[CONFIDENTIAL TREATMENT REQUESTED, CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE
BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION.]
EXHIBIT 10.13
▇▇▇▇▇▇▇▇▇▇ HEALTHCARE SERVICES INC.
WAREHOUSE DISTRIBUTION CONTRACT
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This contract (the "Contract") is made effective the 15th day of March, 2000,
between ▇▇▇▇▇▇▇▇▇▇ Healthcare Services Inc., a Delaware corporation, having its
principal place of business at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇,
hereinafter referred "LHSI," and TheraSense, a California corporation, having
its principal place of business at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇,
hereinafter referred to as "Client."
WITNESSETH
WHEREAS, LHSI is in the business of providing outsource logistics services to
pharmaceutical manufacturers and other similar product manufacturers;
WHEREAS, Client wishes to utilize and engage the services of LHSI for certain of
its logistics requirements, and wishes to utilize LHSI's Premises as more
particularly set forth hereinafter;
WHEREAS, LHSI wishes to provide certain outsource logistics services to Client,
as more particularly set forth hereinafter;
WHEREAS, Client and LHSI wish to memorialize their understanding;
NOW, THEREFORE, in consideration of the premises and covenants hereinafter
contained and other good and valuable consideration each to the other paid and
received, the receipt and sufficiency of which is hereby acknowledged, it is
agreed as follows:
ARTICLE I. DEFINITIONS
1.1 "Authorized Customer" means any party so designated and approved in a
Record by Client.
1.2 "DEA" means the Drug Enforcement Agency.
1.3 "FDA" means the United States Food and Drug Administration.
1.4 "Force Majeure" means acts of war; civil disturbance or riot; shortages of
materials; earthquake; fire; flood; hurricane; windstorm; or similar
natural disasters; and other acts defined as Force Majeure in the laws of
the State of Delaware.
1.5 "LHSI Premises" means the distribution facilities operated by LHSI.
1.6 "Logistics Fees" means those fees listed in Exhibit A attached hereto and
incorporated herein by reference.
1.7 "Products" means, individually and collectively, those items or
transactions which the Client has requested LHSI to physically handle for
the Client.
1.8 "Record" means information inscribed on a tangible medium or stored in an
electronic or other medium and retrievable in perceivable form.
1.9 "Remittance Advice" refers to a summary document of all daily remittances
applied to the Client's bank account at the Client's banking institution.
This document is provided to LHSI by the banking institution on behalf of
the Client.
1.10 "Services" means the full scope of services to be provided by LHSI to
Client, as set forth in Article II.
1.11 "Territory" shall include the ▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, and the
District of Columbia.
1.12 "Work Instructions" means those written procedures maintained and used by
LHSI in the training of its personnel and execution of services under this
Contract and accepted by Client and LHSI in a Record. The Work Instructions
may be amended from time to time by consent of the parties in a Record.
Such consent shall not be unreasonably withheld or delayed.
1.13 A "Year 2000 Problem" means a data handling problem relating to the Year
2000 date change that would cause a computer system, software or equipment
to fail to correctly perform, process and handle date-related data for the
dates within and between the twentieth and twenty-first centuries and all
other centuries, including leap year calculations.
ARTICLE II. OBLIGATIONS OF LHSI
2.1 LHSI shall use commercially reasonable efforts to train its personnel and
perform all services required under this Contract substantially in
accordance with the Work Instructions; provided, however, that if
provisions of this Contract and the Work Instructions conflict, then the
provisions of this Contract shall control.
2.2 Receiving and Storage:
(a) Upon receipt of inbound Products from the Client, LHSI shall make a
commercially reasonable visual inspection of each inbound product
shipment, and shall notify Client as soon as reasonably practicable
whenever Products do not substantially conform to any specification
that may be designated by Client and added to the Work Instructions,
provided such nonconformity is apparent upon a commercially reasonable
visual inspection. LHSI shall not dispose of any nonconforming
Products without prior written authorization and instructions from an
authorized officer of Client.
(b) LHSI shall provide commercially reasonable security at the LHSI
Premises.
(c) LHSI shall comply with all requirements of all local, state and
federal governments and agencies having jurisdiction over the
Products, their storage in the LHSI Premises, and their distribution,
including, but not limited to, the FDA, the DEA, the Environmental
Protection Agency, the Occupational Safety and Health Administration,
and the Department of Transportation.
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(d) LHSI shall use its best efforts to comply with any reasonable policy,
procedure or instruction of Client which is set forth in the Work
Instructions.
(e) LHSI shall communicate with Client within the next business day upon
discovering that any Products do not conform with any specification
that may be designated in a Record by or as outlined in the Work
Instructions.
(f) LHSI shall provide warehouse, office and management personnel it
determines is reasonably required to perform its obligations under
this Contract.
(g) LHSI shall maintain written documentation conforming to the Work
Instructions attesting to the proper receipt and storage of Products.
2.3 Order Receipt and Processing: LHSI shall maintain records of Authorized
Customers who have opened accounts with Client and shall accept orders on
Client's behalf only from Authorized Customers as defined in the Work
Instructions.
2.4 Shipment - In response to orders received from Client or Authorized
Customers, LHSI shall handle, pick, pack and ship as specified below.
(a) LHSI shall handle, pick, pack, and ship each order for Products as
outlined in the Work Instructions after receipt of the order, unless
its inventory of Products is insufficient to fill the order. In the
event of significant daily swings in Client order volume, LHSI shall
request advance authorization from Client for overtime charges
necessary to maintain desired service levels.
(b) LHSI shall handle, package and ship Products in compliance with the
Work Instructions and all applicable laws and all regulations of the
United States Department of Transportation, the FDA, and any other
applicable agencies.
(c) Upon request, LHSI shall include with shipments a flyer or other
promotional material supplied by Client at a cost to Client agreed
upon in a Record.
(d) For each shipment LHSI shall prepare standard documents and disburse
as outlined in the Work Instructions.
(e) LHSI shall prepare and forward to Client reports summarizing orders
received, shipments completed and current inventory status, either via
fax or electronically, as specified by Client in a Record.
(f) Shipments of backordered products shall be shipped within the next
business day after receipt of the backordered Products by LHSI unless
otherwise specified in the Work Instructions.
(g) LHSI shall provide transportation management services, which can
include the following: negotiation of freight rates; carrier selection
to commercially reasonable prescribed service standards put forth by
Client, proof of delivery and damage claim
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processing; and audit and processing of freight invoices as agreed to
in the Work Instructions.
(h) Perform all other duties performed by warehousemen.
2.5 Accounts Receivable Management
(a) LHSI shall provide accounts receivable management in accordance with
commercially reasonable standards and as outlined in the Work
Instructions, including, but not limited to, posting of cash receipts,
deductions processing, and collection and dispute resolution services.
2.6 Chargeback Processing and Management
(a) LHSI shall provide chargeback processing and management in accordance
with commercially reasonable standards and as outlined in the Work
Instructions, including, but not limited to, file maintenance, pickup
from the designated network provider and processing of chargeback data
on a mutually agreed upon schedule.
2.7 Records and Reports
(a) LHSI shall provide inventory records and reports management in
accordance with commercially reasonable standards and as outlined in
the Work Instructions, including, but not limited to, inventory
records, daily and monthly activity reports which shall include
shipping dates and quantities of Products delivered to Authorized
Customers.
2.8 Access and Modifications to the LHSI Premises
(a) LHSI represents that the LHSI Premises as currently configured and
equipped are adequate to meet Client's current and projected
requirements as set forth in the Work Instructions, of Product
receiving, storage and shipment. LHSI shall maintain such capability
throughout the term of this contract.
(b) LHSI shall promptly notify Client, upon notice to LHSI, of any
inspection by a federal, state, or local regulatory representative
concerning the Products and shall provide Client a summary of the
results of such inspections and of the actions, if any taken to remedy
conditions cited in such inspections.
2.9 Insurance and Indemnification
(a) At all times during the term of this Contract, LHSI shall maintain, at
its own expense, the following insurance coverage:
(i) Workmen's compensation in an amount sufficient to comply with
the statutory requirements of the State of Delaware, or any
other state in which LHSI performs its obligations hereunder;
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(ii) Warehouseman's legal liability insurance in an amount
sufficient to permit LHSI to continue its operations. Client
acknowledges that Client has its own insurance sufficient to
cover the value of all Products stored at the LHSI Premises
under this Contract.
(iii) Comprehensive general liability insurance for bodily injury or
property damage for any one occurrence or series of occurrences
arising out of one cause, designating Client as an additional
insured for any losses or damages arising out of LHSI's duties
hereunder. The policy shall also cover liabilities specifically
assumed under this Contract.
(b) The responsibility of LHSI for loss or damage of any Product covered
by this Contract, including any packaging of such Product, while being
stored on the LHSI Premises or transported to or from the LHSI
Premises, is limited to the cost of replacement (including shipping
charges). LHSI shall not be liable for lost profits.
(c) LHSI shall indemnify and hold harmless Client and its affiliates,
directors, officers, agents, shareholders and employees and defend
them from and against any and all claims, demands, actions, causes of
action, losses, judgments and damages, brought or alleged by a third
party, and any and all costs or expenses relating thereto (including,
but not limited to, reasonable attorney's fees, court costs, and costs
of settlement, and the cost of any Product recall, whether voluntary
or involuntary) whatsoever arising out of or related to the sole
negligence, fraud, or willful misconduct of LHSI, or the material
breach of any of LHSI's obligations under this Contract. Client shall
provide LHSI prompt written notice of any claims, demands, actions,
causes of action, losses, judgments or damages and Client shall have
the right, at its discretion and at its cost, to have attorneys of its
choosing participate with LHSI on the investigation, litigation,
settlement and all other aspects of such claims, demands, actions,
causes of action, losses, judgments or damages. In such event LHSI
shall share, on a timely basis, all such information obtained with
Client's designated attorneys. It is a condition to the foregoing
indemnity that Client shall not admit liability nor make any payment,
settlement or compromise in respect thereof without the prior written
consent of LHSI, which consent shall not be unreasonably withheld or
delayed.
2.10 Other Duties
(a) Upon a *** advance notice, LHSI shall allow Client's personnel or its
lenders to perform inventory audits of Products in LHSI's custody,
possession or control at any time during normal business hours,
provided such cGMP audit is performed without undue interruption to
LHSI's normal business activities.
(b) LHSI shall accept returned Products and shall process such Products in
accordance with procedures mutually agreed upon between the parties in
a Record.
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*** CONFIDENTIAL TREATMENT REQUESTED
(c) LHSI shall provide, with Client's consent, Client's lender with any
document to which Client is otherwise entitled that such lender may
reasonably request.
(d) LHSI shall maintain all permits, licenses and registrations required
to store and distribute Products in each of the fifty states of the
United States, District of Columbia and all other locations in the
Territory.
(e) LHSI shall promptly notify Client as soon as possible, but not later
than 3 working days following receipt of information of a possible
adverse event associated with the use of Products.
2.11 Levels of Performance
(a) Levels of performance will be based on Key Performance Indicators
("KPI's") attached hereto as Exhibit C. LHSI and Client will have
monthly process and performance reviews for the first six months of
this Contract. Thereafter, quarterly reviews will be conducted.
2.12 Lot Tracking Data Retention
(a) LHSI will retain lot-tracking data on Client's Products for a seven-
year period. The most recent 2 years of data needs shall be accessible
on line 24 hours a day, 7 days a week. Data over 2 years accessible as
defined by the Work Instructions.
ARTICLE III. OBLIGATIONS OF CLIENT
3.1 Client shall use commercially reasonable efforts to perform all obligations
required under this Contract substantially in accordance with the Work
Instructions.
3.2 Client's Products
(a) Client shall deliver Products in reasonable quantities, based upon
information provided by LHSI as to customer orders and Product
inventories, to LHSI at the LHSI Premises during normal working hours.
(b) Client shall be solely responsible for maintaining a satisfactory
supply of its Products with LHSI at the LHSI Premises at all times to
meet the demands of Client's customers, subject to Client's
manufacturing capacity and the demand, if any, for Client's Products.
Client and LHSI will further define inventory requirements according
to the Work Instructions.
(c) Client shall deliver Products for storage properly marked and
packaged, including a manifest showing sizes or specific stock keeping
units.
(d) Client shall be solely responsible for die procurement, marketing and
sale of the Products and for maintaining regulatory clearance on
approvals.
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(e) Client shall be solely responsible for ensuring that the Products
comply with all federal, state, local and other laws and regulations
with respect to safety, labeling and advertising.
(f) Client shall be solely responsible to its customers for all warranties
express or implied that exist with respect to the Products as required
by law.
(g) Client shall be solely responsible for addressing all regulatory
issues regarding manufacturing defects or safety issues related to any
Product and for deciding the necessity, scope, and procedures for any
Product recall.
(h) Client shall pay the Logistics Fees enumerated in Exhibit "A" and
perform all of its other obligations under this Contract and the Work
Instructions. If Client does not pay the Logistics Fees enumerated in
Exhibit "A" within one hundred and twenty (120) days, LHSI reserves
the right to *** receipt of payment from Client to LHSI.
(i) Client agrees that the Logistics Fee Schedule attached as Exhibit "A"
is conditioned on the accuracy of the Logistics Assumptions attached
as Exhibit "B". Thus, Client agrees that if the Logistics Assumptions
attached as Exhibit "B" prove to be inaccurate in any material respect
greater than *** LHSI may request renegotiation of the Logistics Fee
Schedule attached as Exhibit "A" both retrospectively and
prospectively to account for the changed Logistics Assumptions. Client
shall pay any increased amount due as a result of such adjustment or
receive credit on decreased amount from a backward look of the
business from LHSI.
3.3 Accounts Receivable Management
(a) Client and LHSI shall mutually agree upon Work Instructions for
managing Client's accounts receivable with respect to the Products.
3.4 Chargeback Processing and Management
(a) Client shall designate a key contact person of Client's who shall be
available to work with LHSI on chargeback issues.
(b) Client shall provide LHSI with information deemed necessary by LHSI to
perform its obligations under this Contract on a timely basis.
(c) Client and LHSI will further agree upon Work Instructions for managing
Client's chargeback processing and management functions with respect
to the products.
3.5 Title to and ownership of the Products in possession of LHSI shall always
be vested in Client and subject to its discretion and control. Title and
ownership shall pass directly to the purchaser of the Products upon
delivery by LHSI to a common carrier and all proceeds derived or credits
arising therefrom shall be the sole property of Client.
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*** CONFIDENTIAL TREATMENT REQUESTED
3.6 Client shall indemnify and hold harmless LHSI and its affiliates,
directors, officers, agents, shareholders and employees and defend them
from and against any and all claims, demands, actions, causes of action,
losses, judgments and damages, brought or alleged by a third party, and any
and all costs or expenses relating thereto (including, but not limited to,
attorney's fees, court costs and costs of settlement) whatsoever resulting
from the negligence, willful misconduct or fraud of Client, or the material
breach by Client of Client's obligations under this Contract. LHSI shall
provide Client prompt written notice of any claims, demands, actions,
causes of action, losses, judgments or damages and LHSI shall have the
right, at its discretion and at its cost, to have attorneys of its choosing
participate with Client on the investigation, litigation, settlement and
all other aspects of such claims, demands, actions, causes of action,
losses, judgments or damages. In such event Client shall share, on a timely
basis, all such information obtained with LHSI's designated attorneys.
3.7 Client shall further indemnify and hold harmless LHSI from and against any
and all claims, demands, actions, causes of action, losses, judgments and
damages, brought or alleged by a third party, and any all costs or expenses
relating thereto (including but not limited to attorneys' fees, court costs
and costs of settlement) arising as a result of (a) any actual or asserted
violation of the Federal Food, Drug and Cosmetic Act or any other federal,
state or local law or regulation by virtue of which Products sold, supplied
or delivered by Client shall be alleged or determined to be adulterated,
misbranded, mislabeled or otherwise not in full compliance with any such
law or regulation through no action or fault of LHSI, (b) the possession,
distribution, sale and/or use of, or by reason of the seizure of, any
Client's Products, including any prosecution or action whatsoever by any
governmental body or agency or by any private party, including claims of
bodily injury, death or property damage through no action or fault of LHSI,
or (c) a claim that the Products infringe any patent, trademark, copyright,
License or other property right or proprietary right of any third party.
LHSI shall provide Client prompt written notice of any claims, demands,
actions, causes of action, losses, judgments or damages and LHSI shall have
the right, at its discretion and at its cost, to have attorneys of its
choosing participate with Client on the investigation, litigation,
settlement and all other aspects of such claims, demands, actions, causes
of action, losses, judgments or damages in such event Client shall share,
on a timely basis, all such information obtained with LHSI.
3.8 Client shall maintain primary comprehensive first-party insurance
sufficient to cover the replacement value of Products in the possession of
LHSI.
3.9 Client shall bear the expense of any inventory taxes that might be assessed
on its Products from time to time.
3.10 During the term of this Contract, warehouse services and distribution to be
performed in the Territory with respect to the Products shall be performed
solely by LHSI. This excludes any services performed by Client at ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
3.11 Client recognizes the rights of LHSI to act and to operate LHSI Premises
as a public warehouse.
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3.12 Client shall maintain in effect during the term of this Contract and for a
period of five (5) years after termination of this Contract, product
liability insurance in the amount of at least $5,000,000 and general
liability insurance in the amount of at least $5,000,000, which shall
include contractual liability coverage for all liability assumed under this
Contract and shall include LHSI as an additional insured. Such insurance
shall apply to covered losses of LHSI as additional insured on a primary
basis and without contribution by other insurance of LHSI. Client will
supply, at least 30 days prior written notice to LHSI in the event of
cancellation or material reduction in coverage, and upon request promptly
submit to LHSI satisfactory evidence of such insurance.
ARTICLE IV. AMENDMENT AND ASSIGNMENT
4.1 Effective this 15th day of March, 2000, this Contract together with Exhibit
"A" hereto, constitute the entire understanding of the parties, and
supersedes any and all previous understandings, whether written or oral,
with respect to the subject matter hereof. Effective the 15th day of March,
2000, all such other understandings are hereby declared null and void and
of no further force or effect. The terms, conditions and provisions of this
Contract shall prevail over any inconsistent statements, terms, conditions
or provisions contained in any documents passing between the parties hereto
including, but not limited to, any acknowledgment, confirmation or notice.
This Contract may not be amended, supplemented, or otherwise modified
except by an instrument in a Record executed by the parties hereto.
4.2 This Contract shall inure to the benefit of the parties and to their
successors and assigns. This Contract, or any rights hereunder, shall not
be otherwise sold, assigned, transferred or encumbered by either party
hereto without first obtaining the written consent of the other party. Such
consent shall not be unreasonably withheld or delayed.
ARTICLE V. FORCE MAJEURE
5.1 Each party to this Contract shall be excused from the performance of its
obligations hereunder to the extent that such performance is prevented by
Force Majeure, and such excuse shall continue for so long as the condition
constituting the Force Majeure continues.
5.2 Notwithstanding the immediately foregoing provision, if the LHSI Premises
at any time are subject to a condition constituting Force Majeure such that
LHSI is unable to fulfill its obligations under this Contract, LHSI shall
give immediate written notice thereof to Client, whereupon Client may, at
its sole option, immediately terminate this Contract by giving written
notice of termination to LHSI and make other arrangements for distribution
of its Products, or permit LHSI to provide other warehousing facilities
reasonably acceptable to Client for the duration of the Force Majeure.
Notwithstanding the foregoing, in the event that Client elects to permit
LHSI to provide a substitute facility and the Force Majeure condition
continues for more than sixty (60) days, Client may then, at its sole
option, terminate this Contract by giving written notice of such
termination to LHSI. In the event of termination during a Force Majeure
condition, LHSI shall use its best efforts to remove, or enable Client to
remove Products, shipping and packaging materials, data and information
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related to Products, and other property of Client from the LHSI Premises as
promptly as possible.
ARTICLE VI. CONFIDENTIALITY
6.1 LHSI shall not disclose, communicate or divulge to, or use for the direct
or indirect benefit of any person, corporation, or other entity, other than
Client, any proprietary information regarding the Products, Product
specifications, business methods, business policies, procedures,
techniques, computer programs, research or development projects or results,
trade secrets, or inventions, used or developed by Client, any names or
addresses of Client's customers or clients, any data on or relating to
past, present or prospective customers of Client, information regarding
Client sales, shipments, costs or inventories, or any other confidential
information relating to or dealing with the business operations or
activities of Client or Client's customers (collectively the "Client
Information"), made known, directly to LHSI, or indirectly learned or
acquired by LHSI while providing services or while the business
relationship between LHSI and Client exists under this Contract.
6.2 Client shall not disclose, communicate or divulge to, or use for direct or
indirect benefit of any person, corporation, or other entity, other than
LHSI, any proprietary information regarding business methods, business
policies, procedures, techniques, computer programs, trade secrets, or
inventions used or developed by LHSI (collectively the "LHSI Information")
made known to Client or learned or acquired by Client in relation to this
Contract.
6.3 Client and LHSI acknowledges and agrees that in the event of a violation of
either paragraphs 1 or 2 of this Article VI, the aggrieved party shall have
right to seek injunctive relief, in addition to any other rights provided
in this Contract or by operation of law, without the requirement of posting
bond.
6.4 Client's duty of confidentiality with regard to LHSI Information and LHSI's
duty of confidentiality with regard to Client Information shall not extend
to:
(a) any information that, at the time of disclosure, is in, or after
disclosure becomes a part of the public domain without breach of this
Contract (but only after it becomes a part of the public domain);
(b) any information that, prior to disclosure by the disclosing party, was
already in the lawful possession of the recipient party, as evidenced
by written records kept by the recipient part in the ordinary course
of its business, or as evidenced by proof of actual prior use by the
recipient party;
(c) any information that, subsequent to disclosure, is obtained by the
recipient party from a third party 1) who is lawfully in possession of
that Information, 2) who is not in violation of any contractual, legal
or fiduciary obligation to the disclosing party with respect to that
Information; and 3) who does not prohibit the recipient party from
disclosing the Information to others; or
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(d) any information disclosed pursuant to any applicable law or order of
any court or government agency provided the disclosing party gives the
other party prompt notice so that it may seek a protective order or
other appropriate remedy. In the event such protective order or other
remedy is not obtained, the disclosing party shall furnish only that
portion of the information that it is legally required and shall use
its best efforts to assure confidential treatment of any such
information disclosed.
6.5 ***
6.6 ***
(a) ***
(b) ***
6.7 *** this Contract.
ARTICLE VII. TERM AND TERMINATION
7.1 This Contract shall commence as of the 15th day of March, 2000, and shall
extend for a period of thirty-six (36) months, to and including the 14th
day of March, 2003 with a 2 year option agreed to by both parties.
7.2 The obligation of Client to pay fees and expenses earned or incurred by
LHSI, as the case may be, prior to the effective date of termination, the
obligations of LHSI under paragraphs 2.9(c), the obligations of Client
under paragraphs 3.6 and 3.7, and the rights and
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*** CONFIDENTIAL TREATMENT REQUESTED
obligations of both parties under Articles VI, VII and IX shall survive the
termination or expiration of this Contract.
7.3 If either LHSI or Client should fail to discharge fully and promptly any of
its obligations under this Contract or the Exhibits hereto, including the
Client's obligation to make payments and LHSI's obligation to meet the
KPI's, attached hereto as Exhibit "C", and further fail to cure such
default within a reasonable time not to exceed 60 days (provided that such
a failure can be cured) after written notice thereof by the non-defaulting
party, the non-defaulting party shall have the right to immediately
terminate this Contract upon giving the defaulting party written notice to
such effect
7.4 Client shall have the right to terminate this Contract before the 15th day
of March, 2003 for any major business change with ninety (90) days prior
written notice to LHSI. In the event of early termination under this
paragraph, Client shall pay LHSI an Early Termination Fee equivalent to ***
following the effective date of termination. *** at the time of
notification of early termination by the Client.
7.5 Each party hereto shall have the right to terminate this Contract in the
event of any proceeding under a Bankruptcy Act or any insolvency,
receivership or dissolution proceeding involving the other party is
commenced and not dismissed within 90 days of its commencement.
7.6 Upon termination or expiration of this Contract, LHSI shall promptly return
to Client at Client's sole expense, all Products then in its possession or
control, all packaging, shipping and labeling materials related thereto,
all invoice forms, any equipment or other property purchased by Client, and
all customer and sales representative lists and other confidential or
proprietary information provided hereunder by Client or developed by LHSI
in relation to this Contract, and any information provided in order that
LHSI may obtain any government licenses and permits. LHSI shall provide an
electronic copy of lot tracking data, customer history, and addresses to
Client. LHSI shall be compensated at the accessorial labor rate detailed in
Exhibit "A" of this Contract in returning property of Client from the last
effective day of this Contract.
ARTICLE VIII. YEAR 2000 COMPLIANCE
8.1 Each party covenants and agrees that it shall not permit a Year 2000
Problem to computer systems, software or equipment owned by it, its
affiliates or subsidiaries, or leased or licensed to it, its affiliates or
subsidiaries, to interfere with such party's performance under this
Contract. Each party further agrees to request from those of its suppliers
whose performance may materially affect such party's performance hereunder,
or to receive assurance from such supplier's Web site, that each such
supplier undertake the same obligation with respect to such material
performance. The parties shall use reasonable commercial effort to
cooperate and share information to further comply with this Article VIII,
and to minimize the impact of any Year 2000 Problem on performance of this
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*** CONFIDENTIAL TREATMENT REQUESTED
Contract. Each Party shall inform the other party of any circumstance
indicating a possible obstacle to such compliance, and the steps being
taken to avoid or overcome the obstacle.
8.2 Provided a party complies with section 81, such party shall not be liable
to the other party for any failure to perform obligations under this
Contract to the extent such failure arises from a Year 2000 Problem (1)
affecting one of the non-performing party's suppliers or (2) beyond that
party's reasonable control (e.g., a Year 2000 Problem affecting a
governmental entity). In particular, to the extent, a non-performing party
is not liable to the other party under this section, such non-performing
party shall have no liability to the other party for any damages, including
direct, indirect, incidental, special, consequential, punitive or exemplary
damages.
ARTICLE IX. GENERAL
9.1 This Contract shall be interpreted in accordance with the laws of the State
of Delaware, without regard to its conflict of law principles. The parties
understand and agree that the provisions of Article 7 of the Uniform
Commercial Code as enacted by the State Law governing this Contract shall
apply to this Contract. In the event any terms of this Contract are
contrary to Article 7 of the Uniform Commercial Code, this Contract shall
govern.
9.2 Neither party shall be liable to the other under any circumstances for
consequential, incidental, indirect or special damages, for lost profits,
savings or revenues of any kind, regardless of whether such party has been
advised of the possibility of such damages. LHSI's total liability for
damages under this Contract shall be limited to money damages, and shall
not exceed an amount equal to the amount actually paid to LHSI by Client.
9.3 Save and except for any provision or covenant contained herein which is
fundamental to the subject matter of this Contract (including without
limitation those that relate to the payment of monies), the invalidity or
unenforceability of any provision or covenant hereof or herein contained
shall not affect the validity or enforceability of any other provision or
covenant hereof or herein contained and any such invalid or unenforceable
provision or covenant shall be deemed to be severable.
9.4 Any notice or other communication required or permitted to be given
hereunder shall be in a Record addressed to the parties at their respective
addresses set out above and, if mailed by prepaid first-class mail at any
time other than during a general discontinuance of postal service due to
strike, lockout or otherwise, shall be deemed to have been received two
business days after the post-marked date thereof, or if sent by facsimile,
shall be deemed to have been received on the next business day following
dispatch and acknowledgment of receipt by the recipient's facsimile
machine, or if telecopied, shall be deemed to have been received on the
next business day following dispatch or if delivered by hand shall be
deemed to have been received at the time it is delivered. Notice of change
of address shall also be governed by this paragraph 3.
9.5 This Contract shall be governed by Delaware law.
-13-
9.6 This Contract and the Exhibits hereto represent the final and entire
agreement between the Client and LHSI with respect to its subject matter
and supersedes all prior negotiations, commitments, understandings,
representations and proposals, written or oral, relating to such subject
matter.
IN WITNESS WHEREOF, the parties have executed this Contract effective as of the
date first above written.
THERASENSE
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
By:_____________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
--------------------------
Title: President & CEO
-------------------------
Date:___________________________
▇▇▇▇▇▇▇▇▇▇ HEALTHCARE SERVICES INC.
/s/ illegible
By:_____________________________
Name:___________________________
Title:__________________________
Date:___________________________
-14-
Exhibit A
Fee Schedule: TheraSense ***
Distribution: ***
Inbound Handling: ***
Storage: ***
Outbound Handling: ***
***
***
Return Goods Processing: ***
Customer Service: ***
Accounts Receivable: ***
Chargeback Management: ***
Sample & Literature ***
Distribution
***
***
Transportation Management ***
and Packaging Supplies:
***
Accessorial Labor Rate: ***
*** CONFIDENTIAL TREATMENT REQUESTED
Overtime Rates: ***
Communication Charges: ***
ProCure ***
***
***
***
***
***
Credit Card ***
IT Programming Fees: ***
Contract Length: Three year Contract with a two year auto renewal.
Start-up Fee: ***
Commercial Terms: ***
Pricing Adjustment ***
*Percent of FTE will be determined based on activity and will not be assessed
until start-up. Should 1/2 FTF be required Therasense would be charged
accordingly ***. The monthly charge will be assessed until LHSI
receives chargebacks for processing.
-2-
*** CONFIDENTIAL TREATMENT REQUESTED
Exhibit B
Assumptions
Shipment Manufacturing Forecast
Units per Pallet Mar-00 Apr-00 May-00 Jun-00 Jul-00
FreeStyle
---------
Units
Kits *** *** *** *** ***
Strips (Retail Packs) *** *** *** *** ***
Strips (System Kits) *** *** *** *** ***
Pallets (Total Demand
Based On Assumptions
Meters (Warrantee) *** *** *** *** *** ***
System Kits *** *** *** *** *** ***
Test Strips (10, 50, *** *** *** *** *** ***
100)
Control Solution *** *** *** *** *** ***
Lancets (10 & 100) *** *** *** *** *** ***
Lancing Device *** *** *** *** *** ***
Packing Materials (4 *** *** *** *** *** ***
different sizes)
Meter Cases *** *** *** *** *** ***
Order Volume
Retail *** *** *** *** *** *** ***
Independents/Managed *** *** *** *** *** *** ***
Care, etc.
Internet Orders *** *** *** *** *** *** ***
Warranty Meter *** *** *** *** *** *** ***
Replacements
Strip Warranty *** *** *** *** *** *** ***
Replacements
Case Warranty *** *** *** *** *** *** ***
Replacements
Total Order Volume *** *** *** *** *** ***
Demand Based On *** *** *** *** *** *** ***
Assumptions
Meters *** *** *** *** *** *** ***
System Kits
Retail *** *** *** *** *** *** ***
Independents/Managed *** *** *** *** *** *** ***
Care, etc.
Internet Orders *** *** *** *** *** *** ***
Sales Reps and Samples *** *** *** *** *** *** ***
Total System Kits *** *** *** *** ***
Test Strips
50's *** *** *** *** *** *** ***
100's *** *** *** *** *** *** ***
Samples - 50's *** *** *** *** *** *** ***
Samples & replacement *** *** *** *** *** *** ***
Strips (10)
Total Strips *** *** *** *** ***
Ancillary Products
Control Solution *** *** *** *** *** *** ***
Lancets (10 & 100) *** *** *** *** *** *** ***
Lancing Device *** *** *** *** *** *** ***
Meter Cases *** *** *** *** *** *** ***
Total Anciliary Product *** *** *** *** ***
Units
Aug-00 Sep-00 Oct-00 Nov-00 Dec-00 Total
FreeStyle
---------
Units
Kits *** *** *** *** *** ***
Strips (Retail Packs) *** *** *** *** *** ***
Strips (System Kits) *** *** *** *** *** ***
Pallets (Total Demand
Based On Assumptions
Meters (Warrantee) *** *** *** *** ***
System Kits *** *** *** *** ***
Test Strips (10, 50, *** *** *** *** ***
100)
Control Solution *** *** *** *** *** ***
Lancets (10 & 100) *** *** *** *** *** ***
Lancing Device *** *** *** *** *** ***
Packing Materials (4 *** *** *** *** *** ***
different sizes)
Meter Cases *** *** *** ***
Order Volume
Retail *** *** *** *** *** ***
Independents/Managed *** *** *** *** *** ***
Care, etc.
Internet Orders *** *** *** *** *** ***
Warranty Meter *** *** *** *** *** ***
Replacements
Strip Warranty *** *** *** *** *** ***
Replacements
Case Warranty *** *** *** *** *** ***
Replacements
Total Order Volume *** *** *** *** *** ***
Demand Based On *** *** *** *** ***
Assumptions
Meters *** *** *** *** *** ***
System Kits
Retail *** *** *** *** *** ***
Independents/Managed *** *** *** *** *** ***
Care, etc.
Internet Orders *** *** *** *** *** ***
Sales Reps and Samples *** *** *** *** *** ***
Total System Kits *** *** *** *** *** ***
Test Strips
50's *** *** *** *** *** ***
100's *** *** *** *** *** ***
Samples - 50's *** *** *** *** *** ***
Samples & replacement *** *** *** *** *** ***
Strips (10)
Total Strips *** *** *** *** *** ***
Ancillary Products
Control Solution *** *** *** *** *** ***
Lancets (10 & 100) *** *** *** *** *** ***
Lancing Device *** *** *** *** *** ***
Meter Cases *** *** *** *** *** ***
Total Anciliary Product
Units *** *** *** *** *** ***
*** CONFIDENTIAL TREATMENT REQUESTED
Exhibit B
Assumptions
▇▇▇▇▇▇▇▇▇▇ Logistics Fees Assumptions Fee Mar-00 Apr-00 May-00 Jun-00
----------------------------- -------------------------- ------- ------ -------- -------- ---------
Inbound Pallets
Quantity
Meters (Warranty) *** *** *** *** ***
System Kits *** *** *** *** ***
Test Strips (10, 50, 100) *** *** *** *** ***
Control Solution *** *** *** ***
Lancets (10 & 100) *** *** *** ***
Lancing Device *** *** *** ***
Packing Materials *** *** *** ***
Meter Cases *** *** *** *** ***
Total Pallet a month *** *** *** ***
Handling Fee per month *** *** *** *** ***
Storage
Average On Hand Pallets/mo. *** *** *** ***
Meters (Warranty & Samples) *** *** *** ***
System Kits *** *** *** ***
Test Strips (10, 50, 100) *** *** *** ***
Control Solution *** *** *** ***
Lancets (10 & 100) *** *** *** ***
Lancing Device *** *** *** ***
Packing Materials *** *** *** ***
Meter Cases *** *** *** ***
Average Number of Total Pallets *** *** *** *** ***
Storage Fee ($26.00 pallet) *** *** *** *** ***
Outbound Order Processing
Retail
Average Orders/month *** *** *** *** ***
Average Line Items/month *** *** *** *** *** ***
Average Strip Cartons Picked/mo. *** *** *** *** *** ***
Average Sys Kits Cartons Picked/mo. *** *** *** *** *** ***
Independents/Managed Care etc.
Average Orders/mo. *** *** *** *** ***
Average Line Items/Order *** *** *** *** ***
Average Strip-50's Cartons Picked/mo. *** *** *** *** *** ***
Average Strip-100's Cartons Picked/mo. *** *** *** *** *** ***
Average Sys Kits Cartons Picked/mo. *** *** *** *** *** ***
Average Ancillary Cartons Picked/mo. *** *** *** *** *** ***
Internet Orders
Average Orders/mo. *** *** *** *** ***
Average Line Items/Order *** *** *** *** *** ***
Average Units Picked/Order *** *** *** *** *** ***
Warranty and Samples
Average Orders/mo. *** *** *** *** ***
Average Line Items/Order *** *** *** *** *** ***
Average Units Picked/Order *** *** *** *** *** ***
Total Outbound OrderProcessing
Average Orders/mo. Fee *** *** *** *** ***
Average Line Items/Order Fee *** *** *** *** ***
Average Units Picked/Order Fee *** *** *** *** ***
TOTAL *** *** *** *** ***
Customer Service
▇▇▇▇▇▇▇▇▇▇ Logistics Fees Jul-00 Aug-00 Sep-00 Oct-00 Nov-00 Dec-00 Total
----------------------------- -------- ------- ------- -------- ------- ------- ------
Inbound Pallets
Quantity
Meters (Warranty) *** *** *** *** *** ***
System Kits *** *** *** *** *** ***
Test Strips (10, 50, 100) *** *** *** *** *** ***
Control Solution *** *** *** *** *** ***
Lancets (10 & 100) *** *** *** *** *** ***
Lancing Device *** *** *** *** *** ***
Packing Materials *** *** *** *** *** ***
Meter Cases ***
Total Pallet a month *** *** *** *** *** ***
Handling Fee per month *** *** *** *** *** *** ***
Storage
Average On Hand Pallets/mo. *** *** *** *** ***
Meters (Warranty & Samples) *** *** *** *** *** ***
System Kits *** *** *** *** *** ***
Test Strips (10, 50, 100) *** *** *** *** *** ***
Control Solution *** *** *** *** *** ***
Lancets (10 & 100) *** *** *** *** *** ***
Lancing Device *** *** *** *** *** ***
Packing Materials *** *** *** *** *** ***
Meter Cases *** *** *** *** *** ***
Average Number of Total Pallets *** *** *** *** *** *** ***
Storage Fee ($26.00 pallet)
Outbound Order Processing
***
Retail
Average Orders/month *** *** *** *** *** *** ***
Average Line Items/month *** *** *** *** *** *** ***
Average Strip Cartons Picked/mo. *** *** *** *** *** *** ***
Average Sys Kits Cartons Picked/mo. *** *** *** *** *** *** *** ***
Independents/Managed Care etc.
Average Orders/mo. *** *** *** *** *** *** ***
Average Line Items/Order *** *** *** *** *** *** ***
Average Strip-50's Cartoons Picked/mo. *** *** *** *** *** *** ***
Average Strip-100's Cartons Picked/mo. *** *** *** *** *** *** ***
Average Sys Kits Cartons Picked/mo. *** *** *** *** *** *** ***
Average Ancillary Cartons Picked/mo. *** *** *** *** *** *** *** ***
Internet Orders
Average Orders/mo. *** *** *** *** *** *** ***
Average Line Items/Order *** *** *** *** *** *** ***
Average Units Picked/Order *** *** *** *** *** *** *** ***
Warranty and Samples
Average Orders/mo. *** *** *** *** *** *** ***
Average Line Items/Order *** *** *** *** *** *** ***
Average Units Picked/Order *** *** *** *** *** *** *** ***
Total Outbound OrderProcessing *** *** *** *** *** ***
Average Orders/mo. Fee *** *** *** *** *** ***
Average Line Items/Order Fee *** *** *** *** *** ***
Average Units Picked/Order Fee *** *** *** *** *** *** ***
TOTAL
Customer Service
-2-
*** CONFIDENTIAL TREATMENT REQUESTED
▇▇▇▇▇▇▇▇▇▇ Logistics Fees Assumptions Fee Mar-00 Apr-00 May-00 Jun-00
------------------------- ----------- --- ------ ------ ------ ------
Order Entry Fee/Line Item *** *** *** *** *** ***
TOTAL Order Entry &
Customer Service *** *** *** ***
Accounts Receivable
Order Entry Fee/Line Item Retail and Independent Orders Only *** *** *** *** ***
Total ▇▇▇▇▇▇▇▇▇▇ Charges
(not including *** *** *** ***
Transportation and
Communications Costs)
Transportation Management
Cost + 15%
Management Fee
Communications Charges
Cost + 15%
Management Fee
Packaging Supply
Management Cost + 15%
Management Fee
▇▇▇▇▇▇▇▇▇▇ Logistics Fees Jul-00 Aug-00 Sep-00 Oct-00 Nov-00 Dec-00 Total
------------------------- ------ ------ ------ ------ ------ ------ -----
Order Entry Fee/Line Item *** *** *** *** *** ***
TOTAL Order Entry &
Customer Service *** *** *** *** *** *** ***
Accounts Receivable
Order Entry Fee/Line Item *** *** *** *** *** *** ***
Total ▇▇▇▇▇▇▇▇▇▇ Charges
(not including *** *** *** *** *** *** ***
Transportation and
Communications Costs)
Transportation Management
Cost + 15%
Management Fee
Communications Charges
Cost + 15%
Management Fee
Packaging Supply
Management Cost + 15%
Management Fee
-3-
*** CONFIDENTIAL TREATMENT REQUESTED
Exhibit C
Key Performance Indicators
Customer Service
1. Orders placed through LHSI customer service will meet the following minimum
standards:
A. Order Accuracy ***
B. Abanded call rate of less than ***
C. Call answered within ***
Warehousing & Distribution
2. Orders received by LHSI prior to 2:00 PM:
A. Shipped the same day: ***
B. Shipped with correct product: ***
C. Shipped with correct amount: ***
D. Received inventory to be put away in 24 hours: ***
-unless the product is on backorder
Accounts Receivable
3. All AR data received by 2:00pm:
A. Will be posted same day: ***
B. Will be accurately posted: ***
*** CONFIDENTIAL TREATMENT REQUESTED
FIRST AMENDMENT TO CONTRACT
TheraSense will make the following additions due to changes in ProCure
utilization.
THIS FIRST AMENDMENT ("First Amendment") to the Contract effective January 19,
2000, by and between ▇▇▇▇▇▇▇▇▇▇ Healthcare Services Inc., a Delaware
corporation, having its principal place of business at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("LHSI") and TheraSense, a California corporation, having its
principal place of business at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇,
hereinafter referred to as "Client."
The parties now wish to amend the Contract as set forth below.
Both parties agree that ▇▇▇▇▇▇▇.▇▇▇ Inc.'s system will remain the Electronic
Commerce vehicle and the following new fees will apply as defined below.
Description Fee
--------------------------------------------------------------
Monthly License Fee ***
--------------------------------------------------------------
Design Fee (Attached) ***
--------------------------------------------------------------
Fee per Order ***
--------------------------------------------------------------
Fee per Order line ***
--------------------------------------------------------------
Credit card Processing ***
--------------------------------------------------------------
E-Mail Confirrnation ***
--------------------------------------------------------------
NOTE: Any additional miscellaneous services will be governed under the current
Contract between LHSI and Client, dated March 15, 1999.
IN WITNESS WHEREOF, the parties, intending to be legally bound, have caused this
First Amendment to be executed by their respective duly authorized
representatives as of the date first written above.
▇▇▇▇▇▇▇▇▇▇ HEALTHCARE SERVICES INC. THERASENSE
BY: ________________________________________ BY: _____________________
NAME: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ NAME: ___________________
--------------------------------------
TITLE: President and Chief Operating Officer TITLE: __________________
-------------------------------------
DATE: _____________________________________ DATE: ___________________
*** CONFIDENTIAL TREATMENT REQUESTED