EXHIBIT 10.01
[***] indicates the omission of confidential portions for which confidential
treatment has been requested. Such confidential information has been filed
separately with the Commission.
================================================================================
CARDINAL DISTRIBUTION*
AND
EXPRESS SCRIPTS, INC.
PRIME VENDOR AGREEMENT
================================================================================
PRIME VENDOR AGREEMENT
THIS PRIME VENDOR AGREEMENT (THE "AGREEMENT") IS MADE JULY 1, 2001,
BETWEEN EXPRESS SCRIPTS, INC., ON BEHALF OF ITSELF AND ITS SUBSIDIARIES
(COLLECTIVELY, "BUYER") AND CARDINAL DISTRIBUTION* ("CARDINAL"), WHO HEREBY
AGREE AS FOLLOWS:
1. DESIGNATION AS PRIMARY WHOLESALER
During the term of this Agreement, Buyer will designate
Cardinal as the primary wholesale pharmaceutical supplier to all
pharmacies whether now or hereafter owned, managed or operated by Buyer
in the United States (collectively, the "PHARMACIES" and individually,
a "PHARMACY"). A current list of the Pharmacies is attached hereto as
EXHIBIT A. Additional pharmacies may be added to Exhibit A from time to
time subject to the prior approval of Buyer and Cardinal.
2. SALE OF MERCHANDISE
Buyer will purchase from Cardinal during the term of this
Agreement its Primary Wholesale Requirements of pharmaceuticals for the
Pharmacies ("RX PRODUCTS") and, may, at its option, purchase certain
other inventory carried by Cardinal ("NON-RX PRODUCTS" and, together
with Rx Products, collectively the "MERCHANDISE") for delivery directly
to the Pharmacies ("DIRECT STORE DELIVERY Purchases"). The term
"PRIMARY WHOLESALE REQUIREMENTS" means that Buyer will purchase for
each Pharmacy all of its requirements of Rx Products purchased from
wholesalers from Cardinal. With the exception of Merchandise that is
only available from the manufacturer with less than six (6) months'
dating, Cardinal removes Merchandise from its inventory that has an
expiration date of six (6) months, not including the current month, so
that such Merchandise shipped to Buyer has a minimum of six (6) months'
dating. Cardinal reserves the right at all times to determine what
Merchandise it will carry based upon product quality, manufacturer
indemnity, insurance, and other policies, and other standards
determined by it, and may delete from its available inventory items of
Merchandise with limited or no movement activity.
Cardinal acknowledges that Buyer, from time to time, [***],
including [***]
3. PURCHASE PRICE
Buyer will pay a purchase price for all Merchandise purchased
under this Agreement in an amount equal to Cardinal's Cost plus the
percentage specified in the pricing matrix attached hereto as EXHIBIT B
(the "PRICING MATRIX"). For purposes of this Agreement: (a) the term
"CARDINAL'S COST" will mean the manufacturer's published wholesale
acquisition cost for Merchandise at the date of Cardinal's invoice to
the Pharmacy, including all discounts, price reductions and promotions
offered off-invoice by the manufacturer for the duration of the
manufacturer's offer period, but without reduction for customary cash
discounts; and (b) the term "QUALIFIED PURCHASES" will
- --------------------------------------------------------------------------------
2
mean all purchases made and paid for by Buyer and/or the Pharmacies
under the terms of this Agreement, net of all returns, credits,
rebates, late charges, or other similar items, on an annual, quarterly,
or monthly basis, as applicable. Notwithstanding anything herein to the
contrary, the purchase price of Merchandise which is subject to a
Manufacturer Contract (as hereinafter defined) will be Buyer's contract
price for the Pharmacies. Cardinal reserves the right to adjust the
purchase price of any item of Merchandise in the event that the
manufacturer of such item implements a change in policy which
eliminates or decreases the customary cash discount terms effective on
the Commencement Date with respect to such item.
The purchase price for selected Merchandise, including but not
limited to [***] described above [***] in accordance with [***].
Merchandise described in this paragraph is sometimes referred to as
[***]
The pricing specified in the Pricing Matrix does not reflect
administrative fees for membership in any group purchasing organization
(a "GPO"). If any Pharmacy affiliates with a GPO, the appropriate
administrative fee will be added to the percentages specified in the
Pricing Matrix.
[***] CardinalCHOICE(R) pharmacy system [***] for the pricing
specified in the Pricing Matrix.
4. [***] AND SAVINGS
During the initial term of this Agreement, [***] with related
savings as more fully described on EXHIBIT C.
5. PAYMENT TERMS
(a) Initial Payment Terms. The payment terms initially
applicable to Buyer will be as follows:
(i) For DIRECT STORE DELIVERY PURCHASES, Buyer shall
cause Cardinal to receive payment in full by not later than
[***] of each calendar month of the amount due for all
Merchandise delivered and services provided during the first
(1st) [***] of such calendar month, and by not later than the
[***] of each calendar month, of the amount due for all
Merchandise delivered and services provided during the period
beginning on the [***] of the preceding calendar month and
ending on the last day of such preceding calendar month [***].
(ii) For [***] (I.E., [***]
(iii) For [***] in accordance with the terms set
forth in Exhibit C [***]
- --------------------------------------------------------------------------------
3
If any payments are due on Saturday, Buyer will cause Cardinal
to receive payment in full on the immediately preceding Friday, and if
payment is due on Sunday, Buyer will cause Cardinal to receive payment
in full on the immediately following Monday.
Buyer will deliver to Cardinal any credit information
reasonably requested by Cardinal not less than thirty (30) days prior
to its initial purchases of Merchandise under this Agreement. All
payments for the Merchandise purchased under this Agreement will be due
in accordance with the terms set forth above unless and until otherwise
agreed by Buyer and Cardinal. In such event, Buyer acknowledges and
agrees that Buyer's Cost of Goods may be adjusted by Cardinal to
reflect Buyer's new payment terms and credit considerations deemed
relevant to Cardinal.
(b) Payment. At the end of each calendar month, Cardinal will
evaluate Buyer's payment history, adjusted to reflect legitimately
disputed amounts. The due date of each Cardinal invoice will be
compared with the date Cardinal received payment to relieve that
invoice. Buyer and Cardinal acknowledge that Buyer's cost to purchase
Merchandise from Cardinal is based upon Buyer making payments in
accordance with Buyer's applicable payment terms as set forth above.
For those invoices paid after the applicable due date, Buyer
will pay to Cardinal an amount equal to [***] times the amount of each
invoice times the number of days the payment to relieve the invoice was
late. Cardinal will provide an invoice to Buyer for all amounts due
hereunder by the 10th of the following month. Such invoice will reflect
the amount due to Cardinal for those invoices that were paid beyond
Buyer's applicable payment terms. This invoice will be accompanied by
an electronic file that will detail the calculation of all amounts due.
Buyer shall remit payment for such invoice by the 20th of the month in
which it was billed. Failure or delay by Cardinal to bill Buyer for any
amounts due hereunder shall not waive Cardinal's right to receive the
same.
All payments for Merchandise delivered and services provided
by Cardinal will be made to the applicable servicing division specified
in Cardinal's invoice (or as otherwise specified by Cardinal) by
electronic funds transfer or other method acceptable to Cardinal so as
to provide Cardinal with good funds by the due date. In addition to all
other rights and remedies contained in this Agreement, Cardinal retains
the right, in its sole discretion, but exercising good faith, to
immediately, upon written notice to Buyer, change Buyer's payment terms
or place Buyer on C.O.D. status if Cardinal has not received payment
when due for Merchandise delivered or services provided to Buyer, or
based upon credit considerations deemed relevant by Cardinal, as
determined by Cardinal in good faith. The provisions of Sections 25 and
26 shall not be applicable to this provision.
If Cardinal changes Buyer's payment terms or places Buyer on
C.O.D. status pursuant to this Section 5(b), and Buyer remains subject
to such payment terms for at least ninety (90) consecutive days, or on
C.O.D. for at least sixty consecutive (60) days, Buyer may terminate
this Agreement upon written notice to Cardinal and payment of all
- --------------------------------------------------------------------------------
4
outstanding amounts due from Buyer to Cardinal. No termination notice
from Buyer to Cardinal shall be effective until all outstanding amounts
due from Buyer to Cardinal are paid in full. During the applicable time
period, Cardinal and Buyer shall negotiate in good faith regarding
restoring Buyer's payment terms to those in effect prior to any action
taken by Cardinal hereunder.
(c) Submission of Financial Statements. Buyer will provide
Cardinal with a copy of its publicly available financial statements as
Cardinal may reasonably request from time to time.
(d) Guaranty. As an inducement for Cardinal to supply
Merchandise and provide services to the subsidiaries and affiliates of
Buyer, whether existing now or in the future (collectively,
"Borrowers"), Buyer (i) guarantees to Cardinal the punctual and full
payment (and not merely the ultimate collectability) of all sums now or
hereafter due from Borrowers to Cardinal and (ii) agrees to pay to
Cardinal on demand the reasonable cost and expense incurred by Cardinal
in attempting to enforce any indebtedness, liability, or obligation
under this Agreement, including, without limitation, reasonable
attorney's fees.
6. ORDERING AND DELIVERY
Cardinal will deliver the Merchandise F.O.B. destination to
the applicable Pharmacy and exercise its good faith efforts to provide
an efficient delivery schedule designed to meet the mutual needs of
Cardinal and the Pharmacies, in accordance with Cardinal's general
delivery schedules established from time to time by the applicable
Cardinal servicing division (exclusive of holidays, etc.). All
deliveries will be accompanied by an invoice and all delivery costs
(not including emergency deliveries) absorbed by Cardinal. Pharmacies
having Qualified Monthly Purchases in excess of $[***] will be eligible
to receive [***], except Pharmacies located outside of the contiguous
United States or other Pharmacies mutually agreed upon by the parties
from time to time; provided, however, Buyer's Pharmacies located in
Tempe, Arizona, Albuquerque, New Mexico, and St. Louis, Missouri, will
be eligible to receive [***]. Buyer will incur a separate delivery
charge, not to exceed Cardinal's actual cost, for additional
deliveries. Delivery schedules and purchase order deadlines may be
reviewed and changed from time to time as mutually agreed upon by
Cardinal and Buyer. Cardinal will make every reasonable effort to
accommodate individual order entry and delivery requirements.
Buyer will submit all orders, except for orders for Schedule
II drugs, for all Merchandise to Cardinal via electronic order entry
using equipment supplied by Cardinal to Buyer at no additional charge
to Buyer or other mutually agreeable electronic means. This equipment
benefits Buyer and the Pharmacies and relates to the provision of
products and services by Cardinal hereunder. Buyer and each Pharmacy
agree not to use such equipment (including hardware and software) for
any purpose unrelated to this Agreement. Any such equipment supplied by
Cardinal will be returned to Cardinal by Buyer upon the expiration or
termination of this Agreement for any reason or prior to termination or
expiration if Cardinal reasonably believes its proprietary rights are
- --------------------------------------------------------------------------------
5
threatened. In the event that electronic order entry is temporarily
interrupted for reasons beyond the control of Buyer or Cardinal, Buyer
may place orders manually and both parties will use reasonable efforts
to rectify the problem.
DEA Form 222 may be mailed to the applicable Cardinal
distribution center or given to the delivery driver. Schedule II orders
will be delivered within one (1) day of Cardinal's receipt of the
signed original DEA Form 222. Buyer acknowledges that if Buyer gives
the DEA Form 222s to the delivery driver, such forms will not be
received by Cardinal until such time that the delivery driver
physically delivers the DEA Form 222 to the applicable Cardinal
distribution center. Notwithstanding the foregoing, no Schedule II
orders will be delivered other than in compliance with DEA regulations.
7. OTHER SERVICES
Cardinal will provide the services to Buyer and the Pharmacies
as set forth EXHIBIT D to this Agreement, pursuant to the terms and
conditions contained therein.
8. EMERGENCY DELIVERIES
Cardinal will provide a twenty-four (24) hour, seven (7) day
per week emergency delivery service. The courier charge for such orders
will be prepaid by Cardinal and added to Buyer's invoice. A listing of
key management personnel and emergency order procedures will be
supplied to each Pharmacy.
9. BACKORDER RELAY
[***] a "backorder relay" system [***].
10. MANUFACTURER CONTRACT ADMINISTRATION
Cardinal will recognize and administer manufacturer contracts
between Buyer and any manufacturer (collectively, "MANUFACTURER
CONTRACTS") subject to such Manufacturer Contracts' continued validity
in accordance with applicable laws and subject to such credit
considerations concerning the applicable manufacturers as Cardinal may
consider appropriate; however, if manufacturers' chargebacks for
contract items submitted by Cardinal are disallowed, uncollectable, or
unreconcilable, then the applicable charge will be billed back to
Buyer. Cardinal reserves the right, at any time, to decline to sell or
carry any manufacturer's merchandise, based upon credit considerations
deemed relevant to Cardinal. Buyer will notify Cardinal of all
Manufacturer Contracts. In addition, Buyer or the Pharmacies will
provide Cardinal with a copy of all new Manufacturer Contracts entered
into after the Commencement Date and manufacturer verification of all
renewals, replacements or terminations of Manufacturer Contracts not
less than forty-five (45) days prior to the effective date of such new
Contract, renewal, replacement or termination. Failure to comply with
these notice requirements will entitle Cardinal to discontinue the
service level provisions herein until forty-five (45) days after
delivery of accurate usage data for the new items.
- --------------------------------------------------------------------------------
6
In order to facilitate Cardinal's inventory management
requirements, Buyer will provide Cardinal, with respect to each
Pharmacy not currently being serviced by Cardinal, but to be included
hereunder as a Pharmacy, available six (6) months' usage figures
(including NDC numbers) on both contract and non-contract items in
compatible electronic (disk) format thirty (30) days prior to
participation under this Agreement by that Pharmacy. The service level
provisions set forth in Section 12 below will be waived by Buyer until
accurate usage figures are obtained by Cardinal with regard to such
Pharmacies, or for six (6) months, whichever is less. All purchases
under this Agreement by Buyer will be for the Pharmacies' "own use" as
that term is defined in judicial or legislative interpretation, and
Buyer will comply with applicable manufacturers' pricing criteria and
policies.
11. LICENSURE
Buyer attests to Cardinal that Buyer's Pharmacies are all
properly licensed with applicable state licensing agencies to receive,
dispense, distribute and otherwise legally dispose of Rx Products.
Buyer understands that by attesting to this, Cardinal is complying with
the "good faith inquiry" standard to ensure that Rx Products are
distributed to properly licensed and/or registered pharmacy locations.
Prior to purchasing Rx Products from Cardinal hereunder, Buyer will
provide Cardinal with copies of all such licenses and any renewals,
revocations or other changes to the same.
12. SERVICE LEVEL
For [***] Cardinal will exercise all reasonable efforts to
provide [***] ([***]%) [***] in accordance with Cardinal's customary
standards and procedures in effect from time to time. [***] ([***]%)
[***] ([***]%) [***] ([***]%) [***] For example, [***]
$[***]%[***]$[***]([***])[***]% -[***]% = [***]% and ([***])[***]% x
$[***]x[***]% = $[***]([***])[***].
Buyer may, [***] ([***]%), [***] (as hereinafter defined) and
[***]
Notwithstanding [***] set forth above, [***] in accordance
with Cardinal's customary standards and procedures in effect from time
to time is [***] ([***]%), [***] as set forth above) [***] ([***]%)
[***].
13. RETURNED GOODS POLICY
Cardinal will accept Merchandise for return from Pharmacies in
accordance with the Standard Cardinal Returned Goods Policy (the
"CARDINAL RETURNS POLICY") in effect from time to time. Cardinal will
not accept for return any Merchandise from Buyer prior to execution of
an Ongoing Assurances Form in the identical form as attached as an
exhibit hereto. Cardinal will work with a third party returned goods
processor in accordance with the Standard Third Party Returned Goods
Policy (the "THIRD PARTY RETURNS POLICY") in effect from time to time.
In connection with the Cardinal Returns
- --------------------------------------------------------------------------------
7
Policy and applicable law, Buyer will execute a Cardinal Health Return
Goods Authorization Ongoing Assurance, in the form attached hereto as
EXHIBIT E.
For [***], subject to the following conditions:
[***] and must be[***]
[***] and[***]
[***]
[***]
[***]percent ([***]%) [***].
[***].
14. TERM
The initial term of this Agreement will be for a period of
three (3) years beginning July 1, 2001 (the "COMMENCEMENT DATE").
Thereafter, this Agreement shall automatically renew for two (2)
additional one (1) year renewal terms, unless either party provides
written notice of non-renewal at least ninety (90) days prior to the
expiration of the initial term or the then current renewal term. The
"initial term" and any "renewal terms" shall be referred to
collectively as the "term."
Either party may effect an early termination of this Agreement
upon the occurrence of a material breach by the other party and such
party's failure to cure such material breach within ninety (90) days
after the non-breaching party provides written notice thereof. For
purposes of this Agreement, a lower-priced offer from a competitor of
Cardinal to Buyer to provide the Merchandise and perform the services
as set forth in this Agreement, shall not be deemed to, nor shall it
constitute, a material breach of this Agreement by Cardinal, thereby
permitting Buyer to terminate this Agreement pursuant to the provisions
of this Section 14.
Notwithstanding the foregoing, with respect to payment
defaults by Buyer, Cardinal may terminate this Agreement immediately.
Buyer's obligation to pay Cardinal any amounts due hereunder shall
survive termination of this Agreement.
15. NOTICES
Any notice or other communication required or desired to be
given to either party under this Agreement shall be in writing and
shall be deemed given when: (a) received by the recipient, after being
sent via certified mail, return receipt requested, and addressed to
that party at the address for such party set forth at the end of this
Agreement; (b) received by the recipient after being sent via Federal
Express, Airborne, or any other similar overnight delivery service for
delivery to that party at that address; or (c) received by facsimile
transmission, as evidenced by electronic confirmation, to that party at
its facsimile number set forth at the end of this Agreement. Either
party may change its address or facsimile number for notices under this
Agreement by giving the other party notice of such change.
- --------------------------------------------------------------------------------
8
16. TAXES/COMPLIANCE WITH LAWS
Buyer will pay when due any sales, use, excise, gross
receipts, or other federal, state, or local taxes or other assessments
(other than any tax based solely on the net income of Cardinal) and
related interest and penalties in connection with or arising out of the
transactions contemplated by this Agreement. If Cardinal pays any such
amounts which Buyer is obligated to pay under this section, then Buyer
will promptly reimburse Cardinal in an amount equal to the amount so
paid by Cardinal.
If and to the extent any discount, credit, rebate or other
purchase incentive (as set forth in the Pricing Matrix and this
Agreement) is paid or applied by Cardinal with respect to the
Merchandise purchased under this Agreement, such discount, credit,
rebate or other purchase incentive shall constitute a "discount or
other reduction in price," as such terms are defined under the
Medicare/Medicaid Anti-Kickback Statute, on the Merchandise purchased
by Buyer under the terms of this Agreement. Cardinal and Buyer agree to
use their best efforts to comply with any and all requirements imposed
on sellers and buyers, respectively, under 42 U.S.C. ss.
1320a-7b(b)(3)(A) and the "safe harbor" regulations regarding discounts
or other reductions in price set forth in 42 C.F.R. ss. 1001.952(h). In
this regard, Buyer may have an obligation to accurately report, as may
be required, under any state or federal program which provides cost or
charge based reimbursement for the products or services covered by this
Agreement, the net cost actually paid by Buyer.
17. FORCE MAJEURE
Cardinal's obligations under this Agreement will be excused if
and to the extent that any delay or failure to perform such obligations
is due to fire or other casualty, product or material shortages,
strikes or labor disputes, transportation delays, manufacturer
out-of-stock or delivery disruptions, acts of God, seasonal supply
disruptions, or other causes beyond the reasonable control of Cardinal.
During the period of any such delay or failure, Buyer may purchase the
Primary Wholesale Requirements for the affected Pharmacies from others,
but will recommence purchasing from Cardinal upon cessation of such
delay or failure; provided, however, that if such delay or failure
continues for more than sixty (60) calendar days, Buyer shall have the
right to immediately terminate this Agreement.
18. RECORDS AND AUDIT
Cardinal will maintain records pertaining to this Agreement
and the pharmaceutical products purchased by Buyer hereunder as
required by applicable FDA requirements. Not more than once in any
twelve (12) month period, and following sixty (60) days' advance
written notice to Cardinal, Buyer will have the right to appoint one
(1) or more of its employees to review those relevant records
applicable to its pharmaceutical purchases for the sole purpose of
verifying compliance with this Agreement, including but not limited to
the pricing terms of this Agreement hereof; provided, however, any
- --------------------------------------------------------------------------------
9
information proprietary to Cardinal, as solely determined by Cardinal,
shall be redacted from such records prior to review by Buyer, further
provided, however, Cardinal shall ensure that Buyer receives the
information necessary to verify compliance with this Agreement. Any
such review will be limited to twelve (12) months of historical
information as of the date such review begins and will be subject to a
confidentiality agreement prepared by Cardinal and signed by the Buyer
and its employee(s) who will have access to the information prior to
beginning the review.
Cardinal will have the right to, following sixty (60) days'
advance written notice to Buyer, appoint an independent auditor to
review Buyer's purchase records in order to verify the growth rate of
Buyer's purchase volume for purposes of the savings related to the
[***].
19. RETURN OF HARDWARE/SOFTWARE
Upon termination of this Agreement for any reason, Buyer's
rights as a licensee of the CardinalCHOICE(R), CardinalCHOICE(R)-HQ or
other Cardinal software will automatically expire, and Buyer will
promptly return such software and any related, Cardinal-provided
hardware not purchased by Buyer to a return location specified by
Cardinal.
20. ENTIRE AGREEMENT; SUCCESSORS
This Agreement and its exhibits constitutes the entire
agreement and understanding of the parties with respect to the subject
matter hereof, and supersedes all prior and contemporaneous agreements,
proposals, bids/bid responses, and understandings between the parties
relative to the subject matter of this Agreement. This Agreement will
be governed by Ohio law. Neither Cardinal nor Buyer may assign its
rights under this Agreement without the written consent of the other;
provided, however, that either party may delegate its rights and
obligations to any entity that is controlled by or under common control
with the assigning party; provided that neither Cardinal nor Buyer
shall be relieved of their respective liabilities and obligations
hereunder in the event of such an assignment. This Agreement will be
binding on, inure to the benefit of, and be enforceable by and against
the respective successors and assigns of each party to this Agreement.
21. AMENDMENTS
No changes to this Agreement will be made or be binding on any
party unless made in writing and signed by each party to this
Agreement.
22. WAIVER
The failure of either party to enforce any provision of this
Agreement will not be considered a waiver of any future right to
enforce such provision.
- --------------------------------------------------------------------------------
10
23. ANNOUNCEMENTS
Neither party will issue any press release or other public
announcement, verbally or in writing, referring to the other party or
any entity which is controlled by or under common control with such
other party, without such other party's prior written consent and
advice of counsel. A written copy of any such press release or other
public announcement will be provided to the other party no less than
seventy-two (72) hours prior to the issuing party's intent to issue
such release or announcement. The issuing party is responsible for
confirming in writing that the other party has received any such
proposed press release. Any such press release or other public
announcement proposed by either party will be subject to the other
party's revision and final approval. Nothing contained herein will
limit the right of either party to issue a press release if, in the
opinion of such party's counsel, a press release is required pursuant
to state or federal securities laws, rules or regulations.
24. CHANGE IN LAWS
Notwithstanding any other provision of this Agreement, if the
governmental agencies that administer the Medicare, Medicaid, or other
federal programs (or their representatives or agents), or any other
federal, state, or local governmental or non-governmental agency, or
any court or administrative tribunal passes, issues, or promulgates any
law, rule, regulation, standard, interpretation, order, decision, or
judgment, including, but not limited to, those relating to any
regulation pursuant to state or federal anti-kickback or self-referral
statutes (collectively or individually, "Change in Laws"), which, in
the good faith judgment of a party to this Agreement (the "Noticing
Party"), materially and adversely affects that party's license,
accreditation, certification, or ability to refer, to accept any
referral, to bill, to claim, to present a bill or claim, or to receive
payment or reimbursement from any federal, state, or local governmental
or non-governmental payor, or which subjects the Noticing Party to a
risk of prosecution or civil monetary penalty, or which, in the good
faith judgment of the Noticing Party, indicates a rule or regulation
with which the Noticing Party desires further compliance and the Change
in Laws has a material affect on the legality of this Agreement, or if
Cardinal believes such Change in Laws may adversely affect Cardinal's
financial position, then the Noticing Party may give the other party
notice of intent to amend or terminate this Agreement. Such notice
shall include an opinion of counsel stating: (i) the Change in Laws
giving rise to the notice; (ii) the consequences of the Change in Laws
as to the Noticing Party; (iii) the Noticing Party's intention either
to terminate this Agreement due to an unacceptable risk of prosecution
or civil monetary penalty or to amend this Agreement, together with a
statement setting forth the specific purpose of the amendment as it
relates to the legal compliance issue or risk that the Noticing Party
seeks to address; (iv) the Noticing Party's proposed amendment(s); and
(v) the Noticing Party's request for commencement of the Renegotiation
Period (as hereinafter defined). If the notice provides for an
amendment of this Agreement, the parties have ten (10) days from the
giving of the notice ("Renegotiation Period") within which to attempt
to amend this Agreement in accordance with the Noticing Party's
proposal (if any) or otherwise as the parties may agree. If this
Agreement is not amended within the Renegotiation Period,
- --------------------------------------------------------------------------------
11
this Agreement will automatically terminate as of midnight on the tenth
(10th) day after notice was given, or as otherwise may be mutually
agreed upon by the parties. Except as otherwise required by applicable
law, any amounts then-owing to either party must be paid up to the date
of termination, and any obligation under this Agreement that is to
continue beyond expiration or termination must so continue pursuant to
its terms. All opinions of counsel presented by the Noticing Party, and
any corresponding opinions given by the other party are Confidential
Information solely for purposes of renegotiation and settlement of a
potential dispute, and must not be deemed disclosed so as to waive any
privileges otherwise applicable to the opinions.
25. DISPUTE RESOLUTION
Any dispute relating to this Agreement which the parties are
unable to resolve by mutual agreement and meeting of the Executive
Resolution Committee shall be settled by a sole arbitrator in a
binding, non-reviewable and non-appealable alternative dispute
resolution process conducted in accordance with the procedures set
forth on EXHIBIT F. The existence of the dispute, the dispute
resolution process, and the arbitrator's award shall be maintained
confidential, provided that the arbitrator's award may be entered as a
final judgment in any court having jurisdiction.
26. EXECUTIVE RESOLUTION COMMITTEE
From time to time during the term of this Agreement, upon the
request of either party, a panel consisting of two (2) executives from
Buyer and two (2) executives from Cardinal (the "EXECUTIVE RESOLUTION
COMMITTEE") will meet to review issues pertaining to this Agreement
raised by either party, resolve disputes relating to this Agreement and
address other issues as they may determine. Each executive on the
Executive Resolution Committee shall be of the Senior Vice President
level, or higher, and the identity of the executives from each party
shall be determined based upon the issue or dispute presented. Except
as otherwise set forth herein, the Executive Resolution Committee shall
meet within forty-five (45) days of the request by either party. With
respect to disputes, 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 the Executive Resolution
Committee who will review the same, confer, and attempt to reach a
mutual resolution of the issue. If the Executive Resolution Committee
is unable to reach a mutual resolution with regard to any dispute
related to this Agreement, such dispute shall be settled in accordance
with the dispute resolution process set forth in Section 25 of this
Agreement.
27. SEVERABILITY
Should, by any reason, any clause or provision of this
Agreement be held or ruled unenforceable or ineffective under the law,
such a ruling will in no way affect the validity or the enforceability
of any other clause or provision contained herein.
28. CONFIDENTIALITY
- --------------------------------------------------------------------------------
12
Each party acknowledges that as a result of this Agreement,
that party will learn confidential information of the other party. As
used in this Agreement, the term "Confidential Information" includes
all such information furnished by Cardinal or Buyer, any Pharmacy, or
any of their respective representatives, to the other or its
representatives, whether furnished before, on or after the date hereof
and regardless of the manner in which it is furnished. Confidential
Information includes all analyses, compilations, business or technical
information and other materials prepared by Cardinal or Buyer, any
Pharmacy, or any of their respective representatives, containing or
based in whole or in part on any such information furnished by the
other party or its representatives. Confidential Information also
includes the existence of this Agreement and the terms and conditions
hereof. Neither party will disclose any Confidential Information of the
other party to any third party, or use, or permit any third party to
use, any of such Confidential Information, excepting only: (a)
disclosures on a confidential basis to and use by the directors,
officers, employees, and agents of that party or its affiliates who
have a reasonable need to know such information in connection with that
party's performance of this Agreement, (b) disclosures which are
required by law, as reasonably determined by that party or its legal
counsel, or are made on a confidential basis to that party's attorneys,
accountants, and other professional advisors in connection with matters
relating to this Agreement, and (c) routine disclosures in the normal
course of business, including to IMS/DDD or similar organizations and
manufacturers.
The obligations of confidentiality hereunder will survive the
termination of this Agreement for a period of three (3) years, unless
otherwise mutually agreed upon by the parties. Upon termination of this
Agreement (for any reason) each party will 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) 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.
29. COUNTERPARTS; FACSIMILE SIGNATURES
This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together
shall constitute a single agreement. Each party acknowledges that a
facsimile signature on this Agreement shall be binding upon such party.
- --------------------------------------------------------------------------------
13
EXPRESS SCRIPTS, INC. CARDINAL DISTRIBUTION*
13900 RIVERPORT DRIVE 7000 CARDINAL PLACE
MARYLAND HEIGHTS, MISSOURI 63043 DUBLIN, OHIO 43017
FACSIMILE: (314) 702-7120 FACSIMILE: (614) 757-6000
BY /s/ Barrett Toan BY /s/ Robert D. Walter
--------------------------------------------------- ---------------------------------------------------
NAME Barrett Toan NAME Robert D. Walter
TITLE Chairman and CEO TITLE Chairman and CEO
DATE 7/16/01 DATE 7/19/01
*The term "CARDINAL DISTRIBUTION" will include the following affiliated
operating companies: Cardinal Syracuse, Inc., a New York corporation
(Syracuse, New York); James W. Daly, Inc., a Massachusetts corporation
(Peabody, Massachusetts); Ohio Valley-Clarksburg, Inc., a Delaware corporation
(Wheeling, West Virginia); Cardinal Southeast, Inc. a Mississippi corporation
(Madison, Mississippi); Whitmire Distribution Corporation, a Delaware
corporation (Folsom, California); Bindley Western Drug Company, an Indiana
corporation (Indianapolis, Indiana); and any other subsidiary of Cardinal
Health, Inc., an Ohio corporation ("CHI"), as may be designated by CHI.
- --------------------------------------------------------------------------------
14
EXHIBIT A
PHARMACIES
Express Scripts, Inc.
14000 Riverport Drive
Maryland Heights, Missouri 63043
Express Scripts, Inc.
1700 North Desert Drive
Tempe, Arizona 85281
Express Scripts, Inc.
4500 Alexander Boulevard
Albuquerque, New Mexico 87107
Express Scripts, Inc.
3684 Marshall Lane
Bensalem, Pennsylvania 19020
Express Scripts, Inc.
433 River Street, Suite 800
Troy, New York 12180
Express Access Pharmacy, Inc.*
dba Express Scripts, Inc.
767 Electronic Drive
Horsham, Pennsylvania 19020
Express Scripts, Inc.
Specialty Distribution Service
3168 Riverport Tech Center
Maryland Heights, Missouri 63043
*This location will be subject to the terms and the conditions of this Agreement
upon termination of its existing supply agreement, which is approximately sixty
(60) days from the Commencement Date of this Agreement.
- --------------------------------------------------------------------------------
15
EXHIBIT B
PRICING MATRIX
1. [***]. The [***] has been established based upon [***]
(a) [***];
(b) [***]($[***]); and
(c) [***]($[***]).
(collectively referred to herein as the [***]"). If, for any reason, [***].
Subject to the [***] of this Agreement regarding [***](that is[***])
for [***]; provided, however, during the [***] of this Agreement, [***]%.
-------------------------------------------------- -------------------------------------------------
[***] [***]
-------------------------------------------------- -------------------------------------------------
$[***] - [***] [***]%
-------------------------------------------------- -------------------------------------------------
$[***] - [***] [***]%
-------------------------------------------------- -------------------------------------------------
$[***] - [***] [***]%
-------------------------------------------------- -------------------------------------------------
$[***] - [***] [***]%
-------------------------------------------------- -------------------------------------------------
$[***] [***]%
-------------------------------------------------- -------------------------------------------------
This [***] and any [***]; provided, however, that such [***]. Any [***]
as a result of a[***] pursuant to the terms hereof shall be[***]. Any [***]
pursuant to the terms hereof shall be [***]. In all instances, [***] by this
Agreement, the [***].
For example, [***]. If[***]. If[***].
2. [***] of this Agreement regarding [***] (that is [***]) for[***].
3. SPECIALLY PRICED MERCHANDISE. Notwithstanding the foregoing, the
following Merchandise will not be available for purchase in accordance with the
cost of goods set forth above, but instead will be special net billed:
[***]
[***]
Certain [***]
[***] subject to [***]
Other [***]
4. UP-FRONT DISCOUNT. Buyer shall be eligible to receive an up-front
discount on Buyer's purchases through Cardinal in the amount of [***] Dollars
($[***]) (the "DISCOUNT"). The
- --------------------------------------------------------------------------------
16
Discount shall be payable within sixty (60) days after full execution of this
Agreement in the form of a check.
If this Agreement is terminated prior to the end of the term, Buyer
shall repay to Cardinal, within sixty (60) days of the date of termination, a
pro rata amount (calculated based on a sixty (60) month term) of the Discount
paid to Buyer hereunder; provided, however, Buyer shall have no obligation to
repay to Cardinal any portion of the Discount if Buyer terminates this Agreement
due to Cardinal's material breach of this Agreement and failure to cure such
material breach in accordance with the terms of Section 14. The parties agree,
and Buyer acknowledges, that such payment by Buyer has been negotiated in good
faith and is not intended as a penalty.
5. [***]. During the term of this Agreement, [***]("[***]"). Cardinal [***] In
addition, [***], based upon a [***] ($[***]); provided, however, except as set
forth herein, [***] Dollars ($[***]) [***]; further provided, however, that
[***] shall be [***] In no event shall [***] Dollars ($[***]). If [***] Dollars
($[***]), [***] Dollars ($[***]), or the applicable [***] as set forth herein,
[***] For example, if during the first contract year, [***] Dollars ($[***]),
[***] Dollars ($[***]) ($[***] $[***]), or [***] Dollars ($[***])[***].
If [***] as set forth above,[***]If [***] as set forth above during the
[***] Solely for purposes of this paragraph [***] as set forth above, [***] ,
shall be [***] (as hereinafter defined)); provided, however, in order for such
[***]
Provided the [***] Dollars ($[***]), [***] percent ([***]) of all [***]
transactions hereunder ([***] only) ("[***]"). The [***] of the applicable[***].
All [***].
In order to [***] the Commencement Date of this Agreement. Until [***]
of this Agreement; provided, however, if [***].
6. MEDICARE/MEDICAID DISCLOSURE. The Discount and [***] constitute a "discount
or other reduction in price," as such terms are defined under the
Medicare/Medicaid Anti-Kickback Statute, on the Merchandise purchased by Buyer
under the terms of this Agreement. Cardinal and Buyer agree to use their best
efforts to comply with any and all requirements imposed on sellers and buyers,
respectively, under 42 U.S.C. ss. 1320a-7b(b)(3)(A) and the "safe harbor"
regulations regarding discounts or other reductions in price set forth in 42
C.F.R. ss. 1001.952(h). In this regard, Buyer may have an obligation to
accurately report, as may be required, under any state or federal program which
provides cost or charge based reimbursement for the products or services covered
by this Agreement, the net cost actually paid by Buyer.
- --------------------------------------------------------------------------------
17
EXHIBIT C
[***]
During the term of this Agreement, [***] pursuant to the term and
conditions set forth below ("[***]").
[***] As a result of [***] and [***] with the terms and conditions of the [***]
Contract Year 1 $[***]
Contract Year 2 $[***]
Contract Year 3 $[***]
Renewal Contract Year 4 $[***]
Renewal Contract Year 5 $[***]
The [***] set forth above are based on [***] percent ([***]%) [***]
during the first contract year of this Agreement as the [***] percent ([***]%)
for contract years two (2) through five (5), [***].
[***] in accordance with the provisions set forth below. Except as
otherwise set forth below, if, upon the completion of each contract year, [***]
set forth above, [***] as set forth below [***] ("[***]"). Any [***]
[***] of this Agreement [***]. If this Agreement is [***] in which the
Agreement is [***], and the terms as set forth above shall be of [***].
[***] ("[***]") in accordance with the terms and conditions of this Agreement.
For purposes of the [***].
For purposes of this Agreement, [***] as follows: [***] ([***]%) [***]
set forth below [***] as set forth herein]. The [***] Rx Products [***] or BTC
and [***]; provided, the [***] Rx Products [***] ([***]%) [***] Rx Products
[***]
The [***] as it relates to [***], as well as [***] on the information
provided to [***] as set forth herein.
During the term of this Agreement, [***]
For [***], who, in turn, will [***]. Upon [***]. Upon [***] (i.e.,
[***]). If [***] as set forth above, will be included in the [***] will be as
determined by [***]
[***]
[***]
- --------------------------------------------------------------------------------
18
[***] ([***]%), based on the [***] or the applicable [***], for all
[***] of the following month. [***] hereunder will be included in the [***]
Within [***] set forth above, [***] as set forth below:
------------------------------------------- ------------------------------------------
[***] [***]
------------------------------------------- ------------------------------------------
[***]% [***]%
------------------------------------------- ------------------------------------------
[***]% - [***]% [***]%
------------------------------------------- ------------------------------------------
[***]% - [***]% [***]%
------------------------------------------- ------------------------------------------
[***]% - [***]% [***]%
------------------------------------------- ------------------------------------------
[***]% [***]%
------------------------------------------- ------------------------------------------
[***]
[***]
- --------------------------------------------------------------------------------
19
EXHIBIT D
OTHER SERVICES
HARDWARE/SOFTWARE
[***], pursuant to the provision of Cardinal's Software License
Agreement, [***] CardinalCHOICE(R) unit ([***]) [***] CardinalCHOICE(R)-HQ
([***]) Any such [***] shall remain the [***] of this Agreement, or upon [***]
Upon termination of this Agreement for any reason, Buyer's or any
Pharmacy's rights as a licensee of the CardinalCHOICE(R), CardinalCHOICE(R)-HQ
or other Cardinal software will automatically expire, and Buyer and each
Pharmacy will promptly return such software and any hardware provided hereunder
not purchased by Buyer or any Pharmacy to a return location specified by
Cardinal.
Cardinal will license to Buyer, pursuant to the provision of Cardinal's
Software License Agreement, its eReceiver Systems available to the Pharmacies
pursuant to Cardinal's customary terms and practices.
ON-SITE EMPLOYEE
During the term of this Agreement, [***] employee [***] The employee
will be [***] The provision of this employee [***] and relates solely to this
Agreement. [***] such employee[***] such employee [***] During the term of this
Agreement, [***] such employee [***] such employee [***] The employee will be
[***] with this Agreement; provided, however, that such employee will [***]
employee of [***] such employee [***] the Commencement Date of this Agreement.
SPONSORSHIP OF BUYER'S OUTCOMES SEMINAR
[***]
[***]
[***]
- --------------------------------------------------------------------------------
20
EXHIBIT E
CARDINAL HEALTH RETURN GOODS AUTHORIZATION
ONGOING ASSURANCE
The undersigned Buyer ("BUYER") of one (1) or more of the Cardinal Health
companies identified below ("WHOLESALER," whether one (1) or more) hereby agrees
that this document is being delivered to confirm Buyer's compliance with
applicable federal, state, and local laws / guidelines concerning returned goods
and will apply to all returns by Buyer to Wholesaler from time to time and will
supersede any inconsistent provisions which may be contained in any credit
request, purchase order, or other documents pertaining to the supply
relationship between Buyer and Wholesaler.
1. Buyer represents, warrants, and guarantees to Wholesaler that: (a) each such
return will be made only to the specific Wholesaler from which the item was
originally purchased; (b) each such return will be accompanied by Wholesaler's
credit request form (the "RETURN FORM"), which will specify both Buyer's and
Wholesaler's name and address, the date of the return, the quantity and
description of the product returned, and such other information as may
reasonably be requested on Wholesaler's Return Form; (c) Buyer will retain a
copy of each Return Form and related credit memo and make such documentation
available to the manufacturer and to authorized federal, state, and local law
enforcement officers upon request; (d) the credit claimed or accepted by Buyer
for any such return will not exceed the original purchase price paid to
Wholesaler; and (e) all merchandise returned to Wholesaler has been stored and
handled by Buyer in accordance with all applicable federal, state, and local
laws, manufacturer guidelines when disclosed to Buyer by the manufacturer or
wholesaler, and good trade practices, and such merchandise has not been
adulterated or misbranded by Buyer within the meaning of the Federal Food, Drug,
and Cosmetic Act and meets all FDA, state, and other applicable requirements and
guidelines.
2. Buyer will indemnify and defend Wholesaler against and from any expense,
claim, liability, or penalty (including reasonable legal fees) arising from any
failure of Buyer to properly comply with the provisions specified in this
exhibit.
3. The term "CARDINAL HEALTH" or "WHOLESALER" will include the following
affiliated operating companies: Cardinal Syracuse, Inc., a New York corporation
(Syracuse, New York); James W. Daly, Inc., a Massachusetts corporation (Peabody,
Massachusetts); Ohio Valley-Clarksburg, Inc., a Delaware corporation (Wheeling,
West Virginia); Cardinal Southeast, Inc. a Mississippi corporation (Madison,
Mississippi); Whitmire Distribution Corporation, a Delaware corporation (Folsom,
California); Bindley Western Drug Company, an Indiana corporation (Indianapolis,
Indiana); and any other subsidiary of Cardinal Health, Inc., an Ohio corporation
("CHI"), as may be designated by CHI.
EXPRESS SCRIPTS, INC.
------------------------------------
Dated: , 2001 By Authorized Signature / Title
------------------------
- --------------------------------------------------------------------------------
21
EXHIBIT E
ALTERNATIVE DISPUTE RESOLUTION
(a) The parties recognize that a bona fide dispute as to certain matters
may arise from time to time during the term of this Agreement which
relates to either party's rights and/or obligations. To have such a
dispute resolved by this Alternative Dispute Resolution ("ADR")
provision, the parties first must attempt to resolve the dispute with
the Executive Resolution Committee in accordance with Section 26 of the
Agreement. Any negotiations regarding a dispute shall be treated as
settlement negotiations for purposes of the Federal Rules of Evidence
and any similar state rules of evidence. Such negotiations shall not be
admissible in any subsequent ADR hearing. If the matter has not been
resolved by the Executive Resolution Committee within forty-five (45)
days of the notice of dispute, or such shorter period as set forth in
the Agreement, or if the parties fail to meet within such forty-five
(45) days, or such shorter period as set forth in the Agreement, either
party may initiate an ADR proceeding as provided herein. The parties
shall have the right to be represented by counsel in such a proceeding.
(b) To begin an ADR proceeding, a party shall provide written notice to the
other party of the issues to be resolved by ADR. Within fourteen (14)
days after its receipt of such notice, the other party may, by written
notice to the party initiating the ADR, add additional issues to be
resolved within the same ADR.
(c) The ADR proceeding and the resolution of any disputes in the ADR
proceeding shall be conducted by a panel of three neutrals. Within
twenty-one (21) days following receipt of the original ADR notice, the
parties shall each select one neutral, and the American Arbitration
Association shall select one neutral pursuant to the following
procedures:
(1) The AAA shall submit to the parties a list of not less than
five (5) candidates within fourteen (14) days after receipt of
the original ADR notice, along with a Curriculum Vitae for
each candidate. No candidate shall be an employee, director,
or shareholder of either party or any of their subsidiaries or
Affiliates.
(2) Such list shall include a statement of disclosure by each
candidate of any circumstances likely to affect his or her
impartiality.
(3) Each party shall number the candidates in order of preference
(with the number one (1) signifying the greatest preference)
and shall deliver the list to the AAA within seven (7) days
following receipt of the list of candidates. If a party
believes a conflict of interest exists regarding any of the
candidates, that party shall provide a written explanation of
the conflict to the AAA along with its list showing its order
of preference for the candidates. Any party failing to return
a list of preferences on time shall be deemed to have no order
of preference.
(4) If the parties collectively have identified fewer than three
(3) candidates deemed to have conflicts, the AAA immediately
shall designate as the neutral the
- --------------------------------------------------------------------------------
22
candidate who has no conflicts and for whom the parties
collectively have indicated the greatest preference. If a tie
should result between two candidates, the AAA may designate
either candidate. If the parties collectively have identified
three (3) or more candidates deemed to have conflicts, the AAA
shall review the explanations regarding conflicts and, in its
sole discretion, may either (I) immediately designate as the
neutral the candidate who has no conflicts and for whom the
parties collectively have indicated the greatest preference,
or (ii) issue a new list of not less than five (5) candidates,
in which case the procedures set forth in subparagraphs (c)(1)
- (4) shall be repeated.
(d) No earlier than twenty-eight (28) days or later than fifty-six (56)
days after selection, the panel of neutrals shall hold a hearing to
resolve each of the issues identified by the parties. The ADR
proceeding shall take place at a location, other than the principal
place of business of either party or any of their subsidiaries or
affiliates, as designated by the panel of neutrals.
(e) At least seven (7) days prior to the hearing, each party shall submit
the following to the other party and the panel of neutrals:
(1) a copy of all exhibits on which such party intends to rely in
any oral or written presentation to the panel of neutrals;
(2) a list of any witnesses such party intends to call at the
hearing, and a short summary of the anticipated testimony of
each witness;
(3) a proposed ruling on each issue to be resolved, together with
a request for a specific damage award or other remedy for each
issue. The proposed rulings and remedies shall not contain any
recitation of the facts or any legal arguments and shall not
exceed one (1) page per issue.
(4) a brief in support of such party's proposed rulings and
remedies, provided that the brief shall not exceed twenty (20)
pages. This page limitation shall apply regardless of the
number of issues raised in the ADR proceeding.
Except as expressly set forth in subparagraphs (e)(1) - (4),
no discovery shall be required or permitted by any means,
including depositions, interrogatories, requests for
admissions, or production of documents.
(f) The hearing shall be conducted on two (2) consecutive days and shall be
governed by the following rules:
(1) Each party shall be entitled to five (5) hours of hearing time
to present its case. The panel of neutrals shall determine
whether each party has had the five (5) hours to which it is
entitled.
- --------------------------------------------------------------------------------
23
(2) Each party shall be entitled, but not required, to make an
opening statement, to present regular and rebuttal testimony,
documents or other evidence, to cross-examine witnesses, and
to make a closing argument. Cross-examination of witnesses
shall occur immediately after their direct testimony, and
cross-examination time shall be charged against the party
conducting the cross-examination.
(3) The party initiating the ADR shall begin the hearing and, if
it chooses to make an opening statement, shall address not
only issues it raised but also any issues raised by the
responding party. The responding party, if it chooses to make
an opening statement, also shall address all issues raised in
the ADR. Thereafter, the presentation of regular and rebuttal
testimony and documents, other evidence, and closing arguments
shall proceed in the same sequence.
(4) Except when testifying, witnesses shall be excluded from the
hearing until closing arguments.
(5) Settlement negotiations shall not be admissible under any
circumstances. Affidavits prepared for purposes of the ADR
hearing also shall not be admissible. As to all other matters,
the panel of neutrals shall have sole discretion regarding the
admissibility of any evidence.
(g) Within seven (7) days following completion of the hearing, each party
may submit to the other party and the panel of neutrals a post-hearing
brief in support of its proposed rulings and remedies, provided that
such brief shall not contain or discuss any new evidence and shall not
exceed ten (10) pages. This page limitation shall apply regardless of
the number of issues raised in the ADR proceeding.
(h) The panel of neutrals shall rule on each disputed issue within fourteen
(14) days following completion of the hearing. Such ruling shall adopt
in its entirety the proposed ruling and remedy of one of the parties on
each disputed issue but may adopt one party's proposed rulings and
remedies on some issues and the other party's proposed rulings and
remedies on other issues. The panel of neutrals shall not issue any
written opinion or otherwise explain the basis of the ruling.
(i) The panel of neutrals shall be paid a reasonable fee plus expenses.
These fees and expenses, along with the reasonable legal fees and
expenses of the prevailing party (including all expert witness fees and
expenses), the fees and expenses of a court reporter, and any expenses
for a hearing room, shall be paid as follows:
(1) If the panel of neutrals rules in favor of one party on all
disputed issues in the ADR, the losing party shall pay 100% of
such fees and expenses.
(2) If the panel of neutrals rules in favor of one party on some
issues and the other party on other issues, the panel of
neutrals shall issue with the rulings a written determination
as to how such fees and expenses shall be allocated between
- --------------------------------------------------------------------------------
24
the parties. The panel of neutrals shall allocate fees and
expenses in a way that bears a reasonable relationship to the
outcome of the ADR, with the party prevailing on more issues,
or on issues of greater value or gravity, recovering a
relatively larger share of its legal fees and expenses.
(j) The rulings of the panel of neutrals and the allocation of fees and
expenses shall be binding, non-reviewable, and non-appealable, and may
be entered as a final judgment in any court having jurisdiction.
(k) Except as provided in paragraph (j) or as required by law, the existence of
the dispute, any settlement negotiations, the ADR hearing, any submissions
(including exhibits, testimony, proposed rulings, and briefs), and the rulings
shall be deemed Confidential Information. The panel of neutrals shall have the
authority to impose sanctions for unauthorized disclosure of Confidential
Information.
(l) Except as otherwise set forth herein the ADR proceedings shall be
governed in accordance with the AAA rules.
(m) All references to days in this Exhibit F shall mean calendar days.
- --------------------------------------------------------------------------------
25
FIRST AMENDMENT TO
PRIME VENDOR AGREEMENT
THIS FIRST AMENDMENT TO PRIME VENDOR AGREEMENT ("FIRST AMENDMENT") is
among Cardinal Distribution* ("CARDINAL"), and Express Scripts, Inc. ("BUYER").
WHEREAS, Cardinal and Buyer executed a Prime Vendor Agreement, dated
July 1, 2001 (the "AGREEMENT").
WHEREAS, Buyer desires to discontinue purchasing certain [***] Products
directly from the applicable manufacturers and/or suppliers and commence
purchasing such [***] Products through Cardinal.
WHEREAS, the parties now desire to amend the Agreement as set forth
below.
NOW THEREFORE, in consideration of the foregoing recitals, the parties
hereby agree as follows:
1. SECTION 2, SALE OF MERCHANDISE. The definition of "PRIMARY WHOLESALE
REQUIREMENTS" shall be deleted in its entirety and replaced with the following:
"The term `PRIMARY REQUIREMENTS' means that Buyer will purchase for each
Pharmacy [***] of its requirements of [***] Products that are available from
Cardinal from Cardinal. If Cardinal notifies Buyer (such notice to be provided
at the time of order confirmation) that it will be unable to supply any
[***]Product within forty-eight (48) hours of Buyer's order of such [***]
Product, Buyer may purchase such [***] Product from another supplier, including,
but not limited to alternate source vendors, and such purchases shall be
included in the calculations of Buyer's Qualified Annual and Monthly Purchases
for the purpose of determining Buyer's compliance with the Minimum Requirements
(as hereinafter defined) and Buyer's applicable cost of goods; provided,
however, Buyer shall provide to Cardinal reasonable documentation of the [***]
Products purchased from other suppliers and that Buyer attempted to purchase
such [***] Products from Cardinal and they were unavailable within forty-eight
(48) hours." Further, all references to the term "PRIMARY WHOLESALE
REQUIREMENTS" in the Agreement shall be deleted and replaced with the term
"PRIMARY REQUIREMENTS".
The following paragraph shall be deleted from Section 2, Sale of
Merchandise: "Cardinal acknowledges that Buyer, [***]."
2. SECTION 3, PURCHASE PRICE. The last paragraph of Section 3, Purchase
Price, shall be deleted in its entirety and replaced with the following: "All
[***] CardinalCHOICE(R)pharmacy system [***] the pricing specified in the
Pricing Matrix; provided, however, [***]
3. SECTION 4, [***] AND SAVINGS AND EXHIBIT C. Section 4, [***] and
Savings, and Exhibit C, [***] and Related Savings, shall be deleted in their
entirety.
- --------------------------------------------------------------------------------
26
4. SECTION 5, PAYMENT TERMS. The following additional payment terms
shall be added to Section 5(a)(i) for Direct Store Delivery Purchases:
(a) [***] Buyer will cause Cardinal to receive payment in full by [***]
of the amount due for all Merchandise delivered and services provided during the
[***]
(b) [***] Buyer will cause Cardinal to receive payment in full: (1) by
not later than the [***] day of each calendar month of the amount due for all
Merchandise delivered and services provided during the first (1st) [***] days of
such calendar month; (2) by not later than the [***] day of each calendar month,
of the amount due for all Merchandise delivered and services provided during the
[***] through the [***] day of such calendar month; and (3) by not later than
the [***] day of each calendar month, of the amount due for all Merchandise
delivered and services provided during the period beginning on the [***] day of
the preceding calendar month and ending on the last day of such preceding
calendar month.
Sections 5(a)(ii) and (iii) shall be deleted in their entirety.
5. SECTION 6, ORDERING AND DELIVERY. The third sentence of Section 6,
Ordering and Delivery, shall be amended to add the Pharmacies located in
Bensalem, Pennsylvania; East Hanover, New Jersey; and Harrisburg, Pennsylvania.
In addition, the fourth sentence shall be deleted in its entirety and
replaced with the following: "Buyer will incur a separate delivery charge, not
to exceed Cardinal's actual cost for courier delivery, for additional deliveries
(beyond [***] )."
6. EXHIBIT B, PRICING MATRIX. Section 1 of Exhibit B, Pricing Matrix,
shall be deleted in its entirety and replaced with Section 1 of Exhibit A
attached to this Amendment.
Section 2, Brokerage Purchases, of Exhibit B, Pricing Matrix, shall be
deleted in its entirety.
Section 5, Generic Outsource Program Rebate, of Exhibit B, Pricing
Matrix, shall be deleted in its entirety.
7. EXHIBIT D, OTHER SERVICES. The paragraph titled, [***], shall be
deleted in its entirety from Exhibit D, Other Services.
8. SECTION 12, SERVICE LEVEL. Section 12, Service Level, shall be
deleted in its entirety and replaced with the following:
"Cardinal will exercise all reasonable efforts to provide [***]
(excluding Buyer's Top [***] Items (as hereinafter defined)) [***]
([***]%) [***] in accordance with the standards and procedures
specified in AMENDMENT EXHIBIT B attached hereto. For Buyer's Top [***]
Items, Cardinal will exercise all reasonable efforts to provide each
Pharmacy with an average monthly service level of at least [***]
([***]%) calculated quarterly (calendar) in accordance with the
standards and procedures specified in AMENDMENT EXHIBIT B attached
hereto.
- --------------------------------------------------------------------------------
27
Buyer's "Top [***] Items" means the top [***]Rx Products purchased by
Buyer based on Rx count. Buyer will provide to Cardinal a report of the
"Top [***] Items" on a quarterly (calendar) basis for purposes of
measuring the service level on such items the following calendar
quarter. [***] ([***]%) [***] ([***]%) [***] ([***]%) [***] ([***]%)
[***] ([***]%), [***]. For example, [***] $[***] % [***] $ [***]
([***]) [***]% - [***]% = [***] % and ([***]) [***]% x $[***] x [***]%
= $[***].
Notwithstanding [***] in accordance with the standards and procedures
specified in AMENDMENT EXHIBIT B attached hereto is [***] ([***]%) [***]
([***]%) [***] as set forth above) [***] ([***]%) [***] ([***]%) [***]."
9. EXHIBIT A, PHARMACIES. Exhibit A is hereby amended to add the
following additional Pharmacies:
Central Fill, Inc.
4415 Lewis Road
Harrisburg, Pennsylvania 17111
Central Fill, Inc.
721 Ridgedale Avenue
East Hanover, New Jersey 07936
ESI Mail Pharmacy Service, Inc.
7909 South Hardy
Tempe, Arizona 85284
10. MISCELLANEOUS. Capitalized terms not defined herein will have the
same meaning ascribed to them in the Agreement, it being the intent of the
parties that the Agreement and this First Amendment will be applied and
construed as a single instrument. The Agreement, as modified by this First
Amendment, constitutes the entire agreement between Cardinal and Buyer regarding
the subject matter of the Agreement and this First Amendment and supersedes all
prior or contemporaneous writings and understandings between the parties
regarding the same. This First Amendment will be binding upon the parties, their
heirs, legal representatives, successors and assigns. The terms and provisions
of this First Amendment are severable. If any term or provision of this First
Amendment is determined to be illegal or unenforceable by a court of competent
jurisdiction, the remaining terms and provisions of this First Amendment and the
Agreement will remain in full force and effect. This First Amendment may only be
amended in a writing signed by Cardinal and Buyer.
11. EFFECTIVE DATE. This First Amendment shall be effective as of the
date of full execution ("EFFECTIVE Date"). Except as otherwise amended herein,
the terms and conditions of the Restated Agreement shall remain in full force
and effect.
CARDINAL DISTRIBUTION* EXPRESS SCRIPTS, INC.
BY: /s/ Mark Parrish BY: /s/ George Paz
-------------------------- ------------------------------
- --------------------------------------------------------------------------------
28
NAME: Mark Parrish NAME: George Paz
TITLE: President TITLE: CFO
DATE: 1/15/03 DATE: 1/9/03
*The term "Cardinal Distribution" shall include the following affiliated
operating companies: James W. Daly, Inc., a Massachusetts corporation (Peabody,
Massachusetts) (now known as "Cardinal Health 106, Inc."); Cardinal Southeast,
Inc. a Mississippi corporation (Madison, Mississippi) (now known as "Cardinal
Health 103, Inc."); Whitmire Distribution Corporation, a Delaware corporation
(Folsom, California) (now known as "Cardinal Health 110, Inc."); Bindley Western
Industries, Inc., a Indiana corporation (Indianapolis, Indiana) (now known as
"Cardinal Health 100, Inc."); and any other subsidiary of Cardinal Health, Inc.,
an Ohio corporation ("CHI"), as may be designated by CHI.
- --------------------------------------------------------------------------------
29
EXHIBIT A
1. [***]. The [***] has been established based upon [***]:
(a) [***];
(b) [***] Dollars ($[***]); and
(c) [***] Dollars ($[***]).
(collectively referred to herein as the [***]. If, for any reason, [***] Dollars
($[***]) [***] beginning on the Commencement Date of this Agreement
Subject to the [***] of this Agreement regarding [***] (that is [***]) for
[***]; provided, however, until all Pharmacies are converted to purchasing their
Primary Requirements from Cardinal, the applicable price for the Harrisburg, PA,
East Hanover, NJ and Specialty Distribution Service (Maryland Heights, MO)
Pharmacies will be equal to [***] (as defined in the Agreement) [***] provided,
however, conversion of all Pharmacies shall be completed within six (6) months
following the first day of the conversion of the first Pharmacy. The remaining
Pharmacies will continue to purchase at their current pricing until converted,
at which time they will move to the [***]
- --------------------------------------------------- --------------------- ---------------------- ---------------------
[***] [***] [***] [***]
- --------------------------------------------------- --------------------- ---------------------- ---------------------
$[***] - [***] [***]% [***]% [***]%
- --------------------------------------------------- --------------------- ---------------------- ---------------------
$[***] - [***] [***]% [***]% [***]%
- --------------------------------------------------- --------------------- ---------------------- ---------------------
$[***] - [***] [***]% [***]% [***]%
- --------------------------------------------------- --------------------- ---------------------- ---------------------
$[***] - [***] [***]% [***]% [***]%
- --------------------------------------------------- --------------------- ---------------------- ---------------------
$[***] - [***] [***]% [***]% [***]%
- --------------------------------------------------- --------------------- ---------------------- ---------------------
$[***] - [***] [***]% [***]% [***]%
- --------------------------------------------------- --------------------- ---------------------- ---------------------
$[***] - [***] [***]
- --------------------------------------------------- --------------------- ---------------------- ---------------------
Upon completion of the conversion of all Pharmacies or achievement of
at least [***] Dollars ($[***]) in total [***], whichever is earlier, the next
[***] will be annualized to determine the applicable pricing tier for all fully
converted Pharmacies. Such pricing will be effective on the [***] of the next
[***]. For example, if all conversions are completed in [***] to determine the
applicable price beginning on [***]. Such pricing will continue until a full
[***] can be reviewed. The pricing will be adjusted on the [***] of the [***].
For example, [***] for [***] will be reviewed with the next [***]. Thereafter,
[***] will be reviewed on a [***] basis and any [***] based on [***] days during
such [***]; provided, however, that such [***] of the [***]. In all instances,
[***]. For example, [***].
The pricing set forth on this Exhibit A [***] (as hereinafter defined)
[***] that include, but are not limited to, [***] In the event that [***] during
the term of this Agreement [***] or in the event that [***], then [***] In such
event, [***]. If the [***]; provided, however, [***] shall be [***].
- --------------------------------------------------------------------------------
30
AMENDMENT EXHIBIT B
SERVICE LEVEL DEFINITION
For purposes of this Agreement, the service level percentage will be
calculated by dividing total lines of Rx Products shipped by the number of lines
of Rx Products ordered. The following items will be excluded from the service
level calculation:
1. [***]
2. [***] items [***];
3. [***];
4. Items where a Facility has [***];
5. Items where a Facility's [***]; and
6. [***] item [***].
The service level for each Pharmacy will commence fourteen days (14)
days following the later of such Pharmacy's initial order of Merchandise under
this Amendment from Cardinal or Cardinal's receipt of accurate usage data from
such Pharmacy. The service level for Facilities added to this Agreement after
the Commencement Date will commence fourteen (14) days following receipt by
Cardinal of accurate usage data. This will allow Cardinal to gain usage
information and adjust inventory levels appropriately.
Upon Buyer's request, if Cardinal does not meet its service level for
any quarter, Cardinal and Buyer will jointly develop a service level action plan
for the following quarter.
Buyer will notify Cardinal at least forty-five (45) days prior to the
expiration of any manufacturer's contract which is being replaced with a
different contract, and will cooperate with and assist Cardinal in disposing of
any excess inventory of Merchandise previously stocked at Buyer's or a
Facility's request. Failure to comply with these notice requirements will
entitle Cardinal to discontinue the service level to the Facilities until ninety
(90) days after delivery of accurate usage data for the new items.
- --------------------------------------------------------------------------------
31