<PAGE>
Confidential Treatment Requested
Exhibit 10.1
PRIME VENDOR AGREEMENT
This Prime
Vendor Agreement ("Agreement") is made as of March 1, 2006
("Effective Date") by AmerisourceBergen Drug Corporation, a
Delaware corporation
("ABDC"), and Standard Management Corporation, an Indiana
corporation
("Customer").
A. ABDC is
a national distributor of pharmaceutical and other products,
including prescription ("Rx") and over-the-counter ("OTC")
pharmaceuticals,
nutritional, health and beauty care ("HBC") and home health care
("DME")
products ("Product" or "Products"), and services ("Services");
B.
Customer owns and operates one or more long term care
pharmacies
("Facilities"); and
C. The
parties intend by this Agreement to set forth their obligations
to
each other for an arrangement under which ABDC will provide
Products and
Services to Customer ("Program").
NOW
THEREFORE, the parties agree as follows:
1. PRICING
AND PAYMENT TERMS
ABDC will
be the Primary Vendor of all requirements of Customer's
Facilities for Products. Customer will pay, within terms, Product
costs and
Program fees pursuant to payment terms in Exhibit "1"
("Pricing/Payment Terms").
"Primary Vendor" means Customer purchases from ABDC no less than
***% of all
prescription pharmaceutical Products it purchases, as verified
quarterly, and
meets minimum periodic purchase levels in Paragraph 3(A) of the
Pricing/Payment
Terms. Orders for Products will be electronically transmitted
(including
Schedule II controlled substances when allowed) and will describe
Products that
ABDC will provide to Customer, the quantity and designated delivery
location.
All payment plans (except pre-pay) must be by electronic funds
transfer (EFT).
2. PRO
GENERICS PROGRAM PARTICIPATION
Customer
must elect to participate in ABDC's preferred generic formulary
program ("Preferred Rx Options" or "PRxO Generics") pursuant to
requirements as
amended from time to time by ABDC. If participating, Customer will
purchase no
less than ***% of its purchases of the "Top 100" generic
pharmaceutical Products
from ABDC. The Top 100 is a list determined from time to time by
ABDC of more
than one hundred commonly used generic pharmaceutical Products.
Customer
authorizes ABDC as its sole agent to develop and implement a
generic
pharmaceutical Product list for the Term. Customer will purchase
from ABDC each
calendar quarter no less than the minimum Net Purchase volume of
generic
pharmaceutical Products as set forth in the Pricing/Payment
Terms.
3.
CUSTOMER LOCATIONS & DELIVERIES
ABDC will
deliver Products to each Facility five days a week (Monday -
Friday), once a day except holidays and warehouse physical
inventory days.
Additionally, Customer will be entitled to one emergency delivery
per calendar
quarter at no additional charge. Customer may be charged for each
additional
emergency order. Facility means each of Customer's long term care
pharmacies,
together with any other facilities Customer acquires, is affiliated
with or
operates during the Term in the United States. Newly acquired
facilities with
existing agreements will become Facilities under this Agreement
upon the earlier
of expiration of such existing agreement or the date Customer may
terminate such
agreement according to its terms, with or without cause, without
breaching it or
paying a material termination penalty; provided, however, service
to Facilities
outside ABDC's normal service area (which does not include Alaska,
Hawaii or
U.S. territories) may be subject to a delivery surcharge.
--------
*****Denotes information that has been omitted from this Exhibit
pursuant to a
confidential treatment request filed with the Commission.
1
<PAGE>
Confidential Treatment Requested
Exhibit 10.1
4.
RETURNED GOODS POLICY
Customer
will only return Products to ABDC in accordance with ABDC's
standard policy for returned Products ("Returned Goods Policy"), as
amended from
time to time by ABDC. If Customer returns more than 3% of its OTC
Net Purchases,
or 3% of its pharmaceutical Net Purchases in any month, Customer
may be assessed
an additional restocking fee over and above any standard stocking
fee in the
Returned Goods Policy or ABDC may adjust the Price of Goods or
both. Customer
will return only Product purchased from ABDC for which Customer has
submitted
the invoice number and date of purchase. ABDC may reject returns
not accompanied
by the invoice number and date of purchase or that exceed in amount
either the
3% return limit or the amount on the referenced invoice number.
ABDC reserves
the right to refuse all future returns from Customer in the event
that Customer
submits any counterfeit Product for return. In the event ABDC
changes the
Returned Goods Policy, ABDC will provide Customer with written
notice of such
change no less than thirty (30) days before it is due to become
effective.
5.
ADDITIONAL SERVICES & PROVISIONS.
Services
are listed in Exhibit "2". Terms, conditions and other
provisions
are set forth in Exhibit "3" ("Provisions"). ABDC may, from time to
time,
develop policies and procedures relative to new or existing
Services offered to
customers, on an interim or as-needed basis. If ABDC develops such
policies or
procedures or changes current ones, ABDC will notify Customer in
writing at
least thirty (30) days before such changes are effective.
6. TERM OF
AGREEMENT
Subject to
Paragraph 5 of the Provisions, the Term will be from the
Effective Date until February 28, 2011. The Term will, thereafter,
be extended
on a month-to-month basis until either party gives at least ninety
(90) days
prior written notice to the other of its intention not to extend
this Agreement.
7.
RECORDS
To the
extent required by 42 U.S.C. Section 1395x(v)(1), until four
(4)
years after termination of this Agreement, ABDC will make available
upon written
request to the Secretary of the U.S. Department of Health &
Human Services
("HHS"), the Comptroller General, or their authorized
representatives, a copy of
this Agreement and all records required to certify the nature and
extent of
costs of Products and Services provided by ABDC under this
Agreement. ABDC will
ensure, to the extent it carries out its duties through a
subcontract with a
value or cost of $10,000 or more in a twelve (12) month period with
a related
organization, such subcontract will contain similar provisions.
Notwithstanding
the foregoing, ABDC will have no obligation to make public
documents subject to
attorney-client privilege.
8.
NOTICES
Notices
must be in writing and sent certified mail, prepaid, return
receipt requested, or sent by facsimile to the address or facsimile
number
below. Parties may change this information by written notice to the
other party.
Pursuant to the Telephone Consumer Protection Act of 1991, 47
U.S.C. Section
227, Customer consents to receiving notices, including product
updates, recalls,
new product launches and programs, advertisements and other
marketing materials
by telephone facsimile ("fax") machine from ABDC, its affiliates
and their
related companies, to the fax number set forth below.
--------
*****Denotes information that has been omitted from this Exhibit
pursuant to a
confidential treatment request filed with the Commission.
2
<PAGE>
Confidential Treatment Requested
Exhibit 10.1
To
Customer: Standard
Management Corporation
10689 North Pennsylvania St.
Indianapolis, IN 46280
Attn: Chief Executive Officer
Fax: 317-574-6227
To ABDC:
AmerisourceBergen Drug Corporation
1300 Morris Drive
Chesterbrook, PA
19087-5594
Attn: Vice President, Health Systems
Fax: 610-727-3601
with a
copy to:
AmerisourceBergen Corporation
1300 Morris Drive
Chesterbrook, Pennsylvania 19087-5594
Attn: General Counsel
Fax: (610) 727-3612
9.
EXHIBITS
The
following exhibits to this Agreement are incorporated by this
reference.
1
Pricing/Payment Terms
2
Value-Added Services
3
Provisions
IN WITNESS
WHEREOF, the parties have had a duly authorized officer,
partner or principal execute this Prime Vendor Agreement as of the
Effective
Date.
CUSTOMER:
ABDC:
Standard Management Corporation
AmerisourceBergen Drug Corporation
By: /s/ Ronald
D. Hunter
By: /s/ James F. Riley, III
-------------------------
----------------------------------
Name: Ronald D. Hunter
Name: James F. Riley, III
Title: Chairman, President & CEO
Title: V. P. Strategic Accounts
DATED MARCH 8, 2006
DATED MARCH 8, 2006
--------
*****Denotes information that has been omitted from this Exhibit
pursuant to a
confidential treatment request filed with the Commission.
3
<PAGE>
Confidential Treatment Requested
Exhibit 10.1
EXHIBIT 1 TO
PRIME VENDOR AGREEMENT
PRICING / PAYMENT TERMS
In addition to payment for Products, Customer will pay ABDC the
following
Program and other fees for ABDC's Product distribution and Services
for Customer
and its Facilities. Except as otherwise provided, payments are due
within ten
(10) days from ABDC's invoice date. Pricing does not reflect any
administrative
or other fee to a group purchasing organization or buying group
("GPO"). If
Customer contracts with a GPO, Customer will pay any such fees to
the applicable
GPO.
1. PROGRAM
FEES
A. Price
of Goods. Customer will pay the following Price of Goods based
upon the definition of "Cost" below, subject to the following
adjustments for
Total Average Annual Volume Net Purchase volume and payment terms,
for Products
other than Products and Services designated as ABDC Special Price
Products. ABDC
will add to the billed amount any applicable sales, use, business
and
occupation, gross receipts or other tax. Price of Goods will begin
at Tier No. 1
and may be adjusted quarterly based upon Customer's Total Average
Annual Monthly
Net Purchase volume over the prior three (3) months.
<TABLE>
<CAPTION>
PRICING TIERS
PRICE OF GOODS
--------------------------------
--------------
NO. Total Annual
Net Purchase Volume
******
---
--------------------------------
--------------
<S>
<C>
<C>
1
****** to
******
******
2
****** to
******
******
3
****** to
******
******
4
****** to
******
******
5
****** to
******
******
6
****** to
******
******
7
****** &
******
******
</TABLE>
"Cost" with respect to any Product means the lower of (i)
********************************** is allocated to Customer or
(ii)
***********************, in each case
*************************************.
Cost outside the continental U.S. may be higher than
manufacturer's/supplier's
normal price list.
Selected Products ("ABDC Special Price Products") including but not
limited to
************************************ will not be billed based upon
ABDC's Cost
(as defined above), but will instead be billed in accordance with
the terms and
conditions established by ABDC from time to time for such Products
and Services.
Purchases of ABDC Special Price Products count toward total Monthly
Net Purchase
volume.
B. PRxO
Generics Rebates. If Customer continues to use ABDC as its
Primary
Vendor and otherwise complies with ABDC's PRxO Generics
requirements, ABDC will
adjust Customer's Price of Goods for the following calendar quarter
if
Customer's PRxO Generics purchases are ******% or more of
Customer's total Rx
Net Purchase volume, as follows.
<TABLE>
<CAPTION>
COMPLIANCE LEVEL
PRICE OF GOODS REDUCTION
<S>
<C>
******
*****
******
*****
</TABLE>
ABDC will provide electronic price data to customer upon request
and match
pricing. Should Customer achieve PRxO Generics compliance levels
above **%, ABDC
and Customer will meet to discuss additional opportunities for
rebates. Purchase
rebates are not cumulative; only one level will be paid each
quarter.
Calculations are quarterly, with no carryover from one quarter to
the next.
Customer's PRxO Generics purchases will be invoiced at ABDC's
standard ABDC
Special Price. Pending rebates will be noted in Customer's invoices
and
statements. Customer hereby indemnifies ABDC pursuant to Provisions
Paragraph 6
for any inappropriate use of such invoices. ABDC will issue any
credit to
Customer within forty-five (45) days of
*****Denotes information that has been omitted from this Exhibit
pursuant to a
confidential treatment request filed with the Commission.
CONFIDENTIAL
Customer will delete this Exhibit "1" (or request confidential
treatment)
if
it discloses this Agreement for any reason, including in any SEC
filing.
4
<PAGE>
Confidential Treatment Requested
Exhibit 10.1
the end of each calendar quarter. If Net Purchases of PRxO Generics
are less
than ****% of total Rx Net Purchases, no rebate credit will be
given and ABDC
may reasonably adjust Price of Goods to reflect the lower than
expected purchase
volume. Customer must be compliant with payment terms to be
eligible for any
rebate under this paragraph.
C.
Additional Value-Added Services. The additional value-added
Services in
Exhibit "2" will be provided to Customer by ABDC for ******* for
Facilities that
meet minimum Net Purchase levels.
D.
Ordering Hardware/Software. In addition to the foregoing
value-added
Services fee, Customer will pay the per-month fees in Exhibit "2"
for ordering
and reporting software and hardware selected by Customer for each
installation
on system hardware at Customer's Facilities and other
locations.
E.
Contract Administration. In administering Customer's
GPO/supplier
contracts, Customer must (i) provide a copy of new contracts, (ii)
comply with
supplier's terms, (iii) use all products for its "own use" (as
defined in
judicial and legislative interpretations), (iv) notify ABDC at
least forty-five
(45) days before it changes suppliers, and (v) upon changing
suppliers, assist
ABDC in disposing of any excess inventory acquired for Customer.
Additionally,
Customer will notify ABDC before discontinuing purchases of any
special
inventory that it has requested that ABDC stock (whether or not
pursuant to a
contract) and assist ABDC in disposing of any excess of such
inventory. When
invoiced, Customer will promptly reimburse ABDC for any unpaid
chargebacks that
are (x) denied by a GPO or manufacturer/supplier or (y) not paid
within
forty-five (45) days and, in either case, Customer will look solely
to such GPO
or manufacturer/supplier for redress.
2. PAYMENT
TERMS
A.
Options. Customer agrees to the following payment terms for
Product
purchases.
Semi-Monthly Pay (Default if no box checked).
[X] Payment for invoices dated the *** through the *** must be
received by the
*** of the same month. Pa
