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Exhibit 10.30
August 10, 2000
CVS Corporation
Xxx XXX Xxxxx
Xxxxxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxx
Subject: WHOLESALE SUPPLY AGREEMENT
This letter will confirm the agreement (this "AGREEMENT") between
Cardinal Health* ("CARDINAL") and CVS Meridian, Inc. ("CVS") under which CVS
will purchase certain pharmaceutical and other products from Cardinal on the
following terms and conditions:
SECTION 1. DESIGNATION AS PRIMARY WHOLESALER.
(a) RETAIL PHARMACIES. During the term of this Agreement, CVS will
designate Cardinal as the primary wholesale pharmaceutical supplier to
designated pharmacies, whether now or hereafter owned, managed or
operated by CVS (collectively, the "PHARMACIES" and individually, a
"PHARMACY"). A list of the Pharmacies (the "DESIGNATED PHARMACY LIST")
and a comprehensive list of all of the pharmacies owned, managed or
operated by CVS (the "TOTAL PHARMACY LIST") will be provided by CVS to
Cardinal from time to time during the term of this Agreement, and upon
Cardinal's request. The Qualified Annual Purchases of Merchandise (as
defined below) by such designated Pharmacies compared to CVS' Qualified
Annual Purchases of Merchandise by all of CVS' retail pharmacies will
constitute not less than the percentage set forth in the Section 1(a)
Disclosure Schedule.
(b) DISTRIBUTION CENTERS. During the term of this Agreement, CVS will
designate Cardinal as the primary wholesale pharmaceutical supplier to
all distribution centers, whether now or hereafter owned, managed or
operated by CVS ("CVS PHARMACY DCS"). A comprehensive list of all of
the CVS Pharmacy DCs as of the Commencement Date (the "TOTAL DC LIST")
is set forth in the Section 1(b) Disclosure Schedule.
(c) CVS PROCARE. This Agreement specifically excludes purchases which
are made on behalf of the CVS division known as "CVS ProCare".
SECTION 2. SALE OF MERCHANDISE AND BROKERAGE PURCHASES.
(a) PRIMARY REQUIREMENTS. Each of the Pharmacies and the CVS Pharmacy
DCs will purchase from Cardinal during the term of this Agreement its
Primary Wholesale Requirements (as defined in the Section 2(a)
Disclosure Schedule) of pharmaceutical products ("RX PRODUCTS"), which
consist of purchases of Rx
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Products for (a) delivery directly to the Pharmacies ("STORE RX
PURCHASES"); and (b) delivery directly to the CVS Pharmacy DCs
("BROKERAGE PURCHASES"). CVS may purchase from Cardinal, at CVS'
discretion, for delivery directly to the Pharmacies, its health and
beauty aids, home health care products and other inventory carried by
Cardinal ("STORE OTHER PURCHASES"). For purposes of this Agreement, the
term "QUALIFIED PURCHASES" with respect to a period means all purchases
of Merchandise made and paid for by CVS (and in some circumstances,
either the CVS Pharmacy DCs or the Pharmacies are specifically
designated) from Cardinal during that period, net of all returns and
credits (related to ordering, shipping or accounting errors). For
purposes of this Agreement, the term "MERCHANDISE" will mean the Rx
Products (and Store Other Purchases, with respect to the Pharmacies
only).
(b) BROKERAGE PURCHASES. The Section 2(b) Disclosure Schedule describes
the terms by which CVS will make its Brokerage Purchases through
Cardinal.
(c) DISCONTINUED MERCHANDISE. Cardinal will stock certain Merchandise
that Cardinal would not otherwise stock but for CVS' request, except
food items and Merchandise with limited dating ("SPECIALLY STOCKED
MERCHANDISE"), subject to such credit considerations concerning the
applicable manufacturer as Cardinal may reasonably consider appropriate
(including but not limited to, potential insolvency or outstanding
balance owed to Cardinal without legitimate reason for dispute). CVS
guarantees that at least six (6) pieces of each item of Specially
Stocked Merchandise will be purchased from each of Cardinal's
distribution centers per month. If Cardinal notifies CVS that less than
six (6) pieces of an item of Specially Stocked Merchandise were
purchased in a month from one of Cardinal's distribution centers, then
Cardinal may elect to discontinue carrying such item in its
distribution centers. If Cardinal elects to discontinue carrying any
such item, CVS will accept and purchase the remaining Specially Stocked
Merchandise at the purchase price for such Specially Stocked
Merchandise until the Specially Stocked Merchandise is depleted;
provided, however, that Cardinal will use reasonable efforts to ensure
that the item is discontinued in the most cost-effective manner, which
may include, but not be limited to, returning such item directly to the
manufacturer. Alternatively, Cardinal and CVS may mutually agree to a
drop-ship arrangement in lieu of Cardinal stocking the item.
(d) GENERALLY. CVS will be liable for any payment owing to Cardinal
from any Pharmacy or CVS Pharmacy DC for purchases made hereunder.
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.
SECTION 3. PURCHASE PRICE. As further described in Sections 3(a) and
3(b) Disclosure Schedules, CVS will pay a purchase price ("COST OF GOODS") for
products purchased under this Agreement as follows:
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(a) STORE RX PURCHASES AND STORE OTHER PURCHASES. CVS will pay a Cost
of Goods for Merchandise in an amount equal to "Cardinal's Cost" plus
the percentage set forth in the Section 3(a) Disclosure Schedule. The
term "CARDINAL'S COST" as used herein means the manufacturer's
published wholesale acquisition cost for Merchandise at the date of
Cardinal's invoice to CVS, adjusted to reflect any then-applicable
contract pricing, but without reduction for cash discounts.
Manufacturer off-invoice quantity discounts and promotional allowances
which are intended by the manufacturer to be passed through to
Cardinal's retail national chain accounts will be made available to
CVS.
The purchase price for selected Merchandise, including but not
limited to, multisource pharmaceuticals, CardinalSOURCE(SM) generics,
private label products, medical surgical supplies, home health
care/durable medical equipment, Merchandise acquired from vendors not
offering customary cash discount or other terms, and other
non-pharmaceutical Merchandise will not be based upon Cardinal's
Cost-plus pricing described above but will instead be net-billed in
accordance with the terms and conditions established by Cardinal
(including applicable xxxx-up) for such Merchandise. Merchandise
described in this paragraph is sometimes referred to as "SPECIALLY
PRICED MERCHANDISE." CVS may, but will have no obligation to, purchase
any specified volume or percentage of its requirements for Specially
Priced Merchandise, except as described in the Section 3(a) Disclosure
Schedule.
All orders must be electronically transmitted via Telxon units
or other electronic order entry system approved by Cardinal to qualify
for the pricing specified in the Section 3(a) Disclosure Schedule.
Cardinal and CVS agree and acknowledge that electronic ordering is a
material and critical part of this Agreement and Cardinal's pricing to
CVS. Accordingly, if Cardinal identifies that a Pharmacy or Pharmacies
are causing Cardinal to consistently receive orders other than via
electronically, Cardinal will notify CVS of the problem in writing, and
CVS will use its reasonable efforts to resolve such problem within
seven (7) business days of receiving notice from Cardinal. Thereafter,
non-electronically transmitted orders are subject to Cardinal's Cost
plus 2% pricing (excluding orders for Merchandise which are delivered
to the Pharmacies outside of Cardinal's normal delivery schedule as
described in Section 5 of this Agreement, orders for Schedule II Rx
Products or override orders). Cardinal will promptly notify CVS of any
such orders subject to Cardinal's Cost plus 2% pricing pursuant to this
section.
(b) BROKERAGE PURCHASES. CVS will pay a purchase price for all
Brokerage Purchases in an amount equal to the cost set forth on the
Section 3(b) Disclosure Schedule.
(c) COST OF GOODS ADJUSTMENT. CVS' Cost of Goods will be subject to
adjustment as described in the Section 3(c) Disclosure Schedule.
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(d) ADDITIONAL VOLUME DISCOUNT. CVS is entitled to receive an
additional volume discount as described in the Section 3(d) Disclosure
Schedule.
(e) GENERALLY. CVS acknowledges and agrees that its obligation to pay
the purchase price for all Brokerage Purchases, Store Rx Purchases,
Store Other Purchases and other amounts due or to become due under this
Agreement will not be subject to any reduction, setoff, defense,
counterclaim, or deferment for any reason, except as further described
in this subsection (e), and except as described in the Section 10(a)
Disclosure Schedule relating to returns. If Cardinal fails to pay CVS
amounts due (that are not legitimately disputed by Cardinal) pursuant
to the Sections 7(a), 12(a) or 12(b) Disclosure Schedules, then CVS may
setoff such amounts (that are not legitimately disputed by Cardinal)
against amounts due Cardinal for Brokerage Purchases, Store Rx
Purchases, or Store Other Purchases. Any deductions incorrectly or
improperly recognized (i.e., excluding legitimately disputed amounts)
by CVS will be paid to Cardinal as soon as possible and in any event no
later than fifteen (15) days following notification from Cardinal of
such incorrect or improper deduction; provided, however, that with
respect to such legitimately disputed amounts, CVS agrees to pay when
due the remainder of each invoice which is not disputed, and provided
further that CVS will pay when due any such legitimately disputed
amounts after mutually satisfactory reconciliation; and provided
further that nothing in this subsection will be construed to permit CVS
to fail to cause Cardinal to receive payment when due of legitimately
undisputed amounts.
SECTION 4. PAYMENT TERMS.
(a) STORE RX PURCHASES AND STORE OTHER PURCHASES. CVS will cause
Cardinal to receive payment in full and remittance by automated
clearinghouse ("ACH") for all Store Rx Purchases and Store Other
Purchases according to the schedule set forth in the Section 4
Disclosure Schedule.
(b) BROKERAGE PURCHASES. CVS will cause Cardinal to receive payment in
full by ACH for all Brokerage Purchases according to the schedule set
forth in the Section 4 Disclosure Schedule.
(c) AUTOMATED CLEARINGHOUSE. All payments made by CVS to Cardinal under
this Agreement will be made via ACH, to a financial institution
designated by Cardinal, so as to provide Cardinal with good funds
immediately available to Cardinal on the date such payment is due
according to the schedule set forth in the Section 4 Disclosure
Schedule. In the event that ACH is temporarily interrupted or cannot be
utilized, CVS will seek alternative payment methods to ensure that
Cardinal receives good funds immediately available to Cardinal on the
date such payment is due.
(d) GENERALLY.
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If Cardinal reasonably believes that CVS has suffered a
material adverse effect with respect to its financial position, then
Cardinal has the right to request that CVS provide it with information
within one (1) business day from the date CVS receives the request
(i.e., if CVS receives Cardinal's request at 3:00 p.m. Monday, the
information will be provided no later than 3:00 p.m. Tuesday) that
further describes or refutes (as applicable), in reasonable detail,
such material adverse effect, and that may resolve any such concerns
raised by Cardinal. In addition, CVS agrees to promptly notify Cardinal
in the event CVS has suffered a material adverse effect with respect to
its financial position, including, but not limited to an acceleration
event under its credit facilities. If Cardinal has requested such
information or CVS has notified Cardinal as set forth above and
Cardinal and CVS cannot promptly resolve any such issues pursuant to a
reasonable solution, then Cardinal may (i) limit CVS' daily purchases
thereafter to the daily average of CVS' Qualified Purchases during the
immediately preceding thirty (30) day period; (ii) modify payment
terms, and (iii) in the event that CVS is in Payment Default (as
defined below), give CVS notice of the amount of required payments
under this Agreement by 10:00 a.m. Eastern Standard Time on a business
day and require CVS to wire electronic confirmation of payment of such
amount by non-refundable wire transfer by 2:00 p.m. Eastern Standard
Time on the same business day. As used herein, a "PAYMENT DEFAULT"
shall mean a circumstance where CVS has failed to cause Cardinal to
receive payment when due. If any of the foregoing actions are taken by
Cardinal, the parties will meet every approximate thirty (30) days
following the execution of such action to review CVS' financial
condition, and to reasonably consider reinstating the payment terms
which were in effect prior to execution of such action.
If CVS reasonably believes that Cardinal has suffered a
material adverse effect with respect to its financial position that has
materially, adversely affected (or will imminently materially,
adversely affect) Cardinal's Adjusted Service Level as further
described in the Section 9 Disclosure Schedule, then CVS has the right
to request that Cardinal provide it with information within one (1)
business day from the date Cardinal receives the request (i.e., if
Cardinal receives CVS' request at 3:00 p.m. Monday, the information
will be provided no later than 3:00 p.m. Tuesday) that further
describes or refutes (as applicable), in reasonable detail, such
material adverse effect, and that may resolve any such concerns raised
by CVS. In addition, Cardinal agrees to promptly notify CVS in the
event Cardinal believes it has suffered, or will imminently suffer a
material adverse effect with respect to its financial position,
including an acceleration event under its credit facilities, that has
materially, adversely effected (or will imminently materially,
adversely affect) Cardinal's Adjusted Service Level as further
described in the Section 9 Disclosure Schedule, or Cardinal's ability
to pay amounts due CVS. If CVS has requested such information or
Cardinal has notified CVS as set forth above, and with respect to
service level issues, Cardinal cannot cure the resulting service level
issues within ten (10) days, or with respect to Cardinal's ability to
pay amounts due CVS, Cardinal cannot promptly resolve any such issues
pursuant to a reasonable solution, then CVS may terminate this
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Agreement upon providing written notice to Cardinal, subject to the
Xxxxxxx 0 Xxxxxxxxxx Xxxxxxxx. If neither Cardinal's service level has
been (or will not imminently be, as applicable) materially, adversely
affected, nor Cardinal's ability to pay amounts due CVS, then CVS may
not terminate this Agreement.
(e) UNCONDITIONAL GUARANTY. As an inducement for Cardinal to supply
Merchandise and provide services to the subsidiaries and affiliates of
CVS, whether existing now or in the future (collectively, "BORROWERS"),
CVS Corporation (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; (ii) guarantees to Cardinal
the performance of all other obligations under this Agreement; and
(iii) agrees to indemnify and save harmless Cardinal against and from
any and all losses, damages, liabilities, and claims now or at any time
hereafter arising directly or indirectly out of any failure by
Borrowers to promptly and fully perform all of the obligations
hereunder.
SECTION 5. DELIVERY/ORDER SUBMISSION PROCEDURES. Cardinal will deliver
the Merchandise F.O.B. to the Pharmacies and exercise its good faith efforts to
provide an efficient delivery schedule designed to meet the mutual needs of
Cardinal and the Pharmacies. All deliveries will be accompanied by an invoice
and all delivery costs (not including emergency deliveries) absorbed by
Cardinal. Cardinal will deliver Merchandise to each Pharmacy five (5) days per
week (Monday through Friday, except Pharmacies located outside of the
continental United States or other Pharmacies mutually agreed upon by the
parties from time to time) in accordance with Cardinal's general delivery
schedules established from time to time by the applicable Cardinal servicing
division (exclusive of holidays, etc.). Any additional deliveries will
constitute emergency deliveries, which if required, will incur a separate
delivery charge at Cardinal's cost for such deliveries. Delivery schedules and
purchase order deadlines may be reviewed and changed from time to time as
mutually agreed upon by Cardinal and the Pharmacies. Delivery of Brokerage
Purchases will be subject to the terms and conditions set forth in the Section 2
Disclosure Schedule.
The Pharmacies will submit all orders, except for orders for Schedule
II drugs, for all Merchandise to Cardinal via Telxon units or other electronic
order entry system approved by Cardinal. Any such equipment supplied by Cardinal
will be returned to Cardinal by CVS upon the expiration or termination of this
Agreement for any reason, or upon Cardinal's request, if in Cardinal's
reasonable discretion, Cardinal's proprietary rights are threatened. In the
event that electronic order entry is temporarily interrupted for reasons beyond
the control of CVS or Cardinal, CVS may place orders manually and both parties
will use reasonable efforts to rectify the problem.
DEA Form 222 may be mailed or given to the delivery driver to be
delivered to the applicable Cardinal distribution center. Schedule II orders
will be delivered within one (1) business day of Cardinal's receipt of the
signed original of DEA Form 222. CVS acknowledges that if CVS 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
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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.
SECTION 6. OTHER SERVICES.
(a) CARDINALCHOICE-HQ(TM). Cardinal will license two (2)
CardinalCHOICE-HQ(TM) software systems to CVS' headquarters on the
terms set forth in the Section 6(a) Disclosure Schedule. Such licensing
will be pursuant to the terms and conditions of Cardinal's standard
software license agreement for such software. In addition, Cardinal
will provide CVS with the related hardware as described in the Section
6(a) Disclosure Schedule, pursuant to Cardinal's standard hardware
purchase agreement.
(b) MANAGEMENT INFORMATION SERVICES. Cardinal will provide to CVS those
programs and services described in the Base Service Package set forth
on the Section 6(b) Disclosure Schedule on the terms and conditions
described in that schedule.
(c) RAPIDISTRIBUTION(SM). Cardinal will make available to the
Pharmacies participation in Cardinal's RAPIDistribution(SM) program,
pursuant to the standard terms of that program.
(d) EMPLOYEES.
(i) CVS will engage a Pharmacy DSD employee with the skills
set forth in the Section 6(d) Disclosure Schedule to act as a
liaison between Cardinal and CVS. During the term of this
Agreement and for a two (2) year period thereafter, Cardinal
will not directly or indirectly employ, engage, or otherwise
solicit for employment or engagement such employee, or induce
or encourage such employee to terminate or otherwise modify
such employee's relationship with CVS.
(ii) Cardinal will also engage a Pharmacy employee with the
skills set forth in the Section 6(d) Disclosure Schedule to
act as a liaison between Cardinal and CVS and work on matters
related to this Agreement. During the term of this Agreement
and for a two (2) year period thereafter, CVS will not
directly or indirectly employ, engage, or otherwise solicit
for employment or engagement such employee, or induce or
encourage such employee to terminate or otherwise modify such
employee's relationship with Cardinal.
(iii) Cardinal may elect, in its sole discretion, to employ
one or more supervisory employees in the areas of receiving,
shipping and inventory management of Cardinal transaction at
one (1) or more of the CVS Pharmacy DCs. The employee selected
will be subject to CVS' advance
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approval, which will not be unreasonably withheld. If Cardinal
engages an employee to perform these functions, during the
term of this Agreement and for a two (2) year period
thereafter, CVS will not directly or indirectly employ,
engage, or otherwise solicit for employment or engagement such
employee(s), or induce or encourage such employee(s) to
terminate or otherwise modify such employee's(s') relationship
with Cardinal.
(e) PROFITPAK(R). CVS will fully participate in the ProfitPak(R)
program, with autosubstitution, as more fully described in the Section
6(e) Disclosure Schedule.
SECTION 7. CVS GENERIC FORMULARY AND CARDINALSOURCE(SM) PROGRAM.
Cardinal understands that CVS has established a preferred list of generic Rx
Products for the Pharmacies which CVS stocks in the CVS Pharmacy DCs (the "CVS
GENERIC FORMULARY"). Subject to Cardinal's manufacturer standards and product
movement conditions for those manufacturers with which Cardinal is not doing
business under the CardinalSOURCE(SM) program at that time, Cardinal will make
reasonable efforts to stock all such existing items for the Pharmacies
identified by CVS on CVS' Generic Formulary as of the Commencement Date;
provided, however, in no event will Cardinal be required to stock any item(s)
listed on the CVS Generic Formulary if the manufacturer or item(s) do not meet
Cardinal's criteria (for example, in the event that a manufacturer fails to
obtain the required insurance coverage amounts, or is insolvent or bankrupt, or
is in a debit balance in Cardinal's accounts payable system) or if Cardinal does
not already stock such item(s) to supply to other retail and GPO customers.
Whenever a Pharmacy orders an A-B equivalent generic product (as defined by the
FDA), Cardinal will automatically substitute the corresponding CVS Generic
Formulary item, if applicable. For any such generic item ordered by a Pharmacy
under CVS' Generic Formulary for which Cardinal is out-of-stock, Cardinal will
automatically substitute such item with the corresponding A-B equivalent generic
product, if any, from the CardinalSOURCE(SM) generic formulary (the "CARDINAL
GENERIC FORMULARY"). In addition, for any generic item ordered by any Pharmacy
for which there is not a corresponding item under the CVS Generic Formulary,
Cardinal will automatically substitute such item with the corresponding Cardinal
Generic Formulary item. In the event that the Cardinal Generic Formulary item is
out-of-stock, then Cardinal will automatically substitute such corresponding
item with the corresponding item under the second tier Cardinal generic
formulary (the "SECONDARY CARDINAL GENERIC FORMULARY"). Notwithstanding the
foregoing to the contrary, CVS, from time to time, reserves the right to
prohibit Cardinal from substituting certain items on the Cardinal Generic
Formulary and Secondary Cardinal Generic Formulary for corresponding items on
the CVS Generic Formulary provided that (i) CVS has valid reasons for
prohibiting such items, in CVS' sole reasonable discretion, and (ii) such
prohibited items designated by CVS do not constitute a significant percentage of
the Cardinal Generic Formulary and Secondary Cardinal Generic Formulary. In
addition, in consideration for the competitive pricing offered to CVS hereunder
and other valuable consideration, CVS will not materially (as reasonably
determined by Cardinal) increase the ratio of Qualified Purchases through the
CVS Generic Formulary compared to Qualified Purchases of all generic Rx
Products.
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CVS has provided Cardinal with a list of items on CVS' Generic
Formulary as of the Commencement Date. As items on the CVS Generic Formulary
change from time to time, CVS will provide Cardinal with electronic notice of
such changes including the proposed effective date of such change. Cardinal will
make reasonable efforts to stock items to be added to the CVS Generic Formulary
within the later of thirty (30) days of receipt of such notice or the proposed
effective date, subject to Cardinal's manufacturer acceptance policy for those
manufacturers with which Cardinal is not doing business under the Cardinal
Generic Formulary program at that time. In the event that Cardinal's inventory
level of any product being deleted from the CVS Generic Formulary exceeds the
amount anticipated to be purchased by CVS prior to CVS' proposed effective date
of such deletion and the Rx Product is not on CardinalSOURCE(SM) or another of
Cardinal's retail chain generic programs, then Cardinal will notify CVS of such
situation and Cardinal and CVS will mutually agree upon the adjusted effective
date of such deletion. In addition, CVS will provide Cardinal on a monthly basis
in an acceptable file format with a list setting forth all items on CVS' Generic
Formulary as of the end of the previous month. Cardinal will use the information
on such files to verify its records of CVS' Generic Formulary and notify CVS of
any discrepancies so that such discrepancies may be reconciled and corrected.
CVS will be entitled to a discount (in the form of a rebate) based on
the volume of generic Rx Products purchased by the Pharmacies as described in
the Section 7(a) Disclosure Schedule.
SECTION 8. CONTRACT ADMINISTRATION. Cardinal will recognize and
administer mutually agreed upon manufacturer contracts between CVS and any
manufacturer ("MANUFACTURER CONTRACTS") subject to their continued validity in
accordance with applicable laws and subject to such credit considerations
concerning the applicable manufacturer as Cardinal may reasonably consider
appropriate; however, if manufacturers' chargebacks for contract items submitted
by Cardinal are disallowed or unreconcilable, then the disputed charge will be
billed back to CVS. Notwithstanding the foregoing, credit considerations with
respect to a manufacturer may arise subsequent to Cardinal's initial agreement
to administer a Manufacturer Contract, and in such event, Cardinal may elect not
to recognize or administer such Manufacturer Contract prospectively. Cardinal
will use its reasonable efforts to notify CVS of any manufacturers with which
Cardinal has credit considerations. CVS will provide Cardinal with a copy of all
new Manufacturer Contracts to be administered by Cardinal that are entered into
after the Commencement Date and a copy (in the vendor's form) of all renewals,
replacements or terminations of all Manufacturer Contracts. Cardinal will begin
recognizing and administering each new Manufacturer Contract, renewal, or
replacement at the later of: (i) seven business (7) days after Cardinal has
received a copy of the new Manufacturer Contract, renewal or replacement from
CVS and verification thereof, or (ii) the effective date of the new Manufacturer
Contract, renewal or replacement. Failure of CVS to comply with these notice
requirements will entitle Cardinal to exclude the applicable items from the
Adjusted Service Level calculation pursuant to the provisions of Section 9
hereof until thirty (30) days after delivery of accurate usage data for the
applicable items.
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In order to facilitate Cardinal's inventory management requirements,
CVS will provide Cardinal in file format thirty (30) days prior to participation
under this Agreement by that Pharmacy or CVS Pharmacy DC the following: (a) with
respect to each Pharmacy and CVS Pharmacy DC, accurate six (6) months' usage
figures (including NDC numbers) on both contract and non-contract items; and (b)
with respect to each distribution center of CVS, Brokerage Purchases broken down
by brokerage volume, vendors and items. Cardinal acknowledges that CVS may
desire to sell overstocked Merchandise (that it purchased from Cardinal) to an
alternate source to relieve CVS' inventory position. CVS will sell such
overstocked Merchandise in compliance with all applicable federal, state and
local laws. The parties acknowledge and agree that nothing herein will require
Cardinal to take any affirmative action with respect to the same. CVS will
assume all liability associated with such sale and indemnify Cardinal against
any claims, losses or other damages that Cardinal may incur in connection with
such sale.
SECTION 9. SERVICE LEVEL. Cardinal will exercise all reasonable efforts
to provide CVS with the average adjusted monthly service levels described in the
Section 9 Disclosure Schedule.
SECTION 10. RETURNED GOODS POLICY. Cardinal will accept returns from
the Pharmacies in accordance with the Standard Cardinal Returned Goods Policy
(the "CARDINAL RETURNS POLICY") in effect from time to time during the term of
this Agreement. A current copy of the Cardinal Returns Policy is set forth in
the Section 10(a) Disclosure Schedule. Set forth in the Section 2 Disclosure
Schedule are the terms and conditions of the Cardinal Returns Policy applicable
to CVS for Brokerage Purchases in effect on the Commencement Date. 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 during the term of this Agreement. A current copy of the Third
Party Returns Policy is set forth in the Section 10(b) Disclosure Schedule.
SECTION 11. TERM.
(a) The term of this Agreement will begin on January 1, 2000 (the
"COMMENCEMENT DATE"), and will continue for sixty-four (64) months
thereafter (the "INITIAL TERM"). This Agreement may be renewed for
successive renewal periods of one (1) year each upon mutual agreement
of the parties. In the event either party desires not to renew the
Agreement at the expiration of the Initial Term or any renewal term,
that party shall provide the other party with at least ninety (90) days
written notice prior to the expiration of the then current term. In the
event such notification is not provided with at least the ninety (90)
day notice, the parties agree that the then current term shall be
extended for a period of ninety (90) days from the date notice is
actually received, or if no notice is given, for a period of ninety
(90) days after the expiration of such term to provide for an adequate
transition period. Any reference in this Agreement to the "term of this
Agreement" will include the Initial Term and any renewal term.
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(b) Either party may effect an early termination of this Agreement for
cause by giving written notice to the other party, provided such party
has first given written notice to the other party of the occurrence of
a material breach of this Agreement (which notice will specify the
nature of such breach) and the other party has failed to cure such
breach within ninety (90) days following its receipt of such notice or,
in the event such breach is not capable of being cured in such ninety
(90) day period, the breaching party's failure to diligently prosecute
such cure thereafter; provided that with respect to any failure to make
any payment when due under this Agreement, such period in which to cure
will be reduced to ten (10) days; provided, however, that the foregoing
in no way limits or modifies Cardinal's right to refuse orders, modify
payment terms or cease its supply relationship pursuant to Section 4(c)
herein.
(c) Either party will have the right to terminate this Agreement
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, 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.
(d) CVS' payment obligations to Cardinal will survive termination or
expiration of this Agreement. The parties acknowledge that in the event
of a breach of this Agreement, in addition to all other remedies
available to them under this Agreement or at law, the parties may be
entitled to the remedy of specific performance.
(e) Upon termination of this Agreement for any reason, CVS' rights as a
licensee of CardinalCHOICE-HQ(TM) software and other Cardinal software
will automatically expire, and CVS will (upon request) promptly return
such software and any related hardware not purchased by CVS to a return
location specified by Cardinal. Further, CVS will comply with the
provisions of any related hardware purchase agreement, if any,
regarding termination. Upon termination of this Agreement for any
reason, Cardinal will use its reasonable efforts to provide CVS with
access to CVS' historical purchase data.
(f) Termination of this Agreement will be subject to a termination fee
as described in the Section 11(f) Disclosure Schedule.
(g) This Agreement will supersede and replace that certain Wholesale
Supply Agreement dated March 9, 1998 by and between Cardinal and CVS
(the "ORIGINAL AGREEMENT"), and that certain Interim Letter Agreement
dated March 7, 2000, and all extensions thereof. Upon commencement of
this Agreement, the Original Agreement will terminate and be of no
further force or effect whatsoever.
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SECTION 12. GUARANTEED SAVINGS PROGRAMS. CVS and Cardinal will develop
guaranteed savings programs as described in the Section 12(a) and 12(b)
Disclosure Schedules.
SECTION 13. NOTICES. All notices required or permitted under this
Agreement will be in writing to the other party at the address set forth below
(or such other address as that party may give to the other party by written
notice hereunder) and will be deemed given (a) if delivered personally
(including by overnight express or messenger), upon delivery, (b) if delivered
by first class, registered or certified mail (return receipt requested), upon
the earlier of actual delivery or three (3) days after being mailed, or (c) if
given by telecopy, upon confirmation of receipt of automatic transmission
report.
If to:
CVS MERIDIAN, INC. CARDINAL HEALTH
One CVS Drive 0000 Xxxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000 Xxxxxx, Xxxx 00000
Attn: Senior Vice President, Attn: Senior Vice President,
Healthcare Services Retail Sales and Marketing
Telecopy: (000) 000-0000 Telecopy: (000) 000-0000
with copy to: with copy to:
General Counsel General Counsel at the same address
at the same address Telecopy: (000) 000-0000
Telecopy: (000) 000-0000
SECTION 14. TAXES/COMPLIANCE WITH LAWS. CVS 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 CVS is obligated to pay under this section, then CVS will promptly
reimburse Cardinal in an amount equal to the amount so paid by Cardinal.
If and to the extent any discounts, credits, rebates or other purchase
incentives are paid or applied by Cardinal with respect to the Merchandise
and/or Brokerage Purchases purchased under this Agreement, then applicable
provisions of the Medicare/Medicaid and state health care fraud and
abuse/anti-kickback laws (collectively, "fraud and abuse laws") may require
disclosure of the applicable price reduction on CVS' claim or cost reports for
reimbursement from governmental or other third parties. CVS agrees to comply
with all applicable provisions of the fraud and abuse laws and to indemnify and
hold Cardinal harmless for any failure on CVS' part to do so.
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CVS will certify to Cardinal that all of the Pharmacies are properly
and completely licensed in compliance with all applicable state and federal
laws, regulations, rules and orders. Such certification will be provided in the
form of a Schedule listing all of the Pharmacies, and their respective state and
federal license numbers and expiration dates. CVS will provide Cardinal with an
updated Schedule no later than the twenty-fifth (25th) day of each month which
will include information for the following month.
SECTION 15. FORCE MAJEURE. One or more of Cardinal's obligations under
this Agreement will be excused if, but only 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, change
in business conditions (other than insignificant changes), 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, CVS 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. Further, CVS will be excused
from meeting its Pharmacy Minimum Volume Requirements as set forth in the
Section 3(a) Disclosure Schedule during such period (only in the amounts that
the affected Pharmacies are required to purchase from others due to the event of
force majeure).
SECTION 16. RECORDS AND AUDIT.
(a) Cardinal will maintain records pertaining to the Merchandise
purchased by CVS under this Agreement as required by applicable
federal, state and local laws, rules and regulations. Not more than
twice in any twelve (12) month period, and following thirty (30) days'
advance written notice to Cardinal, or as required by administrative
ruling or court order, CVS will have the right to appoint one or more
of its agents or employees to review those relevant records applicable
to its pharmaceutical purchases for the sole purpose of verifying
compliance with the pricing terms of this Agreement. Any such review
will be limited to twenty-four (24) months of historical information as
of the date such review begins, except if Cardinal is required by
applicable law to maintain records pertaining to the Merchandise
purchased by CVS under this Agreement for a period longer than
twenty-four (24) months, then Cardinal will allow CVS to access such
information also. The information will be subject to a confidentiality
agreement prepared by Cardinal and signed by CVS and its employee(s)
and agent(s) who will have access to the information prior to beginning
the review. Notwithstanding the foregoing, CVS may only appoint agents
who are employees of one of the top five national accounting firms, as
may be deemed reasonably acceptable to Cardinal and CVS. Further, with
respect to contracts between Cardinal and certain manufacturers which
must remain confidential pursuant to a contractual provision, CVS may
only review records relating to such contracts through an employee of
one of the top five national accounting firms deemed reasonably
acceptable to Cardinal (i.e., not a CVS employee) to verify compliance
with the pricing terms of such contracts. Such accounting firm may
confirm to
14
CVS that Cardinal has (or has not) complied with the pricing terms of
such contracts, but may not (and will not) disclose to CVS the
confidential information.
(b) CVS will maintain records pertaining to the Merchandise purchased
by CVS and all pharmacies and distribution centers, whether now or
hereafter owned, managed or operated by CVS, under this Agreement as
required by applicable federal, state and local laws, rules and
regulations. Not more than twice in any twelve (12) month period, or as
required by administrative ruling or court order, and following thirty
(30) days' advance written notice to CVS, Cardinal will have the right
to appoint one or more of its employees or agents to review those
relevant records applicable to such purchases of Rx Products for the
sole purposes of verifying (i) compliance with the Minimum Volume
Percentage with respect to the Pharmacies as further described in the
Section 1(a) Disclosure Schedule, (ii) that each CVS Pharmacy DC is
purchasing its Primary Wholesale Requirements of Brokerage Purchases
from Cardinal, as further described in the Section 2 Disclosure
Schedule, (iii) that CVS has not made any purchases of Rx Products from
alternate sources (unless directed by Cardinal and agreed upon by CVS),
and (iv) compliance with any other material terms of this Agreement.
Any such review will be limited to twenty-four (24) months of
historical information as of the date such review begins, except if CVS
is required by applicable law to maintain records pertaining to the
Merchandise purchased by CVS under this Agreement for a period longer
than twenty-four (24) months, then CVS will allow Cardinal to access
such information also. The information will be subject to a
confidentiality agreement prepared by CVS and signed by Cardinal and
its employee(s) and agent(s) who will have access to the information
prior to beginning the review. Notwithstanding the foregoing, Cardinal
may only appoint agents who are employees of one of the top five
national accounting firms, as may be deemed reasonably acceptable to
CVS and Cardinal.
SECTION 17. CONFIDENTIALITY. Each party acknowledges that as a result
of this Agreement, that party and its employees and agents, will learn
confidential information of the other party (including, but not limited to, the
information Cardinal provides to CVS pursuant to the Guaranteed Savings Program
set forth in the Section 12(a) and (b) Disclosure Schedules). Neither party will
disclose any confidential information of the other party to any person or
entity, or use, or permit any person or entity 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 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, (c) disclosures which
are made on a confidential basis to that party's attorneys, accountants, and
other professional advisors in connection with matters relating to this
Agreement, (d) information which is or becomes available to the other party on a
non-confidential basis from a source entitled to disclose it on a
non-confidential basis, (e) information that is or becomes generally available
to the public or within the industry to which such information relates other
than as a result of disclosure by the other party or its representatives, (f)
routine disclosures to IMS/DDD or similar
15
organizations consistent with past practices, so long as confidential
information regarding CVS is provided only on an aggregate or "blinded" basis
and not identified specifically as CVS information other than as otherwise
contemplated or described in this Agreement, and (g) disclosures to vendors as
reasonably required by Cardinal to enable Cardinal to purchase Merchandise on
behalf of CVS and to generate Gross Margin related to the IPP. The specific
material terms of this Agreement will be deemed to be confidential information
of each party. Each party will be responsible for any breach of this
confidentiality provision by its representatives.
The obligations of confidentiality hereunder will survive the
termination of this Agreement for a period of two (2) years. 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. Notwithstanding the
foregoing, each party may keep one copy of any documentation containing
confidential information of the other party, provided that such copy will be
retained and used solely by the legal department of that party.
Each employee described in section 6(d) of this Agreement will execute
a Confidentiality Agreement as mutually agreed upon by the parties.
SECTION 18. INDEMNITY. Cardinal will indemnify and hold harmless CVS
and all future parent corporations, subsidiaries and affiliates and each of
their officers, directors, employees and representatives (collectively referred
to in this paragraph as CVS) from and against those claims, damages or
liabilities (exclusive of any incidental damages, which are defined as claims,
damages and liabilities associated with or related to actual damages but are in
excess of repayment for actual losses, and exclusive of any consequential
damages, which are defined as claims, damages and liabilities that do not flow
directly and immediately from an act that would require indemnification
hereunder but that result indirectly from such an act) directly attributable to
the failure of Cardinal to properly store, handle or distribute Merchandise in
accordance with this Agreement or in accordance with applicable law, it being
understood, however, that Cardinal is not the manufacturer of the Merchandise
and that no indemnification of any type is being provided other than as
specifically stated in this paragraph. In addition, Cardinal will transfer to
CVS (on a non-exclusive basis) any representations, warranties and indemnities
made by the manufacturers of the Merchandise to the extent that such
representations, warranties and indemnities are assignable by Cardinal, and will
cooperate with all reasonable requests made by CVS to enforce such
representations, warranties and indemnities against such manufacturers.
Notwithstanding anything to the contrary herein, Cardinal reserves its own
rights under such representations, warranties and indemnities made by such
manufacturers and the remedies available to it for any breach of such
representations, warranties and indemnities by the manufacturers.
16
CVS will indemnify and hold harmless Cardinal and all future parent
corporations, subsidiaries and affiliates and each of their officers, directors,
employees and representatives (collectively referred to in this paragraph as
Cardinal) from and against those claims, damages or liabilities (exclusive of
any incidental damages, which are defined as claims, damages and liabilities
associated with or related to actual damages but are in excess of repayment for
actual losses, and exclusive of any consequential damages, which are defined as
claims, damages and liabilities that do not flow directly and immediately from
an act that would require indemnification hereunder but that result indirectly
from such an act) directly attributable to CVS' negligence or wrongdoing. The
parties agree that neither CVS nor Cardinal will be obligated under this section
18 with respect to any claim that results solely from the negligence or
intentional wrongdoing of the other party.
SECTION 19. INSURANCE. Cardinal and CVS agree to maintain the insurance
as set forth in the Section 19 Disclosure Schedule.
SECTION 20. ENTIRE AGREEMENT; SUCCESSORS. This Agreement, together with
the Disclosure Schedules referenced herein, constitutes the entire agreement and
understanding of the parties with respect to the subject matter hereof, and
supersedes all prior and contemporaneous agreements, proposals, and
understandings between the parties relative to the subject matter hereof.
Cardinal may delegate its rights and obligations to any corporation that is
controlled by or under common control with Cardinal Health, Inc. and CVS may
delegate its rights and obligations to any corporation that is controlled by or
under common control with CVS Corporation, provided that in each such assignment
by Cardinal or CVS the assignor will remain the primary obligor for all payment
obligations. If all or substantially all of the stock or assets of CVS
Corporation are acquired by an unrelated third party (which expressly excludes a
merger where CVS Corporation is the surviving entity), then Cardinal may elect
(but will not be required) to terminate this Agreement during the thirty (30)
day period following such acquisition, by providing written notice to CVS of its
intent to terminate sixty (60) days prior to the intended termination date.
Further, if all or substantially all of the stock or assets of Cardinal Health,
Inc. are acquired by an unrelated third party (which expressly excludes a merger
where Cardinal Health, Inc. is the surviving entity), then CVS may elect (but
will not be required) to terminate this Agreement during the thirty (30) day
period following such acquisition, by providing written notice to Cardinal of
its intent to terminate sixty (60) days prior to the intended termination date.
If CVS is acquired and Cardinal terminates this Agreement pursuant to such
acqusition, CVS will not be required to pay the Termination Fee (as such term is
defined in the Section 11(f) Disclosure Schedule), but will be required to
refund the applicable portion of the Additional Volume Discount. This Agreement
will be binding on, and inure to the benefit of, and be enforceable by and
against the respective successors and assigns of each party to this Agreement.
SECTION 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.
17
SECTION 22. WAIVER. Neither party's failure to enforce any provision of
this Agreement will be considered a waiver of any future right to enforce such
provision.
SECTION 23. GOVERNING LAW. This Agreement will be governed by the laws
of the State of Ohio, without regard to choice of law principles.
SECTION 24. RELATIONSHIP OF THE PARTIES. The relationship of the
parties is and will be that of independent contractors. This Agreement does not
establish or create a partnership or joint venture among the parties.
SECTION 25. SEVERABILITY. The intention of the parties is to fully
comply with all applicable laws and public policies, and this Agreement will be
construed consistently with all such laws and policies to the extent possible.
If and to the extent that a court of competent jurisdiction determines that it
is impossible to so construe any provision of this Agreement and consequently
holds that provision to be invalid, such holding will in no way affect the
validity of the other provisions of this Agreement, which will remain in full
force and effect.
SECTION 26. ANNOUNCEMENTS. CVS will not issue any press release or
other public announcement, verbally or in writing, referring to Cardinal or any
entity which is controlled by or under common control with Cardinal Health,
Inc., without Cardinal's prior written consent and advice of counsel. CVS will
provide Cardinal's Executive Vice President, Retail Sales and Marketing, 0000
Xxxxxxxx Xxxxx, Xxxxxx, Xxxx 00000, with a written copy of any such press
release or other public announcement no less than seventy-two (72) hours prior
to CVS' intent to issue such release or announcement. CVS is responsible for
confirming in writing that Cardinal's Executive Vice President, Retail Sales and
Marketing has received any such proposed press release. Any such press release
or other public announcement proposed by CVS will be subject to Cardinal's
revision and final approval. Nothing contained herein will limit the right of
CVS to issue a press release if, in the opinion of CVS' counsel, such press
release is required pursuant to state or federal securities laws, rules or
regulations.
Cardinal will not issue any press release or other public announcement,
verbally or in writing, referring to CVS or any entity which is controlled by or
under common control with CVS Pharmacy, Inc., without CVS' prior written consent
and advice of counsel. Cardinal will provide CVS' marketing department, Attn:
Director of Corporate Communications, with a written copy of any such press
release or other public announcement no less than seventy-two (72) hours prior
to Cardinal's intent to issue such release or announcement. Cardinal is
responsible for confirming in writing that CVS' marketing department has
received any such proposed press release. Any such press release or other public
announcement proposed by Cardinal will be subject to CVS' revision and final
approval. Nothing contained herein will limit the right of Cardinal to issue a
press release if, in the opinion of Cardinal's counsel, such press release is
required pursuant to state or federal securities laws, rules or regulations.
18
SECTION 27. AUTHORIZED SIGNATORIES. All signatories to this Agreement
represent that they are authorized by their respective companies to execute and
deliver this Agreement on behalf of their respective companies, and to bind such
companies to the terms herein.
Cardinal Health*
By: /s/ XXXXXX XXXXX
------------------------------
Xxxxxx Xxxxx
President
Date: 8-18-00
----------------------------
Accepted and Agreed to by:
CVS MERIDIAN, INC.
By: /s/ XXXXXXXXXXX X. XXXXXX
----------------------------
Xxxxx X. Xxxxxx
Its: SR. V.P. MERCHANDISING
---------------------------
Date: 8/17/00
--------------------------
And with respect to Section 3(e) only:
CVS CORPORATION
By: /s/ XXXXXXX X. XXXXXX
------------------------
Xxxxxxx X. Xxxxxx
Its: V.P. CVS Corp.
-----------------------
Date: 8/17//00
----------------------
*The term "CARDINAL HEALTH" or "CARDINAL" will include the following affiliated
operating companies: Cardinal Syracuse, Inc., a New York corporation (Syracuse,
New York); Xxxxxxxx Drug Distributors, Inc., a Delaware corporation (Zanesville,
Ohio); Marmac Distributors, Inc., a Connecticut corporation (Hartford,
Connecticut); Xxxxx X. Xxxx, Inc., a Massachusetts corporation (Peabody,
Massachusetts); Ohio Valley-Clarksburg, Inc., a Delaware corporation (Wheeling,
West Virginia); Cardinal Southeast, Inc. a Mississippi corporation (Madison,
Mississippi); Xxxxxxxx Distribution Corporation, a Delaware corporation (Folsom,
California); Cardinal Health Systems, Inc., an Ohio corporation; and any other
subsidiary of Cardinal Health, Inc., an Ohio corporation ("CHI"), as may be
designated by CHI.
