SALES REPRESENTATIVE SERVICES AGREEMENT

Exhibit 10.32

The confidential portions of this exhibit have been filed separately with the Securities and Exchange Commission

pursuant to a confidential treatment request in accordance with Rule 24b-2 of the Securities and Exchange Act of 1934, as amended. REDACTED PORTIONS OF THIS EXHIBIT ARE MARKED BY AN ***.

SALES REPRESENTATIVE SERVICES AGREEMENT

This Sales Representative Services Agreement (this “ Agreement ”) effective as of April 1, 2008 (the “ Effective Date ”) is entered into by and between VENTIV COMMERCIAL SERVICES, LLC, a New Jersey limited liability company (“ VCS ”), and ENDO PHARMACEUTICALS INC., a Delaware corporation (“ CLIENT ”). VCS and CLIENT are sometimes referred to herein collectively as the “ Parties ,” and individually as a “ Party .”

RECITALS:

WHEREAS , VCS provides integrated outsourced sales and marketing solutions, including client field forces to the healthcare industry, and has certain expertise in the marketing and promotion of pharmaceutical products; and

WHEREAS , CLIENT is an integrated pharmaceutical company that requires the sales and promotional services of VCS as more fully described in this Agreement (the “ Services ”); and

WHEREAS , VCS and CLIENT desire to enter into this Agreement under which VCS will provide such Services to CLIENT.

NOW, THEREFORE , in consideration of the mutual premises contained herein and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties hereby agree as follows:

ARTICLE I. DEFINITIONS

1.1. “Active Representative Days” means days when VCS Sales Representatives who have completed all CLIENT and VCS required training are engaged in Detailing or otherwise engaged in CLIENT required or approved activities pursuant to this Agreement. When measuring the number of Active Representative Days for any period, the number shall be reduced by the product of the number of Business Days during such period when a Territory does not have an Active Representative multiplied by the number of Territories that do not have an Active Representative on any such Business Day.

1.2. “Active Representatives” means VCS Sales Representatives who have completed all CLIENT and VCS-required training and are engaged in Detailing or otherwise engaged in CLIENT-required or approved activities pursuant to this Agreement. Any VCS Sales Representative who is on a Time Out of Territory shall not be considered an Active Representative.

1.3. “Active Territory” means a Territory in which there are Active Representatives.

1.4. “Adverse Event” means any untoward medical occurrence in a patient, consumer or clinical investigation subject associated with the use of a Product that does not necessarily have a causal relationship with this treatment. An Adverse Event can therefore be any unfavorable and unintended sign (including an abnormal laboratory finding), symptom, or disease temporally associated with the use of a Product, whether or not related to such Product. In addition, all cases of apparent drug-drug interaction, pregnancy (with or without outcome), exposure during breastfeeding, paternal exposure, lack of efficacy, overdose, drug abuse and misuse, drug maladministration or accidental exposure and dispensing errors are collected and databased even if no Adverse Event has been reported.

1.5. “Affiliate” means any Person who directly or indirectly controls or is controlled by or is under common control with a Party. For purposes of this definition, “control” or “controlled” shall mean ownership directly or through one or more Affiliates, of more than fifty percent (50%) of the shares of stock entitled to vote for the election of directors, in the case of a corporation, or more than fifty percent (50%) of the equity interests in the case of any other type of legal entity, status as a general partner in any partnership, or any other arrangement whereby a Party controls or has the right to control the Board of Directors or equivalent governing body of a corporation or other entity, or the ability to cause the direction of the management or policies of a corporation or other entity.

1.6. “Agreement” is defined in the preamble of this Agreement.

1.7. “Agreement Territory” means the United States.

1.8. “Agreement Year” means a fiscal year commencing on July 1 and ending June 30, except that the first Agreement Year shall commence on the Effective Date and end on June 30, 2009.

1.9. “Arbitration” is defined in Section 12.7(c) of this Agreement.

1.10. “Arbitration Request” is defined in Section 12.7(c)(i) of this Agreement.

1.11. “Arbitrators” is defined in Section 12.7(d)(i) of this Agreement.

1.12. “Auditee” is defined in Section 4.6(b)(i) of this Agreement.

1.13. “Audit Rights Holder” is defined in Section 4.6(b)(i) of this Agreement.

1.14. “Audit Team” is defined in Section 4.6(b)(i) of this Agreement.

1.15. “At-Risk Management Fee” is defined in Section 4.1(a) of this Agreement.

1.16. “Budget” is defined in Section 4.2(a) of this Agreement.

1.17. “Business Day” means any day other than a Saturday, a Sunday, an approved holiday in accordance with CLIENT’s holiday schedule or a day on which commercial banks in

 

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Philadelphia, Pennsylvania are authorized or required by Law to remain closed. CLIENT’S holiday schedule may be modified by CLIENT from time to time and when modified a copy shall be provided to VCS. The CLIENT’s current holiday schedule has been submitted to VCS.

1.18. “Call” means a face-to-face presentation by a Sales Representative to a Target Prescriber which consists of one or more Details and includes, but is not limited to, having a discussion with the Target Prescriber regarding the features and benefits of the Products, their contraindications, FDA approved uses and other pertinent information, and providing the Target Prescriber Product Literature and samples of the Products.

1.19. “Call Plan” means a plan designed by CLIENT, which is intended to enhance the efficiency and effectiveness of the Sales Representatives in making Calls. The Call Plan may be modified by Client from time to time and when modified a copy shall be provided to VCS. The initial Call Plan has been submitted to VCS by letter dated May 9, 2008.

1.20. “CLIENT” is defined in the preamble of this Agreement.

1.21. “CLIENT Representatives” is defined in Section 10.1 of this Agreement.

1.22. “Client Pass-through Expenses” means those certain “Pass-through Costs” referred to on Schedule B .

1.23. “Competing Product” means ***.

1.24. “Components” is defined in Schedule A-1A to this Agreement.

1.25. “Confidential Information” is defined in Section 6.1(a) of this Agreement.

1.26. “Conversion” is defined in Section 9.2 of this Agreement.

1.27. “DDMAC” means the United States Department of Health and Human Services, Food and Drug Administration Center for Drug Evaluation and Research, Office of Medical Policy, Division of Drug Marketing, Advertising and Communications.

1.28. “Detail” is defined on Schedule A-1 to this Agreement.

1.29. “Detailing” is defined on Schedule A-1 to this Agreement.

1.30. “Direct Marketing Expenses” means the funds (which are part of the Budget) to facilitate the Detailing activities of Sales Representatives to Target Prescribers.

1.31. “Disclosing Party” is defined in Section 6.1(a) .

1.32. “Distribution Agent” is defined in Section 3.2(f) of this Agreement.

 

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1.33. “District Manager” means an employee of VCS who is engaged under this Agreement to manage VCS Sales Representatives in specified Territories.

1.34. “Effective Date” is defined in the preamble of this Agreement.

1.35. “Expected Active Representative Days” means all Business Days in a calendar quarter.

1.36. “FDA” means the United States Food and Drug Administration and any successor agency thereto.

1.37. “Field” means the treatment of pain associated with osteoarthritis in joints amenable to topical treatment.

1.38. “FROVA®” is defined in Section 1.59 of this Agreement.

1.39. “GAAP” means U.S. Generally Accepted Accounting Principles consistently applied by the applicable Person.

1.40. “Governmental Authority” means any court, agency, authority, department, regulatory body or other instrumentality of any government or country or of any national, federal, state, provincial, regional, county, city or other political subdivision of any such government or any supranational organization of which any such country is a member, which has competent and binding authority to decide, mandate, regulate, enforce, or otherwise control the activities of the Parties or their Affiliates contemplated by this Agreement.

1.41. “Inactive Territory” means a Territory that does not have an Active Representative. An Inactive Territory that is inactive for at least *** (***) Business Days in a calendar quarter shall be considered an Inactive Territory for the entire calendar quarter. In the event CLIENT conducts a Conversion, the applicable vacated Territory shall not be considered an Inactive Territory until *** (***) days from the date of Conversion so long as VCS has hired a replacement VCS Sales Representative within such period.

1.42. “Information Technology” is defined in Section 3.2(k) of this Agreement.

1.43. “Law” or “Laws” means all laws, statutes, rules, regulations, orders, judgments, injunctions and/or ordinances of any Governmental Authority, including the PhRMA Code and the rules, regulations, guidelines and other requirements of DDMAC.

1.44. “LIDODERM®” is defined in Section 1.56 of this Agreement.

1.45. “Losses” is defined in Section 10.1 of this Agreement.

1.46. “Management Fee” is defined in Section 4.1(a) of this Agreement.

 

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1.47. “National Liaison” means, as to VCS, the individual designated by VCS to coordinate communication and resolution of issues between the Parties. ***.

1.48. “National Sales Director” means, as to each Party, the individual designated by such Party to lead the project to which this Agreement relates, through whom all major communications will be channeled and who will be responsible for high level support within and between the respective Parties’ organizations in relation to this Agreement, including overseeing all significant operational and other issues in connection with the Detailing and promotion activities and the Services to be performed hereunder.

1.49. “Non-Primary Detail” means a Detail during which VOLTAREN® is the second (2nd) most prominent item presented in the Call and comprises, on average, approximately thirty percent (30%) of the time and cost of the Call.

1.50. “Novartis” means, collectively, Novartis, AG and Novartis Consumer Health, Inc.

1.51. “Novartis Agreement” means that certain License and Supply Agreement dated March 3, 2008 by and between CLIENT and Novartis.

1.52. “NSAID” means a non-steroidal anti-inflammatory drug.

1.53. “OTC Product” means a pharmaceutical product for use in humans that has been approved by the FDA for sale to customers and/or patients in the Agreement Territory without a prescription.

1.54. “Party” or “Parties” is defined in the preamble of this Agreement.

1.55. “PDMA” means the Prescription Drug Marketing Act of 1987, as amended, and the regulations promulgated thereunder.

1.56. “Person” means and includes an individual, partnership, joint venture, limited liability company, a corporation, a firm, a trust, an unincorporated organization and a government or other department or agency thereof.

1.57. “PhRMA Code” means the PhRMA Code on Interactions with Healthcare Professionals, as in effect from time to time.

1.58. “Primary Detail” means a Detail during which VOLTAREN® is the most prominent item presented in the Call and comprises, on the average, approximately seventy percent (70%) of the time and cost of the Call.

1.59. “Products” means VOLTAREN® Gel (diclofenac sodium topical gel 1%) (“VOLTAREN®”), LIDODERM ^® (lidocaine patch 5%) (“LIDODERM®”), FROVA® (frovatriptan succinate tablets) (“FROVA®”) and any additional products added by CLIENT to be Detailed by the Sales Representatives pursuant to this Agreement and listed on Schedule A-1A to this Agreement from time to time.

 

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1.60. “Product Literature” shall mean promotional, informative and other written information concerning a Product.

1.61. “Professionals” means physicians and other health care practitioners who are permitted under the Laws of the United States to prescribe the Products.

1.62. “Project Manager” means, as to VCS, an employee of VCS who is engaged under this Agreement to assist VCS management and to coordinate administrative support for the VCS Field Force.

1.63. “Representative” or “Representatives” is defined in Section 6.1(b) of this Agreement.

1.64. “Receiving Party” is defined in Section 6.1(a) .

1.65. “Sales Representative” means a VCS Sales Representative.

1.66. “Senior Officers” means the respective Chief Executive or Operating Officers (or any designee thereof) of the Parties.

1.67. “Services” has the meaning given to such term in the Recitals to this Agreement.

1.68. “Significant Loss” is defined in Schedule A-2 .

1.69. “Spare Pool Threshold” is defined in Section 3.2(k) .

1.70. “State Disclosure Logs” is defined in Section 4.1(c) of this Agreement.

1.71. “Target Prescriber” means, with respect to the Products, one of the specifically identified Professionals within a Sales Representative’s Territory to be Called upon by the Sales Representative based on CLIENT’s proprietary analysis of physician opportunities as set forth in CLIENT’s Call Plan.

1.72. “Term” is defined in Article II of this Agreement.

1.73. “Territories” means the respective towns, cities and other subdivisions and geographical areas located within the Agreement Territory to which the applicable Sales Representatives are assigned.

1.74. “Theft” is defined in Schedule A-2 .

1.75. “Threshold 1 Arbitrator” is defined in Section 12.7(d)(i) of this Agreement.

1.76. “Time Out of Territory” means a leave of absence, an unapproved absence, an absence for illness that continues for more than *** (***) *** in any calendar month, a pre-approved vacation that continues for more than *** (***) *** in any calendar month or a combination of illness and pre-approved vacation that continues for more than *** (***) *** in any calendar month.

 

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1.77. “Tube Sales” means the total dispensed tubes of VOLTAREN® as measured by Wolters Kluwer™ Prescription Audit or other third party vendor selected by CLIENT from time to time. Appropriate adjustments in the measurement of Tube Sales shall be made in the event that any third party vendor selected by CLIENT as referred to above uses different measurement metrics than the previous vendor.

1.78. “VCS” is defined in the preamble of this Agreement.

1.79. “Variant Amount” is defined in Section 4.1(d) of this Agreement.

1.80. “VCS Field Force” means the VCS Sales Representatives, Project Manager, National Liaison, District Managers and National Sales Director providing Services pursuant to this Agreement.

1.81. “VCS Field Force Information” means the information required to be provided by VCS pursuant to Section 4.1(b) with respect to each Member of the VCS Field Force in the form attached hereto as Schedule A-1F .

1.82. “VCS Sales Representative” means an individual employed by VCS who Details the Products to Target Prescribers in accordance with this Agreement.

1.83. “VCS Representatives” is defined in Section 10.1 of this Agreement.

1.84. “VOLTAREN®” is defined in Section 1.59 of this Agreement.

1.85. “Works” is defined in Schedule A-1A .

ARTICLE II. TERM

Subject to the terms of Article XI, this Agreement shall be in effect commencing on the Effective Date and continuing through June 30, 2010 (the “ Term ”).

ARTICLE III. SCOPE OF SERVICES, PROFESSIONALISM AND COMPLIANCE

3.1. The Scope of Services.

CLIENT hereby engages VCS, and VCS hereby accepts such engagement, to provide the Services pursuant to the terms of this Agreement and the Schedules attached to this Agreement. Such engagement shall be on a nonexclusive basis and CLIENT shall at all times have the right to engage any other Person to provide services (including, without limitation, services similar to the Services) that CLIENT, in its sole discretion, deems necessary or appropriate. The Services to be provided under this Agreement are described in this Agreement and the various Schedules hereto, including Schedule A-1 through Schedule A-2 .

 

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3.2. Sales Efforts, Professionalism and Compliance.

a. VCS shall maintain an experienced, well-trained VCS Field Force, whose time is dedicated exclusively to the promotion of the Products and who collectively will provide a minimum of *** Primary Details per calendar quarter, for a total of *** Primary Details per Agreement Year. For every Primary Detail shortfall below *** commencing with the calendar quarter starting July 1, 2008, VCS shall provide CLIENT with a ***.

b. The VCS Field Force shall consist of 275 Sales Representatives, 27 District Managers, one Project Manager, one National Liaison and one National Sales Director. Each District Manager and Sales Representative shall have the qualifications and meet the hiring profile and criteria set forth on Schedule A-1C . The National Liaison, Project Manager and National Sales Director designated by VCS shall be subject to the approval of CLIENT, which approval shall not be unreasonably withheld. CLIENT hereby designates Larry Romaine as its National Sales Director. VCS hereby designates Tom Dimke as its National Sales Director. Each Party may change its National Sales Director upon written notice to the other Party.

c. (i) All Territories and districts shall be filled by VCS Sales Representatives and District Managers, as applicable, by May 12, 2008. In respect to any Territory and/or district that has an unfilled position during the period beginning *** and continuing through ***, VCS shall pay CLIENT *** for each such Territory and/or district until each such Territory and district has a Sales Representative or District Manager, as applicable, on the payroll that has completed the training required by this Agreement (such payment to continue for any Territory or district that was unfilled on *** and continues unfilled thereafter). For the purpose of clarity, once a Territory and/or district that did not have a VCS Sales Representative and/or District Manager, as applicable, as of *** has a Sales Representatives and/or District Manager, as applicable, on the payroll that has completed the training required by this Agreement, VCS’ obligation to pay the *** described in this Section 3.2(c)(i) shall cease.

(ii) From and after *** Ventiv shall be responsible to ensure that (i) the Active Representative Days equal at least ***% of the product of the Expected Active Representative Days multiplied by *** for at least *** (***) calendar quarters out of any *** (***) consecutive calendar quarters; and (ii) there are no more than *** Inactive Territories in *** (***) calendar quarters out of any *** (***) consecutive calendar quarters. ***.

d. The VCS Field Force shall have a thorough knowledge of the Products and their associated disease entities in respect to which Products CLIENT has provided training in accordance with this Agreement.

e. VCS shall employ its expertise and best professional judgment to direct the Detailing and promotion activities to Target Prescribers identified from time to time by CLIENT. VCS shall be responsible to ensure that the Sales Representatives Detail the Products in an accurate and compliant manner in an effort to enable Target Prescribers to obtain all information necessary or appropriate in connection with prescribing the Products.

f. All promotional materials (as updated from time to time) to be used by the VCS Field Force pursuant to this Agreement shall be chosen and/or approved by CLIENT and CLIENT shall be responsible to ensure the compliance of such promotional materials with applicable Law.

 

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All samples and promotional materials shall be disseminated by CLIENT in compliance with applicable Law and such distribution shall occur directly by CLIENT or through a distribution agent selected by CLIENT from time to time (the “ Distribution Agent ”) to the VCS Field Force. VCS shall be responsible to secure appropriate physical space (including temperature-controlled storage space for samples and Products) for the storage of any and all materials distributed by CLIENT or by the Distribution Agent to the VCS Field Force. VCS shall be responsible to ensure that the VCS Field Force stores and maintains such materials in the designated space.

g. VCS shall be responsible for ensuring that, upon receipt thereof, all samples, promotional and other materials are handled and distributed by VCS and the VCS Field Force in accordance with, and VCS shall comply and shall be responsible to ensure that the VCS Field Force complies with any and all reporting and other obligations (including, without limitation, all obligations regarding reporting of samples lost in transit, a Significant Loss of samples, a theft of drug samples and all falsification of sample documents) under, CLIENT’s Sample Accountability Policies and Procedures provided to VCS by letter dated May 9, 2008 (as they may be amended or otherwise modified from time to time by CLIENT (such amendments and modifications to be provided by CLIENT to VCS in advance and in writing)) and, as more specifically provided below, under all applicable Laws. CLIENT shall be responsible for ensuring that its Sample Accountability Policies and Procedures comply with applicable Law. In connection with its reporting obligations under this Section 3.2(g) , VCS shall be responsible for complying with the terms and conditions set forth in Schedule A-2 of this Agreement. The additional terms and conditions regarding sample management and accountability are set forth in Schedule A-2 of this Agreement.

h. VCS shall comply and be responsible to ensure that the VCS Field Force complies with any and all reporting and other obligations imposed by any state or other jurisdiction (including, without limitation, all obligations regarding providing to ENDO for dissemination to the applicable state or other jurisdiction reports of expenses incurred in the course of the VCS Field Force’s marketing efforts) and as more specifically described in Section 4.1(c) .

i. The Services shall be performed by VCS and the VCS Field Force (i) in a professional manner consistent with industry standards; (ii) in conformance with that level of care and skill ordinarily exercised by other professional contract sales organizations; and (iii) in compliance with all applicable Laws. Each VCS Field Force member shall be subject to removal from providing Services pursuant to this Agreement in accordance with the provisions set forth in Schedule A-1 . Any such VCS Field Force member who is so removed shall be promptly replaced by VCS. VCS shall retain, in all respects, all liability and obligations of any kind or nature with respect to any employment-related claims arising out of or in connection with the activities contemplated by this Agreement and/or the Services provided by the applicable VCS Field Force member.

j. VCS shall promote the Products, and shall cause the VCS Field Force to promote the Products, in strict adherence to applicable Law and professional requirements and CLIENT policies (provided to VCS in advance and in writing) that are applicable to the type of Services contemplated hereunder and which are utilized by CLIENT generally in its business, including ensuring that (i) no member of the VCS Field Force has been (A) convicted of an offense related to any federal or state health care program; (B) excluded or otherwise rendered ineligible for federal or state health care program participation; or (C) debarred under Subsection (a) or (b) of Section 306 of the U.S. Food, Drug and Cosmetic Act, as amended from time to time (21 U.S.C. § 301 et seq.); and (ii) no person on any FDA Clinical Investigator Enforcement lists (including the following: (1)

 

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Disqualified/Totally Restricted List, (2) Restricted List and (3) Adequate Assurances List) will participate in the provision of the Services. If at any time VCS becomes aware that any member of the VCS Field Force who participated or is participating in the provision of the Services is on, or is being added to the FDA Debarment List or any FDA Clinical Investigator Enforcement Lists, VCS shall provide written notice of this to CLIENT within 24 hours of VCS having become aware of this fact and will immediately terminate such person from conducting any activity under this Agreement, subject to applicable Law. Further, in connection with any activity under this Agreement, VCS shall, and shall cause all members of the VCS Field Force to, comply in all material respects with the Office of Inspector General Compliance Program Guidance for Pharmaceutical Manufacturers, April 2003, PDMA, state Laws governing the storage and distribution of pharmaceutical samples and aggregate spending on physician gifts, entertainment and expenses, the PhRMA Code, as in effect from time to time, Section 1128B(b) of the Social Security Act, the AMA Guidelines on Gifts to Physicians from Industry, HIPAA and all other applicable Laws.

k. CLIENT shall provide all laptops and printers and all necessary software, hardware and related equipment (collectively, “ Information Technology ”) necessary for the performance of the Services hereunder. VCS shall ensure that the members of the VCS Field Force use the appropriate level of care in the handling and use of all such Information Technology and shall provide a report identifying the location of each VCS Field Force member within *** days after the end of each calendar quarter during the Term in order to enable CLIENT to monitor the location of all Information Technology. VCS shall provide CLIENT with all information and applicable verifying documentation ( e.g ., police reports) identifying any damaged or stolen Information Technology. CLIENT shall maintain a spare pool of Information Technology equal to *** computers and ***% of the other Information Technology provided to VCS for use by the VCS Field Force (the “ Spare Pool Threshold ”). CLIENT shall replace all documented damaged or stolen Information Technology up to the Spare Pool Threshold. VCS shall be solely responsible for all costs, damages, losses and liabilities associated with damaged, lost or stolen Information Technology (subject to normal wear and tear) in excess of the Spare Pool Threshold and such costs, damages, losses and liabilities shall not be passed through to CLIENT.

l. VCS shall comply, and shall cause any subcontractor that it is permitted to use hereunder to comply, with the terms and conditions of the Novartis Agreement applicable to it, including all compliance, confidentiality, record keeping, reporting and auditing provisions thereof. VCS shall be responsible for each of its permitted subcontractor’s compliance with the terms of this Agreement.

m. The training responsibilities and obligations of the Parties are set forth on Schedule A-1 under the section captioned “Training.”

ARTICLE IV. COMPENSATION, BUDGET AND REIMBURSEMENT; REPORTING; RECORD KEEPING AND AUDIT RIGHTS

4.1. Compensation.

a. Subject to the limitations set forth in this Article IV , CLIENT shall pay VCS compensation for the Services performed under this Agreement as set forth on Schedule B to this Agreement. Such compensation shall include payment of various fees and costs of VCS as described

 

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on Schedule B , including a fixed, non-risk related, management fee (the “ Management Fee ”) and, if applicable, beginning with the calendar quarter commencing July 1, 2008, additional risk-related management fees (collectively, the “ At-Risk Management Fee ”), which shall be computed on the basis of the percentage of the achievement of certain Tube Sale goals, Detailing requirements and Active Representative/Active Territory goals, all as more fully described on Schedule B , in the relevant amounts set forth thereon. VCS shall be entitled to receive a prorated portion of the monthly fixed fee referred to in Schedule B for the period from May 27, 2008 through June 30, 2008. Moreover, Tube Sales and Detailing completed by the VCS Field Force during the period from May 27, 2008 through June 30, 2008 shall count towards VCS’ achievement of the At-Risk Management Fee. The Parties shall agree on an incentive compensation plan relating to the VCS Field Force, which among other things will limit participation by members of the VCS Field Force who are on performance improvement plans in incentive compensation for which CLIENT is required to pay/reimburse VCS under this Agreement.

b. CLIENT shall notify VCS of the Tube Sales in a calendar quarter within 45 days after the end of each calendar quarter, beginning with the calendar quarter commencing July 1, 2008, and tender payment of the applicable At-Risk Management Fee, if any, in respect of the achievement of the applicable percentage of such Tube Sales with that notice. Notwithstanding the above, on a monthly basis, Client shall provide VCS with all data it receives concerning Tube Sale goals, Detailing requirements and Active Representative/Active Territory goals to allow VCS to monitor achievement of the At-Risk Management Fee. Within ten (10) Business Days following the end of each calendar quarter during the Term of this Agreement, CLIENT shall provide to VCS a report summarizing on a calendar quarter and Agreement Year-to-date basis: (i) the total number of Details, providing separate numbers for Primary Details and total Details; and (ii) the total number of Details to Target Prescribers, providing separate numbers for Primary Details and total Details. In addition, within ten (10) Business Days following the end of each month during the Term of this Agreement, VCS shall provide to CLIENT a report in the form of Schedule A-1F , which shall effectively summarize the total number of Active Representatives and Inactive Territories. The At-Risk Management Fee payable in respect of the Detailing requirements and the Active Representative/Active Territory goals shall be determined by CLIENT and VCS based on the reports made with respect to such matters by CLIENT and VCS in accordance with this Section 4.1 and shall be made within 30 days after such determination.

c. In each state or other jurisdiction in which marketing and expense reports (the “ State Disclosure Logs ”) are required, VCS shall provide to CLIENT, by the 15 ^th day of each month during the Term, a report summarizing the expenses incurred by the VCS Field Force in, and all other items required by the applicable state or other jurisdiction to be reported with respect to, the month immediately preceding such month. Such State Disclosure Log shall be provided on the applicable state spreadsheet, the forms of which were provided to VCS by CLIENT by letter dated May 1, 2008. The Project Manager, initially ***, shall be the contact at VCS responsible for timely submitting the State Disclosure Logs to CLIENT. CLIENT shall file the requisite state expense reports utilizing the information contained in the State Disclosure Logs.

d. Upon termination or expiration of this Agreement, any applicable earned fees for any calendar quarter or portion thereof prior to such expiration or termination that have not been invoiced shall be paid. VCS shall invoice CLIENT monthly in arrears for fixed monthly fees related to the Services and shall set forth on each invoice the actual headcount of all persons employed by VCS under this Agreement as of the end of the pay period ending in approximately mid-month for

 

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the month covered by such invoice ***. Each VCS invoice shall also separately set forth in reasonable detail the amount of any Client Pass-through Expense for which VCS seeks reimbursement. Subject to receipt of a monthly reconciliation report, as described below, CLIENT shall pay the full amount of each VCS invoice, except any Client Pass-through Expense in excess of the amount allowed for such item in the Budget that has not been previously approved by CLIENT. CLIENT and VCS shall work together in good faith to develop a Pass-through Expense budget.

e. ***. VCS shall also provide CLIENT with a monthly report regarding the usage by the VCS Field Force of vehicles used in the course of carrying out the Services hereunder (which report shall be based on reports VCS receives from *** and/or the VCS Field Force members, as applicable, with respect to such matters), summarizing the car mileage. Any amounts due through reconciliation of budgeted amounts (for (i) and (ii) above) and actual costs incurred (for (i) and (ii) above) will be applied as a credit or an additional charge on the month’s invoice from VCS that is submitted with the monthly reconciliation report. VCS shall also provide Client at the end of each calendar quarter, together with the invoice for the month just ended, a reconciliation of the invoiced amounts during such quarter and Agreement Year to date to the quarterly and year to date Budget. VCS and CLIENT shall, in addition, review the aggregate of all Variant Amounts within 30 days of the end of each calendar quarter. In that connection, CLIENT may request additional justification for any Variant Amount and to the extent CLIENT is not reasonably satisfied with such justification, CLIENT may require a credit against future invoices (or, at end of the Term, a refund) equal to the unjustified Variant Amounts. In no event shall the variances from the budgeted amounts exceed in the aggregate the annual budget for such items unless otherwise agreed to in writing by CLIENT.

4.2. Budget

a. The annual budget (“ Budget ”) for the first Agreement Year is attached to this Agreement as Schedule B-Y .

b. VCS shall prepare a draft Budget for each subsequent Agreement Year of the Term of this Agreement and deliver such Budget to CLIENT at least 90 days prior to the beginning of such Agreement Year. The aggregate amount of all costs set forth therein shall in no event exceed the prior year’s budget in an amount greater than the percentage increase in the Consumer Price Index for All Urban Consumers (CPI-U), subject to conformance by the parties of items such as salaries and travel expenses to scales utilized by CLIENT for its employees and conformance of charges for gas to accepted gas indices comparing the price of gas at May 27, 2008 to the price at the time the Budget is prepared. The Budget shall set out in reasonable detail the various costs of VCS (related to the Services including those described on Schedule A-1 through Schedule A-2 ) estimated to be payable by CLIENT in the forthcoming year. Upon receipt thereof, CLIENT will promptly review the Budget and the Parties will then reconcile any issues related thereto. CLIENT and VCS recognize that the Budget, as with any projection, may require adjustment due to changes in expenses, market conditions and numerous other factors and agree to review the Budget no less frequently than every *** (***) months for possible adjustment.

c. If CLIENT does not approve a Budget at least 30 days prior to the beginning of any calendar year, or is unable to reach agreement with VCS on any proposed adjustment thereto, including a CLIENT-required reduction in Client Pass-through Expenses (as set forth in Section 4.3 of this Agreement), CLIENT and VCS agree to have their Senior Officers meet forthwith in an attempt to resolve the matter. If such a resolution is not reached within 30 days from such meeting

 

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and unless each Party agrees in writing to continue good faith negotiations as to the Budget for an additional 60 days, CLIENT shall be deemed to have given notice of termination under Section 11.2(b) of this Agreement effective 120 days after such 30 ^th day referred to in the prior clause. The Parties agree that during the aforementioned negotiation period (to the extent such period exists in a new contract year), VCS shall continue provision of the Services and shall be paid by CLIENT in accordance with the prior Agreement Year’s approved Budget, subject to reconciliation with the subsequently agreed-upon Budget.

4.3. Client Pass-through Expenses

a. VCS may request that CLIENT approve particular Client Pass-through Expense items prior to incurrence thereof and once approved by CLIENT in writing, CLIENT shall pay the same when invoiced. In addition, CLIENT may require, on not less than 30 days’ notice, that amounts provided in the Budget for Client Pass-through Expenses be reduced. CLIENT shall, at the written request of VCS, discuss in good faith the reason for the required reduction in Client Pass-through Expenses and the impact of such reduction on VCS and its ability to achieve the At-Risk Management Fee, but CLIENT shall make the final decision with respect to any reduction.

b. Notwithstanding anything herein to the contrary, in no event shall CLIENT be required to pay VCS Client Pass-through Expenses in excess of the amounts provided for such expenses in the Budget, unless otherwise specifically agreed to by CLIENT in writing.

4.4. Additional Expenses

a. CLIENT may request VCS to incur particular expenses in addition to those already relating to the Services and reflected in the Budget, in which case those expenses will be added to the Client Pass-through Expenses payable by CLIENT. All additional expenses must be agreed to in writing by CLIENT prior to such expenses being incurred.

b. CLIENT reserves the right to add additional Products to be Detailed by the Sales Representatives at no additional cost to CLIENT, except that: (i) CLIENT shall pay documented incremental costs ( e.g ., training, distribution, sample costs and Detail aids) that have been approved by CLIENT and which are related to such additional Products and (ii) the Parties shall discuss in good faith and determine whether any adjustments to the metrics required for achievement of the At-Risk Management Fee should be made. At such time as CLIENT exercises this right, VCS shall comply with all other provisions of this Agreement applicable to promoting Products in connection with the promotion of such additional Products and the Parties shall enter into appropriate amendments to this Agreement to reflect the same.

4.5. Payment Due

Invoices are due and payable within *** days of receipt thereof, except to the extent of any amount disputed by CLIENT. CLIENT shall pay the undisputed amount of each invoice when due. In the event CLIENT disputes an amount set forth on a VCS invoice, it shall send VCS written notice specifying in detail the basis for the dispute. In addition to VCS’ right to terminate this Agreement under Section 11.1 in the case of non-payment of any undisputed amount, if VCS elects not to terminate this Agreement in the case of non-payment of any undisputed amount, CLIENT shall pay

 

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VCS a finance charge of *** (***%) percent per month for the undisputed amount on each invoice past due for more than *** days from the applicable payment date. The Parties agree to resolve disputes in good faith and an expeditious manner.

4.6. Books and Records

a. VCS shall keep complete, true and accurate books and records with respect to the Services provided and its other obligations under this Agreement in accordance with GAAP. VCS shall keep such books and records for at least three (3) years following the end of the Agreement Year to which they pertain. Such books and records shall be kept at VCS’ principal place of business. At CLIENT’s sole cost and expense, except as provided below, VCS shall permit auditors, on behalf of CLIENT and Novartis, to visit and inspect, during regular business hours and under the guidance of representatives of VCS, and to examine the books of account of VCS concerning the Services and this Agreement and discuss the affairs, finances and accounts of VCS concerning the Services and this Agreement with, and be advised as to the same by, its officers and independent accountants.

b. Audits . CLIENT and Novartis shall have audit rights with respect to VCS’ records described in this Section 4.6(b) .

i. CLIENT or Novartis (in such capacity, the “ Audit Rights Holder ”) may, upon request and at its expense (except as provided for herein), cause an internationally-recognized independent accounting firm selected by it, other than one to whom VCS (in such capacity, the “ Auditee ”) has a reasonable objection (the “ Audit Team ”), to audit (at CLIENT’s or Novartis’ sole cost and expense, except as otherwise set forth in subsection (v) below) during ordinary business hours the books and records of the Auditee and the correctness of any payment made or required to be made to or by such Auditee, and any report underlying such payment (or lack thereof), pursuant to the terms of this Agreement. Prior to commencing its work pursuant to this Agreement, the Audit Team shall enter into an appropriate confidentiality agreement with the Auditee.

ii. In respect of each audit of the Auditee’s books and records: (i) the Auditee may only be audited once per calendar year, unless a prior audit reveals any material discrepancy, in which case, more frequent audits will be permitted; (ii) no records for any given Agreement Year may be audited more than once for the same purpose, unless a prior audit reveals any material discrepancy, in which case, more frequent audits will be permitted; and (iii) the Audit Rights Holder shall only be entitled to audit books and records of the Auditee from the three (3) Agreement Years prior to the Agreement Year in which the audit request is made.

iii. In order to initiate an audit for a particular Agreement Year, the Audit Rights Holder must provide written notice to the Auditee. The Audit Rights Holder shall provide the Auditee with notice of one or more proposed dates of the audit not less than 30 calendar days prior to the first proposed date. The Auditee will reasonably accommodate the scheduling of such audit. The Auditee shall reasonably cooperate with such audit.

 

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iv. The audit report and basis for any determination by an Audit Team shall be made available for review and comment by the Auditee, and the Auditee shall have the right, at its expense, to request a further determination by such Audit Team as to matters which the Auditee disputes (to be completed no more than 30 calendar days after the first determination is provided to Auditee and to be limited to the disputed matters). If the parties disagree as to such further determination, the Audit Rights Holder and the Auditee shall mutually select an internationally-recognized independent accounting firm that shall make a final determination as to the remaining matters in dispute that shall be binding upon the parties.

v. If the audit shows any under-reporting or underpayment, or overcharging by any party, that under-reporting, underpayment or overcharging shall be reported to the Audit Rights Holder and the underpaying or overcharging party shall remit such underpayment or reimburse such overcompensation to the underpaid or overcharged party within *** calendar days of receiving the audit report. Further, if the audit for an Agreement Year shows an under-reporting or underpayment or an overcharge by any party for that period in excess of *** percent (***%) of the amounts properly determined, the underpaying or overcharging party, as the case may be, shall reimburse the applicable underpaid or overcharged party, for its respective audit fees and reasonable out-of-pocket expenses in connection with said audit, which reimbursement shall be made within *** calendar days of receiving appropriate invoices and other support for such audit-related costs.

vi.  Accounting Standards . All costs and expenses and other financial determinations with respect to this Agreement shall be determined in accordance with GAAP.

vii.  Taxes . Any withholding or other taxes that either Party or its Affiliates are required by Law to withhold or pay on behalf of the other Party, with respect to any payments to it hereunder, shall be deducted from such payments and paid to the applicable Governmental Authority contemporaneously with the remittance to the other Party; provided, however , that the withholding Party shall furnish the other Party with proper evidence of the taxes so paid. Each Party shall furnish the other Party with appropriate documents to secure application of the most favorable rate of withholding tax under applicable Law.

viii.  Payment Currency . All amounts due under this Agreement shall be paid to the designated Party in United States Dollars.

ARTICLE V. REPRESENTATIONS OF THE PARTIES

5.1. VCS Representations

VCS represents to CLIENT that:

 

a.

It has the requisite expertise, experience and skill to render the Services and it shall use all reasonable efforts to cause the Services to be performed in a competent, efficient and professional manner and no less favorable than the overall manner in which similar services are performed for other parties by VCS.

 

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b.

The execution, delivery and performance of this Agreement by VCS and the consummation of the transactions contemplated hereby have been duly authorized by all requisite company action; this Agreement constitutes the legal, valid and binding obligation of VCS, enforceable in accordance with its terms (except to the extent enforcement is limited by bankruptcy, insolvency, reorganization or other Laws affecting creditors’ rights generally and by general principles of equity); and this Agreement and VCS’ performance hereunder does not violate or constitute a breach under any organizational document of VCS or any contract, other form of agreement, or judgment or order to which VCS is a party or by which it is bound.

 

c.

VCS shall adhere to and comply with, and shall cause the VCS Field Force to adhere to and comply with, all applicable Laws in carrying out its obligations under this Agreement.

 

d.

As of the date this Agreement is signed by VCS, neither VCS nor inVentiv Health has any equity or ownership interest of any kind or nature in Alpharma Pharmaceuticals LLC, and Alpharma Pharmaceuticals LLC is not a registered owner of any equity or other ownership interest of any kind or nature in VCS or inVentiv Health and, to the actual knowledge of VCS, no Affiliate of Alpharma Pharmaceuticals LLC is a registered owner of any such interest and neither Alpharma Pharmaceuticals LLC or any of its Affiliates is a beneficial owner of any such interests.

 

e.

VCS will maintain insurance with financially sound carriers in the amounts and types (with the deductibles or retentions) as set forth in Schedule C to this Agreement, as the same may be amended or modified from time to time.

5.2. Client Representations

CLIENT represents to VCS that:

 

a.

The execution, delivery and performance of this Agreement by CLIENT and the consummation of the transactions contemplated hereby have been duly authorized by all requisite corporate action; this Agreement constitutes the legal, valid and binding obligation of CLIENT, enforceable in accordance with its terms (except to the extent enforcement is limited by bankruptcy, insolvency, reorganization or other Laws affecting creditors’ rights generally and by general principles of equity); and this Agreement and CLIENT’s performance hereunder does not violate or constitute a breach under any organizational document of CLIENT or any contract, other form of agreement, or judgment or order to which CLIENT is a party or by which it is bound.

 

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b.

CLIENT shal