Pulse Oximetry & Related Products Capital Equipmnet Supplier Agreement

EX-10.22 5 dex1022.htm PULSE OXIMETRY & RELATED PRODUCTS CAPITAL EQUIPMNET SUPPLIER AGREEMENT Pulse Oximetry & Related Products Capital Equipmnet Supplier Agreement

Exhibit 10.22

*** Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4)

and 230.406

For Purchases and Leases of Direct-Ordered and Distributed Products

Subject to Competitive Bid Process

PULSE OXIMETRY & RELATED PRODUCTS

CAPITAL EQUIPMENT SUPPLIER AGREEMENT

between

NOVATION, LLC

and

Masimo

MS50662

NOVATION, LLC

CAPITAL EQUIPMENT SUPPLIER AGREEMENT

1. INTRODUCTION.

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

b. Supplier. Supplier is the manufacturer of the equipment and other direct-ordered products (collectively, “Equipment”), and/or parts, supplies and other distributed products (collectively, “Supplies”), and/or the provider of services (“Services”), all as listed on Exhibit A. The Equipment, Supplies, and/or Services are collectively referred to herein as “Products” and any specifications are attached hereto as Exhibit B (“Non-Price Specifications”).

c. Authorized Distributors. Novation and/or the Clients have entered into arrangements with certain distributors (“Authorized Distributors”) that have agreed to distribute the Supplies to Members. A current listing of Authorized Distributors is maintained by Novation in the Novation Database. A distributor will: become an “Authorized Distributor” for purposes of this Agreement at the time Novation adds the distributor to the Novation Database and will cease to be an “Authorized Distributor” for such -purposes at the time Novation deletes the distributor from the Novation Database. Any limitations on the scope of an Authorized Distributor’s authority will also be set forth in the Novation Database. By reason of requirements of law, regulation or internal policy of certain Members, from time to time Novation may identify underutilized businesses as Authorized Distributors.

2. CONTRACT AWARD.

a. Letter of Award. By executing and delivering the Letter of Award attached hereto as Exhibit C (“Award Letter”) to Supplier, Novation will have accepted your written offer to the Invitation to Bid (“Bid”), and Novation and Supplier therefore agree that Supplier will make the Equipment and Services available for purchase and/or lease directly by the Members as of the effective date (“Effective Date”) in the Award Letter in accordance with the terms of this Agreement for the term (“Term”) stated in the Non-Price Specifications and for

- 1 -

any renewal terms set forth in the Non-Price Specifications at the agreed upon prices under this Agreement (“Award Prices”) and will make the Supplies available for purchase by the Authorized Distributors at the Award Prices for resale to the Members and the forms of purchase, lease, license, financing or servicing agreements, if any, attached hereto as Exhibit D (collectively, “Forms”); provided, however, that Novation’s award of this Agreement to Supplier will not constitute a commitment by any person to purchase or lease any of the Products. Supplier will not impose any purchasing or leasing commitment on any Member or Authorized Distributor as a condition to the Member’s or Authorized Distributor’s purchasing of any Products pursuant to this Agreement. Supplier acknowledges that, in making its award to Supplier, Novation has materially relied on all representations, warranties and agreements made by Supplier and contained in this Agreement as part of the Bid and that all such representations, warranties and agreements will survive acceptance of the Bid

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

c. Optional Purchasing or Leasing Arrangements. Supplier shall reserve the right to contract directly with each Member for Products included in this Agreement in exceptional circumstances aside from the Supplier’s optional purchasing arrangements included in Exhibit D; provided, however, Supplier shall give prior notice to Novation in writing of such exceptional circumstances and the essential terms of such agreement. Additional value required in such exceptional cases will. be defined in an individual contract that will, at Novation’s . discretion, be an exhibit to the Supplier Agreement. Supplier shall maintain the Reporting Requirements and fees (“Fees”) payable to Novation in Sections 5 and 7 for Products purchased through such independent contracts in recognition of the Novation contribution to and support for any, such exceptional independent arrangement required. In addition, Supplier shall obtain Novation’s written consent prior to offering to sell to any Member, or to any Authorized Distributor purchasing for resale to any Member, any Product covered by this Agreement, which sale is contingent, in, whole or part, on such Member’s or Authorized Distributor’s purchase of a product that is not covered by this Agreement, or vice versa. Notwithstanding Novation’s written consent to such a sale, every Member and Authorized Distributor shall always have the option to purchase Products covered by this Agreement by themselves (i.e., not contingent on the purchase of another product), at the Award Prices.

d. Market Competitive Pricing and Terms.

•

Pricing. Supplier will lower the Award Prices or increase any discount applicable to the purchase of the Products as necessary to assure market competitiveness, and in addition Supplier, agrees to retrospectively, from the time of notification by Novation, lower the Award Prices or increase any discount applicable to the purchase of the Products for a specific member or group of members at all times in the event Supplier offers pricing that is lower than pricing

- 2 -

offered hereunder to any similarly situated competitor of such member or group of members.

•

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

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

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

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

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

3. PRODUCT. SUPPLY.

a. Delivery and Invoicing. On and after the Effective Date, Supplier agrees to promptly deliver Equipment and Services ordered by the Members to the Members, and Supplies ordered by the Authorized Distributors on behalf of the Members to the Authorized Distributors, FOB origin, and will direct its invoices to the ordering organization in accordance with this Agreement. Supplier agrees to prepay and add charges, if any, for transporting Products to either the Authorized Distributors or the Members. Supplier will, at Member’s option, provide insurance on Products during shipment, to be prepaid and invoiced to the Member with the cost of freight. Payment terms are specified in Exhibit B. Within seven (7) calendar days after receipt of a purchase order from, a Member, Suppler will provided estimated lead time from the date of a Member’s purchase order until delivery of the Product at the Member’s location. The actual

- 3 -

delivery lead times may be increased by the ordering Member based on its needs. Unless otherwise agreed, Members will pay Supplier’s. invoice within 30 days of receipt.

b. Return or Recall of Products. Any Member or Authorized Distributor, in addition to and not in limitation of any other rights and remedies, will have the right to return Products to Supplier, in accordance with Supplier’s return goods policy as attached hereto as Exhibit G. In addition, Supplier will reimburse Members for any cost associated with any Product corrective action, withdrawal or recall requested by Supplier or required by any governmental entity. In the event a product recall or a court action impacting supply occurs, Supplier will notify Novation in writing within forty-eight (48) hours for FDA Class I or Class II recalls or action and within five (5) business days of any other such recall or action. Supplier’s obligations in this Subsection will survive the expiration or earlier termination of this Agreement.

c. Supplies. Supplies necessary for the operation of the Equipment will be made available by Supplier to the Authorized Distributors for resale to the Members at the prices or discounts listed on Exhibit A. All warranties and guarantees will remain in force regardless of the source from which the Member purchases Supplies.

d. Manuals/Schematics/Inspection Procedures. Supplier will provide; to the Members two complete and unabridged sets of operator service manuals for each model of Equipment purchased or leased, including all, subassemblies and peripheral devices (including those manufactured by others). The technical service manuals furnished to the Members will be sufficient for normal servicing of Equipment in or out of warranty.

e. Site Preparation. Supplier will `provide the Members with a specific description of pre-installation planning and site preparation services and-site preparation costs at the time the Member requests a quote from Supplier.

f. Installation/Assembly. When the Member requests a quote from Supplier, Supplier will provide as part of the quote a detailed description of the installation and/or assembly requirements, including, but not limited to, electrical, mechanical (HVAC), structural (including seismic where applicable), and plumbing requirements. Based on past installations and a review of the Member’s site, Supplier will provide an estimate of the cost that the Member will bear for each component of the installation and/or assembly, regardless if supplied by Supplier or the Member. The Member will specify whether Supplier or the Member will be responsible for the installation and/or assembly. If Supplier is specified as. having responsibility for the installation and/or assembly, Supplier will include estimated dates and times for installation and/or assembly as part of the agreed delivery schedule referred to in Subsection 3.a. above. If the Member will be taking the responsibility for installation and/or assembly, Supplier will contact the individual selected by the Member that will be responsible for the installation and/or assembly of the Equipment.

g. Installation/Environmental Issues. Supplier will bear all costs associated with the removal of packaging, crating and other material associated with the installation of the Equipment. Supplier, at the discretion of the Member, will remove the retired equipment at a cost

- 4 -

previously agreed to with the Member, including any expenses associated with the proper disposal of hazardous or other wastes.

h. Member Services. Supplier will consult with each Member to identify the Member’s policies relating to access to facilities and personnel. Supplier will comply with such policies and will establish a specific timetable for sales calls by sales representatives and, if applicable, service calls by service representatives, to satisfy the needs of the Member. Supplier will promptly respond to Members’ reasonable requests for verification of purchase or leasing history.

i. Training. Supplier will, unless otherwise agreed to by Novation, at no cost for tuition to the Member, allow a minimum of two (2) of the Member’s staff members to attend Supplier’s technical service training at a mutually agreed upon location within sixty (60) days after Member’s written request. Supplier will also allow the Member to reproduce all training material for use by the Member’s personnel at the Member’s facility. In addition, Supplier will provide in-service training for both operators and technical service staff of the Member at the Member’s- site at Supplier’s own cost as follows, unless otherwise agreed to by Novation: one week of training on-site at Member’s site prior to installation and as agreed by Member and Supplier for up to sixty (60) days after installation. Supplier will provide follow-up in-service training as agreed by Supplier and the Member for the life of the Equipment at no additional charge regardless of where the training is performed.

4. PRODUCT QUALITY.

a. Free From Defects. Supplier warrants the Products, including, but not limited to, all attachments, subsystems and components thereof, against defects in material, workmanship, design and manufacturing for the warranty period set forth in Exhibit E attached hereto (“Warranty Period”). Supplier will make all necessary arrangements to assign such warranty to the Members. Supplier further represents and warrants that the Products will conform to the specifications, drawings, and samples furnished by Supplier or contained in the Non-Price Specifications and will be safe for their intended use. If any Products are defective and a claim is made by a Member or an Authorized Distributor on account of such defect during the Warranty Period, Supplier will, at the option of the Member or the Authorized Distributor, either replace the defective Products or credit the Member or the Authorized Distributor. Supplier will bear all costs of returning and replacing the defective Products, as well as all risk of loss or damage to the defective Products from and after the time they leave the physical possession of the Member or the Authorized. Distributor. The warranties contained in this Subsection will survive any inspection, delivery, acceptance or payment by a Member or an Authorized Distributor. This Subsection and the obligations contained herein will survive the expiration or earlier termination of this Agreement. The remedies set forth in this Subsection are in addition to and not a limitation on any other rights or remedies that may be available against Supplier.

b. New Technology.

(i)

During the Term, Supplier will disclose to Novation new technology developed by Supplier which provides the same function as the Products. Upon introduction of the new technology by Supplier, each Member will

- 5 -

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

(ii)

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

c. Warranty Service. All warranty repairs will have twenty-four (24) hour coverage at no additional charge where the Member will be allowed to determine whether the service response may be postponed until the following working day. During the Warranty Period, in the event the Equipment is inoperable for any reason, Supplier agrees to provide a loaner of the Equipment of identical (compatible with the system the Member is using) or superior type to the Member at its site at no additional charge during the term of this Agreement. The loaner equipment will be available and delivered to the Member’s site within twenty-four (24) hours of request at no charge to Member.

d. Replacement Parts. Replacement parts supplied by Supplier pursuant to a qualified service provider agreement to be separately executed by Supplier and Member at any time, whether during or after the Warranty Period or the term of any service agreement, will be newly manufactured parts or assemblies, unless the Member agrees otherwise. In the case where new parts are not available, the service representative may install rebuilt parts in order to make the unit operational. Within thirty (30) days after the repair, the rebuilt parts must be replaced with newly manufactured parts. The Member may retain parts removed from the Equipment and all parts that are not eligible for or are not returned by the Member for Supplier credit will remain the property of the Member. In all cases where Supplier is permitted to charge the Member for parts, Supplier will only replace and charge for parts necessary to bring the Equipment to operating condition. Supplier will warrant replacement parts and labor associated with such replacement parts for the period of time set forth in Supplier’s standard warranty.

e. Service Response Time. Supplier guarantees a response time of one (1) hour by .phone and for onsite as agreed. to by the Member for all warranty, contract or time and materials service calls requested by any Member during the life of the Equipment.

f. Uptime Guarantee. For any calendar quarter during the Warranty Period and the term of any service agreement, Supplier guarantees that the Equipment will maintain a level of uptime equal to or better than 98%. Uptime will be calculated using the following formula:

- 6 -


Uptime =		(T – TNF) X 100
Uptime =		T

where “T” is the total number of hours that the Equipment is. typically used per quarter (determined by multiplying the number of hours per day that the Equipment is typically used by the number of days per week that the Equipment is typically used, and multiplying the result by 13 weeks in a quarter), and “TNF” is the number of hours the Equipment or any component of the Equipment is not functional during the quarter (the hours calculated will only include those hours that the Equipment would typically be in use). If any portion of the total functionality of the Equipment is unavailable for operational use, the Equipment will be considered down. Downtime scheduled for preventive maintenance or any other scheduled event, including those for the convenience of Member, will not be included in the downtime calculation.

Member will calculate uptime after each calendar quarter. If uptime is less than 98%, any lost revenue suffered by the Member for downtime beyond the allowable 2% during the quarter will be paid by Supplier to the Member. Lost revenue will be calculated by multiplying the number of procedures that would have been performed or the number of times the Equipment would have been used during any downtime times the Member’s current charge rate per procedure or per use. The Member will give written notice to Supplier of its failure to meet the uptime requirement and the amount of lost revenues, and Supplier will pay such amount to the Member within thirty (30) days after receipt of the notice. In addition, Supplier will extend the Warranty Period or the service agreement without charge by one week for every hour the Equipment or component thereof is not operational beyond the allowable 2%.

g. Preventive Maintenance. There is no preventive maintenance associated with the Equipment or Supplies.

h. Upgrades. Commercially reasonable arrangements will be made to install all software upgrades within two (2) weeks after the release of any software upgrade.

i. Customization Software. Pricing relating to the customization of software and additional charges that the Member will incur for annual maintenance, training, documentation, backup, etc. is attached hereto as Exhibit A.

j. Operational Software. The form of software licensure agreements available to the Members will be included as part of any quote requested by a Member. All software necessary to operate the Equipment, unless otherwise provided in any exhibit hereto, will be licensed to the Member upon delivery of the Equipment. All new operational software that provides no additional functionality will be provided to the Member, at no charge, throughout the Warranty Period and thereafter throughout the term of any service agreement.

k. Diagnostic Software. There is no diagnostic software for Supplier Products.

l. Data Conversion/Interfaces. In the event that the Equipment requires conversion of data at the time of installation or assembly, Supplier agrees to perform this conversion either manually or electronically at no charge to the Member. A schedule of Supplier’s pricing for performing data conversion thereafter during the Warranty Period and after

- 7 -

the warranty has expired is included in Exhibit A attached hereto. The data conversion will include all data requested by the Member in writing. Supplier will inform Member, in writing, of the length of time required to perform the conversion prior to the issuance of the purchase order and will perform the conversion within such time. Supplier will also include all interfaces requested by the Member at no charge, unless otherwise provided in Exhibit A, to connect the Equipment to other information systems owned by the Member and its affiliates.

m. Service Contract Cancellation. The Member reserves the right to cancel any service agreement, without cause or penalty, with thirty (30) days prior written notification to Supplier. Payment reimbursement will be prorated and Supplier will separate costs for preventive maintenance and repair for the purpose of allocating expenses. Supplier will be required to leave the Equipment in certifiable condition as deemed by the Member. Supplier will not cancel the contract without a minimum of sixty (60) day’s prior written notification to the Member. Cancellation of the contract will not affect Supplier’s response time and quality of support nor result in other penalties if. the Member elects to use Supplier for time and materials repairs, perform the work in-house or obtain- service from others.

n. Product Compliance. Supplier represents and warrants to Novation, the Clients, the Authorized Distributors and the Members that the Products are, if required, registered, and will not, be distributed, sold, leased or priced by Supplier in violation of any federal, state or local law. Supplier represents and warrants that as of the date of delivery to the Authorized Distributors, with respect to Supplies, or the Members, with respect to Equipment and Services, all Products will not be adulterated or misbranded within the meaning of the Federal Food, Drug and Cosmetic Act and will not violate or cause a violation of any applicable law, ordinance, rule, regulation or order. Supplier agrees it will comply with all applicable Good Manufacturing Practices and Standards contained in 21 C.F.R. Parts 210, 211, 225, 226, 600, 606, 610, 640, 660, 680 and 820. Supplier represents and warrants that it will provide adequate warnings and instructions to inform users of the Products of the risks, if any, associated with the use of the Products. Supplier’s representations, warranties and agreements in this Subsection will survive the expiration or earlier termination of this Agreement.

o. Product Condition. Unless otherwise stated in the Non-Price Specifications or, unless agreed upon by a Member in connection with Products it may order, all Products will be new. Products, which are demonstrators, used, obsolete, seconds, or which have been discontinued are unacceptable unless otherwise specified in the Non-Price Specifications or the Member accepts delivery after receiving notice of the condition of the Products. A description of and pricing for demonstrators or refurbished Products is attached hereto as Exhibit A.

p. End-user license agreement. The Supplier End-user license agreement is included in the Supplier Warranty in Exhibit E.

REPORTS AND OTHER INFORMATION REQUIREMENTS. Within twenty (20) days after the end of each full and partial month during the Term (“Reporting Month”), Supplier will submit to Novation a report in form and content reasonably satisfactory to Novation (“Net Sales Report”) and any other information during the time period required as set forth in the Information Requirements Guidebook. Such Guidebook may be found at the Novation website at www.novationco.com.

- 8 -

6. OBLIGATIONS OF NOVATION.

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

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

7. FEES.

a. Calculation. Supplier will pay to Novation, as the authorized collection agent for each of the Clients and certain of each Client’s subsidiaries and affiliates, respectively (and not collectively), Fees belonging to any of the Clients or certain of their subsidiaries or affiliates equal to the Agreed Percentage of all Net Sales and net lease revenues of the Products to the Members directly or indirectly from Supplier, whether under the. pricing and other terms of this Agreement or under the terms of any other purchasing, leasing, licensing, financing or pricing arrangements that may exist between the Members and Supplier. As used herein, Net Sales shall mean invoiced sales of Products less related Product returns. The “Agreed Percentage” will be defined in the Award Letter. For Members that are also participants in another group purchasing organization or other similar organization to which Supplier also pays administrative fee under business relationship that is similar to its relationship with Novation established by this Agreement (a “GPO”), Supplier shall only be obligated to pay Fees hereunder for Member purchases if the Member has submitted .a Letter of Participation, included as an attachment in Exhibit B establishing that it is purchasing under the terms of this Agreement and not its agreement with the other GPO.

b. Payment. On or about the Effective Date, Novation will advise Supplier in writing of the amount determined by Novation to be Supplier’s monthly estimated Fees. Thereafter, Supplier’s monthly estimated Fees may be adjusted from time to time upon written notice from Novation based on actual purchase data. No later than the tenth (10th) day of each month, Supplier will remit the monthly estimated Fees for such month to Novation. On a calendar quarterly basis, the payment shall be adjusted to reflect the reconciliation between the actual Fees payable with the estimated Fees actually paid. Such, reconciliations will be made within forty (40) days after the close of each calendar quarter.

- 9 -

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

The following is an example of the reconciliation payment that would have been made for the first quarter of the year 2003. It shows the information that a supplier must specify on the remittance advice of a quarterly Fee reconciliation check. All other non-reconciliation months would require only the first three columns of information below to accompany payment.

Agreement
Estimated

Estimated

Payment

Month/Year

01/2003
Reconciliation

02/2003
Reconciliation

03/2003
Reconciliation

Total

MS80019

[...***...]

05/2003

[...***...]

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

If Sent, By First Class Mail:

Novation, LLC

75 Remittance Dr., Suite 1420

Chicago, IL 60675-1420

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

The Northern Trust Company

350 North Orleans Street

Receipt & Dispatch 8th Floor

Chicago, IL 60654

Attn: Novation, LLC, Lockbox Number 1420

Telephone No. (312) 444-3576

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

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

* Confidential Treatment Requested

- 10 -

8. COMPLIANCE WITH LAW AND GOVERNMENT PROGRAM PARTICIPATION.

a. Compliance With Law. Supplier represents and warrants that after due inquiry, it is, and for the Term shall be, in compliance with all federal, state and local statutes, laws, ordinances and regulations applicable to it (“Legal Requirements”) which are material to the operation of its business and the conduct of its affairs or, whether or not material to the operations of Supplier’s business and the conduct of its affairs relate in any way to Supplier’s sales of Product to Members or any contract with Novation, including Legal Requirements pertaining to the safety of the Products, occupational health and safety, environmental protection, nondiscrimination, antitrust, and equal employment opportunity. In the event of Supplier’s failure to comply with the foregoing, Novation may, in addition to any other legal remedy, have the right to immediately remove. from this Agreement any or all of the Product(s) subject to. such failure, with notice to Supplier, or to terminate this Agreement in its entirety pursuant to Section 12.a. During the Term, Supplier will: (1) promptly notify Novation of any lawsuits, claims, administrative actions or other proceedings asserted or commenced against it which assert in whole or in, part that Supplier is in noncompliance with any Legal Requirement which is material to the operation of its business and the conduct of its affairs or, whether or not material to the operations of Supplier’s business and the conduct of its affairs relate in any way. to Supplier’s sales of Product to Members or any contract with Novation, and (2) promptly provide Novation, with true and correct copies of all written notices of adverse findings from the U.S. Food and Drug Administration (“FDA”) and all written results of FDA inspections which pertain to the Products.

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

9. INSURANCE.

a. Policy Requirements. Supplier will maintain and keep in force during the Term product liability, general public liability, and property damage insurance against any insurable claim or claims which might or could arise regarding Products purchased or leased from Supplier. Such insurance will contain a minimum combined single limit of liability for bodily injury. and property damage in the amounts of not less than $2,000,000 per occurrence for product liability and $1,000,000 per occurrence otherwise, and $10,000,000 in the aggregate, and will name Novation, the Clients, the Members and the Authorized Distributors, as their interests may appear, as additional insureds. Supplier will provide to Novation in its Bid and thereafter within fifteen (15) days. after Novation’s request, an insurance certificate indicating the foregoing coverage, issued by an insurance company licensed to do business in the relevant states and signed by an authorized agent.

- 11 -

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

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

10.

RELEASE AND INDEMNITY. SUPPLIER WILL RELEASE, INDEMNIFY, HOLD HARMLESS, AND, IF REQUESTED, DEFEND NOVATION, THE CLIENTS, THE MEMBERS AND THE AUTHORIZED. DISTRIBUTORS, AND THEIR RESPECTIVE OFFICERS, DIRECTORS, REGENTS, AGENTS, SUBSIDIARIES, AFFILIATES AND EMPLOYEES (COLLECTIVELY, THE “INDEMNITEES”), FROM AND AGAINST ANY THIRD PARTY CLAIMS, LIABILITIES, DAMAGES, ACTIONS, COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS’ FEES, EXPERT FEES AND COURT COSTS) OF ANY KIND OR NATURE, WHETHER AT LAW OR IN EQUITY, ARISING FROM. OR CAUSED IN ANY PART BY (1) THE BREACH OF ANY REPRESENTATION, WARRANTY, COVENANT OR AGREEMENT OF SUPPLIER CONTAINED IN THIS AGREEMENT OR IN THE BID; (2) THE CONDITION OF ANY PRODUCT, INCLUDING A DEFECT IN MATERIAL, WORKMANSHIP, DESIGN OR MANUFACTURING; OR (3) THE WARNINGS AND INSTRUCTIONS ASSOCIATED WITH ANY PRODUCT. IN ADDITION, SUPPLIER REPRESENTS AND WARRANTS THAT SALE OR USE OF THE PRODUCTS WILL NOT INFRINGE ANY UNITED STATES PATENT AND WILL, AT ITS OWN EXPENSE, DEFEND EVERY SUIT WHICH WILL ‘BE BROUGHT AGAINST NOVATION, THE CLIENTS, OR A MEMBER FOR ANY ALLEGED INFRINGEMENT OF ANY PATENT BY REASON OF THE SALE OR USE OF THE PRODUCTS AND WILL PAY ALL COSTS, DAMAGES AND PROFITS RECOVERABLE IN ANY SUCH SUIT. THIS SECTION AND THE OBLIGATIONS CONTAINED HEREIN WILL SURVIVE THE EXPIRATION OR EARLIER TERMINATION OF THIS AGREEMENT. THE REMEDIES SET FORTH IN THIS SECTION ARE IN ADDITION TO AND NOT A LIMITATION ON ANY OTHER RIGHTS OR REMEDIES THAT MAY BE AVAILABLE AGAINST SUPPLIER. SUPPLIER SHALL HAVE NO LIABILITY OR RESPONSIBILITY OF ANY KIND TO ANY INDEMNITEE UNDER THIS SECTION (“INDEMNIFICATION”) UNLESS SUCH INDEMNITEE (I) PROMPTLY NOTIFIES SUPPLIER OF SUCH CLAIMS-, (H) GIVES SUPPLIER AN ADEQUATE .OPPORTUNITY TO DEFEND,: INCLUDING, COMPLETE CONTROL OF SUCH DEFENSE, AND (III). PROVIDES REASONABLE ASSISTANCE TO SUPPLIER, AT SUPPLIER’S EXPENSE AND REQUEST, IN CONNECTION WITH THE DEFENSE AND SETTLEMENT OF ANY SUCH CLAIM. SUPPLIER SHALL HAVE NO LIABILITY FOR SETTLEMENTS MADE WITHOUT SUPPLIER’S EXPRESS WRITTEN CONSENT. SHOULD ANY INDEMNITEE DESIRE TO HAVE ITS OWN COUNSEL PARTICIPATE IN ANY SUCH ACTION, THE COST OF SUCH COUNSEL SHALL BE EXCLUSIVELY INDEMNITEE’S. NOTWITHSTANDING THE ABOVE, SUPPLIER SHALL NOT BE LIABLE FOR ANY INFRINGEMENT OF INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES OR FOR ANY LIABILITY, LOSS, DAMAGES, COSTS OR EXPENSES WHICH AN INDEMNITEE MAY INCUR AS A RESULT OF ANY INJURY, ILLNESS OR DEATH RESULTING FROM (A) ALTERATIONS OR MODIFICATIONS TO THE PRODUCTS MADE BY

- 12 -

INDEMNITEE OR OTHERS (OR BY SUPPLIER, IN THE CASE OF AN INFRINGEMENT CLAIM) AT . INDEMNITEE’S REQUEST, (B) ELECTRICAL/ELECTRONICS, SOFTWARE/FIRMWARE, SENSORS, OR PRODUCT INTERFACE NOT FURNISHED BY SUPPLIER, (C) COMBINATION OF THE PRODUCTS WITH OTHER APPARATUS OR TECHNOLOGY NOT FURNISHED OR, IN THE CASE OF INFRINGEMENT CLAIMS, SPECIFIED IN WRITING BY SUPPLIER, (D) USE OF PRODUCTS OR COMPONENTS NOT SUPPLIED BY SUPPLIER, (E) USE OF PRODUCTS NOT PERMITTED UNDER THIS AGREEMENT, OR (F) FOR ANY CLAIMS NOT RELATED DIRECTLY TO THE PRODUCTS.

11.

BOOKS AND RECORDS; FACILITIES INSPECTIONS. Supplier agrees to keep, maintain and preserve complete, current and accurate books, records and accounts of the transactions contemplated by this Agreement and such additional books, records and accounts as are necessary to establish and verify Supplier’s compliance with this Agreement. All such books, records and accounts will be available for inspection and audit by Novation representatives at any time during the Term and for two (2) years thereafter, but only during reasonable business hours and upon reasonable notice. Novation agrees that its routine audits will not be conducted more frequently than twice in any consecutive twelve (12) month period. In addition, Supplier will make its manufacturing and packaging facilities available for inspection from time to time during the Term by Novation representatives, but only during reasonable business hours and upon reasonable notice and no more frequently than once in any 12 month period. The exercise by Novation of the right to inspect and audit is without prejudice to any other or additional rights or remedies of either party.

12.

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

(a) The other party breaches this Agreement and does not cure such breach within thirty (30) days of receipt of such notice, except for Supplier’s monetary breach, for which a cure period of ten (10) days shall be allowed; or breach of Compliance with Laws, for which a cure period shall not be allowed; or

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

13. CONFIDENTIAL INFORMATION.

a. Nondisclosure. Each party agrees that it will:

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

- 13 -

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

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

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

c. HIPAA. If a Member determines, in its sole reasonable discretion, that Supplier is a “business associate,” as that term is defined in the privacy rules promulgated pursuant to The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) codified at 45 CFR Parts 160 and 164, Supplier will negotiate with Member a mutually acceptable written agreement which will govern Supplier’s access to “protected health information” as defined under HIPAA (a “Business Associate Contract”).

14. MISCELLANEOUS.

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

b. No Assignment. No assignment of all or any part of this Agreement maybe made without the prior written consent of the other party which consent may not be unreasonably withheld. As used herein, “assignment” shall mean a transfer by virtue of operation of law, under an order of any court, or pursuant to any plan of merger, consolidation or sale of stock or assets. Any assignment of all or any part of this Agreement by either party will not relieve that party of the responsibility of performing its obligations hereunder to the extent that such obligations are not satisfied in full by the assignee. This Agreement will be binding upon and inure to the benefit of the parties’ respective successors and assigns.

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

- 14 -

If to Supplier:

To the address set forth by Supplier in the Bid

If to Novation:

Novation, LLC

Attn: General Counsel

125 East John Carpenter Freeway

Irving, TX 75062-2324

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

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

e. Entire Agreement. This Agreement, together with the exhibits listed below, will constitute the entire agreement between Novation and Supplier. This Agreement, together with the exhibits listed below and each Authorized Distributor’s purchase order will constitute the entire agreement between each Authorized Distributor and Supplier. This Agreement, together with the exhibits listed below and each Member’s purchase and/or lease order and/or other applicable Form will constitute the entire agreement between each Member and Supplier. In the event of any inconsistency between this Agreement and an Authorized Distributor’s or Member’s purchase and/or lease order and/or other applicable Form, the, terms of this Agreement will control. In, the event of any inconsistency between this Agreement and an exhibit to this Agreement, the terms of this Agreement will control No other terms and conditions in any document, acceptance, or acknowledgment will be effective or binding unless expressly agreed to in writing. The following exhibits are incorporated by reference in this Agreement:


Exhibit A		Product and Service Description and Pricing

Exhibit B		Non-Price Specifications

Exhibit C		Award Letter

Exhibit D		Forms of Purchase, Lease, License, Financing and/or Service Agreements

Exhibit E		Warranty

Exhibit F		Novation E-Commerce Agreement

- 15 -


Exhibit G		Returned Goods Policy

[Other Exhibits Listed, if any]


SUPPLIER:	Masimo

ADDRESS:	40 Parker
	Irvine, CA 92618

SIGNATURE:	/s/ J. Beyer
TITLE:	VP, National Accounts	DATE: Dec. 16, 2005

- 16 -

EXHIBIT A

PRODUCT AND SERVICE DESCRIPTION AND PRICING

[Final listing of products and/or services and prices covered by the Agreement]

I. PRODUCT LIST AND PRICING: See Attachment 1 to Exhibit A = Products and Pricing

Agreement Pricing Structure:


Price Tier	Tier Criteria	Comments

Tier 1	Access tier	Available to all Members

Tier 2	[...***...]

Tier 3	[...***...]	IDN Tier

II. LETTER OF PARTICIPATION. See Attachment 2 to Exhibit A = Letter of Participation

III. PRICE PROTECTION TERMS FOR OPTION YEARS - Pricing will remain firm for the initial term of the Agreement. Pricing for Option Years will be mutually negotiated between Supplier and Novation.

IV. OTHER.

Purchases from a supplier that does not offer the full product line will not count against a Member’s compliance level.

* Confidential Treatment Requested

A-1

NOVATION BID PRICING

PULSE OXIMETRY

CROSS-REFERENCE TEMPLATE

Attachment 1 to Exhibit A

DUAL SOURCE

Generic Product Description

YOUR
PRODUCT
CODE

YOUR PRODUCT DESCRIPTION

UPN
Number

CONTAINS
LATEX?

SELLING
UNIT OF
MEASURE
(SUOM)

QTY
PER
SUOM

LIST PRICE
PER SUOM

TIER 1
(Access)

TIER 2
[...***...]

TIER 3
[...***...]

Multiparameter Pulse Oximeter Monitors

Tabletop monitor with maximum motion tolerance and low perfusion performance

1803

Rad-O Traditional Tabletop Pulse Oximeter (Traditional tabletop means the unit is a one-piece design similar to competitive one-piece units but does not include an integral interface to physiological monitors as uniquely available with the Radical versions listed below).

Each

[...***...]

Tabletop monitor with maximum motion tolerance and low perfusion performance

1603

Rad-8 Traditional Tabletop Pulse Oximeter (Traditional tabletop means a one-piece design similar to competitive one-piece units but does not include the 3-in-1 feature uniquely offered with the Radical versions listed below. NOTE: Rad-8 is pending 510k clearance and general release in July of 2005 and is designed to be priced at or below the Rad-9 listed above).

Each

Tabletop monitor with maximum motion tolerance and low perfusion performance plus 3-in-1 (handheld/interace) features that are totally unique to Radical

R2DS-1

Radical, 3-in-1 Oximeter with blue screen & automatic display rotation plus Docking Station (includes Satshare, R8232, & Nurse Call Interface). Consists of p/n 1708 (Handheld) and p/n 1310 (RDS-1) Docking Station

Each

Tabletop monitor with maximum motion tolerance and low perfusion performance plus 3-in-1 (handheld/tabletop/interace) features that are totally unique to Radical

R2DS-1B

Radical, 3-in-1 Oximeter with blue screen & automatic display rotation plus Docking Station with extended battery option: (includes same interface options listed above) Consists of p/n 1708 (Handheld) and p/n 1311 (RDS-1B) Docking Station

Each

Tabletop monitor with maximum motion tolerance and low perfusion performance plus 3-in-1 (handheld/tabletop/interace) features that are totally unique to Radical

R2DS-3

Radical, 3-in-1 Oximeter with blue screen & automatic display rotation plus Docking Station (includes R8232 & Nurse Call Interface). Consists of p/n 1708 (Handheld) and p/n 1712 (RDS-3) Docking Station

Each

* Confidential Treatment Requested

A-2

DUAL SOURCE

Generic Product Description

YOUR
PRODUCT
CODE

YOUR PRODUCT DESCRIPTION

UPN
Number

CONTAINS
LATEX?

SELLING
UNIT OF
MEASURE
(SUOM)

QTY
PER
SUOM

LIST PRICE
PER SUOM

TIER 1
(Access)

TIER 2
[...***...]

TIER 3
[...***...]

Tabletop monitor with maximum motion tolerance and low perfusion performance plus Pulse Co-Oximetry hardware platform and 3-in-1 (handheld/tabletop/interace) features that are totally unique to Radical

R7DS-1

Radical-7, 3-in-1 Oximeter with same features as R2DS-1 above except the handheld includes Rainbow SET hardware platform – which includes Masimo SET Sp02 plus the option to add other hemoglobin parameters such as C0Hb via s./w option. Consists of p/n 2012 (Handheld) and 1310 (RDS-1) Docking Station

Each

[...***...]

Tabletop monitor with maximum motion tolerance and low performance plus Pulse Co-Oximetry hardware platform and 3-in-1 (handheld/tabletop/interace) features that are totally unique to Radical

R7DS-1B

Radical-7, 3-in-1 Oximeter with same features as R2DS-1B above except it includes Rainbow SET hardware platform – which includes Masimo SET SpO2 plus the option to add other hemoglobin parameters such as COHb via s/w option. Consists of p/n 2012 (Handheld) and p/n 1311 (RDS-1B) Docking Station

Each

R7DS-3

Radical 7, 3-in-1 Oximeter with same features as R2D8-3 above except it includes Rainbow SET hardware platform – which includes Masimo SET SpO2 plus the option to add other hemoglobin parameters such as COHb via s/w option. Consists of p/n 2012 (Handheld) and p/n 1712 (RDS-3) Docking Station

Each

Additional Items:

1708

Radical Blue Screen Handheld with Masimo SET (Combined with choice of docking stations listed below)

Each

2012

Radical 7 Blue Screen Handheld with Masimo Rainbow SET – which includes Masimo SET SpO2 + the Rainbow SET Pulse CO-Oximetry platform capable of adding other hemoglobin parameters such as COHb and others to be released in future (Combined with choice of docking stations listed below)

Each

1310

Radical Docking Station RDS-1 (includes Satshare, RS232 & Nurse Call Interface).

Each

1311

Radical Docking Station RDS-1B (includes same interface capabilities as RDS-1 above plus adds Extended Battery life)

Each

1712

Radical Docking Station RDS-3 (includes RS232 & Nurse Call Interface)

Each

* Confidential Treatment Requested

A-3

DUAL SOURCE

Generic Product Description

YOUR
PRODUCT
CODE

YOUR PRODUCT DESCRIPTION

UPN
Number

CONTAINS
LATEX?

SELLING
UNIT OF
MEASURE
(SUOM)

QTY
PER
SUOM

LIST PRICE
PER SUOM

TIER 1
(Access)

TIER 2
[...***...]

TIER 3
[...***...]

Handheld monitor with

maximum motion tolerance and low perfusion performance

1883

Rad-5 Portable Oximeter, Premium, DCSC 1

Each

[...***...]

1884

Rad-5v Portable Oximeter, DCSC 1

Each

1891

Rad-5 Portable Oximeter, Premium, PC-04 & sensor kit

Each

1892

Rad-5v Portable Oximeter, PC-04 & sensor kit

Each

1957

Rad-5 Portable Oximeter, Premium, DC-IP & PC-04 Patient Cable

Each

1958

Rad-5v Portable Oximeter, CD-IP & PC-04 Cable

Each

2050

Rad-57 handheld Pulse CO-Oximeter capable of measuring Carbon Monoxide (COHb) plus SpO2 and pulse rate (includes Rainbow CDI-dc3 finger sensor that uses 8 wavelengths)

Each

1842

Rad-5/5v Protective Boot – Gray

Each

1980

Rad-5/5v Protective Boot – Yellow

Each

1981

Rad-5/5v Protective Boot – Red

Each

1982

Rad-5/5v Protective Boot – Orange

Each

13158

Rad-5/5v Soft Carrying Case

Each

Extended Warranty/Service Agreements

Rad-9 extended parts/labor warranty (per year)

Each

Radical extended parts/labor warranty (per year – includes docking station)

Each

Radical 7 extended parts/labor warranty (per year – includes docking station)

Each

Rad-5/Rad-5v extended parts/labor warranty (per year)

Each

Rad-57 extended parts/labor warranty (per year)

Each

Computer Software and Accessories

1908

Trend/Com Trend Download Software

Each

1909

Rad-5/5v PRONTO Trend download serial cable

Each

2083

Rad-57 PRONTO Trend download serial cable

Each

Adult Adhesive Disposable Sensor

1912

LNOPv Adult-L (with standard tape)

Box

Adult Adhesive Disposble Sensor

1001

LNOP Adt (with max durability tape)

Box

Adult Adhesive Disposble Sensor

1829

LNOP Adix (with clear tear resistant tape)

Box

Adult Adhesive Disposble Sensor

1859

LNCS Adult (w/Integral Low Noise Cable)

Box

* Confidential Treatment Requested

A-4

DUAL SOURCE

Generic Product Description

YOUR
PRODUCT
CODE

YOUR PRODUCT DESCRIPTION

UPN
Number

CONTAINS
LATEX?

SELLING
UNIT OF
MEASURE
(SUOM)

QTY
PER
SUOM

LIST PRICE
PER SUOM

TIER 1
(Access)

TIER 2
[...***...]

TIER 3
[...***...]

Adult Adhesive Disposable Sensor

1774

SPO2.com Adult (generic sensors, compatible w/Nelcor conventional spO2)

Box

[...***...]

Adult Adhesive Disposable Sensor

1828

LNOP Hi Fi Trauma Specialty Sensor

Box