E-commerce Outsourcing Agreement

Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. Sections 200.80(b)(4),
200.83 and 230.406


PREMIER HEALTH EXCHANGE, L.L.C.


E-COMMERCE OUTSOURCING AGREEMENT


This e-Commerce Outsourcing Agreement (the "Agreement"), is entered into effective March 4, 2000, by and between Premier Health Exchange, L.L.C. ("PHx"), and Premier Purchasing Partners, L.P. ("Purchasing Partners"), with reference to the following facts:


A. Purchasing Partners and PHx are affiliates of Premier, Inc. ("Premier"), the nation's largest alliance of hospitals and health care organizations.


B. Premier's core objective is to improve the health of communities.


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


D. Purchasing Partners operates Premier's acute care group purchasing organization which represents one of the nation's largest groups of acute care and related facilities that have come together through Purchasing Partners in an effort to aggregate their supply purchasing volume in order to obtain more favorable terms from vendors.


E. PHx is a provider of e-commerce systems and solutions to enable the use of the Internet in streamlining the supply chain management process with particular focus on more efficient ordering, tracking and processing of medical product purchases.


F. Purchasing Partners desires to retain the services of PHx to serve as Purchasing Partners' provider of e-commerce systems through which Purchasing Partners' member hospitals and related facilities can take full advantage of the efficiencies and anticipated cost savings offered by Internet-based technologies.


G. PHx desires to provide such services to Purchasing Partners, subject to the terms and conditions of this Agreement.


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


1.0 DEFINITIONS. The following terms as used in this Agreement shall have the meanings set forth below:


1.1 "COMMITMENT PROGRAM". The Purchasing Partners program that requires Participating Members to purchase specified levels of certain Contracted Products and Services from designated Vendors.


1.2 "CONTRACTED PRODUCTS AND SERVICES". The products and services which are covered under a Standard Group Purchasing Agreement between Purchasing Partners and a Vendor.


1.3 "CALENDAR YEAR". The twelve (12) month period commencing on January 1 and ending on December 31.


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1.4 "DISTRIBUTOR". A distribution or wholesaler company which distributes to purchasers medical products, pharmaceuticals and other products or services that have not been manufactured (either by or for) such companies.


1.5 "DISTRIBUTION SERVICES". The warehousing, transport and delivery services of a Distributor with respect to medical products, pharmaceuticals and other products or services that have not been manufactured (either by or for) such Distributor.


1.6 "e-COMMERCE INFORMATION FEE". The fee charged by PHx for providing value-added information with respect to customer purchasing activity which is above and beyond the base level of information (equivalent to sales tracings) customarily provided by PHx.


1.7 "e-COMMERCE OUTSOURCING AGREEMENT". An agreement, such as this Agreement, between PHx and a Group Purchasing Organization whereby PHx provides access to the PHx e-Commerce System by the Group Purchasing Organization and its members and suppliers.


1.8 "e-COMMERCE CONTRACTED PURCHASE VOLUME". The [***] of Contracted Products and Services purchased by Participating Members from Vendors through use of the PHx e-Commerce System.


1.9 "e-COMMERCE NON-CONTRACTED PURCHASE VOLUME". The [***] of Non-Contracted Products and Services purchased by Participating Members through use of the PHx e-Commerce System.


1.10 "FISCAL YEAR". The twelve (12) month period commencing on July 1 and ending on June 30.


1.11 "GROUP PURCHASING ORGANIZATION". Any entity that meets the definition of a "Group Purchasing Organization" as set forth in 42 CFR Section 1001.952(j).


1.12 "MATERIALS MANAGEMENT SYSTEMS". Information systems (including software and hardware) utilized by health care providers to assist in the organization and management of their product purchasing and materials management functions.


1.13 "NON-CONTRACTED PRODUCTS AND SERVICES". Products and services which are not covered under a Purchasing Partners Standard Group Purchasing Agreement.


1.14 "OLM FACILITIES". Any acute care and related facilities that are owned, leased or managed by a Premier Owner. OLM Facilities are separately identified as such in Exhibit A hereto.


1.15 "PARTICIPATING MEMBERS". The Premier members set forth on Exhibit A hereto who shall have the right to access and use the PHx e-Commerce System. Purchasing Partners shall have the right to provide Exhibit A in electronic form and shall update Exhibit A on a periodic basis to reflect changes in membership.


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1.16 "PREMIER OWNERS". The limited partners of Purchasing Partners and the shareholders of Premier. Premier Owners are separately identified as such on Exhibit A hereto.


1.17 "PERFORMANCE STANDARDS AND SERVICE LEVELS". Objective criteria that establish the specific elements of PHx's required performance of Services under this Agreement. The initial Performance Standards and Service Levels are set forth in Exhibit B hereto. On a quarterly basis, Purchasing Partners and PHx shall meet to review the Performance Standards and Service Levels and discuss in good faith any necessary revisions thereto. Any revisions to the Performance Standards and Service Levels shall be mutually agreed to in writing by the parties.


1.18 "PHx e-COMMERCE SYSTEM". The Internet-based, electronic commerce system provided hereunder by PHx to Purchasing Partners, Participating Members, Vendors and Distributors in accordance with the Performance Standards and Service Levels. The PHx e-Commerce System enables, without limitation: (i) online direct ordering, tracking and inventory control by Participating Members with respect to Contracted Products and Services through use of various technologies including electronic cataloging technologies such as WebCat (these functions of the PHx e-Commerce System may be web-based and/or integrated with ERP systems and Materials Management Systems); (ii) dynamic pricing functions which include, but are not limited to, online auctions and an electronic request for quotation system; (iii) an electronic communications infrastructure to integrate supply chain information with clinical information and other health care provider-based information as well as provide transaction related information to Participating Members, Purchasing Partners, Vendors and Distributors; and (iv) such other capabilities as shall be mutually agreed by the parties. The PHx e-Commerce System includes all upgrades and enhancements implemented over time by PHx that are made generally available to PHx customers.


1.19 "PHx RESOURCES". PHx employees and consultants, WebCat and any other PHx owned, leased or licensed hardware, equipment, software, facilities and other assets used by PHx in providing the Services.


1.20 "PHx TRANSACTION FEES". The transaction fees charged by PHx in connection with the use of the PHx e-Commerce System for the purchase, sale and/or distribution of Non-Contracted Products and Services.


1.21 "PRIVACY POLICY". The online policy that describes PHx's position regarding privacy and information security issues. The form and content of the Privacy Policy shall be subject to the mutual agreement of PHx and Purchasing Partners and shall not be modified without the prior written consent of both parties. In the event of a conflict between the Privacy Policy and any of the terms and conditions of this Agreement, the terms and conditions of this Agreement shall control.


1.22 "PURCHASING PARTNERS ADMINISTRATIVE FEES". The administrative fees paid by Vendors to Purchasing Partners pursuant to Purchasing Partners Standard Group Purchasing Agreements based on the volume of purchases by Participating Members of Contracted Products and Services.


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1.23 "PURCHASING PARTNERS RESOURCES". Purchasing Partners employees and consultants and all computer hardware, equipment, software (including software license rights), facilities and other assets owned, leased or licensed by Purchasing Partners which are reasonably necessary for PHx to provide the Services.


1.24 "SERVICES". PHx's provision of the PHx e-Commerce System for use by Participating Members, Purchasing Partners, Vendors and Distributors and the integration of the PHx e-Commerce System with the information systems utilized by Purchasing Partners, Participating Members, Vendors and Distributors.


1.25 "STANDARD GROUP PURCHASING AGREEMENT". An agreement with a supplier of products and/or services to make such products and/or services available for purchase by a designated group of purchasers that exists for the purposes of negotiating pricing and/or other terms and conditions, which has a term of [*** or more (including all extensions and renewals).


1.26 "SYSTEM ADMINISTRATIVE FEES". Fees paid pursuant to an agreement with Purchasing Partners by Vendors directly to Participating Members that qualify to receive such fees under such agreement, subject to compliance with applicable Medicare/Medicaid Fraud and Abuse Safe Harbors.


1.27 "TERMS OF USE". The online terms and conditions under which Purchasing Partners, Group Purchasing Organizations, Participating Members, Vendors and Distributors may access and use the PHx e-Commerce System. The form and content of the Terms of Use shall be subject to the mutual agreement of PHx and Purchasing Partners and shall not be modified without the prior written consent of both parties. In the event of a conflict between the Terms of Use and any of the terms and conditions of this Agreement, the terms and conditions of this Agreement shall control.


1.28 "TOTAL PREMIER PURCHASE VOLUME". The [***] of Contracted Products and Services (including e-Commerce Contracted Purchase Volume) and Non-Contracted Products and Services (including e-Commerce Non-Contracted Purchase Volume) purchased by Participating Members.


1.29 "VENDORS". Manufacturers and suppliers of medical, pharmaceutical and other products and services.


1.30 "WEBCAT". The version of PHx's electronic cataloging technology which is utilized in connection with Purchasing Partners.


2.0 TERM OF AGREEMENT. This Agreement shall commence on March 4, 2000 (the "Effective Date"), and shall remain in effect for ten (10) years, expiring on March 3, 2010. Upon the expiration of the initial term hereof, this Agreement shall automatically renew for successive five (5) year terms unless either party provides written notice to the other of its intent not to renew, at least ninety (90) days prior to the expiration of the initial term or any renewal term.


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3.0 PHx OBLIGATIONS.


3.1 SERVICES IN GENERAL. Subject to the terms of this Agreement, PHx shall provide such professional and technical personnel and other PHx Resources as shall be required to perform the Services in accordance with the Performance Standards and Service Levels.


3.2 PROVISION OF THE PHx e-COMMERCE SYSTEM. In connection with its performance of the Services hereunder, and subject to compliance with the Terms of Use, PHx shall provide Purchasing Partners, Participating Members, Vendors and Distributors access to and customary use of the any and all components of the PHx e-Commerce System. The level of access shall be appropriate for the type of organization making such access (i.e., a Participating Member, Vendor or Distributor, as the case may be) and consistent with PHx's standard access levels for such business types. The PHx e-Commerce System shall, without limitation, provide for: (i) accurate electronic catalog information; (ii) online access by Participating Members to detailed product information that is available on Vendors' information systems, including without limitation, detailed product descriptions, product photographs or pictures, clinical specifications, recall notices, and Material Safety Data Sheets (MSDS) information; (iii) web-based ordering capabilities whereby Participating Members have the ability to order products and services directly from Vendors and Distributors; (iv) cataloging of the non-price value elements of Purchasing Partners' Standard Group Purchasing Agreements; (v) integration of certain Vendor technologies into the PHx e-Commerce System; and (vi) cataloging of the field and customer services resources of Vendors and Distributors.


3.3 INTEGRATION OF THE PHx e-COMMERCE SYSTEM WITH OLM FACILITIES' INFORMATION SYSTEMS. PHx shall make available [***] sufficient PHx Resources in order to cause the timely integration of the PHx e-Commerce System with the Materials Management System and enterprise resource planning ("ERP") system of any and all OLM Facilities in accordance with a mutually acceptable integration plan (the "OLM Facilities Integration Plan"). PHx agrees to install connector technology that is relevant to each facilities' Materials Management System or ERP that processes procurement transactions and manages electronic catalog information. "Connector Technology" is defined as published subscribed translation technology that is specific to transaction management and that enables electronic transfer processes automatically. PHx will install a pre-configured connector or develop and install a custom connector at each OLM Facility requesting integration services. The parties shall use best efforts to finalize the OLM Facilities Integration Plan within [***] after the Effective Date. Further, PHx shall perform [*** with respect to the PHx components of the resulting integrated systems. In connection with such activities, PHx shall use commercially reasonable efforts to integrate the PHx e-Commerce System using its Connector Technology with the leading Materials Management Systems and ERP systems utilized by Participating Members. Notwithstanding the foregoing, the value of [***] that PHx shall make available under this Section 3.3 [***] shall not exceed [***] per facility, unless otherwise expressly agreed by the applicable facility and PHx. Further, the value of [***] which PHx shall make available under this Section 3.3 [***] shall not exceed [***] per facility per year, unless otherwise agreed by the applicable facility and PHx. The terms and conditions under which PHx shall perform the


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integration and maintenance services described in this Section 3.3 shall be set forth in separate written agreements between PHx and the applicable facilities. The form of any such agreements shall be subject to Purchasing Partners' prior approval, which approval shall not be unreasonably withheld. Further, the terms of any such separate agreement shall be consistent with the terms and conditions of this Agreement.


3.4 INTEGRATION OF THE PHx e-COMMERCE SYSTEM WITH THE INFORMATION SYSTEMS OF OTHER PARTICIPATING MEMBERS. PHx shall use commercially reasonable efforts to cause the timely integration of the PHx e-Commerce System with the information systems of other Participating Members (in addition to OLM Facilities) in accordance with a mutually acceptable integration plan (the "General Integration Plan"). The parties shall use best efforts to finalize the General Integration Plan within a reasonable period of time after the Effective Date. The terms and conditions under which PHx shall perform the integration services described in this Section 3.4 shall be set forth in separate written agreements between PHx and the applicable facilities. The form of any such agreements shall be subject to Purchasing Partners' prior approval, which approval shall not be unreasonably withheld. Further, the terms of any such separate agreement shall be consistent with the terms and conditions of this Agreement.


3.5 INTEGRATION OF THE PHx e-COMMERCE SYSTEM WITH PURCHASING PARTNERS' INFORMATION SYSTEM. PHx shall make available [***] sufficient PHx Resources in order to cause the timely integration of the PHx e-Commerce System with the following components of the Purchasing Partners' information system (provided that the maximum amount required to be incurred by PHx for such integration shall not exceed [***]): (i) [***]; (ii) [***]; (iii) [***]; and (iv) [***]. A more detailed description of the applicable integration requirements is set forth in Exhibit C hereto. PHx shall perform all such integration activities in accordance with the Performance Standards and Service Levels. The PHx integration solution for Purchasing Partners' information system shall include without limitation provision for two-way transfer of contract and member information and detailed purchasing transaction and inquiry data.


3.6 INTEGRATION OF THE PHx e-COMMERCE SYSTEM WITH THE INFORMATION SYSTEMS OF VENDORS AND Distributors. PHx shall use commercially reasonable efforts to cause the timely integration of the PHx e-Commerce System with the information systems of Vendors and Distributors. Integration with Vendors and Distributors is defined as making the Vendors' and/or Distributors' catalog available for on-line searching on the PHx e-Commerce System and, to the extent reasonably possible, enabling on-line order management (including without limitation, inventory query, order creation, order submission and order confirmation) and on-line settlement with such Vendor and/or Distributor. The terms under which PHx shall perform such services shall be set forth in separate written agreements between PHx and the applicable Vendors or Distributors and shall be commercially reasonable.


3.7 PHx PRODUCT OFFERINGS TO PARTICIPATING MEMBERS.


A. PROHIBITED USES. PHx represents, warrants and covenants that it prohibits the use of the PHx e-Commerce System (to the extent accessible by Participating Members) for anything other than a lawful and


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legitimate business purpose. Examples of other than lawful and legitimate business uses include, but are not limited to, the following: (i) selling or offering (x) stolen property, counterfeit items, contraband, controlled substances (other than in accordance with applicable law), firearms; tobacco; pornography, (y) products or services that violate any state or federal statute or regulation regarding the display, promotion, advertising, recommending or sale of medical supplies, (z) products or services or any other material which it is unlawful to sell or for a Participating Member to acquire (subsections (x)-(z) cumulatively the "Illicit Items"); (ii) placement on the PHx e-Commerce System of any untrue, malicious, fraudulent, harassing, offensive or defamatory material, or any material that is irrelevant to a legitimate use of the site; (iii) introduction of viruses, worms or other programming routines that are intended to disrupt or interfere with the intended operation of the site; (iv) unauthorized insertion of links to other sites of whatever character; (v) promotion of any unlawful activity or purpose, including any activity that could give rise to criminal or civil liability; (vi) manipulation of pricing on transactions by any means, including the placement of bad faith bids, use of shills in the auction process or collusion between a buyer and seller to cause harm to a competitor;(vii) unauthorized alteration of any data or information supplied by another user of the site: or (viii) any activity that infringes on the copyright, patent, trademark or other rights of any person or entity.


B. RIGHT OF PURCHASING PARTNERS TO REQUIRE THAT PHx PREVENT THE OFFERING OF CERTAIN PRODUCTS OR SERVICES TO PARTICIPATING MEMBERS. If Purchasing Partners reasonably believes that the offering for sale of any product or service through the PHx e-Commerce System accessible by Participating Members may harm or cause injury to third parties, or harm the reputation or goodwill of Purchasing Partners, or is reasonably deemed by Purchasing Partners as failing to meet reasonable safety and quality standards established from time to time by Purchasing Partners through its customary product selection and committee review process involving Participating Members (the "Harmful Items"), PHx shall not offer, and shall prevent Vendors, Distributors and Participating Members from offering, the product or service to Participating Members through the PHx e-Commerce System following the procedure of Section 3.7(c) below.


C. REMOVAL OF ILLICIT AND HARMFUL ITEMS. If (i) PHx should reasonably know or (ii) PHx is notified by Purchasing Partners or a third party that a Vendor, Distributor or Participating Member is offering to Participating Members through the PHx e-Commerce System any Illicit or Harmful Item, then PHx shall use its best efforts to remove the Illicit or Harmful Item from being offered to Participating Members on the PHx e-Commerce System within seventy-two (72) hours of PHx reasonably knowing or being notified of any Illicit or Harmful Item on the PHx e-Commerce System (the "Removal Period"). Such best efforts may include (i) instructing and having the Vendor, Distributor or Participating Member (as the case may be) remove the Illicit or Harmful Item from the PHx e-Commerce System to the extent accessible by Participating Members, (ii) PHx removing the Illicit or Harmful Item from the PHx e-Commerce System to the extent accessible by Participating Members, or (iii) preventing access by Participating Members to the Illicit or Harmful Item. PHx shall promptly notify Purchasing Partners of all communications between and actions taken by PHx and a Vendor, Distributor or Participating Member concerning any Illicit or Harmful Item during the Removal Period and thereafter until Participating Members' access to the Illicit or Harmful Item through the PHx e-Commerce System is eliminated.


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3.8 COMMITMENT PROGRAM ISSUES; AUTHORIZATION TO RELEASE INFORMATION TO PURCHASING PARTNERS. PHx will electronically notify any Participating Member which requests a price quotation or other product information concerning Contracted Products and Services and/or Non-Contracted Products and Services that such Participating Member's consummation of a purchase based on such request could affect such Participating Member's obligations under the Commitment Program. The parties shall mutually agree upon the form, content and mechanism for such notification. In the event a Participating Member consummates any such purchase, PHx shall provide Purchasing Partners written or electronic notice thereof as part of PHx's standard monthly report described in Section 3.12. Further, PHx shall provide Purchasing Partners any other information in its possession that is reasonably requested by Purchasing Partners that relates to Participating Members' obligations under the Commitment Program. Subject to Section 3.7 above, PHx shall have no obligation to stop any transaction requested by a Participating Member. The Terms of Use applicable to Participating Members shall grant PHx express authorization to provide Purchasing Partners the notice required under this Section 3.8 and any other information relevant to the Commitment Program which is reasonably requested by Purchasing Partners.


3.9 e-COMMERCE OUTSOURCING AGREEMENTS WITH AFFILIATED GROUP PURCHASING ORGANIZATIONS; PROVIDER SELECT, INC. Upon Purchasing Partners' written request, PHx shall enter into a separate e-Commerce Outsourcing Agreement with any Group Purchasing Organization designated by Purchasing Partners which is owned or controlled by or under common control with Purchasing Partners and/or Premier. The form and content of such e-Commerce Outsourcing Agreement shall be substantially similar to this Agreement. Notwithstanding the foregoing, PHx shall refrain from encouraging or directing customers to choose one Group Purchasing Organization over another or to switch their affiliation from one Group Purchasing Organization to another. PHx shall have the right to require Purchasing Partners, upon providing written notice, to cause Provider Select, Inc. ("Provider Select") to enter into an e-Commerce Outsourcing Agreement with PHx (the "Provider Select e-Commerce Outsourcing Agreement") whereby PHx shall provide the PHx e-Commerce System to support all of the electronic commerce services provided by Provider Select to physicians and physician groups (the "Provider Select e-Commerce Services"). The terms and conditions of the Provider Select e-Commerce Outsourcing Agreement shall be substantially similar to the terms of this Agreement, including the Covenant Not to Promote. In no event, however, shall Purchasing Partners and/or Provider Select be obligated to take any action under the preceding two sentences unless: (i) PHx is able to provide the same level of functionality as is provided by the Provider Select e-Commerce Services; and (ii) PHx will provide such services through websites which are owned or controlled exclusively by PHx, PHx affiliates or Provider Select unless otherwise agreed by Provider Select. In the event Provider Select in good faith intends to offer electronic commerce services to any group of Provider Select members other than physicians and physician groups, Provider Select shall provide PHx with written notice of such intention and PHx shall, for a period of 120 days, have the right to enter into an e-Commerce Outsourcing Agreement with Provider Select to provide such services to such group of Provider Select members upon terms and conditions which are substantially similar to the terms and conditions of this Agreement, including the Covenant Not to Promote; provided, however that PHx must provide such services through websites which are owned or controlled exclusively by PHx, PHx affiliates or Provider Select unless otherwise agreed by Provider Select. Further, in no event shall Provider Select sell or allow the sale of products,


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supplies or services for use by an acute care facility. For purposes of this Section 3.9, a "PHx affiliate" shall mean any entity that is owned by, controlled by or under common control with PHx.


3.10 NOTICE OF UPGRADES AND ENHANCEMENTS. PHx shall provide Purchasing Partners with reasonable advance notice (the "Notice") of any Upgrades and Enhancements (as defined below). Purchasing Partners and Participating Members and, if applicable, Vendors and Distributors with respect to Contracted Products and Services only, shall have access to such Upgrades and Enhancements [***]. New Services (as defined below) will be available to Purchasing Partners, Participating Members, Vendors and Distributors upon terms which are no less favorable than the terms generally available to other users of PHx's services. "Upgrades and Enhancements" shall mean bug fixes and functional improvements to PHx's systems used for purposes of effecting the online purchase and/or sale of medical, pharmaceutical, surgical, dietary, dental, or veterinarian supplies or services. "New Services" shall mean services or products offered and/or developed by PHx other than Upgrades and Enhancements. Purchasing Partners shall have the right to participate as a beta test site for the testing and evaluation of such Upgrades and Enhancements and New Services. Notwithstanding the foregoing, in the event PHx introduces a New Service which substantially replaces the PHx e-Commerce System as it then exists (the "Legacy PHx e-Commerce System"), to the extent PHx imposes additional charges for use of such New Service, PHx shall continue to operate and provide support (consistent with PHx's prior practices) for the Legacy PHx e-Commerce System for the benefit of Participating Members and Distributors ...