DISTRIBUTION SERVICES AGREEMENT

1.1.

“ Products ” means all current and future ethical pharmaceutical products, bearing Customer’s label and packaging, which Customer sells to wholesale customers in the United States (see current price list).

1.2.

“ Aggregate Inventory ” means, at any given time, the total of Products in units that Service Supplier has on hand at all of its storage and/or distribution facilities and that Service Supplier has on order from Customer.

1.3.

“ Confidential Information ” means the confidential information described in Section 4.2.

1.4.

“ Providers ” means the purchaser(s) of Products from Service Supplier in the United States.

1.5.

“ Average Weekly Movement ” means, at any given time, the total quantity of Products in units (by NDC number) sold by Service Supplier to Providers over the immediately preceding *** weeks divided by ***.

1.6.

“ Effective Date ” means July 1, 2004.

1.7.

“ Inventory and Sales Report s” means the reports described in Sections 2.3.

***

Portion for which confidential treatment requested.

1

1.8.

“ New Price ”means the wholesale acquisition cost (“WAC”) charged by Customer after the effective date and time of a price change instituted by Customer at any time following the Effective Date of this Agreement.

1.9.

“ Old Price ” means the WAC charged by Customer immediately preceding the institution of a New Price.

1.10

“ Brokerage ” means bulk shipments via crossdock and drop shipment to Service Supplier’s warehousing chain customers.

2.1.

Base Distribution Services.

1.

Sophisticated ordering technology

2.

Daily consolidated deliveries to providers

3.

Emergency shipments to providers 24/7/365

4.

Consolidated accounts receivable management

5.

Contract and Chargeback administration

6.

Returns and Recall processing

7.

Customer Service support

8.

Adequate working inventories to meet customer needs and service levels

9.

Licensed, environmentally controlled, PDMA compliant, secure facilities

2.2

Inventory Management Services.

1.

Inventory Levels. During the term of this Agreement, Service Supplier will use best efforts to maintain on hand inventory levels of *** weeks or less on all Products.

2.

Purchase Limits. Customer agrees to ship all Service Supplier purchase orders in full. Customer has the right to question any orders that exceed 150% of Service Supplier’s Average Weekly Movement and has the right to cancel any quantities that Service Supplier is not able to provide reasonable justifications and/or explanations.

3.

Product Availability. Service Supplier and Customer will jointly use best efforts to minimize product shortages and maximize product availability by agreeing to the following:

•

Service Supplier will institute an automated balancing system on Customer Products in order to optimize the use of existing inventories across the entire Service Supplier network, including brokerage.

•

During backorder situations and limited product availability and upon Customer’s request, Service Supplier will implement more frequent order and receiving cycles to help reduce inventory requirements.

***

Portion for which confidential treatment requested.

2

2.3

Data / Reporting Services. Service Supplier shall prepare inventory reports detailing the status of its Aggregate Inventory of Products (“Inventory Reports”) and movement of Products (“Sales Reports”) by NDC number for the duration of this Agreement. Service Supplier shall provide Customer with such Inventory Reports weekly and Sales Reports monthly. All such Inventory and Sales Reports shall be transmitted in EDI 852 and EDI 867 formats, respectively and shall include such information as reasonably requested by Customer, 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

Service Supplier may, due to contractual requirements, be required to block certain data in the 867‘s that discloses Provider identity. This may include Provider name and DEA number, and any other data that would identify a Provider.

Within thirty (30) days after entering into this Agreement, the parties shall examine and test the capability of their respective EDI systems and complete implementation of a mutually agreeable system whereby transfers of information can be made effectively on a consistent basis. In the event that critical internal support systems and electronic communication links including EDI, are not available for 5 business days, the parties will cooperate to promptly implement substitute procedures to document the information customarily sent by EDI and prevent interruptions to each other’s business.

2.4

Service Level. Service Supplier agrees to use its best commercial efforts to service provider orders for Products at a 98% service level. Service Level will be calculated according to Service Supplier’s then current, standard adjusted service level report. In addition, Service Supplier will allow Customer the opportunity, with advanced written notice, to add up to *** additional weeks of temporary inventory beyond the inventory levels defined in Section 2.2.1 in order to ensure maximum service levels. Customer will be entitled to this opportunity one time per quarter.

2.5

Provider Order Monitoring. During the term of this agreement Service Supplier will implement processes and procedures to monitor Provider order patterns. Service Supplier and Customer will agree upon parameters which may represent speculative buy activity. Any orders that meet the agreed upon parameters will be investigated by Service Supplier and the outcome reported to Customer. If it is determined that a Provi