CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH RULE
406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. OMITTED
INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
AGENCY, SERVICES, AND DISTRIBUTION AGREEMENT
by and between
XXXXXX HEALTHCARE CORPORATION
as Baxter
and
ALLEGIANCE HEALTHCARE CORPORATION
as Allegiance
TABLE OF CONTENTS
Page
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1. Definitions; Rules of Construction. . . . . . . . . . . . . . . . . . . . 1
2. Appointment and Commitment. . . . . . . . . . . . . . . . . . . . . . . . 6
3. Agency Model, Distributor Model, and BCS Kit Model. . . . . . . . . . . . 7
4. Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5. Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
6. Prices and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
7. The Council.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
8. Invoicing and Payments. . . . . . . . . . . . . . . . . . . . . . . . . .22
9. Allegiance's Duties . . . . . . . . . . . . . . . . . . . . . . . . . . .22
10. Xxxxxx'x Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
11. Standard of Care. . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
12. Alternative Acute Care Distribution . . . . . . . . . . . . . . . . . . .22
13. Transfer of Title and Risk of Loss. . . . . . . . . . . . . . . . . . . .24
14. Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
15. Trademarks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
16. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
17. Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
18. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
19. Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . . . . . .33
20. Force Majeure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
21. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
22. Limitation of Liability and Remedy. . . . . . . . . . . . . . . . . . . .37
23. Miscellaneous Provisions. . . . . . . . . . . . . . . . . . . . . . . . .38
24. Dispute Resolution and Arbitration. . . . . . . . . . . . . . . . . . . .40
25. Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
i
26. Authority.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
LIST OF EXHIBITS
Exhibit A I.V. Products
Exhibit B Nutrition Products
Exhibit C Allegiance's Duties
Exhibit X Xxxxxx'x Duties
Exhibit E Supplier Scoreboard
Exhibit F Interim Distributor Model
ii
AGENCY, SERVICES, AND DISTRIBUTION AGREEMENT
This AGENCY, SERVICES, AND DISTRIBUTION AGREEMENT (this "Agreement"),
dated as of October 1, 1996, by and between XXXXXX HEALTHCARE CORPORATION, a
Delaware corporation with its principal offices at Xxx Xxxxxx Xxxxxxx,
Xxxxxxxxx, Xxxxxxxx 00000 (hereinafter called "Baxter") and ALLEGIANCE
HEALTHCARE CORPORATION, a Delaware corporation with its principal offices at
0000 Xxxxxxxx Xxxx, XxXxx Xxxx, Xxxxxxxx 00000 (hereinafter called
"Allegiance").
RECITALS
Baxter and its parent corporation, Xxxxxx International Inc. ("Xxxxxx
International"), have spun-off various businesses by transferring those
businesses to Allegiance Corporation ("Allegiance Corporation") (or its
subsidiaries) and distributing all of the stock of Allegiance Corporation to the
stockholders of Xxxxxx International as a dividend. As a result of the
distribution of that dividend, Xxxxxx International and Allegiance Corporation,
and their respective subsidiaries, are separate and independent corporations.
As a consequence of the foregoing actions, Allegiance will acquire,
INTER ALIA, certain business units, including the U.S. Distribution business,
that have previously provided various sales and distribution services to
business units owned by Baxter.
Baxter and Allegiance recognize that it is advisable for Allegiance to
continue providing physical distribution and sales support and related services
to Baxter.
AGREEMENT
In consideration of the mutual undertakings contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Baxter and Allegiance agree as follows:
1. DEFINITIONS; RULES OF CONSTRUCTION.
1.1 DEFINITIONS. As used in this Agreement:
1.1.1 "Affiliate" shall mean any Person controlling, controlled by
or under direct or indirect common control with a party hereto. For the purpose
of this definition, the term "control" means the power to direct the management
of an entity, directly or indirectly, whether solely through the ownership of
voting securities (as in the case of a subsidiary), by contract, or otherwise;
and the term "controlled" has a
meaning correlative to the foregoing. Allegiance Corporation and Xxxxxx
International shall not be deemed to be Affiliates of each other.
1.1.2 "Agreement" shall mean this Agency, Services, and
Distribution Agreement dated as of October 1, 1996, including all Exhibits and
Schedules attached hereto.
1.1.3 "Base Business Products" shall mean all I.V. Products on
Exhibit A that are not designated as Premium Products, as defined herein.
1.1.4 "Best Value Products" shall mean a select offering of
Allegiance-distributed and Allegiance-manufactured products * * *. Best Value
Products are specially promoted externally to Allegiance customers and
internally to Allegiance sales personnel through financial incentives. All Best
Value Products are required to meet the following specific criteria: * * *.
Notwithstanding the foregoing criteria, the Premium Products listed on Exhibit A
from time to time pursuant to Section 4.3 will be deemed Best Value Products;
provided, however, that * * * identified on Exhibit A will not be considered to
be Best Value Products solely on account of their being identified as Premium
Products.
1.1.5 "Competitor" shall mean (a) with respect to Baxter, any
Person (including an affiliate of such Person) that during its most recently
completed fiscal year has annual net revenues from sales of products competitive
with the Products greater than 20% of the total annual net revenues of Baxter
from Products during its most recently completed fiscal year; and (b) in the
case of Allegiance, any Person (including an affiliate of such Person) that
during its most recently completed fiscal year has annual net revenues from the
distribution of medical, surgical and laboratory products greater than 20% of
the total annual net revenues of Allegiance during its most recently completed
fiscal year.
1.1.6 "Cost Management" shall mean the dedication of resources by
Allegiance or its Affiliates to deliver cost improvement services to customers.
Cost Management services shall focus on activities including, without
limitation, reducing product consumption, improving utilization of assets,
improving logistics, and reducing or eliminating operating costs. Cost
Management transactions shall be those transactions performed by Allegiance
pursuant to any comprehensive Cost Management contract which permits Allegiance
to share with a customer the risk and reward of cost savings generated by Cost
Management as well as obligating the customer to purchase a specified percentage
of Best Value Products. As part of such Cost Management transactions,
Allegiance may also provide some or all of the following services: (a)
ValueLink (as defined herein); (b) PBDS (as defined herein); (c) consulting
services; (d) on-site
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clinical resources; (e) contract materials management; and (f) consolidated
service centers.
1.1.7 "Internal Use Sales" shall mean (a) Products transferred to
Xxxxxx'x Affiliates for internal use (including provision of perfusion
services); and (b) Products transferred to another Baxter Division for resale
under a distribution agreement with Allegiance.
1.1.8 "I.V. Products" shall mean the products and accessories
manufactured by or on behalf of Baxter and listed in Exhibit A hereto together
with the parts and components necessary for the repair and replacement thereof.
1.1.9 "Kit" shall mean an aggregation by Allegiance of Baxter,
Allegiance, and/or third-party products packaged together or repackaged for
specific uses and procedures including, without limitation, such aggregations
for programs known prior to the effective date of this Agreement as Baxter
Custom Sterile ("BCS"), Baxter Custom Products ("BCP"), and Procedure-Based
Delivery Systems ("PBDS").
1.1.10 "Line of Products" shall mean any specifically identified
group of related Products set forth in Exhibits A and B to this Agreement.
1.1.11 Net Sales.
1.1.11.1 "Agency Net Sales" shall mean Xxxxxx'x aggregate sales
of Products at the Agency Prices (or direct shipment prices) for such
Products less all applicable dealer, divisional, and corporate bonuses and
discounts, returns, allowances, discounts available at time of purchase,
group purchasing organization fees, drug buy-back premiums, and amortized
contract procurement costs provided or recognized by Baxter. Agency Net
Sales includes all sales of the Products by Baxter in the Territory except
Distributor Net Sales, sales to Allegiance of Products, Internal Use Sales,
VWR Purchases, Drug Purchases, capital equipment lease extensions and re-
signs, or sales and leases of hardware and related software and disposables
to nonhealth-care retailers serving end-user customers.
1.1.11.2 "Contract Net Sales" shall mean the sum of Agency Net
Sales and Distributor Net Sales. Contract Net Sales amounts shall be
recognized for calculation purposes in a manner consistent with Xxxxxx'x
historical revenue recognition policies and generally accepted accounting
principles.
1.1.11.3 "Distributor Net Sales" shall mean a calculation of net
sales for all transactions hereunder pursuant to the Distributor Model or
the Interim Distributor
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Model. Distributor Net Sales shall be based upon the volumes of Products
sold by Allegiance to customers and calculated as if Baxter had sold such
volumes to such customers at the Suggested Sales Prices less all applicable
dealer, corporate, and divisional bonuses and discounts, returns,
allowances, discounts available at time of purchase, group purchasing
organization fees, drug buy-back premiums, and amortized contract
procurement costs provided or recognized by Baxter. Distributor Net Sales
shall not include sales to Allegiance of Products for use as components of
BCS Kits or sales of BCS Kits to customers.
1.1.12 "Notice" shall mean notice given in accordance with Section
23.1.
1.1.13 "Nutrition Products" shall mean the products and accessories
manufactured by or on behalf of Baxter and listed in Exhibit B hereto together
with the parts and components necessary for the repair and replacement thereof.
1.1.14 "Person" shall mean an individual, corporation, partnership,
limited liability company, unincorporated syndicate, unincorporated
organization, trust, trustee, executor, administrator or other legal
representative, governmental authority or agency, or any group of Persons acting
in concert.
1.1.15 "Premium Products" shall mean all I.V. Products on Exhibit A
that are designated as Premium Products.
1.1.16 "Products" shall mean all I.V. Products and all Nutrition
Products.
1.1.17 "Term" shall mean the period of time provided in Section 5
hereof, including any and all extensions thereof.
1.1.18 "Territory" shall mean the District of Columbia and the
fifty states comprising the United States of America.
1.1.19 "Transfer" shall mean any assignment, transfer, sale or
other disposition to a Person that is not an Affiliate of the Transferor,
including any Transfer by way of merger or consolidation or otherwise by
operation of law.
1.1.20 "ValueLink" shall mean the just-in-time inventory management
service known as ValueLink-Registered Trademark-.
1.2 OTHER TERMS. Terms defined in other Sections of this Agreement will
have the meanings therein provided.
1.3 RULES OF CONSTRUCTION.
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1.3.1 In this Agreement, unless a clear contrary intention
appears:
1.3.1.1 the singular number includes the plural number and vice
versa;
1.3.1.2 reference to any Person includes such Person's
successors and assigns but, if applicable, only if such successors and
assigns are permitted by this Agreement;
1.3.1.3 reference to any gender includes the other gender;
1.3.1.4 reference to any Section or Exhibit means such Section
of this Agreement or such Exhibit to this Agreement, as the case may be,
and references in any Section or definition to any clause means such clause
of such Section or definition;
1.3.1.5 "herein", "hereunder", "hereof", "hereto", and words of
similar import shall be deemed references to this Agreement as a whole and
not to any particular Section or other provision hereof or thereof;
1.3.1.6 "including" (and with correlative meaning "include")
means including without limiting the generality of any description
preceding such term;
1.3.1.7 "distribute" and "distribution" shall be used
interchangeably to refer to Allegiance's duties under the Agency Model, the
Distributor Model, the Interim Distributor Model, or the BCS Kit Model and
shall not alone imply a legal distributor relationship;
1.3.1.8 relative to the determination of any period of time,
"from" means "from and including", "to" means "to but excluding" and
"through" means "through and including";
1.3.1.9 reference to any law (including statutes and
ordinances) means such law as amended, modified, codified or reenacted, in
whole or in part, and in effect from time to time, including rules and
regulations promulgated thereunder;
1.3.1.10 accounting terms used herein shall have the meanings
historically attributed to them by Baxter and its subsidiaries based upon
Xxxxxx'x internal financial policies and procedures in effect prior to the
spin-off described in the recitals above;
1.3.1.11 in the event of any conflict between the provisions of
the body of this Agreement and the Exhibits
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hereto, the provisions of the body of this Agreement shall control; and
1.3.1.12 the headings contained in this Agreement (except for
the Exhibits) have been inserted for convenience of reference only, and are
not to be used in construing this Agreement.
1.3.2 This Agreement was negotiated by the parties with the
benefit of legal representation, and any rule of construction or interpretation
otherwise requiring this Agreement to be construed or interpreted against either
party shall not apply to any construction or interpretation hereof. Subject to
Section 23.5 hereof, this Agreement shall be interpreted and construed to the
maximum extent possible so as to uphold the enforceability of each of the terms
and provisions hereof, it being understood and acknowledged that this Agreement
was entered into by the parties after substantial and extended negotiations and
with full awareness by the parties of the terms and provisions hereof and the
consequences thereof.
2. APPOINTMENT AND COMMITMENT.
2.1 APPOINTMENT OF LIMITED AGENCY. Baxter hereby appoints Allegiance, and
Allegiance hereby accepts such appointment, as Xxxxxx'x exclusive limited agent
to provide under the Agency Model (as defined herein), (1) physical distribution
services and sales support services with respect to the Products sold by Baxter
to Xxxxxx'x customers in the Territory, and (2) sales representative services
for sales to surgery centers not affiliated with acute care hospitals (such
acute care hospitals as set forth in the then-current AMERICAN HOSPITAL
ASSOCIATION GUIDE), subject to the terms and conditions stated herein. Subject
to the terms of Section 4.2, Baxter, in its sole and absolute discretion, shall
select the customers to whom Allegiance distributes as Xxxxxx'x agent under the
Agency Model. Subject to the terms of Section 3, all Products shall be sold
under the Agency Model except for (a) Kits, and/or (b) Cost Management,
ValueLink, and other transactions in which the customer demands that Allegiance
issue an Allegiance invoice for Products and, in some instances, Allegiance
products; provided that Allegiance shall nevertheless provide sales, sales
support, customer service, and physical distribution services for the
transactions specified in clauses (a) and (b) of this Section under the
Distributor Model or BCS Kit Model, each as defined herein.
2.2 GRANT OF DISTRIBUTION RIGHTS. With respect to the transactions
specified in clauses (a) and (b) in Section 2.1, Baxter hereby grants to
Allegiance and Allegiance hereby accepts the right, which shall be exclusive
except as set forth in Section 4.2, to provide sales, sales support, customer
service, and physical distribution services, as specified in Section 9, to
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customers in the Territory under the Distributor Model, the Interim Distributor
Model, and the BCS Kit Model, provided that Allegiance shall notify Baxter in
advance of the identity of each such customer.
2.3 EXCEPTIONS AND LIMITATIONS. Baxter reserves all rights not expressly
granted to Allegiance hereunder. Except as expressly provided herein with
respect to Subdistributors, Allegiance shall not grant to any subagents or
subdistributors any of its rights or obligations hereunder.
3. AGENCY MODEL, DISTRIBUTOR MODEL, AND BCS KIT MODEL.
3.1 GENERAL. The Products may be distributed pursuant to the Agency
Model, the Distributor Model, or the BCS Kit Model. Section 2.1 shall apply to
Products distributed pursuant to the Agency Model, and Section 2.2 shall apply
to Products distributed pursuant to the Distributor Model or the BCS Kit Model.
For the period beginning with the effective date of this Agreement and ending
upon the earlier of (a) mutual agreement of the parties or (b) September 30,
1997 (the "Interim Period"), all transactions that would otherwise be treated as
Distributor Model transactions under this Agreement will follow the Interim
Distributor Model as provided in Exhibit F. Based upon the parties' business
prior to the effective date of this Agreement, the parties believe that a
significant majority of Xxxxxx'x distribution of the Products shall be made by
Allegiance under the Agency Model.
3.2 AGENCY MODEL. Under the Agency Model, Baxter shall maintain the
principal contractual relationship with the customer and shall be responsible
for sales, sales support, customer invoicing, accounts receivable, and customer
service in connection with the sales of the Products, and Allegiance shall act
as Xxxxxx'x agent to facilitate physical distribution of the Products from
Baxter to the customer. Baxter shall have the sole right and responsibility for
negotiating and contracting with each customer the delivered price from Baxter
of the Products (the "Agency Price"). As provided in Section 6, Baxter shall
pay Allegiance a percentage of the Agency Net Sales of the Products as a fee for
Allegiance's services as set forth in Section 9.
3.3 DISTRIBUTOR MODEL. Under the Distributor Model, Allegiance shall
maintain the principal contractual relationship with the customer for sales,
sales support, customer invoicing, accounts receivable, and customer service in
connection with the supply of the Products in connection with the provision by
Allegiance of Kits and Cost Management, ValueLink, and other services
consolidated on an Allegiance invoice for Products and, in some instances,
Allegiance products (as required by the customer). Baxter shall use reasonable
efforts to cooperate with Allegiance and to facilitate Allegiance's fulfillment
of its obligations hereunder. Baxter shall provide to Allegiance a suggested
direct sale price including Standard Delivery (the
-7-
"Suggested Sales Price") and an effective Distributor Net Sales price applicable
to each such Product in connection with each Distributor Model transaction;
provided, however, that Allegiance shall have the sole right and responsibility
for negotiating and contracting with each customer the delivered price of the
Products. If the customer has a then-current contract with Baxter for such
Products, the Suggested Sales Price shall be the then-current contract price.
If Baxter has an agreement with any customer for Xxxxxx'x provision of Products
to such customer and such customer subsequently requests (a) Kits, and/or (b)
Cost Management, ValueLink, and other services consolidated on an Allegiance
invoice for such Products and, in some instances, Allegiance products, then all
such Distributor Model sales of Products to such customer shall apply to any
minimum purchase commitments or quantity discounts contained in Xxxxxx'x
agreement with such customer.
3.4 BCS KIT MODEL. Under the BCS Kit Model, Allegiance shall maintain the
principal contractual relationship with the customer for sales, sales support,
customer invoicing, accounts receivable, and customer service in connection with
the provision by Allegiance of BCS Kits. Baxter shall provide to Allegiance a
price for each Product that Allegiance orders from Baxter for use as a component
for a BCS Kit, and such price shall be Xxxxxx'x Agency Net Sales price for
Products from the * * * contract in effect on January 1 of the calendar year in
which the BCS Kit component sale takes place (the "BCS Component Price").
Allegiance shall have the sole right and responsibility for negotiating and
contracting with each customer the delivered price of the BCS Kits. If Baxter
has an agreement with any customer for Xxxxxx'x provision of Products to such
customer and such customer subsequently requests BCS Kits, all such BCS Kit
Model sales of Products to such customer shall apply to any minimum purchase
commitments or quantity discounts contained in Xxxxxx'x agreement with such
customer.
4. EXCLUSIVITY.
4.1 RESTRICTIONS ON ALLEGIANCE.
4.1.1 Unless specifically required by the end-user customer or as
permitted below for certain competitive Best Value Products, Allegiance, its
Affiliates, and any other Person acting on its or their behalf, shall not,
directly or indirectly, market or promote any product or solicit orders through
agents or otherwise, to or from any customer or any Affiliate of any customer
for any product that competes in the Territory with any Product or Products.
The taking by Allegiance of orders not solicited by Allegiance shall not be
deemed to be a breach of this Section. Without limiting the generality of the
foregoing and at all times subject to availability of the Products, Allegiance,
its Affiliates, and any other Person acting on its or their behalf, shall not,
directly or indirectly, market or
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promote any product that competes with any Product or Products as Allegiance's
(a) Best Value Product that competes with the Products, (b) first-line
substitute or for competitive comparison, or (c) as a substitute for any other
product competitive with any Product or Products; except that Allegiance may
market and promote as Best Value Products endotracheal tubes, temperature
probes, and heat and moisture exchangers (whether with or without filters) and
that such competitive Best Value Products shall not be subject to clauses (b)
and (c) of this sentence. Allegiance, its Affiliates, and any other Person
acting on its or their behalf, shall promote the Premium Products [except for
endotracheal tubes, temperature probes, and heat and moisture exchangers
(whether with or without filters)]. This Section 4.1.1 shall not apply if the
applicable Products are unavailable, and such unavailability is due
substantially to Xxxxxx'x acts or omissions.
4.1.2 Allegiance, its Affiliates, and any other Person acting on
its or their behalf, shall not, directly or indirectly, develop or manufacture
any product that competes in the Territory with any Product or Products.
4.1.3 Allegiance, its Affiliates, and any other Person acting on
its or their behalf, shall not, directly or indirectly, market to or solicit
orders from, or distribute any Product through distributors, agents, or
otherwise, to or from any customer or any Affiliate of any customer located
outside of the Territory.
4.2 RESTRICTIONS ON BAXTER. Baxter, its Affiliates, and any other Person
acting on its or their behalf, shall not, directly or indirectly, provide or
engage any Person other than Allegiance to provide physical distribution
services or to act as agent or distributor for Baxter in the Territory with
respect to the sales and distribution of the Products, provided that Baxter
shall have the right to:
4.2.1 distribute the Products in the Territory directly to
customers from Baxter manufacturing facilities and/or Xxxxxx'x replenishment
centers in order to facilitate cost reduction plans;
4.2.2 distribute any Product to any customer in the Territory to
the extent necessitated by Xxxxxx'x inability to assign to Allegiance any
contract or agreement whether pursuant to the Restructuring Agreements or at a
later date in connection with a future acquisition;
4.2.3 distribute the Products directly to Xxxxxx'x Affiliates or
directly to other Baxter Divisions, where such distribution is made in
connection with Internal Use Sales;
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4.2.4 continue to sell and distribute Products directly to VWR
Corporation for resale to industrial customers (all such Products actually sold
and distributed to VWR Corporation to be referred to herein as "VWR Purchases");
4.2.5 continue to distribute directly from Baxter manufacturing
facilities any Product sold directly to drug manufacturers (all such Products
actually sold and distributed to drug manufacturers to be referred to herein as
"Drug Purchases");
4.2.6 distribute Products to customers within the Territory other
than through Allegiance (and Baxter shall be relieved of its obligation to pay
fees pursuant to Section 6.3) if and to the extent Allegiance is unable to so
distribute the Products due to (a) regulatory requirements; (b) Allegiance's
material failure to meet agreed-upon performance standards; or (c) Allegiance
being otherwise prohibited or prevented from selling and/or distributing the
Products or refusing or being unable to sell and/or distribute the Products to
any customer or class of customers other than by customer decision;
4.2.7 direct Allegiance to distribute the Products to third-party
distributors ("Subdistributors"), provided that Baxter shall not have the right
to direct Allegiance to distribute the Products to acute care hospitals (such
acute care hospitals as set forth in the then-current AMERICAN HOSPITAL
ASSOCIATION GUIDE) through Subdistributors unless specifically required by the
end-user customer;
4.2.8 sell and distribute products which are not Products, as
defined herein, through relationships that do not include Allegiance; and
4.2.9 distribute, sell and lease hardware and related software and
disposables to nonhealth-care retailers serving end-user customers.
This Agreement shall in no way limit the right of Baxter and its Affiliates to
market, sell, or otherwise distribute the Products outside the Territory.
4.3 PRODUCT EXCLUSIVITY. Baxter shall: (a) add Products to Exhibits A
and B which are new products (including all modifications of, improvements of,
substitutes for, and line extensions of the Products) developed or acquired by
Baxter that are of the same type and have similar distribution characteristics
as the Products set forth in Exhibits A and B as of the effective date of this
Agreement; and (b) delete from Exhibits A and B and this Agreement any Product,
the manufacture and sale of which has been generally discontinued by Baxter.
Exhibits A and B shall be deemed to be amended to reflect any such Product
additions and deletions without any further act by any party hereto.
Notwithstanding clause (a) above, Baxter shall
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have the right, but not the obligation, to add newly developed or acquired
products to Exhibits A and B pursuant to clause (a) above if such products are
part of a new product line or a new line of business, subject to agreement by
Allegiance. Baxter shall use commercially reasonable efforts to provide at
least 30 days prior written notice to Allegiance of each such addition or
deletion. Exhibits A and B, as amended and supplemented from time to time, are
incorporated by reference herein and form part of this Agreement.
5. TERM. The initial Term of this Agreement shall begin on the effective date
of this Agreement and, except as otherwise provided in this Agreement, end at
the end of the day on December 31, 2001. The Term may be extended for
successive additional periods, subject to the parties agreeing upon the terms
and conditions of such an extension. Beginning no later than July 1, 2000, the
parties shall negotiate in good faith regarding the terms and conditions of an
extension of this Agreement beyond its expiration on December 31, 2001. Each
party may in its absolute discretion determine whether or not the terms of any
such proposed extension are acceptable and may refuse to agree to any such
extension for any reason whatsoever.
6. PRICES AND FEES. Allegiance and Baxter will keep confidential all amounts
paid by either party to the other.
6.1 DISTRIBUTOR MODEL. Baxter shall pay to Allegiance a service fee equal
to the applicable percentages (pursuant to Section 6.4) of the Distributor Net
Sales of such Products.
6.2 BCS KIT MODEL. Allegiance shall pay to Baxter as the purchase price
of the Products purchased by Allegiance pursuant to the BCS Kit Model an amount
equal to the aggregate BCS Component Prices of all such Products.
6.3 AGENCY MODEL, DIRECT SALES AND OTHER. Baxter shall pay to Allegiance
an agency services fee equal to the applicable percentages (pursuant to Section
6.4) of the Agency Net Sales of all Products sold by Baxter to customers.
However, sales to Allegiance of Products, Internal Use Sales, VWR Purchases,
Drug Purchases, capital equipment lease extensions and re-signs, and sales and
leases of hardware and related software and disposables to nonhealth-care
retailers serving end-user customers are excluded from Agency Net Sales.
6.4 APPLICABLE PERCENTAGES.
6.4.1 For all transactions under Sections 6.1 and 6.3 during the
period beginning October 1, 1996, and continuing through December 31, 1996, the
applicable percentage shall be 11.5% and shall be calculated in the same manner
as the internal profit split between Xxxxxx'x business units was calculated from
January 1, 1996, through September 30, 1996.
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6.4.2 The following percentages shall apply to Agency Net Sales
and Distributor Net Sales during calendar year 1997 and thereafter unless
otherwise agreed to by the parties in accordance with Section 0.0.0.0:
6.4.2.1 * * * * during such calendar year for all Nutrition
Products and Base Business Products and Premium Products which are excluded
from Best Value Products except for sales of such I.V. Products within the
scope of Section 6.4.2.2, and * * * during such calendar year for all
Premium Products (except Premium Products which are excluded from Best
Value Products);
6.4.2.2 Notwithstanding the above, the percentage applicable to
Agency Net Sales and Distributor Net Sales of I.V. Products shall be * * *
for sales by Allegiance of such I.V. Products (i) in connection with the
provision of cost management services in which Allegiance shares the risk
and reward of achieving customer cost savings through shared risk and
shared savings agreements which obligate the customer to purchase a
specified percentage of Best Value Products or comprehensive cost
management agreements which require Allegiance to provide clinical and
operational services that reduce the customer's operational costs and which
obligate the customer to (A) purchase a specified percentage of Best Value
Products, and (B) share the operating cost reductions achieved through
specified fees and/or shared savings paid to Allegiance, and the customer
has switched to the Base Business Products under a long-term agreement with
Xxxxxx on or after the date of the Allegiance/customer agreement and such
switch is not as a result of a requirement of a contract between Xxxxxx and
a third party; or (ii) when Xxxxxx has agreed that Allegiance's efforts in
promoting the I.V. Products warrants the higher percentage. This
percentage shall apply for the period ending upon the earliest termination
or expiration of the following: (a) this Agreement; (b) the Allegiance/
customer agreement; and (c) the Xxxxxx/customer agreement.
6.4.2.3 Following the completion of Xxxxxx'x sales plan for and
prior to January 1 of an upcoming calendar year, Xxxxxx will calculate an
amount equal to 11.5% of Xxxxxx'x aggregate sales plan for Contract Net
Sales of I.V. Products. Xxxxxx will then apportion this amount between
proposed base business products and proposed premium products and will then
develop a proposed base percentage and a proposed premium percentage such
that the sum of the proposed percentages when multiplied by the respective
sales plan targets for proposed base business products and proposed premium
products will produce an amount equal to * * * of Xxxxxx'x aggregate sales
plan for Contract Net Sales of I.V. Products. Xxxxxx and Allegiance will
then negotiate and mutually agree to any changes in Base Business Products,
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Premium Products, and the applicable percentages with an expectation, but
with no commitment, that achievement of Xxxxxx'x sales plan as to both Base
Business Products and Premium Products will yield Allegiance an amount of
earned fees which will aggregate to * * * of Xxxxxx'x sales plan for
Contract Net Sales of I.V. Products.
6.4.2.4 If the parties' business information systems and/or
data processing systems are unable to accommodate the applicable
percentages set forth in this Section 6.4.2, the parties shall agree upon a
procedure for monthly payment with a quarterly adjustment to achieve the
effects of the percentage fees set forth herein based upon the then-current
percentages as applied to Agency Net Sales and Distributor Net Sales for
each Product category.
6.5 MINIMUM FEE TO ALLEGIANCE FOR CALENDAR YEAR 1997. For calendar year
1997, Xxxxxx shall pay to Allegiance a minimum dollar amount (the "Minimum Fee")
calculated by multiplying the actual Contract Net Sales of I.V. Products in
calendar year 1996 by * * *. If (a) the agency services fees paid by Xxxxxx to
Allegiance in calendar year 1997 pursuant to Section 6.3 for I.V. Products, plus
(b) the service fees paid by Xxxxxx to Allegiance pursuant to Section 6.1 in
connection with its sales of I.V. Products, is less than (c) the Minimum Fee,
then Xxxxxx shall pay the difference to Allegiance on or before January 30,
1998. This Section 6.5 shall not apply if prior to December 31, 1997, Xxxxxx
fails to retain, replace, or renew Xxxxxx'x contract with any of the following
national group purchasing organizations for the purchase of Base Business
Products by such organization's members: * * *.
6.6 ADJUSTMENTS FOR ALTERNATE SITE DISTRIBUTORS.
6.6.1 ALTERNATE SITE DISTRIBUTION FEE. Xxxxxx shall pay to Allegiance
a minimum dollar amount (the "Alternate Site Distribution Fee") calculated by
multiplying * * * by the actual Contract Net Sales of I.V. Products to resellers
and subdistributors actually managed by Allegiance's dealer management group and
that are reselling to entities other than acute care hospitals (such acute care
hospitals as set forth in the then-current AMERICAN HOSPITAL ASSOCIATION GUIDE)
(such resellers and subdistributors collectively referred to as "Alternate Site
Distributors"). If for any calendar year, the sum of (a) the agency services
fees paid by Xxxxxx to Allegiance pursuant to Section 6.3 for sales of I.V.
Products to Alternate Site Distributors, plus (b) the service fees paid by
Xxxxxx to Allegiance pursuant to Section 6.1 for sales of I.V. Products to
Alternate Site Distributors, is less than (c) the Alternate Site Distribution
Fee, then Xxxxxx shall pay the shortfall to Allegiance on or before January 30
of the subsequent calendar year.
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6.6.2 ALTERNATE SITE DISTRIBUTOR BONUS PROGRAMS. If Allegiance wishes
(1) to provide financial incentives to its Alternate Site Distributors to reward
such Alternate Site Distributors for achievement of growth in purchases of
Products above a predetermined amount, and (2) for Xxxxxx to fund such
incentives by payments to Allegiance for such Alternate Site Distributors in
addition to those payments otherwise specified in this Agreement, then Xxxxxx
must approve the amount of such funding, the purchase requirements applicable to
such Alternate Site Distributors, payment criteria to be used by Allegiance, and
applicable reporting requirements. During the Term of this Agreement,
Allegiance may continue its existing premier bonus program for Alternate Site
Distributors with respect to Products, subject to Xxxxxx'x right to approve in
advance the purchase requirements applicable to such Alternate Site
Distributors, payment criteria to be used by Allegiance, and applicable
reporting requirements. For each calendar year beginning on or after January 1,
1997, during the Term of this Agreement, in addition to those payments otherwise
specified in this Agreement, Xxxxxx will reimburse Allegiance for amounts
incurred under such premier bonus program, up to a maximum of * * *. Xxxxxx'x
reimbursement obligation under this Section 6.6.2 shall be calculated with
respect to total sales (rather than incremental sales) by Allegiance to
Alternate Site Distributors participating in the premier bonus program.
6.7 DRUG WHOLESALER SUPPORT. Allegiance shall supply the equivalent of
one full-time employee who shall possess the requisite level of skill,
experience, and/or training to perform drug wholesaler support services as
directed by Xxxxxx. Xxxxxx shall pay to Allegiance * * * per month for such
services, and payment shall be due on the fifteenth day of each month; provided
that Xxxxxx may terminate such services at any time upon 30 days advance written
notice without any further liability whatsoever to Allegiance in connection
therewith.
6.8 TELEPHONE SALES. Allegiance shall supply the equivalent of one full-
time employee who shall possess the requisite level of skill, experience, and/or
training to perform telephone sales services to doctors and clinics as directed
by Xxxxxx. Xxxxxx shall pay to Allegiance * * * per month for such services,
and payment shall be due on the fifteenth day of each month; provided that
Xxxxxx may terminate such services at any time upon 30 days advance written
notice without any further liability whatsoever to Allegiance in connection
therewith.
6.9 INBOUND FREIGHT.
6.9.1 INBOUND FREIGHT EXPENSES. Within fifteen days after receipt
by Xxxxxx of a monthly invoice from Allegiance detailing Allegiance's expenses,
Xxxxxx shall reimburse Allegiance for its actual out-of-pocket expenses incurred
in connection with freight expenses for Products (a) received by
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Allegiance at its Ontario, California replenishment center and its distribution
centers from Xxxxxx manufacturing plants; and (b) received by Allegiance at its
distribution centers from Xxxxxx'x or Allegiance's replenishment centers.
6.9.2 ALLEGIANCE INBOUND FREIGHT ADMINISTRATIVE SERVICES. Xxxxxx
will pay Allegiance a fee for continuing inbound freight administrative services
provided in accordance with the first two sentences of Section 1.5.2 of Exhibit
X. Xxxxxx will also pay Allegiance any additional fees agreed upon for any
additional inbound freight administrative services provided pursuant to the last
sentence of Section 1.5.2 of Exhibit C.
6.10 EXPENSES OF REBALANCING INVENTORY. Beginning January 1, 1997, and
continuing for the remainder of the Term, Xxxxxx shall reimburse Allegiance for
its actual out-of-pocket expenses incurred in connection with moving Products at
Xxxxxx'x request between distribution centers for purposes of re-balancing
stocks, to the extent that such rebalancing expenses exceeded the actual costs
so incurred in calendar year 1996. Xxxxxx shall reimburse Allegiance for such
rebalancing expenses within 30 days after receipt by Xxxxxx of a monthly invoice
from Allegiance detailing its expenses during the preceding month. During the
first calendar quarter following the close of each calendar year during the
Term, the parties will determine the actual amounts due under this Section 6.10
for the such calendar year and settle any amounts owed.
6.11 OUTBOUND FREIGHT.
6.11.1 GENERAL RULE. Allegiance is responsible for all costs
incurred in delivering Products from Allegiance facilities to customers, subject
to the following provisions regarding sharing of costs and savings for Standard
Delivery and Premium Delivery.
6.11.2 SHARING OF COSTS AND SAVINGS FOR STANDARD DELIVERY. For
1998 and each subsequent calendar year during the Term, the parties will agree
in the Council prior to such calendar year upon a target range for costs that
are expected to be incurred by Allegiance in providing Standard Delivery (as
that term is defined in Section 2.4.1.1 of Exhibit C) for the Products during
such calendar year. If during any such calendar year, the actual costs so
incurred by Allegiance fall outside such target range (using a consistent
methodology for such comparison), then Xxxxxx and Allegiance will share the
excess costs or savings on an equal basis.
6.11.3 SHARING OF COSTS AND SAVINGS FOR UNCOLLECTED PREMIUM
DELIVERY.
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6.11.3.1 For 1997 and each subsequent calendar year during the
Term, the parties will agree in the Council prior to such calendar year
upon a target range for costs that are expected (1) to be incurred by
Allegiance in providing Premium Delivery (as that term is defined in
Section 2.4.1.2 of Exhibit C) of Products and (2) not to be collected from
customers. (Hereinafter, such costs are referred to as "Uncollected Premium
Delivery Costs"). If during any such calendar year, the actual Uncollected
Premium Delivery Costs for Products fall outside such target range (using a
consistent methodology for such comparison), the parties will share such
excess costs or savings as follows: Xxxxxx will reimburse Allegiance * * *
of any excess costs; and Allegiance shall pay Xxxxxx * * * of any savings.
6.11.3.2 For 1997, the target range shall be the actual amount
of Uncollected Premium Delivery Costs for Products incurred by Xxxxxx in
1995, plus and minus * * *. For all subsequent years, the target range
shall be determined by the parties by mutual agreement in the Council,
taking into account the percentage change in Agency Net Sales since 1995.
6.11.3.3 Allegiance will report its actual Uncollected Premium
Delivery Costs to Xxxxxx on a quarterly basis. During the first calendar
quarter following the close of each calendar year during the Term, the
parties will determine the actual amounts due under this Section 6.11.3 for
such calendar year and settle any amounts owed.
6.11.4 INCREMENTAL DELIVERIES. Xxxxxx will pay Allegiance any
amounts agreed upon in respect of Incremental Deliveries pursuant to Section
2.4.1 of Exhibit C.
6.11.5 ALLEGIANCE OUTBOUND FREIGHT ADMINISTRATIVE SERVICES. Xxxxxx
will pay Allegiance any additional fees agreed upon for any additional outbound
freight administrative services provided pursuant to the last sentence of
Section 2.4.3 of Exhibit C.
6.12 CUSTOMER SERVICE REIMBURSEMENT. Beginning January 1, 1997, and
continuing for the Term, Allegiance will pay to Xxxxxx monthly the sum of * * *,
in order to compensate Xxxxxx for Xxxxxx'x increased customer service costs
during such period. For the fourth calendar quarter of 1996, Allegiance will
pay to Xxxxxx an amount equal to * * * per person per month, for all activated
Xxxxxx customer service personnel providing customer service relating to the
Products during that month or any preceding month during such calendar quarter.
For purposes of this Section 6.12, Xxxxxx customer service personnel are
activated when they have received appropriate customer service training relating
to the Products and actually begin providing
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customer service relating to the Products on a full-time basis. Xxxxxx shall
xxxx Allegiance monthly for any amounts due under this Section and Allegiance
shall pay any such invoice net 15 days from the end of the applicable month.
6.13 BCS KIT FUNDING.
6.13.1 PAYMENT OBLIGATION. Beginning on the effective date of this
Agreement and continuing for the Term, for all Products sold under the BCS Kit
Model, Xxxxxx will pay Allegiance an amount equal to the excess of the BCS
Component Prices over the transfer prices that the applicable Xxxxxx business
units charged each other for such Products prior to the effective date of this
Agreement. Notwithstanding the immediately preceding sentence, Xxxxxx'x total
payment obligation to Allegiance under this Section shall not exceed * * * for
any calendar year during the Term and shall not exceed * * * for calendar year
1996.
6.13.2 SETTLEMENT PROCEDURE. The parties will settle any amounts owed
under Section 6.13.1 as follows: For each month during the Term, Xxxxxx will
make payments to Allegiance in the estimated amount of * * * per month, net
fifteen days from the end of the applicable month. During the first calendar
quarter following the close of each calendar year during the Term, the parties
will determine the actual amounts due under Section 6.13.1 for such calendar
year and settle any amounts owed within 15 days of such determination. The
settlement for the fourth calendar quarter of 1996 will take place during the
first calendar quarter of 1997.
6.14 ADJUSTMENTS FOR CHANGES IN APPLICABLE STORAGE REQUIREMENTS.
6.14.1 XXXXXX CHANGES IN APPLICABLE STORAGE REQUIREMENTS. The fees
set forth in Sections 6.1 and 6.3 are subject to renegotiation if Xxxxxx
redefines applicable storage requirements in a way that has a material adverse
impact on Allegiance's costs.
6.14.2 LEGAL CHANGES IN APPLICABLE STORAGE REQUIREMENTS. If
applicable storage requirements change as a result of changes in laws,
regulations, or interpretations or enforcement actions by governmental
authorities with jurisdiction over the Products or the subject matter of this
Agreement, the otherwise applicable fees set forth in Sections 6.1 and 6.3 may
be adjusted, if appropriate, pursuant to the process described in Section 19.3
of this Agreement.
6.15 DEALER MANAGEMENT GROUP FUNDING. If changes in Xxxxxx'x business
requirements (including, without limitation, increased sales volumes through
Allegiance's dealer management group or increased complexity in the sales and/or
distribution process through Allegiance's dealer management group) directly
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cause significant increases in Allegiance's dealer management group operational
headcount, Xxxxxx shall pay Allegiance for such increases in Allegiance's
operational headcount. The parties shall meet at least twice per year to review
the status of Allegiance's dealer management group operations and shall agree
upon Allegiance's need, if any, for increases in operational headcount, the
cause of such need, and Xxxxxx'x payment, if any, for any increases in
operational headcount.
6.16 FCA FEES AND EXPENSES.
6.16.1 In addition to the other fees and charges set forth in this
Section 6, in 1997 and subsequent years Xxxxxx will pay Allegiance an annual fee
equal to (a) * * * times (b) the total number of Product lines affected by FCAs
in such year in excess of * * * (the total number of Product lines affected by
FCAs in 1995). For purposes of this Section, any FCAs caused by Allegiance's
negligence shall be excluded. In addition, for each catalog number affected by
an FCA, the total "lines" shall be an amount equal to the sum of (a) the number
of notification processing responses completed by Allegiance facilities for that
FCA, plus (b) the number of dispositions completed by Allegiance facilities for
that FCA. Xxxxxx shall not owe Allegiance any FCA fee under this Section, nor
shall Xxxxxx be entitled to any fee or credit from Allegiance, if in 1997 or any
subsequent year, the total number of lines affected by FCAs does not exceed
* * *. For 1996, the FCA fee will be computed based on the excess of total
Product lines affected by FCAs in the last three months of 1996 over the average
quarterly total of Product lines affected by FCAs in calendar year 1995.
6.16.2 ADDITIONAL FCA SERVICES. Xxxxxx shall pay Allegiance the
fees agreed upon for any additional FCA services requested and approved by
Xxxxxx and provided by Allegiance pursuant to Section 1.7.2 of Exhibit C.
6.16.3 THIRD-PARTY INVOICES. Xxxxxx shall reimburse Allegiance for
all third-party invoices relating to additional FCA services requested and
approved by Xxxxxx and actually paid by Allegiance, pursuant to Section 1.7.2 of
Exhibit C.
6.17 PACKAGING FAILURE. Xxxxxx shall reimburse Allegiance for Allegiance's
actual expenses (including, without limitation, expenses for repackaging and
return of Product) incurred in respect of failure of shipping cartons for
Products, provided that such failure is not due to Allegiance's acts or
omissions. Such reimbursement shall be paid quarterly and shall be due within 30
days after receipt of Allegiance's invoice therefor together with full
supporting documentation.
6.18 COMPENSATION FOR PRODUCT DAMAGE, THEFT OR LOSS.
If any Products are damaged, lost or stolen while in an Allegiance
replenishment center or distribution center, and
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Allegiance is responsible under this Agreement for such damage, theft or loss,
Allegiance shall compensate Xxxxxx. In addition, if Allegiance is unable to
furnish proof of delivery with respect to Products shipped on Allegiance's
private fleet, Allegiance shall compensate Xxxxxx for such undelivered Products.
For purposes of this Section 6.18, the basis for compensation shall be an amount
equal to Xxxxxx'x standard costs for such Products as stated in Xxxxxx'x
inventory valuation reports together with all amounts owed by Xxxxxx to third
parties in respect of such Products. Payment shall be due within 30 days after
Xxxxxx'x request for compensation hereunder. During the Interim Period, in the
event of any conflicts between the provisions of this Section 6.18 and the
provisions of Exhibit F of this Agreement with respect to transactions under
Interim Distributor Model, the provisions of Exhibit F shall control.
7. THE COUNCIL.
7.1 A Xxxxxx/Allegiance Distribution/Materials Management/Transportation
Council (the "Council") will be formed to ensure open communication between
Allegiance and each of the Xxxxxx divisions, and to provide problem/dispute
identification and resolution in the areas of materials management,
distribution, and transportation and logistics. Without limitation to the
foregoing, the Council will provide a forum for the parties (1) to review
jointly their performance in relation to their responsibilities identified in
Appendices C and D of this Agreement, (2) to agree upon eligible carriers for
Product shipments and to review jointly freight charges and transportation
modes, (3) to agree upon target ranges and compensation for Standard Delivery,
Premium Delivery and Incremental Deliveries under Section 6.11, and (4) to
develop joint recommendations for the parties' respective business executives
regarding the management of freight costs and other issues arising under this
Agreement.
7.2 Xxxxxx and Allegiance will agree upon the membership of the Council
and its procedures.
7.3 The Council will meet at least once per calendar quarter during the
Term of this Agreement. Xxxxxx and Allegiance may identify a Steering Committee
consisting of fewer than all of the Council members with authority to address
issues requiring resolution prior to such quarterly meetings.
8. INVOICING AND PAYMENTS.
8.1 GENERAL.
8.1.1 On or before the fifth business day of each calendar month
during the Term, Xxxxxx shall report to Allegiance its Agency Net Sales for the
previous calendar month, and shall also provide to Allegiance a service fee
report in a format to be
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agreed upon, showing the service fees payable for Products sold under the Agency
Model. Each business day during the Term, Allegiance shall report to Xxxxxx its
aggregate sales and returns of Products for the previous business day by code
and by customer for Distributor Model and BCS Kit Model transactions, and such
reports shall also include, with respect to Distributor Model transactions, the
Suggested Sales Price and Allegiance's actual purchase price of the Products.
8.1.2 Allegiance shall make payment to Xxxxxx at the aggregate
Suggested Sales Prices, for its aggregate purchases of Products sold by
Allegiance under the Distributor Model, net 30 days from the date of shipment of
the Product by Allegiance to the customer. Xxxxxx shall make payment to
Allegiance of applicable service fees in connection with sales of Products under
the Distributor Model, net 30 days from the date of shipment of the Product by
Allegiance to the customer.
8.1.3 For sales other than those made under the Distributor Model,
Allegiance shall xxxx Xxxxxx for any fees due hereunder. Xxxxxx shall pay any
such invoice net 15 days from the end of the applicable month.
8.1.4 For sales to Allegiance of Products for use as components of
BCS Kits, Xxxxxx shall xxxx Allegiance for the BCS Component Prices for the
Products. Allegiance shall pay any such invoice net 60 days from the date of
such invoice.
8.1.5 If any amounts due hereunder have not been received by the
due date, such overdue amounts shall bear interest from the due date at the rate
of * * * per month, or portion thereof, until received. If payment is delayed
because a report required by Section 8.1.1 has not been received, interest will
not accrue until 30 days after receipt of such report.
8.2 ADDITIONAL SERVICES. Allegiance may provide services ("Additional
Services") to customers in connection with Agency Model transactions over and
above Allegiance's duties set forth in Exhibit C, provided that such Additional
Services are not Cost Management services. Allegiance shall have the right to
xxxx customers directly for the Additional Services. Upon Allegiance's written
request, Xxxxxx shall cooperate with Allegiance by performing billing and
collection services for Allegiance in connection with the Additional Services as
directed by Allegiance. Within 30 days after receipt from the customers, Xxxxxx
shall forward to Allegiance any payments received from customers in connection
with the Additional Services.
8.3 DISPUTED PAYMENTS. Either party shall have the right to withhold any
amounts due hereunder if such party in good faith disputes the amount claimed by
the other party to be due hereunder and such party notifies the other party of
such dispute within 60 days after the date of each applicable statement from
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the other party hereunder. The foregoing right to withhold payment of
disputed amounts shall be limited to the amounts disputed in good faith, and
interest will accrue and be payable on the net amount determined to be
payable.
8.4 SUSPENSION OF SERVICE. In addition to any other rights available to
it at law or in equity, upon ten days Notice to Xxxxxx, Allegiance may suspend
the provision of any services for which an undisputed statement for provision of
services hereunder from Allegiance (or one of its Affiliates) has not been
satisfied within 30 days of its due date until such statement has been
satisfied.
8.5 AUDIT. Allegiance may audit Xxxxxx'x books and records and Xxxxxx may
audit Allegiance's books and records for the purpose of determining compliance
with the terms of this Agreement. The party requesting the audit may use
independent auditors, who may participate fully in such audit. In the event
that an audit is proposed with respect to information which the party to be
audited wishes not to disclose to the other party ("Restricted Information"),
then on the written demand of the party to be audited, the individuals
conducting the audit with respect to Restricted Information will be limited to
the independent auditors of the party requesting the audit. In such event, the
party to be audited shall pay the costs of the independent auditors conducting
such audit, but only with respect to that portion of the audit relating to the
Restricted Information. Such independent auditors shall enter into an agreement
with the parties hereto, on terms that are agreeable to both parties hereto,
under which such independent auditors shall agree to maintain the
confidentiality of the information obtained during the course of such audit and
establishing what information such auditors will be permitted to disclose to
report the results of any audit of Restricted Information to the party
requesting the audit. Any such audit shall be conducted during regular business
hours, in a manner that does not interfere unreasonably with the operations of
the party being audited. Such audits shall be conducted not more than once in
any one year period unless the next preceding audit disclosed a failure to
conform to the terms of this Agreement. Subject to the foregoing limitations,
any such audit shall be conducted when requested by Notice given not less than
30 days prior to the commencement of the audit.
8.6 RIGHT OF OFFSET. At any time during the Term or after termination or
expiration of this Agreement, either party may offset any and all amounts which
the other party owes it hereunder against any and all amounts which it owes the
other party hereunder.
8.7 INTERIM PERIOD. During the Interim Period, in the event of any
conflicts between the provisions of this Section 8 and the provisions of Exhibit
F of this Agreement with respect to
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transactions under Interim Distributor Model, the provisions of Exhibit F shall
control.
9. ALLEGIANCE'S DUTIES. During the Term, Allegiance shall maintain the
facilities and personnel necessary to provide the physical distribution services
and related services in connection with its appointment and grant hereunder
including, without limitation, the facilities and personnel necessary to fulfill
Allegiance's duties as set forth in Exhibit C attached hereto and made a part
hereof. Allegiance will use all reasonable efforts to meet the levels of
service specified in Exhibit C.
10. XXXXXX'X DUTIES. During the Term, Xxxxxx shall maintain the facilities and
personnel necessary to manufacture and distribute the Products as provided for
hereunder including, without limitation, the facilities and personnel necessary
to fulfill Xxxxxx'x duties as set forth in Exhibit D attached hereto and made a
part hereof. Xxxxxx will use all reasonable efforts to meet the commitments
specified in Exhibit C.
11. STANDARD OF CARE. Each party will use (and will cause its Affiliates to
use) commercially reasonable efforts in the performance of its obligations and
will do so with the same degree of care, skill and prudence customarily
exercised when engaged in similar activities for itself and its Affiliates.
Subject to the provisions of Section 22, if a party's performance is inaccurate,
incomplete or untimely, such party shall, if practical, promptly perform or
reperform such obligations. In performing its responsibilities hereunder, each
party shall accord the other party and its Affiliates the same priority as it
provides itself and its Affiliates under comparable circumstances. Without
limiting the generality of the foregoing, in the provision of services under
comparable circumstances, a party will not discriminate against the other party
or any of its Affiliates solely because the other party or one of its Affiliates
is the recipient of such services. The parties agree to consult with each other
with respect to performance of their obligations hereunder. Each party shall
give due consideration to any suggestion by the other to improve performance.
11.1 UNIFORM COMMERCIAL CODE. The parties agree that the provisions of
Section 2-306(2) of the Uniform Commercial Code ("U.C.C.") shall not apply to
services or any other activities or obligations of either of the parties
hereunder.
12. ALTERNATIVE ACUTE CARE DISTRIBUTION. If, for any calendar year during the
Term of this Agreement after 1996, Agency Net Sales of Products to nonacute care
customers for delivery to acute care hospitals (such acute care hospitals as set
forth in the then-current AMERICAN HOSPITAL ASSOCIATION GUIDE) ("Alternative
Acute Care Distributors") * * *. If, for any calendar year, Agency Net Sales of
Products to Alternative Acute Care * * *. Notwithstanding
the preceding provisions of this
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Section, * * *. If in any calendar year, Agency Net Sales of Products to * * *.
13. TRANSFER OF TITLE AND RISK OF LOSS.
13.1 GENERAL. Title and risk of loss with respect to Products sold
pursuant to the Agency Model shall pass from Xxxxxx directly to the customer or
Subdistributor when such customer or Subdistributor receives the Products from
Allegiance whether delivered by Allegiance or a third-party carrier. Prior to
such time, title and risk of loss shall remain with Xxxxxx regardless of whether
or not Allegiance shall have physical possession and/or control of such
Products. Title and risk of loss with respect to Products sold pursuant to the
Distributor Model shall pass from Xxxxxx to Allegiance and immediately on to the
customer at the time of Allegiance's shipment of the Products to the customer.
Title and risk of loss with respect to Products sold to Allegiance for use as
components of BCS Kits shall pass from Xxxxxx to Allegiance at the time that
Allegiance receives such Products from Xxxxxx. Notwithstanding the foregoing,
Allegiance shall be solely responsible for any damage to the Products arising
from Allegiance's mishandling of such Products or theft or shrinkage while in
Allegiance's possession.
13.2 INTERIM PERIOD. During the Interim Period, in the event of any
conflicts between the provisions of this Section 13 and the provisions of
Exhibit F of this Agreement with respect to transactions under Interim
Distributor Model, the provisions of Exhibit F shall control.
14. WARRANTIES.
14.1 PRODUCT WARRANTY. Xxxxxx warrants to Allegiance that, at the time of
delivery to Allegiance: (a) the Products shall not be adulterated or misbranded
within the meaning of the Federal Food, Drug and Cosmetic Act, as amended and
the regulations issued thereunder, or products that may not under the provisions
of Sections 404, 505, 514 or 515 of said Act be introduced into interstate
commerce, or banned devices under Section 516 of said Act; and (b) Xxxxxx shall
have good and marketable title to all such Products free and clear of all liens
or encumbrances (other than any created by Allegiance).
14.2 DISCLAIMER. THE FOREGOING WARRANTY IS EXCLUSIVE AND IN LIEU OF ALL
OTHER WARRANTIES OF ANY KIND, WHETHER STATUTORY, WRITTEN, ORAL, EXPRESS OR
IMPLIED, INCLUDING ANY WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE AND
MERCHANTABILITY. IN NO EVENT, WHETHER AS A RESULT OF BREACH OF CONTRACT, TORT
LIABILITY (INCLUDING NEGLIGENCE) OR OTHERWISE, SHALL XXXXXX BE LIABLE TO
ALLEGIANCE FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES.
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14.3 LIMITATION OF LIABILITY. ANY LIABILITY OF XXXXXX TO ALLEGIANCE UNDER
THE WARRANTY CONTAINED IN THIS SECTION 14 SHALL BE LIMITED TO THE TOTAL PRICE
PAID BY ALLEGIANCE FOR THE PRODUCTS WHICH ARE THE SUBJECT OF SUCH LIABILITY PLUS
ALL COSTS FOR TRANSPORTATION AND OTHER DIRECT EXPENSES INCURRED BY ALLEGIANCE
WITH RESPECT TO SUCH PRODUCTS.
15. TRADEMARKS.
15.1 OWNERSHIP. Allegiance acknowledges that Xxxxxx is the owner or
licensee of the trademarks and trade names which Xxxxxx uses in the promotion
and sale of the Products hereunder, and that Allegiance has no right or interest
in such trademarks or trade names. Before commencing any use of the trademarks
or trade names connoting Xxxxxx in connection with any catalog, promotional,
packaging, or other materials, which use has not been previously approved in
writing by Xxxxxx, Allegiance agrees to provide Xxxxxx with proposed specimens
of use of such trademarks or trade names and to obtain Xxxxxx'x written approval
of such proposed use.
15.2 INFRINGEMENT. Allegiance shall notify Xxxxxx promptly of any and all
infringements or improper use by any third party of the trademarks and trade
names connoting Xxxxxx should Allegiance discover reasonable cause for believing
that such infringement or improper use is taking place and shall provide to
Xxxxxx all information which Allegiance has available thereon. Xxxxxx shall
have sole discretion and control with regard to any proceedings relating to
infringement or improper use of its trademarks and trade names. Allegiance may
choose to be represented by its own counsel in any such proceedings but such
representation shall be solely at Allegiance's expense.
15.3 EQUITABLE REMEDIES. Allegiance acknowledges that Xxxxxx would not
have any adequate remedy at law for the breach by the other party of any one or
more of the covenants contained in this Section 15 and agrees that, in the event
of such breach, Xxxxxx may, in addition to the other remedies which may be
available to it, file a suit in equity to enjoin Allegiance from any further
breach of any of the terms of this Section 15.
16. TERMINATION.
16.1 CHANGE IN CONTROL.
16.1.1 GENERAL. In the event of a Change in Control of either party
hereto or any Affiliate thereof to which any of the rights or obligations
hereunder have been assigned as permitted by Section 25, the party (the
"Affected Party") with respect to which the Change in Control has occurred,
either directly or with respect to one of its Affiliates shall give Notice to
the other party (the "Non-Affected Party") within 30 days of the occurrence of
such Change in Control. The Non-
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Affected Party may terminate this Agreement, in whole but not in part, in the
event of any such Change in Control with respect to the Affected Party by giving
Notice of such termination to the Affected Party as provided below. In the
event of a Change in Control of an Affiliate of the Affected Party to which any
of the rights or obligations hereunder have been assigned as permitted by
Section 25, the Non-Affected Party may terminate this Agreement with respect to
such Affiliate by giving Notice to the Affected Party as provided below. The
Non-Affected Party may exercise the rights of termination described in the two
preceding sentences by giving a Notice of termination, specifying the date of
termination, to the Affected Party at any time prior to the end of the 60th day
following the receipt by the Non-Affected Party of the applicable Notice of
Change in Control given by the Affected Party pursuant to the first sentence of
this Section. In the event that the applicable Change in Control involves a
Competitor of the Non-Affected Party, the date of termination specified by the
Non-Affected Party in the Notice of termination shall be the last day of a
calendar month which is not earlier than the sixth full calendar month following
the date of the Notice of termination and not later than the twelfth full
calendar month following the date of the Notice of termination. In the event
that the applicable Change in Control does not involve a Competitor of the Non-
Affected Party, the date of termination specified by the Non-Affected Party in
the Notice of termination shall be the later of (i) the last day of the twelfth
full calendar month following the date of the Notice of termination and (ii)
December 31, 1998.
16.1.2 DEFINITIONS. For purposes hereof, "Change in Control" shall
mean (i) the acquisition, directly or indirectly, by any Person or Persons of
more than *** of the voting stock of either party to this Agreement or any
Affiliate thereof, (ii) any merger or consolidation involving the Affected Party
or any Affiliate of the Affected Party that requires a vote of the stockholders
of the Ultimate Parent of the Affected Party, (iii) the acquisition by the
Ultimate Parent of the Affected Party or any Affiliate of the Ultimate Parent of
the Affected Party of any Person that (a) is a Rival of the Ultimate Parent of
the Non-Affected Party and (b) after such acquisition, constitutes a
"significant subsidiary" of the Affected Party within the meaning of Rule 1-
02(w) of Regulation S-X of the Regulations of the Securities and Exchange
Commission, substituting *** for 10 percent in the tests used therein to
determine significant subsidiary, and (iv) only in the case of an Affiliate of
the Affected Party, the Transfer of all or substantially all of the business and
assets of such Affiliate. For the purposes hereof, "Rival" shall mean (a) with
respect to Xxxxxx, any Person (including an Affiliate of such Person) that
during its most recently completed fiscal year has annual net revenues from
products competitive with products sold by Xxxxxx and its Affiliates greater
than *** of the total annual consolidated net revenues of Xxxxxx
International during its most recently completed fiscal year; and (b) with
respect to Allegiance, any Person (including an
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Affiliate of such Person) that during its most recently completed fiscal year
has annual net revenues from medical, surgical, and laboratory products greater
than * * * of the total annual consolidated net revenues of Allegiance
Corporation during the most recently completed fiscal year. For the purposes
hereof, "Ultimate Parent" means Xxxxxx International in the case of Xxxxxx and
Allegiance Corporation in the case of Allegiance.
16.1.3 TRANSFERS BY XXXXXX. In the event that Xxxxxx or any of its
Affiliates shall Transfer all or substantially all of the business and assets
relating to any Line of Products as permitted by Section 25, Allegiance may
terminate this Agreement with respect to such Line of Products in the same
manner as provided in Section 16.1.1. In the event that Xxxxxx or any of its
Affiliates shall Transfer all or substantially all of the business and assets
relating to the Products as permitted by Section 25, Allegiance may terminate
this Agreement in its entirety in the same manner as provided in Section 16.1.1.
16.1.4 TRANSFERS BY ALLEGIANCE. In the event that Allegiance or any
of its Affiliates shall Transfer any portion of its business and assets relating
to Allegiance's distribution network as permitted by Section 25, which portion
accounted for net sales during the most recently completed fiscal year in excess
of ***, Xxxxxx may terminate this Agreement with respect to the
Transferred portion of the distribution network in the same manner as provided
in Section 16.1.1.
16.1.5 OBLIGATION TO NEGOTIATE. If demanded in writing by the Non-
Affected Party, the Affected Party shall be obligated, during the period
following a Notice of termination from the Non-Affected Party, to negotiate in
good faith to establish terms and conditions that are acceptable to the Non-
Affected Party for an extension of the Term beyond the date of termination
specified in the Notice of termination in light of the Change in Control,
provided, however, the Non-Affected Party may in its absolute discretion
determine whether any proposed terms and conditions are acceptable and may
refuse to agree to any such terms and conditions for any reason whatsoever.
16.1.6 CONFIDENTIAL INFORMATION During the period commencing with
any such Change in Control and continuing through the end of the Term (and
thereafter, if appropriate), the Affected Party shall take any and all action
reasonably requested by the Non-Affected Party to protect any confidential
information of the Non-Affected Party from disclosure to or use by any Affiliate
of the Affected Party other than a Person that, immediately prior to the
occurrence of the Change in Control, was an Affiliate of the Affected Party that
regularly accessed such confidential information for a reasonable business
purpose.
16.2 OTHER TERMINATIONS. Each Party shall have the right to terminate this
Agreement effective upon delivery of Notice to the
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other party if the other party: (a) makes an assignment for the benefit of
creditors, or becomes bankrupt or insolvent, or is petitioned into bankruptcy,
or takes advantage of any state, federal or foreign bankruptcy or insolvency
act, or if a receiver or receiver/manager is appointed for all or any
substantial part of its property and business and such receiver or receiver/
manager remains undischarged for a period of 30 days, (b) has its corporate
existence terminated by voluntary or involuntary dissolution; or (c) materially
defaults in the performance of any of its covenants or obligations contained in
this Agreement and such default is not remedied to the nondefaulting party's
reasonable satisfaction within 30 days after Notice to the defaulting party of
such default, or if such default is not capable of rectification within 30 days,
if the defaulting party has not promptly commenced to rectify the default within
such 30 day period and is not proceeding diligently to rectify the default.
16.3 PROCEDURES ON TERMINATION. In the event of any termination of this
Agreement and if and when requested by Allegiance, Xxxxxx will promptly remove
all inventory of Products owned by Xxxxxx from facilities of Allegiance or any
of its Affiliates. Such removal will be effected during normal business hours
after reasonable advance Notice to Allegiance and will be done in a manner that
will not unreasonably disrupt the normal business operations of Allegiance or
Xxxxxx.
Except as otherwise required pursuant to Sections 21 and 23.9, each party
shall destroy or return to the other party all records made or obtained in the
course of performance hereunder containing information regarding the other party
or its customers that is protected from disclosure under Section 21. In the
event that any party shall elect to destroy any records as permitted above, such
party shall provide the other party with written confirmation of any such
destruction.
16.4 CONTINUED SERVICE. In the event that this Agreement is terminated
pursuant to this Section 16, Xxxxxx and Allegiance shall comply fully with this
Agreement and use reasonable efforts to service adequately existing customers of
the Products until such termination becomes effective.
16.5 PENDING ORDERS. On the expiration or termination of this Agreement
for any reason, Allegiance shall continue to honor customer's orders for
Products placed up to the date of expiration or termination, and Xxxxxx shall
pay the fees due to Allegiance on the terms and conditions set forth in this
Agreement. Any consideration due hereunder that is calculated based upon a
specified time period shall be prorated for any partial period of time between
the end of the last such period and the date of expiration or termination. In
the event that Allegiance has elected to terminate this Agreement because of the
failure of Xxxxxx to pay amounts due hereunder, Allegiance shall be obligated to
perform under the first sentence of this Section
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16.5 only after Xxxxxx shall have paid all amounts due and owing to Allegiance
hereunder.
16.6 SELL-OFF. Notwithstanding any provision of this Agreement or any
other agreement between Xxxxxx, Allegiance, and/or their respective Affiliates,
the parties acknowledge that Allegiance and its Affiliates shall be entitled to
continue to sell or otherwise dispose of the Products within the Territory from
and after the effective date of the expiration or termination of this Agreement
if such Products were owned by Allegiance on the date of termination.
16.7 TRUE-UP. No later than 12 months after expiration or termination of
this Agreement, Xxxxxx shall report to Allegiance all discounts and bonuses
accrued but not earned and/or earned but not accrued on sales made hereunder,
and Xxxxxx shall submit either a payment or an invoice for the net of such
amounts.
17. INDEMNITY.
17.1 XXXXXX'X OBLIGATION. Xxxxxx agrees to indemnify and hold Allegiance
and the Allegiance Indemnified Parties harmless from and against, and in respect
of, any and all claims by, and liabilities to, third parties ("Third-Party
Claims") asserted against or incurred by, and any and all expenses (including
all fees and expenses of counsel, travel costs and other out-of-pocket costs) in
connection with pending or threatened litigation or other proceedings regarding
such Third-Party Claims ("Expenses") incurred by, Allegiance or any of the
Allegiance Indemnified Parties (as hereinafter defined) which arise out of or
relate to:
17.1.1 any actual or alleged patent, copyright or trademark
infringement, or violation of any other proprietary right, arising out of the
purchase, sale or use of Products pursuant to this Agreement;
17.1.2 any tort claim, including claims for personal injury,
wrongful death or property damage, to the extent such claims are based upon any
wrongful or negligent act or omission by Xxxxxx (or its employees or agents) in
the course of its performance of this Agreement;
17.1.3 defects in Products;
17.1.4 any actual or alleged breach of warranty or obligation, if
any, accompanying the Product or Products, subject to the limitations in Section
14 to the extent provided therein; and
17.1.5 any claim for personal injury, wrongful death or property
damage arising out of the use of a Product;
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PROVIDED that this Section 17.1 shall not apply to any Third-Party Claim or
Expense to the extent that the parties agree, or it is finally determined
pursuant to Section 17.4 that the Third-Party Claim or Expense is within the
scope of Allegiance's indemnity obligation set forth in Sections 17.2.1 and
17.2.2 below.
The Allegiance Indemnified Parties shall mean and include (A) Allegiance's
Affiliates (B) the respective directors, officers, agents and employees of and
counsel to Allegiance and its Affiliates, (C) each other person, if any,
controlling Allegiance or any of its Affiliates, and (D) the successors,
assigns, heirs and personal representatives of any of the foregoing. Expenses
shall be reimbursed or advanced when and as incurred promptly upon submission by
Allegiance or any Allegiance Indemnified Party of statements to Xxxxxx.
17.2 ALLEGIANCE'S OBLIGATION. Allegiance agrees to indemnify and hold
Xxxxxx and the Xxxxxx Indemnified Parties harmless from and against, and in
respect of, any and all Third-Party Claims asserted against or incurred by, and
any and all Expenses incurred by, Xxxxxx or any of the Xxxxxx Indemnified
Parties (as hereinafter defined) which arise out of or relate to:
17.2.1 any tort claim, including claims for personal injury,
wrongful death or property damage, to the extent such claims are based upon any
wrongful or negligent act or omission by Allegiance (or its employees or other
agents) in the course of its performance of this Agreement including, but not
limited to, any Third-Party Claims or Expenses caused by any such wrongful or
negligent act or omission constituting a representation concerning the
characteristics or method of usage of Products, or relating to the storage,
handling, or delivery of Products or selection of Products for inclusion in
Kits; and
17.2.2 any actual or alleged patent, copyright or trademark
infringement, or violation of any other proprietary right, arising out of any
act or omission of Allegiance or any of its Affiliates in connection with the
sale of Kits or relating to any intellectual property owned by Allegiance or any
of its Affiliates and used in connection with the sale of Kits.
The Xxxxxx Indemnified Parties shall mean and include (A) Xxxxxx'x Affiliates,
(B) the respective directors, officers, agents and employees of and counsel to
Xxxxxx and its Affiliates, (C) each other person, if any, controlling Xxxxxx or
any of its Affiliates, and (D) the successors, assigns, heirs and personal
representatives of any of the foregoing. Expenses shall be reimbursed or
advanced when and as incurred promptly upon submission by Xxxxxx or any Xxxxxx
Indemnified Party of statements to Allegiance.
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17.3 THIRD-PARTY CLAIMS. If any third party shall make any claim or
commence any arbitration proceeding or suit against any one or more of the
Xxxxxx Indemnified Parties or the Allegiance Indemnified Parties (hereafter,
"Indemnified Persons") with respect to which an Indemnified Person intends to
make any claim for indemnification against Allegiance under Section 17.2 or
against Xxxxxx under Section 17.1 (as the case may be, the "Indemnifying
Party"), such Indemnified Persons shall promptly give written notice to the
Indemnifying Party of such third party claim, arbitration proceeding or suit and
the following provisions shall apply.
17.4 CONTROL OF PROCEEDINGS.
17.4.1 The Indemnifying Party shall have 20 business days after
receipt of the notice referred to in Section 17.3 to notify the Indemnified
Party that it elects to conduct and control the defense of such claim,
proceeding or suit. If the Indemnifying Party does not give the foregoing
notice, the Indemnified Party shall have the right to defend, contest, settle or
compromise such claim, proceeding or suit in the exercise of its exclusive
discretion subject to the provisions of Section 17.5, and the Indemnifying Party
shall, upon request from any of the Indemnified Persons, promptly pay to such
Indemnified Persons in accordance with the other terms of this Section the
amount of any Third-Party Claim resulting from their liability to the third
party claimant and all related Expense.
17.4.2 If the Indemnifying Party gives the foregoing notice, the
Indemnifying Party shall have the right to undertake, conduct and control,
through counsel reasonably acceptable to the Indemnified Party, and at its sole
expense, the conduct and settlement of such claim, proceeding or suit, and the
Indemnified Party shall cooperate with the Indemnifying Party in connection
therewith, provided that (i) the Indemnifying Party shall not thereby permit any
lien, encumbrance or other adverse charge to thereafter attach to any asset of
any Indemnified Person; (ii) the Indemnifying Party shall not thereby permit any
injunction against any Indemnified Person; (iii) the Indemnifying Party shall
permit the Indemnified Person and counsel chosen by the Indemnified Person and
reasonably acceptable to the Indemnifying Party to monitor such conduct or
settlement and shall provide the Indemnified Person and such counsel with such
information regarding such claim, proceeding or suit as either of them may
reasonably request (which request may be general or specific), but the fees and
expenses of such counsel shall be borne by the Indemnified Person unless (1) the
Indemnifying Party and the Indemnified Person shall have mutually agreed to the
retention of such counsel or (2) the named parties to any such claim, proceeding
or suit include the Indemnified Person and the Indemnifying Party and in the
reasonable opinion of counsel to the Indemnified Person representation of both
parties by the same counsel would be inappropriate due to actual or likely
conflicts
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of interest between them, in either of which cases the reasonable fees and
disbursements of counsel for such Indemnified Person shall be reimbursed by the
Indemnifying Party to the Indemnified Person; and (iv) the Indemnifying Party
shall agree promptly to reimburse to the extent required under this Section the
Indemnified Person for the full amount of any Third-Party Claim resulting from
such claim, proceeding or suit and all related Expense incurred by the
Indemnified Person.
17.4.3 In no event shall the Indemnifying Party without the prior
written consent of the Indemnified Person, settle or comprise any claim or
consent to the entry of any judgment that does not include as an unconditional
term thereof the giving by the claimant or the plaintiff to the Indemnified
Person a release from all liability in respect of such claim.
17.4.4 If the Indemnifying Party shall not have undertaken the
conduct and control of the defense of any claim, suit or proceeding as provided
above, the Indemnifying Party shall nevertheless be entitled through counsel
chosen by the Indemnifying Party and reasonably acceptable to the Indemnified
Person to monitor the conduct or settlement of such claim by the Indemnified
Person, and the Indemnified Person shall provide the Indemnifying Party and such
counsel with such information regarding such action or suit as either of them
may reasonably request (which request may be general or specific), but all costs
and expenses incurred in connection with such monitoring shall be borne by the
Indemnifying Party.
17.5 SETTLEMENT OF THIRD-PARTY CLAIMS BY THE INDEMNIFIED PERSON. So long
as the Indemnifying Party is contesting any such claim, suit or proceeding in
good faith, the Indemnified Person shall not pay or settle any such claim,
proceeding or suit. Notwithstanding the foregoing, the Indemnified Person shall
have the right to pay or settle any such claim, proceeding or suit, provided
that in such event the Indemnified Person shall waive any right to indemnity
therefor by the Indemnifying Party, and no amount in respect thereof shall be
claimed as Third-Party Claim or Expense under this Section 17.
If the Indemnifying Party shall not have undertaken the conduct and control
of the defense of any claim, suit or proceeding as provided above, the
Indemnified Person, on not less than 30 days' prior written Notice to the
Indemnifying Party, may make settlement (including payment in full) of such
claim and such settlement shall be binding upon the parties hereto for the
purposes hereof, unless within said 30-day period the Indemnifying Party shall
have requested the Indemnified Person to contest such claim at the expense of
the Indemnifying Party. In such event, the Indemnified Person shall promptly
comply with such request and the Indemnifying Party shall have the right to
direct the defense of such claim or any litigation based thereon subject to all
of the conditions of Section 17.4. Anything in
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this Section 17 to the contrary notwithstanding, if the Indemnified Person
advises the Indemnifying Party that it has determined to make settlement of a
claim, the Indemnified Person shall have the right to do so at its own cost and
expense, without any requirement to contest such claim at the request of the
Indemnifying Party, but without any right under the provisions of this Section
17 for indemnification by the Indemnifying Party.
18. INSURANCE.
Each party is responsible for carrying any insurance desired by it in its
sole discretion, including comprehensive general liability insurance, insurance
to cover its facilities, products liability insurance and business interruption
insurance.
19. COMPLIANCE WITH LAWS.
19.1 ALLEGIANCE COMPLIANCE. Allegiance shall, to the extent material to
Allegiance and its Affiliates taken as a whole, comply (or cause compliance)
with all existing and future federal, state and other laws and regulations in
the Territory applicable to the conduct of Allegiance's business or the
possession of Products pursuant to this Agreement including, without limitation,
the following:
19.1.1 giving prompt written notice to Xxxxxx if Allegiance should
become aware of any actual defect or condition which may alter the quality of
the Products in any material respect or may render any of the Products in
violation of any applicable law or regulation of the Territory including,
without limitation, any violation which could require any alteration of the
specifications of any Product, affect the sale of any Product, cause revocation
of any regulatory approval with respect to any Product or its sale hereunder, or
give rise to a claim against Xxxxxx by any person, and Allegiance shall promptly
notify Xxxxxx upon becoming aware of any changes in any laws or regulations in
the Territory applicable to the manufacture, sale, packaging, labeling,
possession or use of the Products;
19.1.2 keeping appropriate records of all lot coded and serial
numbered Products shipped to customers; and
19.1.3 making prompt return of any and all Products affected by
holds or recalls if so requested by Xxxxxx.
To the extent applicable to the subject matter of this Agreement, and pursuant
to the requirements of 42 CFR 420.300 ET SEQ., Allegiance hereby agrees to make
available to the Secretary of Health and Human Services ("HHS"), the Comptroller
of the General Accounting Office ("GAO"), or their authorized representatives,
all contracts, books, documents and records relating to the nature and extent of
costs hereunder for a period of four (4)
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years after the furnishing of services hereunder. In addition, if any part of
any service is to be provided by subcontract, Allegiance hereby agrees to
require by contract that such subcontractor make available to the HHS and GAO,
or their authorized representatives, all contracts, books, documents and records
relating to the nature and costs thereunder for a period of four (4) years after
the furnishing of services thereunder.
19.2 XXXXXX COMPLIANCE. Xxxxxx shall, to the extent material to Xxxxxx and
its Affiliates taken as a whole, comply (or cause compliance) with all existing
and future laws and regulations in the Territory applicable to the conduct of
Xxxxxx'x business or the manufacture, packaging, labeling and sale to Allegiance
of Products pursuant to this Agreement, including, without limitation, the
following:
19.2.1 giving prompt written notice to Allegiance if Xxxxxx should
become aware of any actual defect or condition which may alter the quality of
the Products in any material respect or may render any of the Products in
violation of any applicable law or regulation of the Territory, including,
without limitation, any violation which could require any alteration of the
specifications of any Product, affect the sale of any Product, cause revocation
of any federal, state or other regulatory approval with respect to any Product
or its sale hereunder or give rise to a claim against Allegiance by any person;
and
19.2.2 giving prompt written notice to Allegiance of any and all
Products affected by holds or recalls and, if Xxxxxx requests Allegiance to
return any of such Products to Xxxxxx, promptly reimburse Allegiance for the
price of such returned Products paid by Allegiance under this Agreement and the
direct cost of returning such Products to Xxxxxx.
The services provided hereunder will not be provided in violation of any
applicable Equal Employment Opportunity requirements including those set forth
in Section 202 of Executive Order 11246, as amended.
19.3 CONSULTATION. If applicable storage requirements change during the
Term of this Agreement as a result of changes in laws, regulations, or
interpretations or enforcement actions by governmental authorities with
jurisdiction over the Products or the subject matter of this Agreement, the
parties will confer regarding the need for and funding of any such changes, in
accordance with the following process. The need for any change in storage
requirements will be reviewed by senior executives of the parties who are
directly responsible for regulatory compliance, who will forward their
recommendation for specific change(s) to the Council. The Council will develop a
proposal for resolution that will include scope, funding needed, alternatives
and its recommendation. The Council will then forward its
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proposal to a working group of business executives designated by Xxxxxx and
Allegiance that will have the authority: (a) to adopt or modify the proposal;
(b) to determine the funding method; and (c) if appropriate, to allocate the
costs of such resolution between the Parties.
20. FORCE MAJEURE. The obligations of either party to perform under this
Agreement shall be excused during each period of delay caused by matters (not
including lack of funds or other financial causes) such as strikes, supplier
delays, shortages of raw materials, government orders or acts of God, which are
reasonably beyond the control of the party obligated to perform; provided that
nothing contained in this Agreement shall affect either party's ability or
discretion with respect to any strike or other employee dispute or disturbance
and all such strikes, disputes or disturbances shall be deemed to be beyond the
control of such party. A condition of force majeure shall be deemed to continue
only so long as the affected party shall be taking all reasonable actions
necessary to overcome such condition. In the event that either party hereto
shall be affected by a condition of force majeure, such party shall give the
other party prompt Notice thereof, which Notice shall contain the affected
party's estimate of the duration of such condition and a description of the
steps being taken or proposed to be taken to overcome such condition of force
majeure. Any delay occasioned by any such cause shall not constitute a default
under this Agreement, and the obligations of the parties shall be suspended
during the period of delay so occasioned. During any period of force majeure,
the party that is not directly affected by such condition of force majeure shall
be entitled to take any reasonable action necessary to mitigate the effects of
such condition of force majeure, and the provisions of Section 4 shall be
suspended to the extent necessary to permit any such action.
21. CONFIDENTIALITY.
21.1 ALLEGIANCE INFORMATION. Baxter agrees to hold, and to use reasonable
efforts to cause its employees and representatives to hold, in confidence all
marketing and pricing information of a confidential nature pertaining to the
Territory, and all information relating to Allegiance's standard costs,
received by Baxter from Allegiance after the Effective Date or obtained from
Allegiance in the course of an audit pursuant to Section 8.5, in a manner
consistent with Xxxxxx'x treatment of its own confidential information. Baxter
shall not use such information for any purpose other than as contemplated under
this Agreement or verifying compliance with this Agreement, without Allegiance's
prior written consent.
21.2 BAXTER INFORMATION. Allegiance agrees to hold, and to use reasonable
efforts to cause its employees and representatives to hold, in confidence all
information of a confidential nature concerning Baxter or its customers
(including all marketing and
34-
pricing information relating to Baxter and all standard cost information
relating to the Products) in the possession of Allegiance as of the Effective
Date or furnished to or obtained by Allegiance after the Effective Date, in a
manner consistent with Allegiance's treatment of its own confidential
information. Allegiance shall not use such information for any purpose other
than as contemplated under this Agreement, without Xxxxxx'x prior written
consent.
21.3 GENERAL. The obligations of confidentiality and non-disclosure
imposed under this Section 21 shall not apply to data and information that the
recipient can demonstrate:
21.3.1 is published or is or otherwise becomes available to the
general public as part of the public domain without breach of this Agreement;
21.3.2 has been furnished or made known to the recipient without
any obligation to keep it confidential by a third party under circumstances
which are not known to the recipient to involve a breach of the third party's
obligations to a party hereto;
21.3.3 was developed independently of information furnished to the
recipient under this Agreement; or
21.3.4 was known to the recipient at the time of receipt thereof
from the other party, is not otherwise subject to (a) the confidentiality
restrictions contained in the Reorganization Agreement dated as of September 30,
1996 between Xxxxxx International and Allegiance Corporation, or (b) any other
obligation to keep it confidential and was not obtained from a third party under
circumstances which were known to the recipient to involve a breach of the third
party's obligations to a party hereto.
21.4 EQUITABLE RELIEF. Each party (the "first party") acknowledges that
the other party would not have an adequate remedy at law for the breach by the
first party of any one or more of the covenants contained in this Section 21 and
agrees that, in the event of such breach, the other party may, in addition to
the other remedies which may be available to it, apply to a court for an
injunction to prevent breaches of this Section 21 and to enforce specifically
the terms and provisions of this Section.
21.5 REQUIRED DISCLOSURES. The provisions of this Section shall not
preclude disclosures required by law; provided, however, that each party will
use reasonable efforts to notify the other, prior to making any such disclosure,
and permit the other to take such steps as it deems appropriate, including
obtaining a protective order, consistent with applicable law, to minimize any
loss of confidentiality.
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21.6 SECURITY. Each party shall be responsible for preventing unauthorized
remote access by such party's own agents and employees to data transferred to or
otherwise made available to the other party under this Agreement.
22. LIMITATION OF LIABILITY AND REMEDY.
22.1 DAMAGES. In no event, whether based on contract, indemnity, warranty,
tort (including negligence), strict liability or otherwise, shall either party
or any of its directors, officers, employees or agents, be liable for special,
exemplary, or punitive damages. The foregoing limitation and disclaimer shall
apply irrespective of whether the possibility of such special, exemplary, or
punitive damages had been disclosed in advance or could have reasonably been
foreseen.
The limitations and disclaimers of obligations and liabilities contained in
this Section 22 are intended to apply to the fullest extent permitted by law;
provided that such limitations and disclaimers shall not limit amounts payable
with respect to any express indemnity provided for in this Agreement.
22.2 EXCLUSIVE REMEDIES.
22.2.1 XXXXXX'X EXCLUSIVE REMEDIES. Except in the case of the gross
negligence or willful misconduct of Allegiance or its Affiliates, Xxxxxx'x
exclusive remedies against Allegiance for any breach of, or other act or
omission arising out of or relating to, this Agreement shall be:
22.2.1.1 the right to receive payment of amounts owed under
Sections 6 and 8 hereof;
22.2.1.2 the right to require reperformance of any service to
the extent required pursuant to Section 11;
22.2.1.3 the right to indemnification as provided in Section 17;
22.2.1.4 the right to injunction, specific performance or other
equitable non-monetary relief when available under applicable law;
22.2.1.5 the right to terminate this Agreement for material
breach as set forth in Section 16; and
22.2.1.6 the right to actual damages for breach of Section 21.
22.2.2 ALLEGIANCE'S EXCLUSIVE REMEDIES. Except in the case of the
gross negligence or willful misconduct of Baxter or its Affiliates, Allegiance's
exclusive remedies against Baxter
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for any breach of, or other act or omission arising out of or relating to, this
Agreement shall be:
22.2.2.1 the right to receive payment of amounts owed under
Sections 6 and 8 hereof;
22.2.2.2 with respect to Interim Distributor Model transactions
only, the right to require Baxter to repair or replace (at Xxxxxx'x option
and expense) any Product that proves not to be in conformity with
applicable labeling or specifications, and Baxter shall pay the
transportation and other costs incurred by Allegiance with respect to any
Products returned to Baxter for repair or replacement under this Section
22.2.2.2, or at Xxxxxx'x option, reimburse Allegiance for any such costs;
22.2.2.3 the right to indemnification as provided in Section 17;
22.2.2.4 the right to injunction, specific performance or other
equitable non-monetary relief when available under applicable law;
22.2.2.5 the right to terminate this Agreement for material
breach as set forth in Section 16; and
22.2.2.6 the right to actual damages for breach of Section 21.
23. MISCELLANEOUS PROVISIONS.
23.1 NOTICES. All notices and other communications required under this
Agreement shall be in writing and shall be deemed to have been given if
delivered by hand, or sent by courier or facsimile transmission (provided that
in the case of facsimile transmission, a confirmation copy of the notice shall
be delivered by hand or sent by courier within 2 days of transmission),
addressed:
To Baxter:
Xxxxxx Healthcare Corporation
Xxx Xxxxxx Xxxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: General Counsel
with copies to:
Xxxxxx Healthcare Corporation
Xxxxx 000 xxx Xxxxxx Xxxx
Xxxxx Xxxx, Xxxxxxxx 00000
Attention: President--I.V. Systems Division
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if to Allegiance to:
Allegiance Healthcare Corporation
XxXxx Park Building A/B
0000 Xxxxxxxx Xxxx
XxXxx Xxxx, Xxxxxxxx 00000
Attention: General Counsel
with a copy to:
Allegiance Healthcare Corporation
XxXxx Park Building A/B
0000 Xxxxxxxx Xxxx
XxXxx Xxxx, Xxxxxxxx 00000
Attention: President--Distribution
until notice of a change in address or addressee is given as provided in this
Section. All notices given in accordance with this Section shall be effective,
if delivered by hand or by courier, at the time of delivery, and, if
communicated by facsimile transmission, at the time of transmission.
23.2 ENTIRE AGREEMENT. This Agreement is the entire agreement between the
parties hereto with respect to the subject matter hereof, there being no prior
written or oral promises or representations not incorporated herein.
23.3 CHOICE OF LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Illinois and the federal
laws of the United States of America applicable therein, as though all acts and
omissions related hereto occurred in Illinois. Any lawsuit arising from or
related to this Agreement shall only be brought in the United States District
Court for the Northern District of Illinois or the Circuit Court of Lake County,
Illinois. To the extent permissible by law, the parties hereby consent to the
jurisdiction and venue of such courts. Each party hereby waives, releases and
agrees not to assert, and agrees to cause its Affiliates to waive, release and
not assert, any rights such party or its Affiliates may have under any foreign
law or regulation that would be inconsistent with the terms of this Agreement as
governed by Illinois law.
23.4 AMENDMENT; WAIVER. No amendment or modification of the terms of this
Agreement shall be binding on either party unless reduced to writing and signed
by an authorized representative of the party to be bound. The waiver by either
party of any particular default by the other party shall not affect or impair
the rights of the party so waiving with respect to any subsequent default of the
same or a different kind; nor shall any delay or omission by either party to
exercise any right arising from any default by the other affect or impair any
rights which the
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nondefaulting party may have with respect to the same or any future default.
23.5 SEVERABILITY. In the event that any of the provisions of this
Agreement is held to be invalid, illegal, void or otherwise unenforceable in any
jurisdiction by reason of any rule of law, administrative decision, judicial
decision, public policy or otherwise, such provision shall be ineffective in
such jurisdiction to the extent of such invalidity, illegality, voidness or
unenforceability without affecting, impairing or invalidating the remaining
provisions, if any, of this Agreement. Any such invalid, illegal, void or
otherwise unenforceable provisions shall be replaced by valid and enforceable
substitute provisions which are as similar as possible to such invalid, illegal,
void or otherwise unenforceable provisions in terms of economic and other
commercial effect upon the parties, which substitute provisions shall be
established pursuant to the dispute resolution procedure set forth in Section
24.2.
23.6 RELATIONSHIP OF THE PARTIES. By virtue of this Agreement, neither
party constitutes the other as its agent (except as otherwise expressly
provided), partner, joint venturer, or legal representative and neither party
has express or implied authority to bind the other in any manner whatsoever.
23.7 SURVIVAL. The rights and obligations of the parties under Sections
8.5, 8.6, 11, 13.1, 14, 16.3, 16.4, 16.5, 16.6, 16.7, 17, 19.1, 19.2, 20, 21,
22, 23, and 24 as well as all rights and obligations with respect to any amounts
that remain unpaid under Sections 6 and 8 hereof as of the date of termination,
shall survive any termination of this Agreement.
23.8 COUNTERPARTS. For convenience of the parties hereto, this Agreement
may be executed in one or more counterparts, each of which shall be deemed an
original for all purposes.
23.9 RECORDS RETENTION. Each party will retain all information obtained or
created in the course of performance hereunder in accordance with the records
retention guidelines of the other party existing from time to time. Each party
has advised the other of its respective guidelines as in effect on the Effective
Date and will advise the other party of any subsequent changes therein.
23.10 BENEFICIARIES. Except for the provisions of Section 17 hereof,
which are also for the benefit of the other Persons indemnified, this Agreement
is solely for the benefit of the parties hereto and their respective Affiliates,
successors and permitted assigns and shall not confer upon any other Person any
remedy, claim, liability, reimbursement or other right in excess of those
existing without reference to this Agreement.
24. DISPUTE RESOLUTION AND ARBITRATION.
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24.1 ESCALATION. The parties agree that they will attempt to settle any
claim or controversy arising out of this Agreement through good faith
negotiations in the spirit of mutual cooperation between business executives
with authority to resolve the controversy. Prior to taking action as provided
in Section 24.2, the parties shall first submit such claim or controversy to the
appropriate Divisional Presidents of each party for resolution, and if such
Divisional Presidents are unable to resolve such claim or controversy, either
party may request that their respective chief executive officers, or their
respective delegees, attempt to resolve the dispute. The officers or delegees
to whom any such claim or controversy is submitted as provided above shall
attempt to resolve the dispute through good faith negotiations over a reasonable
period, not to exceed 30 days in the aggregate unless otherwise agreed. Such 30
day period shall be deemed to commence on the date of a Notice from either party
describing the particular claim or controversy.
24.2 ARBITRATION. Any dispute, claim or controversy arising out of or
relating to this Agreement, or the breach or validity hereof, whether at common
law or pursuant to any statute, regulation, rule or policy, that is not resolved
by good faith negotiations in the spirit of mutual cooperation pursuant to
Section 24.1 will, upon the written request of either party, be resolved by
binding arbitration conducted in accordance with the Rules of the CPR Institute
for Dispute Resolution by a sole arbitrator who is a member of the National
Health Lawyers Association or another mutually agreeable individual. Such
arbitrator shall set a schedule for determination of such dispute that is
reasonable under the circumstances. Such arbitrator shall determine the dispute
in accordance with this Agreement and the substantive rules of law (but not the
rules of procedure) that would be applied by a federal court sitting in
Illinois. The arbitration shall take place in Lake County, Illinois. The
arbitration will be governed by the United States Arbitration Act, 9 U.S.C.
Sections 1-16 and the Patent Arbitration Act, 35 U.S.C. Section 294. Judgment
upon the award rendered by the arbitrator may be entered by any court having
jurisdiction. Where this Agreement provides for future agreement by the
parties, failure to reach such agreement shall not constitute a dispute subject
to the provisions of this Section 24 except as expressly provided otherwise.
24.3 INJUNCTIVE RELIEF. Nothing contained in this Section 24 shall
prevent either party from resorting to judicial process if injunctive or other
equitable relief from a court is necessary to prevent serious and irreparable
injury to one Party or to others. The use of arbitration procedures will not be
construed under the doctrine of laches, waiver or estoppel to affect adversely
either party's right to assert any claim or defense.
25. ASSIGNMENT.
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25.1 GENERAL. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns, provided, however, that, except as provided below, neither party may
Transfer its interest in the Agreement, including Transfers by operation of law
such as by way of merger or consolidation, without the prior written consent of
the other party, which consent may not be unreasonably withheld.
Notwithstanding the foregoing sentence, either party may Transfer its rights and
obligations under this Agreement to any corporation or other entity that shall
acquire all or substantially all of such party's business and assets and assume
in writing all of such party's obligations hereunder and deliver a signed copy
of such assumption instrument to the other party; and, upon the other party's
receipt of such assumption instrument, the assigning party shall be fully
released and discharged from its obligations under this Agreement. In the event
of such a Transfer, the Non-Affected Party shall have the right to terminate
this Agreement as provided in Section 16.1.
25.2 CERTAIN OTHER TRANSFERS BY BAXTER. Notwithstanding the foregoing
provisions of this Section, to the extent that (a) any Person that is not a
Competitor of Allegiance shall acquire all or substantially all of Xxxxxx'x
business and assets relating to any Line of Products, or (b) any Person shall
acquire all or substantially all of Xxxxxx'x business and assets relating to the
Products; then Baxter may Transfer the portion of its rights hereunder relating
to such Line of Products or all of its rights hereunder, respectively, to such
acquiring Person, provided that any such acquiring Person shall assume in
writing all of Xxxxxx'x obligations hereunder which correspond to the portion of
rights Transferred, and shall deliver a signed copy of such assumption
instrument to Allegiance. Baxter shall remain liable for all of the obligations
under this Agreement notwithstanding any such Transfer. In the event of any
Transfer described in this paragraph, Allegiance shall have the right to
terminate the portion of this Agreement relating to such Line of Products as
provided in Section 16.1.
25.3 CERTAIN OTHER TRANSFERS BY ALLEGIANCE. Notwithstanding the foregoing
provisions of this Section, to the extent that any Person shall acquire all or
any portion of Allegiance's business and assets relating to the Allegiance's
distribution network, Allegiance may Transfer the portion of its rights
hereunder relating to such portion of its distribution network to such acquiring
Person, provided that any such acquiring Person shall assume in writing the
portion of Allegiance's obligations hereunder relating to the portion of the
distribution network so Transferred, and shall deliver a signed copy of such
assumption instrument to Baxter. Allegiance shall remain liable for all of the
obligations under this Agreement notwithstanding any such Transfer. In the event
of any Transfer described in this paragraph, Baxter shall have the right to
terminate this Agreement as provided in Section 16.1.
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26. AUTHORITY. Each party represents and warrants that, as of the effective
date of this Agreement, the terms of this Agreement do not violate any existing
obligations or contracts of, or any law, rule, regulation, judgment or order
binding on, such party. Each party shall indemnify and hold harmless the other
party from and against any and all liabilities, damages, losses and expenses
(including reasonable attorney's fees) resulting from any third party claim,
arbitration proceeding or suit which is hereafter made or brought against the
other party and which alleges any such violation, all as provided in Section 17
herein with respect to the indemnification provided in Section 17.1 and Section
17.2.
* * * * * *
IN WITNESS WHEREOF, the parties have by their duly authorized officers
executed this Agreement as of the date first above written.
BAXTER: ALLEGIANCE:
XXXXXX HEALTHCARE CORPORATION ALLEGIANCE HEALTHCARE CORPORATION
By: /s/ Xxxx X. XxXxxxxx By: /s/ Xxxxxxx X. Xxxxxxx
---------------------- --------------------------
Name: Xxxx X. XxXxxxxx Name: Xxxxxxx X. Xxxxxxx
Title: Group Vice President-- Title: Senior Vice President
I.V. Systems and General Counsel
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AGENCY, SERVICES, AND DISTRIBUTION AGREEMENT
EXHIBIT A
I.V. PRODUCTS
See attached listing.
A-1
AGENCY, SERVICES, AND DISTRIBUTION AGREEMENT
EXHIBIT B
NUTRITION PRODUCTS
See attached listing.
B-1
AGENCY, SERVICES, AND DISTRIBUTION AGREEMENT
EXHIBIT C
ALLEGIANCE'S DUTIES
1. GENERAL DUTIES UNDER AGENCY MODEL, DISTRIBUTOR MODEL AND BCS KITS MODEL.
1.1 CORPORATE AGREEMENT BONUS PROGRAM. Allegiance shall participate in
the corporate agreement bonus program for the Products as follows:
1.1.1 EXISTING AGREEMENTS.
1.1.1.1 The "Existing Corporate Agreements" shall mean Xxxxxx'x
agreements with stand-alone hospitals and regional and national health
systems with effective dates prior to September 30, 1996, which provide for
annual bonus or discount payments based, inter alia, upon the quantity of
Baxter-manufactured products purchased by the customer.
1.1.1.2 Allegiance will accept assignment of the Existing
Corporate Agreements and will administer the Existing Corporate Agreements
on behalf of itself and Baxter.
1.1.1.3 Allegiance shall honor and administer each Existing
Corporate Agreement through its expiration or earlier termination pursuant
to its terms.
1.1.1.4 The corporate agreement bonus funding process will be
the same as prior to October 1, 1996, I.E., the corporate agreement bonuses
will be funded by Baxter and Allegiance, the allocation will be made based
on the estimated total year-end payout and actual May year-to-date sales
and gross profit recognized from the applicable customers, the bonus
allocation will be invoiced by Allegiance to Baxter on a monthly basis
(terms of payment will be net 30 days), and on or before May 31 of each
year, any over-accrual or under-accrual will be allocated to Allegiance or
Baxter based upon the foregoing allocation for the applicable year.
1.1.1.5 Allegiance shall prepare and present the corporate
agreement bonus payments to the customers, and Baxter shall have the right
to have Baxter representatives present.
1.1.2 FUTURE AGREEMENTS. For any corporate bonus agreements
entered into on or after the effective date of this
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Agreement with stand-alone hospitals and regional and national health systems,
Allegiance shall meet in advance with each Baxter business unit to determine
whether such Baxter business unit desires to participate in any such agreements.
1.2 SALES SUPPORT. Allegiance shall use commercially reasonable efforts
to support sales of the Products (including sales to Surgery Centers and to
Alternate Site Distributors) in accordance with the following and such efforts
are in lieu of any standard of performance implied by Section 2-306(2) of the
U.C.C.:
1.2.1 Allegiance field service representatives (customer service
representatives in the field) or other Allegiance customer service
representatives shall direct customer inquiries regarding the Products to
Xxxxxx'x customer service support organization for resolution.
1.2.2 If Allegiance receives a request for proposal or request for
bid relating to the Products, Allegiance will advise Baxter of such receipt, and
will also advise Baxter whether the customer appears interested in purchasing
the Products under the Agency Model or the Distributor Model.
1.2.3 Allegiance account managers shall: (a) provide Baxter with
access to the customer decision-makers; (b) generate sales interest in the
Products; (c) actively support the joint customer satisfaction strategy between
Allegiance and Baxter; and (d) work with Baxter (in a manner similar to that
prior to the effective date of this Agreement) relative to account segmentation
rating of Baxter customers. Allegiance segmentation of customers for the
Products shall not affect Allegiance's obligations under the Agency Model.
1.2.4 Allegiance will use commercially reasonable efforts to
monitor critical business indicators in the areas of customer service, materials
management, distribution services, pricing/billing, and compliance with all
specific service requirements set forth in this Exhibit C. Without limitation
to the foregoing sentence, Allegiance will use commercially reasonable efforts
to measure and assess customer satisfaction for Allegiance sales processes and
sales representatives, to the extent Allegiance provides such sales-related
functions under this Agreement.
1.2.5 Allegiance shall participate with Baxter in a semi-annual
review of regional account segmentation, performance to critical business
indicators, and regional sales to be conducted between the leaders of their
respective regional sales organizations. Allegiance and Baxter will work
together in good faith to develop action plans to improve customer satisfaction
in areas that are mutually identified as key factors for customer growth and
retention, or areas where Xxxxxx'x performance is
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significantly (statistically defined) below that of its competitors.
1.2.6 Allegiance's sales generalist sales force shall continue to
promote sales of the Products in the same manner as prior to the effective date
of this Agreement.
1.2.7 Allegiance will provide telephone sales services for
deployment purposes or strategic account management, at Xxxxxx'x request, for an
additional fee to be agreed upon.
1.2.8 Allegiance shall make available to Baxter its electronic
catalog listing each party's products.
1.2.9 Upon termination or expiration of any pre-existing customer
contract with a third-party supplier for products that compete with any Product
or Products, except for permitted competitive Best Value Products, Allegiance
shall encourage and facilitate use of the Products (rather than any product
competing with any Product or Products) through appropriate means including, but
not limited to, use of Best Value Product incentives, Allegiance customer
contract provisions, and/or sales representative incentives.
1.2.10 TRANSITION. During the period beginning with the effective
date of this Agreement and ending on December 31, 1996, Allegiance will continue
to use reasonable business efforts to provide substantially the same level of
customer service relating to the Products through substantially the same
personnel as Xxxxxx'x U.S. Distribution business provided as of July 1, 1996.
Allegiance's responsibilities under the preceding sentence shall end as and to
the extent that Baxter customer service personnel are activated. Baxter will
use reasonable efforts to meet the agreed-upon transition schedule.
1.3 MARKETING SUPPORT. Allegiance shall use commercially reasonable
efforts to support marketing of the Products in accordance with the following,
and such efforts are in lieu of any standard of performance implied by Section
2-306(2) of the U.C.C.:
1.3.1 Allegiance shall provide marketing services (other than
product management services which will be provided by Baxter) to Surgery Centers
and to Alternate Site Distributors.
1.3.2 Allegiance shall maintain its own communications resources
and shall coordinate the communications messages with Baxter when appropriate.
1.3.3 Allegiance shall attempt whenever possible to share with
Baxter expenses for convention fees, industry organizations, and industry
databases when and where appropriate.
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1.3.4 Prior to publication, Allegiance shall submit to Baxter for
Xxxxxx'x approval all Allegiance promotional/communication endeavors
specifically referencing the Products or any Baxter services.
1.3.5 Either as part of the promotion of Best Value Products or as
part of a general promotion, Allegiance shall represent the Products fully and
prominently in Allegiance's product and service literature or any other media,
including field sales support tools.
1.3.6 Allegiance shall include Baxter sales volume by Product
category on Allegiance's sales reports in a similar format as provided by
Allegiance prior to the effective date of this Agreement.
1.3.7 For a fee to be agreed upon from time to time, Allegiance
shall provide literature distribution services to Baxter.
1.4 NATIONAL SAMPLE CENTER. From the effective date of this Agreement
through the period ending December 31, 1997, Allegiance shall provide the
following services in connection with the National Sample Center:
1.4.1 Allegiance shall maintain the Sample Center for the
Products.
1.4.2 Allegiance shall order the Products to be stocked in the
Sample Center which shall remain owned by Baxter.
1.4.3 Allegiance shall maintain the MAS90 system for the Sample
Center inventory.
1.4.4 Allegiance shall provide to Baxter a monthly spreadsheet
with the Product-related activity for the month, I.E., rep name, cost center,
product ordered, and service charge.
1.4.5 Allegiance shall charge Baxter a handling charge of
$6.50/order to cover the overhead associated with receiving, storing, and
shipping the Products.
1.4.6 Allegiance shall apply special handling charges to priority
shipments as follows: (a) next day shipments will be charged an additional
$7.00; and (b) second day air shipments will be charged an additional $5.50.
1.4.7 Allegiance shall xxxx Xxxxxx monthly for applicable charges.
1.4.8 Allegiance shall conduct an annual inventory and/or routine
cycle counting to maintain inventory integrity in the National Sample Center.
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1.4.9 Allegiance shall continue to provide the same customer
service functions to the sales representatives as was provided prior to the
effective date of this Agreement.
1.4.10 Allegiance shall continue to check expiration dates on all
Sample Center Products.
1.4.11 Allegiance shall maintain contact with Xxxxxx'x finance
personnel regarding inventory status and financial transactions.
1.4.12 Allegiance shall send monthly reports to Xxxxxx providing
inventory levels.
1.5 MATERIALS MANAGEMENT. Allegiance and Xxxxxx shall use commercially
reasonable efforts to make the supply chain as efficient as possible for both
parties. Future opportunities to improve efficiency include, but are not
limited to, EDI, bar coding, custom palletization, network channels and the use
of returnable totes. Both parties agree to work in good faith to achieve this
goal.
1.5.1 FINISHED GOODS REQUIREMENTS PLANNING.
1.5.1.1 Both parties agree that the echeloning of products
based on line item usage generally makes sense. Assuming there are no
significant customer contractual issues or financial impacts to Xxxxxx,
Xxxxxx agrees to the parameters set forth by the rationalized supply chain.
If after the appropriate review there are significant customer contractual
issues or financial impacts to Xxxxxx, 1995 will be used as the baseline
for where products are stocked and the number of low velocity SKU's will
not exceed 1995 levels.
1.5.1.2 Allegiance will not be required to carry more than 1995
average Days Inventory On Hand.
1.5.2 ALLEGIANCE INBOUND FREIGHT ADMINISTRATIVE SERVICES.
Allegiance shall continue to provide the following administrative services for
all inbound freight shipments (i.e., shipments of Products from manufacturing
plants to replenishment centers and distribution centers or from replenishment
centers to distribution centers) to the extent that such services were normally
being provided by Xxxxxx'x U.S. Distribution business to Xxxxxx'x I.V. Division
prior to the effective date of this Agreement: (a) freight payments, (b) audit
of freight payments, (c) transportation cost reporting, and (d) logistics
analysis/distribution technology to include network planning and replenishment
center sourcing. Allegiance's compensation for such services shall be
determined in accordance with the methodology used by Xxxxxx prior to the
effective date of this Agreement. For an additional fee to be agreed upon,
Allegiance
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may agree to provide to Xxxxxx additional inbound freight administrative
services beyond the scope of the services normally being furnished by Xxxxxx'x
U.S. Distribution business to Xxxxxx'x I.V. Division prior to the effective date
of this Agreement.
1.6 DISTRIBUTION.
1.6.1 RECEIVING (NOTIFICATION AND PLANNING).
1.6.1.1 Product will be system received within one and one-half
business days of arrival at Allegiance's replenishment center or
distribution center.
1.6.1.2 Allegiance will coordinate with Xxxxxx to schedule
receiving appointments for Products coming from manufacturing facilities
and replenishment centers, and in unloading Products. Allegiance will
follow Xxxx of Lading (BOL) instructions regarding receipt unless late
arrival prevents Allegiance from doing so, and alternative arrangements
have not been made.
1.6.1.3 Allegiance will receive products at distribution
centers using Xxxxxx'x and Allegiance's computer systems or an Allegiance
warehouse management system that will upload to such computer systems.
1.6.2 WAREHOUSE MANAGEMENT.
1.6.2.1 Allegiance will be responsible for the management of
its replenishment centers and distribution centers.
1.6.2.2 Allegiance will hold Xxxxxx inventory in Allegiance's
replenishment center or its distribution centers.
1.6.2.3 Except as otherwise agreed, Allegiance will adhere to
existing storage, shipping and receiving practices, including practices
regarding time-sensitive Products.
1.6.2.4 Allegiance will measure and report to Xxxxxx on a
monthly basis Product damage or loss that occurs at Allegiance facilities.
Allegiance shall compensate Xxxxxx pursuant to Section 6.18 of this
Agreement for any damage or loss that is Allegiance's responsibility under
this Agreement.
1.6.2.5 Allegiance will measure and report to Xxxxxx on a
monthly basis Product damage that occurs prior to arrival at Allegiance's
distribution centers or its replenishment center.
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1.6.3 CYCLE COUNTS AND PHYSICAL INVENTORIES.
1.6.3.1 Allegiance will continue to perform counts of Xxxxxx'x
Product inventory in all Allegiance facilities through annual physical
inventories or cycle counts, following substantially the same practices as
employed by Xxxxxx and Xxxxxx'x U.S. Distribution business prior to the
effective date of this Agreement, at no additional cost to Xxxxxx.
1.6.3.2 Allegiance facilities that performed cycle counts for
the Products prior to the effective date of this Agreement will continue to
do so consistent with practices utilized prior to the date hereof.
1.6.3.3 Allegiance shall provide Xxxxxx with the results of its
cycle counts by the tenth business day after the count was taken.
1.6.3.4 Xxxxxx personnel and external auditors for Xxxxxx shall
have the right to audit an Allegiance cycle count of the Products at any
time up to 90 days after the end of the month in which the cycle count is
conducted.
1.6.3.5 Xxxxxx personnel and external auditors for Xxxxxx shall
have the right to audit Product inventory in Allegiance facilities at any
mutually-acceptable time upon not more than five business days advance
notice.
1.6.3.6 Allegiance facilities that performed annual physical
inventories prior to the effective date of this Agreement will continue to
do so during the Term of this Agreement. The annual physical inventory
will take place in October of each year during the Term of this Agreement.
Xxxxxx will select a day in October acceptable to Allegiance on which the
physical inventory will take place.
1.6.3.7 Allegiance will have 20 business days from the day of
the physical inventory to reconcile, system enter, and report the physical
inventory results to Xxxxxx.
1.6.3.8 Each Allegiance facility participating in the physical
inventory must demonstrate a gross variance of the dollar value of the
Product inventory on TOPS within a range of -5% to +5%. Xxxxxx may require
Allegiance facilities that do not meet this standard to perform another
physical inventory in April of the following calendar year. If the gross
variance is outside of the range of -1.5% to +1.5%, Xxxxxx may require
Allegiance to perform specified Product physical inventory counts.
1.6.3.9 To the extent practicable, Xxxxxx and Allegiance shall
record any annual physical inventory
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adjustments into their respective accounting records at the same time.
1.6.3.10 Xxxxxx shall have the right to have Xxxxxx personnel
and external auditors present at Allegiance facilities on the day that the
physical inventory is conducted. In addition, Xxxxxx shall have the right
to audit Allegiance's annual physical inventory results at any time up to 3
months after the date on which Allegiance records its annual inventory
adjustments into its accounting records.
1.6.4 ORDER FULFILLMENT. When customer orders are released
through Xxxxxx'x computer system to Allegiance's computer system, Allegiance
personnel will pick, pack, load and stage and ship-verify the customer order for
delivery within the Allegiance distribution center. For Agency Model
transactions, Allegiance personnel will continue to provide problem resolution
for electronic data interchange (EDI) orders to the same extent as provided by
Xxxxxx'x U.S. Distribution business to Xxxxxx'x I.V. Division immediately prior
to the effective date of this Agreement, at no additional charge to Xxxxxx.
1.6.5 OUTBOUND SHIPMENT.
1.6.5.1 Allegiance personnel will be responsible for the
selection and routing, private fleet or commercial carrier, of the Xxxxxx
customer order.
1.6.5.2 Allegiance shipments will be based on BOL instructions.
If no specific instruction appears on the in BOL, shipments will occur on
the next scheduled delivery or within a maximum of two business days (if no
scheduled delivery).
1.6.6 FREIGHT CLAIMS.
1.6.6.1 Allegiance will be responsible for filing freight
claims and resolving product shortages and overages, including providing
proof of delivery, with respect to all Product shipments.
1.6.6.2 If Allegiance is unable to furnish proof of delivery
with respect to Products shipped on Allegiance's private fleet within a
reasonable period of time thereafter, it shall compensate Xxxxxx for such
undelivered Product in accordance with Section 6.18 of this Agreement.
1.6.7 LOT TRACKING. Allegiance shall provide lot tracking
capabilities as provided by Xxxxxx for the Products prior to the effective date
of this Agreement.
1.6.8 RETURN GOODS MANAGEMENT.
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1.6.8.1 Allegiance shall arrange for and pick up, process and
dispose of returned Products at Xxxxxx'x request.
1.6.8.2 In the event of returned Products, a return goods
authorization will be issued by Xxxxxx Customer Service and Allegiance will
arrange for and pick up such Products within 5 business days. However, if
the customer is located in a remote area where pick-up within 5 business
days would be impracticable, Allegiance will use commercially reasonable
efforts to pick up the returned Products at the next scheduled delivery,
but in no event later than 30 days after its receipt of such return goods
authorization.
1.6.8.3 Allegiance will continue practices existing immediately
prior to the effective date of this Agreement regarding returned goods
processing, including unloading, segregation, inspection, product
disposition (restocking, disposal, or transport for restocking),
documentation, and forwarding paperwork for Xxxxxx to administer credit.
1.6.8.4 Return goods processing time (receipt date at
distribution center to paperwork receipt at Xxxxxx) will not exceed 30
days.
1.6.8.5 Allegiance shall use commercially reasonable efforts to
dispose of returned Products in a cost-effective manner, subject to
Xxxxxx'x instructions.
1.7 PRODUCT FIELD CORRECTIVE ACTIONS.
1.7.1 Allegiance shall perform field corrective action ("FCA")
services in a manner consistent with the quality systems, procedures and
specifications as of the effective date of this Agreement. Allegiance shall
provide the following FCA services for the fee stated in Section 6.16.1:
a. FCA notification processing;
b. FCA disposition processing;
c. storage of Products affected by an FCA inside an Allegiance
distribution center for up to six months from the date of
initiation of the FCA;
d. transportation of all Products affected by the FCA to
Xxxxxx, freight collect;
e. rework or inspections of Products by Allegiance employees;
f. discard and destruction of Products utilizing nonhazardous
waste disposal methods;
g. delivery of recall report information to Xxxxxx;
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h. incoming inspection of all Xxxxxx Products for open FCAs for
twelve months from the date of initiation of the FCA;
i. third-party invoices for any of the services listed above;
and
j. third-party invoices for any services in addition to those
listed above as performed in 1996.
1.7.2 At Xxxxxx'x request and with Xxxxxx'x approval, Allegiance shall
perform FCA services not included in Section 1.7.1 for additional compensation
to be agreed upon. Xxxxxx will be invoiced separately for such additional
services pursuant to Section 6.16.2 of this Agreement. Examples of additional
FCA services addressed by this Section 1.7.2 include:
a. all third-party invoices related to expenses incurred by
Allegiance (except expenses related to the discard and
destruction of non-hazardous Products) that arise out of the
need for Xxxxxx to issue an FCA for Products;
b. computer system upgrades requested by Xxxxxx or Xxxxxx for
Allegiance FCA systems;
c. storage of Products affected by an FCA for periods longer
than six months or storage of such Products in rented
trailers; and
d. incoming inspection of all Products for open FCAs for
periods longer than 12 months from the date of initiation of
the initiation of the FCA.
1.7.3 For purposes of the subsequent provisions of this Section 1.7,
Allegiance shall use commercially reasonable efforts to accomplish the FCA tasks
identified within the time periods indicated. If extraordinary volume or other
circumstances make such time periods impracticable, Xxxxxx and Allegiance will
make adjustments by extending time periods, setting priorities or otherwise.
1.7.4 Allegiance shall perform FCA notification to Allegiance's
distribution centers and replenishment center based upon priorities. Priority A
notification requires extraordinary and immediate action. Priority B
notification requires notification to all Allegiance distribution centers and
its replenishment center within one business day. Priorities will be based on
the urgency of the FCA as determined primarily by Xxxxxx.
1.7.5 For FCAs involving Products sold under the Distributor
Model, Allegiance shall provide customer lists to Xxxxxx the next business day
for requests received before 1:00 p.m. Central Standard Time.
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1.7.6 Allegiance shall perform stock checks based upon priorities.
Priority A requires extraordinary and immediate action. Priority B requires
processing and reporting on the same day. Priority C will be negotiated based
upon needs but generally requires processing and reporting in 2 to 5 business
days. Priorities will be based on the urgency of the FCA as determined
primarily by Xxxxxx.
1.7.7 Initial inventory reports shall be issued in 5 business days
from initial FCA notification to Allegiance's distribution centers or
replenishment center unless otherwise requested.
1.7.8 Subject to local restrictions regarding discard of the
products, routine dispositions (as designated by Xxxxxx) shall be issued to
Allegiance's distribution centers and replenishment center in 5 business days.
Allegiance's distribution centers and replenishment center shall then have 5
business days to process the routine disposition.
1.7.9 Subject to local restrictions regarding discard of the
Products, expedited dispositions (as designated by Xxxxxx) shall be issued to
Allegiance's distribution centers and replenishment center within 1 business
day. Allegiance's distribution centers and replenishment center shall then have
five business days to process the expedited disposition.
1.7.10 Subject to local restrictions regarding discard of the
Products, extraordinary dispositions (as designated by Xxxxxx) shall be issued
within 1 business day. Allegiance's distribution centers and replenishment
center shall then have one business day to process the extraordinary
disposition.
1.7.11 Reconciled disposition reports for quantity variance shall be
negotiated between Allegiance and Xxxxxx at the time of disposition.
1.7.12 The necessity for and content of sampling plans and protocols
shall be negotiated at the time of the FCA.
1.7.13 Allegiance shall cooperate with Xxxxxx in performing any FCA
by identifying affected Products and customers, developing an action-specific
management plan detailing specific responsibilities, and notifying customers of
any such action. Allegiance shall encourage customers to follow instructions
related to any hold or recall situation.
1.7.14 FCAS FOR KITS. Allegiance shall implement and report, as
necessary, any Product FCAs for Kits, following, to the extent commercially
reasonable, the same instructions and priorities provided for Products sold
pursuant to the Agency Model or the Distributor Model. Allegiance shall provide
to Xxxxxx a customer list for specialized distribution such as
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ValueLink and other low unit of measure ("XXX") programs. Allegiance shall
implement the FCA for such specialized distribution. Allegiance shall reconcile
the Kit portion of any recall and provide Xxxxxx with all required recall data.
1.8 DIVISIONAL BONUS PROGRAM.
1.8.1 Allegiance shall participate in the Xxxxxx divisional bonus
programs for the Products if and to the extent that such programs include
Allegiance products and such programs are in existence as of the effective date
of this Agreement.
1.8.2 Allegiance shall continue to xxxx the customer for sales of
Allegiance products and promptly provide to Xxxxxx information related to such
sales necessary to calculate the divisional bonus. Xxxxxx will invoice the
bonus allocation to Allegiance.
1.8.3 Xxxxxx shall prepare and present the divisional bonus
payments to customers, and Allegiance shall have the right to have Allegiance
representatives present at the presentation.
1.8.4 Allegiance shall use commercially reasonable efforts to
cooperate with Xxxxxx in the event customers request that divisional bonus
payments be made by alternative means, for example, through credits on
Allegiance statements of account.
1.8.5 Beginning with calendar year 1997, Allegiance shall pay to
Xxxxxx Allegiance's share of operations and systems expenses required to support
the administration of the divisional bonus program based upon Allegiance's share
of the divisional bonus as a percentage of the total divisional bonus.
Notwithstanding the preceding sentence, Allegiance's share of such operations
and systems expenses shall not exceed $150,600.
1.9 PRIOR NOTICE. To the extent practicable, Allegiance shall provide at
least six months prior written notice to Xxxxxx before making any change in its
business operations that is likely to impact materially Xxxxxx'x business
operations, revenues or costs. Such changes include, but are not limited to,
Allegiance's closure of one or more of its distribution centers.
2. AGENCY MODEL.
2.1 GENERAL.
2.1.1 Allegiance will system receive the Products into Xxxxxx'x
computer system.
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2.1.2 Allegiance will receive the shipping documentation from
Xxxxxx'x computer system and pick-up information by facsimile.
2.1.3 Allegiance will perform shipment verification on Xxxxxx'x
computer system.
2.2 CUSTOMER SERVICE. Allegiance shall provide customer service support
and order entry as follows for Products sold to Subdistributors (except for EIS
customers and anaesthesia dealers, for whom Xxxxxx will provide all dealer
management services):
2.2.1 When utilizing the dealer management group as an agent to
service Alternate Site Distributors and Alternative Acute Care Distributors:
2.2.1.1 Allegiance's dealer management group will act as
Xxxxxx'x agent in negotiating agreements with Alternate Site Distributors
and Alternative Acute Care Distributors as designated by Xxxxxx for
Products and will act as the primary interface with such Alternate Site
Distributors and Alternative Acute Care Distributors.
2.2.1.2 Allegiance shall seek Xxxxxx'x approval which must be
obtained by the Allegiance dealer management group prior to setting up any
accounts for Alternate Site Distributors or Alternative Acute Care
Distributors.
2.2.1.3 Xxxxxx will establish sales strategies, selling terms,
ordering policies, and pricing for sales to Alternate Site Distributors and
Alternative Acute Care Distributors.
2.2.1.4 Allegiance shall provide operational support including
order entry/customer service, billing/contract and pricing administration,
collection, dealer rebates, trace sales, return processing, accounts
receivable dispute resolution, system support, and new account set-up.
2.3 PRICING/BILLING.
2.3.1 When utilizing the dealer management group as an agent to
sell and service Alternate Site Distributors and Alternative Acute Care
Distributors:
2.3.1.1 Allegiance's dealer management group must seek approval
from Xxxxxx which must be obtained prior to any agreement with an Alternate
Site Distributor or an Alternative Acute Care Distributor to fund margin or
pay sales tracing fees.
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2.3.1.2 Allegiance's dealer management group will perform the
billing function for Xxxxxx using Xxxxxx'x computer system.
2.3.2 When Allegiance's surgery center sales force is promoting
Xxxxxx'x sale of the Products to surgery centers, Allegiance's sales force shall
operate within the price guidelines set by Xxxxxx.
2.3.3 ADDITIONAL CUSTOMER-REQUESTED SERVICES. In conjunction with
the Agency Model, if a customer requests Product-related services from
Allegiance that are in addition to the services that Allegiance has agreed to
provide under the foregoing provisions of Exhibit C, Allegiance will provide to
Xxxxxx a description of the additional services requested and its associated
fees for such services. Xxxxxx will conduct all preliminary negotiations with
the customer relative to such additional services. Based on these negotiations,
Xxxxxx will advise Allegiance as to whether (a) Xxxxxx will contract directly
with Allegiance for provision of such additional services, or (b) Allegiance
should contract directly with the customer for provision of such services.
2.4 DISTRIBUTION.
2.4.1 OUTBOUND SHIPMENT.
2.4.1.1 Allegiance shall provide the following standard
delivery services ("Standard Delivery"): (a) with respect to customer
contracts in connection with new relationships beginning after September
30, 1996, Allegiance shall provide delivery of carton quantities,
palletized, delivered to the customer's receiving area (loading dock) at
least two days per week (or three days per week for shipments to alternate
site customers); or (b) with respect to all other transactions, delivery
services consistent with Allegiance's performance at the customer level
immediately preceding the effective date of this Agreement. Allegiance
will share with Xxxxxx the costs and savings associated with Standard
Delivery as set forth in Section 6.11.
2.4.1.2 Allegiance shall deliver Products by air freight or by
messenger ("Premium Delivery") when requested by Xxxxxx. Allegiance will
share with Xxxxxx the costs and savings associated with Uncollected Premium
Delivery Costs as set forth in Section 6.11 of this Agreement.
2.4.1.3 Allegiance shall make deliveries of Products in
addition to Standard Delivery ("Incremental Deliveries") when requested by
Xxxxxx. For calendar year 1997 Allegiance will be compensated by Xxxxxx
for providing such Incremental Deliveries in an amount equal to * * * of
the amount, if any, that Xxxxxx invoices to its customers
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for such Incremental Deliveries. For 1998 and subsequent calendar years
during the Term, the parties will agree in Council prior to the beginning
of each year upon Allegiance's compensation for providing such Incremental
Deliveries.
2.4.1.4 During calendar year 1997, Allegiance will review with
Xxxxxx on a quarterly basis in the Council the operational and financial
effects of the terms of this Agreement regarding Incremental Deliveries,
and will renegotiate such terms for 1997 if necessary to keep both parties
financially whole. Without limiting the foregoing sentence, the parties
will renegotiate such terms for 1997 if (a) the total number of Incremental
Deliveries of Products increase substantially more rapidly than Agency Net
Sales, and (b) Allegiance's costs incurred in providing such Incremental
Deliveries (net of freight and net of any reimbursement by Xxxxxx pursuant
to Exhibit D, Section 1.5.4), increase substantially.
2.4.1.5 Allegiance shall provide enhanced delivery services
(e.g., custom palletization, inside delivery, etc.) that are outside the
basic agreements ("Enhanced Delivery"), when requested by Xxxxxx, for
compensation to be agreed upon in accordance with Section 2.3.3 of this
Exhibit C (Additional Services).
2.4.1.6 Allegiance will ship-verify shipments of Products to
customers by private fleet or commercial carriers within one business day.
2.4.2 FREIGHT CLAIMS. Allegiance will pay to Xxxxxx any amounts
recovered with respect to freight claims filed on behalf of Xxxxxx within 30
days of receipt, except that (1) Allegiance may set-off against such payments
any amounts that it has previously paid to Xxxxxx with respect to the same
claim; and (2) during the Interim Period, the provisions of Exhibit F shall
control with respect to payment of any amounts recovered with respect to such
freight claims for Products shipped to customers under the Interim Distributor
Model.
2.4.3 ALLEGIANCE OUTBOUND FREIGHT ADMINISTRATIVE SERVICES.
Allegiance shall continue to provide the following administrative services for
all outbound freight shipments (i.e., shipments of Products from Allegiance
facilities to customers) to the extent such services were normally being
provided by Xxxxxx'x U.S. Distribution business to Xxxxxx'x I.V. Division prior
to the effective date of this Agreement: (a) freight payments, (b) audit of
freight payments, (c) transportation cost reporting, and (d) logistics
analysis/distribution technology to include network planning and replenishment
center sourcing, at no additional cost to Xxxxxx. For an additional fee to be
agreed upon, Allegiance may agree to provide to Xxxxxx additional outbound
freight
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services beyond the scope of the services normally being furnished by Xxxxxx'x
U.S. Distribution business to Xxxxxx'x I.V. Division prior to the effective date
of this Agreement.
3. DISTRIBUTOR MODEL AND BCS KIT MODEL.
3.1 GENERAL.
3.1.1 Allegiance system receives the Products into its computer
system.
3.1.2 Each business day during the Term, Allegiance shall report
to Xxxxxx its aggregate sales of Products for the previous business day by code
and by customer for Distributor Model transactions and BCS Kits, and such
reports shall also include, with respect to Distributor Model transactions, the
Suggested Sales Price, Allegiance's actual purchase price of the Products, and
sufficient information regarding customer discounts, returns, allowances and all
other applicable customer debits and credits to permit Xxxxxx to calculate
Distributor Net Sales.
3.1.3 For all transactions under the Distributor Model, Allegiance
will provide Xxxxxx each business day with customer Product demand information
by product code to support Xxxxxx'x finished goods requirements planning.
3.2 CUSTOMER SERVICE. Allegiance shall provide customer service support
and order entry as follows for all Products sold under the Distributor Model and
the BCS Kits Model:
3.2.1 PRE-SALES SERVICES. Allegiance shall perform the following
pre-sales services:
3.2.1.1 PRODUCT/SERVICE SPECIFICATIONS - Allegiance shall
forward to Xxxxxx any requests for Product information not available on
Allegiance systems.
3.2.1.2 PRICING/CONTRACTING INFORMATION - Allegiance shall
develop and maintain contract information for all contracts, and such
information shall be accessible to Allegiance via its computer system.
3.2.1.3 PRODUCT AVAILABILITY - Allegiance shall provide fill
rate and product availability information from Allegiance and Xxxxxx
computer systems to all Allegiance customer service personnel.
3.2.1.4 COMPETITIVE PRODUCT CROSS-REFERENCING - Allegiance
shall update information cross-referencing Products and competitive
products on a consistent time frame and provide it to its service personnel
via Allegiance's computer system.
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3.2.1.5 SALES REPRESENTATIVE INFORMATION - Allegiance shall
provide Allegiance sales representative identification to the customer.
This information will reside in the Allegiance customer master file and be
updated as needed.
3.2.1.6 HARDWARE SALES - Specific questions regarding hardware
sales should be referred to Xxxxxx'x hardware order entry personnel.
3.2.1.7 NEW CUSTOMER SET-UP - Allegiance customer service
personnel will ensure effective and efficient coding of all new customers
into the customer master files.
3.2.2 ORDER FULFILLMENT/SALES PROCESS.
3.2.2.1 ORDER PLACEMENT - Allegiance customer service personnel
will be the initial access point for customer into Allegiance and will
handle inquiries and order placement efficiently and effectively. The
order entry activity will function on Allegiance's computer system.
3.2.2.2 ORDER TRACKING - Allegiance shall maintain the ability
to identify to customers the location of Products in the order process.
3.2.2.3 SPECIAL REQUEST PROCESSING - Allegiance customer
service personnel will be required to process special handling requests by
customer such as drop shipping, alternate shipping, special handling, lot
holding, etc., and will work within contract guidelines and procedural
boundaries to service the customer.
3.2.2.4 INVOICING - Allegiance will perform billing for the
Products via appropriate computer systems.
3.2.2.5 CUSTOMER SATISFACTION - Allegiance's service personnel
are accountable for the customer's satisfaction regarding the service
provided. Allegiance will conduct annual surveys of customer satisfaction
levels and manage improvement plans.
3.2.3 POST-SALES SERVICE.
3.2.3.1 DISCOUNTS - Allegiance will pass all appropriate sales
information to Xxxxxx which will calculate discounts and incentives for all
customers.
3.2.3.2 CREDIT AND COLLECTION - Allegiance is responsible for
collecting on outstanding invoices. Allegiance shall have the sole
authority to issue credits.
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3.2.3.3 CREDITS FOR RETURNED GOODS, SHORTAGES, DAMAGES, AND
MISDELIVERIES - Allegiance shall be responsible for issuing credits and
resolving customer issues relating to returned goods, shortages, damages
and misdeliveries. Allegiance shall use commercially reasonable efforts to
advise Xxxxxx of all Product-related credits and any other customer
resolutions likely to affect Xxxxxx'x relationship with the customer.
3.2.3.4 PRICING DISPUTES - Pricing disputes will be handled by
Allegiance.
3.2.3.5 BACK ORDER STATUS AND RESOLUTION - Allegiance will be
accountable for managing customer communications of back orders to provide
accurate and timely information on resolution. Allegiance will communicate
appropriate product substitution information to the customer.
3.2.3.6 PRODUCT COMPLAINT - Initial customer Product complaints
will be logged by Allegiance customer service. Such complaints may be
escalated for resolution.
3.3 PRICING/BILLING.
3.3.1 Allegiance will negotiate the delivered price for the
Products.
3.3.2 Allegiance will quote the Allegiance price to the customer
in response to market conditions but may quote as its price the Suggested Sales
Price, plus any markup or less any markdown it feels is appropriate, including
any markup for added services.
3.3.3 Each customer will sign a bid or contract with Allegiance
and an addendum or new contract with Xxxxxx that states that such customer has
reached agreement with Allegiance on the final price such customer will pay.
The customer must comply with the purchase requirements of the bilateral
contract with Xxxxxx, and such bilateral contract shall continue to constitute a
binding commitment of the customer to Xxxxxx. Shortfall charges and
cancellation fees, if any, under such bilateral contract will be calculated
using the Suggested Sales Price and will be administered by Xxxxxx.
3.3.4 Allegiance shall process all billing to the customer on its
computer system.
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AGENCY, SERVICES, AND DISTRIBUTION AGREEMENT
EXHIBIT X
XXXXXX'X DUTIES
1. GENERAL DUTIES UNDER AGENCY MODEL, DISTRIBUTOR MODEL, AND BCS KITS MODEL.
1.1 CORPORATE AGREEMENT BONUS PROGRAM. Xxxxxx shall participate in the
Existing Corporate Agreements bonus program as follows:
1.1.1 Xxxxxx shall provide to Allegiance comparable sales and
gross profit data as it provided prior to October 1, 1996, for each applicable
customer participating in the Existing Corporate Agreements Bonus Program.
1.1.2 Beginning with calendar year 1997, Xxxxxx shall pay to
Allegiance Xxxxxx'x share of operations and systems expenses required to support
the administration of the Existing Corporate Agreements bonus plan based upon
Xxxxxx'x share of the corporate agreement bonus as a percentage of the total
corporate agreement bonus. Notwithstanding the preceding sentence, Xxxxxx'x
share of such operations and systems expenses shall not exceed * * *.
1.1.3 Xxxxxx may have a representative(s) present when Allegiance
presents each bonus check to each customer.
1.2 SALES.
1.2.1 Xxxxxx will use commercially reasonable efforts to monitor
critical business indicators in the areas of customer service, materials
management, distribution services, pricing/billing and compliance with all
specific service requirements set forth in this Exhibit D. Without limitation
to the foregoing sentence, Xxxxxx will use commercially reasonable efforts to
measure and assess customer satisfaction for Xxxxxx sales processes and sales
representatives, to the extent Xxxxxx provides such sales-related functions
under this Agreement. Xxxxxx will also use commercially reasonable efforts to
measure and assess critical business indicators relating to other customer-
related services provided by Xxxxxx under this Agreement (e.g., customer fill
rate, pricing accuracy).
1.2.2 Xxxxxx shall participate with Allegiance in a semi-annual
review of regional account segmentation, performance to critical business
indicators, and regional sales to be conducted between the leaders of their
respective regional sales organizations. Allegiance and Xxxxxx will work
together in good faith to develop action plans to improve customer satisfaction
in
D-1
areas that are mutually identified as key factors for customer growth and
retention, or areas where Xxxxxx'x performance is significantly (statistically
defined) below that of its competitors.
1.2.3 COMPETITIVE PRODUCT SUBSTITUTIONS - Xxxxxx shall update
competitive product substitution information on a consistent time frame and
provide it to Allegiance customer service personnel via Xxxxxx'x system.
1.3 MARKETING. Xxxxxx shall use commercially reasonable efforts to market
the Products in accordance with the following:
1.3.1 During the Term of this Agreement, Xxxxxx shall continue to
devote substantially the same degree of effort to marketing and promoting the
Products (such effort to be judged in the aggregate) as it did prior to the
effective date of this Agreement.
1.3.2 Xxxxxx shall provide product management services to surgery
centers and to Alternate Site Distributors.
1.3.3 Xxxxxx shall provide marketing services to the Long
Term/Subacute and Homecare customers.
1.3.4 Xxxxxx shall provide product and service development in the
same manner as provided by Xxxxxx prior to the effective date of this Agreement.
1.3.5 Xxxxxx shall maintain its own communications resources and
will coordinate communications messages with Allegiance where appropriate.
1.3.6 Xxxxxx shall attempt whenever possible to share with
Allegiance expenses for convention fees, industry organizations, and industry
databases where appropriate, and convention assets originally purchased by
Xxxxxx shall remain Xxxxxx'x.
1.3.7 Xxxxxx shall provide sales reports by Product category for
inclusion on Allegiance sales reports as provided by Xxxxxx prior to the
effective date of this Agreement.
1.4 NATIONAL SAMPLE CENTER. Xxxxxx shall own the Products stocked in the
Sample Center.
1.5 MATERIALS MANAGEMENT. Allegiance and Xxxxxx shall use commercially
reasonable efforts to make the supply chain as efficient as possible for both
parties. Future opportunities to improve efficiency include, but are not
limited to, EDI, bar coding, custom palletization, new work channels and the use
of returnable totes. Both parties shall work in good faith to achieve this
goal.
D-2
1.5.1 FINISHED GOODS REQUIREMENTS PLANNING.
1.5.1.1 Xxxxxx manufacturing planning will evaluate all
pipeline segments for domestic customers.
1.5.1.2 Xxxxxx will establish appropriate stocking levels for
all product codes of Products to meet required customer service
commitments.
1.5.1.3 Xxxxxx shall not require Allegiance to carry more than
1995 average Days Inventory On Hand. Stocking levels should be consistent
with Xxxxxx'x planned turn improvement for the Products.
1.5.1.4 Both parties agree that the echeloning of products
based on line item usage generally makes sense. Assuming there are no
significant customer contractual issues or financial impacts to Xxxxxx,
Xxxxxx agrees to the parameters set forth by the rationalized supply chain.
If after the appropriate review there are significant customer contractual
issues or financial impacts to Xxxxxx, 1995 will be used as the baseline
for where products are stocked and the number of low velocity SKU's will
not exceed 1995 levels.
1.5.2 PIPELINE VISIBILITY. Xxxxxx will provide to Allegiance
visibility to actual inventory levels for all Xxxxxx segments of the Product
pipeline.
1.5.3 INBOUND FREIGHT SHIPMENTS.
1.5.3.1 Xxxxxx will ship all products to appropriate Xxxxxx or
Allegiance replenishment centers as directed by the replenishment center
sourcing model.
1.5.3.2 Product will move on carriers agreed upon by the
parties in the Council.
1.5.3.3 The physical replenishment of Products from
replenishment centers to distribution centers will use the following
process: (a) variable review, (b) load build, and (c) pick, pack, schedule
delivery, load and ship.
1.5.3.4 Xxxxxx will coordinate with Allegiance to schedule
receiving appointments for Products shipped to Allegiance facilities from
manufacturing facilities and replenishment centers, and in unloading
Products. Xxxxxx will provide Xxxx of Lading (BOL) instructions regarding
receipt, where appropriate.
1.5.3.5 Xxxxxx is ultimately responsible for freight charges
for shipments of Products from Xxxxxx manufacturing facilities to Xxxxxx or
Allegiance
D-3
replenishment centers and from Xxxxxx and Allegiance replenishment centers
to Allegiance distribution centers.
1.5.4 OUTBOUND SHIPMENT
1.5.4.1 Standard Delivery -- Xxxxxx shall use commercially
reasonable efforts to implement Standard Delivery when negotiating new
customer agreements or renegotiating expiring customer agreements, with the
goal of reducing Allegiance's overall number of Product deliveries and its
related delivery costs. Xxxxxx will share with Allegiance the costs and
savings associated with Standard Delivery as set forth in Section 6.11 of
this Agreement.
1.5.4.2 Premium Delivery -- When Xxxxxx'x customers are
required to pay for Premium Delivery of Products, Xxxxxx will collect such
amounts from the customers and pay the amounts collected to Allegiance on a
quarterly basis in accordance with Section 6.11 of this Agreement. Xxxxxx
will share with Allegiance the costs and savings associated with
Uncollected Premium Delivery Costs as set forth in Section 6.11 of this
Agreement.
1.5.4.3 Incremental Deliveries -- For calendar year 1997,
Xxxxxx will pay Allegiance an amount equal to * * * of the amount, if
any, that Xxxxxx invoices to its customers for Incremental Deliveries of
Products. Such payments shall be made on a quarterly basis in accordance
with Section 6.11 of this Agreement. For 1998 and subsequent calendar
years during the Term, the parties will agree in Council upon Allegiance's
compensation for providing such Incremental Deliveries, prior to the
beginning of each year.
1.5.4.4 For calendar year 1997, Xxxxxx shall review with
Allegiance in the Council on a quarterly basis the operational and
financial effects of the terms of this Agreement regarding Incremental
Deliveries of Products, and agrees to renegotiate such terms for 1997 if
necessary to keep both parties financially whole. Without limiting the
preceding sentence, Xxxxxx shall renegotiate such terms with Allegiance if
(a) the total number of Incremental Deliveries of Products increase
substantially more rapidly than Agency Net Sales, and (b) Allegiance's
costs (net of freight) incurred in providing such Incremental Deliveries,
net of any payments by Xxxxxx under this Section, increase substantially.
1.5.5 FREIGHT CLAIMS. Xxxxxx will use commercially reasonable
efforts to assist Allegiance in carrying out its responsibilities under this
Agreement regarding filing freight claims and resolving product shortages and
overages, including proof of delivery.
D-4
1.5.6 PACKAGING QUALITY AND LOAD BUILD CONFIGURATION. Quality of
packaging and load build configuration will conform to uniform distribution
standards (E.G., palletized, etc.) as agreed by the parties in the Council.
1.5.7 WAREHOUSE INVENTORY MANAGEMENT.
1.5.7.1 Xxxxxx will specify storage requirements for the
Products.
1.5.7.2 Xxxxxx will manage inventory levels for Xxxxxx products
within the replenishment centers utilizing the "Compass" inventory system
or equivalent system.
1.5.8 CYCLE COUNTS AND PHYSICAL INVENTORIES.
1.5.8.1 Xxxxxx will provide at least 5 days advance notice
prior to conducting inventory counts at any Allegiance locations.
1.5.8.2 Xxxxxx shall not audit Allegiance cycle counts more
than 90 days after the month in which such cycle count was conducted.
1.5.8.3 For each year during the Term of this Agreement, Xxxxxx
shall agree with Allegiance upon the day in October on which the annual
physical inventory will take place.
1.5.8.4 To the extent practicable, Xxxxxx and Allegiance shall
record any annual physical inventory adjustments into their respective
accounting records at the same time.
1.5.8.5 Xxxxxx may audit Allegiance's physical inventory
results at any time up to 3 months after the date on which Allegiance
records its annual inventory adjustments into its accounting records.
1.5.8.6 Xxxxxx shall be solely responsible for determining (a)
the gross variance of the dollar value of the Product inventory on TOPS for
each Allegiance facility participating in the physical inventory, and (b)
whether each such variance is within the permitted range.
1.6 PRODUCT FCAS.
1.6.1 Xxxxxx shall provide to Allegiance in a format to be agreed
upon by the parties all information reasonably required by Allegiance to perform
Allegiance's duties in connection with Product FCAs. Such information shall
include,
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without limitation, product identifiers, reason priority, and any information
related to disposition plans.
1.6.2 Xxxxxx shall have sole authority to initiate any FCA. If
Xxxxxx is required to initiate an FCA for any Product, Xxxxxx'x Vice President
of Quality Management (or such person's designee) shall notify Allegiance's Vice
President of Quality Management (or such person's designee).
1.6.3 Xxxxxx shall cooperate with Allegiance in performing any FCA
by identifying affected Products and customers, developing an action-specific
management plan detailing specific responsibilities, and notifying customers of
any such action. Xxxxxx and Allegiance shall encourage customers to follow
instructions related to any FCA situation.
1.6.4 Xxxxxx shall be solely responsible for all communications with
the U.S. Food and Drug Administration in connection with the Products.
1.7 DIVISIONAL BONUS PROGRAM.
1.7.1 Xxxxxx shall be responsible for administering the divisional
bonus program. The divisional bonus allocation will be based on actual calendar
year-end payments and actual calendar year-end sales to applicable customers.
1.7.2 Xxxxxx shall prepare and present the divisional bonus
payments to customers, and Allegiance shall have the right to have Allegiance
representatives present at the presentation.
1.7.3 Xxxxxx shall use commercially reasonable efforts to
cooperate with Allegiance in the event customers request that divisional bonus
payments be made by alternative means, for example, through credits on
Allegiance statements of account.
2. AGENCY MODEL AND DIRECT SALES.
2.1 CUSTOMER SERVICE. Xxxxxx shall be responsible for order entry,
pricing and invoicing for all Products sold under the Agency Model or sold
directly to customers. Beginning January 1, 1997, Xxxxxx shall be responsible
for all customer service support for all Products sold under the Agency Model or
sold directly to customers.
2.1.1 PRE-SALES SERVICES. Xxxxxx shall perform the following pre-
sales services:
2.1.1.1 PRODUCT/SERVICE SPECIFICATIONS - Xxxxxx shall provide
Product information as resident on Xxxxxx systems. Additional information
shall be provided through
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the Product Information Center or as requested by Allegiance Customer
Service. (Requests for Product information not available on Allegiance
systems shall be forwarded to Xxxxxx customer service).
2.1.1.2 PRODUCT AVAILABILITY - Xxxxxx shall provide fill rate
and product availability information to all service personnel and regions,
and such information shall reside in Allegiance and Xxxxxx systems.
2.1.2 ORDER FULFILLMENT/SALES PROCESS.
2.1.2.1 ORDER TRACKING - Xxxxxx shall maintain the ability to
identify to customers the location of Products in the order process.
2.1.2.2 SPECIAL REQUEST PROCESSING - Xxxxxx customer service
personnel will be required to identify special handling requests by
customer such as drop shipping, alternate shipping, special handling, lot
holding, etc., and will work within contract guidelines and procedural
boundaries to service the customer.
2.1.3 POST-SALES SERVICE.
2.1.3.1 CREDIT AND COLLECTION - Xxxxxx is responsible for
collecting on outstanding invoices. Xxxxxx shall use commercially
reasonable efforts to advise Allegiance of any significant customer credit
problems.
2.1.3.2 CREDITS FOR RETURNED GOODS, SHORTAGES, DAMAGES, AND
MISDELIVERIES - Xxxxxx shall be responsible for issuing all credits to
customers and resolving customer issues relating to returned goods,
shortages, damages and misdeliveries. Xxxxxx shall use commercially
reasonable efforts to advise Allegiance of any Product-related credits or
other customer resolutions likely to affect Allegiance's relationship with
the customer.
2.1.3.3 RETURN GOODS MANAGEMENT - In the event of returned
Products, a return goods authorization will be issued by Xxxxxx. Xxxxxx
shall resolve the returned Products problem (issue credit, deliver
substitute, etc.).
2.1.3.4 BACK ORDER STATUS AND RESOLUTION - Xxxxxx will be
accountable for managing customer communication of back orders to provide
accurate and timely information on resolution. Xxxxxx will communicate
appropriate product substitution information to customers.
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2.1.3.5 PRODUCT COMPLAINT - Initial customer Product complaints
will be logged by Xxxxxx customer service. Such complaints may be
escalated for resolution.
2.1.3.6 TECHNICAL SUPPORT - Basic Product -related
information as resident on Xxxxxx'x computer system will be provided.
Additional information including technical letters and clinical
information will be provided by Xxxxxx'x product information center.
2.1.3.7 TECHNICAL SERVICE, PARTS AND REPAIR - Parts information
as provided in Xxxxxx'x computer system or Product file will be shared with
customer by Xxxxxx customer service. Xxxxxx will also provide, as
appropriate, additional transfer or access to specialist.
2.1.4 OTHER ISSUES/SERVICES.
2.1.4.1 TELEMARKETING - Telemarketing can be provided by
Allegiance or Xxxxxx as needed for deployment purposes and strategic
account management. Fees to be determined as needed.
2.2 PRICING/BILLING.
2.2.1 Pricing will be solely Xxxxxx'x responsibility. Xxxxxx will
negotiate the delivered product price with the customer. Xxxxxx will submit all
requests for bids, bilaterals, quotes, etc., to the customer.
2.2.2 Xxxxxx will contract directly with the customer at a product
price which includes Standard Delivery. Should a customer require services in
excess of Standard Delivery, Xxxxxx will discuss with Allegiance the method of
reimbursing Allegiance for additional delivery services. Xxxxxx will determine
the method of charging the customer therefor.
2.2.3 Xxxxxx will xxxx the customer on its computer system.
2.2.4 When utilizing the dealer management group as an agent to
service Alternate Site Distributors and Alternate Acute Care Distributors:
2.2.4.1 Xxxxxx will set pricing including guidelines for the
Allegiance dealer management group for pricing to Alternate Site
Distributors and Alternate Acute Care Distributors;
2.2.4.2 Xxxxxx will work with the customer to obtain the
appropriate two-party contract signed between the customer and Xxxxxx to
adjust Xxxxxx'x obligations under any existing bilateral agreement;
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2.2.4.3 Xxxxxx will be responsible for determining all pricing
and contract terms for a Xxxxxx agreement with a Alternate Site Distributor
or an Alternate Acute Care Distributor.
2.2.5 Xxxxxx will set the price including guidelines for the
Allegiance surgery center sales force when such sales force solicits orders from
surgery centers, and Xxxxxx will process all billing relating to surgery center
customers on Xxxxxx'x computer system.
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3. DISTRIBUTOR MODEL.
3.1 If a customer approaches Xxxxxx rather than Allegiance in connection
with a Distributor Model transaction, Xxxxxx will advise the customer that the
customer must obtain the delivered price from Allegiance, and Xxxxxx will advise
Allegiance of the Suggested Sales Price. Xxxxxx may inform the customer that it
will provide a Suggested Sales Price to Allegiance, and Allegiance could use the
Suggested Sales Price as a starting point. Nevertheless, Allegiance shall have
the sole right to set the delivered price.
3.2 Xxxxxx will transfer to Allegiance's computer system all inventory
level information related to the Products.
3.3 Xxxxxx will cooperate with Allegiance in developing and implementing
Allegiance's proposed vendor managed inventory ("VMI")system.
3.4 Xxxxxx will administer customer contracts on its computer system
including, without limitation, account number set-up, ship-to/sold-to
information, licensing information and ongoing customer contract maintenance.
3.5 Xxxxxx will transfer to Allegiance's computer system the Suggested
Sales Price related to the Products.
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AGENCY, SERVICES, AND DISTRIBUTION AGREEMENT
EXHIBIT E
SUPPLIER SCOREBOARD
See attached.
E-1
AGENCY, SERVICES AND DISTRIBUTION AGREEMENT
EXHIBIT F
INTERIM DISTRIBUTOR MODEL
1. GENERAL PROVISIONS.
1.1 All transactions under the Distributor Model during the Interim Period
will follow the Interim Distributor Model set forth in this Exhibit F.
1.2 Except as expressly stated in or necessarily implied by this Exhibit
F, all provisions of the body of this Agreement having general applicability,
and all provisions specifically relating to the Distributor Model, shall also
apply to the Interim Distributor Model set forth in this Exhibit F.
1.3 Allegiance will use commercially reasonable efforts, and Xxxxxx will
cooperate with Allegiance to install all necessary systems and make all other
necessary preparations to permit terminating the Interim Distributor Model and
implementing the Distributor Model as set forth in the main text of this
Agreement as soon as possible, but in no event later than September 30, 1997.
2. INTERIM DISTRIBUTOR MODEL. Notwithstanding Section 3.3 of this Agreement,
for all transactions under the Interim Distributor Model:
Allegiance shall maintain the principal contractual relationship with the
customer for sales, sales support, customer invoicing, accounts receivable, and
customer service in connection with the supply of the Products under the Interim
Distributor Model. Such Interim Distributor Model shall apply to the provision
by Allegiance of Kits (except BCS Kits), Cost Management, ValueLink, and other
services consolidated on an Allegiance invoice for Products and, in some
instances Allegiance products (as required by the customer). Xxxxxx shall use
reasonable efforts to cooperate with Allegiance and to facilitate Allegiance's
fulfillment of its obligations hereunder. Xxxxxx shall sell the Products to
Allegiance at a price generally applicable to all of Xxxxxx'x distributors of
the Products (the "Distributor List Price"). Xxxxxx shall not change its
Distributor List Price for any Product more frequently than once per calendar
year. Xxxxxx shall provide to Allegiance a Suggested Sales Price for the
Products; provided, however, that Allegiance shall have the sole right and
responsibility for negotiating and contracting with each customer the delivered
price of the Products. If the customer has a then-current
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contract with Xxxxxx for such Products, the Suggested Sales Price shall be the
then-current contract price. If Xxxxxx has an agreement with any customer for
Xxxxxx'x provision of Products to such customer and such customer subsequently
requests (a) Kits (except BCS Kits), and/or (b) Cost Management, ValueLink, and
other services consolidated on an Allegiance invoice for such Products and, in
some instances, Allegiance products, then all such Interim Distributor Model
sales of Products to such customer shall apply to any minimum purchase
commitments or quantity discounts contained in Xxxxxx'x agreement with such
customer.
For all Products sold under the Interim Distributor Model, Allegiance will
deduct from its purchase payments to Xxxxxx an amount equal to the amount, if
any, by which the Distributor List Price exceeds the Suggested Sales Price (the
"Vendor Rebate"). Such Vendor Rebate shall be in addition to the service fee
and other payments set forth in Section 6 of this Agreement.
3. INVOICING AND PAYMENTS FOR INTERIM DISTRIBUTOR MODEL. Notwithstanding any
contrary provisions of Section 8 of this Agreement:
3.1 On or before the fifth business day of each calendar month during the
Interim Period, Xxxxxx shall provide to Allegiance a service fee report in a
format to be agreed upon, showing the service fees payable for Products sold
under the Interim Distributor Model during the previous month. On or before the
second business day of each month during the Interim Period, Allegiance shall
report to Xxxxxx its aggregate sales and returns of Products for the preceding
month by code and by customer for Interim Distributor Model transactions, and
such reports shall also include the Suggested Sales Price, the Distributor List
Price, and the applicable Vendor Rebate for such Products.
3.2 Allegiance shall pay Xxxxxx for its aggregate purchases of Products
under the Interim Distributor Model, net 60 days from the date of Xxxxxx'x
invoice to Allegiance. Allegiance may deduct from such purchase payments to
Xxxxxx any Vendor Rebates then owed to Allegiance by Xxxxxx.
3.3 Xxxxxx shall pay Allegiance any applicable service fees in connection
with sales of Products under the Interim Distributor Model on the fifteenth day
of the month following the month in which such sales are reported.
3.4 Notwithstanding the foregoing provisions of this Section 3 of Exhibit
F, Allegiance's payment for Products transferred by Xxxxxx to Allegiance prior
to October 1, 1996 shall occur on November 15, 1996.
4. TRANSFER OF TITLE AND RISK OF LOSS UNDER THE INTERIM DISTRIBUTOR MODEL.
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4.1 Notwithstanding Section 13 of this Agreement, title and risk of loss
with respect to Products to be sold pursuant to the Interim Distributor Model
shall pass from Xxxxxx to Allegiance at the time Allegiance receives the
Products in Allegiance's computer systems.
4.2 Notwithstanding Section 4.1 of this Exhibit F and Sections 6.17 and
6.18 of this Agreement, if any Products purchased by Allegiance under the
Interim Distributor Model are damaged, lost or stolen while in an Allegiance
replenishment center or distribution center - (1) Xxxxxx will issue a credit
memo to Allegiance for such damaged, lost or stolen Products at Xxxxxx'x
applicable Distributor List Price, and (2) Xxxxxx will invoice Allegiance
monthly for such damaged, lost or stolen Products (but not carton failure) at
its applicable standard cost as stated in Xxxxxx'x inventory valuation
reports.
4.3 Notwithstanding Section 1.6.7.2 of Exhibit C of the Agreement, during
the Interim Period, Allegiance rather than Xxxxxx shall have the right to any
amounts recovered with respect to freight claims for Products shipped from
Allegiance facilities to customers under the Interim Distributor Model.
5. TERMINATION OF INTERIM DISTRIBUTOR MODEL.
5.1 On the date agreed upon for termination of the Interim Distributor
Model and the transition to the Distributor Model, but no later than September
30, 1997, Xxxxxx will purchase from Allegiance all Products then in Allegiance's
inventory at Xxxxxx'x Distributor List Price. Xxxxxx will issue Allegiance a
credit memorandum reflecting such purchase within 30 days after receipt of
Allegiance's invoice for such inventory. Xxxxxx and Allegiance will cooperate
with each other in providing any inventory reports or conducting any audits in
connection with such transition.
5.2 Once the parties have made the transition to the Distributor Model as
contemplated in Section 1.2 of this Exhibit F, the provisions of this Exhibit F
relating to the Interim Distributor Model shall have no further effect, except
that both parties shall have the right to receive any amounts owed under the
Interim Distributor Model.
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