1
EXHIBIT 10.27
CORPORATE SERVICE AGREEMENT
This is a Corporate Service Agreement (this "Agreement") between
Sterile Recoveries, Inc. ("Sterile Recoveries"), a Florida corporation, 00000
X.X. Xxxxxxx 00 Xxxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxxxx 00000 and Health Services
Corporation of America ("HSCA"), a Missouri corporation, 000 Xxxxx Xxxxx Xxxxxx
Xxxx, Xxxx Xxxxxxxxx, Xxxxxxxx 00000.
BACKGROUND
Sterile Recoveries' service currently provides daily delivery and
retrieval of its reusable surgical products. Its reusable surgical products
include gowns, towels, drapes, stainless steel basins, and boots. Sterile
Recoveries' service offers the following benefits for HSCA's members:
- Sterile Recoveries' surgical products are among the most protective
and comfortable in the industry and are popular with HSCA's medical
staff. Because of the surgical products' quality, usage is often less
than with competing disposable products.
- Sterile Recoveries' drivers deliver its reusable products on carts
to a designated efficient delivery point within the hospital,
typically the central supply or surgical suite. Its delivery service
is designed to be "just-in-time," helping the hospital avoid
unnecessary warehousing, personnel, and processing costs and assure
availability of surgical products as needed.
- Sterile Recoveries retrieves its reusable products for reprocessing
in its facilities. The use of reusable surgical products instead of
disposable products reduces biomedical waste costs.
- Sterile Recoveries owns the reusable surgical products and
supplies them to the members on a per use basis, helping members
avoid capital investment and inventory carrying costs.
Sterile Recoveries also provides disposable accessory packs to complement its
reusable offering.
HSCA desires to further encourage its members to use Sterile
Recoveries' service. This Agreement confirms Sterile Recoveries as an approved
vendor of reusable surgical products to hospitals and surgery centers which
HSCA serves as a group purchasing agent.
2
OPERATIVE TERMS
1. VENDOR RELATIONSHIP; GEOGRAPHIC SCOPE. Subject to the terms and
conditions of this Agreement, HSCA approves Sterile Recoveries as a vendor for
hospitals and surgery centers that it serves as a group purchasing agent from
time to time that are within its service area as specified in Exhibit "A" (the
"Service Area"), including without limitation the HSCA members that are listed
on the attached Exhibit "B". Sterile Recoveries' relationship with each member
will be governed by a Service Agreement in substantially the form attached as
Exhibit "C" (the "Service Agreement"), which will specify in Schedule 1 the
products to be delivered. Sterile Recoveries may by notice to HSCA amend
Exhibit "A" from time to time to change the Service Area to reflect development
of additional facilities, depots, and delivery routes .
2. TERM. The term of this Agreement will be five years, from November
1, 1997 through October 31, 2002. After the first two (2) years, either party
may terminate this Agreement, with or without cause, by giving three months'
advance notice of termination to the other party. This term will be
automatically extended in increments of one year each unless a party notifies
the other of its desire not to extend at least 90 days before the scheduled
expiration date.
3. PRODUCTS. Sterile Recoveries shall provide the reusable surgical
products, including without limitation gowns, towels, drapes, stainless steel
basins, boots, and disposable accessory packs (the "Products") that are
specified by the HSCA member and identified on Schedule 1 to the HSCA member's
Service Agreement. As it adds new Products to its service relationship with an
HSCA member, Sterile Recoveries shall update Schedule 1 to the HSCA member's
Service Agreement.
4. PRICING. From the date of this Agreement through December 31, 1998,
Sterile Recoveries' unit prices for the Products (including those supplied on a
trial basis) will be those set forth on the price schedule furnished to each
HSCA member as Schedule 1 to the Service Agreement, plus any applicable sales
or use tax. After December 31, 1998, Sterile Recoveries may adjust the
Products' per unit price schedule, subject to a maximum unit price change
limitation of 5% in any one calendar year. Price increases will be effective on
notice to HSCA and each affected member. HSCA and Sterile Recoveries
acknowledge that multiple combinations of gowns, towels, drapes, basins, and
stainless steel products may be assembled to service the varied mix of
surgeries required among the members. Sterile Recoveries shall assemble these
combinations in cost effective packages for HSCA members while working to
standardize its product offering among all of the members.
5. TRIALS. If requested by a member prospect, Sterile Recoveries may
supply on a paid trial basis services for up to 45 days without execution of a
service agreement. A member must sign a service agreement for service beyond a
trial period.
2
3
6. COST SAVINGS. Sterile Recoveries has designed its price schedule to
generate savings for the members as compared to their "Current Total Cost." The
"Current Total Cost" is the average cost incurred by a member, on an arm's
length basis, for use of substantially equivalent competitive disposable
products as of November 1, 1997, plus the additional costs as delineated on the
Cost to Hospital sheet attached as Exhibit "D." Sterile Recoveries will provide
an initial assessment of savings based upon Exhibit "D" assumptions, which
should indicate savings of at least 10% as compared to current products and
processes. Sterile Recoveries will provide the members with an analysis of
these cost savings on at least a quarterly basis.
7. GROUP PURCHASING AGENT FEE. Sterile Recoveries shall pay to HSCA a
group purchasing agent fee in consideration of HSCA's administration of the
group purchasing program. The fee shall be calculated as two percent (2%) of
the value of reusable surgical products and services purchases made by members
pursuant to this Agreement, two percent (2%) of the value of reusable surgical
product and service purchases made by non-hospital affiliated surgery centers,
and three percent (3%) of the value of purchases of disposable accessory packs.
Sterile Recoveries shall each month furnish to HSCA a list of the members that
purchased the Products from Sterile Recoveries during the previous month and
the net amount of the Products purchased by each member during that month for
purposes of determining the fee owed under this section. The fee will be
payable monthly by the tenth day of each month based on sales during the
previous month. HSCA's fee for reusable surgical products and services may be
increased by one percent (1%) for a particular HSCA member if an HSCA nurse
consultant has performed all of the product analysis specified by Sterile
Recoveries and HSCA for conversion of the member to SRI reusable surgical
products and is involved in the clinical implementation of SRI's products and
services into the HSCA member. To sustain payment of this fee beyond the first
year, the HSCA nurse must be available to SRI and the HSCA member to continue
implementing the cost saving benefits of Sterile Recoveries reusable products
and services.
8. LIABILITY FOR CHARGES; ORDERING METHODS. Sterile Recoveries shall
xxxx each HSCA member directly for any payments due under the Service
Agreement. Sterile Recoveries acknowledges that HSCA is not liable for any
charges, claims, or expenses arising under any Service Agreement between
Sterile Recoveries and a member. Each HSCA member shall be responsible for
placing its orders directly with Sterile Recoveries. Sterile Recoveries shall
retain responsibility for obtaining payment from participating members. All
disputes and controversies concerning services and products or any purchases,
order or invoice, goods, materials, shipment, performance, scheduling and
delivery of performance date shall be handled by Sterile Recoveries on a direct
basis with the participating member.
9. FILL RATE. Sterile Recoveries shall maintain a first delivery fill
rate of at least ninety-five percent (95%) for members based on mutually
agreed-upon benchmarks. Fill rate shall be monitored by HSCA and the member.
Should Sterile Recoveries' fill rates fall below ninety-five percent (95%),
Sterile Recoveries will be notified by HSCA
3
4
and given thirty (30) days to remedy the deficiency. Failure to remedy may
result in cancellation of this contract by HSCA.
10. WARRANTY. All commodities and services supplied by Sterile
Recoveries shall be warranted to be free from material defects and
imperfections in design, material and workmanship to be in material conformity
with all product specifications, labeling and product brochures, to be
merchantable and, if intended for a particular rational purpose, to be fit in
all material respects for such purpose.
11. SUSPENSION OF SERVICE. Service may not be suspended to a member
unless the Director of Purchasing, the Chief Financial Officer of the member
and the Vice President, Corporate Negotiations for HSCA have been notified in
writing ten (10) days prior to the proposed action. A suspended member shall be
reinstated when the cause for suspension has been rectified and notification
has been given to all parties.
12. NON-SOLICITATION. During the term of this Agreement, Sterile
Recoveries shall not solicit directly or indirectly any HSCA member or HSCA
affiliated member facilities or contract for any of the services set forth in
this Agreement on terms different from those set forth in this Agreement,
without the written approval of HSCA or notification to HSCA and/or SRI by the
HSCA member or surgery center that another group purchasing organization will
represent them for these products.
13. MEMBERSHIP LISTS AND UPDATES. HSCA shall provide Sterile
Recoveries with a list of its members and update this list on a monthly basis.
Each member (including any new member added pursuant to an update) will be
entitled to purchase products and services under this Agreement. Any member
deleted from the foregoing list will not be entitled to make further purchases
under this Agreement from the effective date of notice. Sterile Recoveries
shall pay to HSCA all administrative fees earned with respect to purchases made
by a deleted member through the termination date, irrespective of when the
underlying payment is received by Sterile Recoveries.
14. HOLD HARMLESS. Sterile Recoveries shall defend, indemnify, and
hold harmless HSCA and its participating members against any and all suits,
claims, and expenses arising from the member's use or sale of Sterile
Recoveries' articles, products, or programs, to the extent that the suit or
claim establishes (a) a defect in the article, product or program supplied by
Sterile Recoveries when the item was supplied or (b) a violation by a Sterile
Recoveries product of another person's rights under a patent, trademark,
copyright or service xxxx.
As conditions precedent to this indemnification obligation:
(a) HSCA and/or the member must promptly notify Sterile Recoveries of
the suit or claim;
4
5
(b) Sterile Recoveries must be allowed to control and defend the
litigation, if it elects to do so; and
(c) The liability must not have been caused by the negligent or
willful conduct of the party seeking to be indemnified.
15. PERSONAL LIABILITY. No director, officer, agent or employee of
HSCA or Sterile Recoveries shall be charged personally or held contractually
liable by or to the other party under any term of provision to this Agreement
or because of the execution, approval or attempted execution of this Agreement.
16. FORCE MAJEURE. If either of the parties hereto is delayed or
prevented from fulfilling any of the obligations under this Agreement by force
majeure, said parties shall not be liable under this Agreement for said delay
or failure. Force majeure means any cause beyond the reasonable control of a
party including, but not limited to, war, fire, flood, storm, strike, labor,
transportation delays or embargoes, failure or shortage of materials, supplies,
machinery, or shipping facilities, acts of God, and acts, regulations,
directives, or priorities of any government authority. Sterile Recoveries may
prorate available products and services among its customers. If a force majeure
event occurs, Sterile Recoveries shall notify the HSCA member of the event, the
reason for the delay, the length of time that the product or services may be
delayed and alternate proposals, if any, which Sterile Recoveries wishes to
make to alleviate any difficulties or hardships which may be suffered by HSCA
and affect its member organizations as a result of that delay. Methods of
notification shall be by telephonic communications, confirmed by letter,
facsimile transmission or telegraph. Neither party of this Agreement shall be
deemed in default by reason of delay or failure due to force majeure.
17. NO JOINT VENTURE. It is understood and agreed that nothing herein
contained is intended or shall be construed to, in any respect, create or
establish the relationship between Sterile Recoveries and HSCA of copartners,
independent contractor, joint venturer, general representative or general agent
of any purpose whatsoever under this Agreement.
18. COMPLETE AGREEMENT. The Agreement and any other supporting
documents and schedules which have been so identified and dated by the
signatories to this Agreement shall constitute the complete understanding of
the parties and supersede any and all other agreements, either oral or in
writing, between the parties hereto with respect of the subject matter hereof,
and no other agreement, statement or promise relating to the subject matter of
this Agreement which is not contained herein shall be valid or binding.
19. TERMINATION OF EXISTING CONTRACTS. Any member that has an existing
agreement with Sterile Recoveries for the purchase of the Products may
terminate that Agreement and enter into a Service Agreement with the Company.
5
6
20. EXCLUSIVE RELATIONSHIP IN SERVICE AREA. Sterile Recoveries shall
from time to time provide to HSCA information regarding the names of members
that are within the Service Area. During the term of this Agreement, HSCA shall
not enter into an agreement within the Service Area with any other vendor of
reusable products and services. HSCA reserves the right to enter into
agreements with other vendors of competitive products in markets outside of the
Service Area, provided HSCA first consults with Sterile Recoveries regarding
its plans to construct additional facilities or depots in those areas.
21. HSCA'S RESPONSIBILITIES. HSCA shall:
(a) Provide liaisons (name and contact point) for Sterile Recoveries'
communications with HSCA and the members on a regional, divisional, and
individual member basis.
(b) Provide exposure for Sterile Recoveries and its Products and
services by notifying members of this Agreement's existence and HSCA's
exclusive relationship with Sterile Recoveries (including compliance vendor
number).
(c) Encourage the members to increase their use of Sterile Recoveries'
Products and services through regular communications with O.R. directors,
material managers, vice presidents of surgical services, and chief financial
officers at member divisional and regional levels.
(d) Update the list of members attached as Exhibit "B" before June 1
of each year.
(e) Include the Products in the compliance calculation for appropriate
HSCA member and employee compliance evaluations.
22. STERILE RECOVERIES' RESPONSIBILITIES. Sterile Recoveries shall:
(a) Extend the terms of this Agreement from HSCA headquarters to each
of the members.
(b) Provide a National Account Representative as the primary Sterile
Recoveries contact with HSCA headquarters, as follows:
Xxxxxxx X. Xxxxxx, Xx.
Sterile Recoveries, Inc.
00000 X.X. Xxxxxxx 00 Xxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
(000) 000-0000
6
7
(c) Provide and review with HSCA headquarters quarterly member
activity reports, to include a quarterly cost reporting on an individual member
basis to demonstrate progress in cost savings.
(d) Provide to HSCA headquarters written notice of special offerings
and/or promotions, stating which offerings are supplemental to this Agreement.
(e) Provide sales and customer service representative coverage
under the direction of the facility general managers listed in Schedule "E" to
be furnished separately to HSCA.
23. PUBLICITY. The parties to this Agreement may announce the
existence of this Agreement and the relationship between HSCA and Sterile
Recoveries that this Agreement evidences. The parties shall not disclose the
price terms without the other party's consent. HSCA acknowledges that Sterile
Recoveries might be required by law to file a copy of this Agreement with the
Securities and Exchange Commission.
24. NOTICES. Except for oral requests and notices expressly authorized
by this Agreement, every notice, request, demand, consent, approval, and other
communication required or permitted under this Agreement will be valid only if
it is given in writing (or sent by telecopy and promptly confirmed in writing),
conspicuously marked "FOR IMMEDIATE ATTENTION," and addressed by the sender to
the appropriate party in the manner set forth below:
(a) If to HSCA:
Health Services Corporation of America
000 Xxxxx Xxxxx Xxxxxx Xxxx
Xxxx Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx Xxxxxxxx
Telecopy: (000) 000-0000
(b) If to Sterile Recoveries:
Sterile Recoveries, Inc.
00000 X.X. Xxxxxxx 00 Xxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx, Xx.
Telecopier: (000) 000-0000
or to such other address as a party designates by notice to the other party. A
validly given notice, request, demand, consent, approval, or other
communication will be effective on its receipt.
7
8
25. MISCELLANEOUS.
(A) SEVERABILITY. Each provision of this Agreement should be
construed and interpreted so that it is valid and enforceable under applicable
law. Except as otherwise provided below, if a provision of this Agreement, or
the application of it, is held by a court to be invalid or unenforceable, that
provision will be deemed separable from the remaining provisions of this
Agreement and will not affect the validity, interpretation, or effect of the
other provisions of this Agreement or the application of that provision to a
person or circumstance to which it is valid and enforceable.
(B) RIGHTS OF THIRD PARTIES. Nothing in this Agreement, whether
express or implied, is intended or should be construed to confer upon, or to
grant to, any person (other than the parties and their respective assignees and
successors) any claim, right, or remedy under or because of this Agreement.
(C) AMENDMENT AND ASSIGNMENT. An amendment or modification of
this Agreement or any provision of it will be valid and effective only if it is
in writing and signed by each party to this Agreement. This Agreement is not
assignable by either party without the prior consent of the other party. Except
as otherwise provided, any attempted assignment by a party without the prior
consent of the other party will be invalid and unenforceable against the other
party. This Agreement inures to the benefit of, and is binding on, the
respective successors and assignees of the parties to it.
(D) EXECUTION. The parties may execute this Agreement in
counterparts. Each executed counterpart will constitute an original document,
and all of them, together, will constitute the same document.
EXECUTED: as of October , 1997
---
STERILE RECOVERIES, INC.
By: /s/ Xxxxxxx X. Xxxxxx, Xx.
--------------------------------
Xxxxxxx X. Xxxxxx, Xx.
Executive Vice President and
Chief Operating Officer
HEALTH SERVICES CORPORATION
OF AMERICA
By: /s/ Xxxxxx Xxxxxxxx
-------------------------------
Xxxxxx Xxxxxxxx
President and Chief Operating
Officer
8
