Wholesale Agreement: Definition & Sample

A wholesale agreement is a contract that transfers the ownership of goods from an original seller to the buyer through an intermediary, called the wholesaler. In this type of agreement, the original seller sells the product to the wholesaler.

The wholesaler becomes the legal owner of the goods, assuming all the liabilities and responsibilities related to the goods. The wholesaler then uses the wholesale agreement to assign or sell the goods to a buyer. The buyer then becomes the legal owner of the goods and is entitled to all the benefits and liabilities associated with goods.

Common Sections in Wholesale Agreements

Below is a list of common sections included in Wholesale Agreements. These sections are linked to the below sample agreement for you to explore.

Wholesale Agreement Sample

CERTAIN MATERIAL (INDICATED BY AN ASTERISK) HAS BEEN OMITTED FROM THIS DOCUMENT PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

Wholesale Purchase Agreement

This Wholesale Purchase Agreement (“Agreement”) is entered into on the 16 day of December, 2009 (the “Effective Date”) by and between Zogenix, Inc., a Delaware corporation with its principal place of business located at the address set forth under its name on the signature page of this Agreement (“Supplier”), and California Health (as hereinafter defined), with offices at 7000 Cardinal Place, Dublin, Ohio 43017 (“Cardinal”).

Statement of Agreement

Supplier and Cardinal hereby agree as follows:

§1. Appointment of Cardinal . Supplier hereby appoints Cardinal as a non-exclusive, authorized distributor of the Products in the United States of America, its territories and possessions, and Cardinal hereby accepts that appointment on the terms and subject to the conditions described in this Agreement. As an authorized distributor, Cardinal may purchase such quantities of the Products as Cardinal deems necessary or appropriate to fill its customers’ orders from time to time, subject to the order cutback procedures described below. Cardinal shall not be required to provide any particular level of promotion or marketing activities with respect to or on behalf of any of the Products and shall not be prohibited from providing customized promotional or marketing services with respect to any other products on or behalf of other suppliers. Notwithstanding anything in this Agreement to the contrary, Cardinal may purchase Products from a source other than Supplier in the following circumstances: (a) when directed to do so by an agency of the United States government, provided that Cardinal distributes those Products so purchased only to that agency or (b) when required by emergency medical needs reflected in a federal, state, or local government official’s declaration, request or statement or upon specific request from a Final Dispenser to treat a patient’s emergency medical condition. As used in this Section the term “Final Dispenser” means (i) entities and individuals, such as pharmacies, hospitals, physicians, and prescribers whose practice with respect to prescription pharmaceuticals is devoted to selling, dispensing, or administering such pharmaceuticals to individual patients or patients’ agents, (ii) chain pharmacy warehouses that exclusively supply affiliated retail pharmacies and/or individuals with prescriptions, and (iii) entities that use prescription pharmaceuticals for research and development or clinical trial’s, but such uses will require prior approval from the Supplier for distribution by Cardinal.

§2. Orders for the Products . Cardinal shall transmit orders for the Products to Supplier using a mutually acceptable automated order entry system or such other means as may be agreed upon by the parties. All of Cardinal’s orders for the Products are subject to acceptance and approval by Supplier. Cardinal shall have no obligation to accept automatic shipments of any Product.

If any of the Products are in limited supply or otherwise unavailable in the quantities requested by Cardinal, supplier may elect to cutback Cardinal’s order for such Product and-instead allocate suck limited supply availability among Cardinal and Supplier’s other wholesaler customers in a commercially reasonable manner that does not place Cardinal at a competitive disadvantage. Cardinal acknowledges and agrees that Cardinal shall have no claim or remedy against Supplier, in connection with any such allocation by Supplier.

§3. Terms of Sale and Shipment . Supplier shall sell the Products to Cardinal at Supplier’s published wholesale prices (“WAC”) in effect on the date the Cardinal’s orders. Supplier shall give Cardinal notice at least one full business day prior to the effective date of an increase in WAC for any Product; provided, however, that any orders submitted by Cardinal after receiving notice of a WAC increase will be at the increased WAC. Supplier shall deliver the Products F.O.B. to those distribution centers specified in Cardinal’s orders or to such other locations as may be agreed upon by the parties in the case of drop shipment orders, in either such case, freight prepaid. Title and risk of loss to the Products shall remain with Supplier until shipment is received at the specified destination. If Cardinal requests special routing of a shipment which results in a higher transportation cost than would be incurred as a result of the routing selected by Supplier, then the extra cost incurred by Supplier shall be added to Supplier’s invoice. Cardinal shall report any damage, defect, loss in transit, or other shipping errors promptly following Cardinal’s discovery of the same. Any chargebacks (which are reductions in Cardinal’s purchase price based on prices contractually established directly between Supplier and Cardinal’s customers), rebates or promotional incentives shall be based on Supplier’s published wholesale price, without reduction for cash or off-invoice discounts, and shall be based on all purchases by Cardinal, unless otherwise agreed upon by the parties. All wholesale prices provided by Supplier are exclusive of taxes and each of the respective parties shall pay all applicable taxes, tariffs, duties or assessments other than taxes imposed on inventories of Products held by Cardinal as assessed by taxing entities to the respective parties and arising out of the transactions contemplated under this Agreement.

§4. Payment Terms . Unless otherwise mutually agreed by the parties, all orders for the Products shall be invoiced by Supplier on the date shipped. Cardinal shall pay Supplier’s invoices for Products in accordance with the due dates specified therein, provided that such payment terms shall [***]. In the event that a due date fall son a Saturday, Sunday or a federal holiday, Cardinal may make payment on the next business day and still be entitled to the cash discount. Notwithstanding the foregoing, Cardinal shall not be required to remit payment to Supplier during any period of time in which Supplier carries a commercially unreasonable debt balance with Cardinal (i.e., the total undisputed amount Supplier owes to Cardinal as the result of chargebacks, product returns or any other transaction involving the Products exceeds the undisputed amounts Cardinal owes to Supplier for invoiced Product purchases). Releasing payment for delivery to Supplier, whether through electronic means or the mail, constitutes making payment. If Supplier establishes so-called “credit limits” for Cardinal’s purchases, Supplier shall (a) promptly following the establishment of such limits and in any event not less than ten (10) business days prior to cutting back orders or otherwise acting upon such limits, give Cardinal notice of the establishment of such limits, and (b) consult in good faith with Cardinal as to the appropriateness of such limits in light of Cardinal’s overall creditworthiness, sales growth rate, and other relevant factors.

If Cardinal notifies Supplier that Supplier is carrying a debt balance, Supplier shall remit payments for such amounts to Cardinal by check or wire transfer until such time that Cardinal notifies Supplier that the debt balance has been eliminated; provided, however, that prior to requesting payment, Cardinal and Supplier will work together to eliminate the Debt Balance through other means, including but not limited to, purchasing additional inventory, in order to eliminate and/or reduce the negative financial impact to Supplier.

Supplier shall, promptly following Cardinal’s requests made from time to time during the term of this Agreement, provide Cardinal with Supplier’s most recent year-end consolidated financial statements and quarterly year-to-date updates to such financial statements.

Cardinal retains the right to withhold payments, setoff amounts owed to Supplier against amounts owed to Cardinal, request a chargeback advance and/or cease its purchase relationship with Supplier based upon (a) Cardinal not receiving payment for amounts owed to it under this Agreement, or (b) Other credit considerations deemed relevant by Cardinal. With respect to Cardinal’s right of set-oft Cardinal and its affiliates, parent or related entities, collectively or individually, may exercise a right of set-off against any and all amounts due Supplier, without in any way limiting its rights under law or in equity. For purposes of this provision, Cardinal, its affiliates, parent and related entities dial be deemed to be a single creditor.

§5. Inventory . If at any time during the term of this Agreement, Supplier [***]. For purposes of this Section, Cardinal’s then-current inventory shall include all inventory of Products held in Cardinal’s distribution centers, all Products owned by Cardinal located at any store owned or operated by a customer of Cardinal and held by such customer on consignment, and all Products “in transit” to or from such distribution centers [***]. For Products owned by Cardinal and held by customer on consignment, [***]

§6. Returned Goods and Recalls . Cardinal shall have the right to return Products to Supplier for credit and Supplier shall process and provide appropriate credit to Cardinal with respect to all Product returns, all in accordance with this Section 6 and the Supplier’s returned goods policy (“Returned Goods Policy”) in effect at the time of the return. A copy of the Returned Goods Policy in effect as of the Effective Date is attached hereto as Attachment 2 to this Agreement and incorporated herein. Cardinal shall notify Supplier of its intent to return such Products to obtain return authorizations from Supplier. Such authorization shall not be unreasonably withheld by Supplier. Except as provided otherwise in this Agreement, Products with more than [***] of remaining dating are not eligible for return absent prior authorization from supplier, such authorization not to be unreasonably withheld. Cardinal may return specific Products without limit, without regard to the remaining dating and without authorization under the following circumstances: (a) new Products during the [***] period following their introduction; (b) Products discontinued by Supplier to the extent the then-current Product inventory is not sold within [***] of discontinuation; (c) Products that experience decreased market demand due to circumstances beyond Cardinal’s control; and (d) all Products immediately upon termination of this Agreement between Supplier and Cardinal. Should any of the circumstances specified in subsections (a)-(d) of this Section 6 occur, Supplier shall have the option to issue an additional [***] of dating in which Cardinal may return the Product. Third-party return companies shall be recognized as legitimate processors. These return guidelines shall be in effect for all Products originally purchased by Cardinal from Supplier, exclusive only of specialty or promotional program purchases specifically exempted by mutual written consent of the parties.

Supplier shall reimburse Cardinal, consistent with Healthcare Distribution Management Association (HDMA) guidelines, for the full amount of all reasonable costs and expenses incurred by Cardinal in connection with Cardinal’s performance of any recall services or assistance relating to the Products (unless such recall is due to the action or inaction of Cardinal in which case such expense shall be borne by Cardinal).

§7. Contract Administration and Chargeback Procedures . Cardinal shall recognize and administer those contracts between Supplier and customers of Cardinal pursuant to which Supplier and such customers have established prices at which the customers may purchase certain Products (each, a “Supplier Contract” and, collectively, “Supplier Contracts”), subject to the continued validity of Supplier Contracts in accordance with applicable law and to Cardinal’s right to suspend such recognition as provided herein. Cardinal’s Standard Policy on Chargebacks (the “Chargeback Policy”) in effect at the time of the chargeback shall govern the administration of Supplier Contracts under this Agreement. A copy of the Chargeback Policy in effect as of the Effective Date is attached hereto as Attachment 1 to this Agreement and incorporated herein. The Chargeback Policy may be amended, by Cardinal from time to time. If there is a dispute regarding Supplier Contracts administration and chargeback procedures that can not be resolved in a timely manner, Cardinal reserves the right to suspend the recognition and administration Of such contracts until there is a mutually agreed upon resolution of the dispute.

Section 8 blank.

§9. Confidential Information . During the course of operating under this Agreement, each party, its respective agents, employees and representatives (collectively, the “receiving party”) may receive or have access to confidential materials and information of the other party (the “disclosing party”). All such materials and information (including but not limited to information regarding Products, pipeline, operations, methods, strategies, formulas, price lists, discount programs, incentives, rebates, records of unit movement of Products, shipping and warehousing, and confidential proprietary information from third parties), are collectively referred to herein as “Confidential Information” and constitute the property of the disclosing party. Confidential Information does not include, and the receiving party shall have no obligation hereunder with respect to, information that (a) was known to the receiving party before receipt, directly or indirectly, from the disclosing party; (b) is lawfully obtained, by the receiving party, from a third party who is under no obligation of confidentiality; (c) is or becomes publicly available other than as a fault of the receiving party; or (d) is developed by the receiving party independent of the Confidential Information disclosed by the disclosing party. During the term of this Agreement and for a period of [***] years thereafter the receiving party shall not use or disclose to third persons any such Confidential Information without the disclosing party’s prior written consent, excepting those (a) disclosures made on a confidential basis to and use by the affiliates, directors, officers, employees, and agents of the receiving party who have a reasonable need to know such information in connection with the receiving party’s performance of this Agreement, (b) disclosures which are required by law, as reasonably determined by the receiving party or its legal counsel, or are made on a confidential basis to the receiving party’s attorneys, accountants, and other professional advisors in connection with matters relating to this Agreement, and (c) routine disclosures by Supplier in the normal course of business of aggregated warehouse withdrawals, sales and other data to IMS, DDD or other similar organizations. The existence of this Agreement and its terms and conditions are hereby designated as confidential and, notwithstanding anything in this Section to the contrary, shall be treated as Confidential Information subject to the obligations of the immediately preceding sentence for the term of this Agreement and for a period of [***] years thereafter.

§10. Representations, Warranties and Indemnification . Supplier hereby represents and warrants that, at the time of delivery to Cardinal’s destinations designated in Cardinal’s orders the Products are and shall be manufactured and delivered to Cardinal in conformity with the Federal Food, Drug and Cosmetic Act, as amended, and all other applicable laws, rules, and regulations.