Vendor Confidentiality Agreement

Exhibit 10.1

PRIME VENDOR AGREEMENT

By and Between

AmerisourceBergen Drug Corporation, a Delaware corporation

And

Longs Drug Stores California, Inc., a California corporation

TABLE OF CONTENTS

 

 

*	Subject to a request for confidential treatment; Separately filed with the Commission.

 

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EXHIBITS

 

EXHIBIT 1 -

PRICING / PAYMENT TERMS

 

EXHIBIT 2 -

*        PROGRAM

 

EXHIBIT 3 -

ORDERS AND DELIVERY

 

EXHIBIT 4 -

RETURNED GOODS POLICY

 

EXHIBIT 5 -

SERVICES IN HAWAII

 

EXHIBIT 6 -

CENTRAL FILL PHARMACY SERVICE

 

EXHIBIT 7 -

*        PROGRAM

 

EXHIBIT 8 -

ADDITIONAL VALUE-ADDED SERVICES

ATTACHMENTS

ATTACHMENT A - Defined Terms

ATTACHMENT B -         *        Category List (Fine Line Codes)

 

*	Subject to a request for confidential treatment; Separately filed with the Commission.

 

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PRIME VENDOR AGREEMENT

This Prime Vendor Agreement (“ Agreement ”) is made as of March 14, 2006 (“ Execution Date ”) by AmerisourceBergen Drug Corporation, a Delaware corporation (“ ABDC ”), and Longs Drug Stores California, Inc., a California corporation (“ Longs ”).

A. ABDC is a national distributor of pharmaceutical and other products, including prescription pharmaceuticals (“ Rx ”) and over-the-counter pharmaceuticals (“ OTC ”), nutritional, health and beauty care products (“ HBC ”) and home health care products (“ DME ”) (collectively, “ Products ”), and a provider of related services to be provided under this Agreement (collectively, “ Services ”);

B. Longs owns and operates a chain of retail pharmacies (“ Pharmacies ”) in various states, including California, Nevada, Oregon, Washington, Hawaii and Colorado and certain central fill pharmacies, warehouses, specialty pharmacies (“ Specialty Pharmacies ”), mail order pharmacies (“ Mail Order ”), and pharmacy benefit management (“ PBM ”) operations (collectively, “ Other Facilities ”);

C. Longs and ABDC are parties to that certain RxD Warehouse and Direct Store Delivery Primary Supplier Agreement, dated February 1, 1999, as amended to date (“ Prior Agreement ”);

D. Longs and ABDC intend by this Agreement to replace and supersede the Prior Agreement and to set forth herein their obligations to each other for an arrangement under which ABDC will provide Products and Services to Longs (“ Program ”) effective as of July 1, 2006 (“ Effective Date ”); and

E. Longs and ABDC or their affiliates are parties to the following additional agreements related to the Products and Services to be supplied hereunder, each of which (as amended to date) shall remain in effect according to its terms after the Effective Date:

 

1.

certain agreements between Longs and AutoMed Technologies, Inc. (“ AutoMed ”), an affiliate of ABDC;

 

2.

an agreement between Longs and American Health Packaging, Inc., an affiliate of ABDC, dated as of October 15, 2002 (“ RePack Agreement ”); and

 

3.

the Pharmacy Data Services Agreement, dated February 25, 2005, between the parties.

NOW THEREFORE, the parties hereto agree as follows:

 

1.	DEFINITIONS; EXHIBITS; RULES OF CONSTRUCTION

A. Definitions . Terms used as defined terms herein shall have the meanings as set forth in Attachment A, which includes an index to terms defined in the text of this Agreement.

 

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B. Exhibits and Attachments . The Table of Contents hereto sets forth a list of all Exhibits and Attachments to this Agreement, each of which is incorporated herein by reference.

C. Rules of Construction .

 

1.

The term “including” means “including, without limitation” unless the context clearly indicates otherwise.

 

2.

All references in this Agreement to articles, sections, exhibits or attachments, unless otherwise expressed or indicated, are to the articles, sections, exhibits or attachments to this Agreement.

 

3.

References to terms set forth “herein,” obligations to be performed “hereunder,” and similar phrases shall be construed as references to this Agreement.

 

4.

Words importing persons include, where appropriate, firms, associations, partnerships, trusts, corporations and other legal affiliates, including public bodies, as well as natural persons.

 

5.

Words importing the singular include the plural and vice versa. Words of the masculine, feminine or neuter genders are each deemed to include the correlative words of the other genders.

 

6.

All references to a number of days mean calendar days, unless expressly indicated otherwise.

 

7.

The article, section and attachment headings and any table of contents (except to the extent it incorporates exhibits and attachments pursuant to Section 1(B)) are for reference and convenience only and shall not be considered in the interpretation of this Agreement.

 

8.

All references herein to this “Agreement” shall include the attachments and exhibits referenced in the body of this Agreement.

D. Prior Agreement .

The term of the Prior Agreement, as amended, is agreed to be extended through June 30, 2006, and will terminate as of the Effective Date. Except as otherwise agreed, the rights and obligations of the parties under the Prior Agreement that accrued prior to its termination will not be extinguished, but will be satisfied according to the terms of the Prior Agreement. Notwithstanding the foregoing, if Longs meets its obligation to purchase         ^*         in branded Rx net purchases under the Prior Agreement earlier than June 30, 2006, the Prior Agreement will not expire until June 30, 2006. As of the Effective Date, Longs’ obligation to purchase        *        in branded Rx net purchases under the Prior Agreement        *        under Section 11A of the Prior Agreement (as added by the 6th Amendment thereto).

 

*	Subject to a request for confidential treatment; Separately filed with the Commission.

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2.	SUPPLY AND PURCHASE COMMITMENTS

A. Products . This Agreement encompasses several categories of Products to be supplied by ABDC to Longs hereunder, each of which is subject to different pricing terms, and some of which are governed by different sets of commercial terms.

 

1.	Quantity, Price and Terms . These categories and the supply and purchase commitments hereunder applicable to each are as follows:

 

a)

Branded Rx Products.

 

 

b)

*        Products, Longs Contracted Generic Products and Other Generic Rx Products .

 

(i)

*        Products.

 

 

*	Subject to a request for confidential treatment; Separately filed with the Commission.

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(ii)

Longs Contracted Generic Products.

 

 

(iii)

Other Generic Rx Products.

 

 

c)

Non-Rx Products.

“ Non-Rx Products ” include all non-prescription Products other than those non-prescription Products that are        *        Products. Non-Rx Products consist of (i)        *        Non-Rx Products and (ii) any        *        Non-Rx Products (as such terms are defined, respectively, in        *        below).

 

(i)

*        Non-Rx Products.

 

 

*	Subject to a request for confidential treatment; Separately filed with the Commission.

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(ii)

*         Non-Rx Products.

 

 

2.	Quantity Measurement . Except as otherwise provided, percentages herein are to be measured by dollar volume on an annual basis.

 

3.	Quantity Exclusion . Products that Longs purchases from other suppliers because ABDC has been unable to supply within the time periods required in this Agreement, including under Exhibit 3 : (i) shall not count against the        *        and (ii) shall be        *        .

B. Pharmacies .

 

1.	Pharmacies within the scope of this Agreement consist of all Pharmacies owned and operated by Longs as of the Effective Date, subject to the following:

 

a)

Pharmacies newly opened by Longs shall be deemed added to the scope of this Agreement upon opening;

 

b)

existing Pharmacies acquired by Longs in the ordinary course of its business shall be deemed added to the scope of this Agreement (in all cases pursuant to a reasonable transition plan agreed upon by the parties) upon the later to occur of:

 

(i)

closing of the acquisition, or

 

(ii)

the earliest time when Longs may terminate existing agreements for the supply of Products to such Pharmacies without breach or payment of charges for early termination;        *        , or

 

(iii)

if the existing supply agreement for any such existing acquired Pharmacy is        *        ; and

 

c)

Pharmacies closed or sold by Longs from time to time in the ordinary course of its business (and thereafter not operated by Longs) shall be deemed deleted from the scope of this Agreement upon such event.

 

*	Subject to a request for confidential treatment; Separately filed with the Commission.

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2.	Acquisitions .

 

a)

In the event that, during the Term, Longs makes any acquisition of a group of pharmacies (“ New Pharmacy Chain ”), such acquisition is subject to Section 2(B)(1)(b) above, provided , however , that Longs will allow a reasonable period of time to enable ABDC to arrange logistics infrastructure, before activating the Adjusted Service Level Commitment under Exhibit 3 with respect to the New Pharmacy Chain.

 

b)

Further, for any acquisition of a New Pharmacy Chain of at least          *         new Pharmacies to be added to this Agreement, that were not supplied by ABDC at the time of the acquisition (other than any Pharmacy whose existing supply arrangement with ABDC is terminated in connection with the acquisition by Longs and then resumed under Longs’ ownership),        *        :

 

 

c)

*        .

C. Contract Administration .

 

1.	Longs’ Supplier Contracts Administered by ABDC.

In administering Longs’ GPO or other supplier contracts for Rx and Non-Rx Products which Longs elects to have administered by ABDC, Longs will (a) provide ABDC with the material terms of all such contracts to enable ABDC to load relevant data into its ordering and other systems, (b) comply with each supplier’s terms in order to afford ABDC the ability to receive appropriate pricing chargebacks thereunder, and bear the economic risk of the inability to receive chargebacks due to Longs’ failure to comply with such terms of the supplier’s contract terms, and (c) with respect to Rx Products, use all Products for its “own use” (as defined in judicial and legislative interpretations).

 

*	Subject to a request for confidential treatment; Separately filed with the Commission.

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2.	Rx Supplier Contract.

ABDC must notify Longs whether it is purchasing Rx Products primarily for Longs under a Longs’ GPO or other supplier contract, and in any such case (effective after the date of such notice), Longs will (a) provide reasonable notice but not less than 30 days’ notice before it changes suppliers, and (b) upon changing suppliers, use commercially reasonable efforts to assist ABDC in disposing of a reasonable amount of excess inventory that was acquired for Longs. When invoiced, Longs will promptly reimburse ABDC for any unpaid chargebacks with respect to such Rx Products that are (x) denied by a Longs GPO or manufacturer/supplier or (y) not paid within forty-five (45) days and, in either case, Longs will look to such GPO or manufacturer/supplier (and not to ABDC) for redress of any such issues. As used in this Section 2(C) , an Rx GPO or other supplier contract will be considered as “ primarily for Longs ” when Longs’ Net Purchases constitute         ^*         of ABDC’s sales of such Product, as measured separately for each DC servicing Longs hereunder.

 

3.	Non-Rx Special Purchase Contracts.

 

(a)

ABDC shall have no obligation to purchase Non-Rx Products that,        *        .

 

(b)

Notwithstanding the foregoing,        *        .

 

3.	DUTIES OF ABDC

A. Orders and Services . ABDC will accept and fill all orders placed by Longs in accordance with this Agreement. Orders will be placed and filled at least in accordance with the minimum standards set forth below and in Exhibit 3 . When available, ABDC will provide Longs with the capability to place orders for Class II controlled substances using the electronic CSOS ordering system, at        *        . Each party shall perform its obligations hereunder in accordance with the performance requirements set forth in this Agreement, but in all cases at least to the standard of care and competence of an experienced professional engaged in the regular performance of similar activities.

B. Longs Locations and Deliveries .

 

1.

Pharmacies . ABDC will deliver Products to each Pharmacy for direct store delivery (also known as “ DSD ”), within the existing service areas six days per week (Monday – Saturday), once per day, during normal business hours. The existing service areas are those areas where existing Pharmacies are served as of the Effective Date, excluding        *        .

 

2.	Warehouses and Large Volume Facilities . ABDC will deliver Products to Longs at Warehouses and Large Volume Facilities (each as defined in Exhibit 1 , Section 1(A)(1)) within existing service areas, in all cases during normal business hours, as set forth below:

 

 

*	Subject to a request for confidential treatment; Separately filed with the Commission.

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C. Delivery Times . ABDC shall use best efforts to deliver to each of Pharmacies, Warehouses and Large Volume Facilities         ^*         on each delivery day. ABDC does not make normal deliveries on holidays or its scheduled physical inventory days (        *        ) in an ABDC distribution center (“ DC ”).

D. Title And Risk Of Loss . All Products are shipped F.O.B. Longs’ receiving location, with freight prepaid for normal delivery. Title and risk of loss pass upon delivery to Longs.

E. Emergency Orders . ABDC will use all reasonable efforts to meet a requested delivery time for emergency orders. Longs will reimburse ABDC’s        *        . If ABDC cannot meet requested emergency delivery times, Longs may fill emergency orders on such occasions using another provider.

F. Adjusted Service Level Commitment . ABDC shall perform its delivery obligations in compliance with the Adjusted Service Level Commitment pursuant to Exhibit 3 .

G. Manufacturer Agreements . As ABDC (but typically not Longs) is a party to contracts with Product manufacturers, ABDC shall        *        .

 

4.	DUTIES OF LONGS

A. Late Fees . Longs will pay all invoices and other charges by their due date pursuant to Exhibit 1 ; provided , however ,        *        . If such payment is not received by ABDC by the due date (other than due to        *        ), ABDC will assess a late payment fee as follows:

 

(1)

*        .

 

(2)

For each of the        *        a payment is late (or on the first day following        *        ), ABDC will assess a late fee of        *        .

 

(3)

ABDC’s right to assess a late fee for Longs’ payment delays does not relieve Longs of its obligation to make prompt payment in accordance with this Agreement.

B. Longs’ Affiliates . Purchases by Longs’ affiliates from ABDC will be (1) entitled to pricing as provided hereunder, (2) included within the quantity of Longs’ purchases for purposes of this Agreement and (3) considered as purchases by Longs hereunder. As used above, “ Longs’ affiliates ” consists of all entities owned and controlled by Longs Drug Stores Corporation.

 

*	Subject to a request for confidential treatment; Separately filed with the Commission.

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5.	IMPLEMENTATION OF CONTRACT

A. Orders and Deliveries . Terms regarding orders and deliveries of Products hereunder, together with required Service Levels and credits related thereto, are as set forth in Exhibit 3 .

B. Returned Goods . Terms regarding returns of goods (“ Returned Goods Policy ”) are as set forth in Exhibit 4 .

C. Services in Hawaii . Special terms regarding sales of Products and provision of Services for Pharmacies and Longs’ central fill pharmacy in Hawaii (“ HRx ”) are as set forth in Exhibit 5 .

D. Central Fill Pharmacy Service . Terms regarding provision of Services for Longs’ Mainland central fill pharmacies, Escalante and SRx in Southern California, are set forth in Exhibit 6 .

E.         *        Program . Special terms regarding the        *        program are as set forth in Exhibit 7 .

F. Additional Value-Added Services . Terms regarding additional Services to be provided by ABDC are as set forth in Exhibit 8 .

G. Additional Facilities . Purchases by and Services to be provided by ABDC to Specialty Pharmacies, LTC Pharmacies, and PBM operations are included under this Agreement.

H. RePack Program . The parties intend to negotiate in good faith for a new agreement to amend or replace the RePack Agreement, if such agreement can be concluded on mutually satisfactory terms.

 

6.	RECORDS; AUDITS

A. Records . ABDC will maintain records related to Products and transactions under this Agreement in compliance with applicable law. In the event that Longs has a reasonable business need (for purposes other than audits, reviews or inquiries pursuant to the other sub-sections of this Section 6 ) to review such records of ABDC: (1) for the immediately preceding        *        , ABDC will make such records available to Longs; and (2) for prior periods, ABDC will make such records available to Longs only to the extent it has preserved such records (without obligation hereunder to do so). In either case, (1) if the records requested by Longs with respect to such        *        can be produced or generated by ABDC in the ordinary course of its operations (including reports generated by standard computer data-base inquiry), ABDC will provide such records        *        , and (2)        *        , Longs will reimburse ABDC its costs of producing or generating such records or reports.

B.         *        Files . To provide Longs with a means to order Products,        *        , ABDC will provide        *        hereunder on         *        basis. Further, ABDC will provide Longs with a

 

*	Subject to a request for confidential treatment; Separately filed with the Commission.

- 9 -

        *        for Products available to Longs. Such        *        will be provided in a format and manner consistent with current practice between the parties as of the Execution Date, with any changes therein subject to mutual agreement, which agreement will not be unreasonably withheld or delayed. ABDC will make commercially reasonable efforts so that (1)          ^*         provided by ABDC to Longs will include        *        and stocked by DCs that service Longs and (2)        *        provided to Longs will be complete and accurate.

C.         *         . ABDC will continue to show all        *        statements to Longs, accompanied by supporting detail showing the basis for        *        , with any changes therein subject to mutual agreement, which agreement will not be unreasonably withheld or delayed.

D. Periodic Audit .

 

1.

For purposes of audit under this Section 6(D), ABDC will maintain records of all transactions under this Agreement (i) for the         *        during the Term and (ii) for the        *        immediately prior to the expiration or earlier termination of this Agreement for at least        *        following such expiration or earlier termination; provided , however , if a dispute exists relating to any earlier periods, ABDC also will maintain records related to such dispute until such dispute is resolved. Longs will have the right to review the relevant records of ABDC pertaining to the business transactions covered under this Agreement for the purpose of verifying ABDC’s compliance with the terms of this Agreement and the following:

 

a)

*        ;

 

b)

*        ;

 

c)

*        ; and

 

d)

*        .

 

2.

Not more than        *        per Contract Year, Longs will have the right to review the relevant records of ABDC pertaining to the business transactions under this Agreement for the purpose of verifying ABDC’s compliance with the terms of this Agreement (each a “ Periodic Audit ”) within the previous twelve (12) month period (“ Audit Period ”) (provided that the first Periodic Audit may include transactions under both this Agreement and the Prior Agreement during such period). Periodic Audits may be conducted only during ordinary business hours and upon reasonable notice.        *        .

 

3.	ABDC shall produce supporting cost information        *        .

 

4.

For each audit, with regard to the next step procedures, Longs and ABDC shall work together for up to        *        days or as extended by mutual consent to determine whether they can resolve the issues or if additional testing or procedures shall be performed. Each party will propose to the other next step procedures reasonably designed to generate information which would resolve the audit issues identified in the initial Periodic Audit.

 

*	Subject to a request for confidential treatment; Separately filed with the Commission.

- 10 -

The parties will cooperate reasonably to limit the scope of such next steps to those Product categories, DCs, locations, processes or other areas in which the identified audit issues appeared.

 

5.

If ABDC and Longs are unable to resolve any disagreement related to such audits, or agree upon next step or additional next step testing that should be performed within         *         days (or such period as extended by mutual consent) after such disagreement is notified by either party to the other, then such disagreement shall be submitted to a mutually satisfactory independent auditor for resolution. If the parties cannot agree        *        . Any amounts payable as a result of such resolution shall be paid within        *        of receipt of the independent auditor’s report.

E. Audit Fees . Each party shall bear its own costs and expenses relating to each Periodic Audit and share equally the cost of the independent auditor described in Section 6(D)(5) .

F. Contract Compliance . Longs’ opportunity to verify pricing accuracy pursuant to this Section 6 does not relieve ABDC of its obligation to correctly invoice charges and issue credits and to promptly correct any identified errors that may occur during the Term. Inaccurate pricing or other over- and under-charges shall be corrected in the ordinary course of business, as described in Section 15(J) , (any prior corrections shall not be duplicative of corrections resulting from an audit).

G. Additional Inquiries . In addition to conducting Periodic Audits, if during the course of this Agreement Longs reasonably determines that billings may have been rendered in error, Longs retains        *        . Any such additional inquiries may not extend to periods earlier than the then-current Contract Year and        *        .

 

7.	TERM OF AGREEMENT

A. Term . Subject to a party’s right to terminate this Agreement as provided herein, the term of this Agreement (the “ Term ”) will initially extend from the Effective Date through such date as Longs has purchased its Total Branded Rx Net Purchase Volume (as defined in Section 3 of Exhibit 1 ). Notwithstanding the foregoing obligation to purchase the Total Branded Rx Net Purchase Volume, the Term will extend through at least June 30, 2009 unless terminated as provided below in this Section 7 .

 

1.	Either party may terminate this Agreement effective upon a date after Longs has purchased the Total Branded Rx Net Purchase Volume, but not earlier than June 30, 2009, by giving written notice to the other of its intent to terminate not less than 90 days prior to the effective termination date.

 

2.

In the event that Longs’ purchases of Branded Rx Products from ABDC hereunder do not meet the Total Branded Rx Net Purchase Volume amount by June 30, 2012, but nonetheless Longs provides reasonable documentation to establish that it has        *        , this Agreement will terminate effective June 30, 2012.

 

*	Subject to a request for confidential treatment; Separately filed with the Commission.

- 11 -

3.

In the event that Longs’ purchases of Branded Rx Products from ABDC hereunder do not meet the Total Branded Rx Net Purchase Volume amount by June 30, 2012, and Longs has not         *         , this Agreement will automatically be extended for an additional        *        or, if earlier, until Longs meets the Total Branded Rx Net Purchase Volume. During the final year of the extended term, if any as provided above, all terms of this Agreement shall remain in effect and, in addition, during such year        *        .

B. ABDC’s Termination Rights .

 

1.

ABDC may terminate this Agreement, by giving written notice to Longs during March 2009, in the event of a Material Change in ABDC’s business as defined herein, such termination to be effective no earlier than January 31, 2010. ABDC shall provide with such notice information establishing a reasonable basis for its conclusion that a Material Change has occurred. If such notice is not given during March 2009, this right will be deemed to have been waived. A “ Material Change ” means that both (a) there has been a reduction in ABDC’s “incremental net earnings” on sales to Longs hereunder (over a period of at least        *        ) by at least        *        as compared to ABDC’s incremental net earnings when calculated in the same manner over any earlier        *        period during the Term and (b) ABDC’s incremental net earnings on sales to Longs under this Agreement are no more than        *        . Following such notice, the parties will engage        *        or another national accounting firm of comparable size, scope and stature reasonably acceptable to both parties (“ ITP ”) to validate both such elements. By way of example, to have the right to terminate, ABDC’s earnings would have to decline from        *        to        *        (         *        ; that is, a         *        reduction in order to reach        *        ) or, as a different example, from        *        (        *        ) to        *        (        *        , a        *        reduction). “ Incremental net earnings ” means ABDC’s        *        attributable to sales to Longs under this Agreement, including        *        for such sales but without        *        .

 

2.	ABDC shall provide        *        .

 

3.

During the period after notice of termination due to Material Change and until such termination is effective, the parties will continue to perform their respective obligations under this Agreement. The parties may attempt to negotiate a replacement agreement in lieu of termination, but if no new agreement is reached by the end of November 2009, the parties will plan for wind-down of supplies and services hereunder pursuant to Section 7(G) .

C. Longs’ Termination Rights . Longs may terminate this Agreement upon occurrence of        *        .

 

*	Subject to a request for confidential treatment; Separately filed with the Commission.

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D. Mutual Termination Rights . In addition to other available remedies, either party may immediately terminate this Agreement for cause upon written notice to the other party upon the other party’s:

 

1.

(a) filing an application for or consenting to appointment of a trustee, receiver or custodian of its assets; (b) having an order for relief entered in Bankruptcy Code proceedings; (c) making a general assignment for the benefit of creditors; (d) having a trustee, receiver or custodian of its assets appointed unless proceedings and the person appointed are dismissed within thirty (30) days; (e) insolvency within the meaning of Uniform Commercial Code Section 1-201 or failing generally to pay its debts as they become due within the meaning of Bankruptcy Code Title 11, Section 303(h)(1) (11 U.S.C. §303(h)(1)), as amended; or (f) certification in writing of its inability to pay its debts as they become due (collectively, “ Bankruptcy ”);

 

2.	failure to make any undisputed payment of        *        when due in accordance with the terms of this Agreement and such failure continues        *        after written notice thereof; or

 

3.

failure to perform any other material obligation of this Agreement and such failure continues for thirty (30) days after it receives notice of such breach from the non-breaching party; provided , however , if the other party has commenced to cure such breach within such thirty (30) days, but such cure is not completed within such thirty (30) days, it will have a reasonable time to complete its cure if it diligently pursues the cure until completion; and further provided that if such breach occurs more than three times during any twelve (12) month period, the non-breaching party may terminate this Agreement upon thirty (30) days’ written notice. “For cause” does not include Longs’ receiving a more favorable offer from an ABDC competitor.

E. Survival Upon Termination . Upon termination of this Agreement, all outstanding amounts will be payable according to their normal payment terms. Additionally, (1) within thirty (30) days Longs will return to ABDC all hardware, Software and other equipment, including ordering devices and totes, or pay to ABDC the replacement cost of such items that are not returned, and (2) ABDC will promptly deliver all Longs inventory purchased by Longs and not previously delivered and equipment held by ABDC.          ^*         . Obligations in any provision the context of which shows the parties intended it to survive will remain in effect after the Term.

F. Automatic Extension . Upon its expiration pursuant to Section 7(A) , 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.

G.         *         .

 

8.	REPRESENTATIONS AND WARRANTIES

A. Compliance With Laws . Each party will comply with all federal and state laws applicable to Products and Services hereunder.

B. Goods . ABDC hereby represents and warrants that the Products it ships will not be modified or adulterated by ABDC (or its employees, affiliates or subcontractors), and will be handled, shipped and stored in accordance with manufacturers’ instructions regarding the Products and in accordance with all applicable federal, state, and local laws now or hereafter in effect.

 

*	Subject to a request for confidential treatment; Separately filed with the Commission.

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C. Qualified Suppliers . In order to assist ABDC in complying with the foregoing, in the event Longs requests that ABDC acquire certain Products from a manufacturer or supplier that has not been a supplier of ABDC’s at the time of such request, Longs agrees that         *        .

 

9.	INSURANCE AND INDEMNITY

A. Longs . Longs will maintain in force a Commercial General Liability insurance policy, including Products Liability insurance, with limits of no less than        *        per incident and        *        aggregate for bodily injury including death and personal injury to persons and damage to property. ABDC will be named on such policies (up to such amounts) as an additional insured to the extent of Longs’ insurable liabilities assumed under this Agreement.

B. ABDC .

 

1.

ABDC will maintain in force a Commercial General Liability insurance policy, including Products Liability insurance, with limits of no less than         *         per incident and        *        aggregate for bodily injury including death and personal injury to persons and damage to property. Longs will be named on such policies (up to such amounts) as an additional insured,        *        .

 

2.

ABDC shall maintain in force a Commercial Auto Liability policy, with policy limits of no less than        *        per occurrence, and Workers Compensation and Employers Liability insurance with Statutory limits for Workers Compensation and limits of no less than        *        for Employers Liability. Any such Workers Compensation policy will allow ABDC to waive any of its and its insurer’s rights of subrogation against Longs.

C. Requirements . Such insurance policies shall be maintained with responsible insurers that have a Best’s financial rating of at least A-VII. Such policies may not be cancelled or materially reduced without thirty (30) days’ prior written notice to the additional insured. Each party shall furnish the other with a Certificate of Insurance upon request evidencing that such policy terms and conditions are maintained in force.

D. Indemnification

 

1.

Each party (“ Indemnifying Party ”) will indemnify and defend the other party, together with its employees and representatives (“ Indemnified Party ”), against all claims of third parties for damages (including the Indemnified Party’s expenses and reasonable attorneys’ fees) (“ Claims ”) to the extent caused by the Indemnifying Party’s breach of its obligations under this Agreement.

 

2.	If any third-party Claim is commenced against an Indemnified Party entitled to indemnification under Section 9(D)(1) , notice thereof shall be given to the Indemnifying Party of its obligation to provide indemnification hereunder as promptly as practicable.

 

*	Subject to a request for confidential treatment; Separately filed with the Commission.

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Failure to give prompt written notice of a Claim will not relieve the Indemnifying Party of liability except to the extent caused or contributed to by such failure. If, after such notice, the Indemnifying Party shall acknowledge that this Agreement applies with respect to such Claim, then the Indemnifying Party shall be entitled, if it so elects, in a notice promptly delivered to the Indemnified Party, but in no event less than 10 days prior to the date on which a response to such Claim is due, to immediately take control of the defense and investigation of such Claim and to employ and engage attorneys reasonably satisfactory to the Indemnified Party to handle and defend the same, at the Indemnifying Party’s sole cost and expense. The Indemnified Party shall cooperate, at the cost of the Indemnifying Party, in all reasonable respects with the Indemnifying Party and its attorneys in the investigation, trial and defense of such Claim and any appeal arising therefrom; provided , however , that the Indemnified Party may, at its own cost and expense, participate, through its attorneys or otherwise, in such investigation, trial and defense of such Claim and any appeal arising therefrom. No settlement of a Claim that involves a remedy other than the payment of money by the Indemnifying Party shall be entered into without the consent of the Indemnified Party. After notice by the Indemnifying Party to the Indemnified Party of its election to assume full control of the defense of any such Claim, the Indemnifying Party shall not be liable to the Indemnified Party for any legal expenses incurred thereafter by such Indemnified Party in connection with the defense of that Claim. If the Indemnifying Party does not assume full control over the defense of a Claim subject to such defense as provided in this Section 9(D) , the Indemnifying Party may participate in such defense, at its sole cost and expense, and the Indemnified Party shall have the right to defend the Claim in such manner as it may deem appropriate, at the cost and expense of the Indemnifying Party.

 

10.

RECALL

ABDC will comply with all requirements for recalls of Rx Products in accordance with manufacturers’ instructions and all applicable law. ABDC will notify Longs of all Class I and Class II recalls immediately upon receipt of notice. ABDC will notify Longs of any other types of recalls or Product warnings or advice as instructed in the supplier’s notification.         ^*         . Longs consents to receiving notices, including Product updates, recalls, new Product launches and programs, advertisements and other marketing materials by facsimile (“fax”) machine from ABDC, its affiliates and their related companies, to the fax number set forth in Section 12 , provided that fax notice is confirmed promptly thereafter as provided in Section 12 .

 

11.	FORCE MAJEURE

If either party’s performance is prevented or delayed by labor disputes, fire, terrorism, acts of God or any other cause beyond its reasonable control (other than its financial inability to perform) and which such party is unable to prevent, including unavailability of Products due to manufacturer shortage, transportation, shortage of fuel, unavoidable delays by suppliers, loss of facilities or distribution, telecommunication or electrical system failures or interruptions, bank errors or delays, voluntary foregoing of the right to acquire or use any materials in order to comply with or accommodate government orders or requests, or compliance with law (“Force

 

*	Subject to a request for confidential treatment; Separately filed with the Commission.

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Majeure”), the affected party shall be excused from its failure to perform its obligations hereunder to the extent such failure is caused by the Force Majeure event, provided that the affected party (i) notifies the other party promptly of the cause complained of and the anticipated effect thereof under this Agreement and (ii) exercises all reasonable efforts to remove the disability and resume operations at the earliest possible date. In the event that ABDC’s supply of Products is restricted on account of Force Majeure, ABDC may reduce or eliminate such Products to the extent affected by the Force Majeure on a pro rata basis among all of ABDC’s customers ordering such Products. Any quantities of Products that ABDC is unable to deliver due to an event of Force Majeure shall be eliminated from this Agreement during the time in which the Force Majeure event is preventing such delivery. Longs may, in its sole discretion, with notice to ABDC, obtain any Products for which deliveries are reduced or eliminated, or services that are suspended, from a third party until such time as ABDC notifies Longs in writing of its ability to fulfill its obligations under this Agreement. Nothing in this Section 11 restricts Longs’ rights to         ^*         .

 

12.

NOTICES

All notices or demands of any kind that either party is required or desires to give or make upon the other in connection with this Agreement, or arising out of the relationship created hereby, shall be in writing and shall be given or made by (a) United States registered or certified mail, return receipt requested, postage prepaid, (b) personal delivery, (c) overnight courier, or (d) facsimile, in each case to the address or facsimile number below. Notice sent by certified or registered mail will be deemed delivered three (3) business days after mailing. Notice delivered personally will be deemed delivered on the date of actual delivery. Notice sent by overnight courier shall be deemed to have been given on the date of delivery confirmed by the courier service. Notice sent by facsimile will be deemed delivered on the day sent if sent during normal business hours of the receiving party (or, otherwise, on the first business day after the date of transmission), with a confirming copy by mail or overnight courier. Either party may change its contact information by a written notice delivered in accordance with this Section 12 .

 

 

*	Subject to a request for confidential treatment; Separately filed with the Commission.

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13.	CONFIDENTIALITY

A. Confidential Information . Each party and its employees or representatives (“ Receiving Party ”) will protect all proprietary and confidential information (“ Confidential Information ”) disclosed by the other (“ Disclosing Party ”) and will not use or disclose, directly or indirectly, any Confidential Information except in connection with this Agreement or as otherwise agreed. Confidential Information does not include information (i) available on a non-confidential basis, (ii) known to the Receiving Party prior to disclosure hereunder, or (iii) required to be disclosed by applicable law, regulation, rule having the force of law, or subpoena or other enforceable legal process. Confidential Information includes any information that, together with publicly available information, would allow a third party to determine Confidential Information. This Agreement is confidential. Pricing and payment terms are confidential and shall not be shared with any third party and each party will remove Exhibit 1 and/or such other highly confidential provisions as the parties may agree (or request confidential treatment therefor) if it discloses this Agreement for any reason, including in a Securities and Exchange Commission filing. Before a party makes any disclosure it believes to be required by law, with regard to which confidential treatment is not assured by the recipient governmental agency, such party will notify the other party of such intended disclosure in sufficient time and manner as to allow the other party reasonable opportunity to request confidential treatment of such information.

B. HIPAA Compliance . Each party will comply with applicable provisions of the Health Insurance Portability and Accountability Act of 1996 (42 USC § 1320d through d-8), including applicable regulations and federal privacy regulations and federal security standards (“ HIPAA ”). Except as permitted by this Agreement and HIPAA, neither party will either use or further disclose any patient’s protected health information or individually identifiable health information (“ Protected Health Information ”). Each party will implement appropriate safeguards to prevent use or disclosure of Protected Health Information other than as provided for by this Agreement and HIPAA. Each party will promptly report any use or disclosure of Protected Health Information not provided for by this Agreement or in violation of HIPAA of which it becomes aware. If either party contracts with any agent to which it provides Protected Health Information, it will require that such agent is subject to restrictions and con