Contract Sales and Services Agreement

EXHIBIT 10.4

* Certain portions of this exhibit have been omitted pursuant to a request for confidential
treatment which has been filed separately with the SEC.

Contract Sales and Services Agreement

Between

Cumberland Pharmaceuticals, Inc.

&

Cardinal Health Contract Sales & Services

For

Cumberland Pharmaceuticals Dedicated Sales Force

May 16, 2006

TABLE OF CONTENTS

AGREEMENT

     This AGREEMENT (“Agreement”) is dated as of May 16, 2006 by and between Cardinal Health PTS, LLC (“Cardinal Health”) with a place of business at 7000 Cardinal Place, Dublin, Ohio, and Cumberland Pharmaceuticals, Inc. (“Cumberland”), having a principal place of business at 2525 West End, Suite 950, Nashville, Tennessee 37203.

Background Information

     Cumberland is a Tennessee-based company which focuses on the acquisition, marketing, and distribution of a portfolio of niche pharmaceutical products. Cardinal Health provides medical representatives who Detail (as hereinafter defined) pharmaceutical products for third parties. Cumberland desires Cardinal Health to provide representatives to Detail certain products as determined and directed by Cumberland in the geographical territory hereinafter specified, pursuant to the terms and conditions of this Agreement, and Cardinal Health desires to provide the Representatives and perform such services pursuant to the terms and conditions set forth in this Agreement.

     The parties hereby agree as follows:

ARTICLE I

     1.1. Definitions. The following terms when used in this Agreement shall, except where the context otherwise requires, have the following meanings:

          (a) “Act” means the Federal Food, Drug and Cosmetic Act, as amended, and the regulations promulgated thereunder from time to time.

          (b) “Affiliate” means any corporate or non-corporate business entity that controls, is controlled by, or is under common control with a party to this Agreement. A corporation or non-corporate business entity shall be regarded as in control of another corporation if it owns or directly or indirectly controls at least forty percent (40%) of the voting stock of the other corporation, or (i) in the absence of the ownership of at least forty percent (40%) of the voting stock of a corporation or (ii) in the case of a non-corporate business entity, if it possesses directly or indirectly, the power to direct or cause the direction of the management and policies of such corporation or non-corporate business entity, as applicable.

          (c) “Agency” means any governmental regulatory authority in the Territory responsible for granting approvals for the sale or maintaining regulatory oversight of the Products, including, without limitation, the FDA.

          (d) “Cardinal Health” means Cardinal Health PTS, LLC and shall be deemed to include the Representatives and Managers.

          (e) “Detail” means an interactive, face-to-face visit by a Representative with a Target Customer or his or her legally empowered designee in the Territory, during which the FDA-approved indicated uses, safety, effectiveness, contraindications, side effects, warnings and other relevant characteristics of one or more of the Products (as defined herein) are described by the Representative in a fair and balanced manner consistent with the requirements of the Act, and using, as necessary or desirable, the Product Labeling (as defined herein) and the Product Promotional Materials (as defined herein). “Product Detail” means Detail of a Product between Target Customer and Representative. When used as a verb, “Detail” or “Detailing” shall mean to engage in a Detail as defined in this Section 1.1(f).

          (f) “FDA” means the United States Food and Drug Administration and any successor agency having substantially the same functions.

          (g) “Manager” means an individual hired by and retained as an employee of Cardinal Health to oversee activities of Representatives under this Agreement, including a project manager.

          (h) “PDMA” means the Prescription Drug Marketing Act of 1987, as amended, and the regulations promulgated thereunder from time to time.

          (i) “Product Labeling” means all labels and other written, printed, or graphic matter provided by Cumberland including (i) any container or wrapper utilized with a Product, or (ii) any written material accompanying a Product, including, without limitation, Product package inserts.

          (j) “Product Promotional Materials” means all written, printed or graphic material provided by Cumberland, including Product Labeling, intended for use by Representatives during a Detail, including visual aids, file cards, premium items, clinical studies, reprints, drug information updates and any other promotional support items that Cumberland deems necessary or appropriate to conduct the Program. Product Promotional Materials shall include FDA approved indicated uses, safety, effectiveness, contraindications, side effects, warnings and other relevant characteristics of each of the Products.

          (k) “Products” means the pharmaceutical products to be detailed by Representatives and marketed by Cumberland as set forth on attached Schedule 1.1(k) and such other products as may be added by Cumberland from time to time to Schedule 1.1(k) attached hereto.

          (l) “Program” means the program of Detailing to be conducted by the Representatives pursuant to this Agreement beginning as of September 5, 2006 and continuing thorugh the remainder of the Term, as defined in Section 14.1.

          (m) “Representative” and “Representatives” mean an individual or individuals hired by and retained as an employee of Cardinal Health to conduct Detailing of Cumberland Products only in connection with the Program.

          (n) “Target” or “Target Customer” means a physician or other specialist identified by Cumberland.

          (o) “Territory” means the geographical area specified in the attached Schedule 1.1(o).

ARTICLE II
APPOINTMENT OF CARDINAL HEALTH; GENERAL SCOPE OF ACTIVITIES

     2.1. Detailing. Cardinal Health shall provide twenty four (24) Representatives to engage in Product Detail activities in the Territory. Cardinal Health shall assign Representatives for such Target Customers, in such numbers, and in such Territories as shall be designated by Cumberland during the term of this Agreement. Each Representative shall make Product Details to his or her assigned Target Customers based on any reasonable general direction given by Cumberland’s designated management team. The duties of such Representatives shall be exclusively to Detail the Products and perform other related activities reasonably agreed upon by Cardinal Health as deemed necessary for the establishment and maintenance of new and existing customers of the Products in the Territories. Cumberland shall at all times retain the right to promote the Products by whomever, wherever, and to whomever it chooses.

     2.2 Furnishing Managers . Cardinal Health shall provide two Managers to oversee the activities of Representatives and to perform this Agreement in such numbers and for such Territories (when relevant) as mutually agreed upon by Cardinal Health and Cumberland.

     2.3. Scope of Activities. The parties shall perform the following activities as applicable to each in connection with the Program:

          (a) Cardinal Health shall have sole and exclusive authority to discipline or terminate the employment of Representatives. Cumberland may reasonably request that a Representative or Manager be terminated or reassigned if such Representative’s or Manager’s activities or conduct are not adequately achieving the performance goals of the Product, or if the Representative or Manager fails to comply with all applicable laws, regulations, and Cumberland requirements for Detailing the Product. Cardinal Health shall use its best efforts to comply with such request; provided that such action complies with applicable laws and is in accordance with Cardinal Health’s policies and procedures, as determined by Cardinal Health’s human resources manager. In the event Cardinal Health determines that its policies and procedures or applicable laws prohibit the termination or reassignment of any Representative so requested by Cumberland, it shall notify Cumberland of such determination and submit a corrective action plan for Cumberland’s approval.

          (b) Cardinal Health shall cause each Representative to attend and successfully complete the Training Program (as defined in Section 6.1) conducted by Cumberland for each of the Products prior to participating in the Program. Any such Representative who shall not successfully complete all such requirements shall be removed and replaced by another Representative who shall comply with such requirements.

          (c) Cumberland shall provide the Representatives without cost with sufficient quantities of the Product Promotional Materials and Product Labeling for the performance of Detailing. Cumberland shall be solely responsible for the preparation, content, and method of distribution of the Product Promotional Materials and the Product Labeling. In connection with the Detailing of the Products, the Representatives shall use only the Product Labeling and the Product Promotional Materials provided by Cumberland; and under no circumstances shall Cardinal Health or the Representatives develop, create, or use any other promotional material or literature for the Detailing of the Products. Cumberland shall advise Cardinal Health immediately of any inaccuracy or incompleteness of the Product Promotional Materials or the Product Labeling, and upon such notice Cardinal Health and the Representatives shall immediately cease the use of any portion or all of the Product Promotional Materials or Product Labeling so identified by Cumberland.

          (d) Cardinal Health shall instruct the Representatives to limit their verbal statements and claims regarding the Products, including efficacy and safety, to those that are consistent with the Product Labeling and the Product Promotional Materials. The Representatives shall not add, delete, or modify claims of efficacy or safety in the Detailing of the Products, nor make any changes (including underlining or otherwise highlighting any language or adding any notes thereto) in the Product Promotional Materials. Representatives shall not make any disparaging, untrue, or misleading statements about Cumberland or its Affiliates, employees, competitors, or competing products. Representatives shall Detail the Products in strict adherence to all applicable laws, regulations, and professional requirements, including, but not limited to, the Act, the Medicare and Medicaid Anti-Kickback Statute, and the American Medical Association Gifts to Physicians from Industry Guidelines.

          (e) The Representatives shall remain under the direct authority and control of Cardinal Health, but shall cooperate with the members of Cumberland and shall receive advice and direction related to Detail activities on the Products from Cumberland and Cardinal Health mutually. Cumberland shall make all decisions with respect to the overall strategy in connection with the Detailing of the Products. Any Cumberland personnel interacting with Cardinal Health Representatives shall not discipline the Representatives or implement terms or conditions of employment or personnel policies and/or practices with respect to the Representatives. Cumberland shall provide Cardinal Health with copies of all reports, memoranda, audits and other data it develops pertaining to (i) the Representatives, Detailing, and the Program within 30 days of the preparation of such documents, and (ii) any negligent or wrongful acts or omissions of Representatives as promptly as practicable.

          (f) In the event Cardinal Health supplies Representatives and Managers with fleet vehicles for their use in performing the Detailing as described in the Schedules of this Agreement, Cumberland shall reimburse Cardinal Health for all of its out-of-pocket costs related to using such vehicles for Detailing, including but not limited to costs related to owning, leasing, maintaining, insuring, and/or operating such vehicles (including fuel costs). Cumberland shall reimburse Cardinal Health for all reasonable out-of-pocket costs and expenses (i.e., airline tickets and other travel expenses, hotel, rent-a-car, business meals, travel meals) of

Representatives and Managers in connection with performing services pursuant to this Agreement. Cumberland and Cardinal Health shall establish a mutually acceptable budget for the costs and expenses referenced in this subparagraph for each Territory.

          (g) Cumberland shall provide Cardinal Health with a list of Target Customers in the Territory and with data on prescriptions and sales in the Territory for Cardinal Health’s use in performing this Agreement. Cumberland shall also provide Cardinal Health with other sales and marketing information concerning the Products that Cumberland obtains or prepares during the term of this Agreement and deems useful to Cardinal Health.

     2.4. Orders for Products . Cumberland shall be solely responsible for establishing the terms and conditions of the sale of the Products, including without limitation, the price at which the Products will be sold, whether sales of the Products will be subject to any discounts, the method of distribution of the Products, and whether any credit will be granted or refused in connection with the sale or return of any Product. Cumberland shall be exclusively responsible for accepting and filling all purchase orders for the Products, billing and returns for the Products, and all other activities in connection with the sale and delivery of the Products, other than Detailing. If Cardinal Health or the Representatives receive an order for the Products, they shall immediately transmit such order to Cumberland for further handling and communications with the submitter of the order, including acceptance or rejection, which shall be in Cumberland’s sole discretion.

     2.5. Representatives’ Activity

     (a) Subject to Cumberland’s obligations and representations and warranties in this Agreement, any negligent or wrongful act or omission on the part of the Representatives (both individually and as a group) that occur during the term of this Agreement and that arise during the course and within the scope of their employment with Cardinal Health pursuant to this Agreement shall be deemed to be negligent or wrongful acts or omissions of Cardinal Health. Notwithstanding the foregoing, any acts or omissions of the Representatives pursuant to the exclusive direction, control or supervision of Cumberland or its employees or agents shall not be deemed to be negligent or wrongful acts or omissions of Cardinal Health.

     (b) Each party shall notify the other in writing as promptly as practicable of any such material alleged negligent or wrongful acts or omissions on the part of the Representatives of which it becomes aware along with a plan to remedy such acts or omissions, and Cumberland shall provide Cardinal Health with a reasonable opportunity to remedy such acts or omissions, and if indicated, to replace the involved Representatives.

     2.6 Vacancies/Turnover . In the event of a Representative vacancy due to resignation, reassignment or termination of a Representative, Cardinal Health shall fill any such vacancy within a six (6) week period. Cumberland shall be responsible for paying the Service Fees (as defined in Section 3.1 below) during such vacancy, unless such vacancy exceeds the six (6) week period, in which event, the associated Service Fees for such vacancy shall be suspended after the six (6) week period and shall resume once the vacancy is filled by Cardinal Health. All recruiting and other related expenses for filling a vacancy shall be borne by Cardinal Health;

provided, however, that Cumberland shall be responsible for all recruiting and other related expenses for filling any vacancy occurring pursuant to Cumberland’s request for reassignment or termination other than a request pursuant to Section 2.5(b) or resulting from the Representative’s failure to comply with any one or more of the provisions of Section 2.3. In addition, if Cumberland desires to interview any candidates, Cumberland shall bear its own cost of attending any final interview conducted by Cardinal Health or the costs of any separate interview arranged for by Cumberland.

     2.7 Management Reports . Cardinal Health or its third party designee shall provide Cumberland with monthly reports in the form agreed between Cumberland and Cardinal Health within fifteen (15) days after the end of each month. At the request of Cumberland, Cardinal Health shall furnish Cumberland at reasonable times such documentation as Cumberland reasonably requests for purposes of verifying the accuracy of any monthly report.

     2.8 Project Manager . Cardinal Health shall appoint a Project Manager to serve as a liaison between Cardinal Health, Representatives and Cumberland regarding the performance by Cardinal Health and Cumberland of their respective obligations under this Agreement.

     2.9 Non-compete . During the term hereof and until the first anniversary of the expiration thereof, the Representatives shall not, directly or indirectly, solicit or influence or attempt to solicit or influence any Target Customer to acquire pharmaceutical products manufactured by a competitor of Cumberland for a laxative product, an oral rehydration solution or other Products added to Schedule 1.1(k) by Cumberland.

ARTICLE III
COMPENSATION

     3.1. Amount and Time of Payment . For services hereunder, Cumberland shall pay to Cardinal Health the fees set forth in Schedule 3.1 attached hereto and incorporated by reference (the “Service Fees”), which shall be payable as set forth in the payment schedule set forth therein.

     3.2 Cumberland’s Hiring of Representatives. Cumberland shall not solicit, directly or indirectly, any Representative or other employee of Cardinal Health to terminate their employment with Cardinal Health and/or hire any such Representative or employee during the Term of this Agreement without the prior written consent of Cardinal Health, which consent shall not be unreasonably withheld or delayed. At the expiration or termination of this Agreement, Cumberland shall have the right to hire as its own employee or as an independent contractor or agent any one or more of the Representatives or Managers (collectively, the “Targeted Employees”). Cumberland shall have the right to negotiate with any Targeted Employee concerning the terms on which Cumberland might hire that Targeted Employee prior to the end of the Term only upon the prior written consent of Cardinal Health, which shall not be unreasonably withheld or delayed. Cardinal agrees not to interfere with or restrict in any manner Cumberland’s solicitation and hiring of the Targeted Employees and Cardinal Health will assist Cumberland in the transition of Targeted Employees from Cardinal Health to Cumberland.

     3.3. Reimbursement of Expenses . All expenses of Cardinal Health for which Cumberland is obligated to reimburse Cardinal Health as expressly provided in this Agreement, including but not limited to travel expenses and vehicle expenses under Section 2.3(e), shall be paid by Cumberland within [***] days after Cardinal Health has submitted a statement itemizing such expenses. Cardinal Health shall submit such expense statements to Cumberland monthly.

     3.4 Past Due Amounts . All amounts owing by Cumberland to Cardinal Health pursuant to this Agreement that are not timely paid by Cumberland will bear interest at the rate of twelve (12%) per annum from the due date. An invoice will be considered late and begin to accrue interest if unpaid 30 days past its due date.

ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS

     4.1. By Cardinal Health. Cardinal Health represents, warrants, and covenants to Cumberland, as of execution of this Agreement and during the term of this Agreement, as follows:

          (a) that Cardinal Health and the Representatives shall perform the Detailing in a professional and timely manner;

          (b) that Cardinal Health and the Representatives shall comply with all laws, rules and regulations that apply to the performance of services under this Agreement, including but not limited to the PDMA, the Medicare and Medicaid Anti-Kickback Act (42 U.S.C. § 1320a-7b(a)), the Civil False Claims Act (31 U.S.C. § 3729(a)), Sections 1128A, 1128B, and 1877 of the Social Security Act (42 U.S.C. §§ 1320a-7a, -7b, and 1395nn), the Health Care Fraud Act (18 U.S.C. § 1347), and the Criminal False Claims Act (18 U.S.C. § 287), as amended from time to time, as well as similar applicable state laws; and

          (c) that Cardinal Health is under no obligation to any third party that would prevent the execution of this Agreement or interfere with its performance under this Agreement.

     4.2. By Cumberland . Cumberland represents, warrants, and covenants to Cardinal Health, as of execution of this Agreement and during the term of this Agreement, as follows:

          (a) that Cumberland is under no obligation to any third party that would prevent the execution of this Agreement or interfere with its performance under this Agreement;

          (b) that Cumberland shall comply with all laws, rules and regulations that apply to the Products and their sale, the Program, and this Agreement, including but not limited to the Act, the PDMA, the Medicare and Medicaid Anti-Kickback Act (42 U.S.C. § 1320a-7b(a)), the Civil False Claims Act (31 U.S.C. § 3729(a)), Sections 1128A, 1128B, and 1877 of the Social Security Act (42 U.S.C. §§ 1320a-7a, -7b, and 1395nn), the Health Care Fraud Act (18

U.S.C. § 1347), and the Criminal False Claims Act (18 U.S.C. § 287), as amended from time to time, as well as similar applicable state laws;

          (c) that the Product Labeling and Product Promotional Materials are accurate, complete, and in compliance with the Act and all applicable rules and regulations of the FDA; and

          (d) that to the best knowledge of Cumberland, the manufacture, sale, and distribution of the products do not and will not during the term of this Agreement, infringe any patent or other proprietary rights of third parties, and the Products have all necessary governmental approvals and may be lawfully Detailed and sold by Cumberland and the Representatives.

ARTICLE V
STATUS OF CARDINAL HEALTH AND THE REPRESENTATIVES

     5.1. Cardinal Health Independent Contractor. Cardinal Health is being retained and shall perform hereunder strictly as an independent contractor. Representatives and Managers of Cardinal Health performing services hereunder shall not be, and shall not be considered to be, employees of Cumberland for any purpose, and shall at all times remain employees of Cardinal Health, subject to Section 3.3. Neither party shall have any responsibility for the hiring, termination, compensation, benefits or other conditions of employment of the other party’s employees, except as otherwise provided in this Agreement.

     5.2. No Cumberland Benefits. While employees of Cardinal Health, the Managers and Representatives are not eligible to participate in any benefits programs or sales bonuses offered by Cumberland to its employees, or in any pension plans, profit sharing plans, insurance plans or any other employee benefit plans offered from time to time by Cumberland to its employees, provided that the Representatives shall be eligible to participate in Cumberland sales contests and bonus plans if so requested by Cumberland and approved by Cardinal Health. Cardinal Health acknowledges and agrees that Cumberland does not, and will not, maintain or procure any worker’s compensation or unemployment compensation insurance for or on behalf of the Managers or Representatives while they are employees of Cardinal Health. Cardinal Health acknowledges and agrees that it shall be solely responsible for paying all salaries, wages, benefits and other compensation which its employees (including Representatives and Managers) may be entitled to receive in connection with the performance of the services hereunder.

     5.3 Sales, Use and Excise Taxes. If any state or local government or other taxing authority determines that sales, use or excise Taxes (“Taxes”) are applicable to Cardinal Health’s services performed hereunder, Cardinal Health shall promptly accrue and Cumberland shall pay such Taxes on behalf of Cardinal Health to the appropriate taxing authorities. In addition, Cumberland shall be responsible for the payment of any applicable Taxes related to Cumberland’s supply to Cardinal Health of Product Promotional Materials and Product Samples.

     5.4. No Joint Venture. Nothing contained in this Agreement shall be construed as creating a joint venture or, except as otherwise provided herein, as granting to either party the

authority to bind or contract any obligations in the name of or on the account of the other party or to make any guarantees or warranties on behalf of the other party.

ARTICLE VI
TRAINING

     6.1. Training Programs .

          (a) Cumberland shall conduct a training program for new Representatives and Managers prior to participating in the Program, which shall include such medical and technical