Exhibit 10.06
[***] indicates the omission of confidential portions for which confidential
treatment has been requested. Such confidential information has been filed
separately with the Commission.
SECOND AMENDMENT TO
PRIME VENDOR AGREEMENT
THIS SECOND AMENDMENT TO PRIME VENDOR AGREEMENT ("SECOND AMENDMENT") is
among Cardinal Health*, formerly known as Cardinal Distribution, ("CARDINAL"),
and Express Scripts, Inc. ("BUYER").
WHEREAS, Cardinal and Buyer executed a Prime Vendor Agreement, dated
July 1, 2001 (the "AGREEMENT"), and executed a First Amendment to Prime Vendor
Agreement, dated January ___, 2003 ("FIRST AMENDMENT").
WHEREAS, the parties desire to further amend the Agreement, as amended,
to reflect the terms of a new returned goods policy for unmerchantable product.
NOW THEREFORE, in consideration of the foregoing recitals, the parties
hereby agree as follows:
1. RETURNED GOODS POLICY FOR UNMERCHANTABLE PRODUCT. Attached as EXHIBIT A
and incorporated herein by reference is a returned goods policy for
unmerchantable product, which describes a return process whereby Cardinal will
assist Buyer in receiving value for certain unmerchantable product.
2. MISCELLANEOUS. Capitalized terms not defined herein will have the same
meaning ascribed to them in the Agreement, as amended by the First Amendment, it
being the intent of the parties that the Agreement, as amended by the First
Amendment, and this Second Amendment will be applied and construed as a single
instrument. The Agreement, as amended by the First Amendment and as modified by
this Second Amendment, constitutes the entire agreement between Cardinal and
Buyer regarding the subject matter of the Agreement, as amended by the First
Amendment, and this Second Amendment and supersedes all prior or contemporaneous
writings and understandings between the parties regarding the same. This Second
Amendment will be binding upon the parties, their heirs, legal representatives,
successors and assigns. The terms and provisions of this Second Amendment are
severable. If any term or provision of this Second Amendment is determined to be
illegal or unenforceable by a court of competent jurisdiction, the remaining
terms and provisions of this Second Amendment and the Agreement, as amended by
the First Amendment will remain in full force and effect. This Second Amendment
may only be amended in a writing signed by Cardinal and Buyer.
3. EFFECTIVE DATE. This Second 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 HEALTH* EXPRESS SCRIPTS, INC.
BY: /s/ John E. Grimm BY: /s/ George Paz
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NAME: John E. Grimm NAME: George Paz
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TITLE: SVP, Alternate Care TITLE: President
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DATE: 11-19-03 DATE: 11/12/03
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*The term "CARDINAL HEALTH" means the following pharmaceutical distribution
companies including: Cardinal Health 106, Inc. (formerly known as James W. Daly,
Inc.), a Massachusetts corporation (Peabody, Massachusetts); Cardinal Health
103, Inc. (formerly known as Cardinal Southeast, Inc.), a Mississippi
corporation (Madison, Mississippi); Cardinal Health 110, Inc. (formerly known as
Whitmire Distribution Corporation), a Delaware corporation (Folsom, California)
and any other subsidiary of Cardinal Health, Inc., an Ohio corporation ("CHI"),
as may be designated by CHI.
EXHIBIT A
RETURNED GOODS POLICY FOR UNMERCHANTABLE PRODUCT
Cardinal and Buyer have agreed to pursue a return process whereby Cardinal will
assist Buyer in receiving value for certain unmerchantable Product. Product
which may not be returned pursuant to Cardinal's Standard Returned Goods Policy
may be returned to an authorized manufacturer through a third party pursuant to
this policy. Products which are "UNMERCHANTABLE" include, but are not limited
to, those items which Cardinal determines are not in "merchantable condition"
(as defined in Cardinal's Returned Goods Policy), and the following:
A. Any item which has been used or opened, is a partial dispensing unit or unit
of sale, is without all original packaging, labeling, inserts or operating
manuals, or that is stickered, marked, damaged, defaced or otherwise cannot
readily be resold by Cardinal for any reason.
B. Short-dated (less than seven (7) months expiration dating), outdated, or
seasonal product and items purchased on a "special order" basis, including
non-stock and drop ship items.
C. Any sterile or refrigerated Merchandise, unless Cardinal is specially assured
that such Merchandise was properly stored and protected at all times and such
Merchandise is returned separately in a package marked as such and accompanied
by a separate credit request form.
D. Any low stability product, including Epogen(TM), Eminase(TM), or other
products which are usually sensitive to temperature and handling conditions.
E. Any product not intended for return to a wholesaler in accordance with the
return policies of the applicable manufacturer.
Product in "unmerchantable condition" may generally be returned to vendors (a)
with which Cardinal has a current relationship, (b) are not either insolvent or
subject to a petition in bankruptcy, or (c) which do not have an outstanding
balance due Cardinal at the date on which such Product is submitted for return
(each such vendor, an "ACTIVE MANUFACTURER"). Unmerchantable Product may only be
returned through a third party return processor ("THIRD PARTY") in accordance
with the terms and conditions described in this policy. Cardinal will provide
the Third Party selected by Buyer with a current list of all Active
Manufacturers. Any Third Party selected by Buyer must enter into a
Confidentiality Agreement, in a form acceptable to Cardinal, prior to accepting
any returns from Buyer.
PROCEDURES FOR RETURNS
Buyer and Cardinal will notify each Active Manufacturer of their relationship as
customer/wholesaler. Buyer will send all returns of unmerchantable Product to
its selected Third Party. The amount identified by the Third Party as the amount
to which Buyer is entitled in exchange for the return will be determined in
accordance with the return policy of the applicable Active Manufacturer as
described in the Third Party's database, which will reflect Buyer's cost of
goods purchased through Cardinal. Buyer will instruct the Third Party to provide
Cardinal with documentation (either in paper or electronic format) to
substantiate each debit memo submitted to Active Manufacturers on behalf of
Buyer.
Buyer will instruct each Active Manufacturer to issue any and all credits to
Cardinal for Merchandise that was purchased by Buyer from Cardinal and is
returned through a Third Party in unmerchantable condition, and to reference the
debit memo number corresponding to the debit memo prepared by the Third Party.
Buyer and Cardinal acknowledge that Buyer will handle, without Cardinal's
involvement, all matters relating to returns to manufacturers with which Buyer
has a direct contracting relationship (whether or not such manufacturer is an
Active Manufacturer).
Buyer will pay the Third Party directly for all of such Third Party's fees. In
addition, Buyer will reimburse Cardinal for all costs billed by the Third Party
to Cardinal that relate to Buyer's returns hereunder, including, but not limited
to, processing fees, postage, delivery and destruction fees.
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Cardinal will be paid [***]% of the net returns received by Cardinal from all
Active Manufacturers as a processing fee (the "PROCESSING FEE") in accordance
with the following procedure:
(1) Cardinal will adjust Buyer's account upon the earlier of receipt of
an actual credit from an Active Manufacturer, or within sixty (60) days
following the date of a debit memo submitted to an Active Manufacturer. Buyer
will not deduct from any UNAUTHORIZED amounts owed to Cardinal, any UNAUTHORIZED
amounts relating to the return of Merchandise through a Third Party.
(2) Each calendar month, Cardinal will (a) track credits due Buyer's
account in the amount received by Cardinal from each Active Manufacturer during
such month for Buyer returns (or, if not received within sixty (60) days, the
amount anticipated to be received as shown on the debit memo), and (b) adjust
previously made credits to Buyer's account to reflect actual credits authorized
to Cardinal for returned Product, so that a net credit may be determined.
(3) Within five (5) business days after the end of the previous
calendar month, Cardinal will credit Buyer's account with the net amount due
Buyer for all Third Party Returns activities during the previous month, less the
Processing Fee.
With the monthly credit, Cardinal will provide Buyer with a report of all Active
Manufacturer credits and debit memos posted during such month. Cardinal will not
perform a detail line reconciliation of the amounts authorized by Active
Manufacturers as compared to the original debit memo.
Notwithstanding the foregoing, if the applicable Active Manufacturer (a) is in a
debit balance in Cardinal's accounts payable system, or (b) is subject to a
petition in bankruptcy or is deemed insolvent, then no credit will be issued to
Buyer, and the credit will accrue to Cardinal's benefit, until such time as the
Active Manufacturer is no longer in a debit balance, bankruptcy proceeding or
insolvent. In addition, the Third Party will be exclusively responsible for
resolving discrepancies relating to returned Product through such Third Party.
To the extent that Buyer desires to return Product to a supplier which is not an
approved Active Manufacturer, Cardinal will credit Buyer's account only after
Cardinal receives payment either through check, money order or wire transfer. If
check, wire transfer or any other payment method is employed which does not
guarantee Cardinal immediately available funds, Cardinal will credit Buyer's
account only upon receiving such funds in Cardinal's account. Buyer may not
offset payments due from Buyer to Cardinal for Product purchases against any
amounts Buyer deems are due and owing pursuant to this Third Party Returned
Goods Policy.
Cardinal may modify this Third Party Returned Goods Policy in its reasonable
discretion from time to time. The Buyer is to be notified within thirty (30)
days of a modification and such modification is subject to mutual agreement.
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