Exhibit 10.38
AMERISOURCE PRIMARY VENDOR AGREEMENT
This Primary Vendor Agreement (this "Agreement") is made and entered into this
8th day of May 2001 between AmeriSource Corporation (hereinafter referred to as
"AmeriSource") located at 0000 Xxxxxx Xxxxx, Xxxxx 000, Xxxxxxxxxxxx, XX 19087-
5594 and Horizon Pharmacies, Inc. (hereinafter referred to as "Pharmacy"),
located at 000 X. Xxxx Xx., Xxxxx 000 Xxxxxxx, XX 00000.
STATEMENT OF THE PARTIES' INTENTIONS
------------------------------------
AmeriSource and Pharmacy desire to enter into a Pharmacy Primary Vendor
Agreement wherein AmeriSource shall serve as a Primary Supplier of
pharmaceuticals and related products to Pharmacy pursuant to this Agreement, and
Pharmacy shall, in turn, receive special pricing and services from AmeriSource.
TERMS AND CONDITIONS
--------------------
NOW THEREFORE, In consideration of the mutual agreements herein contained and
the promises herein expressed, and for other good and valuable consideration,
the receipt of which is hereby acknowledged, and intending to be legally bound
hereby, the Parties do agree as follows:
1. TERM AND RENEWAL: The term of this Agreement shall be three (3) years
commencing on the effective date of this Agreement, unless sooner terminated
pursuant to the terms of this Agreement (the "Term"). This Agreement shall
automatically renew thereafter for up to two (2) additional successive one (1)
year periods unless either party provides to the other party written notice of
its desire to terminate this Agreement at least ninety (90) days prior to the
end of the initial or any renewal term. This Agreement shall apply to all
pharmacy locations owned by Pharmacy as of the effective date of this Agreement
as well as all pharmacy locations acquired by Pharmacy during the term hereof.
2. BREACH: Either party shall be entitled to terminate this Agreement if the
other party fails to perform in any material respect any obligation required of
such party hereunder (or under the Security Agreement, as hereafter defined),
and such default continues for ten (10) days after the giving of written notice
by the non-defaulting party, specifying the nature and extent of such default.
Any such default that is not cured within the cure period described above is
referred to herein as a "default."
3. PRICE OF GOODS GRID:
----------------------------------------------------------------------------
HORIZON PHARMACIES, INC.
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Annual Volume Daily OTC HBC Source
Commitment Wire Transfer
----------------------------------------------------------------------------
$* * * *
----------------------------------------------------------------------------
$* * * *
----------------------------------------------------------------------------
$* * * *
----------------------------------------------------------------------------
Terms: Pharmacy shall pay by electronic funds transfer (EFT) on * terms.
Payment for each day's purchases shall be due and payable * later, on a daily
basis. Pharmacy shall receive a credit limit of *.
. This proposal is offered with Pharmacy agreeing to fully participate
in all AmeriSource generic formularies and applicable programs.
Home healthcare items, AmeriSource contracted generics, Private label items,
HBC Source, and certain slow-moving items are excluded from this cost
pricing definition and are instead net billed.
AmeriSource reserves the right to charge and collect interest on late payments
at the lesser of (i) the rate of 1.5% per month, and (ii) the highest rate
allowed under applicable law, and to put the account on credit hold preventing
shipment in the event of late payment.
4. PURCHASE MONEY SECURITY INTEREST: AmeriSource shall have a purchase money
security interest in all goods sold to Pharmacy under this Agreement, as
evidenced by that certain Security Agreement of even date herewith (the
"Security Agreement") between AmeriSource and Pharmacy.
5. DEFINITION OF COST: "Cost" means (i) the manufacturer's invoice cost on
the date the order is shipped to the Pharmacy, or (ii) the contract/bid price of
the item, as the case may be, in each case exclusive of discounts for prompt
payment given to AmeriSource by its vendors. Any reduction in this customary
discount will cause "Cost" to be increased as appropriate. Home health care
items, AmeriSource contracted items, generics, Health Services Plus items, HBC
Source items, Health Centre items and slow moving items are excluded from this
definition of cost and are instead net billed. In addition, special rebates
given to AmeriSource on generic drugs with vendor distribution allowances do not
affect the determination of Cost. All Pharmacy contracted items will be priced
at the Pharmacy's negotiated contract price.
All excise, gross receipts, sales, and other taxes incurred in connection with
Pharmacy's purchases hereunder, other than net income taxes of AmeriSource, will
be paid by Pharmacy.
*Language has been intentionally omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
2
6. EXCEPTIONS TO COST PLUS PRICING: The following items shall not be subject
to Cost plus pricing:
. Trade Show purchases
. Generics, Vitamin Lines
. HBC Source
. Computer Services
. Other net prices categories, including, but not limited to, Home Health
Care, and School and Office supplies.
7. EARLY TERMINATION: In the event that Pharmacy commits a default hereunder,
such default is not waived by AmeriSource and AmeriSource terminates this
Agreement pursuant to Section 2 hereof as a result of such default, then
Pharmacy shall pay AmeriSource * (the "Early Termination Penalty").
Notwithstanding the foregoing, the Early Termination Penalty shall be reduced by
*. The Early Termination Penalty shall be payable to AmeriSource not later than
sixty (60) days after the date that this Agreement is terminated. The Early
Termination Penalty shall be in addition to any other damages owed by Pharmacy
to AmeriSource as a result of a breach of this Agreement.
8. LEVEL OF PURCHASES: Pharmacy will purchase at least * of its designated
goods per month, less returns, from AmeriSource under this Agreement. It is
agreed and understood that the prices listed in paragraph 4 are based on
AmeriSource Primary Vendor status to Pharmacy. Should Pharmacy purchase less
than * of its needs from AmeriSource, *.
9. SPECIAL ORDER/NEW ITEM REQUESTS: Special orders and/or new item requests
should be forwarded to customer service at each servicing division. One-time
orders will be drop-shipped directly to each store. Items will be stocked
accordingly based on stated usage by Pharmacy. If there is not a significant
amount of usage, the item would be handled as a one-time drop-ship item.
10. GENERIC FORMULARIES: Pharmacy agrees to participate in all AmeriSource's
generic formularies at the level of *. If the level of generic purchases falls
below *, AmeriSource reserves the right to adjust the overall price of goods.
11. RETURNED GOODS: Returns shall be accepted in accordance with the
AmeriSource Returned Goods Policy and the Prescription Drug Marketing Act, and
shall include the following financial terms:
. Merchandise originally purchased from AmeriSource returned in saleable
condition within 60 days of invoice date, with the AmeriSource item
number and invoice date information, will be credited at * of the
original invoice amount.
. Merchandise originally purchased from AmeriSource returned in saleable
condition between 61-180 days after date of invoice, with the
AmeriSource item number and invoice date information, will be credited
at * of cost.
*Language has been intentionally omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
3
. Merchandise originally purchased from AmeriSource returned in saleable
condition after 180 days of invoice date, with the AmeriSource item
number and invoice date information, will receive credit based upon the
respective product's manufacturer's policies.
. Any shortages of product must be reported to the servicing division
within 24 hours of invoice date to be considered for credit.
12. PRODUCT AND SHELF STICKERS: AmeriSource will make individual product
stickers available to each store providing the proper information. AmeriSource
will provide shelf stickers and other shelf sticker related supplies to
pharmacies. Upon notification of bid award AmeriSource will distribute an
account opening packet which will include, but not be limited to, Telxon OE
unit, divisional contact sheet including all appropriated phone numbers,
addresses, emergency procedures, etc.
13. FUTURE DISCUSSIONS-PAYMENT TERMS: Pharmacy shall pay by electronic funds
transfer (EFT) on * terms. Payment for each day's purchases shall be due and
payable * later, on a daily basis. Pharmacy shall receive a credit limit of *.
As Pharmacy continues to restructure its financial status, AmeriSource would be
open to a review of all terms of the Agreement, including, but not limited to,
payment terms. No change shall be effective until mutually agreed to in writing
by both parties.
14. COST REPORTING: Pharmacy understands that rebates and discounts may need
to be reported as a part of its cost for purposes of federal and/or state
healthcare programs, including for purposes of 42 CFR 1001.952(h).
15. PROPRIETARY SOFTWARE: AmeriSource grants to Pharmacy a non-exclusive non-
transferable license the ("License") to use the AmeriSource's proprietary
software (the "Software"), including without limitation the ECHO system and the
iECHO software, solely for the purposes of this Agreement at the Pharmacy
locations, in accordance with, and subject to, the terms and conditions of this
Agreement.
AmeriSource will provide the Software in the form of a CD-ROM, diskettes or
other media containing machine-readable object-code. AmeriSource may provide
the Software to Pharmacy on more than one medium. Regardless of the type or
size of the medium that Pharmacy receives, Pharmacy only use the medium
appropriate for its designated computer or network server.
AmeriSource or its suppliers retain all rights to the Software and related
documentation (including, but not limited to any images, "applets," photographs,
animations, video, audio, music and text incorporated therein, copyright, trade
secrets and other proprietary rights), which are not expressly granted, to
Pharmacy under this Agreement. All updates, enhancements, modifications and
additions to the software developed by AmeriSource or any other entity will be
the sole and exclusive property of AmeriSource.
*Language has been intentionally omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
4
Pharmacy agrees that it and its locations will not copy, duplicate, or prepare
derivative works from any element of the Software except that (i) Pharmacy may
make one (1) back-up or archival copy of the Software at each Pharmacy location
as permitted by the copyright law of the United States; and/or (ii) install the
Software on a single hard disk at each Pharmacy location. Pharmacy shall not
remove any copyright or proprietary rights notice included in or on any Program
element, and shall reproduce all such notices in or on all copies made by
Pharmacy.
16. ECHO HARDWARE: The following hardware (the "Hardware") will be provided by
AmeriSource to each Pharmacy location, at additional cost, upon written request
by Pharmacy:
500 MHz Processor
6.4/13 GB Hard Drive
64 MB Ram
Color Monitor (15 inch)
56K Baud Modem
Windows 98
17. PROPRIETARY SOFTWARE/HARDWARE LIMITED WARRANTY: AmeriSource warrants that
the Software, if operated as directed, will perform substantially in accordance
with its documentation for a period of ninety (90) days from the date of
installation at each Pharmacy location. AmeriSource also warrants that the
Hardware provided by AmeriSource, and the diskettes, CD-ROMs, or other media on
which the Software is provided, will be free from defects and workmanship under
normal use for a period of ninety (90) days from the date of installation at
Pharmacy. Other than as set forth in this paragraph, (a) AmeriSource makes no
warranty, express or implied, including without limitation, any implied warranty
of merchantability or fitness for a particular purpose, and (b) no oral or
written information provided by AmeriSource or its employees, agents or
representatives will create any representation or warranty.
AmeriSource's entire liability, and Pharmacy's exclusive remedy, for breach of
the warranties contained in this paragraph shall be, at AmeriSource's option, to
(i) repair or replace the Software so that it performs substantially in
accordance with its documentation; (ii) advise Pharmacy how to achieve
substantially the same functionality with the Software as described in any
documentation through a procedure different from that set forth in any
documentation, or (iii) replace defective media returned within ninety (90) days
of the date that Pharmacy receives such defective media. Any replacement
software shall not serve to extend the original ninety (90) day warranty.
18. INDEMNIFICATION: Each party agrees to indemnify, defend and hold harmless
the other party, its subsidiaries, officers, directors and successors and
assigns from and against all claims, losses, damages, liabilities and expenses
(including but not limited to attorneys' fees and court costs) arising as a
result of negligence, illegality or wrongdoing of any kind alleged or actual on
the part of such party.
19. LIMITATION OF LIABILITY: In all cases, each party's liability shall be
limited to actual damages proven by the other party, except as specifically
provided for otherwise in this
5
Agreement. In no event shall a party be entitled to indirect, special,
consequential or punitive damages.
20. INSOLVENCY: In the event of any proceedings, voluntary or involuntary, in
bankruptcy or insolvency by or against either party, the inability of either
party to meet its debts as they become due, or in the event of the appointment,
with or without either party's consent, of an assignee for the benefit of
creditors or of a receiver, then other party shall be entitled, at its sole
option, to immediately terminate this Agreement without notice.
21. INSURANCE: During the Term of this Agreement, Pharmacy shall maintain
professional liability insurance in the amounts of not less than one million
dollars ($1,000,000.00) per incident and five million dollars ($5,000,000.00) in
the aggregate. AmeriSource shall be named on Pharmacy's policy as an additional
insured.
22. ENTIRE AGREEMENT: This Agreement supersedes all prior agreements between
the parties with regard to the subject matter hereof and there are no other
understandings or agreements between them. No representations, warranties, or
promises pertaining to this Agreement have been made by, or shall be binding on,
any of the parties, except as expressly stated in this Agreement. This Agreement
may not be changed orally, but only by an agreement signed by the party against
whom enforcement of any such change is sought.
23. SEVERABILITY: If any provision or clause of this Agreement conflicts with
applicable law, such conflict shall not affect other provisions of the Agreement
if the provisions can be given effect without the conflicting provision. To this
end the provisions of this Agreement are declared to be severable. If any
provision of this Agreement is held to be invalid or unenforceable for any
reason whatsoever, including any conflict with applicable law, the remaining
provisions shall remain valid and unimpaired, and shall continue in full force
and effect.
24. WAIVERS: Failure of either party to enforce strict performance of any
obligations under this Agreement shall not constitute a waiver of such party's
right to thereafter enforce every term and condition hereof.
25. FORCE MAJEURE: If either party to this Agreement is delayed in or
prevented from performing any of its obligations hereunder (other than payment
obligations) by reason of labor problems, inability to procure materials, power
failure, restrictive government laws or regulations, acts of God or other
similar events beyond the reasonable control of such party, then such
performance shall be excused for the period of the delay.
26. NOTICES: All notices required to be given hereunder shall be made in
writing and shall be deemed sufficiently given if delivered by certified or
registered mail return receipt requested, overnight or same-day delivery (such
as Federal Express or special courier), at the addresses set forth. The notice
shall be effective on the date indicated on the return receipt in the case of
certified or registered mail, effective on the date following the date of
mailing in the case of overnight delivery and effective the date of delivery in
the case of same-day delivery at the
6
addresses below or at such addresses as may subsequently be provided in writing
to the respective parties:
Xxxx Xxxxx Xxxxxxx Xxx
Vice President, National Accounts Chief Financial Officer
AmeriSource Corporation Horizon Pharmacies, Inc.
0000 Xxxxxx Xxxxx, Xxxxx 000 000 X. Xxxx Xx., Xxxxx 000
Xxxxxxxxxxxx, XX 00000-0000 Xxxxxxx, XX 00000
With a copy to: With a copy to:
General Counsel Xxxxxxx X. Xxxxx, III
AmeriSource Corporation Xxxxxxx & Xxxxxx, P.C.
0000 Xxxxxx Xxxxx, Xxxxx 000 000 X. Xxxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000-0000 Xxxxx 0000
Xxxxxx, XX 00000
27. GOVERNING LAW: The construction, application and enforcement of this
Agreement shall be governed by the laws of the State of Texas.
28. ASSIGNABILITY: This Agreement may not be transferred, assigned, pledged or
hypothecated by either party hereto without the prior written consent of the
other party to this Agreement.
29. CAPTIONS: The captions, headings and arrangements used in this Agreement
are for convenience only and do not in any way affect, limit or amplify the
provisions hereof.
30. COUNTERPARTS: This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original for all purposes and all of which
shall be deemed collectively to be one agreement.
7
IN WITNESS WHEREOF, the Parties, intending to be bound by the terms of this
Agreement and having the authority to bind their respective corporations, hereby
execute this Agreement by placing their signatures below:
AMERISOURCE CORPORATION HORIZON PHARMACIES, INC.
By: /s/ Xxxx Xxxxx By: /s/ Xxxx X. XxXxxx
-------------------------- --------------------------
Name: Xxxx Xxxxx Name: Xxxx X. XxXxxx
Title: Vice President, National Title: President and Chief Executive
Accounts Officer
Date: May 8, 2001 Date: May 8, 2001
-------------------------- --------------------------
8
