**Exhibit10.31**

 

December 16,2005

 

**VIAOVERNIGHT MAIL**

Frank Segrave

SVP, Supply Chain Services

Cardinal Health

7000 Cardinal Place

Dublin, OH  43017

 

**RE:****                            Distributionand Inventory Management Services Agreement by and between First HorizonPharmaceutical Corporation (“First Horizon”) and Cardinal Health with anEffective Date of January 1, 2005 (the “Agreement”)**

 

Dear Neil:

 

This letter agreement shall serve as thefirst amendment to the Agreement (the “Amendment”).  Below are the amended terms.

 

NOW THEREFORE, the parties agree to amend theterms of the Agreement as follows:

 

**Article 2(Purchasing and Inventory)**

 

1.                                       Paragraph2.2A (Inventory Levels) shall be deleted in its entirety and replaced with thefollowing paragraph.

 

In*ventory Levels**.  During the term of thisAgreement, Cardinal Health shall maintain at all times a stock of Product(s)sufficient to supply the demand of Customers provided, however, such stockshall be not less than #####-### (##) days nor more than ####### (##) days of Cardinal Health’s expectedsales to Customers as determined by its Customary Practice unless otherwiseagreed to by First Horizon in writing. The Inventory*

 

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*Levels set forth in this section reflectan additional ### (#) #####  stock ofProduct(s) for FHPC’s Disaster Recovery plan.*

 

*Wholesaler shall have no obligation tomaintain the minimum Inventory Level of a particular Product if such Product isunavailable from FHPC.*

 

2.                                       Section 2.2B(Purchase Requirements) shall be deleted in its entirety and replaced with thefollowing:

 

*Purchaseand Delivery Requirements. Cardinal Health agrees topurchase 100% of its requirements of Products directly from First Horizon.  First Horizon shall deliver any and allProducts ordered by Cardinal Health to Cardinal Health’s National LogisticsCenter located in Groveport, Ohio. Cardinal Health agrees to order the minimum quantities for each Productset forth in the attached Exhibit A. Title and risk loss shall pass to Cardinal Health upon delivery ofProduct to Cardinal Health’s carrier.  Inthe event Product is shipped by First Horizon’s carrier, then title and risk ofloss shall pass to Cardinal Health upon delivery to Cardinal Health’s NationalLogistics Center.*

 

3.               The followingParagraph 2.2D (Inventory and Sales Reports) shall be amended as follows:

 

*Inventoryand Sales Reports. Cardinal Health shall prepareinventory reports detailing the status of its Aggregate Inventory of Productsand movement of Products by NDC number (“Inventory and Sales Reports”)and, for the duration of this Agreement, provide First Horizon with suchInventory Reports (852’s) daily and Sales Reports (867’s) monthly. All suchInventory and Sales Reports shall be transmitted in EDI format pursuant to Section 2.2.1(E) and shall include such information as reasonably requested by FirstHorizon, including but not limited to the following:*

 

*(a)**       On Hand Inventory level bydistribution center for All Distribution Centers; and*

*(b)**       On Order Inventory level bydistribution center for All Distribution Centers; and*

*(c)**        Sales out by distributioncenter for All Distribution Centers*

*(d)**       Morgue Reports, uponrequest, by distribution center for All Distribution Centers.*

 

*Cardinal Health may, due to contractualrequirements, be required to block certain data in the 867’s that disclosescustomer identity. This may include Customer name and DEA number, and any otherdata that would identify a Customer.  Inno event will Cardinal Health be required to provide customer identifyinginformation to*

 

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*First Horizon in the event it is contractually prohibited from doingso.*

 

*In addition to the Inventory and SalesReports above, Cardinal Health agrees to provide the following EDIreports:  820-Electronic FundsTransfer;  844 -ElectronicChargeback;  and 849-ElectronicChargeback reconciliation (collectively, “Data Reports”) .  The foregoing Data Reports shall be providedto First Horizon upon generation.*

 

*Notwithstanding anything to contrary in thisAgreement, Cardinal Health shall includesufficient data in the Inventory and Sales Reports and Data Reports so thatFHPC can determine and evaluate the Aggregate Inventory, purchases, returns andchargebacks made by those Customers that receive Federal Statutory Pricing(1) (“FederalCustomers”).*

 

4.                                       Paragraph 2.3 (Post Price Increase Buy InAllocations) shall be amended as follows:

 

*Post PriceIncrease Buy In Allocations. First Horizon may electto provide Cardinal Health, in its sole discretion, allocations of Product atthe price prior to a price increase. The economic benefit realized by CardinalHealth for such purchase at the old price will be included in the calculationof the Base Service Fee as set forth in Attachment A, Service Fee Credits. *
| ####################################################################################################  ########################################################################################. |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

5.               The following paragraph shall be addedto Article 2 as paragraph 2.7.

 

*Returns.  Cardinal Health shall receive a credit in theamount of the contract purchase price for Federal Customers’ returns.  All other returns of Product shall be inaccordance with Attachment B of the Agreement.*

 

6.               Attachment A isdeleted in its entirety and replaced with the Attachment A dated November 2005set forth in this Amendment.

 

Any capitalized terms used in this Amendment,which are not otherwise defined herein, shall have the same meanings ascribedto them in the Agreement.  All otherterms and conditions of the Agreement shall remain in full force and effect andunless as otherwise modified herein, shall also apply to the subject matter ofthis Amendment.  In the event there isany inconsistency or conflict between the provisions in this Amendment 

 

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(1) Customers that receiveFederal Statutory Pricing include but not limited to Department of Defense(DOD), Veterans Administration (VA), Disproportionate Share Hospitals (DSH),and Public Health Services (PHS).

 

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and those in the Agreement, theprovisions in this Amendment shall supersede and control.

 

Please sign two copies of this letteragreement to acknowledge your acceptance of this Amendment to the Agreement andreturn one signed copy to:  First HorizonPharmaceutical Corporation, Attention: Toi Wilson, 6195 Shiloh Road,Alpharetta, GA.  30005.  The second copy should be retained for yourrecords.

 

 
|   | Very truly yours,       |
|--------|-------------------------|
|   |                    |
|   |                    |
|   | Darrell Borne           |
|   | Chief Financial Officer |

 

 

[SIGNATURES ON FOLLOWING PAGE]

 

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IN WITNESS WHEREOF, the parties hereto have duly executed thisAmendment as of December 1, 2005.

 
| ** ** | **ACCEPTED AND AGREED:**                     |
|------------|----------------------------------------------|
| ** ** | **Cardinal Health**                          |
|       | By:                                          |   | /s/ Frank Segrave |   |
|       | Title                                        | SVP Supply & Supplier Relations |   |
|       |                                         |
|       |                                         |
| ** ** | **ACCEPTED AND AGREED:**                     |
| ** ** | ** **                                   |
| ** ** | **First Horizon Pharmaceutical Corporation** |
|       | By:                                          |   | /s/ Darrell Borne |   |
|       | Title                                        | CFO |   |

 

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EXHIBIT A - Minimum OrderQuantities

 
| **Product**                | ** ** | **NDC #**  | ** ** | **##### ###** | ** ** |
|----------------------------|------------|------------|------------|---------------|------------|
| Robinul 100’s         |       | 5963020010 |       | ##            |       |
| Robinul Forte              |       | 5963020510 |       | ##            |       |
| Nitrolingual Pumpspray 200 |       | 5963030020 |       | ###           |       |
| Nitrolingual Pumpspray 60  |       | 5963030065 |       | ##            |       |
| Ponstel 100’s         |       | 5963040010 |       | ##            |       |
| Tanafed DP 4oz             |       | 5963046504 |       | ##            |       |
| Tanafed DP 16oz            |       | 5963046516 |       | ##            |       |
| Tanafed DMX 4 oz           |       | 5963047004 |       | ##            |       |
| Tanafed DMX 16oz           |       | 5963047016 |       | ##            |       |
| Sular 10mg                 |       | 5963044010 |       | ##            |       |
| Sular 20mg                 |       | 5963044110 |       | ##            |       |
| Sular 30mg                 |       | 5963044210 |       | ##            |       |
| Sular 40mg                 |       | 5963044310 |       | ##            |       |
| Cognex 10                  |       | 5963019012 |       | ##            |       |
| Cognex 20                  |       | 5963019112 |       | ##            |       |
| Cognex 30                  |       | 5963019212 |       | ##            |       |
| Cognex 40                  |       | 5963019312 |       | ##            |       |
| Furadantin 470 mL          |       | 5963045016 |       | #             |       |
| Prenate Elite 90’s    |       | 5963041190 |       | ##            |       |
| Optinate 30s               |       | 5963041230 |       | ##            |       |
| Zoto                       |       | 5963013503 |       | ##            |       |
| Fortamet 1000mg            |       | 6202257560 |       | ##            |       |
| Fortamet 500mg             |       | 6202257460 |       | ##            |       |
| Altoprev 20mg              |       | 6202262830 |       | ##            |       |
| Altoprev 40mg              |       | 6202262930 |       | ##            |       |
| Altoprev 60mg              |       | 6220226303 |       | ##            |       |
| Triglide 50mg              |       | 5963048090 |       | ##            |       |
| Triglide 160mg             |       | 5963048590 |       | ##            |       |

 

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ATTACHMENT A (revised December 2005)

 

**BaseService Fee**: A Base Service Fee of ##### will becalculated and paid annually based on #### of the total volume purchased byCardinal Health in 2005, including brokerage, from First Horizon valued at theFirst Horizon list price at the time the Product was purchased. “**Base Service Fee**” shall mean the #################################fee that will be paid to Cardinal Health by First Horizon in 2006 based upon ##################################of the total dollar volume of Product purchased by Cardinal Health duringcalendar year 2005.

 

 AService Fee of ##### will be calculated and paid annually based on the totalvolume exceeding #### of calendar year 2005 on all Products purchased byCardinal Health from First Horizon in 2006 except purchases made by FederalCustomers which shall be calculated at ################.  Service Fee shall include brokerage servicesand shall be valued at First Horizon’s list price at the time the Product waspurchased. “**Service Fee**” shall mean the #################### fee paid to Cardinal Health by First Horizon for total dollar volumepurchased by Cardinal Health in 2006 that exceeds ##################################of the total dollar volume of Product purchased by Cardinal Health duringcalendar year 2005 excluding those purchases made Federal Customers which shallbe calculated at ################.  BaseService Fee and Service Fee are collectively known as “**Fees.**”

 

Cardinal Health shall issue an invoice toFirst Horizon for Fees no later then January 30, 2007.  Such invoice shall include sufficient detailto allow First Horizon to verify and audit Cardinal Health’s invoice. FirstHorizon shall pay undisputed invoice amounts within 30 days of First Horizon’sreceipt of invoice.

 

**Credits: **First Horizonwill receive credit towards Fees for the following items:

 

a.               Price Appreciationon Aggregate Inventory after a Customer pricing action.

 

b.              Margin earned onquarterly promotions, deals, off-invoice allowances, Post Price Increase Buy InAllocations, or any other method, excluding those that are intended for ServiceSupplier’s Providers.

 

Provided Cardinal Health maintainssubstantially the same or higher purchase volumes as 2005, under nocircumstances should the Base Service Fee earned on the initial #### volumepurchases in 2006 over 2005 be less than #####, including any credits issued orinventory appreciation recognized on price increase or post price increase buyin allocations received.

 

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