LIFESCAN INC
a Xxxxxxx & Xxxxxxx company
Purchasing Agreement Contract
for Medicare Distributors Pilot Program
Date: June 2, 1997
Distributor's Name: Certified Diabetic Supplies, Inc.
Distributor's Address: 0000 X & X Xxxx.
Xxxxxx, XX 00000-0000
Distributor's Phone (000) 000-0000 FAX: (000) 000-0000
Key Contacts: Xxxxx X. Fascina Title: President
Signatures:
/s/ XXXXX X. XXXXXXX /s/ XXXXX XXXXXXX
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Signature Signature
Xxxxx X. Xxxxxxx Xxxxx Xxxxxxx
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Name (Please Print) Name (Please Print)
6/25/97 June 2, 1997
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Date Date
I. INTRODUCTION
A. Pursuant to this agreement, LifeScan agrees to sell and Certified
Diabetic Supplies, Inc. (hereafter, "Customer") agrees to buy Medicare
ONE TOUCH and SureStep Test Strips for sale exclusively to Medicare
end-users according to the terms set forth below.
PAGE 2
B. This contract supersedes any existing agreement between LifeScan and
Customer covering the same subject matter.
II. TERM
A. This agreement shall commence on the date executed by both parties and
be effective with shipments beginning May 15, 1997 (hereinafter, the
effective date), and shall remain in effect until December 31, 1997.
B. This Agreement will be automatically renewed for successive annual
periods unless either party delivers, by December 1 of the current
year, written notice stating it does not intend to renew.
III. DEFINITIONS
A. Medicare Distributor - 1) An entity in the business of selling blood
glucose self-monitoring devices, such as ONE TOUCH meters and test
strips, 2) At least 70% of the entity's customer base for these blood
glucose meters and test strips are enrolled in Medicare or Medicaid, 3)
The entity has signed an agreement to accept assignment as a "preferred
supplier" for Medicare, and 4) The entity provides an enhanced product
consisting of test strips and patient services that promote tight
control of glucose levels, frequent testing and an improved quality of
life for people with diabetes.
B. Product Discounts - As an incentive for achieving the volumes and
providing services to the Medicare/Medicaid community, discounts are
available according to the following schedule:
Product Qtrly 50's Rqmt Net Price* Patient Services
------- --------------- ---------- ----------------
1. ** ** 800# for Patient Training
2. ** ** 800# for Patient Training
Out-Bound Calling
Patient Newsletter
3. ** ** 800# for Patient Training
Out-Bound Calling
Patient Newsletter
In-Home Patient Assistance
4. ** ** 800# for Patient Training
Out-Bound Calling
Patient Newsletter
In-Home Assistance
CDE Hot-Line Assistance
---------------------
*Note: Net Price as of 7/1/96, if a price increase is announced after this date,
the Medicare Net Price increase will be proportionate.
** Confidential treatment requested. Portions of this document have been
omitted by blocking out the relevant text pursuant to an Application for
Confidential Treatment. Such blocked out omissions have been filed
separately with the Securities and Exchange Commission. The Registrant
shall furnish all omitted schedules and exhibits to this document upon
the request of the Securities and Exchange Commission.
PAGE 3
C. Quarterly Volume Objectives (QVO) - quarterly volume requirements
established by the schedule above.
D. Medicare ONE TOUCH Test Strips - 50's - Genuine ONE TOUCH and
SureStep(TM) Test Strips, containing 2 vials of 25 strips for a total
of 50, specially packaged with a label marked "For Medicare Only",
LifeScan part # 010-391, and NDC # 00000-000-00, for ONE TOUCH; part
# 010-442 and NDC # 00000-000-00, for SureStep.
E. Medicare Assignment End-User - a qualified Medicare recipient for whom
the Customer has agreed to process the Medicare paperwork and accept
80% of the authorized Medicare reimbursement rate directly from
Medicare, plus the remaining 20% directly from the end-user or a
supplementary insurance provider.
F. 50-strip vial - one carton of Medicare ONE TOUCH or SureStep Test
Strips - 50's containing 2 vials of 25 strips for a total of 50.
G. Unit - one carton of Medicare ONE TOUCH or SureStep Test Strips - 50's
containing 2 vials of 25 strips for a total of 50 and the basis for
measuring sales volume.
H. Original Invoice Price - *
I. Credit Certificate - a document completed by a LifeScan representative
at the time of the on-site quarterly audit that verifies compliance to
the terms of the Agreement and calculates the Product Discounts earned
on each invoice. The Credit Certificate can be attached to an
outstanding LifeScan invoice. *
IV. PRICING AND QUANTITY LIMITATIONS
A. LifeScan will sell Medicare ONE TOUCH or SureStep Test Strips to
Customer at * (hereinafter, the "Original Invoice Price").
B. *
-----------------
* Confidential treatment requested. Portions of this document have been
omitted by blocking out the relevant text pursuant to an Application for
Confidential Treatment. Such blocked out omissions have been filed
separately with the Securities and Exchange Commission. The Registrant
shall furnish all omitted schedules and exhibits to this document upon
the request of the Securities and Exchange Commission.
PAGE 4
C. Customer agrees to permit a quarterly on-site audit by LifeScan. This
will confirm shipments to Medicare customers, reconcile Credit
Certificates and verify that the Consumer Service Requirements are
being met.
D. Customer agrees that orders exceeding * are subject to LifeScan
approval. Customer agrees to provide complete and adequate
documentation of increased Medicare assignment end-user demand, if
necessary.
E. Customer agrees to maintain a good credit status within its previously
approved limits and consistent with its current business conditions. If
the Customer exceeds its limit, LifeScan reserves the right to refuse
or hold additional shipments. Resolving a credit hold may require
advance payments on outstanding invoices that exceed the credit limit.
F. LifeScan has no control over the Customer's price to the end-user.
V. CUSTOMERS REPRESENTATIONS AND OBLIGATIONS
A. Customer represents that it is a Medicare Distributor, as defined
above. Customer further represents that at least 70% of the sales
(measured by unit sales) of such test strips made in the 12 months
preceding the Effective Date of this Agreement, were made to Medicare
Assignment end-users, and that Customer accepted 80% of the authorized
Medicare reimbursement ceiling price, plus the 20% co-payment from
either the end-user or a supplementary insurance carrier, as full
payment.
B. During the term of the Agreement, following the Effective Date,
Customer will only accept 80% of the authorized Medicare reimbursement
ceiling for LifeScan blood glucose products, plus the 20% co-payment
from either the end-user or a supplementary insurance carrier, as
payment in full. Customer agrees to sell Medicare ONE TOUCH or SureStep
Test Strips (measured by unit sales) to Medicare assignment end-users
only. Failure by Customer to sell Medicare ONE TOUCH or SureStep Test
Strips exclusively to Medicare assignment end-users during the one-year
term renders this Agreement immediately voidable by LifeScan.
C. Customer agrees to buy from LifeScan at least the minimum number of
units of 50-strip vials required for its QVO for each quarter of the
contract term, commencing on the Effective Date.
D. Customer agrees to sell Medicare ONE TOUCH or SureStep Test Strips to
Medicare assignment end-users only. If LifeScan, at its sole
discretion, believes that Customer has made a knowing sale of Medicare
ONE TOUCH or SureStep Test Strips to a person or entity other than a
Medicare assignment end-user, LifeScan may terminate this Agreement
immediately.
----------
* Confidential treatment requested. Portions of this document have been
omitted by blocking out the relevant text pursuant to an Application of
Confidential Treatment. Such blocked out omissions have been filed
separately with the Securities and Exchange Commission. The Registrant
shall furnish all omitted schedules and exhibits to this document upon the
request of the Securities and Exchange Commission.
PAGE 5
E. Customer agrees not to advertise Medicare ONE TOUCH or SureStep Test
Strip prices. Customer agrees that advertising price is not essential
element of making sales to the Medicare assignment end-user since
Customer is accepting the Medicare reimbursement ceiling, including the
patient co-pay, as full payment. Failure to comply with the terms of
this paragraph renders the Agreement immediately voidable by LifeScan.
F. Customer agrees that, consistent with good professional practices, it
will not recommend that any Medicare assignment end-user requesting ONE
TOUCH or SureStep Test Strips consider accepting a substitute reagent
strip. Failure to comply with the terms of this paragraph renders the
Agreement immediately voidable by LifeScan.
Customer agrees to provide LifeScan with complete and adequate
documentation on sales and inventories, no later than 15 days after
each invoice becomes due, confirming sales of Medicare ONE TOUCH or
SureStep Test Strips to Medicare assignment end-users only. Failure to
comply with the terms of this paragraph renders the Agreement
immediately voidable by LifeScan. Customer's obligations and LifeScan's
rights under this paragraph survive termination of the Agreement.
VI. PRODUCT RETURNS
Product returns will be covered by the terms of the existing agreement
between the Customer and LifeScan. Customer agrees that all product
returns will be deducted from the volume calculations used for Volume
Discounts.
VII. DELAYS
Customer will not be penalized in volume calculations for Volume
Discounts if LifeScan was unable to fill legitimate orders or the
product was backordered.
VIII. WARRANTIES
LifeScan warrants to Customer that each product will be free from
defects in materials and workmanship and complies with LifeScan
specifications. Customer acknowledges and agrees that LifeScan's sole
responsibility in case of breach of the foregoing warranty shall be for
LifeScan to comply with LifeScan's policy for the return of defective
products in effect at the time of such breach, and LifeScan shall not
be liable to Customer for any other damages, including but not limited
to consequential for punitive damages arising out of breech of this
warranty. The foregoing warranty shall not apply to and LifeScan is not
responsible for any defects or damage caused by improper storage,
misuse, abuse, neglect or accident caused by persons not employed by
LifeScan.
PAGE 6
IX. INDEMNIFICATION
Customer shall hold harmless and indemnify LifeScan, its agents and
employees, from any third party claims, suits, losses and expenses,
including attorney fees, provided that any such claim, suit, loss or
expense is attributable to bodily injury sickness, disease, or death,
or injury to property which is caused by negligence or intentional acts
of Customer, its agents, employees, subcontractors or suppliers, or
failure to comply with federal, state or local law including but not
limited to statutes, regulations and ordinances prohibiting illegal
discrimination or retaliation. And, LifeScan shall hold harmless and
indemnify Customer, its agents and employees, from any third party
claims, suits, losses and expenses, including attorney fees, provided
that any such claim, suit, loss or expenses is attributable to bodily
injury, sickness, disease, or death, or injury to property which is
caused by negligence or intentional acts of LifeScan, its agents,
employees, subcontractors or supplies, or failure to comply with
federal, state or local law including but not limited to statutes,
regulations and ordinances prohibiting illegal discrimination or
retaliation.
X. CONFIDENTIALITY
A. The pricing terms and conditions of this Agreement are considered
proprietary and confidential. Within Customer, such pricing terms and
conditions will be restricted to Customer's management directly
involved with administering the Agreement.
B. Customer agrees not to divulge the pricing, terms or conditions of
this Agreement to an outside party. If LifeScan, at its sole
discretion, believes Customer has breached the provisions of this
section IX, it may terminate Agreement immediately.
C. Customer's obligations and LifeScan's rights under this paragraph
survive termination of this Agreement.
XI. ARBITRATION
Any and all unresolved disputes between the parties relating to this
agreement shall be settled by binding arbitration at a location within
San Jose, California. Such arbitration shall be conducted in accordance
with the then current rules of the American Arbitration Association
("AAA") with a panel of three arbitrators to be selected from the
National Panel or Arbitrators of AAA pursuant to the AAA rules.
Reasonable discovery as determined by the arbitrators shall apply to
the arbitration proceeding and California law shall govern. Judgment
upon award rendered by the arbitrators may be entered in any court
having jurisdiction thereof. Each party shall bear its own costs. No
punitive damages shall be awarded.
PAGE 7
XII. RELATIONSHIP OF THE PARTIES
The relationship between LifeScan and the Customer is that of supplier
and purchaser. Customer is an independent contractor and is not the
legal representative, agent, joint venturer, partner, or employee of
LifeScan for any purpose whatsoever and has no right or authority to
assume or create any obligations of any kind or to make any
representations or warranties, whether express or implied, on behalf of
LifeScan, or to bind LifeScan in any respect whatsoever.
XIII. TERMINATION
The intent of this contract is to establish an on-going business
relationship that provides efficient distribution to Medicare patients,
delivers services to those consumers, encourages increased blood
glucose monitoring compliance and reduces the associated medical costs.
Except as otherwise specified in the Agreement, this Agreement may be
terminated by either party in the event of a breach of any material
term after 6 month notice to the breaching party and an opportunity to
cure.
