ORPHAN MEDICAL, INC. EXHIBIT 10.20 TO FORM 10-K/A DATED 12-31-2003




EXHIBIT 10.16 



Services Agreement 



between 



Orphan Medical, Inc. 



and 



Express
Scripts Specialty Distribution Services, Inc 








	* 	  	
Denotes confidential information that has been omitted from the exhibit and filed
separately, accompanied by a confidential treatment request, with the Securities and
Exchange Commission pursuant to Rule 406 of the Securities Act of 1933. 




























1











SERVICES AGREEMENT  



        THIS
SERVICES AGREEMENT (this “Agreement”) is made this ___ day of July, 2002 (the
“Effective Date”), by and between EXPRESS SCRIPTS SPECIALTY DISTRIBUTION
SERVICES, INC., a Delaware corporation (“SDS”), having a business address at *,
and ORPHAN MEDICAL, INC. (“Orphan”), a Delaware corporation, having a business
address at 13911 Ridgedale Drive, Suite 250, Minnetonka, Minnesota 55305 



RECITALS 



        WHEREAS,
Orphan manufactures Product, and desires to enter into an agreement with SDS, whereby SDS
will facilitate the dispensing and distribution of Product, and perform certain ancillary
functions associated therewith; and 



        WHEREAS,
SDS has experience in providing the services desired by Orphan, and is willing to provide
such services for Orphan on the terms set forth in this Agreement. 



        NOW,
THEREFORE, in consideration of the premises and mutual promises herein stated, the receipt
and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 



TERMS OF AGREEMENT  



ARTICLE 1
DEFINITIONS  




        As
used in this Agreement, each of the following terms (and the plural or singular thereof,
when appropriate) shall have the meaning set forth herein, except where the context makes
it clear that such meaning is not intended: 



        1.1
“Act” shall mean the United States Federal, Food, Drug and
Cosmetic Act, as amended from time to time.  



        1.2
“AWP” shall mean the average wholesale price of Product as
reported by First Data Bank. 



        1.3
“Business Rules” shall mean those
written business rules mutually agreed upon and executed prior to the Implementation Date
by the parties (or subsequently agreed to by the parties by amendment to this Agreement),
which either further describe how the Covered Services are to be performed or describe
additional services to be performed under this Agreement. 



        1.4
“Confidential Information” shall have
the meaning assigned to it in Section 5.1.  



        1.5
“Covered Services” shall mean those
services to be performed by SDS as set forth on Exhibit A or as described in any SOP.  





2











        1.6
“DEA” shall mean the United States
Drug Enforcement Administration. 



        1.7
“Facility” shall mean a distribution facility (or
facilities) owned and/or operated by SDS and utilized in connection with the Xyrem Risk
Management Program, as selected by SDS in its discretion and subject to change from time
to time. Orphan Medical reserves the right to inspect and approve any facility used for
Xyrem distribution prior to any change in the aforementioned facility. 



        1.8
“FDA” shall mean the United States Food and Drug
Administration. 



        1.9
“Fees” shall mean the fees as described in Section
4.2 hereof below to be paid by Orphan to SDS hereunder. 



        1.10
“HIPAA” shall mean Health Insurance Portability and
Accountability Act of 1996, as further defined in the United States Code of Federal
Regulations (CRF) 45, Part 164 – Security and Privacy section. 



        1.11
“Implementation Date” shall mean the
date on which SDS will first begin to perform the Covered Services, which will be
approximately 30 days after FDA approval of Xyrem. 



        1.12
“Non-PAP Order” shall mean each
shipment of Product by SDS to any Person other than a PAP Patient in accordance with
applicable law and FDA guidelines. 



        1.13
“Non-PAP Patient” shall mean a Patient
who is not eligible to participate in the PAP, as determined by NORD, but for whom SDS
dispenses Product pursuant to a Non-PAP Order. 



        1.14
“NORD” shall mean the National Organization of Rare
Disorders, which will be solely responsible for determination whether individuals are
eligible for participation for in the PAP, based on criteria established by NORD and/or
Orphan, and for communicating such eligibility to SDS. 



        1.15
“PAP” shall mean the patient assistance program established
by Orphan, pursuant to which SDS will provide dispensing services as described in the
applicable SOP. 



        1.16
“PAP Patient” shall mean a Patient who
has been approved by NORD as eligible to participate in the PAP. 



        1.17
“PAP Order” shall mean a valid
prescription indicating the dose, amount and strength of Product properly prescribed to a
PAP Patient by a health care practitioner who is licensed to prescribe Product, and which
is submitted to SDS in accordance with the relevant SOP. 



        1.18
“Patient” means an individual who: (a) properly completes all necessary intake
and Xyrem Patient Success forms (the form and content of which shall be mutually agreed
upon by  





3











Orphan and SDS prior to the
Implementation Date, and which shall comply with applicable laws and all applicable FDA
requirements), as described in the relevant SOP; and (b) is either deemed eligible by
NORD to participate in the PAP, or is otherwise approved by SDS to receive Product. 



        1.19
“Patient Confidential
Information” means individually-specific medical or prescription
information and any other individually-identifiable information which may be deemed to be
confidential or protected under federal or state law or regulations, including, without
limitation, information that constitutes Protected Health Information under HIPAA. 



        1.20
“Person” shall mean any natural person, corporation,
organization, association, partnership, limited liability company, HMO, or similar entity. 



        1.21
“Product” shall mean Xyrem®
(sodium oxybate) oral solution and dosing kit. 



        1.22
“SOPs” shall mean those written standard operating
procedures mutually agreed upon and executed prior to the Implementation Date by the
parties (or subsequently agreed to by the parties by amendment to this Agreement), which
either further describe how the Covered Services are to be performed or describe
additional services to be performed under this Agreement. 



        1.23
“Territory” shall mean the United States of America. 



        1.24 “Marks”
shall mean those registered and common law trademarks of Orphan that are listed in Exhibit
C. 



ARTICLE II
SERVICES  




        2.1
Covered Services. From and after the Implementation Date, SDS shall provide
the Covered Services for the benefit of Orphan. 



        2.2
Exclusive Distributor. During the term of this Agreement, all Product sold
in the Territory, or made available through the PAP, will be distributed exclusively
through SDS pursuant to this Agreement. Further, Product sold, or made available through
the PAP, in the Territory shall be warehoused at the Facility in accordance with Exhibit A
and any related SOP. 



ARTICLE III
SUPPLY OF
PRODUCT; AUDIT  



      3.1
Consignment Relationship  



		    (a)        General.
Orphan shall deliver, at its own expense, to SDS’s possession at the Facility (on a
consignment basis) sufficient quantities of Product to enable SDS to provide the Covered
Services in accordance with this Agreement. The parties shall mutually agree upon a
sufficient level of inventory of Product to be maintained at the Facility. The Product to
be shipped pursuant to Non-PAP Orders will be furnished to, and held by, SDS on a
consignment  









4











basis at all times, except as
provided in Subsection 3.1(b). The consignment of Product hereunder shall at no time be
construed as a loan or other debt financing or secured transaction arrangement between
the parties, and title to consigned Product shall remain with Orphan until transferred
pursuant to Subsection 3.1(b). 



		    (b)              Transfer of Title. Immediately
prior to the shipment of Product by SDS from the Facility pursuant to a Non-PAP
Order, SDS shall purchase from Orphan such Product being shipped. Title to the
consigned Product so purchased by SDS in connection with a Non-PAP Order shall
pass to SDS at the time of such purchase 







		    (c)              Shipment of Non-PAP Orders. Subject
to the restrictions set forth in Subsection 4.2(d) of this Agreement or any FDA
requirements, SDS shall have sole authority to determine to whom it will ship a
Non-PAP Order and at what price, although SDS shall not provide Product to any
Person suspected of diversion as outlined in the corresponding SOP.








        3.2
PAP Orders. The Product to be shipped by SDS pursuant to PAP Orders shall be
for the account of Orphan, and title to such Product shall remain with Orphan until
shipped to the PAP Patient, at which time title will pass to the PAP Patient. Once NORD
approves a Patient as eligible to participate in the PAP, SDS shall treat such Patient as
so eligible until notified otherwise by NORD. SDS shall fulfill PAP Orders and perform
certain ancillary services relating thereto as set forth in the applicable SOP. 



        3.3
Risk of Loss. All risk of Product loss or damage during the time that
such Product is at the Facility, after receipt in good condition by SDS at the Facility,
including inventory shortages which are unaccounted for, shall be borne by SDS, except to
the extent caused by the negligence or willful misconduct of Orphan. Payment to Orphan by
SDS for consigned Product lost or damaged while at SDS’s Facility shall be based on
Orphan’s reasonable replacement costs, as reasonably determined and documented by
Orphan. 



        3.4
Financial Audit. During the term of this Agreement (excluding the months of
December and January) and for a period of ninety (90) days after the expiration or
termination of this Agreement, upon reasonable prior notice and during normal business
hours, Orphan, or any third party auditor designated by Orphan shall be entitled to audit
and inspect those books and records of SDS which are maintained by SDS in connection with
its performance of the Covered Services, subject to confidentiality constraints and
applicable law. Such third party auditor (a) shall not have a conflict of interest with
SDS or any of its affiliates (as determined by SDS in good faith), and (b) will be
required to sign a confidentiality agreement in a form reasonably acceptable to SDS prior
to commencing such audit. Neither Orphan nor its auditor shall have access to any Patient
Confidential Information in the context of an audit. 



      3.5
Regulatory and Compliance Audits and Information Requests.  



         (a)       
SDS shall provide to Orphan and/or the FDA, DEA or any other governmental body
all documents and information requested by the FDA, DEA or any other
governmental body in support of Orphan’s regulatory filings or any
governmental investigations or inquires. Copies of all documents to be provided
to the FDA or DEA shall be provided to 





5











Orphan in advance, if practicable,
or otherwise within two (2) business days of delivery to the FDA or DEA. SDS shall notify
Orphan immediately upon receipt of notice of any inspection by the FDA or DEA directed
specifically toward Product, and Orphan shall have the right to have an employee present
at any such inspection, if allowed by law. In addition, SDS shall notify Orphan of any
FDA or DEA correspondence or inspections that concern SDS generally and which are related
to any SDS compliance issues that may adversely impact SDS’s ability to perform the
services contemplated by this Agreement. SDS shall notify Orphan immediately of any
notices, requests for information or other communications related to Product from the
U.S. Department of Health and Human Services or any other government agency or any state
healthcare program or other state agency and, to the extent permitted under applicable
law, shall give Orphan copies of such communications. 



		    (b)                        SDS
shall from time to time submit to audits and inspections by Orphan during normal
business hours or at any other time during which the services being audited are
ongoing, including but not limited to, audits of regulatory and quality
assurance SOPs and of records of contacts with regulatory agencies, provided the
scope of any such audit or inspection shall be limited to information and
facilities pertaining to Orphan’s program. Orphan shall give SDS at least
two (2) business days prior notice of any such inspection and at least thirty
(30) days prior notice for any such audit, and Orphan shall bear the out of
pocket costs of such audit or inspection. 







        3.6
Returns and Replacement. In the event that SDS-purchased Product is
damaged in transit as a result of SDS’s negligence or its designated shipper, SDS
will replace the Product to the Patient free of charge once the damaged Product is
returned to SDS. SDS will monitor all reports of lost Product for the potential for abuse
and diversion. SDS will cooperate with state and federal authorities fully in any
investigations of lost Product, and will provide reports of such loss to Orphan on a
monthly basis for the purpose of allowing Orphan to track the Product and satisfy its FDA
reporting requirements. SDS will investigate the loss of Product by interviewing the
Patient, and/or physician, report the loss to Orphan and to the appropriate regulatory
authorities, as required by law, and record the loss in the Patient’s file. Where
there is suspicion of abuse of diversion, SDS will contact the Orphan designee responsible
for DEA issues, and lost Product will not be replaced without Orphan’s approval.
Where abuse or diversion is not suspected, SDS will replace the lost Product at no charge
to the Patient in the event such loss is the result of SDS’s negligence or its
designated shipper and record the shipment in the Patient file. SDS will treat a repeat
request for lost Product as a suspicion of abuse or diversion and report to the Orphan
designee responsible for DEA issues, and SDS will not replace the lost Product without
Orphan’s approval. For damaged Product, SDS will make a good faith effort to arrange
for the damaged Product to be returned to SDS. Upon receipt of damaged Product, SDS will
keep the damaged Product in a secure locked area, and will dispose of it at SDS’s
cost in compliance with the applicable SOP for destruction of Product. SDS shall not be
required to disclose any Patient Confidential Information to Orphan pursuant to this
Section 3.6 to the extent such disclosure is not permitted under HIPAA and other federal
and state law. 



        3.7
Recalls. If Orphan is required to recall or, on its own initiative, recalls or
withdraws Product sold in the Territory, SDS shall reasonably assist Orphan in such recall
in accordance with applicable laws and regulations. For such purposes, SDS shall maintain
a 





6











complete and current list of all
Patients and other third parties to who SDS has shipped (or dispensed) Product, as well
as from whom SDS as accepted returns of Product, with the lot numbers of Product
dispensed/distributed or returned. Orphan shall pay for all costs and expenses of SDS in
connection with any such recall. SDS shall provide to Orphan, at Orphan’s request,
any information reasonably requested by Orphan in connection with Orphan investigations
relating to recalled Product, subject to the confidentiality constraints imposed by HIPAA
and any other federal or state law. 



        3.8
Expired Product. Orphan will at its cost replace Product that expires.
Orphan will not replace expired Product once it has been purchased by SDS. SDS will
dispose of, or return, expired Product as reasonably directed by Orphan, subject to
applicable law, and Orphan shall promptly reimburse SDS for all reasonable expenses
incurred in complying with this Section 3.8 



ARTICLE IV
PURCHASE
PRICE OF PRODUCT; FEES 



        4.1
Set-up Fee. On the Effective Date, Orphan shall pay SDS a non-refundable
set-up fee in the amount set forth on Exhibit B, as payment for up-front expenses
anticipated to be incurred by SDS in preparation for the performance of the Covered
Services. 



      4.2
Purchase Price of Product.  



		    (a)                        With
respect to all Product purchased by SDS pursuant to Subsection 3.1(b),
SDS shall pay a purchase price to Orphan equal to Orphan’s current
wholesale price, as it may be changed by Orphan from time to time on at least 30
days prior written notice to SDS. 







		    (b)                        The
purchase price for Product purchased by SDS within the first ninety (90) days
after the Implementation Date shall be due and payable to Orphan within ninety
(90) days from the date of sale. Thereafter, the purchase price for Product
purchased by SDS shall be due and payable to Orphan within thirty (30) days from
the date of sale. SDA shall provide Orphan with written confirmation of sales of
Product on a weekly basis. If SDS makes payment of the purchase price of Product
within the applicable time period, it shall be entitled to a two percent (2%)
discount off the purchase price of such Product, and the discount shall be
applied by SDS by reducing the amount due and payable to Orphan by two percent
(2%). 







		    (c)                        SDS
shall be responsible for any sales tax or similar taxes payable in connection
with the sale of Product to SDS. 







		    (d)                        SDS
shall have the right to establish the price at which it resells Product to
Non-PAP Patients, and shall have all right, title and interest in and to any
amounts that SDS receives from third parties in connection with Product
dispensed or distributed pursuant to Non-PAP Orders; provided, however, that the
price at which SDS sells Product shall not exceed the greater of (i) 125% of
Orphans’ then-current wholesale price for Product or (ii) the then AWP of
Product. 









7











        4.3
Fees. As compensation for the Covered Services performed by SDS, Orphan shall pay
SDS the Fees described in Exhibit B. SDS shall invoice Orphan for the Fees on a bi-weekly
basis, commencing on the second Friday after the Implementation Date, and such Fees shall
be due and payable to SDS within thirty (30) days of the date of SDS’s invoice. On
the first anniversary of the Implementation Date, and each anniversary thereafter, SDS
shall be entitled to increase each of the Fees by no more than a percentage which is equal
to the percentage increase to the then current twelve (12) month Consumer Price Index (all
items) as published by the U.S. Department of Labor, Bureau of Labor Statistics during
such twelve (12) month period. SDS shall notify Orphan in writing within thirty (30) days
after the effective time of any such increase in Fees. 



        4.4
Late Penalty. Any amount not paid by the owing party on or before the
respective due date thereof shall bear interest at the rate of 18% per annum (1.5% per
month) or, if lower, the highest interest rate permitted by law. 



        4.5
Adjustment. In December, 2003, and annually thereafter, the parties will, in good
faith, re-evaluate the pricing set forth on Exhibit B to determine whether an adjustment
thereto is warranted in light of certain unanticipated expenditures, efficiencies,
reductions or other circumstances that may necessitate such an adjustment; provided,
however, in no event shall either party be obligated at such time to agree to any such
adjustment. 



ARTICLE V
CONFIDENTIAL
INFORMATION  



        5.1
Nondisclosure Commitments. The parties acknowledge that, as a result of this
Agreement, each may learn confidential and proprietary information, including, but not
limited to, information about Orphan’s operations, business, and products, and
information about SDS’s report formats, computer software, business, and operations
(all of which shall collectively be considered the “Confidential Information” of
the respective party). Except as specifically provided herein, neither Orphan nor SDS
shall disclose any Confidential Information of the other to any person or entity, or use,
or permit any person or entity to use, any of such Confidential Information, excepting
only: (a) disclosures to and use by the employees of Orphan or SDS who have a reasonable
need to know such information in connection with performance to this Agreement, (b)
disclosures which are required by law, and (c) disclosures that are made on a confidential
basis to the attorneys, accountants, and other professional advisors of Orphan or SDS in
connection with matters relating to this Agreement. Notwithstanding the foregoing,
Confidential Information shall not include: (x) information which is public or becomes
public through no fault of the receiving party, (y) information of which the receiving
party has knowledge prior to receipt, and (z) information which is received by one party
from a third person not under an obligation of confidentiality to the other party to this
Agreement. 



        5.2
Patient Confidential Information. Except as otherwise provided in
Section 6.7, Orphan shall neither have access to nor be entitled to receive
any Patient Confidential Information, except to the extent Orphan must have access to such
Patient Confidential Information to satisfy its FDA reporting requirements associated with
Product. Each party shall maintain the confidentiality of all information and records,
including patient information if such 





8











party receives Patient
Confidential Information in any form or manner, to the extent required by
applicable law, including, but not limited to, HIPAA. All patient-related data
and information obtained by SDS hereunder shall be and remain the property of
SDS and shall be deemed the Confidential Information of SDS. SDS will not
utilize Patient Confidential Information it comes into possession of as a result
of this Agreement outside the scope of this Agreement. SDS will not engage in
any activity designed to expand its information of individual Patients through
the use of third parties for a purpose other than to effectuate the uses and
disclosures contemplated by this Agreement. There shall be no prior use of
Patient Confidential Information outside of the scope of this Agreement.
Notwithstanding anything to the contrary, however, SDS and/or its affiliates may
use any such Patient Confidential Information in the aggregate and on a
de-identified basis with other drug-use data, to the extend permitted by law,
without charge, for research, cost analysis, and other business purposes of SDS
and its affiliates, so long as there is no specific disclosure of the
Confidential Information of Orphan. Notwithstanding anything to the contrary
herein, with respect to any information or documents that are subject to
disclosure or that are requested pursuant to Section 3.5 or otherwise, and which
contain Patient Confidential Information, SDS shall only be required to disclose
such information and documents to the extent permitted by federal and state
confidentiality laws and regulations, including, but not limited to, HIPAA and,
in connection with any such disclosure to Orphan pursuant to Section 3.5 or
otherwise which involves Patient Confidential Information, Orphan hereby
represents that such disclosure is required by law or is intended for one of the
purposes described in 45 C.F.R. § 164.512(b) and that such documents and
information received by Orphan will be used solely to comply with such law or
with one of the intended purposes under 45 C.F.R. § 164.512(b). 



ARTICLE VI
TERM AND
TERMINATION 



        6.1
Initial Term; Renewal. The initial term of this Agreement shall begin
on the Effective Date and continue for a period of three (3) years after the
Implementation Date, and may be terminated earlier or automatically extended in accordance
with the terms thereof. Not less than one hundred twenty (120) days prior to the end of
the initial or any renewal term of this Agreement, either party may notify the other party
in writing that it desires to terminate this Agreement, effective as of the end of the
then current term. If no such written notification is given, this Agreement shall
automatically continue with the same terms and conditions as set forth herein for an
additional one (1) year term, subject to the right of termination as otherwise provided
herein. 



        6.2
Termination for Bankruptcy. Either party shall have the right to
terminate this Agreement upon five (5) days’ written notice, if (a) the other party
files a petition for reorganization or liquidation under any federal or state bankruptcy
law, or any such petition is filed against such other party and, in either case, the
petition is not withdrawn or dismissed within sixty (60) days after filing, or (b) a
receiver is appointed for any part of its assets and said appointment is not vacated
within sixty (60) days. 



        6.3
Termination for Noncompliance. Orphan shall have the right to
terminate this agreement upon five (5) days’ written notice to SDS if SDS is cited as
non-compliant with regulatory requirements as determined by an audit of SDS facilities by
Orphan and confirmed by 





9











a third-party audit, or if SDS is
cited as non-compliant as determined by a regulatory body, and appropriate corrective
action cannot be mutually agreed to by the parties within thirty (30) days after such
determination of non-compliance or such earlier date as is specified by the regulatory
body. 



        6.4
Termination for Cause. Notwithstanding anything to the contrary
herein, either party may give the other written notice of a material breach of this
Agreement. If the breaching party has not cured said breach within thirty (30) days from
the date such notice was sent, this Agreement may be terminated at the option of the
non-breaching party. If the amount of time commercially reasonable for the breach to be
cured is longer than thirty (30) days, this Agreement may not be terminated by the
non-breaching party pursuant to this provision until such commercially reasonable period
of time has elapsed; provided, however, that in no event shall such cure period exceed
sixty (60) days from the date such notice was sent. Notwithstanding the foregoing, Orphan
may terminate this Agreement under Section 10.5 if SDS is precluded from rendering Covered
Services as a result of an event of force majeure. 



        6.5
Transition of Covered Services. Upon termination or expiration
of this Agreement, the parties shall mutually agree on an expeditious schedule of
transition of the Covered Services. SDS shall promptly return to Orphan (or to any other
third party as directed by Orphan) all Product then in SDS’s possession or control
which has not been purchased by SDS pursuant to Subsection 3.1(b). If this Agreement has
been terminated by Orphan under Sections 6.2, 6.3, or 6.4, SDS shall be responsible for
the costs of returning Product to Orphan; otherwise, Orphan shall be responsible for such
costs. 



        6.6
Return of Confidential Information. Upon termination or
expiration of this Agreement, each party shall, if requested by the other party, promptly:
(a) return to the other party all documentation and other materials (including all copies
of original documentation or other materials) containing any Confidential Information, and
(b) certify to the other party as to the destruction or return of all such documentation
and other materials public through no fault of the receiving party. 



        6.7
Transfer of Patient Information, Etc. Upon termination
or expiration of this Agreement, for whatever reason, Orphan shall have the right to
transfer all mutually-developed Xyrem Risk Management SOPs and the toll free Xyrem
telephone number to another specialty pharmacy and/or distributor of its choice, and SDS
shall cooperate with Orphan in the transfer of such items to another qualified specialty
pharmacy and/or distributor. In addition, Orphan may request that SDS also transfer
Patient Confidential Information to such other specialty pharmacy for the purpose of
continuing “treatment” (as that term is defined under HIPAA) of such Patients,
and SDS shall expeditiously honor such request to the extent disclosure of such Patient
Confidential Information by SDS is permitted under applicable law, including, but not
limited to, HIPAA. If this Agreement has been terminated by Orphan under Sections 6.2, 6.3
or 6.4, Orphan shall promptly reimburse SDS for all expenses incurred in connection with
the transition described in this Section 6.7; otherwise, SDS shall be responsible for all
such costs incurred by SDS in connection with such transition. 





10











ARTICLE VII
COMPLIANCE
WITH LAW; REPRESENTATIONS AND WARRANTIES  



        7.1
Compliance With Law. Each party agrees that it will perform its
respective obligations hereunder in accordance with applicable federal, state
and local laws, including but not limited to applicable DEA, FDA, state and
local retail and wholesale pharmacy requirements. FDA laws are not limited to
section 505 of the Federal Food, Drug and Cosmetic Act, but also include any
special considerations required by the FDA for approval of Product. SDS will be
notified of such requirements in writing by Orphan. In the event any such
special FDA requirements not communicated to SDS by the Effective Date cause
SDS’s obligations under this Agreement to be materially more burdensome or
expensive, the parties shall promptly negotiate an appropriate modification to
the Fees, and if the parties cannot agree on such a modification, or SDS in good
faith views such additional responsibility as too burdensome to continue with
the Agreement, SDS shall have the right to terminate this Agreement without
penalty upon five (5) days written notice to Orphan. 



      7.2
Representations and Warranties.  



		    (a)               Each
party hereby represents and warrants to the other party that: (i) it has all
requisite corporate power and authority to enter into this Agreement and perform
and observe all obligations and conditions required to be performed or observed
by that party under this Agreement; (ii) neither the execution and delivery of
the Agreement nor the performance by that party of its respective obligations
under this Agreement will conflict with or result in a breach of any covenant or
agreement between that party and any third party; (iii) this Agreement
represents the legal, valid and binding obligation of that party; and (iv) such
party has (or will have at such time as performance of its obligations under
this Agreement may require) obtained all of the local, state and federal
permits, licenses or another regulatory registrations or approvals necessary for
the performance of its obligations under this Agreement; provided, however, SDS
shall make a good faith effort to apply and obtain the requisite DEA license
necessary in order for SDS to distribute Product to Persons other than the
end-user, but the failure to obtain such license shall not constitute a breach
of this Agreement by SDS.  







		    (b)                        Orphan
hereby represents and warrants that Product at the time of shipment to
SDS’s facility: (i) shall not be adulterated or misbranded within the
meaning of the Act, or within the meaning of any applicable state or municipal
law in which the definitions of adulteration or misbranded are substantially the
same as those contained in the Act, as the Act and such laws are constituted and
effective at the time of shipment; and (ii) shall not be a product which may
not, under the provisions of the Act or FDA guidelines pertaining to the
Product, be introduced into interstate commerce. 













11











ARTICLE VIII
INDEMNIFICATION
AND INSURANCE 



      8.1
Indemnification.  



		    (a)                        SDS
shall indemnify and hold harmless Orphan and its directors, officers, employees,
and affiliates from and against all claims, liabilities, losses, damages, costs,
and expenses (including without limitation reasonable attorneys’ fees)
arising out of: (i) any breach by SDS of this Agreement, including, but not
limited to, its representations and warranties; (ii) the negligent act or
negligent omission, or the willful misconduct, of SDS or any of its employees or
agents in connection with the performance of its obligations under this
Agreement; and (iii) SDS’s use of patient information in violation of
applicable laws governing confidentiality; except to the extend such claims
arise out of Orphan’s negligence or willful misconduct or breach hereunder,
including, but not limited to, a breach of Orphan’s representations and
warranties hereunder. 







		    (b)                        Orphan
shall indemnify and hold harmless SDS and its directors, officers, employees and
affiliates from and against all claims, liabilities, losses, damages, costs, and
expenses (including without limitation reasonable attorneys’ fees) arising
out of (i) any breach by Orphan of this Agreement, including , but not limited
to, its representations and warranties; (ii) the negligent act or negligent
omission, or the willful misconduct, of Orphan or any of its employees or agents
in connection with the performance of its obligations under this Agreement;
(iii) any claim relating to the manufacturing of the Product or use of the
Product by a Patient or other individual; and (iv) use by SDS of a Mark in
accordance with the terms of this Agreement, except to the extent such claims
arise out of SDS’s negligence or willful misconduct or breach hereunder,
including, but not limited to, a breach of SDS’s representations and
warranties hereunder. 







        8.2
Insurance. Each party shall procure and maintain during the term of this Agreement,
comprehensive general liability insurance in the amount of * per claim made, and in the
aggregate, including but not limited to, for contractual liability, personal and bodily
injury, and product liability. Each party shall provide the other party with evidence of
such insurance upon request. A party may not cause or permit such insurance to be canceled
without obtaining comparable replacement coverage or modified to materially reduce its
scope or limits of coverage during the term of the Agreement. 



ARTICLE IX
TRADEMARKS  



        9.1
Grant of License. Orphan grants to SDS a nonexclusive, royalty-free,
nontransferable license to use the Marks in the Territory in connection with the rendering
of the services and sale of Product contemplated by this Agreement, and SDS accepts the
license subject to the following terms and conditions. 



        9.2
Ownership of the Service Marks. SDS acknowledges that
Orphan is the exclusive owner of the Marks and that all use of the marks by SDS will inure
to the benefit of and be on 





12











behalf of Orphan. SDS will do
nothing inconsistent with such ownership and will reasonably assist Orphan in recording
the evidence of this license arrangement with any appropriate government authorities.
Nothing in this Agreement shall give SDS any right, title, or interest in the Marks other
than the right to use the Marks in accordance with this Agreement, and SDS will not
attack the title of Orphan to the Marks. 



        9.3
Quality Standards. All use of the marks by SDS will be in compliance with
the quality control standards that are furnished from time to time by Orphan or its
agents. SDS will reasonably cooperate with Orphan in facilitating Orphan’s ultimate
control of such nature and quality standards, will permit reasonable inspection of
SDS’s operation, and, upon request of Orphan, will supply Orphan with specimens of
all uses by SDS of the Marks. 



        9.4
Marking. SDS’s use of the Marks will comply with all marking requirements and
other laws pertaining to trademarks in force during the term of this Agreement. 



        9.5
Form of Use. SDS will use the Marks only in the form and manner and
with appropriate legends as prescribed from time to time by Orphan. 



        9.6
Infringement Proceedings. SDS will promptly notify Orphan of an unauthorized
uses of the Marks by others that come to SDS’s attention. Orphan will have the sole
right and discretion to bring infringement, dilution or unfair competition proceedings
involving the Marks. 



        9.7
Effect of Termination. Upon termination of this Agreement, SDS will
immediately discontinue all use of the Marks and any term or symbol confusingly similar
thereto, will cooperate with Orphan or its agents to apply to the appropriate authorities
to cancel any recording of evidence of this Agreement from all government records, and
will destroy all printed materials bearing the Marks. 



ARTICLE X
MISCELLANEOUS  



        10.1
Notices. Except as otherwise specified in this Agreement any notice or other
communication required or contemplated under the provisions of this Agreement shall be in
writing and (a) delivered in person, evidenced by a signed receipt, (b) deposited in the
United States mail, first class postage prepaid, (c) sent by electronic facsimile
transmission, or (d) sent via Federal Express, Airborne, or any other similar express
delivery service, to the addresses indicated below or to such other persons or addresses
as the parties may provide by written notice to the other. The date of the notice shall be
(x) the date of delivery if the notice is personally delivered or sent via Federal Express
or similar express service, or (y) three (3) days after the date of mailing if the notice
is mailed by United States mail. 


	If to SDS:	*
Attn: Vice President and General Manager
*








13










	with a copy to: 	*
Attn: General Counsel
*
	 
	If to Orphan:	Orphan Medical, Inc.
13911 Ridgedale Drive, Suite 250
Minnetonka, Minnesota 55305
Attn: Vice President of Commercial Operations
Fax No. 952-541-9209






        10.2
Invalidity. Should any of the provisions hereof become legally invalid or
unenforceable, the remainder of this Agreement shall remain effective, provided that the
essential purpose of the Agreement can still be carried out. In such event, the parties
agree to negotiate a mutually acceptable amendment to the terms and conditions of this
Agreement. 



        10.3
Non-Waiver. A failure by any 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 any other party shall not affect, or constitute a waiver of, the first
party’s right to insist 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 or, a party’s right to demand strict compliance with all provisions of this
Agreement 



        10.4
Remedies. 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, including without limitation
specific performance, a temporary restraining order, and temporary or permanent
injunctions. 



        10.5
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, and
acts of God, or any other similar causes which are beyond the reasonable control of such
party, 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 the parties
to pay amounts then due shall not be suspended or delayed; and provided, further, that if
SDS is precluded from rendering Covered Services for a continuous period in excess of ten
(10) business days, Orphan shall be entitled to terminate this Agreement upon five (5)
days written notice to SDS. 



        10.6
Governing Law. This Agreement and performance hereunder shall be governed
by, and construed in accordance with, the laws of the State of Delaware, without regard to
choice of law principles. 



        10.7
Successors and Assigns. This Agreement may not be assigned by any
party hereto without the prior written consent of the other parties, which consent shall
not be unreasonably withheld. 





14











        10.8
Relationship of the Parties. The parties are independent contractors and
shall not be considered as an employee, agent or legal representative of any
other party for any purposes whatsoever. Nothing herein shall be construed to
create a partnership, joint venture or general agency. Except as expressly
provided for herein, the parties shall have no authority to act for or on behalf
of the any party or to sign or otherwise enter into any kind of contract,
undertaking or agreement, or make any promise, warranty or representation, with
respect to the Product or any other matter on behalf of any other party, and no
other party shall be bound by or liable for any acts, obligations, or defaults
of the other party, its employees or agents. Each party shall have exclusive
liability and responsibility for workers’ compensation insurance, taxes and
other obligations with respect to itself, its employees and agents. 



        10.9
Complete Agreement; Amendment. This Agreement (together with the
exhibits, 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. This Agreement may not be amended or changed in any of its provisions
except by a subsequent written agreement between the parties. 



        10.10
Headings. The article, section and paragraph headings used in this Agreement are
for convenience only and are not part of the agreement between the parties. 



        10.11
Survival. Notwithstanding any provisions of this Agreement to the contrary,
Section 3.3, Section 3.5(a), Article IV, Article V, Section 6.5, Article
VII, Article VIII, and Sections 10.3, 10.4, 10.6 and 10.11 shall survive the expiration or
termination of this Agreement for any reason. 



        IN
WITNESS WHEREOF, the parties have signed this Agreement effective as of the Effective
Date. 


	EXPRESS SCRIPTS SPECIALTY
DISTRIBUTION SERVICES, INC.	ORPHAN MEDICAL, INC.
	
 	
 
	By: _____________________________
Name: ___________________________
Title: ____________________________	By: _____________________________
Name: ___________________________
Title: ____________________________












15











EXHIBIT A
COVERED
SERVICES  



	• 	  	Administration
of the Xyrem Success ProgramSM  






        *  



	• 	  	Inventory
Management  






        *  



	• 	  	Master
Warehouse  






        *  



	• 	  	Reporting  






        *  


























16











	•  	  	SOPs
and BUSINESS RULES  






Any other services as mutually
agreed upon by the parties and memorialized in written SOPs or Business RuLes. 





































17











EXHIBIT B
FEES  


	

	Type of Fee	Amount Owed by Orphan
	

	Set-Up Fee	 	 	*	 	 
	

	Non-PAP Administrative Fee	 	 	*	 	 
	

	PAP Administrative Fee	 	 	*	 	 
	

	PAP Order Dispensing Fee	 	 	*	 	 
	

	PAP Order Shipping Costs	 	 	*	 	 
	

	Custom and ad hoc reports	 	 	*	 	 
	









*The  *  is based on the current
strength, dosage and bottle size of Product as of the Effective Date, and is subject to
change as mutually determined in good faith by SDS and Orphan if the current strength,
dosage or bottle size changes.  

























18











EXHIBIT C
XYREM 



XYREM & DESIGN (As
identified in U.S. Reg. No. 2,472,156) 



XYREM &DESIGN (Color)(As
identified in U.S. Reg. No. 2,423,880) 



XYREM CIII SODIUM OXYBATE ORAL
SOLUTION & DESIGN  



XYREM SUCCESS PROGRAM  



XYREM PATIENT SUCCESS PROGRAM  



XYREM PHYSICIAN SUCCESS PROGRAM  



1-866-XYREM88  



ORPHAN MEDICAL & Design (As
shown in U.S. Reg. No. 1,906,107) 



ORPHAN  



ORPHAN MEDICAL  



ORPHAN MEDICAL, INC.  




















19