EXCLUSIVE DISTRIBUTION AGREEMENT

CONFIDENTIAL TREATMENT REQUESTED: Certain portions of this document have been omitted pursuant to a request for confidential treatment and, where applicable, have been marked with an asterisk (“ [****] ”) to denote where omissions have been made. Note that eight pages of this exhibit contain omitted material pursuant to this request. The confidential material has been filed separately with the Securities and Exchange Commission.

 

EXCLUSIVE DISTRIBUTION AGREEMENT

 

This Exclusive Distribution Agreement (“Agreement”) is made as of April 1, 2002 (the “Effective Date”), between Alliance Pharmaceutical Corp., a New York corporation, having its principal place of business at 3040 Science Park Road, San Diego, California 92121 (“Client”), and CORD Logistics, Inc., an Ohio corporation, having its principal place of business at 15 Ingram Boulevard, LaVergne, Tennessee 37086 (“CORD”).

 

A.      Client is, among other things, in the business of developing and marketing pharmaceutical products in the United States, the District of Columbia and Puerto Rico (the “Territory”).

 

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

 

C.      Client desires to engage CORD as its exclusive distribution agent for commercial sales of lmagent™ in all formulations (collectively, the “Product”), and such other pharmaceutical products agreed to by the parties in the Territory and to perform certain other services described in this Agreement, all upon the terms and conditions set forth in this Agreement.

 

THEREFORE, in consideration of the mutual conditions and covenants set forth herein, CORD and Client (collectively referred to as “Party” or “Parties”) agree as follows:

 

1.      Appointment/Authorization .

 

1.1      Upon the terms and conditions set forth in this Agreement, Client appoints CORD as its exclusive distribution agent of Product in the Territory to Client’s customers, including, but not limited to, wholesalers, specialty distributors, physicians, clinics, hospitals, pharmacies and other health care providers in the Territory (collectively, “Customers”).

 

1.2      Subject to the terms and conditions set forth in this Agreement, CORD accepts the appointment to represent Client as its authorized exclusive distribution agent of Product to Customers in the Territory.

 

1.3      Client shall provide CORD with a right of first negotiation with respect to the distribution of new imaging agents or other pharmaceutical products acquired or promoted by Client in the Territory after the Effective Date. Client shall grant CORD an exclusive right of negotiation with respect to the distribution of such new product for a period of sixty (60) days after Client’s notice to CORD that such new product will be available for distribution. If the parties have not reached an agreement with respect to the distribution of the new product within sixty (60) days from the date of Client ^’ s notice, and entered into a definitive agreement within sixty (60) days thereafter, or if Cord notifies Client in writing at any point during such negotiation period that it is not interested or unable to distribute such new product(s), then Client shall have no further obligation with respect to that new product under this Section 1.3.

 

[****] Represents material which has been redacted pursuant to a request for confidential treatment pursuant to Rule 24B-2 under the Securities Exchange Act of 1934, as amended. The confidential materials have been filed separately with the SEC.

 

2.      Services .

 

2.1      CORD shall provide the services set forth in the Operating Guidelines, which include, without limitation, storage, distribution, returns, customer support, financial support, EDI and system access support (“Services”). A copy of the Operating Guidelines is attached hereto as Exhibit A and incorporated by reference.

 

2.2      The Operating Guidelines may be amended from time to time upon the mutual written agreement of the Parties; provided, however, that any change, modification or amendment to the Operating Guidelines may result in an increase in the fees charged by CORD in Section 5.

 

2.3      CORD’s services shall comply with the Operating Guidelines, provided Client’s shipment of Products to CORD are within [****] of its Forecast (as hereinafter defined).

 

2.4      All Product Returns shall be processed and handled by CORD in accordance with the Operating Guidelines; and, any customization or additional return services requested by Client shall be performed at an additional fee as agreed by the Parties.

 

2.5      Client is solely responsible for all Product recalls. In the event Product is subject to recall, or Client, on its own initiative, recalls any Product, CORD shall provide assistance to Client as set forth in the Operating Guidelines, provided that Client shall pay to CORD an amount equal to CORD’s actual costs incurred with any, such recall services. Such cost shall be in addition to the Service Fees described in Section 5 below.

 

3.      Product Supply/Client Responsibilities.

 

3.1      Client shall deliver Product to CORD at CORD’s facility located at 15 Ingram Boulevard, Suite 100, La Vergne, TN 37086, or to such other distribution facility as may be designated by CORD to Client in writing (“Facility”).

 

3.2      Client shall be responsible for delivery of Product to the Facility, including all costs, expenses and risk of loss associated with such delivery. Title to Product shall remain with Client at all times, even when Product is stored or warehoused at the Facility. Client shall at all times insure the Product for damage, loss, destruction, theft or any such other property damage (“Loss”) as further set forth in Section 17 below. Except for Loss resulting solely from the gross negligence or willful misconduct of CORD, Client shall bear all risk of loss or damage with respect to the Product stored or warehoused at the Facility.

 

3.3      Client shall provide CORD with a forecast of the volume of Product to be handled by CORD under this Agreement, not less often than [****] (“Forecast”). Upon execution of this Agreement, Client shall deliver to CORD a customer list, which sets forth the Product prices (the “Customer Price List”). Client shall notify CORD of any change in the Customer Price List not less than [****] prior to the effective date of any such change. CORD shall use commercially reasonably efforts to implement such price change in accordance with Client’s instruction.

 

3.4      CORD shall visually inspect each shipment of Product for external damage or loss in transit and notify Client of any such damage or loss within a commercially reasonable period of time following discovery.

 

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[****] Represents material which has been redacted pursuant to a request for confidential treatment pursuant to Rule 24B-2 under the Securities Exchange Act of 1934, as amended. The confidential materials have been filed separately with the SEC.

 

4.      Information System Access.

 

4.1      CORD shall provide Client access to an Operating System Base, which consists of the software used by CORD to support the services provided to Client, including the server and other components needed to execute the software and certain support services associated therewith, as further set forth in the Operating Guidelines (collectively, the “System”), upon the terms and conditions set forth in the System Access Agreement. A copy of the System Access Agreement is attached as Exhibit C and incorporated herein by reference. The software releases are (1) EliteSeries 6.1.2, as modified by CORD, supplied by Tecsys, Inc., a Montreal, Quebec, Canadian company, and any upgrades, maintenance releases or modifications implemented by CORD to support distribution services provided by CORD; (2) BACCS 3.0 as modified by CORD and any upgrades implemented by CORD to support financial services provided by CORD; and (3) Impromptu 6.0, supplied by Cognos Inc., a Canadian company, and any upgrades, maintenance releases or modifications implemented by CORD to support reporting services provided by CORD.

 

4.2      The System shall be made available to Client at the fees set forth in the Fee Schedule, except that any custom enhancements requested by Client shall be billed separately based on an hourly rate set forth in the Fee Schedule (as defined in Section 5).

 

4.3      In addition to the terms set forth in the System Access Agreement, Client shall maintain (4) a local area network sufficient to support Client’s terminals and personal computers that have access to the System, all such personal computers shall meet the minimum specifications necessary to support software needed to access the system; (5) a centralized server sufficient for data storage, if data export requirements exist; and (6) a connection to the internet sufficient to support system access. Client shall also assign knowledgeable and qualified employees or representatives to facilitate access to the System.

 

5.      Fees.

 

5.1      As compensation for the Services, Client shall pay to CORD the fees (the “Fees”) set forth on Exhibit B (the “Fee Schedule”).

 

5.2      CORD shall issue an invoice to Client for the Services rendered under this Agreement or for any other amounts due on a [****] basis. Payment is due within [****] days of the invoice date. If the Invoice is not paid within such [****] day period, a service charge on the unpaid amount calculated at the rate of [****] per month (or the maximum rate permitted by law if such rate is less than [****] per month) shall be imposed until such amount is paid in full.

 

5.3      The Fees shall be held firm for the [****] . Thereafter, CORD shall adjust the price not more often than once per contract year by the increase in the Producer Price Index - All Commodities published by the United States Department of Labor, Bureau of Statistics, as amended from time to time. In the case of a decrease in the Producer Price Index — All Commodities referenced above, Client’s pricing shall remain unchanged from the immediately preceding contract year. For purposes of sub-Section (i), the base point shall be the index level on the first day of the contract year.

 

5.4      Notwithstanding the terms set forth above in Section 5.3, if CORD can reasonably demonstrate that the costs for providing the Services have materially increased, or are likely to materially increase in the coming year due to the adoption of any applicable law or regulation (or any material change in the interpretation or administration thereof), or due to unforeseen circumstances beyond CORD’s reasonable control, then upon notice from CORD, the Parties agree to meet in good faith and negotiate a mutually acceptable adjustment to the Fees.

 

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[****] Represents material which has been redacted pursuant to a request for confidential treatment pursuant to Rule 24B-2 under the Securities Exchange Act of 1934, as amended. The confidential materials have been filed separately with the SEC.

 

6.      Term and Termination.

 

6.1      The initial term of this Agreement shall begin on the Effective Date and shall continue for a period of [****]   years (the “Initial Term”), unless terminated earlier pursuant to this Agreement. Thereafter, this Agreement shall automatically renew for additional terms of [****] each, unless written notice of termination is given by either Party at least ninety (90) days prior to the end of the Initial Term, or such other term, in which case this Agreement shall terminate at the end of the then current term.

 

6.2      Either Party shall have the right to terminate this Agreement:

 

(a)      upon one hundred eighty (180) days prior written notice to the other Party, provided that in the event Client terminates this Agreement, without cause, prior to the end of the Initial Term, such termination shall be effective only upon payment to CORD of six (6) months of the System Access Fees set forth on the Fee Schedule;

 

(b)      upon the breach by the other Party of a material provision of this Agreement and that Party’s failure to cure such breach within thirty (30) days following written notice thereof from the non-breaching Party, provided that, with respect to any failure to make any payment when due under this Agreement, such period to cure shall be reduced to ten (10) days; or

 

(c)      immediately upon notice to the other Party following the commencement of any bankruptcy or insolvency proceeding (whether voluntary or involuntary) with respect to such other Party or its assets, which in the event of an involuntary proceeding, is not dismissed within sixty (60) days, the general assignment for the benefit of creditors by such other Party, or the appointment of a receiver, trustee or liquidator by or for such other Party.

 

6.3      Termination or expiration of this Agreement shall not relieve either Party from any liability or obligation that accrued prior to such termination or expiration. Upon termination or expiration of this Agreement, all Product shall be returned to Client or a designee of Client, at Client’s sole cost and expense. Sections 13 and 14 shall survive termination or expiration of this Agreement.

 

7.      Audits . No more than twice per calendar year, Client or its designee shall have the right during normal business hours (i.e., 8:00 a.m. to 5:00 p.m. local time), upon fifteen (15) business days prior written notice to CORD, to: ii) conduct a physical audit of such parties of the Facility that relate solely to Product stored and warehoused at the Facility under this Agreement; and iii) review and audit records that relate solely to the storage and distribution of the Product. Notwithstanding the foregoing, Client or its designee may, from time to time and subject to CORD’s prior consent, perform additional physical audits of the Product located at the Facility in the event of a reasonable, documented concern related to the state of such Product. Such additional audits shall be conducted during normal business hours (i.e., 8:00 a.m. to 5:00 p.m. local time).

 

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

 

9.      Representations and Warranties .

 

9.1      Each Party represents and warrants to the other that:

 

(a)      it has full power and authority to enter into this Agreement and perform all obligations and conditions to be performed by it under this Agreement without any restriction by any other Agreement or otherwise;

 

(b)      the execution, delivery and performance of this Agreement have been duly authorized by all necessary corporate action of that Party; and

 

(c)      this Agreement constitutes the legal, valid and binding obligation of that Party.

 

9.2      Client further represents and warrants to CORD that the Product:

 

(a)      is and shall be manufactured in conformity with the Food, Drug and Cosmetic Act, as amended from time to time, and all other applicable laws, rules, regulations and orders of governmental entities relating to the manufacture, promotion, sale or distribution of the Product;

 

(b)      does not violate or infringe any patent, trademark, tradename or other interest of any person or entity.

 

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

 

11.      Trademarks . Neither Party shall have the right to use the name of the other Party or any Affiliate of the other Party, or the other Party’s or such Affiliates’ trademarks, service marks, logos, or other similar marks in any manner except with the prior written approval of that Party; provided that the foregoing shall not prohibit CORD’s use of Client names or marks in connection with the performance of the Services in a manner consistent with this Agreement. “Affiliate,” as used in this Agreement, means any legal entity which, during the Term hereof, controls, is controlled by, or is under common control with, such Party. For purposes of this definition, an entity shall be deemed to control another entity if it owns or controls, directly or indirectly, at least fifty percent (50%) of the voting interest of all equity interests of the other entity (or other such comparable ownership interest for an entity other than a corporation).

 

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12.      Confidentiality.

 

12.1      Each Party acknowledges that as a result of this Agreement it may learn and have access to trade secrets and other confidential and proprietary information of the other Party through employees, representatives and/or agents acting on behalf of or subcontracted to either Party (collectively the “Representatives”), including without limitation, financial information, information regarding business practices and techniques, customer lists and systems and technology information, or any information identified as confidential in writing by either Party (the “Confidential Information”). For purposes of this Agreement, Confidential Information shall not include information disclosed by one Party to the other Party to the extent that such information can be proven by written evidence: b) to be in the public domain or generally available in the industry in which the disclosing Party engages in business without any violation of this Agreement by the other Party; c) is already legally known to the other Party or any of its Affiliates at the time of its disclosure by the disclosing Party; d) becomes known to the other Party or any of its Affiliates from a third party without any obligation of confidentiality or limitation on use; or e) is independently developed by the other Party or any of its Affiliates prior to the date of its disclosure. The specific material terms of this Agreement shall be deemed to be the Confidential Information of each Party. Confidential Information shall not be deemed to be in the public domain or publicly known or in the receiving Party’s possession because it is embraced by more general information in the receiving Party’s possession or because it is embraced in general terms in publications.

 

12.2      Neither Party shall, directly or indirectly, at any time: f) disclose to any third person or entity any Confidential Information of the other Party (whether learned before or after the date of this Agreement), or g) use, or permit or assist any third person or entity to use, any such Confidential Information, excepting only: (1) disclosures required by law, rule, regulation or order, as reasonably determined by the disclosing Party or its legal counsel, and (2) disclosures on a confidential basis to directors, officers, employees, and agents of that Party or its Affiliates who have a reasonable need to know such Confidential Information in the normal course of business of that Party or any of that Party’s Affiliates.

 

12.3      The obligations of confidentiality hereunder shall survive the termination of this Agreement for a period of three (3) years. Upon termination of this Agreement (for any reason) each Party shall promptly: (3) 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 (4) with the other Party’s consent, which consent will not be unreasonably withheld, 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.

 

13.      Indemnification . Each Party shall indemnify and hold harmless the other Party and its parent and Affiliates, and each of their directors, officers, employees, agents, and representatives from and against all claims, liabilities, losses, damages, costs, and expenses, including, without limitation, reasonable attorneys’ fees (“Liability”) to a third party or property arising directly or indirectly out of any failure of that Party to perform fully all obligations and conditions to be performed by that Party pursuant to this Agreement or any breach of any warranty made by that Party in this Agreement. Client further agrees to indemnify and hold harmless CORD, its parent and Affiliates and each of their directors, officers, employees, agents and representatives from any and all Liability arising directly or indirectly out of injury or death to person or property alleged to have been caused by Client’s Product.

 

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14.      Limitation of Liability. NOTWITHSTANDING THE FOREGOING PROVISIONS OF SECTION 13, OR ANY OTHER PROVISION OF THIS AGREEMENT TO THE CONTRARY, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY CONSEQUENTIAL (SPECIFICALLY EXCEPTING THOSE CONSEQUENTIAL DAMAGES ARISING FROM EACH PARTY’S OBLIGATION TO INDEMNIFY THE OTHER FOR LIABILITY ARISING OUT OF OR RELATING TO THIRD PARTY CLAIMS IN ACCORDANCE WITH SECTION 13 ABOVE), INCIDENTAL, INDIRECT, SPECIAL, OR OTHER SIMILAR DAMAGES ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT.

 

15.      Insurance . During the term of this Agreement and for as long thereafter as necessary to cover claims resulting from this Agreement, Client shall maintain: (5) product liability and commercial general liability insurance having a limit of not less than $5 million; and (6) property damage insurance at replacement value for the Product located at the CORD Facility or in transit to or from the CORD Facility, pursuant to one or more insurance policies with reputable insurance carriers. Cardinal Health, Inc. and its subsidiaries shall be designated as “additional insureds” under the product liability and commercial general liability insurance policy(ies) and under the property damage insurance policy(ies). Prior to the Commencement Date, Client shall deliver to CORD certificates evidencing such insurance. Client shall not cause or permit such insurance to be canceled or modified to materially reduce its scope or limits of coverage during the term of this Agreement or thereafter as provided above. Except for any losses resulting solely from the gross negligence or intentional misconduct of CORD, Client shall bear all risk of loss or damage with respect to the Product, whether located at the Facility or otherwise.

 

16.      Dispute Resolution . The Parties agree to use good faith efforts to resolve all disputes within ninety (90) days of written notice that such a dispute exists. If dispute under this Agreement cannot be resolved by the Parties within such sixty (60) day period, the Parties agree to refer the matter to one executive from each Party not directly involved in the dispute for review and resolution. A copy of the terms of this Agreement, agreed upon facts and areas of disagreement, and a concise summary of the basis for each side’s contentions will be provided to both executives who shall review the same, confer, and attempt to reach a mutual resolution of the issue within forty-five (45) days after receipt of the materials referenced above. If the matter has not been resolved within such forty-five (45) day period, either or both Parties may pursue resolution of the matter through litigation or other process available under law or equity.

 

17.      Miscellaneous .

 

17.1      Relationship of the Parties. The relationship among the Parties is that of independent contractors, and this Agreement does not establish or create a partnership, joint venture, or other agency relationship among the Parties.

 

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

 

17.3      Governing Law. This Agreement shall be construed under the laws of the State of Tennessee, without regard to its conflicts of laws provisions.

 

17.4      Severability. If any term of this Agreement is declared invalid or unenforceable by a court or other body of competent jurisdiction, the remaining terms of this Agreement will continue in full force and effect.

 

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

 

17.6      Force Majeure. If the performance of any part of this Agreement by either Party shall be prevented, restricted, interfered with or affected for any length of time by fire or other casualty, government restrictions, war, riots, strikes or labor disputes, lock out, transportation delays, acts of God, or any other causes which are beyond the 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 one Party to pay amounts due to the other Party shall not be subject to the provisions of this Section.

 

17.7      Complete Agreement. This Agreement constitutes the entire understanding between the Parties and supersedes any contracts, agreements or understanding (oral or written) of the Parties with respect to the subject matter hereof. No term of this Agreement may be amended except upon written agreement of both Parties, unless provided otherwise in this Agreement.

 

17.8      Assignment. Except as set forth herein, neither Party shall have the right to assign this Agreement, or any of such Party’s rights or obligations under this Agreement, without the prior written consent of the other Party, provided, however, that CORD may assign its rights under this Agreement to any parent, subsidiary or affiliate without obtaining such consent. This Agreement shall be binding upon, inure to the benefit of, and be enforceable by and against the respective successors and assigns of the Parties.

 

17.9      Independent Contractor. The relationship of the Parties is that of independent contractors, and neither Party shall incur any debts or make any commitments for the other Party except to the extent expressly provided in this Agreement. Nothing in this Agreement is intended to create or shall be construed as creating between the Parties the relationship of joint ventures, co-partners, employer, employee or principal and agent.

 

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IN WITNESS WHEREOF, the undersigned acknowledge and accept the terms of this Agreement and have duly executed this Agreement.

 

 

CORD LOGISTICS, INC.   By: /s/ Frank C. Wegerson                             Frank C. Wegerson       Vice President and General Manager   15 Ingram Boulevard LaVergne, TN 37086 Facsimile No. (615) 793-4783

ALLIANCE PHARMACEUTICAL CORP.   By: /s/ Jack DeFranco                                       B. Jack DeFranco       Vice President, Marketing & Business Development   3040 Science Park Road San Diego, CA 92121 Facsimile No.: (858) 410-5201

 

 

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Exhibits

 

Exhibit A      Operating Guidelines

 

Exhibit B      Fee Schedule

 

Exhibit C      System Access Agreement

 

 

 

 

Alliance Pharmaceuticals / CORD Logistics, Inc.

Exhibit A

Operating Guidelines

 

In performing its obligations under the Distribution Services Agreement (“Agreement”), CORD Logistics, Inc. (“CORD”) will follow the Operating Guidelines as developed jointly with Alliance Pharmaceuticals Corp Inc. (“Client”). These Operating Guidelines are in addition to CORD Standard Operating Procedures (“SOPs”). Copies of these documents are maintained by both parties and will be reviewed, and updated if necessary, from time to time as mutually agreed, but not less than once per calendar year.

 

1.0 WAREHOUSING,