Exhibit 10.1
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THIRD AMENDED AND RESTATED OUTSOURCING AND OPERATING AGREEMENT *
dated as of September 30, 2002
among
NOVATION, LLC,
VHA INC.,
UNIVERSITY HEALTH SYSTEM CONSORTIUM,
HEALTHCARE PURCHASING PARTNERS INTERNATIONAL, LLC,
and
NEOFORMA, INC.
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_________________
* Confidential treatment requested: Certain portions of this agreement have
been omitted pursuant to a request for confidential treatment and, where
applicable, have been marked with an asterisk to denote where omissions
have been made. The confidential material has been filed separately with
the Securities and Exchange Commission.
TABLE OF CONTENTS
Page
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1. DEFINITIONS ...................................................... 2
2. NOVATION OBLIGATIONS ............................................. 9
2.1 Agency Relationship ..................................... 9
2.2 Novation Duties ......................................... 9
2.3 Certain Contracts ....................................... 10
3. NEOFORMA OBLIGATIONS ............................................. 11
3.1 Service ................................................. 11
3.2 Service Levels .......................................... 11
3.3 Cooperation with Novation ............................... 11
3.4 Employee Incentives ..................................... 11
3.5 Quality Assurance Program ............................... 12
3.6 Notice of Materially Adverse Facts ...................... 12
3.7 Case Studies ............................................ 12
3.8 Supplier Sign-Up and Integration ........................ 12
4. THE MARKETPLACE .................................................. 13
4.1 Maintenance of Marketplace .............................. 13
4.2 Consultation ............................................ 13
4.3 Provision of Non-Contract Product Information ........... 13
4.4 Provision of Contract Product Information ............... 13
4.5 Independent Users ....................................... 13
4.6 Multiple Memberships .................................... 14
4.7 User Registration ....................................... 14
4.8 Delivery and Order Fulfillment .......................... 14
4.9 Removal of Products from the Marketplace ................ 14
4.10 Customized Marketplaces ................................. 14
4.11 Links ................................................... 15
4.12 Reasonable Assistance ................................... 15
5. NOVATION MARKETPLACE AND HPPI MARKETPLACE ........................ 15
5.1 Development ............................................. 15
5.2 Hosting ................................................. 15
5.3 Delivery and Order Fulfillment .......................... 15
5.4 Display of Material ..................................... 15
5.5 Reports and Meetings .................................... 15
5.6 Retained Contracts ...................................... 16
5.7 Marketing. .............................................. 16
5.8 Neoforma Auction ........................................ 16
6. EXCLUSIVITY AND RIGHT OF FIRST OFFER ............................. 17
6.1 Novation, VHA, UHC and HPPI Exclusivity ................. 17
6.2 Neoforma Exclusivity .................................... 17
6.3 Right of First Offer for Novation and Neoforma .......... 18
6.4 First Offer for Non-Exclusive Services .................. 18
7. LICENSES AND OWNERSHIP ........................................... 19
7.1 Ownership of Marks ...................................... 19
7.2 Novation Marks .......................................... 19
7.3 Neoforma Marks .......................................... 19
7.4 VHA, UHC and HPPI Marks ................................. 20
7.5 Ownership of Neoforma Materials and Novation Materials .. 20
7.6 Neoforma Materials ...................................... 20
7.7 Novation Materials ...................................... 20
7.8 Development of Tools .................................... 20
7.9 Access License .......................................... 21
8. FEES AND TAXES ................................................... 21
8.1 Contract Product Transaction Fees ....................... 21
8.2 Revenue Sharing ......................................... 22
8.3. Establishment of * ...................................... 23
8.4 Reporting and Payment of Novation Marketplace Transaction
Fees and Revenue Sharing ................................ 23
8.5 * ....................................................... 24
8.6 Taxes ................................................... 25
8.7 New Markets ............................................. 25
8.8 Product Returns ......................................... 25
8.9 Neoforma Auction and other non-GPO marketplaces ......... 25
8.10 Distribution or Licensing of Software and other
Technology Solutions .................................... 25
8.11 Other Expenses .......................................... 26
9. TERM AND TERMINATION ............................................. 26
9.1 Initial Term ............................................ 26
9.2 Renewal and Extension of Term ........................... 27
9.3 Termination for Cause ................................... 27
9.4 Termination for Insolvency Events ....................... 27
9.5 Termination for Rejection in Bankruptcy ................. 27
9.6 Termination Upon Neoforma Change of Control ............. 28
9.7 Return of Materials ..................................... 28
9.8 Survival ................................................ 28
9.9 Termination Assistance Services ......................... 28
9.10 Third Party Products .................................... 30
10. USER DATA ........................................................ 31
10.1 Registration ............................................ 31
_______________
* Confidential treatment requested.
ii
10.2 Transaction Database .................................... 31
10.3 Member Data ............................................. 31
10.4 Aggregated Member Data .................................. 32
10.5 Transaction Database .................................... 32
10.6 License Grant of Information to Novation ................ 32
10.7 No Other Licenses or Use ................................ 32
10.8 Other Data .............................................. 33
10.9 Neoforma Information .................................... 33
11. SAFEGUARDING OF DATA; CONFIDENTIALITY ............................ 33
11.1 Novation Data ........................................... 33
11.2 Confidentiality ......................................... 34
12. REPRESENTATIONS AND WARRANTIES ................................... 35
12.1 Representations by Neoforma ............................. 35
12.2 Representations by Novation, VHA, UHC and HPPI .......... 36
12.3 Warranty Disclaimer ..................................... 38
13. USE OF SUBCONTRACTORS ............................................ 38
13.1 Generally ............................................... 38
13.2 Novation's Right to Revoke Approval ..................... 38
13.3 Continuing Responsibility ............................... 38
13.4 Confidential Information ................................ 38
14. INSURANCE ........................................................ 38
14.1 Insurance ............................................... 38
14.2 Proof of Insurance ...................................... 39
15. INDEMNITY ........................................................ 39
15.1 Neoforma Indemnity ...................................... 39
15.2 Novation Indemnity ...................................... 40
15.3 Infringement Claims ..................................... 40
15.4 Indemnity Procedures .................................... 41
16. LIMITATION OF LIABILITY .......................................... 41
16.1 Limitations ............................................. 41
16.2 Exceptions .............................................. 42
16.3 Liquidated Damages ...................................... 42
17. AUDIT RIGHTS ..................................................... 43
17.1 General ................................................. 43
17.2 Frequency of Audits ..................................... 44
17.3 Auditors ................................................ 44
17.4 Record Retention ........................................ 44
17.5 Cooperation ............................................. 44
17.6 Overcharges ............................................. 44
18. DISPUTE RESOLUTION ............................................... 44
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18.1 Resolution of Disputes .................................. 44
18.2 Negotiations and Escalation ............................. 45
18.3 Appointment of Arbitral Body ............................ 45
18.4 Qualifications of Arbitrator ............................ 45
18.5 Initiation of Arbitration and Procedures ................ 45
18.6 Procedures .............................................. 46
18.7 Governing Law; Jurisdiction ............................. 46
18.8 Arbitration Award ....................................... 46
18.9 Cooperation of the Parties .............................. 47
18.10 Costs ................................................... 47
18.11 Judgment on the Award; Enforcement ...................... 47
18.12 Preservation of Equitable Relief; Third-Party
Litigation .............................................. 47
18.13 Continued Performance ................................... 48
19. GUARANTY OF PERFORMANCE .......................................... 48
19.1 VHA and UHC Guarantees .................................. 48
19.2 VHA and UHC Waivers ..................................... 48
19.3 Scope of Liability ...................................... 49
19.4 Continued Performance by Neoforma ....................... 50
20. GENERAL PROVISIONS ............................................... 50
20.1 No Waiver ............................................... 50
20.2 Entire Agreement ........................................ 51
20.3 Publicity ............................................... 51
20.4 Covenant of Good Faith .................................. 51
20.5 Compliance with Laws and Regulations .................... 51
20.6 Assignment; Successors and Assigns ...................... 51
20.7 Governing Law ........................................... 51
20.8 Notices ................................................. 52
20.9 No Agency ............................................... 52
20.10 Force Majeure ........................................... 53
20.11 Interest ................................................ 53
20.12 Program Management ...................................... 54
20.13 Severability ............................................ 54
20.14 Counterparts ............................................ 54
20.15 Headings................................................. 54
20.16 Section 365(n) Matters .................................. 54
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EXHIBITS:
Exhibit A Marks +
Exhibit B Current Marks Usage Guidelines for Novation +
Exhibit C Current Marks Usage Guidelines for Neoforma +
Exhibit D Current Marks Usage Guidelines for VHA, UHC and HPPI +
Exhibit E Reports and Other Information Requirements +
Exhibit F Program Management +
Exhibit G Minimum Fees
Exhibit H *
Exhibit I Target Fee Levels
Exhibit J 2002 Monthly * Schedule
Exhibit K Current Functionality Roadmap
Exhibit L Collaborative Marketing Agreement
Exhibit M Collaborative Development Process
Exhibit N Service Level Specifications
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+ Exhibit filed previously and not included here
* Confidential treatment requested.
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THIRD AMENDED AND RESTATED
OUTSOURCING AND OPERATING AGREEMENT
This Third Amended and Restated Outsourcing and Operating Agreement
("Agreement") effective as of September 30, 2002 (the "Effective Date"), by and
among Neoforma, Inc., (formerly named Xxxxxxxx.xxx, Inc.) a Delaware corporation
with offices at 0000 Xxxxxx Xxxx, Xxx Xxxx, Xxxxxxxxxx 00000 ("Neoforma"),
Novation, LLC, a Delaware limited liability company with offices at 000 Xxxx
Xxxx Xxxxxxxxx Xxxxxxx, Xxxxxx, Xxxxx 00000 ("Novation"), Healthcare Purchasing
Partners International, LLC, a Delaware limited liability company with offices
at 000 Xxxx Xxxx Xxxxxxxxx Xxxxxxx, Xxxxxx, Xxxxx 00000 ("HPPI"), VHA Inc., a
Delaware corporation with offices at 000 Xxxx Xxx Xxxxxxx Xxxxxxxxx, Xxxxxx,
Xxxxx 00000-0000 ("VHA"), and University Health System Consortium, an Illinois
corporation with offices at 0000 Xxxxxx Xxxx, Xxxxx 000, Xxx Xxxxx, Xxxxxxxx
00000 ("UHC").
RECITALS
WHEREAS, Neoforma is a provider of Internet (as defined in Section 1)
e-commerce services to the healthcare industry facilitating the sale, rental or
lease of new and used equipment, products, supplies, services information and
other content, and provides information regarding various healthcare facilities
and equipment through its online offerings and programs;
WHEREAS, VHA and UHC are organizations whose patrons are hospitals and
healthcare providers, who view e-commerce as an essential part of their
cooperative purchasing programs on behalf of their patrons for the future and
who desire to more fully develop the services they render to their patrons
through this Agreement;
WHEREAS, VHA and UHC together own all the ownership interests in Novation
and HPPI;
WHEREAS, Novation is a contracting agent that develops and delivers supply
chain management agreements, programs and services on behalf of VHA and UHC and
their patrons;
WHEREAS, HPPI is a GPO that serves healthcare organizations that are not
members of VHA and UHC and other GPOs and which develops and delivers
supply-chain management programs and services to such healthcare organizations;
WHEREAS, the parties wish to establish a long-term, global relationship to
enable the parties to achieve increased efficiency and cost savings through
Internet-based technology and pursuant to which (i) Neoforma will develop and
manage the Novation Marketplace and HPPI Marketplace (as defined in Section 1),
e-commerce web sites for the benefit of the members of VHA and UHC, the
associated healthcare organizations of HPPI and for the benefit of other users
unaffiliated with VHA, UHC or HPPI, (ii) Novation will serve as the contracting
agent for Neoforma by recruiting, contracting with and managing relationships
with healthcare equipment manufacturers and service suppliers on Neoforma's
behalf and (iii) VHA and UHC will provide marketing support for the Novation
Marketplace and HPPI Marketplace, guarantee Novation's
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obligations to the extent provided under this Agreement and enter into the
exclusivity provisions hereunder;
WHEREAS, the Parties have previously entered into an Outsourcing and
Operating Agreement (the "Original Outsourcing and Operating Agreement"), dated
as of March 30, 2000 (the "Original Effective Date"), and have also previously
entered into an amended and restated Outsourcing and Operating Agreement, dated
as of May 24, 2000 (the "First Amended and Restated Outsourcing and Operating
Agreement"), a second amended and restated Outsourcing and Operating Agreement,
dated as of January 1, 2001 (the "Second Amended and Restated Outsourcing
Agreement"), and a first amendment to the Second Amended and Restated
Outsourcing Agreement, dated as of July 1, 2001 (the "First Amendment"), and
each Party desires to amend and restate the Second Amended and Restated
Outsourcing and Operating Agreement and the First Amendment as set forth herein;
and
WHEREAS, in consideration for the services initially agreed to be provided
by VHA and UHC pursuant to the Original Outsourcing and Operating Agreement and
the First Amended and Restated Outsourcing and Operating Agreement, Neoforma
issued to VHA and UHC shares of, and warrants to purchase, common stock of
Neoforma.
NOW, THEREFORE, for good and valuable consideration, the parties agree as
follows:
1. DEFINITIONS
As used in this Agreement, the following terms shall have the respective
meanings set forth below. Other capitalized terms shall have the meanings set
forth elsewhere in this Agreement.
"Adjusted Gross Transaction Value(s)" means, with regard to a confirmed
purchase, rental or lease on the Novation Marketplace or HPPI Marketplace, the *
which are related to the Product purchased, rented or leased.
"Affiliate(s)" means, with respect to a specified person, any other person
that, directly or indirectly, through one or more intermediaries, controls, is
controlled by or is under common control with such specified person. Neoforma,
on the one hand, and Novation, VHA and/or UHC, on the other hand, shall not be
Affiliates.
"Aggregated Member Data" means all or any of an aggregate of the
Information relating to any two or more Members.
"API(s)" means language and messaging formats, in human and computer
readable form, that define how programs interact with an operating system, a
database, with functions in other programs, with communication systems, or with
hardware drivers.
__________________________
* Confidential treatment requested.
2
"Blinded Aggregated Data" means aggregated data which does not contain
information sufficient to identify any individual Supplier, Member or User or
any Member Data, that is derived from transactions of Users of a Customized
Marketplace, at least * of which shall come from non-Member Users.
"Contract Product(s)" means any Product that is part of the Novation
Contract Portfolio and available on the Novation Marketplace or the HPPI
Marketplace.
"Customized Marketplace(s)" means a Marketplace specifically for and
accessible only to members of a particular GPO or its members, and includes, but
is not limited to, the Novation Marketplace and the HPPI Marketplace.
"EDI Standards" means, the standard format for Electronic Data Interchange
(EDI) generally accepted and used in North America, as may change from time to
time.
"Expected Transaction Fees" means all amounts of Novation Marketplace
Transaction Fees expected to be paid by a Supplier during the period commencing
on the applicable * or *, as the case may be, up to and including * of such
Supplier. Such Expected Transaction Fees shall be calculated with respect to
each Supplier by multiplying (i) the * sales, rentals and leases of * (as
evidenced by the most recent *) and * (as evidenced by reasonable supporting
documentation provided to Neoforma by Novation) by * that were * prior to the
applicable * or *, as the case may be, and that processed transactions with the
applicable * through the Novation Marketplace during the preceding *, by (ii)
the applicable * for sales, rentals and leases of * and * as defined in the
agreement between Neoforma and such Supplier. In order to calculate the *
Expected Transaction Fees, the resulting number is then multiplied by a
fraction, the numerator of which is * for the first * days subsequent to the *,
* for the second * days, * for the third * days, and * thereafter, and the
denominator of which is *. By way of example, if (A) as of a certain *,
healthcare organizations (as described above) representing * in annual purchases
of * and * from the applicable Supplier in the preceding * were processing
transactions through the Novation Marketplace, and (B) such Supplier was
obligated to pay a Novation Marketplace Transaction Fee of * with respect to
such transactions through the Novation Marketplace, then in the first * days
following such *, * would be multiplied by *, and the resultant number of *
would be multiplied by the quotient of * and *, or *, to calculate a * Expected
Transaction Fee of *.
"Functionality Roadmap" means each proposed plan for development and
implementation of new and updated functionality specifications for the Novation
Marketplace or HPPI Marketplace, as may be agreed and amended from time to time
by and between Novation and Neoforma in signed writings in accordance with
Section 5.1.
"GAAP" means United States generally accepted accounting principles as in
effect at the time of the application thereof.
__________________________
* Confidential treatment requested.
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"GPO(s)" means any entity in the United States that meets the definition of
a "Group Purchasing Organization" as set forth in 42 CFR Section 1001.952(j),
and any entity outside the United States performing a similar function.
"Gross Revenue" means, with respect to Novation's responsibility to pay
Neoforma any * pursuant to Section 8.1, the aggregate of (i) the
marketing fees and other revenue recognized by VHA and the administrative fees
and other revenue recognized by UHC pursuant to Novation-related agreements with
suppliers and distributors and (ii) revenue recognized by Novation pursuant to
Sections 8.2, 8.9 and 8.10, less any revenues recognized from HPPI and amounts
related to purchases made through VHA's Care Continuum Program and any
substantially similar program operated by UHC.
"High-Volume Supplier" means a Supplier whose sales of Products from the
Novation Contract Portfolio (whether purchased through the Novation Marketplace
or otherwise) are at least * annually as evidenced by the * during the preceding
12-month period.
"HPPI Marketplace" means a Customized Marketplace accessible only to HPPI
Members.
"HPPI Member(s)" means, at any date, those organizations acting as
purchasers, renters or lessees in their respective markets that are associates
of HPPI and to which HPPI provides procurement related services, cost management
programs and other services.
"Information" means the information and data maintained by Neoforma in the
Transaction Database, which shall include, at minimum, (i) any and all
information and data collected, developed and/or stored by Neoforma relating to
Members and (ii) any and all information and data relating to use of or
transactions on the Novation Marketplace by Members.
"Intellectual Property Rights" means all copyrights, patents, trade names
and trademarks (in each of the preceding cases, whether registered or not) and
trade secrets and other intellectual property rights of a person.
"Integration" means the integration of the current system of a Supplier or
Member, as applicable, with the Novation Marketplace or HPPI Marketplace such
that such Supplier or Member, as the case may be, may (i) conduct transactions
through the Marketplace or send or receive Supply Chain Data regarding such
transactions, (ii) solely in the case of a Supplier that conducts transactions
through a distributor integrated with the Marketplace whose data Neoforma is
contractually permitted to share with other Users, access information regarding
transactions, or (iii) solely in the case of a Supplier that conducts
transactions through a distributor which is not integrated with the Novation or
HPPI Marketplace, publish Supplier's product catalog data on the Novation or
HPPI Marketplace.
__________________________
* Confidential treatment requested.
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"Internet" means the public, global network of computer networks and
individual computers constantly connected using standardized communications
protocols, specifically TCP/IP or any successor protocol thereof.
"Marketplace" means the Novation Marketplace, HPPI Marketplace, all
Customized Marketplaces and all other Neoforma web sites.
"Material(s)" means information on equipment, products, supplies or
services, including, without limitation, product availability and pricing
information, provided to Neoforma for display to Users of the Novation
Marketplace or HPPI Marketplace.
"Member(s)" means, at any date, those organizations that are (i) patrons or
members of VHA or UHC, or are associated therewith, or (ii) HPPI Members, and in
each case, that are listed in an electronic file supplied to Neoforma and
updated periodically by Novation.
"Member Data" means any and all Transaction Database information relating
to a specific Member.
"Neoforma Auction" means Neoforma's auction services offered on the
Marketplace.
"Neoforma Change of Control" means the occurrence of any of the following:
(a) the direct or indirect sale, transfer, conveyance or other disposition
(other than by way of merger or consolidation), in one or a series of
related transactions, of all or substantially all of the properties
and assets of Neoforma and its subsidiaries taken as a whole to any
"person" or "group" (as such terms are used in Section 13(d)(3) of the
Securities and Exchange Act of 1934, as amended (the "Exchange Act")),
other than Novation or any of its Affiliates;
(b) the adoption by the Board of Directors of Neoforma of a plan relating
to the liquidation or dissolution of Neoforma;
(c) the consummation of any transaction or series of related transactions
(including, without limitation, any merger or consolidation) the
result of which is that any "person" or "group" (as defined above),
other than Novation or any of its Affiliates, becomes the "beneficial
owner" (as such term is used in Rule 13d-3 promulgated under the
Exchange Act), directly or indirectly, of more than 50% of the capital
stock of Neoforma, measured by voting power or economic interest
rather than number of shares;
(d) the consummation of any transaction or series of related transactions
(including, without limitation, any merger or consolidation) the
result of which is that the beneficial owners (as defined above) of
the capital stock of Neoforma immediately prior to such transaction or
transactions cease to be the beneficial owners of at least 50.1% of
the capital stock, measured by voting power or
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economic interest rather than number of shares, of the surviving or
resulting entity of such transaction or transactions; or
(e) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of
Neoforma (together with any new directors whose election by the Board
of Directors or whose nomination for election by the stockholders of
Neoforma was approved by a vote of a majority of the directors then
still in office who were either directors at the beginning of such
period or whose election or nomination for election was previously
approved) cease to constitute a majority of the directors then in
office.
"Neoforma Information" means Information received from non-Members.
"Neoforma Materials" means Materials provided by Neoforma and displayed on
and available to Users of a Marketplace but shall not include the Novation
Materials.
"Non-Contract Product" means any Product available through a Customized
Marketplace that is not part of the Novation Contract Portfolio or any other
GPO-specific contract portfolio.
"Novation Contract Portfolio" means a catalog of all Products and Novation
Materials that will appear on the Novation Marketplace or the HPPI Marketplace,
for which Novation has contracted, for the benefit of the Members.
"Novation Competitor" means any person that, at the time of determination,
would reasonably be considered to be (i) a competitor of Novation or (ii) a
competitor of any Member.
"Novation Marketplace" means a Customized Marketplace accessible only to
members of VHA, UHC or HPPI, which may include Contract and Non-Contract
Products.
"Novation Marketplace Transaction Fee(s)" means fees to be paid by
Suppliers to Neoforma in respect of (i) transactions occurring "on the Novation
Marketplace" or (ii) processing Supply Chain Data; excluding fees associated
with Neoforma Auction. For the purposes of this definition "on the Novation
Marketplace" means the initiation or confirmation of a transaction is captured
through the Novation Marketplace.
"Novation Materials" means Materials provided by Novation or by Novation
Suppliers to Neoforma for display to Users of a Customized Marketplace,
including to Members on the Novation Marketplace.
"Novation Suppliers" means suppliers, manufacturers or distributors that
provide equipment, products, supplies, services, information and other content
for sale, rental or lease through the Novation Marketplace and HPPI Marketplace
under the Novation Contract Portfolio.
"Party" means each of Neoforma, Novation, HPPI, VHA and UHC and any other
person who becomes a signatory to this Agreement, unless the context requires
otherwise.
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"Patron(s)" means a person who is entitled to receive a patronage refund
from VHA or UHC.
"Person" means a natural person, corporation, partnership (limited or
general), limited liability company, business trust or other entity.
"Product(s)" means equipment, products, supplies, services, information and
other content provided by Suppliers and available for purchase, rental or lease
by Users through a Marketplace.
"Remote Order Entry" means the ability of Users, including, without
limitation, persons outside of central purchasing/materials management
departments to create requisitions and to have such requisitions turned into
valid orders in accordance with the protocol agreed to by the Novation
Marketplace and the User.
"Retained Contract(s)" means those product or service contracts of VHA or
UHC that have not been transferred to Novation and which the Members may have
access to because they are Members in VHA or UHC.
"Service(s)" means the services to be provided hereunder by Neoforma.
"Service Level(s)" means the objective criteria establishing the level of
Neoforma's required performance of the Services under this Agreement.
" * " has the meaning specified in Section 8.1.2
"Sign-up" (also "Signs-up" and "Signed-up") means for a party to enter into
a contractual relationship with a Supplier to enable all or any portion of that
Supplier's equipment, products, supplies, services, information and other
content to be displayed on a Customized Marketplace.
"Supplier(s)" means suppliers, manufacturers or distributors that provide
Products and Materials for display, sale, rental or lease, including, without
limitation, High-Volume Suppliers pursuant to an agreement allowing
participation on the a Customized Marketplace.
"Supplier Integration Deadline" means the later of: (i) * days following
the date on which a Supplier is Signed-up; or (ii) the * specified in the
contract between the Supplier and Neoforma, as either may be adjusted pursuant
to Section 3.8.2.
"Supply Chain Data" means information for use by Members and Suppliers
regarding the purchase, rental or lease of a Product by a Member who has signed
a Member participation
___________________________
* Confidential treatment requested.
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agreement with Neoforma to participate in the Novation Marketplace or HPPI
Marketplace, whether the * is conducted * or *. For the purposes of this
definition * means the *, and * means *.
"Supply Chain Data Transaction Value(s)" means the * , relating to each
purchase, rental or lease of a Product *, but for which Neoforma processes
Supply Chain Data. For the purposes of this definition * means the *.
"Supply Chain Management Services" means (i) with respect to Novation, VHA
and HPPI, operations and activities related to the evaluation, bidding,
negotiation, contracting, administering, marketing, distribution, sale,
acquisition or disposal of equipment, products, supplies, services, information
and other content by healthcare organizations from third parties and (ii) with
respect to UHC only, operations and activities related to the evaluation,
bidding, negotiation, contracting, administering, marketing, distribution, sale,
acquisition or disposal of equipment, products, supplies and services by
healthcare organizations from third parties, and in the case of each of clause
(i) and (ii), including operations and activities directly related to Neoforma
Auction. Notwithstanding the generality of the foregoing, and with respect to
UHC only, Supply Chain Management Services do not include outsourcing,
consulting, information technology products and services (unless related to
equipment or supplies), financial products and services, insurance products and
services, education and networking and communication products and services.
"Target Fee Levels" has the meaning specified in Section 8.2.1 of this
Agreement.
"Tool(s)" means a program, utility or user interface that helps the user of
the program, utility or user interface analyze or search for data.
"Transaction Data" means the data maintained by Neoforma on the Transaction
Database.
"Transaction Database" means any and all means used to store Information.
"Transaction Fee(s)" means fees to be paid by each Supplier pursuant to its
agreement with Neoforma for participation on the Novation Marketplace or the
HPPI Marketplace.
"User(s)" means all Members and other users of a Customized Marketplace,
including, without limitation, participating healthcare organizations, GPOs or
other registered users that do not act as Suppliers.
_____________
* Confidential treatment requested
8
2. NOVATION OBLIGATIONS
2.1 Agency Relationship. Neoforma hereby appoints Novation to act as
Neoforma's agent to Sign-up Suppliers for the Novation Marketplace
and HPPI Marketplace, and Novation accepts such appointment, for the
principal purpose of facilitating e-commerce purchases by the patrons
of VHA and UHC and by others.
2.2 Novation Duties. In connection with Novation's appointment as agent
under Section 2.1, Novation will perform the following obligations:
2.2.1 Neoforma and Novation shall meet to discuss and mutually
agree upon certain commercially reasonable negotiating
parameters within which Novation may negotiate with Suppliers
without seeking Neoforma's approval. While within such
parameters, Novation may negotiate with and Sign-up any
Supplier and obtain any terms and conditions that in
Novation's reasonable discretion are consistent with its
obligations under this Agreement. Novation agrees that if it
wishes to conclude any agreement upon terms and conditions
outside of the agreed upon negotiating parameters, or at
Transaction Fee levels that are lower than the levels agreed
upon by Neoforma and Novation under Section 2.5, it will seek
Neoforma's prior consent, which consent shall not be
unreasonably withheld or delayed. Novation shall use its
diligent efforts to obtain favorable terms from each Supplier
with whom it negotiates on behalf of Neoforma. Neoforma
agrees, however, that Novation shall have no obligation to
obtain the best terms and conditions available from any
Supplier.
2.2.2 Neoforma and Novation shall meet no less frequently than on a
quarterly basis (or at any time that either Neoforma or
Novation reasonably requests such a meeting) to review the
then-current negotiating parameters. At such meetings,
Neoforma and Novation shall in good faith review whether the
negotiating parameters then in effect are market competitive
and, if not, shall adjust so that they are market
competitive. For the avoidance of doubt, the parties agree
that "market competitive" shall mean that (i) Suppliers are
reasonably likely to sign such agreement (after negotiation)
or (ii) the negotiating parameters are commercially
reasonable.
2.2.3 Novation will provide to Neoforma promptly after the Sign-up
of each Supplier agreement that Novation enters into on
Neoforma's behalf, all information concerning such agreement
that is necessary for Neoforma to fulfill its obligations
thereunder.
2.2.4 Novation will manage the Supplier relationships in respect of
each Supplier that Novation Signs-up on Neoforma's behalf,
and will use diligent efforts to facilitate favorable
commercial relationships between Neoforma and such Suppliers.
9
2.2.5 Novation shall make available a number of employees as will
be necessary to perform Novation's agency obligations
hereunder. No such employees will be required to devote their
full time to providing such services hereunder.
2.2.6 Novation and Neoforma shall cooperate to increase the number
of Suppliers on the Novation Marketplace and HPPI
Marketplace.
2.2.7 Novation will reasonably cooperate with Neoforma to resolve
performance problems with respect to any Supplier that it has
Signed-up on Neoforma's behalf and who has become the subject
of numerous User complaints. In the resolution of such
issues, Novation will act solely as Neoforma's agent with
respect to Suppliers, and Novation shall not be required to
contact any Users.
2.2.8 Subject to its obligations under Section 11.2, Novation will
bring to Neoforma's attention, reasonably promptly after
learning thereof, any fact that would reasonably be likely to
materially adversely affect the Novation Marketplace or HPPI
Marketplace, Neoforma or Users, including, without
limitation, the institution of litigation against Novation or
any Supplier.
2.2.9 In connection with the negotiation of Supplier agreements,
Novation will provide Suppliers with technical information
and specifications provided by Neoforma to enable such
Suppliers to effectively connect to and interface with the
Novation Marketplace or HPPI Marketplace. Novation shall not
independently negotiate or modify any aspects of Neoforma's
technical specifications regarding a Marketplace without
Neoforma's prior written consent.
2.2.10 During or after development by Neoforma of any Customized
Marketplace other than the Novation Marketplace or HPPI
Marketplace, Neoforma and Novation shall discuss the
feasibility and desirability for each party of Neoforma
appointing Novation as its agent to Sign-up Suppliers for
that Customized Marketplace. Should Novation wish to act as
such agent, it shall obtain Neoforma's consent, which consent
shall not be unreasonably withheld or delayed. The
reasonableness of Neoforma's consent shall take into account,
among other factors, the terms for such appointment, and the
willingness of the Customized Marketplace to use Novation as
its Agent.
2.2.11 In performing its duties under this Section 2, Novation shall
not be required to initiate or carry on litigation.
2.3 Certain Contracts. For the avoidance of doubt, the parties agree that
the contracts constituting the Novation Contract Portfolio or the
Retained Contracts, as now or hereafter constituted, shall remain
obligations of Novation, UHC or VHA, as the
10
case may be, and shall not be transferred to, or assumed by,
Neoforma in connection with this Agreement.
2.4 Employee Incentives. No later than February 15, 2003 and by February
15 every year thereafter for the term of this Agreement, Novation
shall develop and implement Novation employee compensation plans
that will provide Novation employees with incentives to meet
Functionality Roadmap delivery dates.
2.5 Adjustment of Transaction Fees. Novation shall meet with Neoforma no
less frequently than on a quarterly basis (or at any time that
either Neoforma or Novation reasonably requests such a meeting) to
review the Transaction Fees then in effect. At such meetings,
Neoforma and Novation shall in good faith review whether the
Transaction Fees then in effect are market competitive and, if not,
shall adjust such Transaction Fees so that they are market
competitive. For the avoidance of doubt, the parties agree that
"market competitive" shall mean that (i) Suppliers are reasonably
likely to agree to pay such fees at such time or (ii) such fees are
competitive with similar Transaction Fees paid by suppliers in
similar e-commerce or related industries. Until Neoforma and
Novation have agreed upon a change to the Transaction Fees, as the
case may be, the then-existing fees shall remain in effect.
3. NEOFORMA OBLIGATIONS
3.1 Service. Neoforma shall provide Services mutually agreed between
Neoforma and Novation in the Functionality Roadmap. Neoforma and
Novation anticipate that the Services will evolve and be modified or
be enhanced over time to keep pace with technological advancements
and improvements in e-commerce as specified in each Functionality
Roadmap as agreed upon in accordance with the Collaborative
Development Process set forth in Exhibit M. Once agreed upon, all
modification to each Functionality Roadmap must be in writing and
agreed to by the parties in writing.
3.2 Service Levels. Neoforma shall provide such professional and
technical personnel and other resources (including, without
limitation, hardware, software, facilities, equipment and other
assets) as shall be required to perform the Services in accordance
with service levels set forth in Exhibit N and as shall otherwise be
mutually agreed upon by the parties hereto and referred to as the
"Service Level Specifications." Once agreed upon, all modifications
to the Service Level Specifications must be in writing and agreed to
by the parties in writing.
3.3 Cooperation with Novation. Neoforma shall cooperate with Novation in
the performance of Novation's agency obligations under Section 2.
3.4 Employee Incentives. No later than February 15, 2003 and by February
15 every year thereafter for the term of this Agreement, Neoforma
shall develop and
11
implement employee compensation plans that will provide Neoforma
employees with incentives to meet Functionality Roadmap delivery
dates.
3.5 Quality Assurance Program. Neoforma will administer a quality
assurance program that has been mutually agreed to by Neoforma and
Novation, among other things, to monitor Supplier performance and
order confirmation for Products ordered by Users.
3.6 Notice of Materially Adverse Facts. Subject to its obligations under
Section 11.2, Neoforma will bring to the attention of each of
Novation, VHA and UHC, reasonably promptly after learning thereof, any
fact that would reasonably be likely to materially adversely affect
the Novation Marketplace, the HPPI Marketplace or the Members, VHA,
UHC or HPPI, including, without limitation, the institution of
litigation against Neoforma or any Supplier.
3.7 Case Studies. During each of the * through *, Neoforma shall on *
basis (but in no event later than *) undertake to prepare * or more
User case studies documenting the economic value that the Novation
Marketplace and HPPI Marketplace has for each of Suppliers and
Members. After calendar year *, such case studies shall be prepared by
Neoforma from time to time as mutually agreed by Novation and
Neoforma. In addition, during the Term, Neoforma shall measure *
provided to Members and Suppliers by the Novation Marketplace and HPPI
Marketplace. Each case study prepared by Neoforma will be sent to each
of Novation, VHA, and UHC for the purpose of marketing the Novation
Marketplace and HPPI Marketplace to other Suppliers and Members.
3.8 Supplier Sign-Up and Integration.
3.8.1 Neoforma and Novation shall meet within 30 days after the
execution of this Agreement, and at each Cross-Functional
Management Team Meeting thereafter, to establish a plan (i) to
Sign-up additional Suppliers, (ii) to Integrate and make
operational such Suppliers for receiving and confirming orders,
and (iii) to eliminate the back-log of Suppliers, if any, that
have been previously Signed-up but not yet Integrated.
3.8.2 Neoforma shall complete the Integration and make operational
for receiving and confirming orders, or delivering or receiving
Supply Chain Data, for each Supplier that is Signed-up by the
Supplier Integration Deadline. In the event that a *, then
Neoforma shall *. Notwithstanding the foregoing, if (i)
Neoforma does not *, as the case may be, (ii) such * is a
result of that *, and (iii) prior to the 30th day before the
applicable *, Neoforma (A) notifies Novation in writing of such
* and the likelihood
________________
* Confidential treatment requested.
12
that such * by the applicable * and (B) reasonably demonstrates
to Novation's reasonable satisfaction *, then *, as the case
may be, will be * as the * day following the date of such *.
4. THE MARKETPLACES
4.1 Maintenance of Novation Marketplace and HPPI Marketplace. Neoforma
shall use its best efforts to maintain the Novation Marketplace and
HPPI Marketplace as a leading provider of e-commerce services to the
healthcare industry.
4.2 Consultation. Neoforma, Novation, VHA and UHC will consult regularly
(but no less frequently than on a quarterly basis) to discuss the
strategic direction of the Novation Marketplace and HPPI Marketplace,
including the features and functions that would provide additional
value to patrons and others.
4.3 Provision of Non-Contract Product Information. The Suppliers will be
responsible for providing Neoforma with Materials to be located on the
Marketplaces in respect of all Non-Contract Products. Novation will
review such Materials relating to the Non-Contract Products, subject
to Neoforma providing Novation a methodology for previewing such
Materials.
4.4 Provision of Contract Product Information. Novation shall be
responsible for providing Neoforma with pricing for Contract Products
and any unique facts and summary sheets relating to such Contract
Products that are prepared by Novation. The Suppliers will be
responsible for providing Neoforma with all other information
regarding such Contract Products. Subject to Neoforma providing to
Novation a methodology for allowing Novation to preview Materials
relating to Contract Products,Novation will review such information
and determine that such information is reasonably accurate, prior to
being loaded on the Novation Marketplace (e.g., correct pricing,
product numbers, description, etc.).
4.5 Independent Users. Prior to the date on which Neoforma concludes an
agreement with a GPO (other than HPPI) having its own Supplier
contracts (an "Independent GPO") who, as a condition to using a
Marketplace, contractually requires Neoforma to act in a neutral
manner, Neoforma shall refer any User who requests access to a
Customized Marketplace (other than a Member entitled to use the
Novation Marketplace) to the HPPI Marketplace. After the date on which
an Independent GPO is on the Marketplace, if a User (other than a
Member entitled to use the Novation Marketplace) approaches Neoforma
requesting access to a Customized Marketplace, Neoforma shall act in a
neutral manner with regard to such User and shall not be required to
recommend or otherwise refer such User to any specific part of the
Marketplace, including the HPPI Marketplace or the Novation
Marketplace. Notwithstanding the preceding sentence, Neoforma will
__________________
* Confidential treatment requested.
13
at all times feature the HPPI Marketplace at least as prominently on
the Marketplace as any other Customized Marketplace.
4.6 Multiple Memberships. If a Member is also a member of any other GPO
that has a Customized Marketplace on the Marketplace, that Member
will have access to all of the Marketplace, including the Novation
Marketplace or HPPI Marketplace, as the case may be, and the
applicable Customized Marketplace. Members who are also Users of
Customized Marketplaces will have access rights to the Novation
Marketplace or the HPPI Marketplace equal to those of Members that do
not belong to Customized Marketplaces. Notwithstanding the foregoing,
Neoforma shall provide favorable view and framing in respect of the
Novation Contract Portfolio to any Member accessing the Marketplace.
4.7 User Registration. Upon implementation of the Novation Marketplace,
Neoforma, with Novation's assistance, will develop a Tool to register
Members on the Novation Marketplace and HPPI Marketplace. Neoforma
will require Members to create and use passwords as a necessary
condition to accessing the Novation and HPPI Marketplace. Neoforma
shall be responsible for keeping the Novation Marketplace registry
and the HPPI Marketplace registry current and for not allowing access
to such Marketplaces by unauthorized Users.
4.8 Delivery and Order Fulfillment. Neoforma will notify Suppliers and
provide Suppliers access to the Transaction Database for sales,
rentals and leases of Products by such Suppliers, in a form and
format mutually agreed upon by Neoforma and Suppliers and to the
extent set forth in the Functionality Roadmap.
4.9 Removal of Products from the Novation Marketplace and HPPI
Marketplace. With regard to Non-Contract Products, Neoforma shall
remove Product listings from the Novation Marketplace and HPPI
Marketplace promptly after determining that the appearance of such
Products will, or is reasonably likely to, result in liability to
Neoforma, Novation, HPPI, VHA, UHC or any Users. Upon such removal,
Neoforma will promptly notify Novation of such action and the reasons
therefore. With regard to Contract Products, Neoforma shall notify
Novation promptly after becoming aware of any problems with a
Contract Product or that any such Contract Product will, or is
reasonably likely to, result in liability to Neoforma, Novation,
HPPI, VHA, UHC or any Users. In addition and at the same time,
Neoforma shall provide to Novation all information of which it is
aware regarding the problems with such Contract Product. Neoforma
will obtain Novation's prior written consent, prior to taking any
action to remove such Contract Product listing from the Novation
Marketplace and HPPI Marketplace.
4.10 Customized Marketplaces. In accordance with the Functionality Roadmap
to be agreed upon, Neoforma may create Customized Marketplaces and
other customized sites for the use and benefit of Users on the
Customized Marketplace. Neoforma will not intentionally create
Customized Marketplaces for the purpose of evading fees owed to
Novation under Section 8 of this Agreement.
14
4.11 Links. The parties will establish and maintain hypertext links from
the Novation web site, HPPI web site, VHA web site and UHC web site
to the Novation Marketplace and HPPI Marketplace. Each of Novation,
HPPI and Neoforma will use reasonable efforts to ensure that the
respective links that each party maintains linking Novation, HPPI and
Members to the Novation Marketplace and HPPI Marketplace function
correctly.
4.12 Reasonable Assistance. Each party will provide the other parties with
on-going reasonable assistance with regard to technical,
administrative and service-oriented issues relating to the
Marketplaces.
5. NOVATION MARKETPLACE AND HPPI MARKETPLACE
5.1 Development. The parties shall meet from time to time to agree to the
"look and feel" and organization of the Novation Marketplace and the
HPPI Marketplace, and to jointly develop and agree upon a
Functionality Roadmap, which shall include an implementation plan and
schedule for development of the Novation Marketplace and the HPPI
Marketplace. The current Functionality Roadmap is approved by the
Parties as of the date hereof and attached hereto as Exhibit K. . The
Collaborative Development Process is the process by which future
Functionality Roadmaps will be developed and is attached hereto as
Exhibit M.
5.2 Hosting. Neoforma will create, host and implement the Novation
Marketplace and the HPPI Marketplace according to the agreed plan and
display the Novation Contract Portfolio in a manner similar to the
way in which products currently appear on the Marketplace.
5.3 Delivery and Order Fulfillment. Neoforma will notify the Suppliers of
purchases, rentals and leases made by Members in a form and format
according to the terms of Neoforma's agreements with Suppliers.
5.4 Display of Material. In order to facilitate efficient presentation of
Product information, Neoforma will categorize, organize and display
all Products on the Novation Marketplace and the HPPI Marketplace in
a manner consistent with that in which it organizes similar
information on other Customized Marketplaces.
5.5 Reports and Meetings.
5.5.1 Subject to obtaining the consent of the Members' in accordance
with Section 10, Neoforma will provide each of Novation, VHA,
UHC and HPPI with real-time, on-line reports of its Members
usage statistics and reports on other reasonable matters. Such
reports shall be made available in the form of Excel(TM) files
transferred via electronic transmission to Novation, VHA, UHC
or HPPI, or in such other format as the parties agree. The
parties will mutually agree as to the scope, format and
15
substance of the standardized reporting system that Neoforma
will develop (at no extra charge) and that will be available
to Novation, VHA, UHC and HPPI via the Internet.
5.5.2 Neoforma and Novation shall establish a cross-functional
management team in order to review operations of the Novation
Marketplace. The cross-functional management team shall meet
(each a "Cross-Functional Management Team Meeting") no less
frequently than on a quarterly basis. The cross-functional
management team shall include the lead executive from each of
Neoforma and Novation responsible for overseeing this
Agreement, and shall also include management representatives
from each of Neoforma and Novation from each functional area,
including marketing, Member sales, Supplier relations,
implementation and development. Additionally, one or more
representatives from each of VHA and UHC shall be invited to
participate in each Cross-Functional Management Team Meeting.
In addition, Neoforma and Novation shall establish a strategic
planning team to discuss the direction and strategy of the
Novation Marketplace. The strategic planning team shall meet at
least twice in each calendar year.
5.6 Retained Contracts. Either VHA or UHC may at any time elect to put
their respective Retained Contracts on the Novation Marketplace. If
the posting on the Novation Marketplace is merely informational and
Members are not able to purchase, rent or lease Products covered by
such Retained Contracts through the Marketplaces, no fees shall be
paid for such posting. If during the Term, Novation Signs-up the
Suppliers under such Retained Contracts, such contracts shall then
become subject to Section 8.
5.7 Marketing. Novation, VHA, UHC and HPPI will use commercially
reasonable efforts to drive traffic to the Novation Marketplace and
the HPPI Marketplace, including, without limitation, making
appropriate introductions for Neoforma, allowing Neoforma preferred
space and visibility at Member forums, presenting satellite broadcasts
or web casting targeted at the Members, and otherwise in accordance
with the roles and responsibilities specified for each Party in any
collaborative marketing agreement reached among the Parties. The
current collaborative marketing agreement is attached hereto as
Exhibit L. Novation, VHA and UHC will work with Neoforma to develop
new initiatives targeted toward increasing Members' participation on
the Marketplaces, including the Novation Marketplace and the HPPI
Marketplace.
5.8 Neoforma Auction.
5.8.1 Novation, VHA, UHC and HPPI will promote the use of Neoforma's
asset management and recovery services and related activities
of Neoforma Auction to patrons and others.
16
5.8.2 Any Member wishing to utilize the Neoforma Auction and
Neoforma's asset management and recovery services shall enter
into an Asset Recovery Services Agreement with Neoforma.
5.8.3 Neoforma may delegate the performance of the asset management
and recovery services to a third party appointed by Neoforma.
6. EXCLUSIVITY AND RIGHT OF FIRST OFFER
6.1 Novation, VHA, UHC and HPPI Exclusivity. Except as provided in Section
6.3, each of Novation, HPPI, VHA and UHC agrees that it will not
directly or indirectly develop, promote, contract for the development
of, assist others to develop, or enter into any agreement with any
other person to provide to any of them, or promote to their Members,
any Internet-based marketplace related to Supply Chain Management
Services by acute or non-acute healthcare providers anywhere in the
world other than the Marketplaces.
6.2 Neoforma Exclusivity.
6.2.1 Except as otherwise provided in Section 6.3, neither Neoforma
nor its Affiliates will develop, promote, contract for the
development of, assist others to develop, or enter into any
agreement with any other person to provide, any Internet-based
system related to the acquisition or disposal of equipment,
products, supplies, services, information and other content by
acute or non-acute healthcare providers anywhere in the world
other than the Marketplaces.
6.2.2 Except as provided in Section 6.2.3, Novation will be
Neoforma's and Neoforma's Affiliates' exclusive agent to
Sign-up Suppliers to the Novation Marketplace. Neoforma will
not, and will cause any Affiliate of Neoforma not to: (i)
Sign-up any Supplier directly to the Novation Marketplace; or
(ii) contract with, or pay any financial incentives to, any
person to act as a contracting agent of Neoforma or Neoforma's
Affiliates to Sign-up any Supplier to the Novation Marketplace
on Neoforma's or Neoforma's Affiliates' behalf; provided,
however, that nothing herein shall be construed to impose upon
Neoforma any obligation to seek to terminate agreements with
Suppliers previously entered into by Neoforma and existing as
of the Original Effective Date.
6.2.3 Notwithstanding the provisions of Subsection 6.2.2, Neoforma
may Sign-up any Supplier, if Neoforma refers a Supplier to
Novation for contracting, and notwithstanding such referral,
the Supplier specifically requests to Sign-up with Neoforma or
Novation informs Neoforma that Novation will not Sign-up that
Supplier.
17
6.3 Right of First Offer for Novation and Neoforma.
6.3.1 If either Novation or Neoforma elects to commence an
Internet-venture in any country other than the United States
or in any market that is not then served by a Customized
Marketplace (whether in the United States or otherwise), such
party (the "Offeror") shall offer to the other (the "Offeree")
the opportunity to participate in such venture in a manner
commensurate with the Offeree's role under this Agreement
(including the right of Novation to create other contract
portfolios similar to the Novation Contract Portfolio or to
recruit suppliers for such venture). The Offeror shall provide
full information to the Offeree regarding the venture, and
shall make its senior executives available to meet with the
Offeree to discuss the venture. The Offeror shall also notify
the Offeree of such venture a reasonable time prior to
commencement of the venture (but in no event less than 60 days
prior to the date on which the Offeree must decide to
participate). If after consideration the Offeree declines to
participate in such venture, then, notwithstanding Section 6.1
or 6.2, as the case may be, the Offeror may proceed with such
venture, but solely in that market or country, and on no less
favorable terms and conditions in the aggregate as had been
offered to the Offeree. In addition, the Offeree shall be
released from its obligations under Section 6.1 or 6.2, as the
case may be, but solely in respect of the market or country
that was the subject of such Offer. If the Offeror
subsequently does not consummate the venture, and the Offeror
wishes to commence another venture in the same market or
country, the Offeror must once again offer such opportunity to
the Offeree. The Offeror shall have no obligation to share any
fees earned in a venture in which the Offeree has not elected
to participate.
6.3.2 Business development representatives of Neoforma and Novation
shall meet on a quarterly basis to review existing
opportunities in foreign markets and countries and to review
existing opportunities in markets not then served by a
Customized Marketplace. Such representatives shall prepare a
joint plan to identify and exploit such other opportunities in
foreign markets and in other healthcare markets. Any right of
an Offeror to proceed with a venture under Subsection 6.3.1
without the Offeree shall be conditioned on such Offeror's
compliance with this Subsection 6.3.2.
6.4 First Offer for Non-Exclusive Services.
6.4.1 The term "Non-Exclusive Service(s)" means Internet-related
services available primarily through Neoforma that are outside
the scope of Section 6.1, including, without limitation, the
products and services excluded from the definition of Supply
Chain Management Services as applied to UHC. For purposes of
clarification, Non-Exclusive Services will not include
Internet-related services the majority of which are provided
by an entity other than Neoforma. UHC shall give favorable
consideration to
18
Neoforma as a third-party provider to UHC of Non-Exclusive
Services as follows: if (i) UHC elects to provide for itself
or for the benefit of all or substantially all of UHC's
Members any new Non-Exclusive Service or (ii) UHC intends to
replace any agreement for the provision of a Non-Exclusive
Service then being provided to UHC by a third party, then UHC
shall first offer to Neoforma the opportunity to provide such
Non-Exclusive Service (the "Opportunity"). Promptly upon
becoming aware of an Opportunity, UHC shall send notice of the
Opportunity in electronic or paper writing to the Chief
Executive Officer of Neoforma, or his or her designate.
Promptly after receiving such notification, but in no less
than 15 days, Neoforma shall meet with UHC to discuss the
Opportunity and Neoforma's proposed role therein. Neoforma and
UHC shall continue to meet and discuss the Opportunity for the
30-day period commencing upon UHC's notification to Neoforma.
Neither UHC nor Neoforma will have any obligation to meet and
to discuss the Opportunity (i) if Neoforma does not meet with
UHC within the time required, or (ii) after the expiration of
the 30-day discussion period. The communication by UHC to
Neoforma of any Opportunity, including the ideas, concepts or
other intellectual property contained therein, will be
Confidential Information subject to Section 11.
6.4.2 For the avoidance of doubt and notwithstanding anything to the
contrary in this Agreement, in no event will UHC be required to
obtain any Non-Exclusive Service from Neoforma.
7. LICENSES AND OWNERSHIP
7.1 Ownership of Marks. Each party will own and retain all right, title
and interest in and to its intellectual property, including its
trademarks, trade names, service marks and logos ("Marks") worldwide,
as specified in Exhibit A.
7.2 Novation Marks. Subject to the terms of this Agreement, Novation
grants to Neoforma, VHA, UHC and HPPI a worldwide, nontransferable,
non-exclusive, royalty-free license to use, transmit and display
Novation's Marks in connection with the Marketplaces during the Term
of this Agreement, provided that such use is in accordance with
Novation's then-current trademark usage guidelines. A copy of
Novation's current trademark usage guidelines is attached as Exhibit
B. Upon any change in such guidelines, Novation will promptly provide
to Neoforma a copy of such revised usage guidelines. Neoforma will not
modify the Novation Marks or combine any of the Novation Marks with
any other xxxx or term. Subject to the provisions of Section 9.9, upon
termination or expiration of this Agreement, Neoforma will cease all
use of the Novation Marks.
7.3 Neoforma Marks. Subject to the terms of this Agreement, Neoforma
grants to Novation, VHA, UHC and HPPI a worldwide, nontransferable,
non-exclusive,
19
royalty-free license to use, transmit and display Neoforma's Marks
during the Term only in promotional materials used to encourage
participation on the Marketplaces, provided that such use is in
accordance with Neoforma's then-current trademark usage guidelines. A
copy of Neoforma's current trademark usage guidelines is attached as
Exhibit C. Upon any change in such guidelines, Neoforma will promptly
provide to Novation, VHA, UHC and HPPI a copy of such revised usage
guidelines. Except as authorized under this Agreement, Novation, VHA,
UHC and HPPI will not modify any of the Neoforma Marks or combine the
Neoforma Marks with any other xxxx or term. Subject to the provisions
of Section 9.9, upon the termination or expiration of this Agreement,
Novation, VHA, UHC and HPPI will cease all use of the Neoforma Marks.
7.4 VHA, UHC and HPPI Marks. Subject to the terms of this Agreement, each
of VHA, UHC and HPPI grants to Novation and Neoforma a worldwide,
nontransferable, non-exclusive, royalty-free license to use, transmit
and display its Marks solely to promote the Marketplaces to the
Members during the Term, provided that such use is in accordance with
the then-current trademark usage guidelines of VHA, UHC and HPPI, as
the case may be. A copy of each of VHA's, UHC's and HPPI's current
trademark usage guidelines are attached as Exhibit D. Except as
authorized under this Agreement, Neoforma and Novation will not modify
any of the Marks of VHA, UHC and HPPI or combine any of them with any
other xxxx or term. Subject to the provisions of Section 9.9, upon the
termination or expiration of this Agreement, Neoforma and Novation
will cease all use of VHA's, UHC's and HPPI's Marks.
7.5 Ownership of Neoforma Materials and Novation Materials. Neoforma and
Novation will own and retain all worldwide right, title and interest
in and to the Neoforma Materials and Novation Materials, respectively.
Neither Neoforma nor Novation will alter or delete any copyright or
other proprietary notice that may appear in the other party's
Materials without prior written consent of such party.
7.6 Neoforma Materials. Neoforma grants to Novation a worldwide,
nontransferable, non-exclusive, royalty-free license to use the
Neoforma Materials only in promotional materials used to encourage
participation on the Marketplaces.
7.7 Novation Materials. Novation grants to Neoforma a worldwide,
nontransferable, non-exclusive, royalty-free license to use the
Novation Materials on the Marketplaces during the Term solely to
enable Neoforma to provide the Services contemplated under this
Agreement.
7.8 Development of Tools. From time to time during the Term, Novation may
request Neoforma to design Tools for Members or Suppliers in addition
to the Tools, functions and APIs, which will be mutually agreed upon
and contained in the Functionality Roadmap. Within a reasonable time
after such request, appropriate personnel from Novation and Neoforma
will meet to discuss and draft technical specifications for the
desired customized Tools, functions and APIs.
20
7.8.1 If the Tool, function or API requested by Novation
will be used by all Users of the Customized
Marketplaces, Neoforma will develop such Tool,
function or API promptly and at its own expense.
Neoforma will own and retain all right, title and
interest to all the intellectual property, including
the source code, object code and other Confidential
Information, in and to the Neoforma developed Tools,
functions and APIs.
7.8.2 If Neoforma does not otherwise agree to develop such
Tool, function or API for use by all Users of the
Customized Marketplaces, Novation may, in its sole
discretion, agree to pay for the development of such
Tool, function or API. If Novation agrees to pay
Neoforma for the development of such Tool, function
or API, Neoforma will promptly endeavor to develop
such requested Tool, function or API, and Novation
will own all right, title and interest to all the
intellectual property, including all source code,
object code and other Confidential Information, in
and to such Tools, functions and APIs. Any fees
charged to Novation for development of any Tool,
function or API shall be provided by Neoforma at the
most favorable fee Neoforma charges to any other
person for such development or integration services.
7.8.3 Nothing in this Section 7.8 shall limit Neoforma's
obligation to provide the Services as shall be set
forth in the Functionality Roadmap.
7.9 Access License. Neoforma grants to Novation a non-exclusive,
worldwide, non-assignable license to members of Novation and
HPPI in order to access the Novation Marketplace and HPPI
Marketplace. Novation and HPPI grant to Neoforma a
non-exclusive, worldwide, non-assignable license to access the
Novation and HPPI web sites and computer systems solely to
enable Neoforma to provide the services contemplated under
this Agreement.
8. FEES AND TAXES
8.1 Fees.
8.1.1 Neoforma and Novation shall each use its reasonable
best efforts to collect all Transaction Fees required
to be paid by each Supplier.
8.1.2 Novation * to Neoforma aggregate minimum Novation
Marketplace Transaction Fees, which shall be
calculated as a percentage (the "Supplier Target
Percentage") of the * on a * basis as set forth in
Exhibit G (the "Minimum Fees"). Subject to Section
3.8 and Subsection 8.1.3, Novation shall pay to
Neoforma the *, if any, in any * the * calculated in
accordance with this Section 8.1.2 and the *
recognized by Neoforma in accordance with GAAP for
such * (each such payment, a " * ").
_______________________
* Confidential treatment requested.
21
8.1.3 Notwithstanding anything in this Agreement to the
contrary (except, with respect to clauses (ii)-(v)
below, any prior period * amounts or "*" payable
pursuant to Section 8.3 below), Novation shall not be
responsible for any *: (i) to the extent that any
part of the * results from the * by a * of its
agreement with Neoforma as a result of Neoforma's *
of such *, (ii) during the period commencing on * and
ending *, to the extent that the * in any * for that
* in Exhibit H; (iii) during the period commencing on
* and ending *, to the extent that the aggregate * in
that * exceed * of Novation's * for that *, (iv)
during the period commencing on * and ending *, to
the extent that the aggregate * in that * exceed *
of Novation's * for that *, or (v) for * periods
beginning on *, to the extent that the aggregate * in
any * exceed * of Novation's * for that *; provided,
however, that (A) the * in clauses (iii), (iv) and
(v) above may be adjusted from time to time pursuant
to Section 8.5; (B) any such * adjustment shall not
result in a *; and (C) the * of Novation's * amount
for such applicable * shall be further reduced by $*
in *, $* in *, $* in *, $* in * and $* in *.
8.1.4 In the event that Novation notifies Neoforma that its
obligations under Section 8.1.2 are limited by
Section 8.1.3(iii), Section 8.1.3(iv) or Section
8.1.3(v), Neoforma may request in writing Novation's
financial statements for the applicable *. Novation
shall provide to Neoforma relevant financial
statements in sufficient detail to verify Novation's
* for such * within a reasonable period of time
following such request from Neoforma.
8.2 Revenue Sharing.
8.2.1 The parties have agreed to the Target Fee Levels (the
"Target Fee Levels"), set forth in Exhibit I.
8.2.2 Neoforma shall pay to Novation * of any Novation
Marketplace Transaction Fees recognized by Neoforma
in accordance with GAAP in excess of the Target Fee
Level for any given *, but only if Novation has
fulfilled its obligations under Subsection 8.1.2.
8.2.3 Subject to Section 8.2.2, Neoforma shall retain all
revenues it earns and collects, and Novation shall
pay to Neoforma within thirty (30) days after the end
of each *, all revenues earned by Neoforma but
_______________________
* Confidential treatment requested.
22
* (as the case may be) for the provision of the
Customized Marketplaces during that *, including all
* and *, and revenue that would otherwise be subject
to revenue sharing pursuant to Section *.
8.3 Establishment of * and * Payment Thereof. Neoforma and
Novation shall meet and agree on or before * of * on the *
for the subsequent * pursuant to Sections 8.1.2 and 8.1.3 (the
"*"). On the * of each * month, Novation shall * to Neoforma
an amount equal to * of that * payable pursuant to Sections
8.1.2 and 8.1.3. The agreed * payment amounts and schedule for
such * for the remainder of * are set forth in Exhibit J.
Beginning in *, on or before * , Neoforma and Novation shall
meet and agree on the * of any "*" required to the * for the
preceding * pursuant to Sections 8.1.2 and 8.1.3 based on
Novation's * in such *. Neoforma and Novation shall apply any
such "*" to subsequent * as mutually agreed to by them.
Beginning in *, on or before *, Novation and Neoforma shall
meet and agree on the * for the subsequent * pursuant to
Sections 8.1.2 and 8.1.3.
8.4 Reporting and Calculation of Fees and Revenue Sharing. To
fulfill the obligations of Novation and Neoforma under Section
8.3 to agree on estimated and actual *, before any meeting
conducted pursuant to Section 8.3: (a) Novation will provide
Neoforma with a written report of: (i) Novation's * or any
other adjustment amounts that may be applicable pursuant to
Section 8.1.3; and (ii) the revenues received by Novation for
the provision of the Customized Marketplace (including * and
*); and (b) Neoforma will provide each of Novation, VHA and
UHC, with a written report of: (i) aggregate Adjusted Gross
Transaction Values and Supply Chain Data Transaction Values
for all purchases, rentals and leases of Products through the
Novation Marketplace, (ii) the aggregate amount of any
Transaction Fees received by Neoforma, (iii) the aggregate
amount of any Novation Marketplace Transaction Fees received
by Neoforma; (iv) the information set forth in Exhibit E and
such other information as Novation may reasonably request; (v)
revenue received by Neoforma from distribution or licensing of
software and other technology solutions; and (vi) revenue
received by Neoforma associated with Section 8.9 below.
Neoforma and Novation shall then jointly calculate: (i) the
Minimum Fees, (ii) any revenue sharing amounts under Sections
8.2, 8.9, and 8.10, (iii) any *
____________________
* Confidential treatment requested.
23
payable pursuant to Subsection 8.1.2, subject to Section
8.1.3, and (iv) any other fees to be paid by a party
hereunder.
8.5 *.
-
8.5.1 Right to *. Beginning on * and from time to time
thereafter, either Novation or Neoforma may initiate
an * (the "* Process") in order to *.
8.5.2 * Process. In the case of a general * Process, (i)
either Novation or Neoforma may select and hire a *,
which * shall be reasonably acceptable to the other
party, and the party selecting such * shall pay all
costs associated with the * Process; or (ii) Novation
and Neoforma shall mutually agree upon an
independent, third party * and Novation and Neoforma
shall share all costs associated with such shared *.
In addition, in the case of a * Process with respect
to Supplier Target Percentages, or if Neoforma and
Novation otherwise agree with respect to a general *
Process, Neoforma and Novation may rely on publicly
available information in carrying out the * Process,
and to carry out the * Process without the use of a
third-party *. The Parties shall cooperate to
facilitate the * Process, including by providing
reasonable information as is necessary to conduct the
* Process.
8.5.3 General *. The * Process for general items shall *
(i) with respect to Neoforma, the * provided by
Neoforma to Novation, the * offered to Members, the *
offered to Suppliers, the * of the Services, and
Neoforma's * incurred in performing its obligations
under this Agreement and (ii) with respect to
Novation, the * by Novation of its agency obligations
pursuant to Section * and the * for any * as provided
in Subsection * and, in each case, shall be based
upon a *, including, without limitation, relative *.
If the * Results indicate that the * by Novation or
Neoforma, as the case may be, are not "*," Neoforma
and Novation shall promptly meet and enter into a
good faith negotiation to determine whether there
should be an *.
8.5.4 *. The * Process with respect to * shall be based
upon review of whether such * are "*". If the *
Results indicate that the * in place during the
period examined are not "*," then Neoforma and
Novation shall promptly meet and * such * so that
they are *. For the avoidance of doubt, the parties
agree that "*" shall mean that (i) * are reasonably
likely to agree to pay such fees at such time or (ii)
such *.
8.5.5 * Results. Within 30 days after the completion of any
* Process, the *, if any, shall deliver the results
of the * (the "* Results") in a written report,
including identification of the *, to Novation and
Neoforma. In the event
_______________________
* Confidential treatment requested.
24
that the * Process does not utilize a third-party *,
the party initiating the * Process shall be
responsible for writing and delivering such report of
the * Results to the other party.
8.5.6 * Review Period. For a period of 60 days following
delivery of the * Results from the * (the "* Review
Period"), Novation and Neoforma shall review the *
Results, and schedule one or more meetings to address
any issues either Party may have with the * Results.
8.5.7 * Dispute. In the event Novation and Neoforma in good
faith dispute the * Results or if Novation and
Neoforma have not reached agreement after the *
Review Period, Novation may dispute such outcome in
accordance with the provisions of Section 18 hereto.
8.6 Taxes. Neoforma and Novation shall cooperate to minimize any
local, state, national and foreign taxes (including, without
limitation, sales, use and VAT taxes which may apply),
licenses, export/import fees and any other fees or similar
obligations relating to any sale, rental or lease of a
Contract Product through the Marketplaces or relating to the
Supply Chain Data. If in the future any such taxes or similar
obligations are required to be paid by Neoforma or Novation in
respect of Contract Products, such fees shall be shared by
Neoforma and Novation proportionately based on revenues each
derives from the Novation Marketplace and HPPI Marketplace. In
no event shall Novation be required to share any taxes under
this Section 8.6 for Products other than Products for which
Novation receives Novation Marketplace Transaction Fees.
8.7 New Markets. If Neoforma and Novation agree pursuant to
Section 6.3 to enter any other healthcare market (other than
the United States acute care market) that is not then served
by a Customized Marketplace or that is in countries outside of
the United States, Neoforma and Novation shall negotiate in
good faith to set the Transaction Fees to be paid in respect
of such products to be purchased, rented and leased on such
Customized Marketplace.
8.8 Product Returns. Neoforma and Novation will cooperate in good
faith to make any adjustments to the fees to be paid hereunder
to reflect Products that have been returned by Users.
8.9 Neoforma * and * and *. Beginning *, Neoforma shall pay to
Novation on a * basis * by Neoforma * from (i) Neoforma *),
(ii) other * (excluding *, and *), and (iii) all * of * from
*.
8.10 *. Neoforma will pay to Novation * by Neoforma *, whether to
buyers or suppliers, but not including * in any way related to
Neoforma *. For the
_______________________
* Confidential treatment requested.
25
avoidance of doubt, the parties agree that this Section 8.10
shall not limit the scope of Section 6.2.1.
8.11 Other Expenses. Neither Neoforma nor Novation shall be
required to pay to the other party any amounts for the
performance of their respective obligations hereunder other
than those expressly set forth in this Agreement.
8.12 VHA/UHC Allocation. VHA and UHC agree to allocate between
themselves (i) any obligation of Novation to pay Shortfall
Payments pursuant to Section 8.1.2 and (ii) any fees received
by Novation pursuant to Section 8.2.2, 8.9, 8.10, 10.6.3, or
16.3 as follows:
(i) with respect to *, * to VHA and * to UHC;
(ii) with respect to each succeeding *, VHA's allocation
shall be a fraction (A) the numerator of which is the
sum of the aggregate dollar amount of VHA's Members'
purchases through Novation, plus * of the aggregate
dollar amount of all purchases through HPPI, and (B)
the denominator of which is the sum of the aggregate
dollar amount of both VHA's and UHC's Members'
purchases through Novation, plus * of the aggregate
dollar amount of all purchases through HPPI, in each
case during the immediately preceding calendar year
and excluding purchases through VHA's Care Continuum
Program or any similar program operated by UHC; and
(iii) with respect to each succeeding *, UHC's allocation
shall be a fraction (A) the numerator of which is the
sum of the aggregate dollar amount of UHC's Members'
purchases through Novation, plus * of the aggregate
dollar amount of all purchases through HPPI, and (B)
the denominator of which is the sum of the aggregate
dollar amount of both VHA's and UHC's Members'
purchases through Novation, plus * of the aggregate
dollar amount of all purchases through HPPI, in each
case during the immediately preceding calendar year
and excluding purchases through VHA's Care Continuum
Program or any similar program operated by UHC.
9. TERM AND TERMINATION
9.1 Initial Term. This Agreement commences on the Original
Effective Date and will remain in effect for an initial term
of 10 years (the "Initial Term"), unless terminated earlier in
accordance with the terms of this Agreement.
_______________________
* Confidential treatment requested.
26
9.2 Renewal and Extension of Term. This Agreement will
automatically renew for successive one-year terms after the
completion of the Initial Term (each a "Renewal Term") unless
Neoforma or Novation provides written notice of its intention
to terminate this Agreement to the other at least 90 days
prior to the end of the Initial Term or any then-current
Renewal Term. The Initial Term and any and all renewals or
extensions thereof and any Termination Assistance Period are
referred to herein as the "Term".
9.3 Termination for Cause. Each of Neoforma and Novation, after
complying with Section 18.2 hereunder, will have the right to
terminate this Agreement if the other party materially
breaches (i) its service obligations under this Agreement or
(ii) its exclusivity obligations under Section 6 of this
Agreement, unless the breaching party (x) cures such breach
within 30 days after receiving written notice or (y) if such
breach is not curable within 30 days, makes substantial
progress in curing such breach within 30 days and cures such
breach within 90 days. Any repeated or sustained failure of
Neoforma to meet its Service Level obligations hereunder shall
constitute a material breach of Neoforma's service obligations
under Subsection (i) hereunder.
9.4 Termination for Insolvency Events. If either Neoforma or
Novation is unable to obtain credit from any creditors,
becomes insolvent, makes an assignment for the benefit of its
creditors, or becomes the subject of a proceeding under Title
11 of the United States Code, as amended, or becomes the
subject of similar state court proceedings, then in any such
case, the other party, or in the case of Neoforma, VHA, UHC or
HPPI, may, without prejudice to any other rights, immediately
terminate this Agreement or, if such termination is subject to
any statutory provision or judicial order staying such action,
seek leave to modify such stay so as to terminate this
Agreement. Each of Neoforma and Novation acknowledges and
agrees that its insolvency, the making of an assignment for
the benefit of its creditors, or its becoming the subject of a
proceeding under Title 11 of the United States Code, is
"cause" for the termination of any statutory or judicial stay
of the rights of the other party hereunder to terminate this
Agreement. Each of Neoforma and Novation acknowledges and
agrees that, in such event, it could not provide "adequate
protection" to the other party, or in the case of Neoforma, to
VHA, UHC or HPPI, that the continued imposition of a stay
would likely cause irreparable harm to the other party, and
the continued imposition of a stay would adversely affect the
health, safety and welfare of communities served by the
parties hereto.
9.5 Termination for Rejection in Bankruptcy. Each of Neoforma and
Novation will have the right to immediately terminate this
Agreement if the other party becomes a debtor or an alleged
debtor in a case under Title 11 of the United States Code, as
amended, and in such proceeding this Agreement is rejected in
such case in accordance with Title 11 of the United States
Code.
27
9.6 Termination Upon Neoforma Change of Control. Novation may
terminate this Agreement upon any Neoforma Change of Control.
9.7 Return of Materials. Subject to Section 9.8, upon termination
or expiration of this Agreement for any reason, each of
Neoforma and Novation shall promptly return to the other
party, and shall not take, use or disclose, all Products of
any nature that belong to the other party and all records (in
any form, format or medium) containing or relating to Neoforma
Materials or Novation Materials or the Confidential
Information of the other party.
9.8 Survival. The provisions of Sections 7.1, 7.5, 8.4, 9.7, 9.8,
9.9, 9.10, 10, 11, 15, 16, 17, 18, 19 and 20 will survive
termination or expiration of this Agreement for any reason.
9.9 Termination Assistance Services.
9.9.1 General. Upon any termination or expiration of this
Agreement, Neoforma shall provide termination
assistance and shall comply with the reasonable
directions of Novation, or, if applicable, VHA or
UHC, to allow the Services to continue without
interruption or adverse effect and to facilitate the
orderly transition and migration of all Services then
being performed by Neoforma, including any transition
and migration from Neoforma to Novation or, if
applicable, VHA and UHC, (or a third-party provider
undertaking, on behalf of Novation, VHA or UHC, to
provide the Services) (the "Termination Assistance
Services"), all in accordance with this Section 9.
Additionally, all of Novation's, or, if applicable,
VHA's and UHC's, rights under this Agreement
(including, without limitation, the right to license
software hereunder), as such rights exist immediately
prior to any expiration or termination, but excluding
any right to share Novation Marketplace Transaction
Fees with Neoforma pursuant to Section 8, shall
continue during any Termination Assistance Period (as
defined in Section 9.9.2). Novation or, if
applicable, VHA and UHC, shall cooperate in good
faith with Neoforma in connection with Neoforma's
obligations under this Section 9.
9.9.2 Termination Assistance Period. Neoforma shall
commence providing Termination Assistance Services
(i) with respect to the scheduled expiration of this
Agreement, 90 days prior to such scheduled expiration
or such earlier date as Novation may reasonably
request, and (ii) with respect to any termination of
this Agreement, upon the delivery of the notice of
termination. Neoforma shall continue providing
Termination Assistance Services through the effective
date of the expiration or termination of this
Agreement and for a period of not less than * days
thereafter (the "Termination Assistance Period").
Upon at least 30 days prior written notice to
Neoforma, Novation or, if applicable, each of VHA
_______________________
* Confidential treatment requested.
28
and UHC, may extend, from time to time, the
Termination Assistance Period for an additional
* period. During any Termination Assistance
Period, Neoforma shall provide, at Novation's
request, or, if applicable, VHA's or UHC's request,
as applicable, as part of the Termination Assistance
Services, any or all of the Services being provided
by Neoforma prior to the date of the expiration or
termination of this Agreement.
9.9.3 Termination Plan. Neoforma and Novation or, if
applicable, VHA and UHC, shall cooperate in good
faith to develop a termination plan setting forth the
respective tasks to be accomplished by each party in
connection with the termination and a schedule
pursuant to which such tasks are to be completed in
accordance with the Termination Assistance Services
(collectively, the "Termination Plan").
9.9.4 Certain Licenses. As of the Original Effective Date,
Neoforma shall grant the following to Novation:
(i) a * license to all third-party software that
is required to provide the Services, to the
extent Neoforma is entitled to sublicense
such software, and to the extent Neoforma is
not entitled to sublicense such software,
Neoforma shall provide a list of all
third-party software licenses that are
required to provide the Services and shall
assist Novation in licensing a substantially
similar software at a commercially
reasonable price; and
(ii) a * license, solely for Novation's internal
use, to all Neoforma-owned software that is
required to provide the Services. For the
avoidance of doubt, "internal use" as used
in this Section 9.9.4 shall include the
right of other Internet marketplaces or
providers to use the software solely on
behalf of Novation for its Members. In
addition, Neoforma shall provide to Novation
consulting services, at no charge to
Novation, as may be reasonably required in
order to recreate the Marketplace
environment for Novation.
(iii) Additionally, if at any time after the
Original Effective Date Neoforma begins
using any software to provide the Services,
then Neoforma shall be deemed to have
granted, as of the first date on which such
software is used to provide the Services and
for so long as such software is either used
or required to provide the Services, the
following licenses to Novation: (x) with
respect to third-party software, a * license
to such software, to the extent Neoforma is
entitled to sublicense such software, and
(y) with respect to
_______________________
* Confidential treatment requested.
29
Neoforma-owned software, a * license, solely
for Novation's internal use, to such
software.
(iv) Notwithstanding the other provisions in this
Section 9.9.4, Novation shall not use such
licenses until the effective date of the
termination of this Agreement in accordance
with Section 9.3, 9.4, or 9.5.
9.9.5 Equitable Remedies. Neoforma acknowledges that, if it
breaches (or attempts or threatens to breach) its
obligation to provide Novation or, if applicable, VHA
and UHC, Termination Assistance Services in
accordance with this Section 9.9, Novation or, if
applicable, VHA and UHC, will be irreparably harmed.
In such circumstance, and notwithstanding the
provisions of Section 18, Novation or, if applicable,
each of VHA and UHC, may proceed directly to court.
If a court of competent jurisdiction should find that
Neoforma has breached (or attempted or threatened to
breach) any such obligations, Neoforma agrees that
even without any additional findings of irreparable
injury or other conditions to injunctive relief, it
shall not oppose the entry of an appropriate order
compelling performance by Neoforma restraining it
from further breaches (or attempted or threatened
breaches).
9.10 Third Party Products. Notwithstanding anything in this
Agreement to the contrary, prior to entering any agreement
with a third party for the provision of software (other than
providers of off the shelf software) (the "Third Party
Products"), Neoforma shall use commercially reasonable and
good faith efforts to obtain the agreement of each provider of
a Third Party Product that such Third Party Product may be
assigned and/or sublicensed without additional charge to each
and any of Neoforma, VHA or UHC. If Neoforma is not able to
obtain such written agreement or, in the event that Neoforma
is informed that such provision will be made available on at
additional cost to Neoforma, Neoforma shall promptly provide
notice of such to each of Novation, VHA and UHC, setting forth
with particularity in such notice the nature of the proposed
Third Party Product, the nature of the assignment and/or
sublicense proposed, the agreement to be signed and, if
applicable, the additional cost for the required assignment
and/or sublicense provision. Each of Novation, VHA and UHC
shall have one business day after the receipt of such notice
from Neoforma to advise Neoforma as to whether Novation, VHA
or UHC, or any of them or any combination of them, agrees to
pay the additional cost involved for the proposed assignment
and/or sublicense provision. Failure of Novation, VHA or UHC
to advise Neoforma of its decision within one business day
after the receipt of notice from Neoforma shall be deemed an
affirmative refusal to pay additional amounts required to
obtain the proffered assignment and/or sublicense provision
and,
_______________________
* Confidential treatment requested.
30
provided that the agreement is not materially modified in a manner
that might cause the sublicense and/or assignment provision to be
renegotiated in a manner more favorable to Novation, VHA or UHC,
Neoforma may proceed to enter into the agreement for such Third Party
Product without further obligation to Novation, VHA or Neoforma under
this Section 9.10.
10. USER DATA
10.1 Registration. Users who are representatives of Members will be
required to register as a representative of a Member prior to using
the Novation Marketplace. To effect such registration, Neoforma will
require that each Member or other User complete a registration form in
form and substance reasonably acceptable to Novation, which form shall
request, among other things, submission of contact information
regarding the User, including, without limitation, the User's name,
name of the Member organization, mailing address, and email address.
Neoforma will verify such information against the on-line data base
information made available by Novation and ensure that such
registration is authorized in accordance with registration and
password issuance and protection procedures acceptable to Neoforma and
in accordance with the Functionality Roadmap to be mutually agreed
upon. Neoforma will store data collected during registration as part
of the Information in the Transaction Database.
10.2 Transaction Database. Neoforma will create and maintain the
Transaction Database relating to all activity occurring on the
Novation Marketplace and relating to Supply Chain Data in accordance
with the Functionality Roadmap to be mutually agreed upon. Novation
and Neoforma shall only use Information in accordance with the
provisions of this Section 10. Neoforma shall at all times make all
Information available to Novation in any manner that it is, or can
reasonably be, made available.
10.3 Member Data. Members shall own their respective Member Data. Novation
will use commercially reasonable efforts to acquire a nonexclusive,
non-transferable license from Members (or sublicense from VHA, UHC or
HPPI) to permit:
(i) Novation to access and use such Member Data for, among other
things, (A) legal compliance purposes, (B) to track the
performance of Suppliers, (C) to be able to track payments to
VHA, UHC and HPPI and cooperative payments to the Members, (D) to
consult with each of the Members and (E) to promote utilization
and standardization among Members; and
(ii) Neoforma to use such Member Data provided that such use is (A)
solely related to the performance of Neoforma's obligations
pursuant to this Agreement and (B) in accordance with the
confidentiality provisions of Section 11.
31
10.4 Aggregated Member Data. Subject to the receipt of a license or
sublicense for use of the Member Data, Novation shall own the
Aggregated Member Data.
10.5 Transaction Database. Subject to the ownership rights of the Members
in Member Data and of Novation in Aggregated Member Data, Neoforma
shall own the derivative works created by using the Member Data and
the Aggregated Member Data, provided that no such information may be
used by Neoforma other than subject to the following conditions:
(i) in accordance with the license or sublicense to be obtained from
Members in accordance with the provisions of Subsection 10.3
(ii); or
(ii) is provided as Blinded Aggregated Data.
10.6 License Grant of Information to Novation.
10.6.1 Subject to the terms and conditions of this Agreement, Neoforma
hereby grants to Novation a nonexclusive, non-transferable
license during the Term to access and use the Information and
Blinded Aggregated Data; provided, however, that (i) such use
is solely for Novation's internal use and for the
sublicensing of the use of such data to VHA, UHC and HPPI for
their use in serving the needs of their Members (provided that
a party may not license, sell or otherwise make available the
Information), (ii) such use complies with the privacy policy in
existence on the Novation Marketplace at the time of such use
and (iii) Novation, VHA, UHC and HPPI each treat such
Information as Confidential Information subject to Section 11
of this Agreement.
10.6.2 Subject to the terms and conditions of this Agreement, Neoforma
hereby grants to Novation a nonexclusive, non-transferable
license, as agent, to sublicense the Information described in
Section 10.5 to Suppliers.
10.6.3 With respect to the Information sublicensed by Novation under
Subsection 10.6.2, Novation will keep * of the gross license
fees and the remaining * of such license fees shall be paid to
Neoforma.
10.7 No Other Licenses or Use. Except as expressly set forth in this
Xxxxxxx 00, xxxx of the Members, Novation or Neoforma grants any
license, express or implied, in the Member Data, Aggregated Member
Data or Information. The failure to abide by the terms and conditions
of this Section 10 shall constitute a material default of this
Agreement.
___________________________
* Confidential treatment requested.
32
10.8 Other Data. Neoforma and Novation acknowledge that all other data that
a party gathers or develops independent of this Agreement shall not be
covered by this Agreement, provided that Neoforma shall not solicit
any information from a Member without fully disclosing to the Member
all intended uses for which such information is being collected and
will be used.
10.9 Neoforma Information. Notwithstanding anything herein to the contrary,
Neoforma may use the Neoforma Information in any manner that it
chooses, provided that such information does not include Member Data
or Aggregated Member Data.
11. SAFEGUARDING OF DATA; CONFIDENTIALITY
11.1 Novation Data.
11.1.1 Generally. As between Neoforma and its Affiliates, on the one
hand, and Novation and its Affiliates, on the other hand,
information relating to Novation, VHA or UHC or their
respective Affiliates, Members or customers, whether or not
marked "confidential" and whether disclosed in tangible or in
intangible (e.g., oral or visual) form, including, without
limitation, (i) information regarding the operations, affairs
and business of Novation, VHA or UHC, or their respective
Affiliates, Members or customers, (ii) Novation Materials and
(iii) all Transaction Data, except as provided in Section 10,
(collectively, the "Novation Data") is confidential and will be
subject to Section 11.2. Novation Data is the property of
Novation, VHA or UHC, or their respective Affiliates, Members
or customers. Neoforma shall have access to and may make use of
Novation Data to the extent reasonably necessary to perform
obligations under this Agreement. Neoforma shall not, its
however, use Novation Data for any purpose other than providing
Services, except as provided in Section 10. Upon termination or
expiration of this Agreement for any reason, or upon Novation's
request, Neoforma shall promptly return to Novation all of the
Novation Data in Neoforma's possession (including backup or
archival copies).
11.1.2 Safeguarding of Data. Neoforma shall maintain appropriate
safeguards, consistent with prevailing industry standards,
against the destruction, inappropriate disclosure, wrongful
access or use, loss or alteration of the Novation Data in the
possession of Neoforma. In any event, Neoforma shall maintain
safeguards that are no less rigorous than those maintained by
Neoforma for its own information of a similar nature and, in no
event, less than a reasonable level of safeguards.
33
11.2 Confidentiality.
11.2.1 Confidential Information. "Confidential Information" means (i)
business or technical information of any party, including,
without limitation, information relating to a party's product
plans, designs, costs, product prices, finances, marketing
plans, business opportunities, personnel, research,
development, know-how or the pricing information available to
Members, (ii) any information communicated with respect to an
Opportunity, including the ideas, concepts or other
intellectual property contained therein, (iii) any
information designated "confidential" or "proprietary" or
which, under the circumstances, should reasonably have been
understood to be confidential, (iv) Novation Data and (v)
the terms and conditions of this Agreement.
11.2.2 Confidentiality Obligations. Each party agrees that (i) it will
not use or disclose to any other party or third person
including its Affiliates any Confidential Information
disclosed to it by any other party except as contemplated by
this Agreement and (ii) it will take all reasonable measures to
maintain the confidentiality of all Confidential Information of
each other party in its possession or control, which will in no
event be less than the measures it uses to maintain the
confidentiality of its own information of similar importance.
11.2.3 Exclusions. Subsection 11.2.2 will not prevent a party from
disclosing Information that (i) is owned by such party or its
Affiliates or is already known by the recipient party or its
Affiliates without an obligation of confidentiality other than
under this Agreement, (ii) is publicly known or becomes
publicly known through no unauthorized act of the recipient
party, (iii) is rightfully received from a third party,
provided that the source is not known to be bound by a
confidentiality agreement or (iv) is independently developed by
employees of a party or an Affiliate of a party without use of
the other party's Confidential Information. If Confidential
Information is required to be disclosed pursuant to a
requirement of a governmental authority, such Confidential
Information may be disclosed pursuant to such requirement so
long as the party required to disclose the Confidential
Information, to the extent possible, (i) provides the party
that owns the Confidential Information with timely prior notice
of such requirement and coordinates with such other party in an
effort to limit the nature and scope of such required
disclosure and (ii) uses commercially reasonable efforts to
ensure that, within applicable law, such Confidential
Information will not be further disclosed. If Confidential
Information is required to be disclosed in connection with the
conduct of any arbitration proceeding conducted pursuant
to Section 18, such Confidential Information may be disclosed
pursuant to and in accordance with the approval and at the
direction of the arbitrator conducting such proceeding. Upon
written request at the termination or expiration of this
Agreement
34
for any reason, all such Confidential Information in tangible
form (and all copies thereof) owned by the requesting party or
its Affiliates will be returned to the requesting party or
at the requesting party's option will be destroyed, with
written certification thereof being given to the requesting
party, and subject to any rights expressly granted to the
other party under this Agreement, the other party shall cease
all further use of any Confidential Information, whether
tangible or intangible.
11.2.4 No License. Nothing contained in this Section 11.2 will be
construed as obligating a party to disclose its Confidential
Information to another party, or as granting to or conferring
on a party, expressly or implied, any patent, copyright,
trademark, trade name, trade secret or other Intellectual
Property Rights or any license to the Confidential
Information of the other party.
11.2.5 Loss of Confidential Information. In the event of any breach
by the recipient party of this Section 11.2 that results in a
disclosure or loss of, or inability to account for, any
Confidential Information of the furnishing party, the
receiving party shall promptly, at its own expense, (i) notify
the furnishing party in writing, (ii) take such commercially
reasonable actions as may be necessary or reasonably
requested by the furnishing party to minimize the breach, and
(iii) cooperate in all reasonable respects with the furnishing
party to minimize the breach and any damage resulting
therefrom.
12. REPRESENTATIONS AND WARRANTIES
12.1 Representations by Neoforma. Neoforma represents and warrants to
Novation, VHA, UHC and HPPI that each of the following statements in
this Section 12.1 are true and correct as of the Effective Date of
this Agreement.
12.1.1 Due Organization. Neoforma is a corporation duly organized,
validly existing and in good standing under the laws of the
State of Delaware.
12.1.2 Authority; Non-Contravention.
(a) Neoforma has all requisite corporate power and
authority to enter into this Agreement and to perform
its obligations hereunder. The execution and delivery
of this Agreement and the consummation of the
transactions contemplated hereby have been duly
authorized by all necessary corporate action on the
part of Neoforma. This Agreement has been duly executed
and delivered by Neoforma, and it constitutes the valid
and binding obligation of Neoforma, enforceable against
Neoforma in accordance with its terms, except as
enforceability may be limited by bankruptcy and other
similar
35
laws affecting the rights of creditors generally and
general principles of equity.
(b) The execution and delivery of this Agreement by Neoforma
does not, and the performance of this Agreement by
Neoforma will not, (i) conflict with or violate the
Certificate of Incorporation or Bylaws of Neoforma, (ii)
conflict with or violate any law, rule, regulation,
order, judgment or decree applicable to Neoforma or by
which Neoforma or any of its properties is bound or
affected or (iii) result in any breach of or constitute
a default (or an event that with notice or lapse of time
or both would become a default) under, or impair
Neoforma's rights or alter the rights or obligations of
any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of,
or result in the creation of an encumbrance on any of
the properties or assets of Neoforma pursuant to, any
note, bond, mortgage, indenture, agreement, lease,
license, permit, franchise or other instrument or
obligation to which Neoforma is a party or by which
Neoforma or its assets is bound or affected, except, in
the case of clauses (ii) and (iii), for such conflicts,
violations, breaches, defaults, impairments, or rights
which, individually or in the aggregate, would not have
a material adverse effect on Neoforma.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with any governmental
entity is required to be obtained or made by Neoforma in
connection with the execution, delivery and performance of
this Agreement.
12.1.3 Performance. All Services will be performed in a professional
and workmanlike manner, consistent with the high professional
standards and practices prevailing in the Internet e-commerce
services industry.
12.2 Representations by Novation, VHA, UHC and HPPI. Each of Novation, VHA,
UHC and HPPI, severally and not jointly, represents and warrants to
Neoforma that the following statements made by it in this Section 12.2
are true and correct as of the Effective Date of this Agreement.
12.2.1 Due Organization. Novation is a limited liability company duly
organized, validly existing and in good standing under the laws
of the State of Delaware; UHC is a corporation duly organized,
validly existing and in good standing under the laws of the
State of Illinois; VHA is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware; HPPI is a limited liability company duly organized,
validly existing and in good standing under the laws of the
State of Delaware.
36
12.2.2 Authority; Non-Contravention.
(a) Each of Novation and HPPI has all requisite limited
liability company power and authority, and each of VHA and
UHC has all requisite corporate power and authority, to
enter into this Agreement and to perform its obligations
hereunder. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby
have been duly authorized by all necessary limited
liability company action on the parts of Novation and HPPI
and all necessary corporate action on the parts of VHA and
UHC. This Agreement has been duly executed and delivered by
Novation, VHA, UHC and HPPI, and it constitutes the valid
and binding obligation of each of Novation, VHA, UHC and
HPPI, enforceable against each of Novation, VHA, UHC and
HPPI in accordance with its terms, except as enforceability
may be limited by bankruptcy and other similar laws
affecting the rights of creditors generally and general
principles of equity.
(b) The execution and delivery of this Agreement by Novation,
VHA, UHC and HPPI does not, and the performance of this
Agreement by each of Novation, VHA, UHC and HPPI will not,
(i) conflict with or violate the limited liability company
and corporate organizational documents, respectively, (ii)
conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to Novation, VHA, UHC or HPPI
or by which Novation, VHA, UHC or HPPI, or any of their
respective properties are bound or affected, or (iii)
result in any breach of or constitute a default (or an
event that with notice or lapse of time or both would
become a default) under, or impair Novation's, VHA's, UHC's
or HPPI's rights or alter the rights or obligations of any
third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or
result in the creation of an encumbrance on any of the
properties or assets of Novation, VHA, UHC or HPPI pursuant
to, any note, bond, mortgage, indenture, agreement, lease,
license, permit, franchise or other instrument or
obligation to which Novation, VHA, UHC or HPPI is a party
or by which Novation, VHA, UHC or HPPI, or any of their
assets, is bound or affected, except, in the case of
clauses (ii) and (iii), for such conflicts, violations,
breaches, defaults, impairments, or rights which,
individually or in the aggregate, would not have a material
adverse effect on Novation, VHA, UHC and HPPI,
respectively.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with any governmental
entity is required to be obtained or made by Novation, VHA,
UHC or HPPI in connection with the execution, delivery and
performance of this Agreement.
37
12.3 Warranty Disclaimer. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT,
EACH PARTY DISCLAIMS ALL EXPRESS AND IMPLIED WARRANTIES, INCLUDING,
WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF NON-INFRINGEMENT,
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE.
13. USE OF SUBCONTRACTORS
13.1 Generally. Neoforma may subcontract its obligations under this
Agreement subject to the limitations imposed by this Section 13.1.
Neoforma shall not subcontract any of the following without the prior
written consent of Novation, such consent not to be unreasonably
withheld:
(i) any Services involving any contact or interface with Members,
including, without limitation, sales efforts, implementation and
integration and call center services; or
(ii) any Services to a Novation Competitor.
13.2 Novation's Right to Revoke Approval. Novation shall have the right
during the Term to revoke its prior approval of a subcontractor and
direct Neoforma to replace such subcontractor as soon as possible if
the subcontractor's performance is materially deficient, good faith
doubts exist concerning the subcontractor's ability to render future
performance because of changes in the subcontractor's ownership,
management, financial condition, or otherwise, or there have been
material misrepresentations by or concerning the subcontractor.
13.3 Continuing Responsibility. Neoforma shall remain responsible for
obligations performed by subcontractors to the same extent as if such
obligations were performed by Neoforma's employees. Neoforma shall be
Novation's sole point of contact regarding the Services, including
with respect to payment.
13.4 Confidential Information. Neoforma shall not disclose Confidential
Information of any of Novation, VHA, UHC or HPPI to a subcontractor
unless and until such subcontractor has agreed in writing to protect
the confidentiality of such Confidential Information as required of
Neoforma under this Agreement.
14. INSURANCE
14.1 Insurance. Each of Neoforma and Novation shall determine the types and
amounts of insurance coverage it requires in connection with this
Agreement, including, without limitation, general public liability,
property damage and workers compensation insurance. Neither Neoforma
nor Novation is required to obtain insurance for the benefit of the
other, including, without limitation, business interruption insurance.
Each of Neoforma and Novation will pay all
38
costs and receive all benefits under policies arranged by it, and each
waives rights of subrogation it may otherwise have regarding the
other's insurance policies.
14.2 Proof of Insurance. When requested by Neoforma or Novation, an
insurance certificate indicating the coverage described in Section
14.1, issued by an insurance company licensed to do business in the
relevant state or states and signed by an authorized agent, shall be
furnished by the insured party to the requesting party. Each of
Neoforma and Novation shall provide the other with at least 30 days
prior written notice of any cancellation or material modification of
such insurance.
15. INDEMNITY
15.1 Neoforma Indemnity. Subject to Section 15.4, Neoforma shall indemnify,
defend and hold harmless each of Novation, VHA, UHC and HPPI and each
of their Affiliates, officers, directors, employees, consultants and
agents from and against any and all damages, liabilities, claims,
actions, suits, proceedings, costs, charges and expenses, including
reasonable attorneys' fees (collectively, "Losses"), incurred or
sustained by any of such persons as a result of or from any
third-party claim relating to (i) any claims based on Neoforma's
confidentiality obligations contained in Section 11 or its warranties
contained in Section 12; (ii) the failure of Neoforma to perform any
of its obligations under any agreement between Neoforma and a third
party (including, without limitation, any agreements between Neoforma
and a Supplier); (iii) any claims arising out of Neoforma's breach of
this Agreement; (iv) any claim arising out of the death of or bodily
injury to any employee of any of Novation, VHA, UHC and HPPI and each
of their Affiliates (or their respective subcontractors) to the extent
caused by the negligence or willful misconduct of Neoforma or its
Affiliates; (v) the loss of or damage to the real or tangible personal
property (whether owned or leased) of each of Novation, VHA, UHC and
HPPI and each of their Affiliates, officers, directors, employees,
consultants and agents to the extent caused by the negligence or
willful misconduct of Neoforma or its Affiliates; (vi) any third-party
claim that arises in connection with the use by any of Novation, VHA,
UHC and HPPI and each of their Affiliates of any deliverables or
services provided by Neoforma to any of Novation, VHA, UHC and HPPI
and each of their Affiliates under this Agreement, except to the
extent covered by Novation's indemnities set forth in Section 15.2;
(vii) Neoforma's failure to pay and discharge any taxes (including
interest and penalties) for which Neoforma is responsible pursuant to
the terms of this Agreement; (viii) any claim asserted against any of
Novation, VHA, UHC and HPPI and each of their Affiliates by an
employee of Neoforma to the extent such claim arises from decisions,
acts, omissions or violations of statute by Neoforma with respect to
such employee's employee/employer relationship with Neoforma.
39
15.2 Novation Indemnity. Subject to Section 15.4, Novation shall indemnify,
defend and hold harmless each of Neoforma and its Affiliates,
officers, directors, employees, consultants and agents from and
against any and all Losses awarded against or paid in settlement by
Neoforma, incurred or sustained by any of such persons as a result of
or from any third-party claim relating to (i) any claims based on
Novation's confidentiality obligations contained in Section 11 or its
warranties contained in Section 12; (ii) the failure of Novation to
perform any of its obligations under any agreement between Novation
and a third party; (iii) any claims arising out of Novation's breach
of this Agreement; (iv) any claim arising out of the death of or
bodily injury to any employee of Neoforma or its Affiliates (or their
respective subcontractors) to the extent caused by the negligence or
willful misconduct of Novation or its Affiliates; (v) the loss of or
damage to the real or tangible personal property (whether owned or
leased) of Neoforma and its Affiliates, officers, directors,
employees, consultants and agents to the extent caused by the
negligence or willful misconduct of Novation or its Affiliates; (vi)
any third-party claim that arises in connection with the use by
Neoforma and its Affiliates or any deliverables or services provided
by Novation to any of Neoforma or its Affiliates under this Agreement,
except to the extent covered by Neoforma's indemnities set forth in
Section 15.1; (vii) Novation's failure to pay and discharge any taxes
(including interest and penalties) for which Novation is responsible
pursuant to the terms of this Agreement; or (viii) any claim asserted
against Neoforma by an employee of Novation to the extent such claim
arises from decisions, acts, omissions or violations of statute by
Novation with respect to such employee's employee/employer
relationship with Novation.
15.3 Infringement Claims.
15.3.1 Each of Neoforma and Novation, at their respective expense,
shall indemnify, defend and hold harmless the other party and
its Affiliates, and their respective officers, directors,
employees, consultants, agents, successors and assigns, from
and against any and all Losses arising from any Services,
software, hardware or the indemnitor's Materials ("Item(s)")
provided or delivered by the indemnitor to the indemnitee
under this Agreement, when used in conformity with all
applicable written instructions and documentation, (i)
infringes any patent in any country that is a signatory to the
Patent Cooperation Treaty, (ii) infringes any copyright in any
country that is a signatory to the Berne Convention for the
Protection of Literary and Artistic Works, or (iii) constitutes
misappropriation of any trade secret in any country in which a
trade secret right exists such that it would be enforceable in
the United States (each such third-party claim, action, suit
or proceeding, an "Infringement Claim").
15.3.2 Notwithstanding anything to the contrary herein, the indemnitor
shall have no obligation to defend or indemnify the indemnitee
for any Infringement Claim to the extent arising out of or
relating to modifications to any Item
40
made by or on behalf of the indemnitee where but for such
modifications there would have been no Infringement Claim.
15.3.3 If the indemnitee's use of any Item is enjoined or otherwise
prohibited, or if the indemnitor reasonably believes that there
exists a threat of the same, the indemnitor shall have the
right, in its sole discretion and at its expense, in addition
to its indemnification obligations above, to (i) obtain for
the indemnitee the right to continue to use the affected Item,
(ii) replace the affected Item with a non-infringing product
or service that will not degrade the performance quality of
the affected component of the Services or (iii) modify the
affected Item so that it becomes non-infringing. If the
alternatives in (i), (ii) and (iii) are not feasible, the
indemnitor shall remove the Item from the Services and
equitably adjust the charges to reflect such removal.
15.3.4 THIS SECTION SETS FORTH THE SOLE AND EXCLUSIVE REMEDY OF THE
INDEMNITEES, AND THE ENTIRE OBLIGATION AND LIABILITY OF THE
INDEMNITOR, AS TO ANY INFRINGEMENT CLAIMS IN CONNECTION WITH
ANY ACTIVITY UNDER THIS AGREEMENT.
15.4 Indemnity Procedures. The party seeking indemnification under Section
15.1 through 15.3, as the case may be (the "Indemnified Party"), shall
give prompt written notice to the other party (the "Indemnifying
Party"). In addition, the Indemnified Party shall allow the
Indemnifying Party to direct the defense and settlement of any such
claim, with counsel of the Indemnifying Party's choosing that is
reasonably acceptable to the Indemnified Party, and will provide the
Indemnifying Party, at the Indemnifying Party's expense, with
information and assistance that is reasonably necessary for the
defense and settlement of the claim. The Indemnified Party reserves
the right to retain counsel, at the Indemnified Party's sole expense,
to participate in the defense of any such claim. The Indemnifying
Party shall not settle any such claim or alleged claim without first
obtaining the Indemnified Party's prior written consent, which consent
shall not be unreasonably withheld, if the terms of such settlement
would not adversely affect the Indemnified Party's rights under this
Agreement.
16. LIMITATION OF LIABILITY
16.1 Limitations. IN NO EVENT WILL ANY PARTY BE LIABLE TO ANY OTHER PARTY
FOR ANY LOST PROFITS, SPECIAL, INCIDENTAL, INDIRECT OR CONSEQUENTIAL
DAMAGES, WHETHER BASED ON BREACH OF CONTRACT, TORT (INCLUDING
NEGLIGENCE) OR OTHERWISE, WHETHER OR NOT THAT PARTY HAS BEEN ADVISED
OF THE POSSIBILITY OF SUCH DAMAGE.
41
16.2 Exceptions. The limitation set forth in Section 16.1 above will not
apply to (i) Neoforma's obligations under Section 11, Section 15.1,
Section 15.3 or Section 16.3, (ii) Novation's obligations under
Section 11, Section 15.2 or Section 15.3, (iii) Neoforma's willful
misconduct or gross negligence in the provision of Services or (iv)
Neoforma's wrongful termination or abandonment of this Agreement.
16.3 Liquidated Damages.
16.3.1 Neoforma acknowledges that proper achievement of each of the
functions and responsibilities as shall be agreed upon and
set forth in the Functionality Roadmap and the completion of
each functional deliverable (as shall be defined in the
Functionality Roadmap) within the time frames specified
pursuant to the process set forth therein (or as otherwise
agreed to by Neoforma and Novation) are critical to the
business operations of Novation. In connection therewith,
Neoforma agrees that if any of its functions and
responsibilities or any of the functions and responsibilities
with respect to any functional deliverable (as shall be
described in the Functionality Roadmap) are not properly
achieved by the applicable target date (a "Failure"), such
Failure shall be deemed to constitute a material breach of
Neoforma's service obligations under this Agreement. Upon
such Failure, Neoforma shall pay liquidated damages to
Novation for each day past the applicable target date in
which the objective is still not achieved in the amount of
(i) *; provided, however, that any Failure by Neoforma to
complete any of its functions and responsibilities under the
Functionality Roadmap or any functional deliverable within
the time frames to be agreed upon as described in the
Functionality Roadmap shall be excused if and to the extent
(A) such Failure by Neoforma resulted principally from a
material failure by Novation to perform its obligations in
respect of such Phase (as such obligations are set forth
pursuant to the Functionality Roadmap) and (B) Neoforma used
commercially reasonable efforts to perform notwithstanding
Novation's failure to perform; provided, further, that any
Failure by Neoforma pursuant to the preceding proviso shall
only be excused for a number of days equal to the number of
days Novation failed to perform its obligations in respect of
such function, responsibility or functional deliverable (as
such obligations are set forth pursuant to the Functionality
Roadmap). Notwithstanding the foregoing, Neoforma shall not
be required to pay any liquidated damages under this Section
16.3.1 until the * occurrence of Failures in any consecutive
* period. Upon the occurrence of the * such Failure, Neoforma
shall retroactively pay liquidated damages in respect of each
Failure in such period (including the * previous Failures) in
an amount equal to the amount that would have been paid by
Neoforma if each such prior Failure
________________
* Confidential treatment requested.
42
had not been subject to the exception in the penultimate
sentence of this Subsection 16.3.1.
16.3.2 Neoforma acknowledges that proper achievement of the Service
Levels as shall be set forth in the Service Level
Specifications (including those Service Levels which will be
determined after the Effective Date) are critical to the
business operations of Novation. Accordingly, in connection
with any failure to meet Service Levels, Neoforma and
Novation shall agree on a methodology whereby Neoforma shall
pay to Novation liquidated damages up to * of the aggregate
of all Novation Marketplace Transaction Fees received by
Neoforma during the calendar month that such Service Levels
were not met by Neoforma. Such methodology shall be defined
in the Service Level Specifications.
16.3.3 The parties agree that the damages provided in this Section
16 apply only with respect to the failures to perform
described in Subsections 16.3.1 and 16.3.2. Moreover, the
parties agree that the damages provided in this Section 16
are a reasonable estimate of the damages that would be
suffered by Novation as a consequence of the failures
described in Subsections 16.3.1 and 16.3.2 and do not
constitute a penalty (the parties hereby acknowledging the
inconvenience and difficulty of otherwise obtaining an
adequate remedy). Notwithstanding anything to the contrary in
this Agreement, the aggregate amount of liquidated damages
paid by Neoforma to Novation pursuant to this Section 16.3
(including all payments to be agreed upon and described in
the Functionality Roadmap and the Service Level
Specifications) shall not exceed *.
17. AUDIT RIGHTS
17.1 General. Upon 10 days prior notice from Novation, Neoforma shall
provide to such auditors as Novation may designate in writing,
subject to the limitation imposed by Section 17.3, access during
normal business hours to Neoforma's applicable facilities and to
appropriate Neoforma management personnel and subcontractors, and to
the data and records maintained by Neoforma with respect to the
Services for the purpose of (i) performing audits and inspections of
Neoforma and its businesses, (ii) to verify the integrity of Novation
Materials and Neoforma Materials, (iii) to examine the systems that
process, store, support and transmit such Novation Materials, (iv) to
verify user volume reports, (v) to verify the accuracy of Novation
Marketplace Transaction Fees and (vi) to confirm Neoforma's
compliance with this Agreement. To the extent applicable to the
Services performed by Neoforma, the scope of such audits may include,
without limitation, (i) Neoforma's practices and procedures, (ii) the
adequacy of general controls and security practices and procedures
and (iii) the adequacy of disaster
________________
* Confidential treatment requested.
43
recovery and back-up procedures. Subject to Section 17.6, such audits
shall be conducted at Novation's expense.
17.2 Frequency of Audits. Operational audits, to examine the technological
aspects of Neoforma's provision of Services, may not be conducted
more than once in any 12-month period. Financial audits, which
examine Neoforma's financial records, and other supporting records,
may not be conducted more than once in any 12-month period. Novation
may, at its election, conduct operational and financial audits
concurrently.
17.3 Auditors. For the purposes of conducting financial audits, Novation
may designate any internal auditor who customarily audits contract
compliance issues for Novation or any nationally recognized
accounting firm. For the purposes of conducting operational audits,
Novation may designate any party to act as its auditor, subject to
Neoforma's consent, which shall not be unreasonably delayed or
withheld.
17.4 Record Retention. In order to document the Services and the Novation
Marketplace Transaction Fees paid or payable by Novation under this
Agreement, Neoforma shall retain its standard records and supporting
documentation for at least seven years.
17.5 Cooperation. Neoforma shall use commercially reasonable efforts to
assist such auditors, inspectors, regulators and representatives in
connection with such audits and inspections.
17.6 Overcharges. If, as a result of any such audit, Novation determines
that Neoforma has overcharged Novation, Novation shall notify
Neoforma of the amount of such overcharge and Neoforma shall promptly
pay to Novation the amount of the overcharge, plus interest at a rate
of 1.5% per month or the maximum rate permitted by law, whichever is
less, calculated from the date of receipt by Neoforma of the
overcharged amount until the date of payment to Novation. If any such
audit reveals an overcharge to Novation during any 12-month period
exceeding 5% of all Novation Marketplace Transaction Fees in the
aggregate paid by Novation during such period, Neoforma shall
reimburse Novation for the out-of-pocket costs and expenses incurred
for such audit.
18. DISPUTE RESOLUTION
18.1 Resolution of Disputes. Except as otherwise provided in this Section
18, any and all disputes arising out of or in connection with the
execution, interpretation, performance or nonperformance of this
Agreement (each such dispute, a "Disputed Matter") will be resolved
by the procedures established in this Section 18.
44
18.2 Negotiations and Escalation. Each party shall use commercially
reasonable efforts expeditiously to resolve any Disputed Matter which
arises from time to time between it and any of the other parties on a
mutually acceptable negotiated basis. In connection therewith, any
party involved in a Disputed Matter may deliver a notice to each of
the other parties (an "Escalation Notice") demanding an in-person
meeting of the senior level management representatives of the parties
involved (and providing, as a courtesy, notice to the parties not
involved). Any agenda, location or procedures for such discussions or
negotiations may be established by the parties to the Disputed
Matter, but such parties shall, in any event, meet within 10 days
after the delivery of the Escalation Notice. The parties to a
Disputed Matter may, if they mutually so desire, retain a mutually
agreed upon mediator to assist in resolution of the Disputed Matter,
but (i) all statements and opinions of such mediator shall be only
advisory and shall be inadmissible in any subsequent proceedings
between the parties concerning the Disputed Matter, (ii) the parties
thereto shall bear the costs of any such mediation equally (but each
party to the mediation shall be responsible for its own expenses) and
(iii) mediation is not a prerequisite to arbitration. If the parties
to the Disputed Matter are unable to resolve it by the earlier of (i)
30 days after the delivery of the Escalation Notice or (ii) the
conclusion of the meeting held pursuant to the applicable Escalation
Notice, then any party thereto may institute arbitration, as provided
below, concerning the Disputed Matter.
18.3 Appointment of Arbitral Body. Except as provided in Section 18.11,
any Disputed Matters not resolved pursuant to Section 18.2 or
otherwise settled between the parties will be finally resolved solely
by arbitration, by a single arbitrator appointed in accordance with
the rules and procedures (the "Rules") of the American Arbitration
Association, or if the American Arbitration Association is no longer
conducting such arbitrations, a successor organization thereto or
such other private arbitration service as the parties shall mutually
agree (the actual authority involved, the "Arbitral Body"). Except as
set forth below in Sections 18.10 and 18.11, the parties renounce all
recourse to litigation to resolve Disputed Matters and agree that the
Award of the arbitrator will be final and subject to no judicial
review.
18.4 Qualifications of Arbitrator. The arbitrator shall be selected
pursuant to the rules and procedures of the Arbitral Body, but shall
be (i) impartial and will not have been employed by or affiliated
with any of the parties to this Agreement or any of their respective
Affiliates, (ii) experienced in commercial dispute resolution and
(iii) familiar with commercial business practices in the medical
supplies procurement business or the business involved in the
Disputed Matter. If the Arbitral Body is unable to provide an
arbitrator with the qualifications set forth in this Section 18.4,
the Arbitral Body will consult with the parties and consider their
recommendations for the arbitrator.
18.5 Initiation of Arbitration and Procedures. After the expiration of the
30-day period referred to in Section 18.2, arbitration procedures may
be initiated concerning a
45
Disputed Matter by any of the parties thereto by giving written
notice to the other parties thereto and in compliance with any of
the applicable Rules. If not specified by the Rules, such notice
shall be given to the parties to the Disputed Matter in the
manner provided generally for notices in this Agreement. Any
notice will specify in reasonable detail the dispute being
submitted to arbitration and comply with all other Rules
concerning commencement of arbitration.
18.6 Procedures. The arbitrator will conduct the proceedings,
including arguments and briefs, in accordance with the Rules;
provided that the provisions of this Section 18 will prevail in
the event of any conflict between the Rules and its provisions.
Within five days after his or her appointment, the arbitrator
shall contact the parties to the Disputed Matter and arrange an
initial conference with them, to be conducted within 30 days
after his or her appointment, at which conference (the "Hearing
Conference") the arbitrator and the parties will establish
procedures (based on a brief written plan submitted in letter
form by each party to the Disputed Matter in advance of such
Hearing Conference concerning expected measures to prepare for
hearing on the merits) and a schedule for the resolution of the
Disputed Matter by hearing on the merits in a timely and
efficient manner, giving due consideration to the nature and
extent of the Disputed Matter, the apparent complexity of
preparations for, and complexity of, hearing on its merits and
other factors (such as third-party litigation pending against one
of the parties on the same subject-matter as raised in the
Disputed Matter). In the event of a dispute concerning such
procedures at the Hearing Conference, the arbitrator shall have
the power to impose the schedule upon the parties to the Disputed
Matter, giving due consideration to resolution of the Disputed
Matter by a full and fair hearing on the merits. The arbitrator
shall include in procedures established at the Hearing Conference
provisions which permit the parties to engage in reasonable,
limited discovery in preparation for hearing on the merits and
which protect and preserve privileges and shield confidential
proprietary information from disclosure. The hearing on the
merits will be held within 60 days after the Hearing Conference,
and evidentiary matters at such hearing will be determined in
accordance with the Federal Rules of Evidence as applied at the
place of arbitration.
18.7 Governing Law; Jurisdiction. The arbitrator will decide the
issues submitted in accordance with the provisions and commercial
purposes of this Agreement, provided that all substantive
questions of law will be determined under the laws of the State
of New York. The parties consent to venue in the State in which
the principal place of business of the party initiating
arbitration regarding a Disputed Matter is located.
18.8 Arbitration Award. All decisions of the arbitrator will be in
writing and submitted to the parties, and the decision after
hearing on the merits which announces resolution of the Disputed
Matter (the "Award") shall, in addition, set forth findings of
fact and conclusions of law to support the arbitrator's
resolution of the
46
merits of the Disputed Matter. The arbitrator will issue the
Award within 30 days after completion of the hearing on the
merits.
18.9 Cooperation of the Parties. The parties to the Disputed
Matter will facilitate the arbitration by (i) making
availableto one another and to the arbitrator for
examination, inspection and extraction all documents, books,
records and personnel under their control if determined by
the arbitrator to be relevant to the dispute, (ii)
conducting arbitration hearings to the greatest extent
possible on successive days and (iii) observing strictly the
time periods and procedures established by the Rules or by
the arbitrator for submission of evidence or briefs, conduct
of the hearing on the merits and preparations therefor.
18.10 Costs. All costs of the arbitration shall initially be
borne equally by the parties thereto as incurred, but upon
completion of the arbitration, the arbitrator shall award to
the prevailing party, as determined by the arbitrator in
accordance with principles of New York law for determining
prevailing parties in litigation, all reasonable costs, fees
and expenses related to the arbitration, including
reasonable fees and expenses of attorneys, accountants and
other professionals or experts incurred by the prevailing
party.
18.11 Judgment on the Award; Enforcement. Judgment on the Award
may be entered in any court having jurisdiction and
procedures therefor. Each party agrees that any Award of an
arbitrator against it and on which judgment is entered may
be executed against the assets of any party which is a
judgment debtor or otherwise enforced in any jurisdiction
pursuant to the procedures in and protections of such
jurisdiction which are generally applicable to enforcement
of judgments, including provision in such jurisdiction for
the enforcement of equitable remedies provided in the Award.
18.12 Preservation of Equitable Relief; Third-Party Litigation.
Notwithstanding any provision of this Section 18 to the
contrary, any party will be entitled (i) to seek a temporary
restraining order or injunctive or other equitable relief in
any court of competent jurisdiction with respect to a breach
(or attempted or threatened breach) of this Agreement by any
party (including, without limitation, the matters referred
to in Subsection 9.9.5) or (ii) to institute litigation or
other formal proceedings to the extent necessary (A) to
enforce the award of the arbitrator, (B) to avoid the
expiration of any applicable limitations period or (C) to
preserve a superior position with respect to other
creditors. Nothing in this Section 18 shall prevent parties
to this Agreement who become involved in a Disputed Matter
and who have become parties to litigation instituted by a
third party concerning facts involved in such Disputed
Matter from resolving disputes between them arising in
connection with such Disputed Matter through such litigation
in lieu of arbitration under this Section 18.
47
18.13 Continued Performance. Each party agrees to continue
performing its obligations under this Agreement during the
pendency of any dispute resolution process conducted in
accordance with this Section 18.
19. GUARANTY OF PERFORMANCE
19.1 VHA and UHC Guarantees. Subject to Section 19.4, VHA and UHC
agree, severally but not jointly, that they will be
responsible for the obligations and liabilities of Novation
under this Agreement, as follows:
(i) to the extent that any such obligation or liability
relates primarily to any action or omission by UHC or
an UHC Member, UHC shall be responsible;
(ii) to the extent that any such obligation or liability
relates primarily to any action or omission by VHA or a
VHA Member, VHA shall be responsible; and
(iii) to the extent that the allocations set forth in (i)
and (ii) are not applicable, VHA and UHC shall be
responsible in accordance with the allocation
provisions set forth in Section 8.12.
19.2 VHA and UHC Waivers. Each of VHA and UHC hereby waives the
following with regard to its guaranty obligations under
this Section 19:
(i) any right to require Neoforma to pursue any other
remedy in Neoforma's power whatsoever, other than
Neoforma proceeding exclusively against VHA or UHC with
respect to a liability described in Section 19.1 (iii)
(ii) any defense resulting from the absence, impairment or
loss of any right of reimbursement, subrogation or
contribution of VHA or UHC against Neoforma, or against
one another;
(iii) any defense of discharge, relief or stay of the
principal's obligations hereunder based upon a filing
of or against Novation under the U.S. Bankruptcy Code
or Novation's request for any relief of its obligations
under this Agreement based on laws for the relief of
debtors generally;
(iv) any right to be informed by Neoforma of the financial
or other condition of Novation or of VHA or UHC or any
change therein or any other circumstances bearing upon
the risk of nonperformance by Novation; and
(v) any defense of exoneration or release based on
amendment of this Agreement.
48
Each of VHA and UHC agrees that its guarantee, as set forth in
Section 19.1, constitutes a guarantee of payment when due and
not of collection.
19.3 Scope of Liability. Neither VHA's nor UHC's obligations and
liabilities under this Agreement shall be subject to any
set-off, reduction, limitation, impairment or termination for
any reason, including, without limitation, compromise, and
shall not be subject to any defense or termination whatsoever
by reason of the invalidity, illegality or unenforceability of
any of its obligations and liabilities under this Agreement;
excluding, however, any defenses based upon Neoforma's failure
to perform any of its obligations under this Agreement.
49
19.4 Continued Performance by Neoforma.
19.4.1 In the event that the Operating Agreement, dated October 21,
1997, as amended from time to time, between VHA and UHC is
terminated (and not replaced by any successor document) (the
"Novation Dissolution"), Neoforma agrees that it shall
continue to perform its obligations under this Agreement for
a period of no less than * following the date of such
termination (and any additional Termination Assistance Period
required by this Agreement). Additionally, during such *
period, Neoforma shall offer to enter into separate
agreements with each of VHA and UHC upon substantially
similar terms and conditions and pursuant to which Neoforma
will provide services substantially similar to the Services
provided hereunder at the time of such termination and create
separate proprietary marketplaces for each of VHA and UHC.
The price for the aggregate services to be rendered under the
new separate agreements shall be substantially similar to the
price paid by Novation hereunder at the time of such
termination; provided, however, that with respect to each of
the separate agreements, (i) VHA and UHC (in their separate
agreements) will provide services substantially similar to
those being provided by Novation hereunder (or, if either
VHA or UHC elects not to provide such services, Neoforma and
the party so electing will negotiate in good faith to adjust
the cost of the services to be provided by Neoforma to such
party), and (ii) Neoforma may charge VHA or UHC, as
applicable, incremental costs associated with the transition
of services provided by Neoforma from the Novation
Marketplace to the separate marketplaces, including, without
limitation, incremental costs relating to establishing a
separate "look and feel" to the proprietary marketplaces and
creating separate marketplaces.
19.4.2 Notwithstanding the foregoing, neither VHA nor UHC shall be
obligated to enter into an agreement with Neoforma as
described in Subsection 19.4.1. In the event that either VHA
or UHC elects not to enter into such an agreement with
Neoforma, then that party's obligations to Neoforma shall be
limited to its guarantee under Section 19.1 hereunder.
20. GENERAL PROVISIONS
20.1 No Waiver. The delay or omission by any party to exercise or enforce
any right or power of any provision of this Agreement shall not be
construed as a waiver or relinquishment to any extent of such party's
right to assert or rely upon any such provision or right in that or
any other instance. A waiver by any party hereto of any of the
covenants to be performed by any other or any breach thereof shall
not
_______________________________
* Confidential treatment requested.
50
be construed to be a waiver of any succeeding breach thereof or of
any other covenant herein contained.
20.2 Entire Agreement. This Agreement, the Exhibits attached hereto, and
all other agreements contemplated by this Agreement to be agreed upon
by the parties hereto pursuant to the terms of this Agreement (the
"Contemplated Agreements"), together constitute the complete and
exclusive agreement between the parties hereto, and supersede any and
all prior agreements of the parties with respect to the subject
matter hereof. Except in the case of Section 8.12 (which may be
amended with the approval of VHA and UHC only), this Agreement, the
Exhibits attached hereto and the Contemplated Agreements may be
amended or modified, or any rights under it waived, only by a written
document executed by all parties. For the avoidance of doubt, the
term "Agreement", as used throughout this document, shall include the
Contemplated Agreements.
20.3 Publicity. Except as required by law or provided in this Agreement,
no party will make any public statement, press release or other
announcement relating to the terms of or existence of this Agreement
without the prior written approval of all other parties. The parties
will cooperate prior to the filing of any public document which may
require the filing of this Agreement as an exhibit or the filing of a
description thereof in order to preserve the confidentiality and
proprietary information contained herein.
20.4 Covenant of Good Faith. Each party agrees that, in its respective
dealings with all other parties under or in connection with this
Agreement, it shall act in good faith.
20.5 Compliance with Laws and Regulations. Each of Neoforma and Novation
shall perform its respective obligations under this Agreement in a
manner that complies with applicable law, including, without
limitation, identifying and procuring required permits and approvals.
20.6 Assignment; Successors and Assigns. This Agreement will be binding on
the parties hereto and their respective successors and permitted
assigns. No party may, or will have the power to, assign this
Agreement without the prior written consent of all other parties. For
the purposes of this Section 20.6, any assignment by operation of
law, under an order of any court, or pursuant to any Neoforma Change
of Control, plan of merger, consolidation, reorganization, or
liquidation or will be deemed an assignment for which prior consent
is required, and any assignment made without such consent will be
void and of no effect as between the parties. Notwithstanding the
forgoing, no assignment made in respect of or as a result of any
dissolution of Novation will be deemed an assignment for which prior
consent is required, and such assignment will be valid.
20.7 Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of New York, without regard to
or application of conflicts of law rules or principles.
51
20.8 Notices. Any notice required or permitted by this Agreement shall be
in writing and shall be deemed given if sent by prepaid registered or
certified United States mail, return receipt requested, overnight
mail with a nationally recognized overnight mail courier, or sent by
facsimile or similar communication, and confirmed by such mail,
postage prepaid, addressed to another party at the address shown
below or at such other address for which such party gives notice
hereunder. Notices will be deemed given five business days after
deposit in the U.S. Mail, two business days after deposit with an
overnight mail courier, or when confirmation of receipt is obtained
if sent by facsimile or similar communication, or if by personal
delivery, when received, as applicable:
If to Novation: With a copy to:
Novation, LLC Xxxxx Xxxxx L.L.P.
125 East Xxxx Xxxxxxxxx Freeway 0000 Xxxx Xxxxxx
Xxxxxx, Xxxxx 00000 Xxxxxx, Xxxxx 00000-0000
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
Attn: General Counsel Attn: Xxxxx X. Xxxxxxx, Esq.
If to VHA: With a copy to:
VHA, Inc. Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxx Xxx Xxxxxxx Xxxxxxxxx 0000 Xxx Xxxx Xxxxxx, X.X.
Irving, Texas 75039-5500 Xxxxxxxxxx, XX 00000
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
Attn: Chief Financial Officer Attn: C. Xxxxx Xxxxxxxx, Esq.
If to UHC: With a copy to:
University Health System Consortium XxXxxxxxx, Will & Xxxxx
0000 Xxxxxx Xxxx, Xxxxx 000 000 Xxxx Xxxxxx Xxxxxx
Xxx Xxxxx, Xxxxxxxx 00000 Xxxxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
Attn: Executive Vice President Attn: Xxxxxxxx X. Xxxxxx, Esq.
General Counsel
If to Neoforma: With a copy to:
Neoforma, Inc. Fenwick & West LLP
3061 Zanker Road Two Xxxx Xxxx Xxxxxx
Xxx Xxxx, Xxxxxxxxxx 00000 Xxxx Xxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
Attn: General Counsel Attn: Xxxxxx X. Xxxxxxxx, Esq.
Xxxxx X. Xxxx, Esq.
20.9 No Agency. The parties are independent contractors and will have no
power or authority to assume or create any obligation or
responsibility on behalf of each
52
other, except as expressly provided herein. This Agreement will not
be construed to create or imply any partnership, agency or joint
venture.
20.10 Force Majeure.
20.10.1 Subject to 20.10.2, no party shall be liable for any
default or delay in the performance of its obligations
under this Agreement if and to the extent such default or
delay is caused, directly or indirectly, by: flood,
earthquake, elements of nature or acts of God, riots, civil
disorders, rebellions or revolutions in any country, or any
other cause beyond the reasonable control of such party,
provided that (i) the non-performing party is without fault
in failing to prevent or causing such default or delay and
(ii) such default or delay cannot reasonably be
circumvented by the non-performing party through the use of
alternate sources, workaround plans or other means
(including with respect to Neoforma, by Neoforma executing
its disaster recovery plans).
20.10.2 In such event, the non-performing party shall be excused
from further performance or observance of the obligation(s)
so affected for as long as such circumstances prevail and
such party continues to use commercially reasonable efforts
to recommence performance or observance whenever and to
whatever extent possible without delay. With respect to
Neoforma's performance, such efforts shall be no less than
the efforts used for any other customer of Neoforma. Any
party so delayed in its performance shall immediately
notify the party to whom performance is due by telephone
(to be confirmed in writing within two days after the
inception of such delay) and describe at a reasonable level
of detail the circumstances causing such delay.
20.10.3 Notwithstanding anything in this Section 20.10 to the
contrary, upon the occurrence of an event described in
Subsection 20.10.1 that substantially prevents, hinders or
delays performance of services necessary for the
performance of "critical functions" of such party for more
than *, such party to whom such affected or delayed
performance is due will have the right to immediately
terminate this Agreement. For the purposes of this
Subsection 20.10.3, "critical functions" means with respect
to a party, those business functions that are reasonably
and in good faith determined by that party to be essential
and critical to its business operations or the business
operations of its Members.
20.11 Interest. Any payment under this Agreement which is not paid when
due, shall accrue interest at the lower of a monthly rate of 1.5% or
the highest amount allowed by law.
______________________________
* Confidential treatment requested.
53
20.12 Program Management. Neoforma and Novation shall meet to develop a
program management plan to manage the delivery of Services
hereunder. Such plan shall have features similar to those
illustrated in Exhibit F.
20.13 Severability. If for any reason a court of competent jurisdiction
finds any provision or portion of this Agreement to be
unenforceable, that provision of the Agreement will be enforced to
the maximum extent permissible so as to effect the intent of the
parties, and the remainder of this Agreement will continue in full
force and effect.
20.14 Counterparts. This Agreement may be executed in counterparts, each
of which will be deemed an original, but all of which, together,
will constitute one and the same instrument.
20.15 Headings. Section headings are included for only convenient
reference and do not describe the sections to which they relate.
20.16 Section 365(n) Matters. Neoforma acknowledges that if Neoforma as a
debtor-in-possession or a trustee in bankruptcy in a case under the
U.S. Bankruptcy Code rejects this Agreement, the Contemplated
Agreements, or any agreement supplementary hereto or thereto,
Novation may elect to retain its rights under this Agreement, the
Contemplated Agreements, or any agreement supplementary hereto or
thereto, as and to the extent provided in Section 365(n) of the U.S.
Bankruptcy Code. Upon the written request of Novation to Neoforma or
the bankruptcy trustee, Neoforma or such bankruptcy trustee, as
provided in Section 365(n) of the U.S. Bankruptcy Code, (i) shall
provide to Novation the intellectual property for the Services as
described in this Agreement, including all third-party software and
all Neoforma-owned software, and (ii) shall not interfere with the
rights of Novation as provided in this Agreement or any agreement
supplementary hereto, including each Functionality Roadmap, the
Service Level Specifications, or any escrow agreement that may be
entered, to obtain such intellectual property from the bankruptcy
trustee.
54
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
NEOFORMA, INC. NOVATION, LLC
By: /s/ Xxxxxx X. Xxxxxxx By: /s/ Xxxx XxXxxxx
---------------------------------------- --------------------------------
Name: Xxxxxx X. Xxxxxxx Name: Xxxx XxXxxxx
-------------------------------------- ------------------------------
Title: Chairman and Chief Executive Officer Title: President
------------------------------------- -----------------------------
Date: September 30, 2002 Date: September 30, 2002
-------------------------------------- ------------------------------
VHA, INC. UNIVERSITY HEALTH SYSTEM CONSORTIUM
By: /s/ Xxxx Xxxxxxxxx By: /s/ Xxxxxx X. Xxxxx
---------------------------------------- --------------------------------
Name: Xxxx Xxxxxxxxx Name: Xxxxxx X. Xxxxx
-------------------------------------- ------------------------------
Title: Chief Financial Officer Title: President and Chief
------------------------------------- -----------------------------
Executive Officer
-----------------------------
Date: September 30, 2002 Date: September 30, 2002
-------------------------------------- ------------------------------
* Subject to approval by UHC's
Governing Committee on October 16,
2002
HEALTHCARE PURCHASING
PARTNERS INTERNATIONAL, LLC
By: /s/ Xxxx XxXxxxx
----------------------------------------
Name: Xxxx XxXxxxx
--------------------------------------
Title: Chief Executive Officer
-------------------------------------
Date: September 30, 2002
--------------------------------------
[Signature Page To Third Amended and Restated
Outsourcing and Operating Agreement]
55
EXHIBIT G
MINIMUM FEES
The Minimum Fees shall be determined by *; in any : *
In determining the foregoing calculation, the *. By way of example *.
_______________________
* Confidential treatment requested.
G-1
EXHIBIT H
*
_______________________
* Confidential treatment requested.
H-1
EXHIBIT I
TARGET FEE LEVELS
*
_______________________
* Confidential treatment requested.
I-1
EXHIBIT J
2002 ESTIMATED*
Date Payment
-----------------------------------------------------------------------
*
_______________________
* Confidential treatment requested.
J-1
EXHIBIT K
CURRENT FUNCTIONALITY ROADMAP
*
_______________________
* Confidential Treatment Requested
K-1
FUNCTIONALITY ROADMAP SEPTEMBER 30, 2002
Attached is the Functionality Roadmap for Marketplace@Novation for *.
[_] "Future" column represents functionality to be considered in future
releases. It does not represent a time commitment.
[_] "Deferred or Not Doing" functional deliverables that have been moved out of
* and needs validation to determine whether it stays on the roadmap are
also in the Future Column. Validation might include *.
This version of the Committed Functional Roadmap is hereby accepted and approved
by Novation:
Signature: ______________________________________
Name: ___________________________________________
Date: ___________________________________________
To Xxxxxx: Initial each page of this Roadmap.
_______________________
* Confidential treatment requested.
Neoforma and Novation Confidential Novation Approver Initials
Novation Approval Date: 9/30/2002
K-2
_______________________
* Confidential treatment requested.
Neoforma and Novation Confidential Novation Approver Initials
Novation Approval Date: 9/30/02
K-3
EXHIBIT L
COLLABORATIVE MARKETING AGREEMENT
Novation and Neoforma Marketing Communications, Product Marketing and Public
Relations departments agree to work collaboratively on the development of an
annual Marketing communications plan and distribution of all marketing
materials, all press releases and all messaging concerning Marketplace@Novation.
Specifically, Novation and Neoforma agree that in circumstances where specific
approvals are required by either party or both, such approvals will not be
unreasonably withheld. Further the parties agree to these specific processes:
1. Novation and Neoforma will collaborate on the development of overall
messages and positioning of Marketplace@Novation. The owner and final
decision maker will be Novation marketing. These messages will be
reviewed and agreed to on a quarterly basis.
2. Neoforma will obtain Novation input and approval for any communications
directed to VHA, UHC, HPPI members and suppliers (including Novation
contract suppliers as well as non-contract suppliers who may participate
in M@N) concerning Neoforma and/or Marketplace@Novation (48 hour
turnaround).
3. A consensus will be reached between Novation and Neoforma when
developing communications around technology applications, such as
roadmaps, functionality rollouts and implementation of new products,
directed to VHA, UHC, HPPI members and suppliers.
4. Neoforma-issued press releases that include messaging or positioning of
Marketplace@Novation will reflect and support the
collaboratively-developed overall messages as described in #1 above and
require the approval of Novation Public Relations.
5. Novation and Neoforma agree to collaborate on the selection of members
or contract suppliers for Marketplace@Novation PR and or Marketing
initiatives that involve testimonials or "best practice" promotional
activities in order to ensure that they are members or suppliers in good
standing.
6. All jointly-issued press releases that include messages or positioning
of Marketplace@Novation will be approved by both Neoforma and Novation
Public Relations.
L-1
7. All branded communications vehicles that include the
Marketplace@Novation logo will also include the "powered by Neoforma"
logo as specified in the Marketplace@Novation Branding Guidelines.
8. Neoforma and Novation will each obtain approval for the use of the
other's logo(s).
9. The working teams should use the principles outlined above to come to
consensus. If a situation arises where the working teams cannot reach
agreement then issues should be escalated to the appropriate managers
for resolution. It's anticipated that escalations will be rare.
L-2
EXHIBIT M
COLLABORATIVE DEVELOPMENT PROCESS
(WITH TECHNICAL SPECIFICATIONS)
Definitions
"Functionality Roadmap(s)" shall mean the document(s) setting forth the ideas
and deliverables that are proposed and approved by Novation and Neoforma for
implementation on the Novation Marketplace. Each such idea will be developed in
accordance with the collaborative development process and each will have a
Functionality Roadmap Completion Date (as defined below). The Functionality
Roadmaps will be monitored through the Functionality Roadmap (as defined
elsewhere in this Collaborative Development Process).
"Functionality Roadmap Completion Date", for Functionality Roadmaps is the date
that each Functionality Roadmap is (i) fully developed, ready for
implementation, and deployable for use in connection with the Novation
Marketplace and (ii) approved by Novation as complying in all material respects
with its vision, design and functionality specifications, which approval may not
be unreasonably withheld or delayed, by the applicable Functionality Roadmap
Completion Date.
"Member-User(s)" shall mean those Users that are registered participants within
the Member organizations. This term may also be used to include those Users that
are registered participants within Novation Marketplace Supplier organizations.
"Formulary" shall mean a listing of Products and other content, customized for a
Member or Member-User, that appears on the Novation Novation Marketplace or the
HPPI Novation Marketplace.
"Implementation Plan" shall mean a plan to implement the functionality
requirements, which shall consist of (A) a statement of work (such as a product
requirements document) describing the detailed functionalities to be provided by
Neoforma, (B) a "workplan," describing the respective responsibilities
(including deliverables) of Neoforma and Novation as well as the timetable for
fulfilling such responsibilities and (C) a "testing plan," describing the
process and timetable for the testing of functionalities before actual
implementation on the Novation Marketplace.
"Functionality Roadmap Change(s)" shall mean any approved functional deliverable
that will not or can not be delivered on time as committed to on the
Functionality Roadmap.
M-1
"Planning Roadmap" shall mean the document that summarizes the ideas for
features and functions that may someday be implemented on the Novation
Marketplace. The ideas on the Planning Roadmap are non-binding on the parties.
"Post Production Functionality Roadmap Change(s)" shall mean any programmatic
change made to an existing functional deliverable that is already implemented
and available for Member Users on the Novation Marketplace.
"Technical Management Team" This team consists of designated representatives
from Neoforma, Novation, VHA, and UHC. It meets periodically and is the primary
decision making body for (i) all Planning Roadmap related decisions, (ii) final
Functionality Roadmap prioritization, (iii) escalated issue resolution decisions
for the collaborative development process, and (iv) other activities where
technology is used for the Novation Marketplace.
Capitalized terms that are not otherwise defined in this Collaborative
Development Process will have the meanings ascribed thereto in the Agreement.
M-2
Introduction
Upon the timely receipt of content, instruction and specifications from the
appropriate parties, Neoforma will provide the Tools and API's and create the
technology infrastructure for the Novation Marketplace. These activities are
collectively referred to as the "Services".
Neoforma and Novation agree that this Collaborative Development Process
represents their understanding of the scope of the Services including the
collaborative development and change control processes, as of the Effective
Date. Neoforma and Novation also agree that the Services to be provided
hereunder will evolve and be modified and enhanced over time to keep pace with
technological advancements, user requirements, and improvements and changes in
the e-commerce marketplace. Neoforma and Novation will work collaboratively on
all phases of Novation Marketplace development including, without limitation,
general design, establishing functional specifications, system testing,
acceptance testing, and beta testing. Novation will have the final approval at
each phase of system development, and Novation must approve the Novation
Marketplace prior to going live, no such approvals to be unreasonably withheld
or delayed. Neoforma and Novation hereby initially designate * and * as their
respective representatives with authority to make such approvals and other
decisions as are anticipated herein, unless such decision-making authority is
expressly granted to another person or entity either herein or by Neoforma or
Novation in writing.
Neoforma and Novation shall meet at least quarterly to examine the (i) state of
technology, (ii) Neoforma's role as a leading provider of e-commerce services to
the healthcare industry, (iii) User (including Member) needs and concerns and
(iv) other relevant factors. Based on such examination, Neoforma and Novation
will agree on a statement of work for Services to be performed by Neoforma.
Neoforma and Novation agree that the description of Services set forth herein is
not complete and that such parties are required to prepare a more detailed and
complete description as provided for in the "Relationship Management" section of
this Collaborative Development Process.
The Functions and Responsibilities section included in this document is a guide
to the minimal levels of Functionality that are to be included in the Novation
Marketplace. The Outsourcing Agreement and the text of this Collaborative
Development Process shall be construed consistently, but in the event of any
conflict, the terms of the Outsourcing Agreement shall supercede any
inconsistent terms of this Collaborative Development Process.
The Functionality Roadmap shall be the tracking report that (i) documents
features and functions that have been proposed for future development, (ii)
tracks the features and functions that have been approved for development and
that are being developed for
_______________________
* Confidential Treatment Requested
M-3
implementation on the Novation Marketplace (as further described in the
applicable statement of work).
At the end of each development cycle, the completed functional deliverables will
be documented on the next version of the Functionality Roadmap and then tracked
thereafter by the Novation Marketplace Deliverable Tracking Report. The
deliverable tracking report will be maintained as an accurate record of all
delivered and existing Novation Marketplace functionality. It will also be the
record of functionality that is sun-setted over time due to evolving Member User
requirements. The Novation Marketplace Deliverable Tracking Report will be
maintained by Novation, and Neoforma will have visibility to and approval rights
over this report.
Neoforma acknowledges that proper operations of the Novation Marketplace are
critical to the business operations of Novation.
Relationship Management
Account Managers; Steering Committee
Neoforma and Novation shall designate account managers (each, an "Account
Manager"). The Account Managers shall have overall responsibility for day-to-day
management and administration of the Services provided under this Collaborative
Development Process.
Neoforma and Novation shall establish a steering committee (the "Steering
Committee") to monitor issues arising with respect to the Services and the
performance by Neoforma and Novation of their obligations hereunder. Through the
Steering Committee, Novation will have the opportunity to provide input
regarding the direction of implementation of new technology for the Novation
Marketplace and in connection with the Collaborative Development Process (as
defined below). The Steering Committee shall monitor overall Services
performance and review expanded Services and project requests. Neoforma and
Novation shall mutually determine the number of representatives they will assign
to the Steering Committee. Each of Neoforma and Novation may replace its members
of the Steering Committee after providing the other party with reasonable
advance written notice and after consultation with the other party. Each party
shall use reasonable efforts to minimize the turnover of individuals serving on
the Steering Committee. The Steering Committee shall meet as set forth below,
and each party's representatives on the Steering Committee shall have the
responsibility to notify that party's senior management of material issues
considered, and material actions taken, by the Steering Committee.
Reports and Meetings
Neoforma shall provide to Novation, commencing with the month after execution of
the Outsourcing Agreement, a comprehensive monthly performance report delivered
to Novation within five business days after the end of each month, in a form
mutually established by Neoforma and Novation, describing Neoforma's performance
of the
M-4
Services in the preceding month. Such report may be subdivided into separate
monthly reports as mutually agreed by Neoforma and Novation.
As soon as practicable after the execution of the Outsourcing Agreement,
Neoforma and Novation shall determine an appropriate set of meetings to be held
between representatives of Novation and Neoforma. Neoforma shall prepare and
circulate an agenda sufficiently in advance to give participants an opportunity
to prepare for each meeting and shall incorporate into such agenda items that
Novation desires to discuss. At Novation's request, Neoforma shall prepare and
circulate minutes promptly after a meeting. At a minimum, such meetings shall
include the following:
(i) a monthly meeting among operational personnel representing Novation
and Neoforma to discuss daily performance and planned or anticipated
activities and changes that might adversely affect performance;
(ii) a quarterly management meeting of the Steering Committee to review
the monthly performance reports for the quarter, review Neoforma's
overall performance of the Services, review progress on the
resolution of issues, provide a strategic outlook for Novation
Marketplace requirements, and discuss such other matters as
appropriate; and
(iii) an annual senior management meeting to review relevant performance
issues.
M-5
Establishment of a Program Management Office
Neoforma will maintain a Program Management Office (the "Program Management
Office" or "PMO"), which shall have representatives from Neoforma and a
designated representative from Novation. The Program Management Office will be
responsible for overseeing the day-to-day management of the tasks being
completed during the collaborative development process (as described below). In
addition, the Program Management Office will determine the appropriate parties
to make decisions regarding the collaborative development process, and to
coordinate timely responses. Additionally, the Program Management Office will
coordinate the maintenance of all documents related to the collaborative
development process for all Novation Marketplace functional deliverables,
including technical specifications.
With respect to this Collaborative Development Process, the PMO will
. Provide status as to the development activity for all functional
deliverables on the Functionality Roadmap
. Be the central collection point for the status of all projects and
their components
. Keep up to date and manage the information in a project plan status
system that is available for a limited number of Novation managers to
query and view.
. Summarize status, analyze and report all variances from the plan.
. Facilitate program development teams to determine critical path
impacts, identify and analyze trends, and maintain an issues and error
log, report these issues as appropriate to management.
. Facilitate all needed corrective action plans (e.g., plan adjustment,
critical path re-configuration, issue log update, etc.)
. Report program status to program and senior management teams
. Manage change management and document control processes
M-6
Collaborative Development Process.
Overview
The collaborative development process defines how the Technical Staffs at
Neoforma and Novation will work together in building Novation Marketplace
functionality. It defines four key interaction areas. They are:
. Visioning. Novation owns this activity for Novation Marketplace. Novation
will work collaboratively with Neoforma to develop the direction (the
Vision) that Neoforma needs to take in building Novation Marketplace
functionality. This process will be completed when Novation delivers a
document to Neoforma that clearly communicates this direction. This
document is to include: i) directional statements (the Vision); ii)
business justification for the directional statements; iii) a clear
definition of the problems being solved for the stakeholders; iv) use
cases and user acceptance criteria for how the resulting system
enhancements would fit into the day to day processes of the stakeholders;
v) adoption plans and goals, vi) other information as needed to support
the proposed Vision.
Additionally, Neoforma and Novation are responsible for continually
sharing and communicating marketing research, customer/supplier input,
plans for other Neoforma Marketplaces, etc. to each other. This permits
Novation to include these elements into Novation's Vision statements. It
is also acknowledged that Neoforma will have plans for other
marketplaces that it can not share with Novation.
. Planning. Neoforma owns this activity. During this process, Neoforma
takes Novation's Vision documents and determines the functional
deliverables needed to support Novation's Vision. These deliverables are
then added to the Planning Roadmap (usually over multiple releases), and
the Planning Roadmap is reviewed by the joint Technical Management team.
Then, as approved by the Technical Management Team, Neoforma creates and
delivers to Novation detailed and fully specified functional deliverable
requirements documents and/or build plans (including, for example: screen
wire frames, resource allocations, costs, timings, etc.) for the
functional deliverables within one or more release. Each detailed
functional deliverable document is reviewed and approved by Novation. The
Functionality Roadmap is then updated and taken to the Technical
Management Team for their final approval. Upon approval, the
Functionality Roadmap Completion Dates are set on the Functionality
Roadmap.
It is understood that Neoforma is building a Marketplace of which
Novation Marketplace is a significant part. In the Planning Phase
Neoforma will include and take into consideration requirements developed
from sources outside of the Novation Visioning process. Any issues
pertaining to functionality priority, scope, and timing that cannot be
resolved at the team level, will be resolved by
M-7
the Technical Team. Should Neoforma and Novation not be able to agree on
the deliverables, Novation has final approval over the Functionality
Roadmap.
. Building and Testing. Neoforma and Novation jointly own this activity.
. Neoforma. Based upon Novation's approval of the Novation
Marketplace Functionality Roadmap, Neoforma builds the Novation
Marketplace functional deliverables as detailed in the functional
deliverable requirements build plans that were created during the
above Planning process. Neoforma then tests each functional
deliverable based on its own quality assurance processes.
. Novation. Novation does the final user acceptance testing for all
functional deliverables. The testing is completed based on jointly
developed and approved user acceptance criteria and plans. Upon
the successful completion of this testing, Novation approves the
release of the functional deliverables. Novation has final
approval over the release of all functional deliverables.
. Novation Marketplace Oversight. Management oversight of these processes
is provided by 1) the Novation and Neoforma Account Managers, 2) the
relationship managers from both organizations, and 3) by the Technical
Management Team. Any issues pertaining to functionality priority, scope,
and timing that cannot be resolved by parties 1 and 2, will be resolved
by the Technical Management Team.
The Collaborative Development Process detailed herein has two parts.
Part 1: The Collaborative Development Process Principles. These are
included below and these principles summarize how the two teams will
interact with each other on a daily basis.
Part 2: Attached as an exhibit to this document, is a drawing labeled
"The Collaborative Development Process Map." This is a more detailed
overview of team interactions. This drawing may be modified from time to
time as the interactions need to change and upon mutual agreement by both
parties.
M-8
Part 1: Collaborative Development Process Principles
The collaborative development process ("CDP" or the "Collaborative Development
Process") is a process involving many interactions between employees at Neoforma
and Novation. In summary, these employees work together as they prepare the
Novation Marketplace Vision statements, plan and build the functional
deliverables, and approve these functional deliverables for release to Member
Users.
The complex nature of this process is graphically depicted in a Collaborative
Development Process Map.
In addition to the above Collaborative Development Process Overview, the
following principles are fundamental to how the two teams will work together
throughout the collaborative development process. These principles are not
expected to change during the life of this Collaborative Development Process.
They will remain in force unless changed in writing by mutual agreement.
. For the purpose of developing Novation Marketplace direction and vision,
Novation is responsible for the aggregation of all member input. Neoforma
will work in partnership with Novation's designated employees in
providing the input that it collects.
. Neoforma will coordinate its information gathering processes with
Novation when obtaining market research information from Novation's
Member Users.
. Novation is responsible for leading all Novation Marketplace related task
forces and councils. Neoforma will participate in and provide support for
these activities as needed.
. Neoforma and Novation will communicate their goals, desires, plans, etc.
for the Novation Marketplace to each other. This is done so that this
input can be considered during the Visioning Process of the Collaborative
Development Process. As appropriate, Novation will include these plans,
goals, etc in their Novation Marketplace business requirement documents.
. Neoforma will not develop and maintain separate vision or directional
statements for the Novation Marketplace that have not gone through the
Novation Visioning process.
. The Novation and Neoforma teams will work collaboratively to review
Neoforma's written functional requirement documents (e.g. Product
Requirements Document - Prods) in ensuring that they align with
Novation's Vision, as provided in the Novation Vision documents. Each
functional requirement document from Neoforma is to provide detailed
descriptions of specific features and functions, including functional
descriptions, screen designs/layouts, programmatic logic, data
dependencies, and other needed specifications so that Novation has a
clear understanding of what is to be built during each development cycle.
. Neoforma will use Novation's business requirement documents as the basis
for creating its functional requirement documents for Novation
Marketplace during
M-9
each Planning process. This closely aligns what Neoforma is building with
what members and other stakeholders have requested during the Visioning
process as lead by Novation. If new features are being proposed by
Neoforma, the feature will be evaluated for inclusion in the Novation
Marketplace.
. Novation must approve each functional requirement document (e.g. Product
Requirements Document -PRD) before development work can begin. Exceptions
to this will be approved in writing and sent to Neoforma. Novation must
approve these documents within a jointly agreed upon timeframe,
determined during the planning process.
. Neoforma will maintain and make available, detailed project plans for all
Novation Marketplace functional deliverables. Each plan will include
resources, tasks, milestones, estimated costs, and other information that
will help Novation keep informed about where each functional deliverable
is as it is being built or enhanced. Novation's PMO representative and a
limited number of designated managers at Novation will have day to day
visibility into the status of all planned, in process, and completed
functional deliverables.
Part 2: The Collaborative Development Process Map
The Collaborative Development Process Map is attached hereto as Attachment 1.
Novation Marketplace Functionality Roadmap
Neoforma shall maintain the Functionality Roadmap, and through which Novation
and Neoforma will monitor the status of production and implementation of all
Functionality Roadmaps.
Establishment of Functionality Roadmap Completion Dates
During the Planning phase of the Collaborative Development Process, Neoforma and
Novation shall agree to production schedules, including completion dates (each a
"Functionality Roadmap Completion Date"), for all Functionality Roadmaps.
Document Control
The parties shall create a central repository of documents relating to the
Collaborative Development Process, including, without limitation; requirement
documents, technical specifications, data models, project plans, and test plans.
The repository shall be managed by the Program Management Office (PMO). These
documents will be kept current by the PMO.
M-10
Change Management at Neoforma and Novation
Neoforma
Neoforma shall perform certain change management functions to rigorously control
and manage changes in any and all aspects of the Novation Marketplace. Changes
can happen during the building of Functionality Roadmaps, or after a
Functionality Roadmap is moved to Production.
Changes during the Collaborative Development Process
At a minimum, Neoforma's Change Management Process is to include the following
principles as they relate to the Novation Marketplace.
. A Change Control Process will be jointly developed and approved by both
parties.
. Neoforma will vigorously enforce and maintain the approved change control
process for all Functionality Roadmap Changes.
. Changes in Neoforma's Change Control Process must be communicated to and
approved by Novation.
. Once a functional deliverable document is approved by Novation during the
Planning Phase of the Collaborative Development Process, Neoforma will
vigorously enforce strict change control processes and notify Novation of
all material changes to any functional deliverable within 24 hours of
deciding that a functional deliverable change is needed. Upon receipt of
this change notification, the Novation responsible person for the
functional deliverable(s) will work collaboratively with the appropriate
Neoforma Product Manager to understand why a Functionality Roadmap Change
is needed.
. All material changes to any Functionality Roadmap must be approved by
Novation. A material change is one that: 1) changes the user experience
as specified in the functional requirements document that was approved by
Novation, 2) adds or deletes agreed upon features and/or functionality
from what was specified in the functional requirements document that was
approved by Novation, 3) affects business processes for any Novation
Marketplace stakeholder.
. Until receiving Novation's approval for any given Functionality Roadmap
Change, which will not be unreasonably withheld, Neoforma may not
redeploy resources or invoke other plans to change any functional
deliverable already implemented on the Novation Marketplace. Both parties
will mutually agree upon how quickly each approval must be considered and
when an answer must be provided to Neoforma. This time limit will be
based upon the nature and time sensitivity of each change decision.
. Novation, or Neoforma on Novation's behalf, may initiate a Functionality
Roadmap Change. This will occur if Novation fails to deliver on one (or
more) of its assigned tasks on a Neoforma project plan. If this occurs,
Novation acknowledges that this may cause Neoforma to miss a
Functionality Roadmap on
M-11
the Functionality Roadmap, and that Neoforma will be considered to have
met its commitments under the then current Functionality Roadmap.
. Neoforma's PMO will maintain a change control tracking system. Quarterly
reports will be provided to Novation detailing all changes on a quarterly
basis.
Changes Once a Functionality Roadmap is implemented on the Novation Marketplace
. A Change Control Process will be jointly developed and approved by both
parties.
. Neoforma will vigorously enforce and maintain the approved change control
process for all Post Production Functionality Roadmap Changes.
. Changes in Neoforma's Post Production Change Control Process must be
communicated to and approved by Novation's management team.
. Once implemented on the Novation Marketplace, Neoforma will vigorously
enforce strict change control processes and notify Novation of all Post
Production Functionality Roadmap Changes within 24 hours of deciding that
a change is needed. This notification will come from Neoforma to the
appropriate Novation employee responsible for that functional
deliverable(s), and to Novation's PMO representative. Upon receipt of
this change notification, the Novation responsible person for the
functional deliverable(s) will work collaboratively with the appropriate
Neoforma Product Manager to understand why a Functionality Roadmap Change
is needed.
. All material changes to any Post Production Functionality Roadmap(s) must
be approved by Novation. A material change is one that: 1) changes the
user experience as specified in the functional requirements document that
was approved by Novation, 2) adds or deletes agreed upon features and/or
functionality from what was specified in the functional requirements
document that was approved by Novation, 3) affects business processes for
any Novation Marketplace stakeholder.
. Until receiving Novation's approval for any given Post Production
Functionality Roadmap Change, which will not be unreasonably withheld,
Neoforma may not redeploy resources or invoke other plans to change any
functional deliverable already implemented on the Novation Marketplace.
Both parties will mutually agree upon how quickly each approval must be
considered and when an answer must be provided to Neoforma. This time
limit will be based upon the nature and time sensitivity of each change
decision.
. Novation's approval for a Post Production Functionality Roadmap Change
must be in writing.
Novation
Novation shall perform certain change management functions to rigorously control
and manage changes in any and all aspects of the information that it provides
to, or receives from Neoforma.
M-12
. A Change Control Process will be jointly developed and approved by both
parties.
. Novation will vigorously enforce and maintain the approved change control
process for data that it sends to, or receives from Neoforma.
. Changes in Novation's Change Control Process must be communicated to and
approved by Neoforma.
. Once implemented on the Novation Marketplace, Novation will vigorously
enforce strict change control processes and notify Neoforma of all needed
changes within 24 hours of deciding that a change is needed. This
notification will come from Novation to Neoforma, and if known to the
Neoforma employee responsible for effected functional deliverable(s).
Upon receipt of this change notification, the Neoforma responsible person
will work collaboratively with the appropriate Novation employee to
understand why a change is needed.
. Until receiving Neoforma's approval for a Functionality Roadmap Change or
a Post Production Functionality Roadmap Change, Novation may not redeploy
resources or invoke other plans to change any functional deliverable
unless absolutely necessary in keeping the Novation Marketplace
operational.
. Neoforma's approval for a Post Production Functionality Roadmap or
Functionality Roadmap Change must be in writing.
Roadmap Process.
Novation and Neoforma will use the CDP as a standard for planning all functional
deliverables for the Novation Marketplace. All desired functionality will be
maintained in a Planning Roadmap, and Neoforma and Novation's agreed upon and
committed functionality will be tracked in the Functionality Roadmap.
The Planning Roadmap includes ideas and desired functionality for a rolling 12
month period (in quarterly increments), and the Functionality Roadmap will cover
committed development activities for a rolling 6 month period (in quarterly
increments).
Features and functions that are on the Planning Roadmap are simply proposed
directional statements, but items on the Functionality Roadmap must be sized,
scoped, resource planned, and have articulated plans for implementation before
they are added to the Functionality Roadmap.
An item on the Functionality Roadmap is considered to have been delivered by
Neoforma if the Functionality Roadmap Completion Date is met. This date will
always be considered to be the last day of the calendar month for the quarter as
specified on the Functionality Roadmap.
The joint Novation Marketplace technical management team reviews and approves
the Planning and Functionality Roadmaps. Additionally, this team assures that
the Collaborative Development Process is followed and they resolve issues should
there be competing priorities for all Novation Marketplace functional
deliverables.
M-13
Functions and Responsibilities
This section is a guide to the minimal level of Functionality that is to be
included in the Novation Marketplace.
If noted by the letters "CDP" after the listed functionality, it means that it
will be planned, defined and developed in accordance with the CDP but is not a
required functionality unless mutually agreed to by Novation and Neoforma. All
other functions and responsibilities are managed outside of the CDP.
*
Data Communications
.. Novation will provide to Neoforma from time to time, as agreed by Neoforma
and Novation, information regarding membership organizations, Members,
contract suppliers, contract product, pricing, and content. Additionally,
Neoforma and Novation will develop a process for defining and transporting
data from Novation and HealthVision systems to Neoforma. For all such
communications, Neoforma and Novation will agree upon the specific data
elements that are required, the format of the data, and the methodology for
the communication. Neoforma and Novation also will agree to the frequency
of full data refreshes in order to better facilitate the synchronization of
information between Neoforma and Novation.
.. Novation shall establish change management functions to rigorously control
and manage changes in any and all data stored in the system of record.
Within 30 days after the date of the Outsourcing Agreement, Novation will
develop with Neoforma a data Novation Marketplace management process, which
shall include:
(i) Definition of data Novation Marketplace requirements.
(ii) Format of the data to be communicated.
(iii) Methodology by which data will be communicated between to
Neoforma, Novation, HealthVision, and other applicable
related companies.
__________________________
* Confidential treatment requested
M-14
Implementation Reporting and Processes
Neoforma and Novation shall develop and mutually agree to an implementation
process (the "Implementation Process") for each type of implementation (i.e., a
different Implementation Process may be required for each of distributors,
manufacturers, Members, and other Users). Additionally, Neoforma and Novation
will work with representatives from manufacturers, distributors, Members and
Other Users in an effort to continuously improve their respective Implementation
Processes.
Neoforma is responsible for the following communications to Novation as it
implements manufacturers, distributors, Members, and Other Users on the Novation
Marketplace.
.. The service delivery group will provide a weekly report that summarizes all
implementation activity.
.. Neoforma will maintain an accurate Implementation Process for each type of
implementation (e.g., for distributors, manufacturers, Members, and other
Users).
.. Neoforma will prepare individualized Implementation Process documents for
each distributor, manufacturer, Member, and User implementation.
.. Neoforma will provide electronic copies of the individualized Implementation
Process plans prior to the start of each implementation and Novation will be
updated as changes occur in the individualized plans.
.. Neoforma will inform Novation of all changes to the overall Implementation
Process. At least annually, or more frequently if appropriate, there will be
joint meetings to fully review the Implementation Process.
.. Neoforma and Novation will provide a monthly implementation "report card"
that can be shared with internal management and other parties, as
appropriate. The contents of this report card will be jointly developed by
Neoforma and Novation.
All such communications shall be provided to Novation at times and in a manner
mutually agreed to by Neoforma and Novation.
M-15
Technical and Software Issues
System Documentation
On a quarterly basis Neoforma will provide Novation with updated versions of
then-current system design specifications documentation so that Novation remains
appraised of all current features and functions of the system.
Source Code Escrow Agreement
Promptly after execution of the Source Code Escrow Agreement, Neoforma shall
deliver to the Escrow Agent specified therein both printed and electronic copies
of all source code (along with complete copies of all application design
specifications, user manuals, etc.) for any and all applications (i) developed
by Neoforma or (ii) developed by third-parties but in as to which Neoforma has
the right to access the source code, in each case, used by any member of VHA,
UHC or HPPI in connection with the Novation Marketplace. Neoforma will, on a
quarterly basis, update such copies of source code as changes to such Novation
Marketplace technology are made. All fees and expenses charged by the Escrow
Agent will be borne by Novation.
From time to time, Novation may, at its option and expense, request that the
completeness and accuracy of the source code be verified. Such verification
shall be performed in accordance with the terms of the Source Code Escrow
Agreement.
The source code will be released from escrow to Novation upon the occurrence of
one or more specified "release events," to be more fully described in the Source
Code Escrow Agreement which, at a minimum, shall include (i) the delivery by
Novation of any notice of termination under Sections 9.3 and 9.4 of the
Outsourcing Agreement and (ii) the material breach by Neoforma of its service
obligations under Section 9.9 of the Outsourcing Agreement after the delivery by
Novation of any notice of termination under Sections 9.5 and 9.6 of the
Outsourcing Agreement.
Software Support
Neoforma is administratively and financially responsible for obtaining and
maintaining support for all software, hardware, database and other technical
components of the Novation Marketplace. Neoforma and Novation will meet from
time to time to discuss support requirements that materially impact upon the
Services, and Neoforma will provide 90 days notice to Members if a current
version of a technical component is to be eliminated or replaced (if such a
change may have a material impact upon the Services).
Software Standards
Novation and Neoforma will from time to time meet to discuss all software
standards used in the development and support of the Novation Marketplace.
M-16
Systems Maintenance; Outages; Disaster Recovery
Scheduled System Maintenance Windows
Neoforma will schedule systems maintenance activities only within the following
maintenance windows:
--------------------------------------------------------------------------
Outage Period Outage Window
--------------------------------------------------------------------------
Friday Evening (Primary Window) 8PM to 2 AM Saturday morning (PST)
--------------------------------------------------------------------------
Saturday Evening (Secondary Window) 8PM to 2 AM Sunday morning (PST)
--------------------------------------------------------------------------
Sunday Evening (Tertiary Window) 6PM to 12AM Monday morning (PST)
--------------------------------------------------------------------------
Whenever possible, maintenance will be scheduled within the Primary Window.
Alternate times outside of these windows must be negotiated with Novation at
least 48 hours in advance, and used only if critically important to the
continued operation of the Novation Marketplace.
Notification of System Maintenance
Neoforma is to provide Novation with at least 2 business days of advance notice
of all scheduled system outages.
Notification of Unscheduled Outages
If for any reason the Novation Marketplace becomes inoperative, or a critical
systems component of the Novation Marketplace is inoperative, outside of a
scheduled system maintenance period, Neoforma will notify Novation within 30
minutes after Neoforma discovers that the outage has occurred. Neoforma will
notify Novation within 30 minutes after systems restoration that such
restoration has occurred. Within one business day of systems restoration,
Neoforma is to notify Novation as to (i) the probable cause of the outage, (ii)
the number of Members and Member-Users that were affected and (ii) the number of
transactions either queued or rejected during the outage.
Using input from Novation, Suppliers, Members, and other Users, Neoforma will
develop and update from time to time as needed the notification procedures that
will be used to inform affected parties about significant service interruptions
and/or system outages, should they occur. These notification procedures will be
documented in a process and procedures section of the Neoforma disaster recovery
plan
Neoforma will review the notification processes and procedures in its disaster
recover plan with manufacturers, distributors, and member users during the
Implementation Process. Should a manufacturer, distributor, Member, or other
User request certain notification processes, Neoforma will use its best efforts
to honor such requests.
M-17
Order Queuing During Systems Maintenance or Outage
Neoforma is to execute its best efforts to queue all orders and other inbound
and outbound transactions in a safe holding area during all scheduled
maintenance and unscheduled systems outage periods. All queued transactions are
to be immediately processed as soon as safe to do so upon systems restoration.
Hot Site Backup Synchronization with the Primary Site
The hot site will be updated as needed to support functionality and services
that are added to the Novation Marketplace.
1. Novation agrees that Neoforma may accumulate its Hot Site upgrades over a
calander quarter, and implement all of the enhancements at the end of
each quarter.
2. Web Applications. Neoforma and Novation will identify the web based
applications that must be supported by the Hot Site. This will be done as
a standard part of the Collaborative Development Process. If required,
updates will be made to the applications that operate at the Hot Site
based upon the requirements detailed in the functional requirement vision
and/or planning documents created during the Collaborative Development
Process.
3. Hot site support for NeoConnect, the data warehouse, and other
infrastructure components will be discussed quarterly.
A joint Neoforma and Novation team will be established to review all of the
upgrades needed for the Hot Site. This team will meet quarterly. This team will
discuss and mutually agree upon the services being supported by the hot site
backup facility, and the level of application synchronization between the
primary and hot backup sites.
Backup, Disaster Recovery and Storage
Neoforma shall provide backup, disaster recovery and storage capabilities so as
to maximize availability of the Services during an event that would otherwise
affect the delivery of the Services.
Neoforma will maintain a "hot site" disaster recovery site which is able to
support the processing and communication of EDI and/or XML transactions between
the Users and their Suppliers (a "hot site" being defined as a fully equipped
computer center which provides one or more computer models and the necessary
peripheral equipment to replicate the data processing from the primary computer
site, including backup power supplies, redundant environmental conditioning,
communications lines, fire protection and warning devices, intrusion-detection
devices, physical security, and adequate office space for personnel to conduct
normal Novation Marketplace operations). Should a disaster occur at the primary
site of the Novation Marketplace, the system should automatically sense the
outage and begin processing the EDI and XML transactions at the
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hot site and continue until service is restored at the primary site. Neoforma
will continually keep Novation informed as to the location of the hot site.
Neoforma must use its best efforts to ensure that the automatic failover
software and hardware systems work properly between the primary and hot backup
sites. At a minimum, failover processes and manual procedures must be tested
monthly, unless otherwise approved in writing by Novation, and, should the hot
backup system not work properly, immediate action must be taken to resolve any
and all problems. Upon request, Neoforma will provide Novation with reasonable
documentation of the date of such tests, the results of each such test, and any
corrective actions taken in response to errors and any other issues discovered
through such tests.
Backup and Disaster Recovery Plan
Neoforma shall adopt and maintain a Novation Marketplace Backup and Disaster
Recovery Plan which describes (i) the manner in which Neoforma shall perform
backup and disaster recover functions, and (ii) Novation's priorities for backup
and disaster recovery and methods for changing those priorities. Novation will
continually have access to the plan and may, from time to time, meet with
Neoforma to discuss the plan.
Other Disaster Recovery Duties
Neoforma shall also have responsibility to:
(i) Maintain an uninterruptible power supply (UPS), to both the
primary site and "hot site" facilities, with fuel supply and
auxiliary generator to ensure continuity in the event of an
interruption in ordinary power supply, and perform routine
maintenance to ensure reliability.
(ii) Maintain off site storage of the Novation Marketplace's data,
software and disaster-recovery related documentation to
support disaster recovery.
(iii) In the event of a disaster, assume responsibility for operating
the hardware and providing the functions in accordance with the
disaster recovery plan.
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Attachment 1
Collaborative Development Process Map
*
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* Confidential treatment requested.
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EXHIBIT N
SERVICE LEVEL SPECIFICATIONS
1. GENERAL PROVISIONS
1.1. General
Neoforma acknowledges and agrees that the critical importance of
certain of Novation's business functions (e.g., those tied to
Novation's present and future revenue streams and the strategies
therefore) require that certain metrics focus on performance measures
that are a combination of quantitative and qualitative measures (e.g.,
a qualitative measure of Neoforma's overall responsiveness in meeting
Novation's business needs and schedules). As further described in this
Service Level Specifications, Neoforma shall be committed to a process
to develop such metrics and to define Neoforma's responsibilities in
that regard.
The Service Levels set forth in this Service Level Specifications are
intended to measure Neoforma's performance of the Services. Commencing
with the initial provision of the Services, Neoforma shall perform the
Services so as to meet or exceed the Type I Service Levels set forth
in this Service Level Specifications. Neoforma shall perform the
Services so as to meet or exceed the Type II Service Levels as they
are established. The detailed definitions of Type I Service Levels are
set forth in Article 2. Type II Service Levels shall be established in
accordance with the Service Level establishment procedure set forth in
Section 1.4.
Neoforma and Novation agree that this Service Level Specifications
represents their agreement as to the Service Levels as of the
Effective Date. As the Services provided pursuant to the Outsourcing
Agreement are changed, modified or enhanced (i) as a result of the
development of Implementation Plans for each new release or (ii) from
time to time through the provision of additional Services, Neoforma
and Novation will review the Service Levels then in effect and will in
good faith mutually determine whether such Service Levels should be
adjusted and whether additional Service Levels should be implemented.
Capitalized terms used in this Service Level Specifications shall have
the respective meanings set forth herein. Other terms used in this
Service Level Specifications are defined in Attachment 1 hereto, the
Outsourcing Agreement or the Collaborative Development Process.
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1.2. Reporting
(a) On or before the six-month anniversary of the Effective Date, Neoforma
and Novation shall establish an appropriate set of periodic reports to
be delivered by Neoforma to Novation from time to time regarding the
provision of the Services by Neoforma. These reports may include
information of the following type: a monthly status report that (i)
assesses, for each Service Level, the degree to which Neoforma has
attained or failed to attain the pertinent Service Level including
measurements with respect to the Service Levels, (ii) summarizes the
status of problem resolution efforts and other initiatives and (iii)
explains deviations from the Service Levels and includes plans, in
reasonable detail, for corrective action.
(b) The monthly status reports shall include a set of hard and soft copy
reports to verify Neoforma's performance and compliance with the
Service Levels. If feasible, such reports shall also be made available
to Novation on-line. The raw data and detailed supporting information
shall be deemed Novation Data under the Outsourcing Agreement. Such
reports shall be provided on or before the 20/th/ day of the month
reflecting Neoforma's performance of the Services during the
immediately preceding month.
1.3. Service Level Types
(a) Certain Service Levels are established as of the Effective Date
(each, a "Type I Service Level"), and are set forth in Article 2 and
summarized in Attachment 3. Type I Service Levels shall be reviewed
from time to time as described in Section 1.4.
(b) The remaining Service Levels are undefined as of the Effective
Date (each, a "Type II Service Level"). Type II Service Levels shall
be subject to the Service Level establishment procedure set forth in
Section 1.4.
(c) All Service Levels are subject to continuous improvement
described in Section 1.5.
1.4. Establishment and Review of Service Levels
(a) This Section 1.4(a) identifies Neoforma's and Novation's
obligations with regard to the establishment and review of
Service Levels. On or before the two-month anniversary of the
Effective Date, Neoforma and Novation shall develop Service Level
metrics to be published and maintained by the Program Management
Office. The PMO will be responsible for the following with
regards to Service Level metrics:
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(i) Defining the overall Service Level program between Neoforma
and Novation, including, without limitation, the Service
Level Credit payments and other consequences for Neoforma's
failure to meet any Service Level (including Type I and
Type II Service Levels). The definition of such Service
Level Credit payments and other consequences shall include,
without limitation, a methodology whereby Neoforma shall
provide to Novation a credit, calculated as a percentage
(up to * %) of the Monthly Fees. Such methodology shall (A)
include a mechanism whereby an accelerator or multiplier
factor shall apply to each of the different levels of
severity or periods of time associated with Neoforma's
failure to meet such Service Level and (B) be designed to
increase the amount of the Service Level Credit applicable
to Neoforma's failure to meet such Service Level as such
level of severity or the time period of Neoforma's
nonperformance increases. Any such Service Level Credit
methodology shall be subject to the provisions of Section
16.3 (including the limitations set forth therein).
(ii) Reviewing the Type I Service Levels (x) during the
preparation of the Implementation Plan for each new release
and (y) from time to time during the Term. In connection
with such review, the PMO shall examine the (i) Services to
be provided , (ii) state of technology, (ii) Neoforma's
role as a leading provider of e-commerce services to the
healthcare industry, (iii) User (including Member) needs
and concerns and (iv) other relevant factors.
(iii) During the six-month period commencing on the Effective
Date and from time to time during the Term, jointly
proposing, defining, documenting and implementing Service
Level metrics for Type II Service Levels that shall include
additional Service Levels. The PMO shall adhere to the
provisions of this Service Level Specifications and the
establishment and review procedures described in Attachment
2.
(b) Except as expressly stated otherwise in this Service Level
Specifications, the addition, deletion or modification of Service
Levels shall be subject to the mutual agreement of Neoforma and
Novation.
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* Confidential treatment requested.
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(c) Neoforma and Novation agree that if they are unable to agree upon
any of the Service Levels that are to be established, such
disagreement will be treated as a Disputed Matter subject to the
dispute resolution and arbitration provisions set forth in
Section 18 of the Outsourcing Agreement.
1.5. Continuous Improvement
(a) Neoforma and Novation acknowledge that Service Levels will be
subject to continuous improvement during the Term, and will be
adjusted through the review process described in Section 1.5(b).
(b) From time to time and no less frequently than annually during the
Term, Neoforma and Novation shall jointly review (i) the
then-current Service Levels, (ii) the percentage difference
between Neoforma's actual performance and the then-current
Service Levels and (iii) information indicating industry-wide
improvements of delivery of substantially similar services. The
Service Levels shall be adjusted based on the review described in
the preceding sentence.
1.6. Failure to Meet Service Levels
(a) If Neoforma fails to meet any Service Level, then Neoforma shall
(i) promptly perform a root-cause analysis to identify the cause
of such failure, (ii) provide a report to Novation in accordance
with Section 1.2, and (iii) take such action as may be necessary
or appropriate to avoid such failure in the future and begin to
meet the Service Level as promptly as practicable.
(b) If Neoforma fails to meet a Service Level, Neoforma shall credit
the applicable Service Level Credit to Novation on the monthly
invoice immediately following the report of such failure to
Novation. In no event shall the total amount of Service Level
Credits credited to Novation with respect to failures to meet any
Service Levels occurring in a single month exceed, in the
aggregate, * of Monthly Fees. If any Service Level Credit remains
outstanding upon the expiration or termination of this
Outsourcing Agreement and no Service charges remain payable,
Neoforma shall pay Novation such remaining amount in cash within
30 days after such expiration or termination.
__________________________
* Confidential treatment requested.
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(c) Neoforma shall notify Novation in writing if Novation becomes
entitled to a Service Level Credit as part of the monthly status
report referred to in Section 1.2. Such notice shall specify the
performance failure and the amount of the Service Level Credit
that Novation is entitled to receive.
1.7. Quality Assurance
Neoforma shall provide and implement such quality assurance procedures
as may be necessary or appropriate for the Services to be provided in
accordance with the Service Levels. Such procedures will include
checkpoint reviews, testing and other procedures that will enable
Novation to monitor the quality of Neoforma's performance and upon
Novation's request, will be provided to Novation.
1.8 Measurement and Monitoring Tools
Neoforma shall utilize such measurement and monitoring tools and
procedures as may be necessary or appropriate to measure and report on
Neoforma's performance of the Services against the applicable Service
Levels. Such measurement and monitoring shall permit reporting at a
level of detail sufficient to verify compliance with the Service
Levels and shall be subject to audit by Novation in accordance with
Section 17 of the Outsourcing Agreement. Neoforma shall provide
Novation with information and access to such tools and procedures upon
Novation's request.
1.9 Customer Satisfaction
No later than the 12-month anniversary of the Effective Date and on an
annual basis thereafter during the Term, Neoforma shall conduct a
satisfaction survey using a mutually agreed upon survey to capture
Novation and Member perceptions in respect of the delivery of the
Services. Neoforma shall provide the survey and proposed distribution
list therefore to Novation for its review and approval. The
individuals set forth in Neoforma's proposed distribution list shall
be a representative sample of Novation end users of the Services and
senior management of Novation. Neoforma shall provide Novation with
the results of such survey. Promptly thereafter, the Parties shall
jointly review such results and identify any areas of customer
dissatisfaction. Neoforma shall prepare a remedial plan and take such
action as may be necessary or appropriate to remedy the causes of any
recurring or significant customer dissatisfaction. Alliance members
may conduct their own surveys and share these with Neoforma. In order
to coordinate communications, the alliances will share pending survey
language and timing with Neoforma marketing prior to distribution.
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2. DETAILED DEFINITION OF SERVICE LEVELS
2.1 Systems Up Time
Neoforma is responsible for maintaining a system service level of at
least *%. This means that excluding any scheduled system
maintenance activities, the Novation Marketplace will be available for
use by all Users at least *% of the time, 365 days a year, 24 hours
a day. Systems Up Time shall be measured on a quarterly basis.
2.2 Transaction Throughput Requirements
For the purpose of this Service Level Specifications, (i) a
"Transaction" is defined as any structured business document (EDI or
XML) that is processed by the Novation Marketplace and (ii) "time
within Novation Marketplace Operating Environment" is defined as the
period of time during which the Novation Marketplace receives a
Transaction, processes the Transaction and delivers it to an external
organization (such as a Member-User, Supplier or other external
entity) for further action. Neoforma is responsible for ensuring that
the Novation Marketplace processes the various types of Transactions
set forth below within the following time requirements:
Maximum Time Within
Type of Transaction Novation Marketplace Operating Environment
-----------------------------------------------------------------------------------------------
Purchase Orders from User *
Change Purchase Orders *
Purchase Order Acknowledgments from Supplier *
Ship Notices from Supplier *
Invoices from Supplier *
Price Files from Novation Marketplace to User *
Price Files from Suppliers to Members *
All Outbound Fax Transactions (CDP) *
All Other Non-Fax Transactions *
2.3 Novation Marketplace User Capacity
Neoforma will ensure that the Novation Marketplace is capable of
supporting a User capacity of (i) * total named Users with independent
log-ins by *, with additional capability to scale to * named Users
with independent log-ins afterwards if and when needed by Novation,
and (ii) * Users accessing the Novation Marketplace simultaneously
(with "simultaneously" being defined as within a one second time
period). In
_____________________________
* Confidential treatment requested.
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connection with the development of the Implementation Plan, Neoforma
and Novation shall develop a methodology to more accurately measure
the Novation Marketplace's User Capacity.
2.4 Novation Marketplace Content Capacity
Neoforma will ensure that the Novation Marketplace is capable of
supporting (i) *, (ii) * and (iii) *.
2.5 Total Transaction Capacity
Neoforma will ensure that the Novation Marketplace is capable of
supporting the following number of total Transactions annually by the
following dates:
Number of Annual Transactions Supported by December 31 of
-------------------------------------------------------------------------------
*
2.6 Peak Time Transactions Capacity
Neoforma will ensure that the Novation Marketplace is capable of
supporting the following number of "Peak Time Transactions" (defined
as Transactions which utilize the Novation Marketplace in a
high-traffic period measuring five minutes) by the following dates:
Number of Peak Time Transactions Supported by December 31 of
-------------------------------------------------------------------------------
*
2.7 Network Connection Speed
Neoforma will ensure that the Novation Marketplace will provide (i)
network connections at speeds of * or greater and (ii) backup
internet connections at speeds of * or greater. Additionally, these
data communication speeds will be reviewed, and the system will be
upgraded to higher speeds as data communication technologies with
desired specifications become cost effective.
_____________________________
* Confidential treatment requested.
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2.8 Development/Test/Production Environments
Parties agree to develop a process that provides for versioning and
revision control in the production environment. Parties also agree
that a testing environment will be accessible to Novation across the
Internet for the purpose of pre-production approvals.
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Attachment 1
Definitions
"Monthly Fees" means the total of all Contract Transaction Fees and Non-Contract
Transaction Fees collected by Neoforma during any calendar month.
"Service Level Credit" means the amount to be credited to Novation upon any
failure to meet a particular Service Level, which, in the aggregate, shall
be equal * of the Monthly Fees for the month in which Neoforma failed to
meet such Service Level.
_____________________________
* Confidential treatment requested.
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Attachment 2
Service Level Establishment Process
Set forth below is the process by which Neoforma and Novation will develop Type
II Service Levels during the Term.
1. Establishment of Type II Service Levels
1.1 Identification. The PMO shall meet regularly to carry out Neoforma's
and Novation's responsibilities described in this Service Level
Specifications. Within the applicable timeframes, the PMO shall
deliver a report to Neoforma and Novation that contains (i) a detailed
description of the proposed Type II Service Level and how it will be
measured, (ii) the purpose of the proposed Service Level, and (iii) a
recommendation of an appropriate measurement period to measure such
Service Level. None of the foregoing items may contravene the
provisions of this Service Level Specifications.
1.2 Measurement. Within 30 days after mutual agreement of Neoforma and
Novation to proceed to measure any of such proposed Service Levels,
Neoforma shall commence the applicable measurement period relating to
each proposed Service Level.
1.3 Implementation. Upon completion of the applicable measurement period,
Neoforma and Novation will meet to consider the reports provided, the
materials prepared by the PMO and the data collection results
presented by Neoforma or Novation. Within 30 days of such first
consideration, Neoforma and Novation shall implement such proposed
Service Level. Neoforma shall begin reporting on such Service Level
during the next succeeding measurement window.
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Attachment 3
Type I Service Levels Summary
-------------------------------------------------------------------------------------------------------------------------
BASE LEVEL SERVICE
MEASUREMENT DEFINITION TARGET
-------------------------------------------------------------------------------------------------------------------------
Systems Up Time Percent of time Novation *%
Marketplace is available to all (24 hours a day, 365 days a year)
Users, excluding scheduled
maintenance
-------------------------------------------------------------------------------------------------------------------------
Novation Marketplace User Capacity Total number of named Users with * (with capability to scale up to *
independent log-ins which the afterwards if and when needed by
Novation Marketplace can Novation)
support
-------------------------------------------------------------------------------------------------------------------------
Simultaneous User Capacity Number of Users accessing the *
Novation Marketplace
simultaneously which the
Novation Marketplace can support
-------------------------------------------------------------------------------------------------------------------------
Content Capacity Amount of data which the *
Novation Marketplace can support
-------------------------------------------------------------------------------------------------------------------------
Total Transaction Capacity Number of Transactions which the *
Novation Marketplace can support
annually
-------------------------------------------------------------------------------------------------------------------------
Peak Time Transactions Capacity Number of Transactions which the *
Novation Marketplace can support
in a high-traffic period measuring
5 minutes
-------------------------------------------------------------------------------------------------------------------------
Transaction Throughput Requirements Maximum time within the Novation PO's from User *
Marketplace for various types of Change PO's *
Transactions PO Acknow. *
Ship Notices from Supp. *
Invoices from Supplier *
Price Files, Ex. to User *
Price Files, Supplier to User *
Outbound Fax Trans. *
Other Non-Fax Trans. *
-------------------------------------------------------------------------------------------------------------------------
Network Connection Speed Novation Marketplace connection * for network connections;
speed minimum requirements * for backup internet connections
-------------------------------------------------------------------------------------------------------------------------
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* Confidential treatment requested.
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