR IMPLIED.  NOVATION
SPECIFICALLY DISCLAIMS ANY AND ALL IMPLIED WARRANTIES OF TITLE,
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND WARRANTIES ARISING FROM
A COURSE OF DEALING, USAGE OR TRADE PRACTICE. 
NOVATION ALSO DOES NOT GUARANTEE CONTINUOUS, UNINTERRUPTED ACCESS TO MARKETPLACE@NOVATION
AND THE SERVICES, AND OPERATION OF THE MARKETPLACE@NOVATION MAY BE INTERFERED
WITH BY NUMEROUS FACTORS OUTSIDE OF NOVATION’S CONTROL.  USE OF MARKETPLACE@NOVATION AND SALE OF
PRODUCTS TO MEMBERS IS AT SUPPLIER’S RISK. 
BY USING THE SERVICES AND MARKETPLACE@NOVATION, SUPPLIER REPRESENTS AND
WARRANTS THAT IT CAN FORM LEGALLY BINDING CONTRACTS UNDER APPLICABLE LAW.  FURTHERMORE, SUPPLIER REPRESENTS AND WARRANTS
THAT THE INDIVIDUAL EXECUTING THIS AGREEMENT HAS AUTHORITY TO BIND SUPPLIER AS
SELLER AND THAT BY DOING SO IS NOT BREACHING OR IN CONFLICT WITH ANOTHER
AGREEMENT OR OBLIGATION.

 

8.             INDEMNIFICATION

 

8.1           Subject to
Section 8.3, Novation shall defend and/or handle at its own expense any third
party claims or actions to the extent, arising from (i) any actual or alleged
infringement of a copyright, trade secret, trademark, patent or other
proprietary right of a third party arising out of Supplier’s use of
Marketplace@Novation and the Services as permitted under this Agreement, and
(ii) any breach by Novation of any of its representations or obligations set
forth in this Agreement, and shall indemnify and hold harmless Supplier and its
respective officers and directors from and against any loss, liability, cost or
expense (including reasonable attorney’s fees) resulting from any such claim or
action, and its settlement or compromise.

 

8.2           Subject
to Section 8.3, Supplier shall defend, and/or handle at its own expense, any
third-party claims or actions, to the extent arising from (i) any breach by
Supplier of any of its representations or obligations set forth in this
Agreement  (ii) any misrepresentation or
omission in any Content provided by or on behalf of Supplier in connection with
the Services or at Marketplace@Novation, (iii) any claims brought by a third
party, having a basis in contract or tort, in law or in equity, relating to any
Products listed or sold by Supplier through
Marketplace@Novation or otherwise relating to Supplier’s
use of Marketplace@Novation or the Services, , and shall indemnify and hold
harmless Novation, its Affiliates, and their respective officers and directors
from and against any loss, liability, cost or expense (including reasonable
attorneys’ fees) resulting from any such claim or action, and its settlement or
compromise.

 

8.3           The
party seeking indemnification under subsection 8.1 or 8.2, as the case may be (“Indemnified Party”), shall give
prompt written notice to the other party (“Indemnifying
Party”).  In addition, the
Indemnified Party shall allow the Indemnifying Party solely to direct the
defense and settlement of any such claim, with counsel of the Indemnifying
Party’s choosing, and shall provide the Indemnifying Party, at the Indemnifying
Party’s expense, with information and assistance that is reasonably necessary
for the defense and settlement of the claim. 
The Indemnified Party reserves the right to retain counsel, at the
Indemnified Party’s sole expense, to participate in the defense of any such
claim.  The Indemnifying Party shall not
settle any such claim or alleged claim without first obtaining the Indemnified
Party’s prior written consent, which consent shall not be unreasonably
withheld, if the terms of such settlement would adversely affect the
Indemnified Party’s rights under this Agreement.

 

8.4           The
remedy provided under this Section 8 will be the Supplier’s sole and
exclusive remedies in relation to claims and actions alleging intellectual
property infringement.

 

27

 

9.             LIMITATION
OF LIABILITY

 

9.1           WITH
THE EXCEPTION OF NOVATION’S OBLIGATIONS UNDER SECTION 8.1, AND ANY CLAIM BASED ON THE
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF NOVATION OR ITS AFFILIATES,
EMPLOYEES, OFFICERS OR AGENTS, IN NO EVENT WILL NOVATION BE LIABLE TO SUPPLIER
FOR ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR PUNITIVE DAMAGES
ARISING OUT OF THIS AGREEMENT HERETO OR ITS TERMINATION, WHETHER LIABILITY IS
ASSERTED IN CONTRACT OR IN TORT, AND IRRESPECTIVE OF WHETHER NOVATION HAS BEEN
ADVISED OF THE POSSIBILITY OF ANY SUCH LOSS OR DAMAGE. WITH THE EXCEPTION OF
NOVATION’S OBLIGATIONS UNDER SECTION 8.1, AND ANY CLAIM BASED ON THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF NOVATION OR ITS AFFILIATES, EMPLOYEES,
OFFICERS OR AGENTS, IN NO EVENT WILL NOVATION’S TOTAL LIABILITY TO SUPPLIER OR TO
ANY THIRD PARTIES UNDER THIS AGREEMENT HERETO EXCEED ONE THOUSAND DOLLARS.

 

9.2           NOVATION
DOES NOT AND CANNOT CONTROL THE FLOW OF DATA TO OR FROM MARKETPLACE@NOVATION
AND OTHER PORTIONS OF THE INTERNET. 
ACTIONS OR INACTIONS OF THIRD PARTIES MAY RESULT IN SITUATIONS IN WHICH
SUPPLIER’S CONNECTION TO THE INTERNET, AND/OR ACCESS TO MARKETPLACE@NOVATION
MAY BE IMPAIRED, DISRUPTED OR DAMAGED. 
NOVATION CANNOT GUARANTEE THAT SUCH EVENTS WILL NOT OCCUR, AND
ACCORDINGLY DISCLAIMS ANY AND ALL LIABILITY RESULTING FROM OR RELATED TO SUCH
EVENTS.

 

10.          TERM
AND TERMINATION

 

10.1         Term.
The Term of this Agreement will commence on the Effective Date and shall
continue for a period of three 
(3) years.  This Agreement
will automatically renew for additional one-year Terms unless written notice of
termination is provided by the terminating party to the non-terminating party
not less than thirty (30) days prior to the expiration of the then-effective
Term.  No other terms and conditions will
be effective or binding unless expressly agreed to by the parties in writing.

 

10.2         Termination.  Either party may terminate this Agreement at
any time for any reason whatsoever by delivering not less than ninety (90) days’
prior written notice thereof to the other. 
In addition, either party may terminate this Agreement immediately by
delivering written notice thereof to the other upon the occurrence of either of
the following events:

 

(a)           The
other party breaches this Agreement and does not cure such breach within thirty
(30) days of receipt of such notice; or

 

28

 

 (b)          The
other party becomes bankrupt or insolvent or makes an unauthorized assignment
or goes into liquidation or proceedings are initiated for the purpose of having
a receiving order or winding up order made against it or the other party and
applies to the courts for protection from its creditors.

 

In addition, this
agreement shall terminate automatically in the event that Supplier has a single
Supplier Agreement with Novation for the provision of its Products to the
Members which has terminated or expired.

 

10.3         Choice
of Law. This Agreement will be governed by and construed in accordance with
the internal substantive laws of the State of Texas and the Texas courts will
have jurisdiction over all matters relating to this Agreement.

 

In addition, this
agreement shall terminate automatically in the event that Supplier has a single
Supplier Agreement with Novation for the provision of its Products to the
Members which has terminated or expired.

 

IN WITNESS WHEREOF, the
parties have executed this Agreement as of the date first above written.

 

 

	
  NOVATION, LLC,

  	
  SUPPLIER,

  
	
  a Delaware limited liability company

  	
  a California corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Larry Dooley

  	
   

  	
  By: 

  	
  /s/ Cheryl G. Gallarda

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
  Vice-President, Novation Contract & Program
  Services

  	
   

  	
  Title:

  	
  Vice President, Business Operations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Date:

  	
  9/8/04

  	
   

  
	
  Date:

  	
  9-09-04

  	
   

  	
   

  
													

 

29Exhibit 10.1

 

1999 EQUITABLE RESOURCES, INC.

 

LONG-TERM INCENTIVE PLAN

 

(As amended and restated October
20, 2004)

 

SECTION
1.  PURPOSES

 

1.01  The purpose of the 1999 Equitable Resources,
Inc. Long-Term Incentive Plan (the “Plan”) is to assist the Company in
attracting, retaining and motivating employees of outstanding ability and to
align their interests with those of the shareholders of the Company.

 

SECTION
2.  DEFINITIONS; CONSTRUCTION

 

2.01  Definitions.  In addition to the terms defined elsewhere in
the Plan, the following terms as used in the Plan shall have the following
meanings when used with initial capital letters:

 

2.01.1  “Award”
means any Option, Restricted Stock, Performance Award or Other Stock-Based
Award, or any other right or interest relating to Shares or cash granted under
the Plan.

 

2.01.2  “Award
Agreement” means any written agreement, contract or other instrument or
document evidencing an Award.

 

2.01.3  “Board”
means the Company’s Board of Directors.

 

2.01.4  “Cause,”
when used with respect to the termination of employment of a Participant,
means:

 

(a) the willful and continued
failure by the Participant to substantially perform his duties with the Company
or a Subsidiary (other than any such failure resulting from the Participant’s disability),
after a written demand for substantial performance is delivered to the
Participant by the Board which specifically identifies the manner in which the
Board believes that the Participant has not substantially performed his duties,
and which failure has not been cured within 30 days after such written demand;
or

 

(b)  the willful and continued engaging by the
Participant in conduct which is demonstrably and materially injurious to the
Company or a Subsidiary, monetarily or otherwise, or

 

(c)  the breach by the Participant of any
obligation of confidentiality owed to the Company or a Subsidiary.

 

For purposes of this Section 2.02.4, no
act, or failure to act, on the Participant’s part shall be considered “willful”
unless done, or omitted to be done, by the Participant in bad faith and without
reasonable belief that such action or omission was in the best interest of the
Company.  Notwithstanding the foregoing,
the Participant shall not be deemed to have been terminated for Cause unless
and until there shall have been

 

 

delivered to him a copy of a
resolution duly adopted by the affirmative vote of not less than three-quarters
of the non-management members of the Board at a meeting of the Board called and
held for that purpose (after reasonable notice to the Participant and an
opportunity for the Participant, together with his counsel, to be heard before
the Board) finding that in the good faith opinion of the Board the Participant
is guilty of the conduct set forth above in clauses (a), (b) or (c) of
this Section 2.02.4 and specifying the particulars thereof in detail.

 

2.01.5  “Code”
means the Internal Revenue Code of 1986, as amended from time to time, together
with rules, regulations and interpretations promulgated thereunder.  References to particular sections of the Code
shall include any successor provisions.

 

2.01.6  “Change
of Control” has the meaning provided in Section 9.03.

 

2.01.7  “Committee”
means the Compensation Committee or such other Committee of the Board as may be
designated by the Board to administer the Plan, as referred to in Section 3.01
hereof; provided however, that any member of the Committee participating in the
taking of any action under the Plan shall qualify as a “non-employee director”
as then defined under Rule 16b-3 and an “outside director” as then defined
under Section 162(m) of the Code.

 

2.01.8  “Common
Stock” means shares of the common stock, without par value, and such other
securities of the Company or other corporation or entity as may be substituted
for Shares pursuant to Section 8.01 hereof.

 

2.01.9  “Covered
Employee” shall have the meaning provided in Section 162(m)(3) of the
Code.

 

2.01.10  “Exchange
Act” means the Securities Exchange Act of 1934, as amended.

 

2.01.11  “Fair
Market Value” of shares of any stock, including but not limited to Common
Stock, or units of any other securities (herein “shares”), shall be the mean
between the highest and lowest sales prices per share for the date as of which
Fair Market Value is to be determined in the principal market in which such
shares are traded, as quoted in The Wall Street Journal
(or in such other reliable publication as the Committee, in its discretion, may
determine to rely upon).  If the Fair
Market Value of shares on any date cannot be determined on the basis set forth
in the preceding sentence, or if a determination is required as to the Fair
Market Value on any date of property other than shares, the Committee shall in
good faith determine the Fair Market Value of such shares or other property on
such date.  Fair Market Value shall be
determined without regard to any restriction other than a restriction which, by
its terms, will never lapse.

 

2.01.12  “Incentive
Stock Option” means an Option that is intended to meet the requirements of
Section 422 of the Code and is designated as such in the Award Agreement
relating thereto.

 

2

 

2.01.13  “Option”
means a right, granted under Section 6.02 hereof, to purchase Shares at a
specified price during specified time periods. 
An Option may be either an Incentive Stock Option or a nonstatutory
stock option, which is an Option not intended to be an Incentive Stock Option.

 

2.01.14  “Other
Stock-Based Award” means an Award, granted under Section 6.05 hereof, that
is denominated or payable in, valued in whole or in part by reference to, or
otherwise based on, or related to, Shares.

 

2.01.15  “Participant”
means an employee of the Company or any Subsidiary, including, but not limited
to, Covered Employees, who is granted an Award under the Plan.

 

2.01.16  “Performance
Award,” “Performance Goal” and “Performance Period” shall have the meanings
provided in Section 6.04.

 

2.01.17  “Reload
Option Rights” and “Reload Option” have the meanings provided in Section
6.02(v).

 

2.01.18  “Restricted
Stock” means Shares, granted under Section 6.03 hereof, that are subject to
certain restrictions.

 

2.01.19  “Rule
16b-3” means Rule 16b-3 under the Exchange Act, as amended from time to time,
or any successor to such Rule promulgated by the Securities and Exchange
Commission under Section 16 of the Exchange Act.

 

2.01.20  “Shares”
means the common stock of the Company, without par value, and such other
securities of the Company as may be substituted for Shares pursuant to Section
8.01 hereof.

 

2.01.21  “Subsidiary”
means any corporation in an unbroken chain of corporations beginning with the
Company, if each of the corporations other than the last corporation in the
chain owns stock possessing at least 50% of the total combined voting power of all
classes of stock in one of the other corporations in the chain.

 

2.02  Construction.  For purposes of the Plan, the following rules
of construction shall apply:

 

2.02.1 
The word “or” is disjunctive but not necessarily exclusive.

 

2.02.2 
Words in the singular include the plural; words in the plural include
the singular; words in the neuter gender include the masculine and feminine
genders, and words in the masculine or feminine gender include the other and
neuter genders.

 

SECTION
3. ADMINISTRATION

 

3.01  The Plan shall be administered by the
Committee.  The Committee shall have full
and final authority to take the following actions, in each case subject to and
consistent with the provisions of the Plan:

 

3

 

(i)  to
designate Participants;

 

(ii)  to
determine the type or types of Awards to be granted to each Participant;

 

(iii)  to
determine the number of Awards to be granted, the number of Shares or amount of
cash or other property to which an Award will relate, the terms and conditions
of any Award (including, but not limited to, any exercise price, grant price or
purchase price, any limitation or restriction, any schedule for lapse of
limitations, forfeiture restrictions or restrictions on exercisability or
transferability, and accelerations or waivers thereof, based in each case on
such considerations as the Committee shall determine), and all other matters to
be determined in connection with an Award;

 

(iv)  to
determine whether, to what extent and under what circumstances an Award may be
settled in, or the exercise price of an Award may be paid in cash, Shares,
other Awards or other property, or an Award may be accelerated, vested,
canceled, forfeited, exchanged or surrendered;

 

(v)  to
determine whether, to what extent and under what circumstances cash, Shares,
other Awards, other property and other amounts payable with respect to an Award
shall be deferred, whether automatically or at the election of the Committee or
at the election of the Participant;

 

(vi)  to
interpret and administer the Plan and any instrument or agreement relating to,
or Award made under, the Plan;

 

(vii)  to
prescribe the form of each Award Agreement, which need not be identical for
each Participant;

 

(viii)  to
adopt, amend, suspend, waive and rescind such rules and regulations as the
Committee may deem necessary or advisable to administer the Plan;

 

(ix)  to
correct any defect or supply any omission or reconcile any inconsistency, and
to construe and interpret the Plan, the rules and regulations, any Award
Agreement or other instrument entered into or Award made under the Plan;

 

(x)  to
make all other decisions and determinations as may be required under the terms
of the Plan or as the Committee may deem necessary or advisable for the
administration of the Plan; and

 

(xi)  to
make such filings and take such actions as may be required from time to time by
appropriate state, regulatory and governmental agencies.

 

Any
action of the Committee with respect to the Plan shall be final, conclusive and
binding on all Persons, including the Company, Subsidiaries, Participants, any
Person claiming any rights under the Plan from or through any Participant,
employees and shareholders.  The express
grant of any specific power to the Committee, and the taking of any action by
the Committee, shall not be construed as limiting any power or authority of the
Committee.  The Committee may delegate to
officers or managers of the Company or any Subsidiary the

 

4

 

authority, subject to such terms as the Committee shall determine, to
perform administrative functions under the Plan and, with respect to
Participants who are not subject to Section 16 of the Exchange Act, to take
such actions and perform such functions under the Plan as the Committee may
specify.  Each member of the Committee
shall be entitled to, in good faith, rely or act upon any report or other
information furnished to him by an officer, manager or other employee of the
Company or a Subsidiary, the Company’s independent certified public
accountants, or any executive compensation consultant or other professional
retained by the Company to assist in the administration of the Plan.

 

SECTION
4.  SHARES SUBJECT TO THE PLAN

 

4.01  The maximum net number of Shares which may be
issued and in respect of which Awards may be granted under the Plan shall be
limited to (i) 6,000,000 shares of Common Stock, subject to adjustment as
provided in Section 8.01, which may be used for all forms of Awards including
Incentive Stock Options, and (ii) 5,000,000 shares of Common Stock,
subject to adjustment as provided in Section 8.01, which may be used for all
forms of Awards excluding Incentive Stock Options.  For purposes of determining the number of Shares
available under either of the foregoing categories, Shares issued with respect
to Awards granted on or after May 17, 2001 shall be deemed to have been issued
from category (ii) of the foregoing sentence unless such Award is an Incentive
Stock Option or as otherwise determined by the Committee.

 

For
purposes of this Section 4.01, the number of Shares to which an Award relates
shall be counted against the number of Shares available under the Plan at the
time of grant of the Award, unless such number of Shares cannot be determined
at that time, in which case the number of Shares actually distributed pursuant
to the Award shall be counted against the number of Shares available under the
Plan at the time of distribution; provided, however, that Awards related to or
retroactively added to, or granted in tandem with, substituted for or converted
into, other Awards shall be counted or not counted against the number of Shares
reserved and available under the Plan in accordance with procedures adopted by
the Committee so as to ensure appropriate counting but avoid double counting.

 

If
any Shares to which an Award relates are forfeited, or payment is made to the
Participant in the form of cash, cash equivalents or other property other than
Shares, or the Award otherwise terminates without payment being made to the
Participant in the form of Shares, any Shares counted against the number of
Shares available under the Plan with respect to such Award shall, to the extent
of any such forfeiture, alternative payment or termination, again be available
for Awards under the Plan.  If the
exercise price of an Award is paid by delivering to the Company Shares
previously owned by the Participant, the Shares covered by the Award equal to
the number of Shares so delivered shall again be available for Awards under the
Plan.  Any Shares distributed
pursuant to an Award, if granted pursuant to category (i) of the first sentence
of this Section, may consist, in whole or part, of authorized and unissued
Shares or of treasury Shares, including Shares repurchased by the Company for
purposes of the Plan and, if granted pursuant to category (ii) of the first
sentence of this Section, shall consist of treasury Shares.

 

5

 

SECTION
5.  ELIGIBILITY

 

5.01  Awards may be granted only to individuals who
are full-time employees (including, without limitation, employees who also are
directors or officers and Covered Employees) of the Company or any Subsidiary;
provided, however, that no Award shall be granted to any member of the
Committee.

 

SECTION
6.  SPECIFIC TERMS OF AWARDS

 

6.01  General.  Subject to the terms of the Plan and any
applicable Award Agreement, Awards may be granted as set forth in this Section
6.  In addition, the Committee may impose
on any Award or the exercise thereof, at the date of grant or thereafter
(subject to the terms of Section 10.01), such additional terms and
conditions, not inconsistent with the provisions of the Plan, as the Committee
shall determine, including separate escrow provisions and terms requiring
forfeiture of Awards in the event of termination of employment by the
Participant.  Except as required by
applicable law, Awards may be granted for no consideration other than prior
and/or future services.

 

6.02  Options.  The Committee is authorized to grant Options
to Participants on the following terms and conditions:

 

(i)  Exercise Price.  The
exercise price per Share of an Option shall not be less than 100% of the Fair
Market Value of a Share on the date of grant of such Option.

 

(ii)  Option Term.  The term
of each Option shall be determined by the Committee, except that no Incentive
Stock Option shall be exercisable after the expiration of ten years from the
date of grant.

 

(iii)  Times and Methods of Exercise.  The Committee shall determine the time or
times at which an Option may be exercised in whole or in part, the methods by
which the exercise price may be paid or deemed to be paid, and the form of such
payment, including, without limitation, cash, Shares, or other property or any
combination thereof, having a Fair Market Value on the date of exercise equal
to the exercise price, provided, however, that (1) in the case of a Participant
who is at the time of exercise subject to Section 16 of the Exchange Act, any
portion of the exercise price representing a fraction of a Share shall in any
event be paid in cash or in property other than any equity security (as defined
by the Exchange Act) of the Company and (2) except as otherwise determined by
the Committee, in its discretion, at the time the Option is granted, no shares
which have been held for less than six months may be delivered in payment of
the exercise price of an Option.

 

Delivery of Shares in payment of the exercise
price of an Option, if authorized by the Committee, may be accomplished through
the effective transfer to the Company of Shares held by a broker or other
agent.  Unless otherwise determined by
the Committee, the Company will also cooperate with any person exercising an
Option who participates in a cashless exercise program of a broker or other
agent under which all or part of the Shares received upon exercise of the
Option are sold through the broker or other agent, for the purpose of paying
the exercise price of an Option.  Notwithstanding
the preceding

 

6

 

sentence, unless the Committee,
in its discretion, shall otherwise determine, the exercise of the Option shall
not be deemed to occur, and no Shares will be issued by the Company upon
exercise of an Option, until the Company has received payment in full of the
exercise price.

 

Notwithstanding any other provision contained in
the Plan or in any Award Agreement, but subject to the possible exercise of the
Committee’s discretion contemplated in the last sentence of this Section
6.02(iii), the aggregate Fair Market Value, determined as of the date of grant,
of the Shares with respect to which Incentive Stock Options are exercisable for
the first time by a Participant during any calendar year under all plans of the
corporation employing such employee, any parent or subsidiary corporation of
such corporation and any predecessor corporation of any such corporation shall
not exceed $100,000.  If the date on
which one or more of such Incentive Stock Options could first be exercised
would be accelerated pursuant to any provision of the Plan or any Award
Agreement, and the acceleration of such exercise date would result in a
violation of the restriction set forth in the preceding sentence, then,
notwithstanding any such provision, but subject to the provisions of the next
succeeding sentence, the exercise dates of such Incentive Stock Options shall
be accelerated only to the date or dates, if any, that do not result in a
violation of such restriction and, in such event, the exercise dates of the
Incentive Stock Options with the lowest option prices shall be accelerated to
the earliest such dates.  The Committee
may, in its discretion, authorize the acceleration of the exercise date of one
or more Incentive Stock Options even if such acceleration would violate the
$100,000 restriction set forth in the first sentence of this paragraph and even
if such Incentive Stock Options are thereby converted in whole or in part to
nonstatutory stock options.

 

(iv)  Termination of Employment. 
Unless otherwise determined by the Committee and reflected in the Award
Agreement:

 

(A)  if a Participant shall die while employed by
the Company or a Subsidiary or during a period following termination of
employment during which an Option otherwise remains exercisable under this
Section 6.02(iv), Options granted to the Participant, to the extent exercisable
at the time of the Participant’s death, may be exercised within one year after
the date of the Participant’s death, but not later than the expiration date of
the Option, by the executor or administrator of the Participant’s estate or by
the Person or Persons to whom the Participant shall have transferred such right
by will, by the laws of descent and distribution or, if permitted by the
Committee, by inter vivos transfer.

 

(B)  if the employment of a Participant with the
Company or a Subsidiary shall be involuntarily terminated under circumstances
which would qualify the Participant for benefits under the Company’s Separation
Allowance Plan, or if a Participant shall retire under the terms of any
retirement plan of the Company or a Subsidiary or shall terminate his or her
employment with the written consent of the Company or a Subsidiary specifically
permitting such exercise, Options granted to the Participant, to the extent
exercisable at the date of the Participant’s termination of employment, may be
exercised within 90 days after the date of termination of employment, but not
later than the expiration date of the Option.

 

7

 

(C)  except to the extent an Option remains
exercisable under paragraph (A) or (B) above or under Section 9.02, any Option
granted to a Participant shall terminate immediately upon the termination of
all employment of the Participant with the Company or a Subsidiary.

 

(v)  Reload Option Rights. 
Reload Option Rights if awarded with respect to an Option shall entitle
the holder of the Option, upon exercise of the Option or any portion thereof
through delivery of previously owned Shares, to automatically be granted on the
date of such exercise a new nonstatutory stock option (a “Reload Option”) (1)
for a number of Shares not exceeding the number of full Shares delivered in
payment of the option price of the original Option and any withholding taxes
related thereto, (2) having an option price not less than 100% of the Fair
Market Value per Share of the Common Stock on such date of grant, (3) having an
expiration date not later than the expiration date of the original Option so
exercised and (4) otherwise having terms permissible for the grant of an Option
under the Plan.  Subject to the preceding
sentence and the other provisions of the Plan, Reload Option Rights and Reload
Options shall have such terms and be subject to such restrictions and conditions,
if any, as shall be determined, in its discretion, by the Committee.  In granting Reload Option Rights, the
Committee, may, in its discretion, provide for successive Reload Option grants
upon the exercise of Reload Options granted thereunder.  Unless otherwise determined, in its
discretion, by the Committee, Reload Option Rights shall entitle the holder of
an Option to be granted a Reload Option only if the underlying Option to which
they relate is exercised during employment with the Company or a Subsidiary of
the original grantee of the underlying Option. 
Except as otherwise specifically provided herein or required by the
context, the term Option as used in this Plan shall include Reload Options
granted hereunder.

 

(vi)  Individual Option Limit.  The
aggregate number of Shares for which Options may be granted under the Plan to
any single Participant shall not exceed 1,500,000 Shares.  The limitation in the preceding sentence
shall be interpreted and applied in a manner consistent with Section 162(m) of
the Code and, to the extent consistent with Section 162(m) of the Code, in
accordance with Section 4.01 hereof. 
To the extent consistent with Section 162(m) of the Code, in applying
this limitation a Reload Option shall not be deemed to increase the number of
Shares covered by the original underlying Option grant.

 

6.03  Restricted Stock.  The Committee is authorized to grant
Restricted Stock to Participants on the following terms and conditions:

 

(i)  Issuance and Restrictions. 
Restricted Stock shall be subject to such restrictions on
transferability and other restrictions as the Committee may impose (including,
without limitation, limitations on the right to vote Restricted Stock or the
right to receive dividends thereon), which restrictions may lapse separately or
in combination at such times, under such circumstances, in such installments or
otherwise, as the Committee shall determine at the time of grant or
thereafter.  The restriction period
applicable to Restricted Stock shall, in the case of a time-based restriction
period, be not less than three years or, in the case of a performance-based
restriction period, be not less than one year.

 

8

 

(ii)  Forfeiture.  Except as
otherwise determined by the Committee at the time of grant or thereafter, upon
termination of employment (as determined under criteria established by the
Committee) during the applicable restriction period, Restricted Stock that is
at that time subject to restrictions shall be forfeited and reacquired by the
Company; provided, however, that the Committee may provide, by rule or
regulation or in any Award Agreement, that restrictions on Restricted Stock
shall be waived in whole or in part in the event of terminations resulting from
specified causes, and the Committee may in other cases waive in whole or in
part restrictions on Restricted Stock.

 

(iii)  Certificates for Shares. 
Restricted Stock granted under the Plan may be evidenced in such manner
as the Committee shall determine, including, without limitation, issuance of
certificates representing Shares, which may be held in escrow.  Certificates representing Shares of
Restricted Stock shall be registered in the name of the Participant and shall bear
an appropriate legend referring to the terms, conditions and restrictions
applicable to such Restricted Stock.

 

6.04  Performance Awards.  The Committee is authorized to grant
Performance Awards to Participants on the following terms and conditions:

 

(i)  Right to Payment.  A
Performance Award shall represent a right to receive Shares, cash, other
property or any combination thereof based on the achievement, or the level of
achievement, during a specified Performance Period of one or more Performance
Goals established by the Committee at the time of the Award.

 

(ii)  Terms of Performance Awards. 
At the time a Performance Award is granted, the Committee shall cause to
be set forth in the Award Agreement or otherwise in writing (1) the
Performance Goals applicable to the Award and the Performance Period during
which the achievement of the Performance Goals shall be measured, (2) the
amount which may be earned by the Participant based on the achievement, or the
level of achievement, of the Performance Goals or the formula by which such amount
shall be determined and (3) such other terms and conditions applicable to
the Award as the Committee may, in its discretion, determine to include
therein.  The terms so established by the
Committee shall be objective such that a third party having knowledge of the
relevant facts could determine whether or not any Performance Goal has been
achieved, or the extent of such achievement, and the amount, if any, which has
been earned by the Participant based on such performance.  The Committee may retain the discretion to
reduce (but not to increase) the amount of a Performance Award which will be
earned based on the achievement of Performance Goals.

 

(iii)  Performance Goals.  “Performance
Goals” shall mean one or more preestablished, objective measures of performance
during a specified “Performance Period”, selected by the Committee in its
discretion.  Performance Goals may be
based upon one or more of the following objective performance measures and
expressed in either, or a combination of, absolute or relative values:  earnings per share, earnings per share
growth, net income, revenue growth, revenues, expenses, return on equity,
return on total capital, return on assets, earnings (including EBITDA and
EBIT), cash flow, share price, economic value added, gross margin, operating
income, or total shareholder return. 
Performance Goals based on such performance measures may be based either
on

 

9

 

the performance of the Company,
a Subsidiary or Subsidiaries, any branch, department, business unit or other
portion thereof under such measure for the Performance Period and/or upon a
comparison of such performance with the performance of a peer group of
corporations, prior Company performance or other measure selected or defined by
the Committee at the time of making a Performance Award.  The Committee may in its discretion also
determine to use other objective performance measures as Performance Goals.

 

(iv)  Committee Certification. 
Following completion of the applicable Performance Period, and prior to
any payment of a Performance Award to the Participant, the Committee shall
determine in accordance with the terms of the Performance Award and shall
certify in writing whether the applicable Performance Goal or Goals were achieved,
or the level of such achievement, and the amount, if any, earned by the
Participant based upon such performance. 
For this purpose, approved minutes of the meeting of the Committee at
which certification is made shall be sufficient to satisfy the requirement of a
written certification.

 

(v)  Maximum Individual Performance Award Payments.  In any one calendar year, the maximum amount
which may be earned by any single Participant under (a) Performance Awards
granted under the Plan and payable in cash or property (other than Shares)
shall be limited to $3,000,000 and (b) Performance Awards granted under the
Plan and payable in Shares shall be limited to 70,000 shares.  In the case of multi-year Performance
Periods, the amount which is earned in any one calendar year is the amount paid
for the Performance Period divided by the number of calendar years in the
period.  In applying this limit, the
amount of any cash or the Fair Market Value of any Shares or other property
earned by a Participant shall be measured as of the close of the applicable
calendar year which ends the Performance Period, regardless of the fact that
certification by the Committee and actual payment to the Participant may occur
in a subsequent calendar year or years.

 

6.05  Other Stock-Based Awards.  The Committee is authorized, subject to
limitations under applicable law, to grant to Participants, in lieu of salary
or cash bonus, such other Awards that are denominated or payable in, valued in
whole or in part by reference to, or otherwise based on, or related to, Shares,
as deemed by the Committee to be consistent with the purposes of the Plan,
including, without limitation, purchase rights, Shares awarded which are not
subject to any restrictions or conditions, convertible securities, exchangeable
securities or other rights convertible or exchangeable into Shares, as the
Committee in its discretion may determine. 
In the discretion of the Committee, such Other Stock-Based Awards,
including Shares, or other types of Awards authorized under the Plan, may be
used in connection with, or to satisfy obligations of the Company or a
Subsidiary under, other compensation or incentive plans, programs or
arrangements of the Company or any Subsidiary for eligible Participants,
including without limitation the Short-Term Incentive Compensation Plan, the
Deferred Compensation Plan and executive contracts.

 

The
Committee shall determine the terms and conditions of Other Stock-Based
Awards.  Shares or securities delivered
pursuant to a purchase right granted under this Section 6.05 shall be purchased
for such consideration, paid for by such methods and in such forms, including,
without limitation, cash, Shares, or other property or any combination thereof,
as the Committee

 

10

 

shall determine, but the value of such consideration shall not be less
than the Fair Market Value of such Shares or other securities on the date of
grant of such purchase right.  Delivery
of Shares or other securities in payment of a purchase right, if authorized by
the Committee, may be accomplished through the effective transfer to the
Company of Shares or other securities held by a broker or other agent.  Unless otherwise determined by the Committee,
the Company will also cooperate with any person exercising a purchase right who
participates in a cashless exercise program of a broker or other agent under
which all or part of the Shares or securities received upon exercise of a
purchase right are sold through the broker or other agent, or under which the
broker or other agent makes a loan to such person, for the purpose of paying
the exercise price of a purchase right. 
Notwithstanding the preceding sentence, unless the Committee, in its
discretion, shall otherwise determine, the exercise of the purchase right shall
not be deemed to occur, and no Shares or other securities will be issued by the
Company upon exercise of a purchase right, until the Company has received
payment in full of the exercise price.

 

SECTION
7.  GENERAL TERMS OF AWARDS

 

7.01  Stand-Alone, Tandem and
Substitute Awards.  Awards
granted under the Plan may, in the discretion of the Committee, be granted
either alone or in addition to, or in tandem with, any other Award granted
under the Plan or any award granted under the Management Incentive Compensation
Plan, or any other plan, program or arrangement of the Company or any
Subsidiary (subject to the terms of Section 10.01) or any business entity
acquired or to be acquired by the Company or a Subsidiary, except that an Incentive
Stock Option may not be granted in tandem with other Awards or awards.  Awards granted in addition to or in tandem
with other Awards or awards may be granted either at the same time as or at a
different time from the grant of such other Awards or awards.

 

7.02  Certain Restrictions Under
Rule 16b-3.  Upon the
effectiveness of any amendment to Rule 16b-3, this Plan and any Award Agreement
for an outstanding Award held by a Participant then subject to Section 16 of
the Exchange Act shall be deemed to be amended, without further action on the
part of the Committee, the Board or the Participant, to the extent necessary
for Awards under the Plan or such Award Agreement to qualify for the exemption
provided by Rule 16b-3, as so amended, except to the extent any such amendment
requires shareholder approval.

 

7.03  Decisions Required to be
Made by the Committee.  Other
provisions of the Plan and any Award Agreement notwithstanding, if any decision
regarding an Award or the exercise of any right by a Participant, at any time
such Participant is subject to Section 16 of the Exchange Act, is required to
be made or approved by the Committee in order that a transaction by such
Participant will be exempt under Rule 16b-3, then the Committee shall retain
full and exclusive power and authority to make such decision or to approve or
disapprove any such decision by the Participant.

 

7.04  Term of Awards.  The term of each Award shall be for such
period as may be determined by the Committee; provided, however, that in no
event shall the term of any Incentive Stock Option exceed a period of ten years
from the date of its grant.

 

7.05  Form of Payment of Awards.  Subject to the terms of the Plan and any
applicable Award Agreement, payments or substitutions to be made by the Company
upon the grant,

 

11

 

exercise or other payment or distribution of an Award may be made in
such forms as the Committee shall determine at the time of grant or thereafter
(subject to the terms of Section 10.01), including, without limitation, cash,
Shares, or other property or any combination thereof, and may be made in a
single payment or substitution, in installments or on a deferred basis, in each
case in accordance with rules and procedures established, or as otherwise
determined, by the Committee.  Such rules
and procedures or determinations may include, without limitation, provisions
for the payment or crediting of reasonable interest on installment or deferred
payments or the grant or crediting of dividend equivalents in respect of
installment or deferred payments.

 

7.06  Limits on Transfer of
Awards; Beneficiaries.  No
right or interest of a Participant in any Award shall be pledged, encumbered or
hypothecated to or in favor of any Person other than the Company, or shall be
subject to any lien, obligation or liability of such Participant to any Person
other than the Company or a Subsidiary. 
Except to the extent otherwise determined by the Committee, no Award and
no rights or interests therein shall be assignable or transferable by a
Participant otherwise than by will or the laws of descent and distribution, and
any Option or other right to purchase or acquire Shares granted to a
Participant under the Plan shall be exercisable during the Participant’s lifetime
only by such Participant.  A beneficiary,
guardian, legal representative or other Person claiming any rights under the
Plan from or through any Participant shall be subject to all the terms and
conditions of the Plan and any Award Agreement applicable to such Participant
as well as any additional restrictions or limitations deemed necessary or
appropriate by the Committee.

 

7.07  Registration and Listing
Compliance.  No Award shall be
paid and no Shares or other securities shall be distributed with respect to any
Award in a transaction subject to the registration requirements of the
Securities Act of 1933, as amended, or any state securities law or subject to a
listing requirement under any listing agreement between the Company and any
national securities exchange, and no Award shall confer upon any Participant
rights to such payment or distribution until such laws and contractual
obligations of the Company have been complied with in all material
respects.  Except to the extent required
by the terms of an Award Agreement or another contract between the Company and
the Participant, neither the grant of any Award nor anything else contained
herein shall obligate the Company to take any action to comply with any
requirements of any such securities laws or contractual obligations relating to
the registration (or exemption therefrom) or listing of any Shares or other
securities, whether or not necessary in order to permit any such payment or
distribution.

 

7.08  Stock Certificates.  All certificates for Shares delivered under
the terms of the Plan shall be subject to such stop-transfer orders and other
restrictions as the Committee may deem advisable under federal or state
securities laws, rules and regulations thereunder, and the rules of any
national securities exchange or automated quotation system on which Shares are
listed or quoted.  The Committee may
cause a legend or legends to be placed on any such certificates to make
appropriate reference to such restrictions or any other restrictions or
limitations that may be applicable to Shares. 
In addition, during any period in which Awards or Shares are subject to
restrictions or limitations under the terms of the Plan or any Award Agreement,
or during any period during which delivery or receipt of an Award or Shares has
been deferred by the Committee or a Participant, the Committee may require any
Participant to enter into an agreement providing that certificates representing
Shares issuable or issued pursuant to an Award

 

12

 

shall remain in the physical custody of the Company or such other Person
as the Committee may designate.

 

SECTION
8.  ADJUSTMENT PROVISIONS

 

8.01  If a dividend or other distribution shall be
declared upon the Common Stock payable in shares of Common Stock, the number of
shares of Common Stock then subject to any outstanding Options, Performance
Awards or Other Stock-Based Awards, the number of shares of Common Stock which
may be issued under the Plan but are not then subject to outstanding Options,
Performance Awards or Other Stock-Based Awards and the maximum number of shares
as to which Options or Performance Awards may be granted and as to which shares
may be awarded under Sections 6.02(vi) and 6.04(v), shall be adjusted by
adding thereto the number of shares of Common Stock which would have been
distributable thereon if such shares had been outstanding on the date fixed for
determining the shareholders entitled to receive such stock dividend or
distribution.  Shares of Common Stock so
distributed with respect to any Restricted Stock held in escrow shall also be
held by the Company in escrow and shall be subject to the same restrictions as
are applicable to the Restricted Stock on which they were distributed.

 

If the outstanding shares of Common Stock shall be changed into or
exchangeable for a different number or kind of shares of stock or other
securities of the Company or another corporation, or cash or other property,
whether through reorganization, reclassification, recapitalization, stock
split-up, combination of shares, merger or consolidation, then there shall be
substituted for each share of Common Stock subject to any then outstanding
Option, Performance Award or Other Stock-Based Award, and for each share of
Common Stock which may be issued under the Plan but which is not then subject
to any outstanding Option, Performance Award or Other Stock-Based Award, the
number and kind of shares of stock or other securities (and in the case of
outstanding Options, Performance Awards or Other Stock-Based Awards, the cash
or other property) into which each outstanding share of the Common Stock shall
be so changed or for which each such share shall be exchangeable.  Unless otherwise determined by the Committee
in its discretion, any such stock or securities, as well as any cash or other
property, into or for which any Restricted Stock held in escrow shall be
changed or exchangeable in any such transaction shall also be held by the
Company in escrow and shall be subject to the same restrictions as are
applicable to the Restricted Stock in respect of which such stock, securities,
cash or other property was issued or distributed.

 

In
case of any adjustment or substitution as provided for in this
Section 8.01, the aggregate option price for all Shares subject to each
then outstanding Option, Performance Award or Other Stock-Based Award, prior to
such adjustment or substitution shall be the aggregate option price for all
shares of stock or other securities (including any fraction), cash or other
property to which such Shares shall have been adjusted or which shall have been
substituted for such Shares.  Any new
option price per share or other unit shall be carried to at least three decimal
places with the last decimal place rounded upwards to the nearest whole number.

 

If
the outstanding shares of the Common Stock shall be changed in value by reason
of any spin-off, split-off or split-up, or dividend in partial liquidation,
dividend in property other than cash, or extraordinary distribution to
shareholders of the Common Stock, (a) the Committee shall make any
adjustments to any then outstanding Option, Performance Award or Other Stock-

 

13

 

Based Award, which it
determines are equitably required to prevent dilution or enlargement of the
rights of optionees and awardees which would otherwise result from any such
transaction, and (b) unless otherwise determined by the Committee in its
discretion, any stock, securities, cash or other property distributed with respect
to any Restricted Stock held in escrow or for which any Restricted Stock held
in escrow shall be exchanged in any such transaction shall also be held by the
Company in escrow and shall be subject to the same restrictions as are
applicable to the Restricted Stock in respect of which such stock, securities,
cash or other property was distributed or exchanged.

 

No
adjustment or substitution provided for in this Section 8.01 shall require
the Company to issue or sell a fraction of a Share or other security.  Accordingly, all fractional Shares or other
securities which result from any such adjustment or substitution shall be
eliminated and not carried forward to any subsequent adjustment or
substitution.  Owners of Restricted Stock
held in escrow shall be treated in the same manner as owners of Common Stock
not held in escrow with respect to fractional Shares created by an adjustment
or substitution of Shares, except that, unless otherwise determined by the
Committee in its discretion, any cash or other property paid in lieu of a
fractional Share shall be subject to restrictions similar to those applicable
to the Restricted Stock exchanged therefor.

 

If
any such adjustment or substitution provided for in this Section 7 requires the
approval of shareholders in order to enable the Company to grant Incentive
Stock Options, then no such adjustment or substitution shall be made without
the required shareholder approval. Notwithstanding the foregoing, in the case
of Incentive Stock Options, if the effect of any such adjustment or
substitution would be to cause the Option to fail to continue to qualify as an
Incentive Stock Option or to cause a modification, extension or renewal of such
Option within the meaning of Section 424 of the Code, the Committee may elect
that such adjustment or substitution not be made but rather shall use
reasonable efforts to effect such other adjustment of each then outstanding
Option as the Committee, in its discretion, shall deem equitable and which will
not result in any disqualification, modification, extension or renewal (within
the meaning of Section 424 of the Code) of such Incentive Stock Option.

 

SECTION
9.  CHANGE OF CONTROL PROVISIONS

 

9.01  Acceleration of
Exercisability and Lapse of Restrictions.  Unless otherwise determined by the Committee
at the time of grant of an Award or unless otherwise provided in the applicable
Award Agreement, if the shareholders of the Company shall approve a transaction
which upon consummation would constitute a Change of Control of the Company, or
if any Change of Control of the Company not subject to shareholder approval
shall occur:

 

(i)  all
outstanding Awards pursuant to which the Participant may have rights, the
exercise of which is restricted or limited, shall become fully exercisable;

 

(ii)  all
restrictions or limitations (including risks of forfeiture and deferrals) on
outstanding Awards subject to restrictions or limitations under the Plan shall
lapse unless prior to such lapse the right to lapse of restrictions or
limitations is waived or deferred by the Participant; and

 

14

 

(iii)  all
performance criteria and other conditions to payment of Awards under which
payments of cash, Shares or other property are subject to conditions shall be
deemed to be achieved or fulfilled and shall be waived by the Company.

 

9.02  Termination of Employment
Following Change of Control. 
If within three years following the date of any Change of Control the
employment of a Participant shall be terminated voluntarily or involuntarily
for any reason other than for Cause, then unless otherwise provided in the
applicable Award Agreement, and in addition to any other rights of
post-termination exercise which the Participant (or other holder of the Award)
may have under the Plan or the applicable Award Agreement, any Option or other
Award granted to the Participant and outstanding on the date of the Change of
Control, the payment or receipt of which is dependent upon exercise by the
Participant (or other holder of the Award) shall be exercisable for a period of
90 days following the date of such termination of employment but not later than
the expiration date of the Award.

 

9.03  Definition of Change of
Control.  For purposes of this
Section 9, a “Change of Control” of the Company shall mean any of the following
events:

 

(a)  The
sale or other disposition by the Company of all or substantially all of its
assets to a single purchaser or to a group of purchasers, other than to a
corporation with respect to which, following such sale or disposition, more
than eighty percent of, respectively, the then outstanding shares of Common
Stock and the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of the Board is then owned beneficially,
directly or indirectly, by all or substantially all of the individuals and
entities who were the beneficial owners, respectively of the outstanding Common
Stock and the combined voting power of the then outstanding voting securities
immediately prior to such sale or disposition in substantially the same
proportion as their ownership of the outstanding Common Stock and voting power
immediately prior to such sale or disposition;

 

(b)  The
acquisition in one or more transactions by any person or group, directly or
indirectly, of beneficial ownership of twenty percent or more of the
outstanding shares of Common Stock or the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in the
election of the Board; provided, however, that any acquisition by (x) the
Company or any of its Subsidiaries, or any employee benefit plan (or related
trust) sponsored or maintained by the Company or any of its Subsidiaries or (y)
any person that is eligible, pursuant to Rule 13d-1(b) under the Exchange Act
(as in effect on the effective date of the Plan) to file a statement on
Schedule 13G with respect to its beneficial ownership of Common Stock and other
voting securities, whether or not such person shall have filed a statement on
Schedule 13G, unless such person shall have filed a statement on Schedule 13D
with respect to beneficial ownership of fifteen percent or more of the Company’s
voting securities, shall not constitute a Change of Control;

 

(c)  The
Company’s termination of its business and liquidation of its assets;

 

(d)  There
is consummated a merger, consolidation, reorganization, share exchange, or
similar transaction involving the Company (including a triangular merger),

 

15

 

in any case, unless immediately
following such transaction:  (i) all or
substantially all of the persons who were the beneficial owners of the
outstanding Common Stock and outstanding voting securities of the Company
immediately prior to the transaction beneficially own, directly or indirectly,
more than 60% of the outstanding shares of Common Stock and the combined voting
power of the then outstanding voting securities entitled to vote generally in
the election of directors of the corporation resulting from such transaction
(including a corporation or other person which as a result of such transaction
owns the Company or all or substantially all of the Company’s assets through
one or more subsidiaries (a “Parent Company”)) in substantially the same proportion
as their ownership of the Common Stock and other voting securities of the
Company immediately prior to the consummation of the transaction, (ii) no
person (other than the Company, any employee benefit plan sponsored or
maintained by the Company or, if reference was made to equity ownership of any
Parent Company for purposes of determining whether clause (i) above is
satisfied in connection with the transaction, such Parent Company) beneficially
owns, directly or indirectly, 20% or more of the outstanding shares of Common
Stock or the combined voting power of the voting securities entitled to vote
generally in the election of directors of the corporation resulting from such
transaction and (iii) individuals who were members of the Board immediately
prior to the consummation of the transaction constitute at least a majority of
the members of the board of directors resulting from such transaction (or, if
reference was made to equity ownership of any Parent Company for purposes of
determining whether clause (i) above is satisfied in connection with the
transaction, such Parent Company); or

 

(e)  The
following individuals cease for any reason to constitute a majority of the
number of directors then serving: 
individuals who, on the date hereof, constitute the entire Board and any
new director (other than a director whose initial assumption of office is in
connection with an actual or threatened election contest, including but not
limited to a consent solicitation, relating to the election of directors of the
Company) whose appointment or election by the Board or nomination for election
by the Company’s shareholders was approved by a vote of at least two-thirds
(2/3) of the directors then still in office who either were directors on the
effective date of the Plan or whose appointment, election or nomination for
election was previously so approved.

 

SECTION
10.  AMENDMENTS TO AND TERMINATION OF THE
PLAN

 

10.01  The Board may amend, alter, suspend,
discontinue or terminate the Plan without the consent of shareholders or
Participants, except that, without the approval of the shareholders of the
Company, no amendment, alteration, suspension, discontinuation or termination
shall be made if shareholder approval is required by any federal or state law
or regulation or by the rules of any stock exchange on which the Shares may
then be listed, or if the amendment, alteration or other change materially
increases the benefits accruing to Participants, increases the number of Shares
available under the Plan or modifies the requirements for participation under
the Plan, or if the Board in its discretion determines that obtaining such
shareholder approval is for any reason advisable; provided, however, that
except as provided in Section 7.02, without the consent of the Participant, no
amendment, alteration, suspension, discontinuation or termination of the Plan
may materially and adversely affect the rights of such Participant under any
Award theretofore granted to him.  The
Committee may, consistent with the terms of the Plan, waive any conditions or
rights under, amend any terms of, or amend, alter, suspend, discontinue or

 

16

 

terminate, any Award theretofore granted, prospectively or
retrospectively; provided, however, that except as provided in Section 7.02,
without the consent of a Participant, no amendment, alteration, suspension,
discontinuation or termination of any Award may materially and adversely affect
the rights of such Participant under any Award theretofore granted to him; and
provided further that, except as provided in Section 8.01 of the Plan, the
exercise price of any outstanding Option may not be reduced, whether through
amendment, cancellation or replacement, unless such reduction is approved by
the shareholders of the Company.

 

SECTION
11.  GENERAL PROVISIONS

 

11.01  No Right to Awards; No
Shareholder Rights.  No
Participant or employee shall have any claim to be granted any Award under the
Plan, and there is no obligation for uniformity of treatment of Participants
and employees, except as provided in any other compensation arrangement.  No Award shall confer on any Participant any
of the rights of a shareholder of the Company unless and until Shares are in
fact issued to such Participant in connection with such Award.

 

11.02  Withholding.  To the extent required by applicable Federal,
state, local or foreign law, the Participant or his successor shall make
arrangements satisfactory to the Company, in its discretion, for the
satisfaction of any withholding tax obligations that arise in connection with
an Award.  The Company shall not be
required to issue any Shares or make any cash or other payment under the Plan
until such obligations are satisfied.

 

The
Company is authorized to withhold from any Award granted or any payment due
under the Plan, including from a distribution of Shares, amounts of withholding
taxes due with respect to an Award, its exercise or any payment thereunder, and
to take such other action as the Committee may deem necessary or advisable to enable
the Company and Participants to satisfy obligations for the payment of such
taxes.  This authority shall include
authority to withhold or receive Shares, Awards or other property and to make
cash payments in respect thereof in satisfaction of such tax obligations.

 

11.03  No Right to Employment.  Nothing contained in the Plan or any Award
Agreement shall confer, and no grant of an Award shall be construed as
conferring, upon any Participant any right to continue in the employ of the
Company or to interfere in any way with the right of the Company to terminate
his employment at any time or increase or decrease his compensation from the
rate in existence at the time of granting of an Award, except as provided in
any Award Agreement or other compensation arrangement.

 

11.04  Unfunded Status of Awards;
Creation of Trusts.  The Plan
is intended to constitute an “unfunded” plan for incentive and deferred
compensation.  With respect to any
payments not yet made to a Participant pursuant to an Award, nothing contained
in the Plan or any Award Agreement shall give any such Participant any rights
that are greater than those of a general unsecured creditor of the Company;
provided, however, that the Committee may authorize the creation of trusts or
make other arrangements to meet the Company’s obligations under the Plan to
deliver cash, Shares or other property pursuant to any Award, which trusts or
other arrangements shall be consistent with the “unfunded” status of the Plan
unless the Committee otherwise determines.

 

17

 

11.05  No Limit on Other
Compensatory Arrangements. 
Nothing contained in the Plan shall prevent the Company from adopting
other or additional compensation arrangements (which may include, without limitation,
employment agreements with executives and arrangements which relate to Awards
under the Plan), and such arrangements may be either generally applicable or
applicable only in specific cases. 
Notwithstanding anything in the Plan to the contrary, the terms of each
Award shall be construed so as to be consistent with such other arrangements in
effect at the time of the Award.

 

11.06  No Fractional Shares.  No fractional Shares shall be issued or
delivered pursuant to the Plan or any Award. 
The Committee shall determine whether cash, other Awards or other
property shall be issued or paid in lieu of fractional Shares or whether such
fractional Shares or any rights thereto shall be forfeited or otherwise
eliminated.

 

11.07  Governing Law.  The validity, interpretation, construction
and effect of the Plan and any rules and regulations relating to the Plan shall
be governed by the laws of the Commonwealth of Pennsylvania (without regard to
the conflicts of laws thereof), and applicable Federal law.

 

11.08  Severability.  If any provision of the Plan or any Award is
or becomes or is deemed invalid, illegal or unenforceable in any jurisdiction,
or would disqualify the Plan or any Award under any law deemed applicable by
the Committee, such provision shall be construed or deemed amended to conform
to applicable laws or if it cannot be construed or deemed amended without, in
the determination of the Committee, materially altering the intent of the Plan
or Award, it shall be deleted and the remainder of the Plan or Award shall
remain in full force and effect; provided, however, that, unless otherwise
determined by the Committee, the provision shall not be construed or deemed
amended or deleted with respect to any Participant whose rights and obligations
under the Plan are not subject to the law of such jurisdiction or the law
deemed applicable by the Committee.

 

SECTION
12.  EFFECTIVE DATE AND TERM OF THE PLAN

 

12.01  The effective date and date of adoption of
the Plan shall be February 25, 2004, the date of adoption of the Plan by the
Board, provided that such adoption of the Plan is approved by a majority of the
votes cast at a duly held meeting of shareholders held on or prior to
February 24, 2005 at which a quorum representing a majority of the
outstanding voting stock of the Company is, either in person or by proxy,
present and voting.  Notwithstanding
anything else contained in the Plan or in any Award Agreement, no Option or
other purchase right granted under the Plan may be exercised, and no Shares may
be distributed pursuant to any Award granted under the Plan, prior to such
shareholder approval or prior to any required approval or consent from those
governmental agencies having jurisdiction in these matters.  In the event such shareholder or regulatory
approval is not obtained, all Awards granted under the Plan shall automatically
be deemed void and of no effect.  Absent
additional shareholder approval, (1) no Performance Award may be granted
under the Plan subsequent to the Company’s Annual Meeting of Shareholders in
2009, and (2) no other Award may be granted under the Plan subsequent to
March 16, 2009, except that Reload Options may be granted pursuant to Reload
Option Rights then outstanding.

 

18

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