Exhibit 10.64
PRODUCT SUPPLY AND SERVICE AGREEMENT
This Product Supply and Service Agreement (hereinafter referred to as the
"Agreement") is made and entered into this 10th day of November, 1998,
by and between Nova Factor, Inc., a Tennessee corporation (hereinafter referred
to as "Supplier") and Childrens Home Care, a California non-profit public
benefit corporation (hereinafter referred to as "CHC");
W I T N E S S E T H:
WHEREAS, CHC is engaged in the business of providing certain drugs,
therapies and services, to patients who are insured under MediCal, Medicaid, CCS
and GHPP (the "Drug Therapy Business"); and
WHEREAS, CHC desires to obtain from Supplier, and Supplier is willing to
provide to CHC, a supply of drug listed on Exhibit A ("Drug") and certain
services necessary or desirable in the conduct of CHC's Drug Therapy Business,
all upon the terms and subject to the conditions hereinafter set forth;
NOW, THEREFORE, for and in consideration of the mutual promises contained
herein and for other good and valuable consideration, the receipt and adequacy
of which is hereby acknowledged, the parties hereto agree as follows:
1. GOODS AND SERVICES TO BE PROVIDED BY SUPPLIER. During the term of this
Agreement, Supplier agrees to provide, or arrange for the provision of, the
following goods and services to CHC:
A. BILLING, REIMBURSEMENT, COLLECTION AND FINANCIAL COUNSELING SERVICES.
(a) SERVICES. Supplier shall provide such billing,
reimbursement and collection services as are required by CHC in
conducting its Drug Therapy Business, including the preparation,
transmitting and monitoring of all bills to patients of CHC's Drug
Therapy Business, or third party payors; preparing requests or
otherwise assisting patients of CHC's Drug Therapy Business in seeking
reimbursement from all third party payors for the services provided to
such patients by CHC; and collection of amounts due CHC from patients
or third parties. CHC shall establish patient charges for such Drug
Therapy Goods and related services. (These services will also be
provided for Hematrope patients).
(b) CLEARANCE OF PATIENTS. Except as otherwise provided
herein, CHC agrees that it will not commit to provide Drug Therapy
Goods, or related services, to any patient until such patient is
approved by Supplier as eligible for third party reimbursement. CHC
shall promptly notify Supplier as to any potential patient and CHC
shall obtain such patient data as shall be specified by Supplier.
Supplier agrees to promptly contact the third party payor, investigate
a potential patient's insurance coverage and financial ability to pay,
obtain prior authorization, and notify CHC if the potential patient is
approved to purchase Drug Therapy Goods, or related services, from CHC.
CHC shall thereafter obtain all documentation necessary to file claims
with third party payors and forward same to Supplier. In the case of
any potential patient who is not approved, Supplier shall notify CHC of
the reasons for such disapproval. Supplier shall have no liability for
relying upon information provided by third party payors concerning
coverage in the event that such information shall subsequently prove to
be incorrect.
(c) COLLECTION AND DISBURSEMENT. Supplier shall monitor and
coordinate collection of all monies due to CHC from patients and/or
third party payors for Drug Therapy Goods and related services.
Supplier shall deposit all CHS funds received by it into the bank
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account designated by CHS. Collections of all accounts are performed by
Supplier on behalf of CHC and Supplier shall not be responsible for any
failure to collect such accounts. Supplier shall use reasonable efforts
to collect said accounts (but not greater than those efforts used in
the collection of its own accounts) but Supplier shall not be required
to institute suit for collection or incur any extraordinary expenses in
attempting to collect these receivables unless such action is approved
by and the costs are paid by CHC.
B. ACCOUNTING AND FINANCIAL REPORTING. Supplier shall provide the
following accounting and financial reporting services required by CHC in the
conduct of its Drug Therapy Business: schedules of accounts receivable, and cash
applications, (after applying cash received to appropriate invoices, applying
credits to patient accounts and applying write-offs and adjustments approved by
CHC). CHC shall make available to Supplier such information and documentation as
may be needed to enable Supplier to prepare the tax returns and financial
reports specified herein.
C. SALE OF DRUG.
(a) DRUG. During the term of this Agreement, CHC shall purchase from
Supplier and Supplier shall sell and provide to CHC, or arrange for the
provision of, such units of Drug, which are required by CHC to meet the
needs of its Drug Therapy Business. Said Drug will be sold and provided
to CHC when and as requested by CHC for resale by CHC to its patients.
Supplier shall only be obligated to provide Drug to, or on behalf of,
CHC for resale to patients pursuant to a physician's prescription.
Supplier shall provide such Drug as is prescribed by the Physician,
(or if not specifically described in the prescription, as determined by
CHC), subject to product availability. If Drugs are not available,
Supplier shall promptly notify CHC. In the event of Drug
unavailability, Supplier shall provide Drugs to CHC on a "most favored
nations" basis and CHC shall be free to purchase any shortfall of Drugs
elsewhere. "Most favored Nations" basis shall mean that Supplier shall
provide Drugs to CHC on the same basis that it provides Drugs to any
other
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entity with which it has a management contract, but shall not require
Supplier to treat CHC the same as Supplier's direct patients.
(b) HANDLING AND LABELING. Supplier agrees that all Drug
provided by Supplier hereunder shall be labeled in accordance with
applicable federal, state and local law and that said Drug shall be
stored, shipped and handled by Supplier in accordance with recognized
professional standards for handling and storage of such products and in
accordance with Supplier policies and procedures to the extent that
same do not contradict the requirements of federal, state and local
law. As part of preparing drug for shipment from Supplier's facility,
Supplier shall pack the goods in cartons or other suitable packaging
with such ice, cooling packs, insulation, or other packing materials as
necessary.
(c) DELIVERY. All Drug provided by Supplier pursuant to this
Agreement, shall be delivered either to (i) CHC's patients on behalf of
CHC, or (ii) CHC for delivery to CHC's patients, or (iii) the
dispensing pharmacy designated by CHC, whichever shall be designated by
CHC. The cost of delivery of all Drugs which are delivered by Supplier
to CHC shall be paid by CHC. Title to said Drug shall pass to CHC upon
delivery of Drug to CHC. Any Drug shipped to a location other than
CHC's pharmacy shall be shipped at CHC's cost with risk of loss in
transit being in CHC. A copy of all shipping confirmations shall be
forwarded to CHC.
(d) DISCLAIMER OF WARRANTY. Supplier makes no warranty as to
any Drug sold hereunder to CHC, and ALL WARRANTIES, EXPRESSED OR
IMPLIED, INCLUDING BUT NOT BEING LIMITED TO WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, ARE HEREBY
EXPRESSLY DISCLAIMED BY SUPPLIER. CHC shall, where allowable, be
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given and shall obtain all rights under, and directly against, the
warranty of any manufacturer of Drug which is acquired by Supplier and
resold to CHC.
2. COMPENSATION. In exchange for the services provided by Supplier
under Sections 1A through 1C of this Agreement, CHC agrees to pay Supplier in
accordance with the prices set out on Exhibit A attached hereto which exhibit
may be amended from time to time to reflect changes in those prices which
Supplier pays for Product and labor. Said fee shall be determined on a monthly
basis by Supplier and Supplier shall at the end of each calendar month during
the term of this Agreement submit invoices to CHC setting out the amounts due
Supplier for said month. The invoices for Supplier's services shall be due and
payable thirty (30) days from the receipt of same by CHC.
The parties agree that the fees set forth in this Section 2 reflect
fair market value for the products and services provided by Supplier.
3. CHC COSTS. It is agreed and understood that during the term of this
Agreement, Supplier shall be responsible for the costs incurred in providing the
services which it is obligated to provide. Notwithstanding the preceding
provision, CHC shall be responsible for the costs of salaries and fringe
benefits for CHC's employees, if any; cost of goods; outside auditor fees; state
taxes; principal and interest on CHC loans; depreciation; and payroll taxes for
its employees, if any, and the cost of preparing CHC's Federal and State Income
tax returns. All such expenses shall be contracted for and in the name of CHC,
based solely upon CHC's credit, and Supplier shall not be liable to third party
providers for the costs of such goods and services. CHC shall file all sales and
use tax returns necessary in the operation of CHC's Drug Therapy Business, and
CHC shall remit the amount of said taxes, if any, out of its own funds and
Supplier shall not be responsible for paying these taxes.
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4. SALES TAX. With respect to the sale of products supplied by Supplier
to CHC or its patients under this Agreement, CHC shall provide Supplier an
appropriate state resale certificate, or CHC shall be responsible for remitting
to Supplier any state sales or use taxes that may be due relating to such sales.
5. DISCOUNT. Supplier and CHC acknowledge that CHC is obligated to
disclose any discount from Supplier's usual and customary charges reflected in
the prices for the products listed on Schedule A and any price reduction made on
account of the warranties set forth in this Agreement under all applicable state
and federal programs that provide cost or charged-based reimbursement to CHC for
the goods and services provided and that this Section and the disclosure
contained on any invoice delivered to CHC are intended to constitute notice from
Supplier to CHC of such obligation.
6. SUBCONTRACTING. The parties to this Agreement recognize that
Supplier may provide to CHC certain of the goods and services which it is
obligated to provide under this Agreement by means of subcontracts with third
parties. Supplier shall notify CHC of all subcontracting arrangements, and shall
obtain CHC's approval, which approval shall not be unreasonably withheld or
delayed.
7. INDEMNITY AND INSURANCE. Supplier and CHC hereby agree that:
(i) Supplier shall assume responsibility for and shall indemnify and
hold CHC harmless, and defend CHC, from all losses (including claims
for injuries to employees of Supplier or of CHC), expenses,
attorneys' fees, damages, claims and judgments resulting from the
negligent acts or omissions or wrongful acts of Supplier, its agents
or employees;
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(ii) CHC shall assume responsibility for and shall indemnify and
hold Supplier harmless, and defend Supplier, from all losses
(including claims for injuries to employees of Supplier or of CHC),
expenses, attorneys' fees, damages, claims and judgments resulting
from the negligent acts or omissions or wrongful acts of CHC, its
agents or employees.
The party seeking indemnification pursuant to this Section shall notify
the other party in writing by registered mail of the assertion of any claim, or
the commencement of any suit, action or proceeding by any party in respect of
which indemnity may be sought under this agreement within thirty (30) days of
the party's actual knowledge of such assertion or commencement. Failure to
notify the other party will not result in the waiver of indemnity rights with
respect to such claim, suit, action or proceeding, unless such failure shall
prejudice the rights of the other party. The parties shall cooperate with each
other in the defense and settlement of any such claim, suit, action or
proceeding.
The indemnities and assumptions of liabilities and obligations herein
provided for shall continue in full force and effect notwithstanding the
termination of this Agreement whether by expiration of time, by operation of law
or otherwise.
During the term of this Agreement, Supplier will at its sole cost and
expense, maintain general public liability, products liability and property
damage insurance with limits of not less than $1,000,000.00 per incident; and
$3,000,000.00 per annum aggregate. All policies insuring against liability for
bodily injury or death or damage to property shall include coverage for
malpractice if such exposure exists and shall insure Supplier against the
matters covered by Supplier's contractual duty to indemnify CHC set out
hereinabove.
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Supplier will provide CHC with certificates evidencing the insurance
required hereunder, and all such policies shall provide that notice of
cancellation or termination thereof shall be provided in advance to CHC. In the
event of cancellation or termination of the coverage described herein, Supplier
shall immediately obtain substitute or replacement coverage.
8. TERM. This Agreement shall be for a term of EIGHT years from the
date of execution ("Initial Term"), unless otherwise terminated in accordance
with this section. This Agreement shall thereafter be automatically renewed for
additional 12 month periods ("Renewal Term"), unless otherwise terminated in
accordance with the provisions herein. The parties hereto expressly agree that
they have intentionally negotiated a ten year term which cannot be terminated
except as set forth herein and the parties acknowledge that Supplier would be
severely damaged if CHC were to breach the terms of this Agreement. This
Agreement shall automatically terminate upon (i) CHC transferring its Drug
Therapy Business to Childrens Home Service, or (ii) the mutual agreement of the
parties. If CHC shall breach the terms of this Agreement, and if said breach is
not cured within 14 business days following the giving of notice by Supplier,
CHC agrees that it will pay to Supplier as liquidated damages the sum of
$190,000.00, or if (i) CHC shall be financially unable to pay that amount, or
(ii) a Court shall determine that the above provision providing for liquidated
damages is unenforceable, CHC shall transfer to Supplier for the sum of $10.00
all of CHC's interest in the partnership known as Childrens Home Services
("CHS"), free and clear of all liens and encumbrances, and CHC shall be subject
to all of the restrictions set out in the Restrictive Agreement of even date to
which it and Supplier are parties. If CHS does not exist at the time that CHC is
obligated to sell its interest to NFI, CHC will sell its retail pharmacy and all
of the assets, licenses and permits used therein, to Supplier for an amount
equal to the fair market value of said Pharmacy as established by an independent
third party appraiser selected by Supplier. Either purchase shall be on an all
cash basis and shall close within sixty days of Supplier's demand.
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9. FORCE MAJEURE. The obligations of Supplier hereunder shall be
excused during any period of delay caused by matters such as strikes, acts of
God, shortages of raw materials or power, governmental action or compliance with
governmental requirements, whether voluntary or pursuant to order, or any other
matter which is beyond the reasonable efforts of Supplier to control.
10. INDEPENDENT CONTRACTOR. It is agreed that Supplier shall be an
independent contractor, and not an employee or agent, of CHC. Supplier shall
have sole control and discretion in the manner of performing its obligations
under this Agreement and CHC shall not be responsible for the acts of Supplier
while Supplier is performing services under this Agreement. Supplier is solely
responsible for its employees' salaries, federal and state income withholding,
social security tax withholding, workmen's compensation benefits and fringe
benefits.
11. SEVERABILITY. If any one or more of the provisions of this
Agreement shall for any reason be held illegal or invalid, such illegality or
invalidity shall not affect any other provision of this Agreement and this
Agreement shall be enforced as if such illegal or invalid provision had not been
contained herein.
12. CONFIDENTIALITY. Each party has developed or may during the term
hereof develop certain formulae, products, methods of doing business, customer
lists and other proprietary information which that party deems to be
confidential and a trade secret. In the course of fulfilling their respective
obligations hereunder, some of these formulae, products, methods and other
proprietary information will become known to the other party hereto. It is
contemplated that each employee or agent of the parties who will be exposed to
such confidential information will be required to execute a confidentiality
agreement with each party hereto. Each party also agrees that it will not
duplicate, make use of, or disclose, in any manner whatsoever, any
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information which is deemed to be confidential by the other party, either during
or after the term of this Agreement, without the express prior written consent
of the other party hereto.
In the event that any information deemed to be confidential by a party
is provided to the other party or its employees or agents in writing, the party
providing same shall xxxx the writing as "confidential." In the event that such
information is provided in non-written form such as orally, by audiotape,
videotape or computer software or disc, the party claiming such information to
be confidential shall furnish to the other party a written list containing a
brief description of such item and designating such item as confidential. Upon
termination of this Agreement, all copies of any information hereunder deemed,
or designated by a party as, confidential shall be returned to the party who
supplied the information, or who designated same as confidential.
Notwithstanding the preceding provision, the following types of information
provided by a party shall always be deemed confidential, whether or not so
designated: patient records; prescription files; costs of goods and supplies;
and financial records of the party.
It is recognized and acknowledged that damages caused by a party's
breach of this Section would be difficult to ascertain and would not adequately
compensate the other party for its losses. Therefore, both parties agree that
the party claiming a breach of this Section shall be entitled to injunctive
relief to restrain the commission or continued commission of said breach by
seeking such relief from a court of competent jurisdiction.
Notwithstanding the preceding paragraphs, this restriction shall not
apply (i) to any information which is not deemed confidential hereunder, or
which has not been designated as confidential in the manner specified herein,
(ii) to any information which was known to a party prior to its disclosure by
the other party, (iii) to any information which is or becomes public knowledge
through no failure of a party bound by this Agreement, (iv) to any information
which is independently developed by a party hereto, (v) to any information
reasonably required by
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healthcare providers involved in a particular patient's care, (vi) to the extent
that such restrictions conflict with the terms of Partnership Agreement
evidencing CHC, or (vii) to information provided to voluntary accreditation
agencies government agencies or third party payors as required by law or
consented to by the affected party.
This provision shall not negate or in any way affect any other similar
agreement by which any of the parties are bound.
13. PATIENT REFERRALS. No part of this Agreement shall be construed to
induce or encourage the referral of patients. The parties acknowledge that there
is no requirement under this Agreement or any other agreement between Supplier
and CHC that either party refer any patients to the other or any affiliate.
Patients that receive products from CHC purchased pursuant to this Agreement are
patients of CHC and not Supplier. No payment made under this Agreement shall be
in return for the referral of patients. CHC is free to refer patients to or
purchase healthcare goods and services from any source it chooses.
14. SERVICE TO OTHER BUSINESSES. CHC acknowledges that Supplier offers
its services to other businesses and CHC agrees that no provision contained
herein shall restrict or prohibit Supplier from providing services to others in
addition to CHC as long as the performance of said services does not interfere
with the performance of Supplier's obligations hereunder.
15. CHANGE IN LAW. No party shall make or receive any payment under
this Agreement if any judicial decision, legislative action, or regulatory or
other administrative interpretation, whether federal or state, would render
illegal the conduct of either party under this Agreement. If performance by
either party of any term of this Agreement should be deemed illegal for any such
reason, the affected party shall have the right to require that the other party
renegotiate the terms of this Agreement, such renegotiated terms to become
effective not later
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than fifteen (15) days after receipt of written notice of such request for
renegotiations. If the parties fail to reach an agreement satisfactory to both
parties within fifteen (15) days after the receipt of the request for
renegotiations, either party may terminate this Agreement upon fifteen (15)
days' prior written notice to the other party, or sooner if required by law.
Neither party will make payments under this Agreement which would be prohibited
by law.
16. LEGAL COMPLIANCE. It is the intent of the parties to establish a
business relationship which complies with the requirement of the "safe harbor"
regulations regarding price discounts set forth in 42 CFR Section 1001.952(h)
and which also complies with the requirements of the Medicare and Medicaid
anti-kickback statute (set for the at 42 U.S.C. 1320 a-7b (b)) and the
parties believe that this Agreement satisfies those requirements.
17. RECORDS. To the extent required by Section 1861(b)(1)(I) of the
Social Security Act, Supplier shall, upon proper request, allow the United
States Department of Health and Human Services, the Comptroller General of the
United States and their duly authorized representatives, access to this
Agreement and to all books, documents and records necessary to verify the nature
and extent of the costs of the services provided by Supplier under this
Agreement at any time during the term of this Agreement and for an additional
period of four (4) years following the last date services are furnished under
this Agreement.
18. NONASSIGNABILITY. The rights, duties and responsibilities of the
parties hereto are personal in nature and, except as stated herein, shall not be
assigned without the express written consent of the other party.
19. APPLICABLE LAW. This Agreement shall be construed in accordance
with the laws of the State of Tennessee and the laws of the State of Tennessee
shall govern the rights, duties, liabilities and responsibilities created
hereunder.
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20. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but which together shall constitute one
instrument. Facsimile signatures shall have the same effect as originals.
21. EFFECT. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto, their successors, administrators, trustees and
assigns.
22. MODIFICATION. This Agreement may be changed or modified only with
the written consent of both parties.
23. NOTICES. All notices, demands, requests, consents, reports,
approvals, or other communications which may be or are required to be given,
served, or sent pursuant to this Agreement shall be in writing and shall be
mailed by first class, registered or certified mail, return receipt requested,
postage prepaid, or transmitted by telegram, addressed as set out below. Each
party may designate by notice in writing a new address to which any notice,
demand, request, consent, report, approval or communication may thereafter be so
given, served or sent. Each notice, demand, request, consent, report, approval
or communication which shall be mailed in the manner described above, or which
shall be delivered to a telegraph company, shall be deemed sufficiently given,
served, sent or received for all purposes at such time as it is delivered to the
addressee (with the return receipt or the delivery receipt being deemed
conclusive evidence of such delivery) or at such time as delivery is refused by
the addressee upon presentation.
24. WAIVERS. A waiver of the breach of any provision of this Agreement
shall not be deemed a waiver of any other breach of the same or any other
provision hereof.
25. SECURITY INTEREST. As security for payment CHC shall grant Supplier
a continuing security interest in all of CHC's accounts receivable for the
resale of Drugs, together with all
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documents, instruments, account cards, computer tapes and disks, printouts and
books and records relating to the accounts receivable. For this purpose, CHC and
Supplier will enter into a Security Agreement substantially in the form set
forth on Exhibit B attached hereto.
26. HEADINGS. All headings used herein are for ease of reference only
and shall in no way be construed as interpreting, decreasing or enlarging the
provisions of this Agreement.
IN WITNESS WHEREOF, the undersigned parties hereto have caused this
Agreement to be executed as of the day and year first above written.
CHILDRENS HOME CARE, a general partnership
By: /s/ XX XxXxxxx
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Title: President
------------------------------------
Address: 00 X. Xxxxxxx Xxxxxx.,
Xxxxx 000
Xxxxxxxx, XX 00000
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NOVA FACTOR, INC.
By: /s/ Xxxxx X. Xxxxxxx
---------------------------------------
Title: Chairman
------------------------------------
Address: 0000 Xxxxxxx Xxxxxx Xxxxxxx, #000
Xxxxxxx, XX 00000
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Exhibit A
CHILDRENS HOME CARE
GROWTH HORMONE MANAGEMENT FEE PRICE LISTING
Product Per 10MG EQUIVALENT
Genentech Acq. Cost Mgmt. Fee Total
--------- --------- --------- -----
Protropin $ * $ * $ *
Nutropin * * *
Nutropin AQ * * *
Lilly
Humantrope * $ * $ *
Pharmacia
Genotropin * $ * $ *
* Omitted information is the subject of a request for confidential treatment
pursuant to Rule 406 under the Securities Act of 1933 and has been filed
separately with the Securities Exchange Commission.
