Exhibit 10.2
[Confidential treatment has been requested for portions of this document, and
the confidential material has been filed separately with the SEC].
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CARDINAL HEALTH*
AND
CHRONIMED INC.
PRIME VENDOR AGREEMENT
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PRIME VENDOR AGREEMENT
THIS PRIME VENDOR AGREEMENT (THE "AGREEMENT") IS MADE __________, 2003,
BETWEEN CHRONIMED INC. ("BUYER") AND CARDINAL HEALTH* ("CARDINAL HEALTH"), WHO
HEREBY AGREE AS FOLLOWS:
1. DESIGNATION AS PRIMARY WHOLESALER
During the term of this Agreement, Buyer will designate
Cardinal Health as the primary wholesale pharmaceutical supplier to all
of its retail pharmacies (the "RETAIL PHARMACIES") and mail order
pharmacies (the "MAIL ORDER PHARMACIES"), in each case whether now or
hereafter owned, managed or operated by Buyer (the Retail Pharmacies
and the Mail Order Pharmacies, collectively, the "PHARMACIES" and
individually, a "PHARMACY"). A current list of the Pharmacies is
attached hereto as EXHIBIT A. Additional Retail Pharmacies and Mail
Order Pharmacies may be made parties to this Agreement from time to
time subject to the prior approval of Buyer and Cardinal Health which
approval will not unreasonably be withheld.
2. SALE OF MERCHANDISE
Buyer will purchase from Cardinal Health during the term of
this Agreement its Primary Requirements of pharmaceuticals ("RX
PRODUCTS") and of other inventory carried by Cardinal Health ("NON-RX
PRODUCTS" and, together with Rx Products, collectively the
"MERCHANDISE") for delivery directly to the Pharmacies. The term
"PRIMARY REQUIREMENTS" means that Buyer will purchase from Cardinal
Health for each Pharmacy (i) [***] of its requirements of Merchandise
purchased from pharmaceutical wholesalers and (ii) [***] of its
requirements of generic Rx Products. Cardinal Health 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.
3. PURCHASE PRICE
Buyer will pay a purchase price for all Merchandise (except
for those items that are net-billed as described below) purchased under
this Agreement in an amount equal to Cardinal Health'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 HEALTH'S COST" will mean the [***] for Merchandise at the
date of Cardinal Health's invoice to the Pharmacy without reduction for
cash discounts; and (b) the term "QUALIFIED PURCHASES" will 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 for Merchandise which is subject to a Manufacturer
Contract will be Buyer's contract price for the Pharmacies. Cardinal
Health reserves the right to adjust the purchase price of any item of
Merchandise, upon reasonable notice to Buyer, in the event that the
manufacturer of such item implements a change in policy which
eliminates or decreases the cash
discount terms effective on the Commencement Date with respect to such
item. Manufacturer off-invoice quantity discounts and promotional
allowances as evidenced by a manufacturer sell sheet will be made
available to Buyer.
Notwithstanding the foregoing, the purchase price for selected
Merchandise, including but not limited to generic Rx Products, 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 slow moving,
specialty, and non-pharmaceutical Merchandise will not be based upon
the Cardinal Health's Cost-plus pricing described above but will
instead be net-billed in accordance with the terms and conditions
established by Cardinal Health (including applicable xxxx-up) for such
Merchandise. Merchandise described in this paragraph is sometimes
referred to as "SPECIALLY PRICED MERCHANDISE." Subject to Buyer's
obligations under ss.6 with respect to purchases of generic Rx
Products, Buyer may, but will have no obligation to, purchase any
specified volume or percentage of its requirements for Specially Priced
Merchandise.
The pricing specified in the Pricing Matrix does not reflect
administrative fees for membership in any group purchasing organization
(a "GPO"). If Buyer or any Buyer Pharmacy affiliates with a GPO, the
appropriate administrative fee will be added to the percentages
specified in the Pricing Matrix.
All orders must be electronically transmitted via xxxxxxxx.xxx
or other electronic order entry system approved by Cardinal Health to
qualify for the pricing specified in the Pricing Matrix.
Non-electronically transmitted orders are subject to Cardinal Health's
Cost [***] (excluding Schedule II and emergency orders). This Cost
[***] for non-electronically transmitted orders will not apply to
orders placed when xxxxxxxx.xxx or other approved electronic order
entry system is not functioning at the time the order is placed.
4. PAYMENT TERMS
(a) Payment Terms. The payment terms initially applicable
to Buyer will be [***] as set forth in the following payment terms
chart. All payments for the Merchandise will be due in accordance with
[***] terms unless and until otherwise agreed by Buyer and Cardinal
Health. Buyer may request to adjust its payment terms (with the
corresponding adjustment to the cost of goods) to one of the two
payment terms options set forth in the payment terms grid set forth
below. Changes in payment terms must be requested thirty (30) days in
advance and will be effective only on August 1 and February 1 of each
Contract Year. Any such request for adjustment in price is subject to
Cardinal Health's credit approval, which shall not unreasonably be
withheld.
Terms Cost of Goods Adjustment
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[***] Terms - [***], due to Cardinal Health in good Priced as in Exhibit B pricing matrix
immediately available funds by the [***] ([***] days
sales outstanding)
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[***] Terms - [***] due to Cardinal Health in good Increase in cost of goods in Exhibit B
immediately available funds on the[***], [***], due with pricing matrix of [***]
good immediately available funds on the [***] ([***] days
sales outstanding)
------------------------------------------------------------ ------------------------------------------
(b) Cost of Goods Adjustments. At the end of each
calendar quarter, Cardinal Health will evaluate Buyer's payment history
based on average days of sales outstanding ("DSO") calculated on a
quarterly basis and average Qualified Monthly Purchases. If such
payment history shows payment greater than [***] average DSO, as
calculated above, then an adjustment to the then-applicable Cost of
Goods may be made by Cardinal Health as appropriate.
(c) Service Charges. All payments for Merchandise
delivered and services provided by Cardinal Health will be made to the
applicable servicing division specified in Cardinal Health's invoice
(or as otherwise specified by Cardinal Health) by electronic funds
transfer or other method acceptable to Cardinal Health so as to provide
Cardinal Health with good funds by the due date. Buyer will pay a
service charge on any amount not paid by Buyer to Cardinal Health when
due under the terms of this Agreement from the first day of
delinquency, until such amount is paid in full, along with reasonable
attorney fees associated with any such delinquency as follows: (a)
[***] per month (or the maximum allowed by law if such rate is less
than [***] per month) until Buyer's DSO exceeds [***] and (b) if
Buyer's DSO exceeds [***] the service fee shall be at [***] per month
(or the maximum rate allowed by law if such rate is less than [***] per
month). Within fifteen (15) days after the end of each month, Cardinal
Health shall notify Buyer if its average DSO exceeded the applicable
payment terms for each pay period during that month. For example, under
the [***] terms identified above, if Buyer makes one bank wire transfer
payment [***] on or before [***] for all purchases made and received by
Buyer for [***], Buyer will then be in compliance with Cardinal
Health's definition of [***] DSO. If Buyer's average DSO per pay period
exceeded the applicable payment terms for four (4) consecutive pay
periods, or six (6) pay periods in a rolling three (3) month period,
Cardinal Health will assess any and all service charges as set forth
above for all late payments for the immediately preceding twelve (12)
month period. Cardinal Health retains the right, upon notice to Buyer,
to place Buyer on C.O.D. or prepay status, refuse orders, adjust
Buyer's Cost of Goods and/or cease its supply relationship with Buyer
if Cardinal Health has not received payment when due for Merchandise
delivered or services provided to Buyer.
(d) Submission of Financial Statements. Buyer will
provide Cardinal Health with quarterly publicly filed financial
statements and/or filed annual tax returns with all notes and schedules
and such further information as Cardinal Health may reasonably request
from time to time.
(e) Guaranty. As an inducement for Cardinal Health 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 Health
the punctual and full payment (and not merely the ultimate
collectability) of all sums now or hereafter due from Borrowers to
Cardinal Health; (ii) agrees to indemnify and save harmless Cardinal
Health 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, and (iii) agrees to pay to Cardinal Health on
demand the reasonable cost and expense incurred by
Cardinal Health in attempting to enforce any indebtedness, liability,
or obligation under this Agreement, including, without limitation,
reasonable attorney's fees.
5. ORDERING AND DELIVERY
Cardinal Health will deliver the Merchandise F.O.B. Pharmacy
to the Pharmacies and exercise its good faith efforts to provide an
efficient delivery schedule designed to meet the mutual needs of
Cardinal Health and the Pharmacies, in accordance with Cardinal
Health's general delivery schedules established from time to time by
the applicable Cardinal Health servicing division (exclusive of
holidays, etc.). All deliveries will be accompanied by an invoice, and
all delivery costs (not including emergency deliveries) will be
absorbed by Cardinal Health. Each Pharmacy will be entitled to receive
[***] delivery per day, [***] days per week, excluding holidays, except
that (i) the Mail Order Pharmacy in Minneapolis, Minnesota is entitled
to receive [***] deliveries per day, five days per week, excluding
holidays, and (ii) Pharmacies located outside of the contiguous United
States or other Pharmacies will be entitled to deliveries as mutually
agreed upon by the parties. [***]. Delivery schedules and purchase
order deadlines may be reviewed and changed from time to time as
mutually agreed upon by Cardinal Health and Buyer. Cardinal Health will
make every reasonable effort to accommodate individual order entry and
delivery requirements. It is possible, depending on the servicing
Cardinal Health division, that cutoff times may be later than (but not
before) 7:00 p.m., and that morning deliveries may be earlier than (but
not later than) noon.
Buyer will submit all orders, except for orders for Schedule
II drugs, for all Merchandise to Cardinal Health via xxxxxxxx.xxx or
other mutually agreeable electronic means. Cardinal Health will provide
Buyer with access to xxxxxxxx.xxx and entelligence at no additional
charge to Buyer; provided, however, Buyer must supply, at its own
expense, all hardware required for such access, all required Internet
access and any required interfaces or other network enhancements. Buyer
agrees not to use xxxxxxxx.xxx, entelligence or any other electronic
order entry system for any purpose unrelated to this Agreement. Buyer's
right to use xxxxxxxx.xxx and entelligence will be immediately
terminated (i) upon expiration or termination of this Agreement for any
reason or (ii) in the event Cardinal Health reasonably believes
security of the xxxxxxxx.xxx site or its proprietary rights are
threatened due to Buyer's access. In the event that electronic order
entry is temporarily interrupted for reasons beyond the control of
Buyer or Cardinal Health, 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 Health
distribution center or given to the delivery driver. Schedule II orders
will be delivered within one (1) day of Cardinal Health'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 Health until such time that the delivery driver
physically delivers the DEA Form 222 to the applicable Cardinal Health
distribution center. Notwithstanding the foregoing, no Schedule II
orders will be delivered other than in compliance with DEA regulations.
6. GENERICS
(a) Participation in CardinalSOURCE. Buyer shall purchase
[***] of its generic Rx Products needs through Cardinal Health.
Cardinal Health agrees that during the term of the Agreement, its
CardinalSOURCE generics program in the aggregate will remain
competitive with other similar wholesaler generic product programs as
reasonably determined by Buyer and Cardinal Health based on publicly
available data. Buyer will utilize the CardinalSOURCE program
("CARDINALSOURCE") with autosubstitution with the exception of
individual products designated by Buyer for its Mail Order Pharmacies,
for which Buyer shall have the right to override autosubstitution for
such items upon notice to Cardinal Health.
7. DISCOUNTS
(a) Upfront Discount. Each year Buyer shall be entitled
to an annual upfront discount (the "UPFRONT DISCOUNT") in the amount of
$[***], which shall be provided by Cardinal Health to Buyer upon the
first day of each Contract Year during the Initial Term of this
Agreement, in the form of a check. If this Agreement is terminated
before the end of any Contract Year, Buyer shall repay to Cardinal
Health the unearned portion of the annual Upfront Discount, which shall
be repaid prorata based on the number of months remaining until the end
of such Contract Year. Such repayment amount will be calculated as
follows:
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Amount to be (12 minus number of months elapsed since x ($[***])
Repaid = the Commencement Date /12) (multiplied by)
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Payment of the Upfront Discounts will be contingent on Buyer
meeting its minimum purchase requirement of $[***] in Qualified
Purchases per Contract Year, and remaining in compliance with all
payment terms as set forth in this Agreement.
(b) Disclosure. Each of the Upfront Discounts and
"discount or other reduction in price," as such terms are defined under
the Medicare/Medicaid Anti-Kickback Statute, on the products and
services covered by this Agreement, and Buyer may have an obligation to
accurately report, under any state or federal program which provides
cost- or charge-based reimbursement for such products or services, or
as otherwise requested or required by any governmental agency, the net
cost actually paid by Buyer for such products and services.
8. OTHER SERVICES
Cardinal Health will provide comprehensive support services to
Buyer and the Pharmacies in accordance with Cardinal Health's customary
terms and practices for retail pharmacies. A list of those programs,
services, and reports is attached as EXHIBIT C to this Agreement.
9. EMERGENCY DELIVERIES
Cardinal Health will provide a twenty-four (24) hour, seven
(7) day per week emergency delivery service. The courier charge for
such orders will be F.O.B. prepaid
and added to the invoice. A listing of key management personnel and
emergency order procedures will be supplied to each Pharmacy.
10. CONTRACT ADMINISTRATION
Cardinal Health will recognize and administer direct purchase
manufacturer contracts between Buyer and any manufacturer
(collectively, "MANUFACTURER CONTRACTS") for such manufacturers'
products purchased by Chronimed through Cardinal Health subject to
their continued validity in accordance with applicable laws and subject
to such credit considerations concerning the applicable manufacturers
as Cardinal Health may consider appropriate; however, if manufacturers'
chargebacks for contract items submitted by Cardinal Health are
disallowed, uncollectible, or unreconcilable, then the applicable
charge will be billed back to Buyer. Cardinal Health reserves the
right, at any time, to decline to sell or carry any manufacturer's
merchandise, based upon credit considerations deemed relevant to
Cardinal Health. Buyer will notify Cardinal Health of all direct
purchase Manufacturer Contracts. In addition, Buyer or the Pharmacies
will provide Cardinal Health 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 Health to discontinue the service level provisions
herein until forty-five (45) days after delivery of accurate usage data
for the new items.
In order to facilitate Cardinal Health's inventory management
requirements, Buyer will provide Cardinal Health with respect to each
Pharmacy accurate 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. 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 represents and warrants to Cardinal Health that Buyer
and the Pharmacies have complied with, and are currently and will be at
all times during the term in compliance with, all applicable licensing
requirements of all applicable federal, state are local governmental
authorities, including without limitation any licensing requirements to
purchase, receive, possess, store, use, dispense, and/or distribute or
otherwise dispose of pharmaceutical products. Prior to purchasing Rx
Products from Cardinal Health hereunder and at all times during the
term of this Agreement, Buyer will provide Cardinal Health with copies
of all such licenses and any renewals, revocations, changes or notices
related thereto.
12. SERVICE LEVEL
Cardinal Health will provide the following Adjusted Service
Level (defined in EXHIBIT D-1): (i) for each of the top 15 branded mail
order Rx Products (the "TOP MAIL ORDER") and the top 15 branded retail
Rx Products (the "TOP RETAIL"), [***], and (ii) for
all other Rx Products, [***], in each case calculated on a Contract
Quarter in accordance with the standards and procedures specified in
EXHIBIT D-1. Lists of the Top Mail Order products and the Top Retail
products as of the Commencement Date are set forth in EXHIBIT D-2. Such
lists will be revised annually. If Cardinal Health fails to achieve
either the [***] for the Top Retail and Top Mail Order products
commitment or the [***] commitment for all other products for any
Contract Quarter, Buyer shall be entitled to a rebate in an amount
equal to [***] of the [***] the applicable Adjusted Service Level
[***]. For example, if [***] of Top Mail Order and Top Retail products
were $[***] and the Adjusted Service Level was [***] for the Top Retail
and Top Mail Order Products, then the service credit would be $[***]
(the "SERVICE LEVEL REBATE"). The Service Level Rebate, if any, is a
"discount or other reduction in price," as such terms are defined under
the Medicare/Medicaid Anti-Kickback Statute, on the products and
services covered by this Agreement, and Buyer may have an obligation to
accurately report, under any state or federal program which provides
cost- or charge-based reimbursement for such products or services, or
as otherwise requested or required by any governmental agency, the net
cost actually paid by Buyer for such products and services. In addition
to this service level rebate, Buyer may terminate this Agreement for
Cardinal Health's failure to meet specified service levels as provided
for in Section 14, provided that if Buyer terminates this Agreement
pursuant to Section 14, it shall not be entitled a payment hereunder
for the last service level default giving rise to termination.
13. RETURNED GOODS POLICY
Cardinal Health will accept Merchandise for return from
Pharmacies in accordance with the Standard Cardinal Health Returned
Goods Policy (the "CARDINAL HEALTH RETURNS POLICY"). Cardinal Health
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 Health will work with a third
party returned goods processor in accordance with the Standard Third
Party Returned Goods Policy (the "THIRD PARTY RETURNS POLICY"). Current
copies of both the Cardinal Health Returns Policy and the Third Party
Returns Policy are attached as EXHIBITS E-1 and E-2.
14. TERM
(a) The term of this agreement will be for three (3)
years, beginning on August 1, 2003 (the "COMMENCEMENT DATE") and ending
on July 31, 2006.
(b) Either party may effect an early termination of this
Agreement upon the occurrence of a material breach by the other party.
The non-breaching party must give written notice to the breaching party
of the occurrence of such breach. The notice must describe in detail
the nature of the breach. The breaching party will have the opportunity
to cure its breach to the reasonable satisfaction of the non-breaching
party during a sixty (60) day period beginning on the date the
breaching party receives the written notice (the "CURE PERIOD"). In the
alternative, if such breach is of a nature that it cannot be cured in
sixty (60) days, the breaching party must commence and diligently
prosecute in good faith the cure of such breach within the Cure Period
and cure such breach within one hundred twenty (120) days. If the
breach is not cured by the expiration of the Cure Period, or the
breaching party has not begun the cure process if it cannot be cured in
sixty (60) days and does not cure the breach within one hundred twenty
(120) days, then the
non-breaching party may provide written notice to the breaching party
that this Agreement will be terminated in thirty (30) days following
the expiration of the Cure Period. Notwithstanding the foregoing, with
respect to payment defaults by Buyer, Cardinal Health may terminate
this Agreement immediately. In addition, Cardinal Health may terminate
this Agreement immediately upon notice to Buyer in the event of the
following: (i) Buyer files for or is otherwise subject to bankruptcy
proceedings or is or becomes insolvent, (ii) Buyer defaults on the
terms of any bank agreement or other loan or (iii) Buyer is delisted
from NASDAQ or any other national securities exchange. Buyer may
terminate this Agreement immediately upon notice to Cardinal Health if
Cardinal Health has committed a Service Level Default in each of [***]
consecutive quarters within a rolling twelve (12) month period, or a
total of four quarters over the three year term of the Agreement. If
Cardinal Health commits a Service Level Default in each of [***]
consecutive quarters within a rolling twelve (12) month period, Buyer
must notify Cardinal Health in writing of their intent to end the
Agreement within a thirty day period from the end of the second
consecutive quarter that the Service Level Default has occurred. If
notification is not given, Buyer forfeits the right to exercise this
specific Service Level Default. As used herein, a "SERVICE LEVEL
DEFAULT" shall mean a breach of either the (i) Top Mail Order and Top
Retail Adjusted Service Level or (ii) the Adjusted Service Level for
all other products, as specified in Section 12. No termination notice
from Buyer to Cardinal Health will be effective until such time as
Cardinal Health has received payment for all amounts due from Buyer.
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.
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 Health)
and related interest and penalties in connection with or arising out of
the transactions contemplated by this Agreement. If Cardinal Health
pays any such amounts which Buyer is obligated to pay under this
section, then Buyer will promptly reimburse Cardinal Health in an
amount equal to the amount so paid by Cardinal Health.
Buyer and Cardinal Health shall comply with all federal and
state laws, rules and regulations applicable to the storage,
distribution, purchase, sale and use of pharmaceutical products.
If and to the extent any discount, credit, rebate or other
purchase incentive is paid or applied by Cardinal Health 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 Health 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. Section
1320a-7b(b)(3)(A) and the "safe harbor" regulations regarding discounts
or other reductions in price set forth in 42 C.F.R. Section
1001.952(h). In this regard, Buyer may have an obligation to accurately
report, under any state or federal program which provides cost or
charge based reimbursement for the products or services covered by this
Agreement, or as otherwise requested or required by any governmental
agency, the net cost actually paid by Buyer.
17. FORCE MAJEURE
Cardinal Health'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, 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
Health. During the period of any such delay or failure, Buyer may
purchase the Primary Requirements for the affected Pharmacies from
others, but will recommence purchasing from Cardinal Health upon
cessation of such delay or failure.
18. RECORDS AND AUDIT
Cardinal Health will maintain records pertaining to the
pharmaceutical products purchased by Buyer under this Agreement as
required by applicable state and federal laws and regulations. Not more
than once in any twelve (12) month period, and following sixty (60)
days advance written notice to Cardinal Health, Buyer or its agent will
have the right to review those relevant records applicable to its
pharmaceutical purchases for the sole purpose of verifying compliance
with pricing the terms of this Agreement. Any such review will be
limited to the most current full twelve (12) months of historical
information as of the date such advance written notice is provided to
Cardinal Health pertaining to transactions performed under this
Agreement and will be subject to an executed mutually agreed upon
confidentiality agreement. With respect to contracts between Cardinal
Health and certain manufacturers or other contracts which must remain
confidential as determined by Cardinal Health, Buyer may only review
records relating to such contracts through an employee of a national
accounting firm mutually agreed to by both parties (i.e., not a Buyer
employee) only to verify compliance with this Agreement. Such
accounting firm may confirm to Buyer that Cardinal Health has (or has
not) complied with the pricing of this Agreement, but may not (and will
not) disclose to Buyer any confidential information. All information
reviewed by such accounting firm employee will be done only pursuant to
a confidentiality agreement mutually agreed to by both parties and
signed by Buyer and the accounting firm who will have access to such
information, prior to beginning any such review. Any such audit will be
at Buyer's sole cost and expense. Buyer shall provide Cardinal Health a
Summary of
Findings at the completion of any audit. Buyer will allow Cardinal
Health thirty (30) days to review the Summary of Findings and in good
faith discuss all disagreements in such findings with Buyer. Any
findings that provide mutual benefits or off setting errors to both
parties will be addressed in good faith and the cost of the audit will
be shared equally. In the event that the parties agree that Buyer was
overcharged, Cardinal Health shall pay Buyer the amount of such
overcharges within forty-five (45) days of submission of the Summary of
Findings.
19. 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 Health nor Buyer may assign
its rights under this Agreement without the written consent of the
other; provided, however, that Cardinal Health may delegate its rights
and obligations to any entity that is controlled by or under common
control with Cardinal Health, Inc. 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.
20. 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.
21. 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.
22. 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 the
other party, without the other party's prior written consent and advice
of counsel. Each party will provide to the other a written copy of any
such press release or other public announcement no less than
seventy-two (72) hours prior to the party's intent to issue such
release or announcement. 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 that party's counsel, such press release is required
pursuant to state or federal securities laws, rules or regulations, in
which case the party required to make the press release or public
announcement shall use commercially reasonable efforts to obtain the
approval of the other party as to the form, nature and content of the
press release or other announcement prior to issuing the press release
or making the public announcement. In the case of notices to Cardinal
Health under this Section 22 the contact person shall be EVP of Sales,
with a copy to the SVP, Corporate Communications at the address set
forth at the end of this Agreement. For Chronimed
such notices shall be sent to the EVP Operations at the address set
forth at the end of this Agreement.
23. [***]
Cardinal Health will [***] Buyer, as possible, [***], and as
[***], in [***].
24. INDEPENDENT CONTRACTORS
This relationship is that of independent contractors. This
Agreement does not create any employment, agency, franchise, joint
venture, partnership or other similar legal relationship between Buyer
and Cardinal Health. No party has the authority to bind or act on
behalf of the other party except as otherwise specifically stated in
this Agreement.
25. OTHER DEFINITIONS
For purposes of this Agreement, "CONTRACT YEAR" shall mean
each successive twelve (12) month period with the first Contract Year
commencing as of the Commencement Date. "CONTRACT QUARTER" or "QUARTER"
means each successive three (3) month period that this Agreement is in
effect with the first such quarter commencing on the Commencement Date.
26. CARDINAL HEALTH REPRESENTATIONS
Cardinal Health represents that it will comply with all
applicable federal and state laws and regulations regarding the
handling, storage and distribution of Merchandise, including the
Prescription Drug Marketing Act of 1987.
CHRONIMED INC. CARDINAL HEALTH*
___________________________________________ 0000 XXXXXXXX XXXXX
___________________________________________ XXXXXX, XXXX 00000
FACSIMILE:_________________________________ FACSIMILE: (000) 000-0000
BY_________________________________________ BY__________________________
TITLE______________________________________ TITLE_______________________
DATE_______________________________________ DATE________________________
*The term "CARDINAL HEALTH" means the following pharmaceutical distribution
companies: Cardinal Health 106, Inc. (formerly known as Xxxxx X. Xxxx, 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 Xxxxxxxx
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
PHARMACIES
Chronimed/Statscript Pharmacies
March 2003
Mail Order ("Mail Order Pharmacy Group")
Minnetonka
San Francisco
Miami Beach - satellite mail order facility
Memphis - satellite mail order facility
Houston - satellite mail order facility
Retail (the "Retail Pharmacy Group")
Kansas City
Chicago
Dallas
Houston
Fort Lauderdale
St. Xxxxx
Xxxx Palm Beach
Tampa
Miami Beach
Montrose
Philadelphia
Washington D.C.
Atlanta
Indianapolis
San Xxxxxxxxx
Xxxx Hollywood
Seattle
San Diego
Las Vegas
Boston
St. Petersburg
Orlando
New York
Milwaukee
Oaks
Memphis
Minneapolis
EXHIBIT B
PRICING MATRIX
This Pricing Matrix has been established based upon Buyer's
representations that, in each Contract Year:
(a) Buyer will purchase each Pharmacy's Primary Requirements from
Cardinal Health;
(b) Minimum total aggregate Annual Qualified Purchases from
Cardinal Health will be $[***] per Contract Year in order for
Upfront Discounts to remain in effect.
The foregoing (a) through (c) are collectively referred to herein as
the "MINIMUM REQUIREMENTS"). If, for any reason, some or all of the Minimum
Requirements are not met by Buyer, then Cardinal Health may reasonably modify
this Pricing Matrix.
Subject to the Minimum Requirements and Section 4 of this Agreement
regarding timely payment, Buyer will be entitled to purchase from Cardinal
Health branded Rx Products, Schedule II Rx Products (that are not Specially
Priced Merchandise or subject to a Manufacturer Contract) and over-the-counter
Merchandise at an amount as set forth in the table below:
----------------------------------------------------------------------------------
AGGREGATE ANNUAL QUALIFIED PURCHASES OF ALL CARDINAL HEALTH'S [***]
PHARMACIES THE FOLLOWING PERCENTAGE:
----------------------------------------------------------------------------------
BELOW $[***] AS MUTUALLY AGREED BY THE PARTIES
----------------------------------------------------------------------------------
$[***] - $[***] [***]
----------------------------------------------------------------------------------
$[***] - $[***] [***]
----------------------------------------------------------------------------------
$[***] - $[***] [***]
----------------------------------------------------------------------------------
$[***] - $[***] [***]
----------------------------------------------------------------------------------
$[***] AND ABOVE AS MUTUALLY AGREED BY THE PARTIES
----------------------------------------------------------------------------------
*Pricing in the above table is based on [***] DSO
Buyer will initially be invoiced at Cardinal Health's [***]. Each
Contract Quarter, Cardinal Health will evaluate the total, aggregate Qualified
Monthly Purchases of all Pharmacies during the immediately preceding Contract
Quarter. If the total, aggregate annualized Qualified Monthly Purchases of all
Pharmacies during such quarter entitle Buyer to purchase Merchandise at a lower
(or higher) cost of goods according to the foregoing table than Buyer was
invoiced during the applicable quarter, prospective adjustments to the cost of
goods will be made as further described below.
For example, if the cost of goods is equal to Cardinal Health's [***],
and if, during a Contract Quarter, the average, annualized aggregate Qualified
Monthly Purchases of all Pharmacies were $[***] (and Buyer's payment terms
remained [***]), then Buyers' cost of
goods for the following Contract Quarter will be decreased to Cardinal Health's
[***]. Conversely, if the average, annualized aggregate Qualified Monthly
Purchases of all of the Pharmacies was $[***] (and Buyer's payment terms
remained [***]), then Buyer's cost of goods for the following Contract Quarter
will be increased to Cardinal Health's [***].
The parties acknowledge that Cardinal Health may need to retroactively
calculate Buyer's Cost of Goods for the period beginning on the first day of a
Contract Year and continuing until the first date on which an adjustment is
reflected on Buyer's invoice. If Buyer overpaid Cardinal Health for its
purchases during such period, then Cardinal Health will refund to Buyer the
overpayment in the form of a check or a credit memo to be used toward future
purchases of Merchandise from Cardinal Health. If Buyer underpaid Cardinal
Health, then Buyer will pay to Cardinal Health any additional amount owed. Any
refunds due to Buyer from Cardinal Health, or any payments due to Cardinal
Health from Buyer, will be calculated and paid within [***] following the end of
each Contract Year.
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 [***]:
[***]
[***] equipment
Certain [***] Merchandise
Merchandise subject to a Manufacturer Contract
EXHIBIT C
OTHER SERVICES
BASE SERVICE PACKAGE
---------------------------------------------------
PROGRAMS AND SERVICES FREQUENCY
---------------------------------------------------
EOE Machines One per store
---------------------------------------------------
Shelf Labels With each order
---------------------------------------------------
Price Stickers With each order
---------------------------------------------------
Auto Generic Substitution Ongoing
Program
---------------------------------------------------
Auto Repack Substitution Ongoing
Program
---------------------------------------------------
-----------------------------------------------------------
PROGRAMS AND SERVICES FREQUENCY
-----------------------------------------------------------
Category Purchase Monthly, upon request
Summary
-----------------------------------------------------------
Item Purchases Report Monthly, upon request
-----------------------------------------------------------
Rx Velocity Report - Quarterly, upon request
Top 200 Items
-----------------------------------------------------------
Generic Purchase Report Quarterly, upon request
-----------------------------------------------------------
Price Change Notification Weekly, upon request
-----------------------------------------------------------
Controlled Substance Monthly, upon request
Variance Report
-----------------------------------------------------------
DEA Report Monthly, upon request
-----------------------------------------------------------
EXHIBIT D-1
SERVICE LEVEL DEFINITION
For purposes of this Agreement, the service level percentage will be
calculated by [***] of [***] by the [***] of [***]. The following items will be
excluded from the service level calculation:
1. [***];
2. [***] and/or [***];
3. Items where a Pharmacy has failed to provide [***]; and
4. Items where a Pharmacy's historical demand is [***].
The foregoing calculation is the "ADJUSTED SERVICE LEVEL."
The service level guaranty in this Agreement for Buyer will commence
[***] following the later of the Commencement Date or Cardinal Health's receipt
of accurate usage data. The service level guaranty for Pharmacies added to this
Agreement after the Commencement Date will commence [***] following receipt by
Cardinal Health of accurate usage data. This will allow Cardinal Health to gain
usage information and adjust inventory levels appropriately.
Upon Buyer's request, if Cardinal Health does not meet its service
level for any quarter, Cardinal Health and Buyer will jointly develop a service
level action plan for the following quarter. During the implementation of the
service level action plan, Buyer may not terminate this Agreement for cause.
Buyer will notify Cardinal Health at least [***] 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 Health in
disposing of any excess inventory of Merchandise previously stocked at Buyer's
or a Pharmacy's request. Failure to comply with these notice requirements will
entitle Cardinal Health to discontinue the service level guaranty to the
Pharmacies until [***] after delivery of accurate usage data for the new items.
EXHIBIT D-2
TOP 15 BRANDED MAIL ORDER RX PRODUCTS
AND
TOP 15 BRANDED RETAIL RX PRODUCTS
Mail order:
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
Retail:
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
EXHIBIT E-1
CARDINAL HEALTH RETURNED GOODS POLICY - RETAIL
GENERAL POLICY
Product in "merchantable condition" (as defined below) may generally be returned
to the Cardinal Health company from which the product was originally purchased
if the return is made within the timeframes and subject to the terms and
conditions described below:
RETURN MADE WITHIN: NORMAL CREDIT AMOUNT:
1 - [***] from Invoice Date [***] of original invoice amount paid by
Buyer. This policy covers all ordering/filling
errors.
More than [***] [***] of original contract or other "cost"
paid by Buyer (i.e., not including any
applicable xxxx-up and not to exceed actual
amount paid).
"MERCHANTABLE CONDITION" will be determined by Cardinal Health based upon its
ability to return the item to its inventory for resale in the normal course of
its business without special preparation, testing, handling, or expense and will
exclude 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 Health 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 Health 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 [***](TM), [***](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.
UNMERCHANTABLE PRODUCT
Any item not eligible for return in accordance with Cardinal Health's General
Policy (above) will not be accepted for return without special written
authorization and will generally require return directly to the manufacturer. If
Cardinal Health does participate in the return process for any product not in
"merchantable condition," any return credit to the Buyer will be based upon the
actual credit issued by the manufacturer and will be subject to a minimum [***]
handling charge. Cardinal Health will work with third party return processors to
allow Buyer to realize value through returns of unmerchantable product. Upon
Buyer's request, Cardinal Health and Buyer will negotiate the terms of this
arrangement, which will include such terms as an administrative fee payable to
Cardinal Health, reconciliation and credits to Buyer's account.
CONTROLLED SUBSTANCES
Credit for the return of controlled substances requires a separate Merchandise
Return Authorization Form (the "MRA FORM") and must comply with all federal and
state procedures and requirements in addition to the terms and conditions
described herein.
SHORTS AND DAMAGED MERCHANDISE
Claims of order shortages (e.g., invoiced but not received), damage and mispicks
must generally be reported within [***] from the applicable invoice date.
Controlled substance shortage claims must be reported immediately per DEA
requirements.
ONGOING ASSURANCE AND CARDINAL HEALTH CREDIT REQUEST FORM
Prior to returning any product to Cardinal Health, each Buyer must execute and
deliver to Cardinal Health an Ongoing Assurance verifying that all returned
merchandise has been kept under proper conditions for storage, handling, and
shipping. All requests for credit must be submitted via EOE, on the
CardinalCHOICE(R) system or by approved EDI interface. A fully completed MRA
Form must accompany all merchandise to be returned. A fully completed form
includes, but is not limited to, the following information: the invoice number
and invoice date for the merchandise to be returned.
SHIPPING OF RETURN GOODS
Return merchandise must be placed in a proper shipping container and, for
merchandise valued at more than $250, signed for by the driver when the product
is picked up. All MRA Forms will be reviewed by Cardinal Health for compliance
with its Returned Goods Policy. The acceptability, valuation, and acceptance of
any return is at the sole discretion of Cardinal Health and/or the manufacturer.
Any credit of similar offsets may be taken only as previously approved by
Cardinal Health (as evidenced by the issuance of a valid credit memo), and may
not be otherwise taken or deducted by the Buyer.
OTHER RESTRICTIONS
This policy is subject to change without notice by Cardinal Health. This policy
is further subject to modification as may be deemed necessary or appropriate by
Cardinal Health to comply with applicable federal and/or state regulations, FDA
guidelines, state law, and other restrictions applicable to returned
merchandise.
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 document.
3. *The term "Cardinal Health" means the following pharmaceutical
distribution companies: Cardinal Health 106, Inc. (formerly known as Xxxxx X.
Xxxx, 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
Xxxxxxxx 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.
_________________________________
Buyer's Name (Print)
_________________________________
Dated:________________________ , 200_____ By Authorized Signature / Title
EXHIBIT E-2
RETURNED GOODS POLICY FOR UNMERCHANTABLE PRODUCT
GENERAL POLICY
Cardinal Health and Buyer have agreed to pursue a return process whereby
Cardinal Health will assist Buyer in receiving value for certain unmerchantable
Product. Product which may not be returned pursuant to Cardinal Health'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
Health determines are not in "merchantable condition" (as defined in Cardinal
Health'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 Health 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 Health 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 [***](TM), [***](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 Health 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 Health 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 Health 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 Health, prior to accepting any returns from Buyer.
PROCEDURES FOR RETURNS
Buyer and Cardinal Health will notify each Active Manufacturer of their
relationship as Buyer/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 Health. Buyer will instruct the
Third Party to provide Cardinal Health 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 Health for Merchandise that was purchased by Buyer from Cardinal Health
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 Health acknowledge that Buyer will handle,
without Cardinal Health'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 Health for all costs billed by the Third
Party to Cardinal Health that relate to Buyer's returns hereunder, including,
but not limited to, processing fees, postage, delivery and destruction fees.
Each calendar month, Cardinal Health will be paid [***] of the net returns
received by Cardinal Health from all Active Manufacturers as a processing fee
(the "PROCESSING FEE") in accordance with the following procedure:
- Cardinal Health will adjust Buyer's account upon the earlier of receipt
of an actual credit from an Active Manufacturer, or within ninety (90)
days following the date of a debit memo submitted to an Active
Manufacturer. Buyer will not deduct from any amounts owed to Cardinal
Health, any amounts relating to the return of Merchandise through a
Third Party.
- Each calendar month, Cardinal Health will (a) track credits due Buyer's
account in the amount received by Cardinal Health from each Active
Manufacturer during such month for Buyer's returns (or, if not received
within ninety (90) 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 Health for
returned Product, so that a net credit may be determined.
- Once per month, Cardinal Health 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 Health will provide Buyer with a report of all
Active Manufacturer credits and debit memos posted during such month. Cardinal
Health 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 Health'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 Health'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 Health will credit Buyer's account only
after Cardinal Health 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 Health immediately available funds, Cardinal Health
will credit Buyer's account only upon receiving such funds in Cardinal Health's
account. Buyer may not offset payments due from Buyer to Cardinal Health for
Product purchases against any amounts Buyer deems are due and owing pursuant to
this Third Party Returned Goods Policy.
Cardinal Health may modify this Third Party Returned Goods Policy in its
reasonable discretion from time to time.
