Document:

EX-10.26

 

Exhibit 10.26

Confidential Materials omitted and filed separately with the

Securities and Exchange Commission. Asterisks denote omissions.

Cardinal Health

Developing Suppliers Program

Distribution Services Agreement

     This Agreement (“Agreement”) is entered into as of October 1, 2004 (the “Effective Date”) by
and between Xanodyne Pharmaceuticals Inc. (“Supplier”), a Kentucky corporation with its principal
place of business located at 7300 Turfway Rd. Suite 300, Florence, KY 41042, and Cardinal Health*
(“Cardinal Health”) with its principal place of business located at 7000 Cardinal Place, Dublin,
Ohio 43017.

     Cardinal Health performs various distribution services for Supplier with respect to Supplier’s
pharmaceutical products (“Products”).

     Supplier markets Products and desires to use Cardinal’s distribution services.

     NOW THEREFORE, in consideration of the foregoing, the mutual representations, warranties and
covenants contained in this Agreement, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree, as follows:

ARTICLE 1

Standard Program Components

	1.1	 	Standard Distribution Services. — Cardinal Health agrees to provide the following
“Standard Distribution Services” to Supplier:

	 	•	 	Sophisticated ordering technology
	 
	 	•	 	Daily consolidated deliveries to providers
	 
	 	•	 	Emergency shipments to providers 24/7/365
	 
	 	•	 	Consolidated accounts receivable management
	 
	 	•	 	Contract and Chargeback administration
	 
	 	•	 	Returns processing at [**]% of then current WAC.
	 
	 	•	 	Customer Service, support
	 
	 	•	 	Adequate working inventories to meet current WAC.
	 
	 	•	 	Licensed, environmentally controlled, PDMA compliant, secure facilities

	1.2	 	Additional Standard Distribution and Inventory Management Services. — In addition to
the Distribution Services in section 1.1, Cardinal Health agrees to provide Supplier with the
following services and commitments:
	 
	 	 	Inventory Levels Commitment. During the term of this Agreement, Cardinal Health will
use best efforts to maintain [**] (days) constant inventory levels in days of inventory
(“DIOH) of Supplier’s Products at each of its DCs.
	 
	1.2.1	 	Pipeline Information Service. Cardinal Health shall prepare inventory reports
detailing the status of its Aggregate Inventory of Products and movement of Products by NDC
number (“Inventory and Sales Reports”) and, for the duration of this Agreement, provide

1

 

	 	 	Supplier with such Inventory Reports (852’s) weekly and Sales Reports (867’s) or in a format
consistent with what was received in the past, monthly. All such Inventory and Sales Reports
shall be transmitted in EDI format pursuant to Section 2.2.1(D) and shall include such
information as reasonably requested by Supplier, including but not limited to the following:

	 	(a)	 	On Hand Inventory level by distribution center; and
	 
	 	(b)	 	On Order Inventory level by distribution center; and
	 
	 	(c)	 	Sales out by distribution center

	 	 	Cardinal Health may, due to contractual requirements, be required to block certain data in
the 867’s that discloses customer identity. This may include customer name and DEA number,
and any other data that would identify a customer. In no event will Cardinal Health be
required to provide customer identifying information to Supplier in the event it is
contractually prohibited from doing so.
	 
	1.2.2	 	EDI. Cardinal’s Inventory and Sales Reports shall be transmitted to Supplier in an
EDI 852 and EDI 867 format respectively or in a format consistent with what was received in
the past.
	 
	1.2.3	 	Service Level Commitment. Cardinal Health will provide a [**]% fill rate on the
Supplier’s product portfolio during a rolling twelve month period after adjusting for
Supplier supply issues.
	 
	1.2.4	 	Returns Handling Service. Cardinal Health will resell all returns whose saleable
condition has been certified by Customers and that meet Cardinal Health internal
requirements.
	 
	1.2.5	 	Efficient Transactions. Cardinal Health may take deductions it determines are
necessary or appropriate provided however, Cardinal Health will notify Supplier of any
deductions in a timely manner and will delay taking such deductions for up to [**] days from
the date of notification to give the parties the opportunity to meet and discuss the
deductions. Cardinal Health will use its best efforts to resolve any deductions during this
[**] day period.
	 
	1.2.6	 	PTS Benefit. Cardinal Health [**] the Service Fee dollar amount each quarter of
the calendar year [**] in the Pharmaceutical Technologies and Services group revenue [**].
	 
	1.3	 	Premium Distribution Services.
	 
	1.3.1	 	NLC Participation. Cardinal Health will allow Supplier to participate in its
National Logistics Center (“NLC”) for additional compensation to be determined by Cardinal
Health and agreed to by Supplier.

2

 

	1.3.2	 	Premium Service Level. Cardinal Health will commit to a fill rate greater
than [**]% at a fee dependent on the rate and the Product portfolio.
	 
	1.4	 	Service Fee. Supplier will pay Cardinal Health a Service Fee for Services set forth
in Sections 1.1,1.2 and 1.3 of this Agreement in accordance with in Exhibit A.

ARTICLE 2

Term and Termination; Remedies

	2.1	 	Term and Termination. This Agreement shall remain in full force and effect through
December 31, 2005. Thereafter, this Agreement will automatically renew for subsequent one year
periods unless either party provides the other with written notice of non-renewal at least
sixty (60) days prior to the expiration of its then current term. Notwithstanding the
foregoing, either party may terminate this Agreement (a) upon the mutual written agreement of
Supplier and Cardinal; or (b) immediately upon a breach by Supplier or Cardinal Health of any
of the terms of this Agreement that is not cured within thirty (30) days of written
notification thereof by the non-breaching party; or (c) after the Initial Term upon sixty (60)
days’ prior written notice of termination without cause to the other party; or (d) immediately
upon the institution (whether voluntarily or involuntarily) of bankruptcy, insolvency,
liquidation or similar proceedings by or against Supplier or Cardinal, or the assignment of
Supplier’s or Cardinal’s assets for the benefit of creditors.

ARTICLE 3

Miscellaneous

	3.1	 	Audits: Cardinal shall keep and maintain accurate records with respect to the sale
and distribution of Products reported hereunder for not less than three (3) years, or as is
required by law, whichever is longer. Upon thirty (30) days written notice, Cardinal shall
permit Xanodyne representatives or designated auditors, during regular business hours, access
to all data and systems deemed necessary by Xanodyne to audit Cardinal records in order to
verify information concerning sales of Products to Third Party Purchasers. Should any
discrepancy under this Agreement be determined during an audit, it will be corrected in the
next payment. If no outstanding payments remain, Cardinal shall be paid or billed within sixty
(60) days of determination of the amount of the discrepancy.

	3.2	 	Nature of Relationship. The relationship between Supplier and Cardinal Health is
that of independent contractor, and no agency, franchise, partnership, joint venture or other
relationship shall be construed to exist between the parties by virtue of this Agreement.
	 
	3.3	 	Confidentiality. During the term of this Agreement, each party, its respective
agents, employees and representatives (collectively, the “receiving party”) may receive or
have access to confidential materials and information of the other party (the “disclosing
party”). All such materials and information (including, but not limited to the terms of
this Agreement, Products information, operations, methods, strategies, formulas, price
lists, discount programs, incentives, rebates, records of unit movement for Products,
shipping and warehousing, and confidential proprietary information from third parties), are
collectively referred to herein as “Confidential Information” and constitute the
property of the disclosing party. During the term hereof and for a period of one (1) year
thereafter the receiving party shall not use or disclose to third persons any such
Confidential Information without the disclosing party’s prior written consent, excepting
those (a) disclosures made on a confidential basis to and use by the directors, officers,
employees, and agents of the

3

 

	 	 	the receiving party’s performance of this Agreement, (b) disclosures which are required by
law or government agencies, as reasonably determined by the receiving party or its legal
counsel, or are made on a confidential basis to the receiving party’s attorneys,
accountants, and other professional advisors in connection with matters relating to this
Agreement, and (c) routine disclosures in the normal course of business, including to
IMS/DDD or similar organizations. Supplier understands and agrees that Cardinal Health may,
in its sole discretion, elect to sell warehouse withdrawal, sales, and other data to
IMS/DDD and/or other third parties without contribution to Supplier.
	 
	 	 	Upon termination of this Agreement (for any reason) each party will promptly: (i) return to
the other party all documentation and other materials (including copies of original
documentation or other materials) containing any confidential information of the other
party; or (ii) certify to the other party, pursuant to a certificate in form and substance
reasonably satisfactory to the other party, as to the destruction of all such documentation
and other materials.
	 
	3.4	 	Assignment and Delegation. Neither party may assign this Agreement without the prior
written consent of the other party; provided, however, that either party may assign this
Agreement without such consent to an Affiliate, provided that the assigning party shall remain
ultimately liable for any financial obligations under this Agreement. For the purpose of this
Section 3.3, an Affiliate shall be defined to include any company controlling, controlled by,
or under common control with Cardinal Health or Supplier as the case may be through stock
ownership, direct or indirect. This Agreement shall be binding upon and shall inure to the
benefit of the successors and assigns of the parties.
	 
	3.5	 	Governing Law. Agreement shall be interpreted in accordance with, and governed by,
the laws of the State of Ohio, without regard to any conflicts of laws’ rules.
	 
	3.6	 	Severability; Waiver. The invalidity of all or part of any provision of this
Agreement shall not affect the validity of any other provision of this Agreement or the
remaining portion of the applicable provision. Either party’s failure to insist on compliance
or enforcement of any provision of this Agreement shall not affect its validity or
enforceability or constitute a waiver of future enforcement of that provision or of any other
provision of this Agreement.
	 
	3.7	 	Statute of Frauds. All EDI transmissions made pursuant to this Agreement shall be
deemed by the parties to be the same as written communication for all purposes, and for all
applications of law and statutes, including but not limited to, the Statue of Frauds under the
State of the Ohio Uniform Commercial Code.
	 
	3.8	 	Force Majeure. Neither party shall be liable for delay in delivery or nonperformance
in whole or in part nor shall the other party have the right to terminate this Agreement where
delivery or performance has been affected by a condition of force majeure. For purposes of
this Agreement, force majeure means a condition which results from causes beyond a party’s
reasonable control, including, but not limited to, acts of God, acts of the other party,
shortages, fires, labor disputes, strikes, floods, epidemics, quarantines, war, riot, delay in
transportation, compliance with any applicable governmental regulation or order, whether or
not it later proves to be invalid. If either party is affected by a force majeure event, such
party shall, within 10 days of its occurrence, give notice to the other party stating the
nature of the event, its anticipated duration and any action being taken to avoid or minimize
its effect. The suspension of performance shall be of no greater scope and no longer duration
receiving party who have a reasonable need to know such information in connection with

4

 

	 	 	receiving party who have a reasonable need to know such
information in connection with than is reasonably required and the non-performing party shall use its best efforts to
remedy its inability to perform.
	 
	3.9	 	Notices. All notices to either party (each a “Notice”) shall be in writing, shall
refer specifically to this Agreement and shall be hand delivered or sent by express courier
service, costs prepaid, or by facsimile to the respective addresses specified below (or to
such other address as may be specified by Notice to the other party):

	 	 	 
	          If to Cardinal, to:

	 	Cardinal Health
	 

	 	      7000 Cardinal Place
	 

	 	      Dublin, OH 43017
	 

	 	      Attention: Executive Vice President Purchasing
	 

	 	      Telecopier No.: (614) 757-6214
	 
	 	 
	          If to Supplier, to:

	 	Xanodyne Pharmaceuticals Inc.
	 

	 	7300 Turrway Rd.
	 

	 	Suite 300
	 

	 	Florence, KY. 41042
	 

	 	Attention: David Reder
	 

	 	Telecopier: (859)371-6391

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	           With a copy to:

	 	Xanodyne Pharmaceuticals Inc.
	 

	 	547 Bridgeside Dr.
	 

	 	Avon Lake, Ohio 44012
	 

	 	Attention: David Spinale
	 

	 	Telecopier: (440) 930-7931

	3.10	 	Entire Agreement. This Agreement constitutes the entire agreement between the parties
and supersedes all prior contracts, agreements and understandings between the parties whether
written or oral with regard to the subject matter hereof which is distribution services. To
the extent this Agreement contains terms inconsistent with the terms of any other existing
Agreement between the parties this Agreement will control. This Agreement may not be amended
except in writing signed by authorized representatives of the parties hereto.
	 
	3.11	 	Public Announcements. Neither party shall issue any press release or other public
announcement, verbally or in writing, referring to the other party or any entity which
controls, is controlled by ot under common control of such party. Nothing contained
herein shall limit the right of either party to issue a press release or public announcement
if, in the opinion of such party’s counsel, such press release or public announcement is
required pursuant to state or federal securities laws, rules or regulations, or other
applicable laws, in which case the party required to make the press release or public
announcement shall use commercially reasonable efforts to obtain the approval of the other
party as to the form, nature and extent of the press release or public announcement prior to
issuing the press release or making the public announcement

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day first above
written,

	 	 	 	 	 	 	 	 	 	 	 
	Xanodyne Pharmaceuticals Inc.	 	 	 	Cardinal Health*	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Stephen Stamp
	 	 	 	By:
	 	/s/ Jim Scott	 	 
	 

	 	 

	 	 	 	 	 	 

	 	 
	Name:	 	Stephen Stamp	 	Name:	 	Jim Scott	 	 
	Title:

	 	CFO
	 	 	 	Title:
	 	SVP Purchasing	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	EDI Contact
Person:	 	 	 	EDI Contact
Person:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	By:	 	 	 	 
	 

	 	 

	 	 	 	 	 	 

	 	 
	E-mail: David Reder	 	 	 	E-mail:	 	 	 	 
	 

	 	 	 	 	 	 	 	 

	 	 
	Phone: Controller	 	 	 	Phone:	 	 	 	 
	 

	 	 	 	 	 	 	 	 

	 	 

 

* The term “Cardinal Health” shall include the following affiliated operating companies: Cardinal
Health 110, Inc., formerly known as Whitmire Distribution Corporation, a Delaware corporation
(Folsom, California); Cardinal Health 106, Inc., formerly known as James W. Daly, Inc., a
Massachusetts corporation (Peabody, Massachusetts); Cardinal Health 103, Inc., formerly known as
Cardinal Southeast, Inc., a Mississippi corporation (Richland, Mississippi); Cardinal Health 100,
Inc., formerly known as Bindley Western Industries, Inc. an Indiana corporation (Indianapolis,
Indiana); Cardinal Health 104, LP f/k/a Cardinal Distribution, L.P., an Ohio limited partnership
(Dublin, Ohio) Cardinal Health 107, Inc., formerly known as National Pharmipak Services, Inc., an
Ohio corporation, and any other subsidiary of Cardinal Health, Inc., an Ohio corporation (“CHI”),
as may be designated by CHI.

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Exhibit A

Service Fee: In consideration of the Services under this Agreement, Supplier shall pay
Cardinal Health a quarterly “Service Fee” equal to [**]% year one, (10/1/04 through December 2005),
[**]% year two, (2006) of the agreement multiplied times Cardinal Health’s Product sales measured
at then current Wholesale Acquisition Cost (“WAC”) for the applicable calendar quarter. After the
second year Supplier will pay at their normal Service Fee based upon Cardinals model of
calculation. The Service Fee shall be adjusted by deducting from the applicable calendar quarter
the following:

	 	1.	 	“Inventory Appreciation,” which means the difference in the value of on hand
inventory and on order inventory actually received immediately preceding a price
increase and the value of such inventory immediately after a price increase for
Product.
	 
	 	2.	 	The value of pricing action credits or Product inventory supplied to Cardinal
Health at a price less than the then current WAC.
	 
	 	3.	 	Any additional terms given against standard terms of 2% 30/31.

Cardinal Health will invoice Supplier for the Service Fee for the applicable calendar quarter
within 30 days of such calendar quarter and will include appropriate documentation supporting the
Service Fee calculation. Supplier shall pay Cardinal Health such invoice in full within 30 days of
the date of such invoice in the form of a check or credit memo.

The Service Fee will be revised for each calendar year based on sales data from the most recent
Cardinal Health fiscal year.

7

 

FIRST AMENDMENT TO DEVELOPING SUPPLIERS PROGRAM DISTRIBUTION

SERVICES AGREEMENT

     This First Amendment (“Amendment”) dated August 1, 2005 is by and between Xanodyne
Pharmaceuticals Inc. (“Supplier”) and Cardinal Health* (“Cardinal Health”).

RECITALS

	 	A.	 	Supplier and Cardinal Health entered into a Developing
Suppliers Program Distribution Services Agreement (the “Original Agreement”) on
October 1, 2004.
	 
	 	B.	 	The parties desire to amend the Original Agreement as set forth
below.

NOW, THEREFORE, the parties hereto agree as follows:

	 	1.	 	Term. The term of the Original Agreement shall be extended for
a period of one (1) year through December 31, 2006.
	 
	 	2.	 	Effective Date. This Amendment will be effective as of August
1, 2005 (“Effective Date”). Except as otherwise amended herein, the terms and
conditions of the Original Agreement shall remain in full force and effect.

IN WITNESS WHEREOF, the parties have executed this Amendment as of the date set
forth above.

	 	 	 	 	 	 	 	 	 	 	 
	Xanodyne Pharmaceuticals Inc.	 	 	 	Cardinal Health*	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ David Reder
	 	 	 	By:
	 	/s/ Robert J. Sabers	 	 
	Name:

	 	 

David Reder
	 	 
	 	Name:
	 	 

Robert J. Sabers
	 	 
	Title:

	 	Controller
	 	 	 	Title:
	 	VP Strategic Purchasing	 	 

 

*
The term “Cardinal Health” shall include the following affiliated operating companies: Cardinal
Health 110, inc., a Delaware corporation (Folsom, California); Cardinal Health 107, Inc., an Ohio
corporation (Zanesville, Ohio); Cardinal Health 104, LP, an Ohio limited partnership (Dublin,
Ohio); Cardinal Health 3, LLC, a Delaware limited liability company; and any other subsidiary of
Cardinal Health, Inc., an Ohio corporation (“CHI”), as may be designated by CHI.

 

 

SECOND AMENDMENT TO DEVELOPING SUPPLIERS PROGRAM DISTRIBUTION

SERVICES AGREEMENT

This Second AMENDMENT to the DEVELOPING SUPPLIERS PROGRAM DISTRIBUTION SERVICES AGREEMENT
(“Amendment”) is entered into as of January 1, 2006 (the “Effective Date”), by and between Xanodyne
Pharmaceuticals, Inc. (“Supplier”) and Cardinal Health (“Cardinal Health”). Supplier and Cardinal
Health entered into a DEVELOPING SUPPLIERS PROGRAM DISTRIBUTION SERVICES AGREEMENT dated October 1,
2004 (“Agreement”) and amended the Agreement effective August 1, 2005. The Parties desire to
further amend the Agreement in the manner set forth in this Second Amendment. Capitalized terms not
otherwise defined herein shall have the meaning ascribed to such terms in the Agreement.

AGREEMENT

	1.	 	The first sentence in Section 2.1, Term and Termination, of the Agreement is hereby deleted
and replaced with the following:

This Agreement shall remain in full force and effect through December 31, 2008.

	2.	 	Exhibit A should be deleted in its entirety and replaced with the following:

Service Fee: In consideration of the Services under this Agreement, Supplier shall
pay Cardinal Health a quarterly “Service Fee” for sales made by Cardinal Health
during calendar year 2006 equal to [**]% of Cardinal Health’s Product sales measured
at the then current Wholesale Acquisition Cost (“WAC”). Supplier will be given a one
time credit of $[**] to be applied toward such Service Fee in 2006. The Service Fee
for sales made by Cardinal Health during calendar years 2007 and 2008 will be equal
to [**]% of Cardinal Health’s Product sales measured at then current WAC. The
Service Fee shall be adjusted by deducting from the applicable calendar quarter the
following:

1. “Inventory Appreciation,” which means the difference in the value of on hand
inventory and on order inventory actually received immediately preceding a price
increase and the value of such inventory immediately after a price increase for
Product.

2. The value of pricing action credits or Product inventory supplied to Cardinal
Health at a price less than the then current WAC.

3. The value of any promotional pricing compared to then current WAC for quantities
purchased by Cardinal Health.

4. Any additional terms given against standard terms of 2% 30/31.

Cardinal Health will invoice Supplier for the Service Fee for the applicable
calendar quarter within 30 days of the end of such calendar quarter and will include
appropriate documentation supporting the Service Fee calculation. Supplier shall pay
Cardinal Health such invoice in full within 30 days of the date of such invoice in
the form of a check or credit memo.

	3.	 	The remaining provisions of the Agreement shall continue in full force and effect as though
folly set forth in this Second Amendment. Any conflict between the provisions of this Second
Amendment and the Agreement shall be resolved in favor of this Second Amendment.

1

 

The Parties have duly executed this Second Amendment as of the day first written above.

	 	 	 	 	 	 	 	 	 	 	 
	CARDINAL HEALTH	 	 	 	Xanodyne Pharmaceuticals Inc.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Frank Segrave
	 	 	 	By:
	 	/s/ Dan L. O’Korn	 	 
	 

	 	 

	 	 
	 	 	 	 

	 	 
	Name:

	 	Frank Segrave
	 	 	 	Name:
	 	Dan L. O’Korn	 	 
	Title:

	 	SVP
	 	 	 	Title:
	 	VP/GC	 	 

2EX-10.27

 

Exhibit
10.27

Confidential Materials omitted and filed separately with the

Securities and Exchange Commission. Asterisks denote omissions.

McKesson Corporation 

Core Distribution Agreement

This Core Distribution Agreement (“Agreement”) is entered into as of    November 1   , 2005
(the “Effective Date”) between McKesson Corporation (“McKesson”), a pharmaceutical distributor, and
Xanodyne Pharmaceuticals, Inc. (“Manufacturer”), a pharmaceutical company.

McKesson performs certain Core Services (as hereinafter defined) in connection with the
distribution of pharmaceutical products manufactured by Manufacturers. The parties now wish to
define more precisely the amount and manner of payment of the consideration to be received by
McKesson for its performance of the Core Services.

Now, therefore, McKesson and Manufacturer agree as follows:

	I.	 	Obligations of McKesson. McKesson shall perform the following services (referred to
herein as the “Core Services”):

	 	a.	 	McKesson will promptly load, and maintain accurate pricing and related
information with respect to, all contracts between Manufacturer and Manufacturer’s
customers (“Customer Contracts”). Manufacturer will provide 10 business days advance
notice of all price changes to existing Customer Contracts and McKesson will load price
changes to existing Customer Contracts within 10 business days of notification.
Manufacturer will provide 15 business days advance notice of new Customer Contracts and
McKesson will load the new Customer Contract pricing within 15 business days of
notification.
	 
	 	b.	 	McKesson will submit charegbacks to Manufacturer on a daily basis in support of
ongoing Customer Contracts administration.
	 
	 	c.	 	McKesson will provide Manufacturer a single site for distribution, and this
single point of distribution will be through McKesson’s Strategic Redistribution Center
located in Aurora, Colorado (the “SRC”). McKesson shall monitor forward distribution
centers inventory levels to assure target inventory levels are maintained as defined in
section I(e.). In the event product (that has not otherwise been distributed to
McKesson’s customers) is returned from a McKesson distribution center to the SRC in
saleable condition as defined by McKesson’s internal requirements, McKesson will
redistribute said returned product to a McKesson distribution center in need of such
product based on current product on hand and projected customer demand.
	 
	 	d.	 	McKesson will monitor internal purchasing processes assuring 100% of all
Manufacturer products are purchased through the SRC, unless

 

 

	 	 	 	otherwise approved by Manufacturer in writing excluding emergency shipments made to
the Forward Distribution Centers.

	 	e.	 	McKesson will order product so as to maintain inventory of no greater than
[**]-weeks-average-on-hand and no less than [**] weeks average on hand across the
distribution network. One week’s average shall be calculated as the average inventory
sold out by McKesson in one week as measured over the ninety days immediately preceding
McKesson’s purchase of product,
	 
	 	f.	 	McKesson will pick, pack, store in accordance with applicable legal and
regulatory requirements and ship Manufacturer’s product to McKesson’s customers in
accordance with their orders therefore.
	 
	 	g.	 	McKesson will provide the Core Services with respect to Manufacturer’s products
marketed by Manufacturer on the date hereof and all new products launched or acquired
by Manufacturer during the term of this agreement.
	 
	 	h.	 	McKesson will transmit EDI 852 and 867 data, including inventory levels on hand
and on order in addition to aggregate sales out, to Manufacturer on a monthly basis
within five (5) business days following the end of the applicable calendar month.
Notwithstanding the foregoing, McKesson shall provide such data in any different form
as reasonably requested by Manufacturer and available via current McKesson reporting
capabilities.
	 
	 	i.	 	McKesson will immediately reverse any previous chargeback claims whenever
McKesson accepts a return of Manufacturer’s product from a customer and issues a credit
related to the prior sale (for which McKesson has previously submitted a chargeback
claim to Manufacturer).
	 
	 	j.	 	McKesson will notify Manufacturer via the debit memo process fifteen (15) days
before taking a deduction due to short shipments or damaged shipments. Manufacturer has
fifteen (15) days to dispute the written notification and provide McKesson with
additional supporting information or issue a credit. If the information provided does
not substantiate the claim the deduction will occur. McKesson will allow the
Manufacturer an additional sixty (60) days from the deduction date to dispute the
deduction. Both parties will make a good faith effort to resolve any such disputed
deduction.
	 
	 	k.	 	McKesson will work with Manufacture to resolve all open issues/discrepancies.
McKesson and Manufacturer will use commercially reasonable best efforts to quickly
resolve disputes.

 

 

	 	l.	 	McKesson and Manufacturer will designate individuals to coordinate the resolution
of issues and discrepancies. McKesson and Manufacturer will notify each other when
designated individuals are reassigned.

	II.	 	Obligations of Manufacturer

	 	a.	 	Manufacturer agrees to replenish McKesson’s inventory orders in a timely and
efficient manner. Manufacturer will utilize purchase order numbers provided by McKesson
when placing orders on behalf of McKesson.
	 
	 	b.	 	Manufacturer will use commercially reasonable efforts to ensure that McKesson’s
inventory replenishment is operational, except for any scheduled down time needed to
maintain effective operations and/or when interruptions are necessary or caused by
conditions outside of Manufacturer’s control.
	 
	 	c.	 	In consideration of the Core Services to be provided pursuant to this
Agreement, Manufacturer will pay a fee to McKesson determined in accordance with
Attachment A (the “Fee”).

	III.	 	Additional Terms and Conditions

	 	a.	 	Fee calculations are all based on gross branded pharmaceutical purchases by
McKesson. No Fees shall be payable under this agreement with respect to generic
products (as designated by First DataBank).
	 
	 	b.	 	All fees hereunder will be due and payable with respect to any purchases of
branded products by McKesson as described in Attachment A.

	IV.	 	Confidentiality and Disclosure

	 	This Agreement and all information which is provided by each party to the other party
pursuant to this Agreement are confidential. Each party agrees to maintain all such
information in confidence and except as may be required by law or order of any court or
governmental agency, not to disclose to any third party any such information unless such
party shall obtain a written release from the other party. Each party further agrees to
limit access to such information to only those of its officers and employees who
reasonably need to know such information.

	V.	 	Effective Date

 

 

	 	a.	 	This Agreement shall become effective as of November 1,2005 and can be terminated
in accordance with Section b., below.
	 
	 	b.	 	Either party may terminate this Agreement with or without cause at any time on
thirty days prior written notice to the other party.

	VI.	 	General

	 	a.	 	This Agreement is in addition to and shall not supersede any existing agreement
in effect between McKesson and Manufacturer, including but not limited to the McKesson
Buying Terms Form entered into between the parties.
	 
	 	b.	 	This Agreement will be governed by and construed in accordance with the laws of
California, without regard to or application of conflict of law, rules or principles.
	 
	 	c.	 	In no event shall either party be liable under this Agreement for any special,
consequential, incidental or indirect damages, whether or not such party has been
advised of the possibility of such damages.
	 
	 	d.	 	The parties to this Agreement are independent contractors. Accordingly, this
Agreement does not constitute a partnership or other joint venture between the parties
and neither party shall be deemed to be an agent or representative of the other.
	 
	 	e.	 	The failure of either party to enforce at any time or for any period of time
any one or more of the provisions hereof shall not be construed to be a waiver of such
provisions or of the right of such party thereafter to enforce each such provision.
	 
	 	f.	 	Except for the obligation to pay money, neither party will be liable to the
other party for any failure or delay in performance caused by reasons beyond such
party’s reasonable control, including but not limited to acts of God, war, riot, acts
of terrorism, fire, shortage of materials or transportation, strikes or acts of civil
or military authorities, provided such party gives prompt written notice thereof to the
other party.
	 
	 	g.	 	In the event Manufacturer requires services (i.e. distribution, pharmacy,
marketing or logistics) that McKesson Specialty can provide, McKesson Specialty will be
given the opportunity to bid on providing these services to Manufacturer at the time
they may be put out for bid, along with any other competitor(s) that Manufacturer may
so choose.
	 
	 	h.	 	McKesson shall keep and maintain accurate records with respect to the sale and
distribution of products reported hereunder for not less than three

 

 

	 	 	 	years, or as is required by law, which ever is longer. Upon 30 days written notice,
McKesson shall permit Manufacturer representatives, or designated auditors, during
regular business hours, access to all data and systems deemed necessary by
Manufacturer to audit McKesson records in order to verify information concerning
sales of products to third party purchasers. Should any discrepancy under this
agreement be determined during an audit, it will be corrected in the next payment.
If no outstanding payments remain, McKesson shall be paid or pay within 60 days of
determination of the amount of discrepancy. Manufacturer will not audit McKesson
more than once every twelve (12) months and in no event will the audit relate to any
transaction or event that occurred more than twelve (12) months prior to the date of
such audit; provided, however, that Manufacturer may perform additional audits
during such twelve month period if the initial audit results in a determination of a
material discrepancy in McKesson’s records.

	 	 	 	 	 
	For Xanodyne Pharmaceuticals, Inc.:	 	 
	 
	 	 	 	 
	By:

	 	/s/ S.A. Stamp	 	 
	 

	 	 

	 	 
	Name:

	 	S.A. Stamp	 	 
	(Print or Type)	 	 
	Title:

	 	Chief Financial Officer	 	 
	 

	 	 	 	 
	Date:

	 	02/09/06	 	 
	 
	 	 	 	 
	For McKesson:	 	 
	 
	 	 	 	 
	By:

	 	/s/ Martha Torress-Morgan
 

	 	 
	Name:

	 	Martha Torres-Morgan	 	 
	 

	 	       (Print or Type)	 	 
	Title:

	 	Dir Brand Rx Product Mangt	 	 
	Date:

	 	2/8/06	 	 

 

 

Attachment A –

McKesson Core Distribution Agreement Fee

Services Fee Schedule

	1.	 	Additional Terms and Conditions

	 	a.	 	The Fee shall be equal to [**] percent ([**]%) of gross Contract Quarter
(hereafter defined) purchases of [**] of branded pharmaceutical products by McKesson.
Contract Quarter purchases greater than $[**] would qualify Manufacturer to re
negotiate fee structure as it would redefine the current tier structure as defined by
McKesson. Generic pharmaceutical product, as designated by First Data Bank, is not
covered by this Agreement and will not be subject to the fee calculation as defined in
Attachment A. The first Contract Quarter shall be the period beginning on the
Effective Date and ending the last day of the calendar month that contains the three
month anniversary of the Effective Date, and each Contract Quarter thereafter means
each consecutive three calendar month period thereafter.
	 
	 	b.	 	McKesson shall invoice Manufacturer in the amount of [**] percent ([**]%) of
gross Contract Quarter purchases of [**] of branded pharmaceutical products by McKesson
during the previous Contract Quarter (the “Initial Fee Payment”), and will include
appropriate documentation support the Initial Fee Payment calculation. Payment, via
credit memo, will be made by Manufacturer within 30 days from date of receipt of
invoice. Gross purchases will be defined as the total dollar value of product purchased
by McKesson within the measured Contract Quarter less McKesson Distribution Center
returns (gross purchases will not be reduced by McKesson customer returns).
	 
	 	c.	 	Manufacturer shall pay to McKesson the Fee Balance (hereafter defined) within
thirty (30) days after the end of the applicable Contract Year. The first Contract Year
shall be the period beginning on the Effective Date and ending the last day of the
calendar month that contains the one year anniversary of the Effective Date, and each
Contract Year thereafter means each consecutive twelve calendar month period
thereafter.
	 
	 	d.	 	The “Fee Balance” means the Fee, less the sum of (i) the aggregate Initial Fee
Payments made that were attributable to branded pharmaceutical products purchased by
McKesson during the applicable Contract Year, (ii) Increased Value (hereafter defined)
attributable to the applicable Contract Year, and (iii) the Discount Value (hereafter
defined) attributable to the applicable Contract Year. “Increased Value” means the
amount equal to

 

 

	 	 	 	the number of units of branded product in McKesson’s inventory (including any
product in transit to McKesson) at the time of any increase in Wholesaler
Acquisition Cost (“WAC”) price during the applicable Contract Year multiplied by the
increase in WAC price. The “Discount Value” means the amount equal to any discounts
off of WAC pricing granted to McKesson with respect to branded product purchased by
McKesson during the applicable Contract Year. The payment of the Initial Fee
Payments and Fee Balance shall be in full satisfaction of Manufacture’s obligation
to pay the Fee with respect to the applicable Contract Year.

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