EX-10.7 DISTRIBUTION SERVICES AGREEMENT



 





EXHIBIT 10.7




* Certain portions of this exhibit have been omitted pursuant to a request for confidential

treatment which has been filed separately with the SEC.




DISTRIBUTION SERVICES AGREEMENT




     This agreement is made as of August 3, 2000, between Cumberland Pharmaceuticals Inc., a
Tennessee corporation (“Cumberland”), and CORD Logistics, Inc., an Ohio corporation
(“CORD”).



Background Information




     A. Cumberland is a Tennessee-based company formed primarily to acquire and market a
portfolio of niche pharmaceutical products to specific physician segments in the United
States, the District of Columbia and Puerto Rico (the “Territory”).



     B. CORD is in the business of distributing pharmaceutical products to wholesalers,
specialty distributors, physicians, clinics, hospitals, retail pharmacies, and other health
care providers in the Territory, and of providing Information Systems and other services
that support its customers’ use of its distribution capabilities (collectively, the
“Services”).



     C. Cumberland desires to engage CORD as its exclusive distribution agent (described
below) for the pharmaceutical products described on the exhibits attached hereto (each, a
“Product”) and, with respect to each Product, to perform certain other services described in
this agreement, all upon the terms and conditions set forth in this agreement. This
agreement is being entered into pursuant to a letter of intent from CORD dated April 5,
2000, which was accepted and executed by Cumberland as of April 10, 2000.



Statement of Agreement




     Cumberland and CORD (the “Parties”) hereby acknowledge the accuracy of the above
Background Information and agree as follows:



     §1. Appointment. Upon the terms and conditions described in this agreement,
Cumberland hereby appoints CORD as its exclusive distribution agent in and for the Territory
for distribution of each Product (including samples) to Cumberland’s direct customers
(“Customers”).



     The Services for each Product or group of Products identified on the same
Product-specific exhibit to this agreement shall be implemented pursuant to the
Implementation Schedule included in such exhibit (each, an “Implementation Schedule”), with
distribution of each Product to begin on the date specified in the Implementation Schedule
for such Product (the “Commencement Date”). In performing the Services, CORD will provide,
at its discretion, the services of either the Vice President and General Manager, Director
of Sales or other such representative as mutually agreed to by Cumberland and CORD. CORD’s
designated representative will be the primary liaison with Cumberland, unless otherwise
agreed to by the parties.



     §2. Product Supply. Warehousing and Storage. Cumberland shall ship each Product
to CORD at CORD’s distribution facility currently located at 15 Ingram Boulevard, Suite 100,
La Vergne, TN 37086 or to such other distribution facility as may be designated by CORD
(individually or collectively, the “CORD Facility”) and agreed by Cumberland, in sufficient
quantities to meet Cumberland’s anticipated Customer orders. CORD shall visually inspect
each shipment of each Product for external damage or loss in transit and, in the event of
any such damage or loss, shall, within a commercially reasonable period of time following
discovery of such damage or loss by CORD, notify Cumberland that such damage or loss has
occurred.



 









 





     With respect to each Product or group of Products identified on the same Product-specific
exhibit to this agreement: (a) Cumberland shall, during the Product Term set forth on such exhibit,
provide CORD with applicable regulatory storage and handling requirements and projections of such
Product’s volume requirements not less often than quarterly, at least 30 days in advance of the
quarter and written instructions setting forth the storage and handling requirements applicable to
such Product; and (b) CORD shall store such Product in the CORD Facility and comply with applicable
regulatory storage and handling requirements and the storage and handling requirements applicable
to such Product, as such requirements may be supplemented or amended from time to time in writing
by Cumberland with reasonable prior notice to CORD and its prior approval, which approval shall not
be unreasonably withheld or delayed. If CORD notifies Cumberland in good faith that any such
supplement or amendment will require any material modification to the CORD Facility or CORD’s
procedures or requirements which are unique and specific to the Product or the Services resulting
in a material increase to CORD’s anticipated costs and expenses, then Cumberland and CORD shall
consult regarding such reasonable costs and expenses (hereinafter, simply “unique costs”) and
Cumberland shall pay such unique costs resulting from that modification.



     Cumberland shall pay all costs and expenses of delivering each Product to the CORD Facility.
CORD will never take title to any Product, even when such Product is located at the CORD Facility.



     §3. Standard Product Distribution. With respect to each Product or group of Products
identified on the same Product-specific exhibit to this agreement, and during the Product Term set
forth on such exhibit, all Customer orders shall be taken by CORD as described in the Operating
Guidelines (defined in §6, below). CORD shall confirm the receipt of and process each order and, so
long as the ordered Product is then in stock at the CORD Facility and the orders are received no
later than 2:00 p.m. local time at the CORD Facility, routinely have that order available for
shipment within 24 hours of CORD’s receipt of the order (exclusive of holidays and weekends) or
such longer period as may be designated or permitted by Cumberland.



     Customer orders will be delivered by a courier mutually chosen by Cumberland and CORD. CORD
will invoice Cumberland for such handling services and freight cost on a monthly basis. CORD will
use best efforts to manage any claims by Cumberland against the courier, provided, however, that
Cumberland shall be responsible for all lost or damaged shipments.



     In addition, Cumberland shall reimburse CORD for all documented costs and expenses of
packaging material used for shipping the Product and all business forms unique to Cumberland (e.g.,
packing slips, invoices, etc.); provided that the use of such packaging material and business forms
is authorized in advance by Cumberland.



     Each Product shall be shipped on a “first expiration date, first out” basis or as otherwise
directed by Cumberland. In addition, CORD shall establish (and Cumberland shall approve) procedures
for the processing and shipment of emergency orders on weekends and holidays, provided that
Cumberland shall separately pay all increased costs resulting from such orders.



     §4. Product Prices. With respect to each Product or group of Products identified in
the same Product-specific exhibit to this agreement, Cumberland shall, upon execution of such
exhibit, deliver to CORD a price list for Customers who purchase such Product or Products (the
“Customer Price List”). Cumberland shall notify CORD of any change in the Customer Price List not
less than 10 business days prior to the effective date of any such change. The Parties hereby
acknowledge that Cumberland, and not CORD, is the seller of each Product to Customers.



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     §5. Financial Support Services.



     (a) Subject to Section 5(b), during each Product Term set forth on the Product-specific
exhibits to this agreement, CORD shall perform the customer credit research, billing, cash
application, collections, and reporting services described in the Operating Guidelines in
accordance with the policies and procedures set forth in such Operating Guidelines, as such
policies and procedures may be supplemented or amended from time to time by Cumberland with
reasonable prior notice to CORD and with its prior approval (the “Financial Support Services”);
provided that if CORD notifies Cumberland in good faith that any such supplement or amendment will
require any material modification to CORD’s procedures or requirements for providing the Services,
then Cumberland shall pay all unique costs resulting from that modification.



     (b) CORD shall have no obligation to pay for any Product or to reimburse Cumberland for any
losses incurred in connection with the failure of any Customer to pay Cumberland any amount due.



     (c) Customers shall be directed to make payments for the Products in accordance with the
Operating Guidelines.



     §6. Operating Guidelines. As soon as practicable after the date of this agreement,
CORD and Cumberland shall develop operating guidelines relating to the Products and the Services,
which guidelines (the “Operating Guidelines”) will be in writing, in a form satisfactory to CORD
and Cumberland, and will define and document the responsibilities of CORD and Cumberland in
support of the relationship described in this agreement. All Operating Guidelines shall be
developed and implemented in good faith and in a commercially reasonable manner, subject to the
qualifications set forth therein; provided that in the event of any inconsistency between the
Operating Guidelines and the other provisions of this agreement (including each Product-specific
exhibit to this agreement), the other provisions of this agreement shall control. The Operating
Guidelines may be amended from time to time upon the mutual agreement of CORD and Cumberland.



     §7. Returns and Recalls. Pursuant to this agreement and any applicable Operating
Guidelines, CORD shall assist in the processing of Product returns (excluding recall returns,
which will be dealt with as described below) in coordination with the third party returns company
chosen by Cumberland to facilitate return of Product. No such assistance will involve handling by
CORD of the Product being returned. The fees to be paid to CORD for these return services are
described in Section 8.



     CORD shall process Customer Product return authorizations and credits as set forth in the
Operating Guidelines. The fee for such Services by CORD will be included as a part of the Customer
Service Fees described in Section 8.



     If Cumberland is required to recall, or on its own initiative recalls, any Product, CORD will
assist Cumberland with that recall as reasonably requested by Cumberland; provided that Cumberland
shall pay to CORD an amount equal to all costs incurred by CORD in connection with any such
recall.



     §8. Fees. As compensation for services being provided by CORD in connection with the
development and implementation of the infrastructure for the relationship contemplated by this
agreement, including CORD’s information system development (separate from the Information System
Access Fees described below) and implementation for Cumberland’s use, Cumberland shall pay CORD a
one-time implementation fee of [***] (the “Implementation Fee”), one-half of which shall be
payable on the first anniversary of the date of this agreement and one-half of which shall be
payable on the second anniversary of the date of this agreement. Cumberland’s obligation to pay
the Implementation




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Fee is not contingent upon the acquisition by Cumberland of any Product marketing and distribution
rights and shall survive the termination of this agreement. However, the Implementation Fee shall
not be due and payable if this Agreement is terminated early for any reason other than breach by
Cumberland.




     In addition, with respect to each Product or group of Products identified on the same
Product-specific exhibit to this agreement, Cumberland shall pay CORD, as compensation for the
Services related to such Product or Products, the fees described in such exhibit (the “Fees”). CORD
will use commercially reasonable efforts to keep total fees in line with industry standards. The
Fees shall include:



     (a) Storage/Distribution Fees. The Storage and Distribution Fees shall be in the
amounts set forth in each applicable Product Exhibit. This component of the Fees shall cover
storage of Product and distribution services, which fees (the “Storage and Distribution Fees”),
with respect to each Product or group of Products identified on the same Product-specific exhibit
to this agreement, shall be in the amount specified in such exhibit.


The Storage Fees shall be based upon the average weekly number of pallets in storage. The
Distribution Fees, for each calendar month during the Term of this Agreement, shall be based upon
the aggregate number of units (or cases) shipped by CORD from the warehouse. Cumberland shall be
charged an initial price per unit or case (collectively referred to as “pick”) on the first pick of
each order placed by Cumberland each month, and then a recurring amount per pick for each
incremental pick shipped from the same order thereafter. For example, for the distribution of
Reglan and Donnatal, on a monthly basis, Cumberland shall be charged the sum of [***] per pick of
each order of product shipped that month and the sum of [***] per pick for each incremental pick
from the same order.




     (b) Information System Access Fees. This component of the Fees shall cover
Cumberland’s access to CORD’s or an affiliate of CORD’s standard Information Systems, consisting of
the computer hardware and software and other components described in the attached Schedule 8(c)-1
(the “System”), and other services relating to Cumberland’s access to the System as described in
Schedule 8(c)-1, which fees (the “System Access Fees”), with respect to each Product or group of
Products identified on the same Product-specific exhibit to this agreement, shall be in the amount
specified in such exhibit. Access to the System shall be provided pursuant to a System Access
Agreement in the form of the attached Schedule 8(c)-2, which agreement (the “System Access
Agreement”) shall be executed by the Parties concurrently with this agreement. Access to the System
shall be made available to Cumberland’s facility for each Product at the prices set forth in the
exhibit for such Product, so long as Cumberland first has in place a local area network sufficient
to support all Cumberland terminals and personal computers which will have access to the System and
a centralized server sufficient for data storage related to Cumberland’s access to the System. All
costs and expenses associated with establishing initial hook-up of all communication and electronic
information lines necessary for interface of the System with Cumberland’s information systems
located at Cumberland’s address set forth at the end of this agreement are included in the
Implementation Fee and are separate from the services and costs and expenses covered by the System
Access Fees. Cumberland shall have sole responsibility for payment of all costs and expenses of
maintaining all such communication and electronic information lines. CORD and Cumberland shall each
assign knowledgeable and qualified employees to facilitate the access to the System as contemplated
by this agreement.



     (c) Financial Support Services Fees. This component of the Fees shall be payment for cash
application, collections and chargeback processing services (including chargeback system access)
described in the Operating Guidelines, which fees (the “Financial Support Services Fees”), with
respect to each Product or group of Products identified on the same Product-specific exhibit to this
agreement, shall be in the amount specified in such exhibit.



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     (d) Customer Service Fees. This component of the Fees shall be payment for the
customer services performed by CORD pursuant to the Operating Guidelines, which fees (the
“Customer Support Fees”), with respect to each Product or group of Products identified in the same
Product-specific exhibit to this agreement, shall be in the amount specified in such exhibit.



     (e) EDI Set-up, Maintenance, Access Fees. This component of the Fees shall be
payment for services related to the set-up and maintenance of Electronic Data Interchange (“EDI”)
transaction capabilities between Cumberland and its Customers and access and use of a mutually
agreed upon EDI provider. These fees are included in the System Access Fees described in §8(b)
above.



     With respect to each Product or group of Products identified on the same Product-specific
exhibit to this agreement, following the end of each calendar month with respect to Product Term
set forth on such exhibit, CORD shall issue an invoice to Cumberland for the Fees payable with
respect to CORD’s performance of the Services for the prior month. The Fees or other amounts owed
to CORD by Cumberland under this agreement shall be payable within 30 days of the date of CORD’s
invoice for such Fees or other amounts.



     The Fees shall be held firm for the first contract year. Thereafter, CORD shall adjust the
price not more often than once per contract year by not more than the increase in the Producer
Price Index — All Commodities published by the United States Department of Labor, Bureau of
Statistics, as amended from time to time.



     Notwithstanding the above Price Increase, if CORD can demonstrate that the costs for
providing the Services have materially increased, or are likely to materially increase in the
coming year due to the adoption of any applicable law or regulation, or any material change in the
interpretation or administration thereof, then upon notice from CORD, the Parties agree to meet in
good faith and negotiate a mutually acceptable adjustment to the Fees, which compensates CORD for
the change.



     §9. Term and Termination.



     (a) The initial term of this agreement shall begin upon the day Cumberland signs a letter of
intent to acquire its first Product and shall continue for a period of three (3) years (the
“Initial Term”), unless terminated earlier pursuant to this agreement. Thereafter, this agreement
shall automatically renew for additional terms of one (1) year each, unless written notice of
termination is given by either Party at least 90 days prior to the end of the Initial Term, or
such other term, in which case this agreement shall terminate at the end of the relevant term. Any
reference in this agreement to the “term of this agreement” shall include the Initial Term and any
such renewal terms. Upon termination of this agreement or upon the written request of Client, all
Product shall be expeditiously returned to the Client or a designee of the Client.



     (b) Either Party shall have the right to terminate this agreement or any Product-specific exhibit
to this agreement upon the breach by the other Party of a material provision of this agreement or
such exhibit and that Party’s failure to cure such breach within 60 days following written notice
thereof from the non-breaching Party or, in the event such failure is not capable of being cured
within such 60-day period, the non-breaching Party’s failure to continue to diligently prosecute
such cure thereafter; provided, that, with respect to any failure to make any payment when due under this agreement
or any Product-specific exhibit to this agreement, such period in which to cure shall be reduced
to 30 days.



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     (c) Either Party shall have the right to terminate this agreement or any Product-specific
exhibit to this agreement immediately upon notice to the other Party following the commencement of
any bankruptcy or insolvency proceeding (whether voluntary or involuntary) with respect to such
other Party or its assets, the general assignment for the benefit of creditors by such other
Party, or the appointment of a receiver, trustee or liquidator by or for such other Party.



     (d) Sections 8 and Sections 14 through 17, inclusive, of this agreement shall survive the
termination or expiration of this agreement and each Product-specific exhibit to this agreement,
and except as set forth herein, no termination of this agreement or any Product-specific exhibit
to this agreement shall affect any liabilities arising, or based upon acts or omissions occurring,
prior to the date of such termination.



     § 10. Audits. In connection with any services being provided pursuant to this
Agreement, CORD agrees to maintain written records and data during and after the term of this
Agreement in compliance with all applicable legal and regulatory requirements, including without
limitation applicable requirements of the United States Food and Drug Administration. Further,
CORD shall furnish Cumberland within thirty (30) days following each March 31, June 30, September
30, and December 31 of each calendar year a complete and accurate statement for the immediately
preceding calendar quarterly period of (a) the number of units of Products sold; (b) information
as to returns actually credited; (c) current inventory levels for Products; and (d) such other
information as Cumberland may reasonably request. In order to verify compliance, CORD shall
provide Cumberland with such records and agrees to permit representatives of Cumberland to visit
facilities of CORD at which Services are being performed during normal business hours (i.e., 8:00
a.m. to 5:00 p.m. local time), upon 15 business days prior notice, to: (a) review and audit CORD’s
records relating directly to Product received at and shipped from the CORD Facility; and (b)
conduct, together with representatives of CORD, an inventory of the Product at the CORD Facility.



     §11. Compliance With Laws. Each Party shall conduct its activities in connection with
this agreement in substantial compliance with all applicable laws, rules, regulations, and orders
of governmental entities.



     § 12. Representations and Warranties.



     (a) Mutual Representations and Warranties. Each Party represents and warrants to
the other that: (i) it has full power and authority to enter into this agreement and perform and
observe all obligations and conditions to be performed or observed by it under this agreement
without any restriction by any other agreement or otherwise; (ii) the execution, delivery and
performance of this agreement have been duly authorized by all necessary corporate action of that
Party; and (iii) this agreement constitutes the legal, valid and binding obligation of that Party.



     (b) Cumberland Representations and Warranties. Cumberland further represents and
warrants to CORD that (i) each Product is and shall be manufactured in conformity with the Food,
Drug, and Cosmetic Act, as amended, and all other applicable laws, rules, regulations and orders
of governmental entities, and (ii) as of the effective date of any Product-specific exhibit
hereto, Cumberland will have (and will have provided CORD with written documentation in form
reasonably satisfactory to CORD that Cumberland has, as of such effective date) title to such
Product or Products and the right to market and distribute such Product or Products as
contemplated hereby.



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     (c) CORD Representations and Warranties. CORD hereby represents and warrants that it
has the experience, capability and resources, including without limitation, sufficient personnel
and supervisors, to perform the Services offered hereunder in a commercially reasonable manner in
conformity with applicable regulations of any governmental authority, including the United States
Food and Drug Administration. CORD further represent that it will at all times devote the necessary
personnel and supervisors to perform the Services in such a manner.



     CORD shall not make any representations, warranties, or guarantees to Customers with respect
to the Products that are inconsistent with information provided by Cumberland to CORD, including
without limitation, representations, warranties, and guarantees concerning specifications,
features, efficacy, prices, or availability of the Products.



     §13. Taxes. Cumberland shall pay when due all sales, use, gross receipts, excise,
personal property taxes associated with each Product (excluding any personal property tax
associated with CORD’s equipment used in connection with the Services), and other taxes or similar
charges now or hereafter imposed as a result of the transactions contemplated by this agreement,
none of which have been included in the fees payable to CORD under this agreement; provided that
the amounts payable by Cumberland under this section shall not include taxes based on the net
income of CORD.



     § 14. Trademarks and Proprietary Rights.



     14.1 Neither party hereto shall have the right to use the trademarks, service marks, logos, or
other similar marks of the party hereto, or any of its affiliates, in any manner except with the
prior written approval of the party that has rights to such intellectual property.



     14.2 All materials, documents, information, inventions, improvements, data, programs and
suggestions of every kind and description, whether or not patentable, and all copyrightable works
supplied to CORD by Cumberland pursuant to this Agreement shall be the property of Cumberland
solely and exclusively (the “Cumberland Property”); provided that any and all information,
processes, documents, computer software or other proprietary information used, owned, licensed or
developed by CORD shall be the property of CORD.



     §15. Master Agreement. This agreement is being entered into pursuant to the Strategic
Alliance Agreement dated June 6, 2000, between Cardinal Health (as defined below) and Cumberland
(the “Master Agreement”), and this agreement (including any and all exhibits hereto, whether
entered into now or hereafter) constitutes an Addendum, as defined in the Master Agreement. In the
event of any conflict or inconsistency between the terms of this agreement (including any and all
exhibits hereto) and the terms of the Master Agreement, the terms of this agreement shall govern.
For purposes of this agreement, “Cardinal Health” means the following affiliated operating
companies: Cardinal MarketForce, a division of RedKey, Inc., an Ohio corporation (Dublin, OH); CORD
Logistics, Inc., an Ohio corporation (Dublin, OH); and any other subsidiary of Cardinal Health,
Inc., an Ohio corporation (“CHI”), as may be designated by CHI and agreed by client in writing.



     § 16. Indemnification. Each Party shall indemnify and hold harmless the other and its
parent and affiliates, and each of their respective directors, officers, employees, agents, and
representatives from and against all claims, liabilities, losses, damages, costs, and expenses
(including without limitation reasonable attorneys’ fees) arising directly or indirectly out of any
failure of that Party to perform and observe fully all obligations and conditions to be performed
or observed by that Party pursuant to this agreement or any breach of any warranty made by that
Party in this agreement. Cumberland further agrees to indemnify and hold harmless CORD and its parent and affiliates and each of their
respective directors, officers, employees, agents and representatives from and against all claims,
liability, losses, damages, costs, and expenses (including without limitation reasonable attorney’s
fees) arising directly or



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indirectly out of injury or death to person or property alleged to have
been caused by any defect in any
Product. NOTWITHSTANDING THE FOREGOING, OR ANY OTHER PROVISION OF THIS AGREEMENT TO THE
CONTRARY, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY CONSEQUENTIAL, INCIDENTAL,
INDIRECT, SPECIAL, OR OTHER SIMILAR DAMAGES ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT,
AND IN NO EVENT SHALL CORD’S LIABILITY HEREUNDER EXCEED CORD’S INSURANCE LIMITS SET FORTH BELOW IN
SECTION 17(b)(i).



§17. Insurance.




          (a) Promptly after Cumberland acquires rights to distribute its first Product and for as long
thereafter as necessary to cover claims resulting from this agreement, Cumberland shall obtain and
maintain: (i) product liability and commercial general liability insurance having a limit of not
less than $10 million; and (ii) property damage insurance at replacement value for each Product
located at the CORD Facility or in transit to or from the CORD Facility, pursuant to one or more
insurance policies with reputable insurance carriers. Cardinal Health, Inc. and its subsidiaries
shall be designated as “additional insureds” under the product liability and commercial general
liability insurance policy(ies), and as “loss payees” under the property damage insurance
policy(ies). Prior to CORD’s receipt of Product, Cumberland shall deliver to CORD certificates
evidencing such insurance. Cumberland shall not cause or permit such insurance to be canceled or
modified to materially reduce its scope or limits of coverage during the term of this agreement or
thereafter as provided above. Except for any losses resulting from the negligence or intentional
misconduct of CORD, Cumberland shall bear all risk of loss or damage with respect to each Product,
whether located at the CORD Facility or otherwise.




          (b) Promptly after Cumberland acquires rights to distribute its first Product and for as long
thereafter as necessary to cover claims resulting from this agreement, CORD shall obtain and
maintain: (i) product liability and commercial general liability insurance having a limit of not
less than $1 million; and (ii) property damage insurance at replacement value for each Product
located at the CORD Facility or in transit to or from the CORD Facility, pursuant to one or more
insurance policies with reputable insurance carriers. Cumberland shall be designated as “additional
insureds” under the product liability and commercial general liability insurance policy(ies), and
as “loss payees” under the property damage insurance policy(ies). Prior to CORD’S receipt of
Product, CORD shall deliver to Cumberland certificates evidencing such insurance. CORD shall not
cause or permit such insurance to be canceled or modified to materially reduce its scope or limits
of coverage during the term of this agreement or thereafter as provided above.




     §18. Relationship of the Parties. The relationship among the Parties is and shall be
that of independent contractors. This agreement does not establish or create a partnership or joint
venture among the Parties.



     §19. Notices. Any notice or other communication required or desired to be given to any
Party under this agreement shall be delivered in writing to the address or facsimile number set
forth beneath the authorized signatures on this agreement and shall be deemed given: (a) three
business days after such notice is deposited in the United States mail, first-class postage
prepaid, and addressed to that Party at the address for such Party set forth at the end of this
agreement; (b) one business day after delivered to Federal Express, Airborne, or any other similar
express delivery service for delivery to that Party at that address; or (c) when sent by facsimile
transmission, with electronic confirmation, to that Party at its
facsimile number set forth at the end of this agreement. Any notice delivered by facsimile
transmission will be deemed delivered upon electronic confirmation provided the notice is also
deposited in the U.S. mail, first-class postage prepaid. Any Party may change its address or
facsimile number for notices under this agreement by giving the other Parties notice of such
change.



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     §20. Alternative Dispute Resolution.


The Parties agree to use good faith efforts to resolve all disputes within ninety (60) days of
written notice that such a dispute exists. If dispute under this Agreement cannot be resolved by
the Parties within such sixty (60) day period, the Parties agree to refer the matter to one
executive from each Party not directly involved in the dispute for review and resolution. A copy
of the terms of this Agreement, agreed upon facts and areas of disagreement, and a concise summary
of the basis for each side’s contentions will be provided to both executives who shall review the
same, confer, and attempt to reach a mutual resolution of the issue within forty-five (45) days
after receipt of the materials referenced above. If the matter has not been resolved within such
forty-five (45) day period, either or both Parties may pursue resolution of the matter through
litigation or other process available under law or equity.




     §21. Remedies. Each Party acknowledges that in the event of any violation by that
Party of any of the provisions of Section 14 of this agreement or Article III., Sections D or E of
the Master Agreement, the other Party would suffer irreparable harm and its remedies at law would
be inadequate. Accordingly, in the event of any violation or attempted violation of any such
provisions by either Party, the other Party shall be entitled to a temporary restraining order,
temporary and permanent injunctions, specific performance, and other equitable relief, without any
showing of irreparable harm or damage or the posting of any bond. The rights and remedies of each
Party under this agreement shall be cumulative and in addition to any other rights or remedies
available to such Party, whether under any other agreement, at law, or in equity.



     §22. Governing Law. All questions concerning the validity or meaning of this
agreement or relating to the rights and obligations of the Parties with respect to performance
under this agreement shall be construed and resolved under the laws of the State of Tennessee ,
without regard to principles of conflicts of laws. The parties agree that any claims asserted in
any legal proceeding by one party against the other shall be commenced and maintained in any state
or federal court in Nashville, Tennessee or Columbus, Ohio and the parties submit to the
jurisdiction of these courts.



     §23. Severability. The intention of the Parties is to comply fully with all laws and
public policies, and this agreement shall be construed consistently with all laws and public
policies to the extent possible. If and to the extent that any court of competent jurisdiction
determines that it is impossible to construe any provision of this agreement consistently with any
law or public policy and consequently holds that provision to be invalid, such holding shall in no
way affect the validity of the other provisions of this agreement, which shall remain in full
force and effect.



     §24. Non-waiver. No failure by either Party to insist upon strict compliance with any
term of this agreement, to exercise any option, to enforce any right, or to seek any remedy upon
any default of the other Party shall affect, or constitute a waiver of, the first Party’s right to
insist upon strict compliance, to exercise that option, to enforce that right, or to seek that
remedy with respect to that default or any prior, contemporaneous, or subsequent default. No
custom or practice of the Parties at variance with any provision of this agreement shall affect,
or constitute a waiver of, that Party’s right to demand strict compliance with all provisions of
this agreement.



     §25. Force Majeure. If the performance of any part of this agreement by either Party shall
be affected for any length of time by fire or other casualty, government restrictions, war, riots,
strikes or labor disputes, lock out, transportation delays, acts of God, or any other causes which
are beyond the control of the Parties, such Party shall not be responsible for delay or failure of
performance of this agreement for such length of time, provided, however, that the obligation of
one Party to pay amounts due to any other Party shall not be subject to the provisions of this
section



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     §26. Genders and Numbers. Where permitted by the context, each pronoun in this
agreement includes the same pronoun in the other genders or numbers and each noun used in this
agreement includes the same noun in other genders.



     §27. Complete Agreement. This agreement (together with the Master Agreement, the
Product-specific exhibits hereto, and the other documents referred to herein, all of which are
hereby incorporated herein by reference) contains the entire agreement between the Parties and
supersedes all prior or contemporaneous discussions, negotiations, representations, warranties, or
agreements relating to the subject matter of this agreement. CORD and Cumberland agree to comply
with the obligations of confidentiality set forth in Article III, Section E of the Master
Agreement. No changes to this agreement shall be made or be binding on either Party unless made in
writing and signed by both Parties.



     §28. Successors. This Agreement may not be assigned or transferred by a party without
the prior written consent of the other party hereto, provided, however, that either party may
assign this Agreement to any subsidiary, affiliate or an entity which acquires substantially all of
it’s assets and business that is not in direct competition with CORD. Any such assignment shall not
materially or adversely affect the rights or obligations of either party to this Agreement.



	 	 	 
	CUMBERLAND PHARMACEUTICALS, INC.

	 	CORD LOGISTICS, INC.

	 
	 	 
	/s/ A.J. Kazimi

	 	/s/ Frank C. Wegerson
	 

	 	 
	A.J. Kazimi

	 	Frank C. Wegerson
	Chief Executive Officer

	 	Vice President and General Manager
	Initials: /s/ AJK

	 	Initials: /s/ FCW
	 
	 	 
	209 10th Avenue South

	 	15 Ingram Blvd, #100
	Nashville, TN 37203

	 	LaVergne, TN 37086
	 
	 	 
	Facsimile No. (615) 255-0094

	 	Facsimile No. (615) 793-4783






Page 10 of 14









 






          Schedule 8 (c) -1




OPERATING SYSTEM BASE PACKAGE



A. System Access



Includes access to CORD’s processor and operating system Monday through Friday, excluding
holidays, 12 hours per day (5:30 am to 5:30 p.m., Pacific local time).



B. Software Access and Maintenance



Includes access to CORD’s or an affiliate of CORD’s standard software. CORD or an affiliate of CORD
shall perform at it’s own expense any necessary modification to bring the systems in compliance
with the standard functionality described below.





	•	 	Customer service






	•	 	Reports necessary to perform Medicaid rebate calculations






	•	 	Billing (Customization of invoicing/packing slips)






	•	 	Inventory tracking and reporting






	•	 	Lot tracking






	•	 	Order entry






	•	 	Warehousing






	•	 	Returns processing






	•	 	Ability to download system data to Cumberland’s processors for reporting writing






	•	 	All standard reports






	•	 	Contracts/Pricing maintenance and chargeback processing





Systems Development/Additional Services:



Cumberland bears financial responsibility for customization beyond the standard systems
functionality described above. Such customization performed by CORD or its representatives
(exclusive of the base package) in connection with this agreement shall be billed to Cumberland
as follows:





	•	 	Systems and software development—$120 per hour per person, plus travel.






	•	 	On-site training—$120 per hour per person, plus travel.






	•	 	Supplies, equipment and other, to be agreed upon by both parties.





Page 11 of 14









 





Schedule 8 (c) -2




SYSTEM ACCESS AGREEMENT



This agreement is made as of July ___, 2000, between CORD Logistics, Inc., an Ohio corporation
(“Licensor”), and Cumberland Pharmaceuticals Inc., a Tennessee corporation (“Licensee”), who hereby
agree as follows:




     1. System Access; Maintenance Obligations. On the terms and subject to the conditions
described in this agreement and the Distribution Services Agreement having the same date as this
agreement between Licensor and Licensee (the “Distribution Agreement”), Licensor hereby grants to
Licensee a nonexclusive license (the “License”) to utilize Licensor’s Order Entry System,
consisting of the computer hardware, software and other components described in Schedule 8(c)-1 to
the Distribution Agreement (collectively, the “System”), for the information processing needs of
Licensee in connection with the Services to be provided by Licensor under the Distribution
Agreement. Licensee shall maintain during the term of this agreement the network and local area
network (including without limitation centralized server) requirements for the System described in
the Distribution Agreement.



     During the term of this agreement, Licensee shall employ reasonable security measures and
policies designed to safeguard the integrity, accessibility, and confidentiality of all of
Licensee’s data resident on the System and establish reasonable disaster and emergency recovery
plans designed to minimize disruption from System operation interruptions. Licensee shall have the
right to review the operation of the System from time to time upon reasonable prior notice from
Licensee to Licensor; provided that such reviews shall be conducted in a manner to avoid disruption
of Licensor’s business operations to the extent possible.



     2. Proprietary Rights. Licensee shall have the right to use the System during the term
of this agreement as expressly provided in paragraph 1 of this agreement, but not otherwise.
Licensee shall not assign or otherwise transfer, disclose, copy, modify, or decompile the System or
any part thereof without prior written consent of the Licensor. The System and all parts thereof,
in all of their tangible and intangible manifestations, all existing or new enhancements,
developments, derivative works, and other adaptations or modifications to the System (or any part
thereof), and all related proprietary rights, are and shall remain the exclusive property of
Licensor. Except for the License, Licensee shall have no right, title, or interest in or to the
System or any part thereof. Upon termination of this agreement, Licensee shall promptly return to
Licensor all portions of the System then in Licensee’s possession or under its control.



     3. Warranties. Licensee acknowledges that it has had adequate opportunity to review
the System and its features and operation and Licensee accepts the System “AS IS” for its use as
contemplated in the Distribution Agreement. EXCEPT AS EXPRESSLY SET FORTH HEREIN OR IN THE
DISTRIBUTION AGREEMENT, LICENSOR MAKES NO REPRESENTATIONS OR WARRANTIES, AND HEREBY EXPRESSLY
DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES, EXPRESS OR IMPLIED RELATING DIRECTLY OR INDIRECTLY TO
THE SYSTEM OR ANY PART THEREOF, INCLUDING WITHOUT LIMITATION ANY WARRANTIES OF QUALITY,
PERFORMANCE, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE.



     4. Limitation On Liability. LICENSOR SHALL NOT BE LIABLE FOR ANY CONSEQUENTIAL,
INDIRECT, SPECIAL, OR OTHER SIMILAR DAMAGES ARISING DIRECTLY OR INDIRECTLY OUT OF THE USE OR
INABILITY TO USE THE SYSTEM OR ANY PART THEREOF, EVEN IF INFORMED OF THE POSSIBILITY OF SUCH
DAMAGES, WHETHER CLAIMED UNDER CONTRACT, TORT, OR ANY OTHER LEGAL THEORY.



     IF ANY OF THE LIMITATIONS ON THE LIABILITY OF LICENSOR CONTAINED IN THIS AGREEMENT ARE FOUND
TO BE INVALID OR UNENFORCEABLE FOR ANY REASON THEN LICENSOR AND LICENSEE EXPRESSLY AGREE THAT THE
MAXIMUM AGGREGATE LIABILITY OF LICENSOR FOR ALL CLAIMS RELATING TO THE SYSTEM SHALL NOT EXCEED 100%
OF THE AGGREGATE BASE PACKAGE FEES PAID BY LICENSEE TO LICENSOR FOR LICENSEE’S USE OF THE SYSTEM
UNDER THE DISTRIBUTION AGREEMENT.



     5. Taxes. Licensee shall pay when due all sales, use, gross receipts, excise,
property, and other taxes or similar charges (other than taxes based upon Licensor’s net income)
now or hereafter imposed as a result of the transactions contemplated by this agreement.



     6. Term. The term of this agreement shall begin upon Licensee’s initial use of the
System as evidenced by the first entry of inventory into the System (which may be a date earlier
than the Commencement Date specified for the Distribution Agreement) and shall end: (a)
automatically upon the termination of the Distribution Agreement (for any reason), or (b) on any
earlier date specified by Licensee in notice to Licensor given not less than 180 days prior to



Page 12 of 14









 







the specified termination date; provided that: (i) paragraph 2 through 5 inclusive, and
paragraph 8 of this agreement shall survive the termination of this agreement, and (ii)
no termination of this agreement shall affect any liabilities arising, or based upon acts or
omissions occurring, prior to such termination.



     Licensee shall continue to have access to the System for a reasonable period of time (not be
exceed 60 days) following termination of this agreement solely for purposes of retrieving and
transferring to a separate system Licensee’s data relating to its pre-termination operations, and
Licensor shall reasonably cooperate with Licensee to preserve the integrity and accessibility of
Licensee’s data during such period; provided that, during such period, Licensee shall continue to
pay the full Base Package and other fees payable by Licensee under the Distribution Agreement and
comply with all other requirements imposed upon Licensee under this agreement.



     7. 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: (a) three days
after mailing, if deposited in the United States mail, first-class postage prepaid,
and-addressed to that party at its address set forth at the end of this agreement; (b)
when received if delivered to Federal Express or any other similar overnight, delivery
service for delivery to that party at that address; or (c) when sent by facsimile transmission,
with 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.



     8. Remedies. Licensee shall indemnify Licensor and its affiliates, directors,
officers, employees, agents, and representatives against all claims, liabilities, losses, damages,
costs and expenses (including without limitation reasonable attorneys’ fees) arising directly or
indirectly out of any failure of Licensee to perform and observe fully all obligations and
conditions to be performed or observed by Licensee pursuant to this agreement. Licensee
acknowledges that in the event of any violation by it of any of the provisions of paragraph 2 of
this agreement, Licensor would suffer irreparable harm and its remedies at law would be inadequate.
Accordingly, in the event of any violation or attempted violation of any such provisions by
Licensee, Licensor shall be entitled to a temporary restraining order, temporary and permanent
injunctions, specific performance, and other equitable relief, without any showing of irreparable
harm or damage or the posting of any bond, in addition to any other rights or remedies which may be
available to Licensor.



     9. Force Majeure. Notwithstanding any other provisions of this agreement or the
Distribution Agreement to the contrary, each party’s obligations under this agreement (exclusive of
payment obligations) shall be excused if and to the extent that any delay or failure to perform
such obligations is due to fire or other casualty, material shortages, strikes or labor disputes,
acts of God, or other causes beyond the reasonable control of that party.



     10. Successors. Licensee shall not assign or otherwise transfer this agreement or any
of its rights or obligations under this agreement without the prior written consent of Licensor,
which consent shall not be unreasonably withheld. Subject to the preceding sentence, this agreement
shall be binding upon, inure to the benefit of, and be enforceable by and against the respective
successors and assigns of each party.



     11. Interpretation. This agreement shall be governed by and construed in accordance
with the laws of the State of Tennessee. If and to the extent that any court of competent
jurisdiction determines that it is impossible to construe any provision of this agreement
consistently with any law or public policy and consequently holds that provision to be invalid,
such holding shall in no way affect the validity or the other provisions of this agreement, which
shall remain in full force and effect.



     12. Complete Agreement. This agreement (together with the Distribution Agreement,
which is hereby incorporated herein by reference) constitutes the entire agreement between the
parties with respect to the subject matter of this agreement and supersedes all prior or
contemporaneous discussions, negotiations, representations, warranties, or agreements relating to
the subject matter of this agreement. This agreement may not be amended or otherwise modified
except by a written instrument signed by each party.



	 	 	 	 	 	 	 	 	 
	CUMBERLAND PHARMACEUTICALS, INC.	 	 	 	CORD LOGISTICS, INC.
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ A.J. Kazimi
	 	 	 	By:
	 	/s/ Frank C. Wegerson
	 

	 	 
	 	 	 	 	 	 
	 

	 	A.J. Kazimi
	 	 	 	 	 	Frank C. Wegerson
	 

	 	Chief Executive Officer
	 	 	 	 	 	Vice President and General Manager
	 

	 	Initials: /s/ AJK
	 	 	 	 	 	Initials: /s/ FCW
	 
	 	 	 	 	 	 	 	 
	209 10th Avenue South, Suite 332	 	 	 	15 Ingram Blvd., #100
	Nashville, TN 37203	 	 	 	LaVergne, TN 37086
	 
	 	 	 	 	 	 	 	 
	Facsimile No. (615) 255-0094	 	 	 	Facsimile No. (615) 793-4783






Page 13 of 14









 






Exhibit A






CUMBERLAND PHARMACEUTICALS




PROPOSED FEE SCHEDULE




	 	 	 	 	 
	Program Implementation
	 	 	 	 
	One Time Start-up Fee
	 	$	*	**
	 
	 	 	 	 
	Distribution Services
	 	 	 	 
	Monthly per pallet ambient storage
	 	$	*	**
	Per bottle ambient product pick/pack/stage — first bottle (1)
	 	$	*	**
	Per bottle ambient product pick/pack/stage — each add’l bottle (1)
	 	$	*	**
	Per case ambient product pick/pack/stage — first case (1)
	 	$	*	**
	Per case ambient product pick/pack/stage — each add’l case (1)
	 	$	*	**
	Per unit return goods processing
	 	$	*	**
	Monthly distribution system access and use (2)
	 	$	*	**
	Monthly account management fee
	 	$	*	**
	Packing/Shipping Supplies
	 	Cost plus ***% handling fee
	(includes ordering, receiving, storage)
	 	 	 	 
	Shipping Charges (3)
	 	List minus ***%
	 
	 	 	 	 
	Customer Service
	 	 	 	 
	Monthly fixed fee
	 	$	*	**
	Per order fee
	 	$	*	**
	Preprinted Forms
	 	Cost plus ***% handling fee
	 
	 	 	 	 
	Financial Services
	 	 	 	 
	Monthly fixed fee Accounts Receivable Management
	 	$	*	**
	Per order fee Accounts Receivable Management
	 	$	*	**
	Monthly fixed fee Chargeback Management
	 	$	*	**
	Per submission Chargeback Processing & Government Reporting
	 	$	*	**
	Preprinted Forms
	 	Cost plus ***% handling fee






	 	 	 
	Note (1):

	 	This proposal is based on the distribution of Reglan and Donnatal only, any
additional products requiring distribution services will be quoted separately. The pricing
will be based on the buying patterns of the wholesalers.
	 
	 	 
	Note (2):

	 	System access fee includes licenses for two concurrent users. Any additional
licenses required by Cumberland Pharmaceuticals will Increase the monthly fee by $*** per
concurrent user.
	 
	 	 
	Note (3):

	 	List minus ***% is incorporated to UPS and FedEx rates only, all other freight
carriers will be billed back at cost plus ***%.
	 
	 	 
	Note (4):

	 	The implementation fee will be paid in two equal installments at the beginning of
contract year two and three. The monthly fixed fees will be assessed at a ***% discount
in year one and a ***% increase in year three.






 










Page 14 of 14