Unassociated Document




PRIME
VENDOR AGREEMENT 




This
Prime Vendor Agreement (“Agreement”) is made as of September15, 2003 (“Effective
Date”) by AmerisourceBergen Drug Corporation, a Delaware corporation
(“Distributor”) and Allion Healthcare Inc., a Delaware Corporation
(“Customer”).




A.   Distributor
is a national distributor of pharmaceutical and other products
and services, including prescription (Rx) and over-the-counter (OTC)
pharmaceuticals, nutritional, health and beauty care (HBC) and home health care
(DME) products (collectively, “Products”);




B.   Customer
owns and operates one or more specialty pharmacies (Facilities”);
and




C.   The
parties intend by this Agreement to set forth their obligations to each
other for an arrangement under which Distributor will provide Products and
services to Customer (“Program”).




NOW
THEREFORE, the parties agree as follows:




1.    PRICING
AND PAYMENT TERMS




Distributor
will be the Primary Vendor of all requirements of Customer’s Facilities for
Products. Customer will pay, within terms, Product costs and Program fees
pursuant to payment terms in Exhibit
“1”
(“Pricing/Payment Terms”). “Primary Vendor” means Customer purchases from
Distributor no less than *% of all prescription pharmaceuticals Products it
purchases (excluding Products that Distributor does not sell), as verified
quarterly, and meets minimum periodic purchase levels in Paragraph 3(A) of the
Pricing/Payment Terms. Orders for Products will be electronically transmitted
(other than Schedule II controlled substances) and will describe Products that
Distributor will provide to Customer, the quantity and designated delivery
location. All payment plans (except pre-pay) must be by electronic funds
transfer (EFT).




2.    PRO
GENERICS PROGRAM PARTICIPATION

 

Customer
will participate in Distributor’s preferred generic formulary program,
“Preferred Rx Options (PRO Generics)”, pursuant to requirements as amended from
time to time by Distributor. Customer will order all generic pharmaceutical
Products from Distributor and will participate in the PRO Generics automatic
substitution (ACAP or its successor). Customer authorizes Distributor as its
sole agent to develop and implement a generic pharmaceutical Product list for
the Term, including Product selection, the way substitutions are made and all
agreements with generic suppliers. 




3.    CUSTOMER
LOCATIONS & DELIVERIES




Distributor
will deliver Products to each Facility five days a week (Monday –
Friday),
once a day except holidays. Customer’s current Facilities are located
at:




33 Walt
Whitman Road, Suite 200A, Huntington Station, NY 11746

2800
South IH 35, Suite 108, Austin, TX 78704

2330 W.
205th Street,
Torrance, CA 90501

4500
Biscayne Boulevard, Miami, FL























Facility
means each of Customer’s specialty pharmacies, together with any other
facilities Customer acquires, is Affiliated (as defined below) with or operates
during the Term in the United States. For purposes of this Agreement, a facility
that Customer is Affiliated with is one that controls, is controlled by or under
common control with Customer. Newly acquired facilities with existing agreements
with other distributors will become Facilities under this Agreement upon the
earlier of expiration of such existing agreement or the date Customer may
terminate such agreement, with or without cause, without breaching it or paying
any termination penalty. Newly opened “start up” locations will also become
“Facilities” under this agreement. All Facilities listed will receive normal
daily deliveries by 9:00 AM the next business day except the Facility located at
33 Walt Whitman Road, Suite 200A, Huntington Station, NY will received a
delivery by 7:30 AM, five days a week (Monday - Friday).




4.    RETURNED
GOODS POLICY

 

Customer
will only return goods to Distributor in accordance with Distributor’s
standard
policy for returned goods (“Returned Goods Policy”), as amended from time to
time by Distributor.




5.    ADDITIONAL
SERVICES & PROVISIONS

 

Services
are listed in Exhibit
“2”. Terms,
conditions and other provisions are set forth in
Exhibit
“3”
(“Provisions”). Distributor may, from time to time, develop policies and
procedures relative to new or existing services offered to customers, on an
interim or as-needed basis. If Distributor develops such policies or procedures
or changes current ones, Distributor will provide Customer with written notice
at least thirty (30) days before such changes are effective.




6.    TERM
OF AGREEMENT





	A.      	
      Subject
      to Paragraph 5 of the Provisions, the initial Term will begin on the
      Effective Date and end on September 14, *. After the expiration of the
      Term as set forth in subparagraph A. above, the Term will, thereafter, be
      extended on a month-to-month basis until either party gives at least
      ninety (90) days’ prior written notice to the other of its intention to
      not extend this Agreement.







7.    NOTICES





	A.      	
      Subject
      to Paragraph 9.3 of the Provisions, notices to Customer will be sent
      to:







Allion
Healthcare Inc.

33 Walt
Whitman Road

Suite
200A

Huntington
Station, NY 11746

Attn:
Michael P. Moran 

Fax:
631-547-6532




8.    EXHIBITS

 

The
following exhibits to this Agreement are incorporated by this
reference.

 




	1.  	
      Value-Added
      Services





	2.  	
      Provisions





	3.  	
      Pricing/Payment
      Terms




























IN
WITNESS WHEREOF, the parties have had a duly authorized officer, partner or
principal execute this Prime Vendor Agreement as of the Effective
Date.





	
       CUSTOMER:
Allion Healthcare
      Inc.

       

       

       
	 	 	 DISTRIBUTOR:
AmerisourceBergen Drug
      Corporation 
	By: /s/ Michael
      P. Moran	 	 	By: /s/ Donald H.
      Clarfeld
	
      

    	 	 	
      

    
	Name: Michael P. Moran
      
Title:   President & CEO	 	 	Name: Donald H.
      Clarfeld
Title:   Vice President, Alternate
    Care





























IN
WITNESS WHEREOF, the parties have had a duly authorized officer, partner or
principal execute this Prime Vendor Agreement as of the Effective
Date.









	
      CUSTOMER:
Allion Healthcare Inc.

       

       

       
	 	 	 DISTRIBUTOR:
AmerisourceBergen Drug
      Corporation 
	By: /s/ Michael
      P. Moran	 	 	By: /s/ Donald H.
      Clarfeld
	
      

    	 	 	
      

    
	Name: Michael P. Moran
      
Title:   President & CEO	 	 	Name: Donald H.
      Clarfeld
Title:   Vice President, Alternate
    Care

























EXHIBIT
1 TO

PRIME
VENDOR AGREEMENT

PRICING
/ PAYMENT TERMS




In
addition to payment for Products, Customer will pay Distributor the following
Program and other fees for Distributor’s Product distribution and Services for
Customer and its Facilities. Except as otherwise provided, payments for other
services not specifically set forth in this Agreement are due within 10 days
from Distributor’s invoice date. Pricing does not reflect any administrative or
other fees to a group purchasing organization or buying group (“GPO”). If
Customer contracts with a GPO, Customer will pay any such fees to the applicable
GPO.




1.  
  PROGRAM
FEES

 

A.     Distribution
Fee (Price of Goods).   Customer will pay the
following Price of Goods,
which includes Distributor’s fees for distribution, subject to the following
adjustments for Average Per-Facility Monthly Net Purchase volume and payment
terms. For Products other than SuperNet Products, Customer’s Price of Goods will
be based upon *. Distributor will add to the billed amount any applicable sales,
use, business and occupation or similar tax. After the first contract year, the
Price of Goods for Branded Pharmaceutical Products will begin at a Tier to be
determined based on the Average Per-Facility Monthly Net Purchase Volume during
the previous contract year, in accordance with the table set forth below, unless
otherwise agreed to in writing by the parties. Specifically, the Price of Goods
will be reviewed on an annual basis (at the end of each contract year) whereby
the Price of Goods for the following contract year will be adjusted in
accordance with * provided that Customer is, in all material respects, in
compliance with it’s obligations under this Agreement including but not limiting
to being current on all payments due to Distributor. In the event that Customer
is not in material compliance with its obligations under this Agreement, the
Price of Goods table set forth below shall apply.

 

If,
during the Term, Customer acquires additional Facilities or opens any new
Facilities, those Facilities will not be averaged into the Price of Goods for
the initial six months or the remainder of the contract year whichever is
longer.

 

Notwithstanding
any language set forth herein to the contrary, for the first contract year (i.e.
September 15, 2003 to September 14, 2004) only, the Price of Goods for all
Facilities will be Cost minus *% for all Branded Rx Pharmaceutical Products
provided that Customer is, in all material respects, in compliance with its
obligations under this Agreement including but not limiting to being current on
all payments due to Distributor. In the event that Customer is not in material
compliance with its obligations under this Agreement, the price of Goods table
set forth below shall apply.

 





	
       
	
      Pricing
      Tiers
	
       
	
      Price
      of Goods*
	 
	 	 	 	 	 
	
      Average
      Per-Facility Monthly Net Purchase Volume
	 
	
      No.
	 	 	 	 
	 	
      Branded
      Rx Pharmaceutical Products
	
      31
      Day DSO

      Options
	
      Semi-Monthly

      EFT
      Payment
	
      Monthly
      Pre-Pay

	
      1
	
      $800,000.00
      to $900,000.00
	
      *
	
      *
	
      *

	
      2
	
      $900,000.01
      to $1,000,000.00
	
      *
	
      *
	
      *

	
      3
	
      $1,000,000.01
      to $1,500,000.00
	
      *
	
      *
	
      *

	
      4
	
      $1,500,000.01
      to $2,000,000.00
	
      *
	
      *
	
      *

	
      5
	
      $2,000,000.01
      to $3,000,000.00
	
      *
	
      *
	
      *

	
      6.
	
      $3,000,000.01
      to $4,000,000.00
	
      *
	
      *
	
      *

	
      7.
	
      $4,000,000.01
      to $5,000,000.00
	
      *
	
      *
	
      *

	
      8
	
      $5,000,000.01
      & above
	
      *
	
      *
	
      *

	 	
      Contract
      Items and HBC/OTC Product
	
      *
	
      *
	
      *

	 	 	 	 	 
	 PRO
      Generics, repackaged branded Rx, drop shipments, supplies (bottles &
      vials), home healthcare (DME), private label, food, nutritionals, gift
      items, school and office supplies, fragrance, cosmetics, slow-moving
      items, bulk/case goods, etc.	
      *
	 	 






*“Cost”
means *

**
“SuperNet” applies to *




















B.   Price
of Goods after First Contract Year.   After the first contact
year, Customer
shall be entitled to an Additional Discount for the Price of Goods for Branded
Rx Pharmaceuticals as set forth in the table below, based on the previous
Contract Year Total Combined Net Purchase Volume for all of Customer’s
Facilities (excluding SuperNet** purchases as defined in Section A above).
Specially, the Price of Goods for Branded Rx Pharmaceuticals will be reviewed on
an annual basis (at the end of each contract year) whereby the Price of Goods
for Branded Rx Pharmaceuticals for the following contract year will be adjusted
in accordance with *, unless otherwise agreed to by the
parties.








	
      No.
	
      Contract
      Year Total Combined Net
	
      Additional

	 	
      Purchase
      Volume
	
      Discount
      Percentage
      (%)

	 	 	 
	
      1
	
      $60,000,000.01
      to $80,000,000.00
	
      *%

	
      2
	
      $80,000,000.01
      to $100,000,000.00
	
      *%

	
      3
	
      $100,000,000.01
      to $120,000,000.00
	
      *%

	
      4
	
      $120,000,000.01
      & above
	
      *%



























C.     Additional
Value-Added Services.   The additional
value-added services in Exhibit
“2” will be
provided to Customer by Distributor for * per month per Facility for Facilities
that meet minimum Net Purchase levels.

 

D.     Ordering
Hardware/Softeware.   In addition to the
foregoing value-added Services
fee, Customer will pay the per-month fees in Exhibit
“2” for
ordering and reporting software and hardware selected by Customer for each
installation on system hardware at Customer’s Facilities and other
locations.




E.     Set-Up
Fee.
*




F.     Contract
Administration.   In administering
Customer’s GPO/supplier contracts,
Customer must (i) provide a copy of new contracts, (ii) comply with the
supplier’s terms, (iii) use all products for its “own use” (as defined in
judicial and legislative interpretations), (iv) notify Distributor at least 45
days before it changes suppliers, and (v) upon changing suppliers, assist
Distributor in disposing of any excess inventory acquired for Customer. When
invoiced, Customer will promptly reimburse Distributor for any unpaid
chargebacks that are (x) denied by a GPO or manufacturer/supplier; or (y) not
paid within 45 days; and, in either case, Customer will look solely to such GPO
or manufacturer/supplier for redress.




2.  
  PAYMENT
TERMS

 

Customer
agrees to the following payment terms for Product purchases. (Check
only one
box below):

 




	 	
      SEMI-MONTHLY
      EFT PAYMENT
	 	
      SEMI-MONTHLY
      EFT PAY

	 	
      (Default
      if no box checked)
	 	
      “31
      DAY DSO OPTION

	 	 	 	 
	 o	
      Purchases
      form the 1st through the 15th

      of
      the month are due by the 25th of the

      same
      month. Purchases from the 16th

      through
      the end of the month are due

      by
      the 10th of the following month.
	o	
      Purchases
      made from the 1st 

      through
      the 15th of the month

      are
      due on the 10th of the 

      following
      month. Purchases 

      made
      through the 16th 

      through
      the End of the Month 

      of
      the Month are due on the

      25th
      of the following month.

	 	 	 	 
	x	
      WEEKLY
      EFT PAY
	o	
      MONTHLY
      PRE-PAY

	
       
	
      “31
      DAY DSO OPTION”
	 	 
	 	
      Purchases
      made from Monday

      through
      Saturday are due 28 days

      from
      the weekly statement generated

      the
      following Monday.
	 	
      For
      anticipated purchases,

      payment
      for the next month’s

      purchases
      is due and payable 

      on
      the 25th day of the current 

      month,
      adjusted to reflect

      actual
      purchases. Requested

      payment
      is based on an average
of the three (3) previous months’
purchases
      with a reconciliation
statement produced at month
  end.






























All
payments must be received by EFT for deposit to Distributor’s account by the due
date. Distributor may change available payment plans from time to time. Payment
term changes may affect Price of Goods. If Customer does not select an option or
the option selected is not available, Distributor will bill Customer on
Semi-Monthly terms until otherwise notified by Customer. Subject to credit
approval, Customer may change payment terms upon thirty (30) days’ written
notice prior to the beginning of a calendar month. Price of Goods adjustments
for payment terms changes are subject to changes from time to time by
Distributor to reflect *.




3.    MIMIMUM
ORDER VOLUME




A.    Customer’s
minimum annual Net Purchase (total purchases less returns, credits,
rebates, late payment fees and similar items) volume during the second contract
Year shall be $* million. Customer’s Net Purchases during subsequent contract
years are projected to increase at a rate of *% per Year during each year of the
Term. Customer’s aggregate Net Purchase volume during the Term of this Agreement
will be no less than $* million. Year one shall be from the Effective Date until
September 14, 2004.

 

B.    Customer
acknowledges that Price of Goods and Service pricing available under
this Agreement are based upon Customer’s meeting the minimum Net Purchases
provided in 3 (A) above and, if Customer fails to do so, Distributor and
Customer agree to the liquidated damages set forth in 3 (C) below as the sole
remedy of Distributor for failure to purchase of Customer.

 

C.    In the
event of early termination without cause by Customer or because of Customer
default that has not been cured within the applicable time periods set forth in
section 5 of the Provisions, or if Customer fails to meet the minimum aggregate
Net Purchases, a prorated amount will be provided as repayment to Distributor at
the end of the Agreement or upon termination of the Agreement as
follows:




The
prorated amount is equal to * basis points (*%) of the projected volume
remaining on the Term of the Agreement, in the event of termination as set forth
above, regardless of the aggregate Net Purchase at the time of early
termination.




The
projected volume in each contract year, beginning the second year, is calculated
based on the stated annual growth rate as follows:




Year 2:
$* million

Year 3:
$* million

Year 4:
$* million

Year 5:
$* million




For
example and for illustrative purposes only, if Customer terminates this
Agreement without cause at the end of year 4, Customer will pay to the
Distributor $* ($* million multiplied by *).




Customer
and Distributor agree that such amounts are reasonable in
nature.






















EXHIBIT
2 TO 

PRIME
VENDOR AGREEMENT

ADDITIONAL
VALUE-ADDED SERVICES







The
following Services are offered to Customer by Distributor for the monthly fees
in Paragraph 1(B) of Exhibit
“1”
(Pricing/Payment Terms).




·Bar-Coded
Shelf Labels

·DEA
Scheduled Pharmaceuticals Purchased Report

·Monthly
Usage and 80/20 Report

·Price
Stickers - Rx and OTC




Distributor
reserves the right to discontinue any Services as it deems appropriate, in which
case Distributor will make a reasonable proportionate reduction in the monthly
fee based upon the value of the discontinued Services. In addition, for time to
time Distributor may offer such new Services, at such additional fees as it
determines.




Ordering
and Reporting Sortware and Hardware





	
      ·
	
      Internet
      ordering software (iBergen Catalog and Order Entry (CEO), iECHO or
      similar software, as appropriate) for $* per month per
      installation.





	
      ·
	
      UltraPhase/Telxon
      handheld electronic order entry terminal (one per pharmacy) for * per
      installation.





	
      ·
	
      InterLinx
      reporting software for $* per month per installation. (Note: InterLinx is
      subject to a separate software license
agreement.)







Distributor
retains title to all ordering and reporting hardware and software and, pursuant
to Provisions Paragraph 5.2, Customer must return them upon termination of this
Agreement.




Computer
consulting and related services will be offered at Distributor’s then-current
standard charges for such services.




Recalls




Distributor
will notify customer of all recalls as instructed in the supplier’s
notification.




Drop
Ship Service




Distributor
provides drop ship service when Customer’s needs dictate this approach and the
supplier meets Distributor’s liability insurance and other requirements. Drop
shipments may be subject to an additional charge.