Exhibit 10.3
EXCLUSIVE DISTRIBUTION AGREEMENT
This Exclusive Distribution Agreement ("AGREEMENT") is made as of 12:01
A.M., April 1, 2004 (the "EFFECTIVE DATE"), between ▇▇▇▇▇ Laboratories, a Texas
corporation, having its principal place of business at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ("CLIENT"), and Cardinal Health PTS, LLC, a Delaware
limited liability company, by and through its Specialty Pharmaceutical Services
group with offices at ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
("CARDINAL HEALTH").
A. Client is, among other things, in the business of developing and
marketing pharmaceutical products in the United States, the District of Columbia
and Puerto Rico (the "TERRITORY").
B. Cardinal Health is, among other things, in the business of distributing
pharmaceutical products to wholesalers, specialty distributors, physicians,
clinics, hospitals, pharmacies, and other health care providers in the
Territory, and of providing Information Systems and other services that support
its customers' use of its distribution capabilities.
C. Client desires to engage Cardinal Health as its exclusive distribution
agent for commercial sales of products referred to in Exhibit A in all
formulations (collectively, the "PRODUCT"), and such other pharmaceutical
products agreed to by the parties in the Territory and to perform certain other
services described in this Agreement, all upon the terms and conditions set
forth in this Agreement. However, during the first six (6) months following the
Effective Date of this Agreement, Client shall have the right to transfer the
return goods processing to another party.
THEREFORE, in consideration of the mutual conditions and covenants set
forth herein, Cardinal Health and Client (collectively referred to as "PARTY" or
"PARTIES") agree as follows:
1. APPOINTMENT/AUTHORIZATION.
1.1 Upon the terms and conditions set forth in this Agreement, Client
appoints Cardinal Health as its exclusive distribution agent of Product in the
Territory to Client's customers, including, but not limited to, wholesalers,
specialty distributors, physicians, clinics, hospitals, pharmacies and other
health care providers in the Territory (collectively, "CUSTOMERS").
1.2 Subject to the terms and conditions set forth in this Agreement,
Cardinal Health accepts the appointment to represent Client as its authorized
exclusive distribution agent of Product to Customers in the Territory.
1.3 Right of First Refusal.
(a) Client shall provide Cardinal Health with a right of first
negotiation and refusal with respect to the distribution of new pharmaceutical
products acquired or promoted by Client in the Territory after the Effective
Date. Client shall ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Health an exclusive right of negotiation with
respect to the distribution of such new product for a period of thirty (30) days
after Client's notice to Cardinal Health that such new product will be available
for distribution. If the parties have not reached an agreement with respect to
the distribution of the new product within thirty (30) days from the date of
Client's notice, and entered into a definitive agreement within thirty (30) days
thereafter, or if Cardinal Health notifies Client in writing at any point during
such negotiation period that it is not
interested or unable to distribute such new product(s), then Client shall have
no further obligation with respect to that new product under this Section 1.3.
(b) Notwithstanding the foregoing, if the Parties negotiate in good
faith but are unable to reach an agreement with respect to terms regarding the
distribution of the new product, then after the expiration of the period
identified above, and provided that Client enters into negotiations with a third
party to provide such services, Client shall present to Cardinal Health a
definitive letter of intent or bona fide offer from another source to provide
such services, and a copy of such terms, assumptions and conditions (a
"COMPETING OFFER") and Cardinal Health shall be provided the opportunity, for a
period of not less than twenty (20) days after receipt of such notice and
documentation of such Competing Offer, to meet the Competing Offer on
substantially similar terms. If Cardinal Health substantially meets the
Competing Offer, then Client shall enter into a definitive agreement upon such
terms and conditions. If Cardinal Health does not substantially meet the
Competing Offer, then Client may obtain such services from the third party in
accordance with the terms of the Competing Offer.
2. SERVICES.
2.1 Cardinal Health shall provide the services set forth in the
preliminary Operating Guidelines, which include, without limitation, storage,
distribution, returns, customer support, financial support, EDI and system
access support ("SERVICES"). A copy of the Operating Guidelines is attached
hereto as EXHIBIT B and incorporated by reference. It being understood that the
Parties will agree upon mutually acceptable final Operating Guidelines and any
adjustments to Fees related to changes in the Operating Guidelines within thirty
(30) days after the effective date of this Agreement and such final Operating
Guidelines shall be inserted as Exhibit B in lieu of the current Exhibit B.
2.2 The Operating Guidelines may be amended from time to time upon the
mutual written agreement of the Parties; provided, however, that any change,
modification or amendment to the Operating Guidelines may result in an increase
in the fees charged by Cardinal Health in Section 5.
2.3 Cardinal Health's services shall comply with the Operating Guidelines,
provided Client's shipments of Product to Cardinal Health do not exceed its
Forecast (as hereinafter defined) by more than twenty-five percent (25%).
2.4 All Product Returns shall be processed and handled by Cardinal Health
in accordance with the Operating Guidelines; and, any customization or
additional return services requested by Client shall be performed at an
additional fee as agreed by the Parties.
2.5 Client is solely responsible for all Product recalls. In the event
Product is subject to recall, or Client, on its own initiative, recalls any
Product, Cardinal Health shall provide assistance to Client as set forth in the
Operating Guidelines, provided that Client shall pay to Cardinal Health an
amount equal to Cardinal Health's reasonable actual costs incurred with any such
recall services. Such cost shall be in addition to the Service Fees described in
Section 5 below.
3. PRODUCT SUPPLY/CLIENT RESPONSIBILITIES.
3.1 Client shall deliver Product for the first twelve months of this
Agreement, exclusively to Cardinal Health's facility at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇.,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ("Grapevine Facility"). After the first twelve
months of this Agreement, Client may upon a minimum of thirty (30) days notice
to Cardinal Health deliver mutually agreeable quantities of Product to Cardinal
Health's
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facility at ▇▇ ▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ("LaVergne
Facility"). Whichever or both of the Grapevine Facility and/or LaVergne Facility
are receiving Product shall be the "Facility" under this Agreement.
3.2 Client shall be responsible for delivery of Product to the Facility,
including all costs, expenses and risk of loss associated with such delivery.
Title to Product shall remain with Client at all times, even when Product is
stored or warehoused at the Facility. Client shall at all times insure the
Product for damage, loss, destruction, theft or any such other property damage
("LOSS") as further set forth in Section 15 below. Except for Loss resulting
solely from the gross negligence or willful misconduct of Cardinal Health,
Client shall bear all risk of loss or damage with respect to the Product stored
or warehoused at the Facility.*
3.3 Client shall provide Cardinal Health with a forecast of the volume of
Product to be handled by Cardinal Health under this Agreement, not less often
than semi-annually ("FORECAST"). Upon execution of this Agreement, Client shall
deliver to Cardinal Health a customer list, which sets forth the Product prices
(the "CUSTOMER PRICE LIST"). Client shall notify Cardinal Health of any change
in the Customer Price List not less than forty-eight (48) hours prior to the
effective date of any such change. Cardinal Health shall use commercially
reasonably efforts to implement such price change in accordance with Client's
instruction. Notwithstanding the foregoing, Client shall provide the initial
Forecast no later than thirty (30) days after the Effective Date of this
Agreement.
3.4 Cardinal Health shall visually inspect each shipment of Product for
external damage or loss in transit and notify Client of any such damage or loss
within a commercially reasonable period of time following discovery.
4. INFORMATION SYSTEM ACCESS.
4.1 During the term of this Agreement and subject to the terms herein,
Client may use password(s) and identification number(s) provided by Cardinal
Health to remotely access Client's data maintained on Cardinal Health's web
enabled Operating System Base and certain support services associated therewith,
as further set forth in the Operating Guidelines (collectively, the "SYSTEM")
provided that such access is used solely by Client's employees and for Client's
own internal business purposes. Client shall use that access solely to access
Client's data and shall not access or attempt to access any other data, systems
or software. Client shall be responsible for all use of the passwords and
identification elements and shall ensure that they are used solely to effect the
limited access authorized herein. The limited license to access the System
granted herein does not include the right to copy, download or otherwise use any
software or non-Client data maintained on the System.
4.2 The System shall be made available to Client at the fees set forth in
the Fee Schedule. If Cardinal Health agrees to perform any custom enhancements
to the System requested by Client, such customization services shall be billed
separately based on an hourly rate set forth in the Fee Schedule (as defined in
Section 5) and prior to such performance Cardinal Health shall notify Client of
any related increase in the periodic fees hereunder relative to the ongoing
support of the customizations.
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* Omitted information is the subject of a request for confidential treatment
pursuant to Rule 406 under the Securities Act of 1933 and has been filed
separately with the Securities and Exchange Commission.
4.3 During the term of this Agreement, Cardinal Health shall employ
reasonable security measures and policies designed to safeguard the integrity,
accessibility, and confidentiality of Client's data resident on the System and
establish and maintain reasonable disaster and emergency recovery plans designed
to minimize disruption from System operation interruptions.
4.4 Client shall not reverse engineer, reverse assemble, decompile, create
derivative works, modify, or otherwise attempt to derive the source code of any
software on the System or copy, download, modify, or create derivative works of
such software. Also, Client shall not permit access to the System or related
documentation to any other person or entity. The System and all parts thereof,
in all of their tangible and intangible manifestations, all existing or new
enhancements, developments, derivative works, and other modifications to the
System (or any part thereof), and all related proprietary rights, are and shall
remain the exclusive property of Cardinal Health.
4.5 THE SYSTEM, THE SOFTWARE THEREON AND ANY RESULTS OBTAINED THEREFROM
ARE PROVIDED ON AN "AS IS" BASIS, WITHOUT WARRANTY OF ANY KIND, WHETHER EXPRESS,
IMPLIED, STATUTORY OR OTHERWISE. CARDINAL HEALTH MAKES NO REPRESENTATIONS OR
WARRANTIES, AND HEREBY EXPRESSLY DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES,
EXPRESS OR IMPLIED, RELATING DIRECTLY OR INDIRECTLY TO THE SYSTEM OR ANY PART
THEREOF INCLUDING WITHOUT LIMITATION WARRANTIES OF MERCHANTABILITY,
NONINFRINGEMENT AND FITNESS FOR A PARTICULAR PURPOSE.
4.6 Cardinal Health shall use reasonable efforts to make the System
available for access twenty-four (24) hours a day, seven (7) days a week absent
scheduled and emergency maintenance periods.
4.7 Notwithstanding anything to the contrary, in the event of Client's
breach of any of Cardinal Health's security policies or of the confidentiality
provisions in this Agreement, Cardinal Health may revoke or suspend any or all
passwords and identification numbers provided to Client hereunder.
5. FEES.
5.1 As compensation for the Services, Client shall pay to Cardinal Health
the fees (the "FEES") set forth on EXHIBIT C (the "FEE SCHEDULE").
5.2 Cardinal Health shall issue an invoice to Client for the Services
rendered under this Agreement or for any other amounts due on a monthly basis.
Payment is due within twenty (20) days of the invoice date. If the Invoice is
not paid within such twenty (20) day period, a service charge on the unpaid
amount calculated at the rate of 1.5% per month (or the maximum rate permitted
by law if such rate is less than 1.5% per month) shall be imposed until such
amount is paid in full.
5.3 The Fees shall be held firm for the first contract year. Thereafter,
Cardinal Health shall adjust the price not more often than once per contract
year by the * of (i) the increase in the Producer Price Index - All Commodities
published by the United States Department of Labor, Bureau of Statistics, as
amended from time to time ("Index") or * percent (*%) if the Index increase is
less than * percent (*%), or (ii) * percent (*%). For purposes of sub-Section
(i), the base point shall be the index level on the first day of the contract
year.
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* Omitted information is the subject of a request for confidential treatment
pursuant to Rule 406 under the Securities Act of 1933 and has been filed
separately with the Securities and Exchange Commission.
5.4 Notwithstanding the terms set forth above in Section 5.3, if Cardinal
Health can reasonably demonstrate that the costs for providing the Services have
materially increased, or are likely to materially increase in the coming year
due to the adoption of any applicable law or regulation (or any material change
in the interpretation or administration thereof), or due to unforeseen
circumstances beyond Cardinal Health's reasonable control, then upon notice from
Cardinal Health, the Parties agree to meet in good faith and negotiate a
mutually acceptable adjustment to the Fees.
6. TERM AND TERMINATION.
6.1 The initial term of this Agreement shall begin on the Effective Date
and shall continue for a period of three (3) years (the "INITIAL TERM"), unless
terminated earlier pursuant to this Agreement. Thereafter, this Agreement shall
automatically renew for additional terms of one (1) year each, unless written
notice of termination is given by either Party at least ninety (90) days prior
to the end of the Initial Term, or such other term, in which case this Agreement
shall terminate at the end of the then current term.
6.2 This Agreement may be terminated:
(a) by either Party upon one hundred eighty (180) days prior written
notice to the other Party, provided that in the event Client terminates this
Agreement, without cause, prior to the end of the Initial Term, such termination
shall be effective only upon payment to Cardinal Health of seventy-five percent
(75%) of remaining fixed Fees set forth on the Fee Schedule for the remainder of
the Initial Term, it being understood that there be no additional damages for
such termination, and provided that if Cardinal Health terminates this
Agreement, without cause, prior to the end of the Initial Term, such termination
shall only be effective upon payment to Client of an amount which is equal to
One Hundred Twenty Thousand Dollars ($120,000) multiplied by a fraction with a
numerator which is the number of months remaining in the Initial Term as to the
effective date of termination and a denominator which is 36, it being understood
that there be no additional damages for such termination. For example, if
Cardinal Health terminated effective twenty-two months from the beginning of the
Initial Term, then fourteen (14) months would be remaining in the Initial Term
and the termination payment would be $120,000 multiplied by 14/36, or
$46,666.67.
(b) by either party upon the breach by the other Party of a material
provision of this Agreement and that Party's failure to cure such breach within
thirty (30) days following written notice thereof from the non-breaching Party,
provided that, with respect to any failure to make any payment when due under
this Agreement, such period to cure shall be reduced to fifteen (15) days; or
(c) by either party immediately upon notice to the other Party
following the commencement of any bankruptcy or insolvency proceeding (whether
voluntary or involuntary) with respect to such other Party or its assets, which
in the event of an involuntary proceeding, is not dismissed within sixty (60)
days, the general assignment for the benefit of creditors by such other Party,
or the appointment of a receiver, trustee or liquidator by or for such other
Party.
6.3 Termination or expiration of this Agreement shall not relieve either
Party from any liability or obligation that accrued prior to such termination or
expiration. Upon termination or expiration of this Agreement, all Product shall
be returned to Client or a designee of Client, at Client's sole cost and expense
unless the termination is a result of a breach by Cardinal Health in which case
Cardinal Health will pay the Product return expenses. Sections 13 and 14 shall
survive termination or expiration of this Agreement.
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7. AUDITS. No more than twice per calendar year, Client or its designee
shall have the right during normal business hours (i.e., 8:00 a.m. to 5:00 p.m.
local time), upon fifteen (15) business days prior written notice to Cardinal
Health, to: (a) conduct a physical audit of such parts of the Facility that
relate solely to Product stored and warehoused at the Facility under this
Agreement; and (b) review and audit records that relate solely to the storage
and distribution of the Product. Without limiting the foregoing, records review
may include, at Client's option, a review of Product receiving, storage,
picking, packing, shipping and related quality records and/or Client's Customer
records including Customer orders and Customer accounts receivable. Cardinal
Health and Client agree to participate in quarterly business reviews.
8. COMPLIANCE WITH LAWS. Each Party shall conduct its activities in
connection with this Agreement in compliance with all applicable laws, rules,
regulations, and orders of governmental entities.
9. REPRESENTATIONS AND WARRANTIES.
9.1 Each Party represents and warrants to the other that:
(a) it has full power and authority to enter into this Agreement and
perform all obligations and conditions to be performed by it under this
Agreement without any restriction by any other agreement or otherwise;
(b) the execution, delivery and performance of this Agreement have
been duly authorized by all necessary corporate action of that Party; and
(c) this Agreement constitutes the legal, valid and binding
obligation of that Party.
9.2 Client further represents and warrants to Cardinal Health that the
Product:
(a) is and shall be manufactured in conformity with the Food, Drug
and Cosmetic Act, as amended from time to time, and all other applicable laws,
rules, regulations and orders of governmental entities relating to the
manufacture, promotion, sale or distribution of the Product;
(b) does not violate or infringe any patent, trademark, tradename or
other interest of any person or entity.
10. TAXES. Client shall pay when due all sales, use, gross receipts,
excise, personal property taxes associated with the Product (excluding any
personal property tax associated with Cardinal Health's equipment used in
connection with the Services), and other taxes now or hereafter imposed as a
result of the transactions contemplated by this Agreement, none of which have
been included in the fees payable to Cardinal Health under this Agreement;
provided that the amounts payable by Client under this section shall not include
taxes based on the net income of Cardinal Health.
11. TRADEMARKS. Neither Party shall have the right to use the name of the
other Party or any Affiliate of the other Party, or the other Party's or such
Affiliates' trademarks, service marks, logos, or other similar marks in any
manner except with the prior written approval of that Party; provided that the
foregoing shall not prohibit Cardinal Health's use of Client' names or marks in
connection with the performance of the Services in a manner consistent with this
Agreement. In the event Cardinal Health
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uses Client's trademarks or tradenames, Cardinal Health shall identify such as
the property of Client. Moreover, Cardinal Health may not use any third party
trademarks or tradenames with the Products without prior written approval of
Client. "AFFILIATE," as used in this Agreement, means any legal entity which,
during the Term hereof, controls, is controlled by, or is under common control
with, such Party. For purposes of this definition, an entity shall be deemed to
control another entity if it owns or controls, directly or indirectly, at least
fifty percent (50%) of the voting interest of all equity interests of the other
entity (or other such comparable ownership interest for an entity other than a
corporation).
12. CONFIDENTIALITY.
12.1 Each Party acknowledges that as a result of this Agreement it may
learn and have access to trade secrets and other confidential and proprietary
information of the other Party through employees, representatives and/or agents
acting on behalf of or subcontracted to either Party (collectively the
"REPRESENTATIVES"), including without limitation, financial information,
information regarding business practices and techniques, and systems and
technology information, or any information identified as confidential in writing
by either Party (the "CONFIDENTIAL INFORMATION"). Client acknowledges and agrees
that all information and materials related to the System shall constitute
Confidential Information. For purposes of this Agreement, Confidential
Information shall not include information disclosed by one Party to the other
Party to the extent that such information can be proven by written evidence: (a)
to be in the public domain or generally available in the industry in which the
disclosing Party engages in business without any violation of this Agreement by
the other Party; (b) is already legally known to the other Party or any of its
Affiliates at the time of its disclosure by the disclosing Party; (c) becomes
known to the other Party or any of its Affiliates from a third party without any
obligation of confidentiality or limitation on use; or (d) is independently
developed by the other Party or any of its Affiliates prior to the date of its
disclosure. The specific material terms of this Agreement shall be deemed to be
the Confidential Information of each Party. Confidential Information shall not
be deemed to be in the public domain or publicly known or in the receiving
Party's possession because it is embraced by more general information in the
receiving Party's possession or because it is embraced in general terms in
publications.
12.2 Neither Party shall, directly or indirectly, at any time: (a)
disclose to any third person or entity any Confidential Information of the other
Party (whether learned before or after the date of this Agreement), or (b) use,
or permit or assist any third person or entity to use, any such Confidential
Information, excepting only: (i) disclosures required by law, rule, regulation
or order, as reasonably determined by the disclosing Party or its legal counsel,
and (ii) disclosures on a confidential basis to directors, officers, employees,
and agents of that Party or its Affiliates who have a reasonable need to know
such Confidential Information in the normal course of business of that Party or
any of that Party's Affiliates.
12.3 The obligations of confidentiality hereunder shall survive the
termination of this Agreement for a period of three (3) years. Upon termination
of this Agreement (for any reason) each Party shall promptly: (i) return to the
other Party all documentation and other materials (including copies of original
documentation or other materials) containing any Confidential Information of the
other Party; or (ii) with the other Party's consent, which consent will not be
unreasonably withheld, certify to the other Party, pursuant to a certificate in
form and substance reasonably satisfactory to the other Party, as to the
destruction of all such documentation and other materials.
13. INDEMNIFICATION. Each Party shall indemnify and hold harmless the
other Party and its parent and Affiliates, and each of their directors,
officers, employees, agents, and representatives from and against all claims,
liabilities, losses, damages, costs, and expenses, including, without
limitation,
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reasonable attorneys' fees ("LIABILITY") to a third party or property arising
directly or indirectly out of any failure of that Party to perform fully all
obligations and conditions to be performed by that Party pursuant to this
Agreement or any breach of any warranty made by that Party in this Agreement.
Client further agrees to indemnify and hold harmless Cardinal Health, its parent
and Affiliates and each of their directors, officers, employees, agents and
representatives from any and all Liability arising directly or indirectly out of
or relating to (i) injury or death to person or property alleged to have been
caused by Client's Product, (ii) any violation or infringement of any patent,
trademark, tradename or other interest of any person or entity relating to
Client's Product, and (iii) the manufacture, marketing, testing, shipping, sale,
possession or use of Product, provided said Liability is not solely attributable
to Cardinal Health's negligence or intentional misconduct.
14. LIMITATION OF LIABILITY. NOTWITHSTANDING THE FOREGOING PROVISIONS OF
SECTION 13, OR ANY OTHER PROVISION OF THIS AGREEMENT TO THE CONTRARY, NEITHER
PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY CONSEQUENTIAL (SPECIFICALLY
EXCEPTING THOSE CONSEQUENTIAL DAMAGES ARISING FROM EACH PARTY'S OBLIGATION TO
INDEMNIFY THE OTHER FOR LIABILITY ARISING OUT OF OR RELATING TO THIRD PARTY
CLAIMS IN ACCORDANCE WITH SECTION 13 ABOVE), INCIDENTAL, INDIRECT, SPECIAL, OR
OTHER SIMILAR DAMAGES ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT.
FURTHER, IN NO EVENT SHALL CARDINAL HEALTH'S TOTAL LIABILITY UNDER THIS
AGREEMENT, INCLUDING, WITHOUT LIMITATION ANY OF CARDINAL HEALTH'S INDEMNITY OR
OTHER FINANCIAL OBLIGATIONS UNDER SECTION 13 OR ANY OTHER PROVISION OF THIS
AGREEMENT, EXCEED THE TOTAL FEES PAID BY CLIENT TO CARDINAL HEALTH FOR THE
SERVICES WHICH WERE INVOLVED IN CAUSING ANY CLAIMS, DAMAGES, LOSSES, COSTS OR
EXPENSES.
15. INSURANCE. Client shall, at its own cost and expense, obtain and
maintain in full force and effect the following insurance during the term of
this Agreement.
(a) Products and Completed Operations Liability Insurance covering
the Product included in this Agreement with per-occurrence limits of not less
than $5,000,000; and
(b) All-Risk Property Insurance, including transit coverage, in an
amount determined by Client in its sole discretion covering Client's property
while it is at the Cardinal Health facility or in transit to or from the
Cardinal Health facility. Client's all-risk property insurance shall apply to
all losses and be primary (with respect both to any insurance issued to Cardinal
Health and to any deductible amount or self-insured amount retained by Cardinal
Health) except for losses resulting solely from the gross negligence or
intentional misconduct of Cardinal Health.
In the event that any of the required policies of insurance are written on a
claims made basis, then such policies shall be maintained during the entire term
of this Agreement and for a period of not less than five (5) years following the
termination or expiration of this Agreement.
Client shall obtain a waiver from any insurance carrier with whom Client carries
Property Insurance releasing its subrogation rights against Cardinal Health
except for losses resulting solely from the gross negligence or intentional
misconduct of Cardinal Health. Client shall not seek reimbursement for any
property claim, or portion thereof, that is not fully recovered from insurance
except for losses resulting solely from the gross negligence or intentional
misconduct of Cardinal Health.
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Cardinal Health, LLC, and its Affiliates shall be named as additional insureds
under the Products and Completed Operations Liability insurance policies as
respects the products and completed operations outlined in this Agreement. Such
insurance shall be primary (with respect both to any insurance issued to
Cardinal Health and to any self-insured amount retained by Cardinal Health) for
the additional insureds' liability for damage arising out of those products and
completed operations for which they have been added as additional insureds.
Client shall furnish certificates of insurance for all of the above noted
policies and required additional insured status to Cardinal Health as soon as
practicable after the Effective Date of the Agreement and upon renewal of any
such policies. Each insurance policy that is required under this Section shall
be obtained from an insurance carrier with an A.M. Best rating of at least
A-VII.
16. DISPUTE RESOLUTION. The Parties agree to use good faith efforts to
resolve all disputes within sixty (60) days of written notice that such a
dispute exists. If dispute under this Agreement cannot be resolved by the
Parties within such sixty (60) day period, the Parties agree to refer the matter
to one executive from each Party not directly involved in the dispute for review
and resolution. A copy of the terms of this Agreement, agreed upon facts and
areas of disagreement, and a concise summary of the basis for each side's
contentions will be provided to both executives who shall review the same,
confer, and attempt to reach a mutual resolution of the issue within forty-five
(45) days after receipt of the materials referenced above. If the matter has not
been resolved within such forty-five (45) day period, either or both Parties may
pursue resolution of the matter through litigation or other process available
under law or equity.
17. MISCELLANEOUS.
17.1 Notices. Any notice or other communication required or desired to be
given to any Party under this Agreement shall be in writing and shall be deemed
given: (a) three business days after such notice is deposited in the United
States mail, first-class postage prepaid, and addressed to that Party at the
address for such Party set forth at the end of this Agreement; (b) one business
day after delivered to Federal Express, Airborne, or any other similar express
delivery service for delivery to that Party at that address on the next morning;
or (c) when sent by facsimile transmission, with electronic confirmation, to
that Party at its facsimile number set forth at the end of this Agreement. Any
notice delivered by facsimile transmission will be deemed delivered upon
electronic confirmation provided the notice is also deposited in the U.S. mail,
first-class postage prepaid. Any Party may change its address or facsimile
number for notices under this Agreement by giving the other Party notice of such
change.
17.2 Governing Law. This Agreement shall be construed under the laws of
the State of Texas, without regard to its conflicts of laws provisions.
17.3 Severability. If any term of this Agreement is declared invalid or
unenforceable by a court or other body of competent jurisdiction, the remaining
terms of this Agreement will continue in full force and effect.
17.4 Non-Waiver. No failure by either Party to insist upon strict
compliance with any term of this Agreement, to enforce any right, or to seek any
remedy upon any default of the other Party shall affect, or constitute a waiver
of, the first Party's right to insist upon strict compliance, to exercise that
option, to enforce that right, or to seek that remedy with respect to that
default or any prior, contemporaneous, or subsequent default. No custom or
practice of the Parties at variance with any provision of this Agreement shall
affect, or constitute a waiver of, that Party's right to demand strict
compliance with all provisions of this Agreement.
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17.5 Force Majeure. If the performance of any part of this Agreement by
either Party shall be prevented, restricted, interfered with or affected for any
length of time by fire or other casualty, government restrictions, war, riots,
strikes or labor disputes, lockout, transportation delays, acts of God, or any
other causes which are beyond the reasonable control of such Party, such Party
shall not be responsible for delay or failure of performance of this Agreement
for such length of time, provided, however, that the obligation of one Party to
pay amounts due to the other Party shall not be subject to the provisions of
this Section.
17.6 Complete Agreement. This Agreement constitutes the entire
understanding between the Parties and supersedes any contracts, agreements or
understanding (oral or written) of the Parties with respect to the subject
matter hereof. No term of this Agreement may be amended except upon written
agreement of both Parties, unless provided otherwise in this Agreement.
17.7 Assignment. Except as set forth herein, neither Party shall have the
right to assign this Agreement, or any of such Party's rights or obligations
under this Agreement, without the prior written consent of the other Party,
provided, however, that either party may assign its rights under this Agreement
to any parent, subsidiary or affiliate without obtaining such consent. This
Agreement shall be binding upon, inure to the benefit of, and be enforceable by
and against the respective successors and assigns of the Parties.
17.8 Independent Contractor. The relationship of the Parties is that of
independent contractors, and neither Party shall incur any debts or make any
commitments for the other Party except to the extent expressly provided in this
Agreement. Nothing in this Agreement is intended to create or shall be construed
as creating between the Parties the relationship of joint venturers,
co-partners, employer/employee or principal and agent.
17.9 Publicity. Neither Party will make any press release or other public
disclosure regarding this Agreement or the transactions contemplated hereby
without the other Party's express prior written consent, except as required
under applicable law or by any governmental agency, in which case the Party
required to make the press release or public disclosure shall use commercially
reasonable efforts to obtain the approval of the other Party as to the form,
nature and extent of the press release or public disclosure prior to issuing the
press release or making the public disclosure.
IN WITNESS WHEREOF, the undersigned acknowledge and accept the terms of
this Agreement and have duly executed this Agreement.
CARDINAL HEALTH PTS, LLC CLIENT
By /s/ ▇▇▇ ▇. ▇▇▇▇▇▇ By /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------- -------------------------
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President and General Manager Chief Financial Officer
Specialty Pharmaceutical Services Colonial Court
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
10
EXHIBITS
Exhibit A Product Listing
Exhibit B Operating Guidelines
Exhibit C Fee Schedule
EXHIBIT A
PRODUCT DESCRIPTION
Mucinex
Mucinex D
Mucinex DM
Aquatab D
Aquatab DM
Aquatab C
ALLERx 10 Day Dose Pack
ALLERx D
ALLERx Suspension (liquid)
Aquatab DM Syrup (liquid)
All SKUs and strengths
- 1 -
EXHIBIT B
OPERATING GUIDELINES
EXHIBIT A
▇▇▇▇▇ LABORATORIES/CARDINAL HEALTH PTS, INC.
SPECIALTY PHARMACEUTICALS SERVICES
The Operating Guidelines shall be incorporated into the Distribution Services
Agreement between Client ("Client"), and Cardinal Health PTS, Inc. ("Cardinal
Health"), dated April 1, 2004 (the "Agreement"). Capitalized terms not otherwise
defined in this Operating Guidelines shall have the same meaning as set forth in
the Agreement.
In performing its obligations under the Agreement, Cardinal Health will follow
these Operating Guidelines. The Operating Guidelines are in addition to the SOPs
that have been approved by Client for use by Cardinal Health in the performance
of Services.
1.0 WAREHOUSING
l.1 Cardinal Health will maintain its warehouse facility in accordance and
comply with all federal, state and local laws, rules and regulations,
including current Good Manufacturing Practices ("cGMP") as promulgated
under the FDA.
1.2 Cardinal Health will maintain SOPs appropriate for a pharmaceutical
distribution center operating environment. All SOPs will be appropriately
approved and controlled under the Cardinal Health cGMP quality system.
1.3 Cardinal Health will maintain cGMP compliant documented training programs.
These training programs will include training on all SOPs, the Operating
Guidelines and the Quality Requirements Agreement. Client will have the
authorization to audit the training records.
1.4 Cardinal Health will comply with all storage, handling and shipping
conditions designated by Client for the Product.
1.5 The Product will be stored by Cardinal Health at 20 TO 25 DEGREES CELSIUS
FOR MUCINEX PRODUCTS AND 15 TO 30 DEGREES CELSIUS FOR NON-MUCINEX
PRODUCTS. Client shall ensure that the storage requirements are identified
on the package label. Client shall ensure that the storage requirements,
lot number and expiry date will be in human readable format and the
Product NDC number will be in an acceptable barcode format on the unit
carton. Product will be stored in areas designed to be continuously
monitored and will be periodically validated for the temperature range
specified for the Product. Cardinal Health will maintain daily temperature
recordings. Cardinal Health will provide such records to Client upon
written request.
1.6 Cardinal Health will report temperature excursions to Client promptly and
in no event more than 48 hours from the point of discovery of the
excursion.
1.7 Product will be stored in an area with secured access, accessible only to
authorized Cardinal Health personnel.
2.0 RECEIVING
2.1 Client or Client's contract manufacturing agent will arrange
transportation services to transfer the Product to Cardinal Health. Client
will notify Cardinal Health of the specific delivery schedule.
2.2 Each shipping carton of Client's Product will be labeled with a barcode
representing the Product's NDC number, lot number, and expiration date.
This information will also be in human readable format. Each individual
shipping container (unit carton) will have a barcode representing the
Product's NDC number and will have the Product lot number and expiration
date in human readable format.
2.3 Client's carrier will contact Cardinal Health to arrange a delivery
appointment.
2.4 Client shall retain title and ownership to the Product at all times.
Cardinal Health signature on the ▇▇▇▇▇▇▇'▇ ▇▇▇▇ of lading is an
acknowledgement only of Cardinal Health's receipt of Product.
- 1 -
2.5 Client will provide Cardinal Health with a Material Safety Data Sheet for
the Product.
2.6 Client's Product will meet the following standards for carton
identification, documentation, palletization, and uniformity:
2.6.1 Client will provide the ▇▇▇▇ of lading, certificate of analysis and
other documentation necessary. Cardinal Health will follow its SOP
for receiving Product.
2.6.2 Pallets will meet GMA standards for 40" x 48" x 46" dimensions with
four-way entry; will be free of broken boards, treated for pests,
and clean.
2.6.3 Receipt of Product on non-standard pallets may require restacking
onto conforming pallets at Client's expense.
2.6.4 Palletized Product must be uniform and consistent with
specifications set up in the Product master for the number of
cartons and caches.
2.7 Cardinal Health will receive each shipment into a secure receiving area
and perform all requirements as detailed in Cardinal Health's receiving
SOP.
2.8 Cardinal Health will count and inspect the exterior packaging of the
Product, noting any shortages, overages or damage on the ▇▇▇▇▇▇▇ ▇▇▇▇ of
lading. Cardinal Health will obtain the carrier's signature on the ▇▇▇▇ of
lading acknowledging the condition of the Product upon receipt by Cardinal
Health.
2.9 Cardinal Health will compare the Client documentation to Cardinal Health's
receiving report. Discrepancies will be noted. Cardinal Health Quality
Assurance will investigate and report all discrepancies to Client within
24 hours of receipt. Client and Cardinal Health will determine corrective
actions, if any.
2.10 Cardinal Health will fax receiving checklist and downloaded temp tale data
to Client Quality Assurance for official lot release. Product will be held
in quarantine until released in writing by Client Quality Assurance.
2.11 Product in unapproved or quarantine status will be physically segregated
and flagged in Cardinal Health's warehouse management system to prevent
unapproved Product from entering approved picking areas of the warehouse.
2.12 Client Quality Assurance will fax written documentation to Cardinal Health
to release the lot from quarantine Product status to approved Product
status.
2.13 Cardinal Health will post receipts in the warehouse management system
within four business hours of delivery unless count discrepancies, missing
paperwork, damage investigation, and other receiving anomalies interfere
with efficient receiving and documentation. Cardinal Health will report
this attribute periodically according to Section 21 of the Operating
Guidelines.
2.14 Cardinal Health will move Product from the receiving area to bulk storage
following Cardinal Health SOPs.
3.0 INVENTORY
3.1 Inventory will be received, tracked and controlled on Cardinal Health's
warehouse management system by item number, lot number, expiration date,
quantity, and status. Cardinal Health's warehouse management system will
meet all cGMP requirements for lot traceability and accountability, from
receipt of Product at Cardinal Health to shipment of Product to Client's
Customer.
3.2 Quarantined Product will be physically segregated and appropriately
labeled. Quarantined Product will be released from quarantine status in
Cardinal Health's warehouse management system upon written authorization
by Client's Quality Assurance.
3.3 Cardinal Health will assign a unique location for the Product and lot in
storage.
3.4 Cardinal will perform a daily cycle count on forward pick locations that
have had activity during the given day. Cardinal Health will use its
commercially reasonable efforts to maintain accurate
- 2 -
and timely inventory records. Cardinal Health will report on cycle count
accuracy periodically according to Section 21 of the Operating Guidelines.
3.5 Inventory variances will be investigated by Cardinal Health and reported
promptly to Client and in no event later than 48 hours. Corrective actions
will be determined jointly by Cardinal Health and Client.
3.6 Client may conduct a complete physical inventory once per calendar year,
upon at least ten (10) business days advance written notice prior to the
start of a physical inventory, or more frequent if inventory variances
exceed the standard of 99.5% accuracy, as set forth in Section 21 of the
Operating Guidelines.
3.7 Cardinal Health will notify Client of all expired or short dated Product
as specified by Client to be 12 months prior to expiry date.
3.8 Cardinal Health will receive returned Product according to Cardinal Health
SOP and Client's Returned Goods Policy. Client's Quality Assurance will
determine appropriate disposition of the returned Product. Client's
Quality Assurance must be notified prior to disposition of the Product. If
the disposition is to destroy the Product, Cardinal Health will
subcontract the destruction by means of landfill, if possible, or other
means as specified by Client, through a third party supplier. Cardinal
Health will provide Client with the Certificate of Destruction.
4.0 DISTRIBUTION
4.1 Orders approved and available for processing (pick & pack) by 2:00 p.m.
Central Standard Time Monday through Thursday, and on Fridays if approved
by Client, will be shipped before the close of business the same day
("Standard Hours"). Orders received and processed after 2:00 p.m. Central
Standard Time will be shipped the following business day. For order
received after Standard Hours, Cardinal Health will fax a notification to
the Customer alerting them that the Product will ship on the following
business day. If the day the Product is to be received by the Customer
falls on a holiday or weekend, then the order will be shipped on the next
business day which will ensure the Product will not be delivered to
Customer on a holiday or weekend.
4.2 Orders placed within Standard Hours will be shipped to Customer to arrive
within 3 to 5 business days.
4.3 Order arrival times to SPS must allow for an even distribution of work
within normal start times of 8:00 p.m. CST>.
4.4 Orders that have Drop Ship requirements within Standard Hours will be
shipped via standard overnight delivery service and Customer will be
charged a $35 shipping fee along with a $50 handling fee.
4.5 Orders placed outside Standard Hours and in which the Customer has
requested delivery for the next day will be defined as emergency orders
and will be shipped via priority overnight delivery. Customer will be
charged a $35 shipping fee along with a $50 handling fee. Emergency Drop
Ship orders will incur only one set of shipping and handling fees.
4.6 Orders placed during Standard Hours in which the Customer requests
priority service (upgrade of shipping service) will be accommodated and
Client will cover the cost of the increased freight charge. This will be
accommodated on an exception basis only and not implemented as standard
ongoing service for a particular Customer. An upgrade to priority services
will not be considered an emergency order.
4.7 Client will be responsible for monitoring customer ordering practices.
4.8 Recognizing that order volume may fluctuate from time to time, Cardinal
Health will staff to meet the greater of 125% of the rolling average
number of Client orders processed over the previous two (2) calendar
months or the Forecast as defined in the Exclusive Distribution Agreement.
Cardinal Health will use commercially reasonable efforts to meet the
shipping schedule outlined herein when order or unit volume exceeds 125%
of the rolling average number of orders or units; provided, however, that
Cardinal Health cannot guarantee daily on-time shipping standards will be
achieved during such increased activity periods.
- 3 -
4.9 Cardinal Health will measure the timeliness of shipments and will report
this attribute periodically according to Section 21 of the Operating
Guidelines.
4.10 Cardinal Health personnel will be available for emergency Product
shipments, via phone request, 24 hours per day, 365 days per year. For
shipments called in after the carrier's cutoff time (approximately 8:00
p.m. for overnight airfreight), Cardinal Health will ship the Product the
following day.
4.11 Cardinal Health's inventory system will comply with First to-Expire,
First-Out (FEFO) inventory allocation. Any exceptions from FEFO must be
approved by Client in writing prior to shipment.
4.12 For the period beginning on the effective date of the Agreement through
September 30, 2004, Client anticipates that certain Client customers will
require Mucinex products be shipped in cases containing "inner packs".
Client plans to differentiate the Mucinex product that contains such inner
packs by populating the item field with the NDC number. Cardinal agrees to
use commercially reasonable efforts to ship inner packs to those Client
customers designated by Client. From and after October 1, 2004, all
cartons should contain inner packs.
4.13 Cardinal Health will perform quality verification on all Client shipments
by an individual other than the employee who picked the order. Cardinal
Health will use commercially reasonable efforts to pick, check and ship
accurately all Customer orders. Cardinal Health will measure picking and
shipping accuracy and will report this attribute periodically according to
Section 21 of the Operating Guidelines.
4.14 Cardinal Health and Client will mutually determine and agree in writing on
the packaging requirements for shipping the Product. Cardinal Health's
Quality Assurance will assist Client and Cardinal Health will issue
appropriate guidelines and cGMP training to the distribution department to
assure compliance with Client's specifications. These specific Client
specifications will be controlled in the Cardinal Health cGMP quality
system.
4.15 Cardinal Health will provide shipment confirmation information to Client
through Cardinal Health's information System on the same business day on
which the shipment occurs.
4.16 Cardinal Health will manage shipping supplies - including vendor
selection, ordering, inventory record keeping, and storage. Cardinal
Health will invoice Client for all shipping materials; corrugated cartons,
insulated coolers (if specified), address labels, inner packing; as may be
required by Client's packing specifications.
6.0 TRANSPORTATION
6.1 Cardinal Health and Client will mutually agree upon a common carrier(s)
based on shipment size, destination, freight rates, availability of
standard and special services, reliability of delivery, and claim history
among other requirements.
6.2 Cardinal Health shall provide, if Client agrees, carriers under contract
with Cardinal for discounted rates.
6.3 Shipping charges, including all special charges for insurance, proof of
delivery, hazardous materials, service upgrades, and so forth, will be
billed directly to Cardinal Health's account with the carrier and passed
through to Client and will include a handling fee.
6.4 Freight terms will be F.O.B. origin.
6.5 Cardinal Health, at the request of the Client, will provide proof of
delivery for specific Customer shipments. Fees charged by carriers for
proofs of delivery, if any, will be passed directly to Client.
7.0 CUSTOMER SERVICE
7.1 Cardinal Health will provide a dedicated inbound phone line (or lines) for
Client's Customers to phone in purchase orders, for inquiries, and for
general information.
7.2 Cardinal Health will staff the inbound phone line from 7:00 a.m. - 6:00
p.m. Central Standard Time, Monday through Friday, except for the
following holidays: Christmas Day, New Year's
- 4 -
Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and the
day after Thanksgiving.
7.3 Cardinal Health will be responsible for training Cardinal Health's
customer service representative(s) and backup representative(s). Client
will provide company and Product specific information for training of the
customer service representatives assigned to Client.
7.4 Cardinal Health will be responsible for initial set up and on-going
maintenance of Customer master files. The initial Customer master file
will be approved and signed by Client. Client may add Customers by
completing the Customer profile form and forwarding to Cardinal Health for
system entry.
7.5 Cardinal Health will accept Customer orders by electronic data interchange
(EDI), mail or fax, Cardinal Health will maintain records of all Customer
orders. All Customer orders must be in writing or by EDI. Cardinal Health
will not accept telephone orders without a mail or fax confirmation.
7.6 Cardinal Health will use commercially reasonable efforts to answer inbound
phone calls within the first thirty (30) seconds, and will report this
attribute periodically according to Section 21 of the Operating
Guidelines.
7.7 As a backup to the customer service representatives, a voice mail system
will be maintained to collect messages from Customers.
7.8 Cardinal Health's customer service representatives will re-route, via warm
transfer, all misdirected calls to the appropriate vendors designated by
Client. In the event that a call cannot be re-routed to a particular
vendor (e.g., due to a system outage), the customer service representative
should warm transfer the call to the Client's operator at (▇▇▇) ▇▇▇-▇▇▇▇.
8.0 ORDER ENTRY
8.1 Client's minimum order quantity will be 1 case and any additional
quantities can only be ordered in multiples of cases.
8.2 Client will instruct its Customers to place orders based on the contract
between Client and Customer.
8.3 Cardinal Health will follow the Client's Customer price list.
8.4 Client will determine when Customers shall pay for premium freight,
special handling, and emergency order processing.
8.5 Client reserves the right to limit quantities, to hold or to refuse
orders. These decisions will be executed by Cardinal Health. It is the
responsibility of the Client to monitor Customer ordering practices.
Cardinal Health will train customer service reps that Client discourages
distributors from routinely ordering more frequently than weekly.
8.6 Cardinal Health will use commercially reasonable efforts to enter orders
accurately. Cardinal Health measures the accuracy of orders entered and
will report this attribute periodically according to Section 21 of the
Operating Guidelines.
9.0 CUSTOMER CREDIT
9.1 Client will establish credit limits for each Customer or groups of
Customers.
9.2 Cardinal Health's System will monitor orders and outstanding accounts
receivable against the Customer's credit limit and hold orders where
credit limits are exceeded.
9.3 Client may elect to place a Customer's account on credit hold so that all
orders are reviewed prior to shipment.
9.4 Client will review and approve all Customer orders held for credit limits
prior to shipment.
10.0 PRICING AND TERMS
10.1 Client will publish terms and conditions of sale to wholesalers and
warehouse chains. Standard terms are 2% -30 days, net 31 days. Contracted
Customers may have non-standard terms.
- 5 -
10.2 Client will publish list prices for wholesalers and warehouse chains,
which are subject to change from time to time at the sole discretion of
Client.
10.3 Client will determine contract prices on a contract-by-contract basis.
Client will notify Cardinal Health of such price changes with 24 hour
notice for update of the Cardinal Health system files. Client will develop
and forward Customer notifications to Cardinal Health and Cardinal Health
will provide printing and mailing services on behalf of Client.
10.4 Cardinal Health will perform system maintenance of pricing and terms.
Client will provide to Cardinal Health in writing any changes to prices or
terms. Cardinal Health will be responsible for updating the Cardinal
Health system within 24 hours of receipt of such notice or as Client may
otherwise instruct.
10.5 Cardinal Health employees are bound by the confidentiality provisions of
the Agreement between Cardinal Health and Client and, as such, shall not
disclose Client sales data or pricing information outside the specific
Cardinal Health employees who have a need to know of this information in
the course of performing their routine job responsibilities.
10.6 Cardinal Health will provide the necessary reports within stipulated time
frames to ensure Client can comply with the reporting requirements of
Medicaid (OBRA), Veterans HealthCare Act, PHS Covered Entities, and state
rebate programs. Client will define reporting requirements against which
Cardinal Health will produce the required reports.
11.0 INVOICING
11.1 Cardinal Health will use commercially reasonable efforts to mail invoices
the morning following shipment of Product, or transmit by electronic data
interchange (EDI), where installed, the same day of shipment of Product,
to Customer's billing address.
11.2 For any order shipped after the close of business, the invoice will be
prepared and mailed the following business day.
11.3 Cardinal Health will make commercially reasonable effort to process
invoices as timely and accurately as possible. Cardinal Health measures
invoice accuracy and processing timeliness and will report this attribute
periodically according to the conditions set forth in Section 21 of the
Operating Guidelines.
12.0 CHARGEBACKS
12.1 Client may enter into prime vendor arrangements for select contract or
government mandated pricing arrangements.
12.2 Cardinal Health, on behalf of Client, will process chargebacks daily with
reconciliation of chargeback discrepancies within 5 working days. Cardinal
Health's chargeback SOPs will define the parameters available to Cardinal
Health to resolve discrepancies between Client's contract terms and
conditions and the chargeback submitted by the wholesaler.
12.3 All chargebacks will be processed according to the chargeback policy for
Client.
12.4 All validated chargeback submissions will be settled via credit invoice.
Client will not make advance payments or authorize advance deductions of
chargebacks.
12.5 Prime vendors will be instructed to report all returns from Client's
contract Customers as a reverse chargeback.
12.6 Cardinal Health will make commercially reasonable effort to process
chargebacks as timely and accurately as possible.
13.0 ACCOUNTS RECEIVABLE
13.1 Client will open and maintain a bank lockbox. The bank will receive
Customer remittances invoice information on behalf of Client. Customers
may remit payment via EFT.
13.2 Client's bank will forward information about lockbox deposits along with
the Customer's remittance information to Cardinal Health.
- 6 -
13.3 Cardinal Health will reconcile and apply the cash receipt to the
outstanding account receivable within 24 hours of receipt from the bank.
13.4 Cardinal Health will disallow discounts for payments received beyond the
payment terms, as indicated by the receipt date. Cardinal Health will
handle the amount of the discount as a balance due on the Accounts
Receivable account.
13.5 Cardinal Health's standard for past due payment collection activity:
13.5.1 Contact Customer 20 days (regardless of terms) from invoice date,
to ensure that Customer has received invoice and invoice is setup
for on time payment. If Customer has not received invoice, Cardinal
Health will re-send the invoice within 24 hours.
13.5.2 Initiate collection call when invoice becomes 8 days past due.
13.5.3 Initiate second collection call at 16 days past due.
13.5.4 Initiate third collection call at 30 days past due. If customer
does not take payment action after this third call, Client will
instruct Cardinal Health to either (i) write off the balance in
question (ii) forward the account to an outside agency, as
designated by Client, for collection, or (iii) carry the balance
forward for later disposition.
13.6 Cardinal Health will maintain notes related to collection activities in an
Accounts Receivable system file that will be accessible to Client's
authorized personnel.
13.7 Cardinal Health will use commercially reasonable efforts effort to process
accounts receivable as timely and accurately as possible. Cardinal Health
will measure accounts receivable and collections activity and report these
attributes periodically according to Section 21 of the Operating
Guidelines.
14.0 GOVERNMENT REPORTING
14.1 Cardinal Health personnel will provide the following Government reports to
Client within 5-8 business days following the close of a business quarter.
Cardinal Health will measure and report this attribute periodically
according to Section 21 to the Operating Guidelines.
14.1.1 IFF Direct Sales Report
14.1.2 IFF Indirect Sales Report
14.1.3 AMP Report
14.1.4 Non FAMP Report
14.1.5 Best Price Report
14.1.6 Most Favored Price Report
14.2 Cardinal Health will also provide supporting schedules and source
documents to be used by Client to perform verification of the Government
reports.
15.0 MONTH-END CLOSE
15.1 Client will complete its close by the first working day after the last day
of the month being closed. Cardinal Health will make every effort to
record all transactions for the month being closed by the close of
business on the first working day (day 1) of the following month (i.e.
March activity is posted by the end of the first working day in April.).
Cardinal Health will measure and report this attribute periodically
according to Section 21 of the Operating Guidelines.
15.2 Cash received by the bank on the final day of the month, and reported to
Cardinal in the A.M. transactions of the first working day of the month
will be applied by the end of business on day 1 to the open receivables
for the prior month.
15.3 Open items that cannot be resolved by the close of business on day 1 will
be communicated to the Client and will be carried over into the following
month.
16.0 RETURNED GOODS
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16.1 Returns will be processed in accordance with Client's Returned Goods
Policy.
16.2 Cardinal Health will complete the processing of all returns and issue
credits (if applicable) within five (5) business days of receipt of the
return.
16.3 Cardinal Health will use commercially reasonable efforts to process
returned goods as timely and accurately as possible. Cardinal Health will
measure the timeliness of returned goods processing and will report this
attribute periodically according to Section 21 of the Operating
Guidelines.
17.0 PRODUCT COMPLAINT RETURNS
17.1 If the Product is being returned due to a Product complaint, Cardinal
Health will obtain the following information from the end customer
returning the Product;
a) # of vials/bottles/packages to be returned
b) physician name
c) fax number
d) identify source of product (i.e. Name of Wholesaler or whether it's
a PAP Product)
e) name, address and telephone number of caller
17.2 Cardinal Health will fax instructions for returning the Product to the end
customer, which will include, at a minimum, instructions to return the
Product a) in a biohazard bag; b) to Client's Quality Assurance
Department; and c) to include the Return Authorization Number provided by
Cardinal Health on the outside of the package.
17.3 Client will notify Cardinal Health upon receipt of the Product. Upon
notification, Cardinal Health will issue a credit to the wholesaler on the
end customer's behalf. The credit will identify the Return Authorization
Number and the end customer name. The end customer will be responsible for
following-up directly with the wholesaler to ensure appropriate
credit/replacement has been issued.
18.0 RECALL ASSISTANCE
18.1 Client is responsible for management of a recall event.
18.2 If there is a recall or withdrawal of Product, then Cardinal Health agrees
to stop shipping recalled lots promptly, and in no event later than
twenty-four (24) hours after Cardinal Health receives written notification
of such recall.
18.3 If mutually agreed upon, Cardinal Health shall provide assistance to
Client and cooperate fully in any such recall. Client shall pay to
Cardinal Health an amount equal to Cardinal Health's actual costs incurred
with any such recall services. Such cost shall be in addition to the fees
described in Exhibit C to the Agreement. Such assistance shall include but
not be limited to:
18.3.1 Working with Client to assist in the development of a recall
strategy
183.2 Contacting consignees (wholesaler, customers) who may have received
affected Product and requesting prompt quarantine of all affected
lots pending further disposition instructions from Cardinal Health
or Client.
18.3.3 Storage and control of on-hand inventory of recalled Product.
18.3.4 Receipt, storage and control of returned recalled Product.
18.3.5 Documentation of recalled Product used, destroyed or returned to
the distributor through established document systems at Cardinal
Health.
18.3.6 Preparing final Recall Report including a copy of all
communications, if any, with FDA concerning the recall.
18.3.7 Shipment of samples of recalled Product to Client or a designated
testing site for analysis, if applicable.
- 8 -
18.3.8 Cardinal Health shall maintain appropriate cGMP SOPs, and to the
extent that they are not in conflict with the Operating Guidelines,
Cardinal Health will follow its SOPs with regard to executing these
requirements.
18.3.9 Cardinal Health will be responsible for executing, or otherwise
overseeing, the disposition of recalled Product in accordance with
the decision set forth by Client's Recall Committee.
18.4 Cardinal Health will provide the necessary recall reports within two hours
of notification by Client. Reports will contain, but not be limited to,
the following information for each recalled Product and lot member: all
Customer shipments by date, item number, quantity, lot number, and ship to
address.
18.5 Cardinal Health shall provide Client Quality Assurance with signed and
dated records documenting final disposition of the Product(s). In
addition, Cardinal Health will assist with the following information:
18.5.1 Name and location of distributors involved in the execution of the
final disposition of the recalled Product
18.5.2 Name and location of drug destruction sites (if applicable)
18.5.3 List of applicable State or Federal licenses currently required and
held for drug transport and/or disposal for all drug destruction
sites (if applicable).
18.5.4 Product disposition method
18.5.5 Amount of product dispositioned.
18.5.6 Date of Product disposition
18.5.7 Documentation from each affected Distributor(s) head of Quality
Assurance or designee attesting to the completion of the Product
disposition functions and requirements set forth by Client's Recall
Committee.
19.0 SYSTEMS
19.1 Client retains ownership to all Client Data in the Cardinal Health System
but grants Cardinal Health a limited right to use such Client Data in the
performance of its services.
19.2 Cardinal Health will use commercially reasonable efforts to maintain
security of the Client Data in files, to segregate them and render them
inaccessible to all third parties except those providing services or
systems support hereunder.
19.3 Cardinal Health will provide Client with on-line access to sales
information, inventory records, lot tracking, Customer profiles, item
maintenance, pricing and terms, and other business critical data as
defined in Cardinal Health's standard reports output.
19.4 Additional reporting and interfaces may be jointly defined by Client and
Cardinal Health.
19.5 Cardinal Health will use commercially reasonable efforts to maintain all
Systems within the change control SOPs.
19.6 Cardinal Health will use commercially reasonable efforts to make Cardinal
Health's System accessible to the Client 24 hours per day 7 days per week
and guaranteed between the hours of 6:00 a.m. - 7:00 p.m. Central Standard
Time, Monday through Friday ("Accessible Hours"), except for routine,
scheduled or emergency maintenance. Cardinal Health will provide 48 hours
advance notification to Client of a scheduled maintenance which would
affect Client's ability to access the System
19.7 Cardinal Health will use commercially reasonable efforts to ensure that
unscheduled System downtime per calendar quarter shall not exceed 2% of
the Accessible Hours. Cardinal Health will promptly notify Client of any
System problem that might affect services and an estimated time for
restoration of System access. Cardinal Health will measure system
availability and report on this attribute according to Section 21 of the
Operating Guidelines.
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19.8 Full System backups will be generated on a nightly basis in conjunction
with SOP IS-005 `Backup and Recovery'. These backup tapes will be stored
either off-site or in a fireproof cabinet as indicated by the SOP.
20.0 AUDITS
20.1 Cardinal Health will assist Client with inspections/audits ordered by the
FDA or other governmental or official agencies.
20.2 Client will have the right to conduct audits in accordance with the terms
of the Agreement. Cardinal Health will assist Client with such audits.
20.3 Cardinal Health will notify Client promptly of any inspection activity by
FDA, DEA or other government agency, as applicable to the Client or
Client's Product.
21.0 QUALITY COUNCIL REPORT
21.1 Cardinal Health will provide Client with reports on measurable attributes
including but not limited to those identified below. Such reports shall be
used to track and benchmark performance.
21.2 Client and Cardinal Health will agree to meet periodically to review
performance and to develop methods, policies, practices, and procedures
that may improve the quality and efficiency of the Cardinal Health-Client
relationship.
21.3 Cardinal Health will use its commercially reasonable efforts to meet or
exceed the Client's expectation for performance based on the measured
attributes.
21.4 Measured attributes and standards:
REPORTING
SECTION PERFORMANCE ATTRIBUTE PERFORMANCE STANDARD FREQUENCY
1.0 Temperature excursions *% excursion - free Upon occurrence
2.0 On-time receipts and data *% within four (4) business hours for all Monthly
entry conforming receipts
3.0 Cycle count accuracy *% Monthly
4.0 On-time shipping *% same day for orders received by the Monthly
standard cut-off time
5.0 Picking/shipping accuracy *% for all orders processed with carton Monthly
markings meeting NWDA bar code standards
6.0 Answer inbound phone calls *% answered within thirty (30) seconds Monthly
within thirty (30) seconds
7.0 Order entry accuracy *% Monthly
8.0 Invoicing accuracy and *% Monthly
timeliness
9.0 Accounts receivable *% A/R collected on or before the Monthly
38th day
10.0 Chargeback processing Time *% processed in 2 days or less from Monthly
receipt of chargeback from wholesaler
11.0 Government Reporting *% completed by the close of business on Monthly
the first work day of the following month
12.0 Month-End Close *% completed by the close of business on Monthly
the first work day of the following month
13.0 Return goods processing *% processed in five (5) business days or Monthly
cycle time less
14.0 System availability *% of normal accessible hours Upon occurrence
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---------
* Omitted information is the subject of a request for confidential treatment
pursuant to Rule 406 under the Securities Act of 1933 and has been filed
separately with the Securities and Exchange Commission.
EXHIBIT C
▇▇▇▇▇ LABORATORIES, INC.
ESTIMATED FEE SCHEDULE
PROGRAM IMPLEMENTATION
One Time Start-Up Fee (3) $*
DISTRIBUTION SERVICES
Storage Fee
Ambient storage fee - Dallas (5) $* Per pallet per month
Pick, pack and ship fee (1)
Monthly distribution account $* Per month
management fee (7)
Ambient product pick/pack/stage $* Per line, per first case
Ambient product pick/pack/stage $* Per each additional case
Return goods processing $* Per first unit, per order
Return goods processing $* Per each additional unit, per order
Freight Charges (6) Cost plus *% handling fee
Packing/Shipping materials (4) Cost plus *% handling fee
Destruction Charges Cost plus *% handling fee
Emergency/International Orders $* Per order
INFORMATION SYSTEM
System access and support fee (2) $* Per month
Special reports, connectivity or $* Per hour
other IT requests (per hour
charge)
CUSTOMER SERVICE
Customer Service Management fee $* Per month
Per order processing fee $* Per order
Per credit memo $* Per credit memo
FINANCIAL SERVICES
Accounts Receivable Management Fee $* Per month
AR per order processing fee $* Per order
Chargeback Management Fee $* Per month
Chargeback per line fee $* Per line
SAMPLE DISTRIBUTION MANAGEMENT
Sample Distribution Management Fee $* Per month
Sample product pick/pack/stage $* Per line, per first case
Sample product pick/pack/stage $* Per each additional case
Sample order processing fee $* Per order
NOTE (1): This proposal is based on distribution services for ▇▇▇▇▇
Laboratories, Inc. of approximately 16 SKUs as outlined below:
This project is expected to launch in March 2004. In Year One, an estimated
5,406 orders containing a total of 229,682 cases will be shipped. Each order
will consist of an estimated 3 SKUs and 42 cases of product. An average of 451
orders will be placed each month. The minimum unit (for ordering/billing
purposes) is one case. Each case contains either 12 or 24 units (depending upon
the SKU).
Each return is estimated to contain 12 units representing 2 SKUs of product.
Approximately 600 units are estimated to be returned each month. Approximately
220 lines of chargebacks (over 3 products) are estimated each month.
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---------
* Omitted information is the subject of a request for confidential treatment
pursuant to Rule 406 under the Securities Act of 1933 and has been filed
separately with the Securities and Exchange Commission.
EXHIBIT C
FEE SCHEDULE (Continued)
In addition, 55 orders per month will be sent to sales representatives. Each
order will consist of approximately 4 SKUs and 20 cases of product. In total,
660 orders per year containing 13,200 cases of sample product will be shipped.
The minimum unit (for ordering/billing) purposes is one case.
The orders will be shipped through the wholesale, distribution, and physician
office channels. Orders will be received via phone, fax, and other available
channels.
Other products/promotional materials requiring other types of services, or
modified distribution channels will be quoted separately. If the assumptions
change from those presented in the RFI, either party will have the right to
renegotiate the fees and basis used for quoting these services.
The pricing above has been developed based on the assumptions provided by ▇▇▇▇▇
Laboratories. This pricing serves as an outline of associated costs and will be
changed if the account characteristics change. Ninety days after implementation
SPS and ▇▇▇▇▇ Laboratories will conduct an account review to assess any changes
to the previously shared account characteristics. At that time, any necessary
change to the pricing structure will be made and incorporated into the
agreement.
NOTE (2): System access fee includes licenses for two concurrent users.
Additional licenses will increase the monthly fee by $* per concurrent user.
NOTE (3): The implementation fee is to be paid in two equal installments. The
first payment is due after the first implementation meeting, and the second
following the launch. Non-standard procedures required for connectivity will be
charged at $* per hour. Additionally, the migration of previous history from
another provider to Cardinal Health - Specialty Pharmaceutical Services will be
assessed a rate of $* per hour until the entire process is complete and the data
has been validated by both parties.
NOTE (4): Supplies include tape, labels, bubble pack, etc. (approximately
$40/shipment), pallets ($6.60/pallet), boxes, and any other ▇▇▇▇▇ Laboratories
requirements.
NOTE (5): Pallet storage fee is based on a daily average of pallets on hand.
Pallet storage greater than two months inventory on hand will be assessed an
additional charge of * times the standard fee. Storage is for Cardinal Health -
SPS Dallas location.
NOTE (6): Freight and supply costs are at discounted rates negotiated by
Cardinal Health plus appropriate ▇▇▇▇-up. Acknowledgment of delivery costs are
estimated at $* per shipment, if requested.
NOTE (7): The account management fee covers the following services: logistics
management, inventory management, regulatory assurance, receiving discrepancy
resolution, standard operating procedures, validation management, supply
control, process set-ups, and process scheduling.
NOTE (8): The term of agreement will be for three years with payment terms of
Net 20.
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---------
* Omitted information is the subject of a request for confidential treatment
pursuant to Rule 406 under the Securities Act of 1933 and has been filed
separately with the Securities and Exchange Commission.
