EXHIBIT 10.19
AGREEMENT BETWEEN ENDO PHARMACEUTICALS INC.
AND
XXXXXXXXXX HEALTHCARE SERVICES INC.
EFFECTIVE
FEBRUARY 1, 2000
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 406 of the Securities Act of 1933.
REDACTED PORTIONS OF THIS EXHIBIT ARE MARKED BY AN ***.
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This Agreement ("Agreement") is effective as of February 1, 2000, by and between
ENDO PHARMACEUTICALS INC., a Delaware corporation, with its principal office at
223 Wilmington West Xxxxxxx Xxxx, Chadds Ford, Pennsylvania 19317 ("ENDO") and
XXXXXXXXXX HEALTHCARE SERVICES INC., a Delaware corporation, with its principal
office at 000 Xxxx Xxxxx, Xxxxxx, Xxxxxxxx 00000 ("LHSI").
W I T N E S S E T H:
WHEREAS, LHSI is in the business of providing outsource logistics services to
pharmaceutical manufacturers and other similar product manufacturers; and
WHEREAS, ENDO is an integrated pharmaceutical company which requires customer
service, chargeback processing, certain account receivables management services
and other logistics services for its pharmaceutical business; and
WHEREAS, LHSI desires to provide certain outsource logistics services to ENDO,
as more particularly set forth herein;
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
promises, covenants and conditions contained herein and other good and valuable
consideration each to the other paid and received, the receipt and sufficiency
of which is hereby acknowledged, LHSI and ENDO agree as follows:
1. DEFINITIONS
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1.1 "Adverse Drug Experience" means all data concerning any serious or
unexpected adverse event associated with the use of a drug in humans,
whether or not considered drug-related, with regard to any Product which
may come to the attention of any LHSI employee providing Services under
this Agreement, and which is of such a nature and magnitude that it is
required under the laws and regulations of the FDA to be collected,
maintained, and reported to the FDA.
1.2 "Affiliate" means any corporation, association or other entity, which
directly or indirectly controls, is controlled by or is under common
control with the party in question. As used herein the term "control" means
control with possession of the power to direct, or cause the direction of,
the management and policies of a corporation, association, or other entity.
1.3 "Authorized Customer" shall mean any party approved in a Record by ENDO.
1.4 "Best Efforts" means those efforts which would be made by a reasonably
prudent business person acting in good faith, in the exercise of reasonable
commercial judgment and in a manner consistent with those efforts a party
would devote to the provision of Services to its own customers.
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1.5 "Controlled Substance" means the pharmaceutical product classified by DEA
as a scheduled drug in categories II through V and which are included as a
Product in Schedule A, attached hereto and made a part hereof, as the same
may be amended by from time to time, at ENDO's option. ENDO may add to or
delete a Controlled Substance from Schedule A for no additional cost.
1.6 "DEA" means the Drug Enforcement Administration of the United States.
1.7 "ENDO Literature" means any written information concerning the Products
provided to LHSI by ENDO.
1.8 "FDA" means the United States Food and Drug Administration.
1.9 "Fee" means the logistics fees to be paid by ENDO to LHSI as set forth in
Schedule B, attached hereto and made a part hereof, as the same may be
amended from time to time, by mutual consent of the parties.
1.10 "Force Majeure" means acts of war; civil disturbance or riot; earthquake;
fire; flood; hurricane; windstorm; or similar natural disasters; material
change in the laws or regulations governing the importation and manufacture
of active drug substances and/or final finished pharmaceutical products,
marketing, promotion, sale, and/or distribution of pharmaceutical products,
including controlled substances of any government, regulatory or judicial
authority; destruction of facilities and materials; labor disturbances;
failure of public utilities or common carriers; all beyond the reasonable
control of the applicable party; and other acts defined as Force Majeure
under the laws of the State of Delaware.
1.11 "LHSI Premises" means the distribution facilities operated by LHSI.
1.12 "Product" means, individually and collectively, the ENDO pharmaceutical
products and all product extensions (including single and combination
products), product improvements, dosage forms (including placebos),
strengths, and package sizes of such Products listed in Schedule A-I and
ScheduleA-II (collectively, "Schedule A"), which may be amended from time
to time, at ENDO's option. ENDO may add to or delete a Product from
Schedule A for no additional cost.
1.13 "Record" means information inscribed on a tangible medium or stored in an
electronic medium and retrievable in a perceivable or written form.
1.14 "Report" means a report or analysis regarding any reports requested by ENDO
which are related to the Services provided by LHSI to ENDO. The type of and
frequency of such reports are described in Schedule C and the cost of such
reports is included in the Fee set forth in Schedule B.
1.15 "Services" means the full scope of logistics services to be provided by
LHSI to ENDO as more fully described herein, in Schedule C, and in the Work
Instructions, including (i) the
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Warehouse and Distribution Services, (ii) the Customer Service and
Chargeback Processing Services, and (iii) the Accounts Receivable Services.
1.16 "Term" means the periods described in Section 3 for the various Services
provided under this Agreement.
1.17 "Territory" means the fifty (50) states of the United States of America,
the District of Columbia, its commonwealths, possessions, and territories,
and any other locations on which the parties may agree in a Record.
1.18 "Work Instructions" means those procedures to be established jointly by
ENDO and LHSI no later than January 31, 2000 for the provision of Services.
Such procedures shall be used to train LHSI personnel in order for such
personnel to perform their responsibilities under this Agreement. The Work
Instructions may be amended from time to time by consent of the parties in
a Record.
1.19 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.
2. APPOINTMENT
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2.1 During the Term of this Agreement, LHSI shall provide the Services set
forth in Schedule C to ENDO in the Territory.
2.2 LHSI shall commence providing the Warehouse and Distribution Services on
March 1, 2000, and shall commence providing the Customer Service and
Chargeback Processing Services, as well as the Accounts Receivable
Services, on the date hereof.
2.3 During the Term of this Agreement, ENDO grants to LHSI a nonexclusive right
to use at no cost the SAP computer program provided by ENDO solely for the
purpose of performing the Services under this Agreement
2.4 LHSI shall use its Best Efforts to recruit and retain personnel with the
requisite expertise, experience, and skills to provide the Services to ENDO
and perform its obligations under this Agreement.
2.5 Within five (5) days of the execution of this Agreement, LHSI and ENDO
shall each appoint a representative who shall be the primary contact
between the parties and shall be responsible for managing the relationship
between the parties. The representatives shall meet periodically but no
less than once per calendar week at a location to be mutually agreed to by
the parties.
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3. TERM; COMMENCEMENT OF SERVICES
------------------------------
This Agreement shall commence and shall remain in effect for the following
periods unless earlier terminated in accordance with paragraph 16: (i) with
respect to the Warehouse and Distribution Services described on Schedule C,
the period from February 1, 2000 through and including February 28, 2005,
(ii) with respect to the Customer Service and Chargeback Processing
Services described on Schedule C, the period from the date of this
Agreement through January 31, 2003, and (iii) with respect to the Accounts
Receivable Services described on Schedule C, the period from the date of
this Agreement through January 31 2001; provided, however, that LHSI's
distribution services which are described as part of the Warehouse and
Distribution Services on Schedule C will commence at the Memphis, Tennessee
LHSI Premises on March 1, 2000, and provided further, however, that LHSI's
processing of returns which is described as part of the Warehouse and
Distribution Services on Schedule C will commence on April 1, 2000.
Notwithstanding the foregoing commencement dates, LHSI will continue to
perform the distribution and warehouse services it presently performs at
the other LHSI Premises until the transition to Memphis, Tennessee is
completed in a manner which provides uninterrupted distribution and
warehouse services to ENDO. If LHSI does not have all applicable federal,
state and local licenses, permits and registrations necessary for the
performance of its obligations under this Agreement including, without
limitation, its DEA license for the new Controlled Substances vault, by
March 31, 2000, then ENDO shall have the right to either terminate this
Agreement or negotiate a restructuring of this Agreement with LHSI. Upon
mutual consent of the parties, this Agreement may be renewed for Additional
Term(s) for such Services and on such terms as may be negotiated and agreed
to by the parties.
4. SERVICES
--------
The services to be provided by LHSI to ENDO for the Term of this Agreement
are set forth herein and in Schedule C.
5. BEST EFFORTS
------------
During the Term of this Agreement, each party shall use its Best Efforts to
meet its obligations under this Agreement.
6. COMPENSATION AND REIMBURSEMENT
------------------------------
6.1 Compensation.
(a) During the Term of this Agreement, ENDO shall pay LHSI the
compensation for Services as set forth in Schedule B. No compensation
other than as described on Schedule B shall be paid to LHSI in
connection with this Agreement or the Services. Schedule B sets forth
the applicable volume discounts and Schedules B and C set forth the
assumptions on which the compensation is based.
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(b) In the event that the parties renew this Agreement, the compensation
for Services provided by LHSI to ENDO during such additional Term
shall be determined by mutual consent of the parties.
6.2 Reimbursement. ENDO shall also reimburse LHSI for certain expenses
specified on Schedule B incurred by LHSI in connection with the performance
of the Services under this Agreement. For each project such as the mailing
of ENDO promotional materials to customers, LHSI shall provide ENDO with an
estimate of the expenses to be incurred for such project. Such estimate
shall be approved by ENDO prior to LHSI undertaking such project.
6.3 Payment Terms
(a) LHSI shall provide to ENDO an invoice on a monthly basis, in arrears,
for Warehouse and Distribution Services (including a transportation
cost management fee of *** (***) percent of the preceding month's
third-party transportation charges, but excluding the fixed monthly
storage fee provided for in paragraph 6.3(b) below), the Customer
Service and Chargeback Processing Services, and the Accounts
Receivable Services, and ENDO shall pay LHSI within thirty (30) days
of receipt of such invoice.
(b) LHSI shall provide to ENDO an invoice on a monthly basis, in advance,
for the fixed monthly storage fee which will be due and payable on the
first day of each month.
(c) Commencing with the year 2001, LHSI shall provide to ENDO an invoice
on or about February first of each year, in arrears, for the
Transportation Shared Savings Allowance described in Appendix B, and
ENDO shall pay LHSI within thirty (30) days of receipt of such
invoice. To enable the calculation of the Transportation Shared
Savings Allowance, ENDO will provide prior to February 1 the prior
year's net sales. ENDO and LHSI will also share, from time to time,
such information and figures as may be necessary or desirable to
reduce transportation costs and perform the calculations associated
with the Transportation Shared Savings Allowance.
(d) LHSI shall provide to ENDO an invoice for actual transportation
service charges from third-party transportation service providers as
of the 15th day and the last day of each month, and ENDO shall pay
LHSI within fifteen (15) days of receipt of such invoice.
(e) Reimbursable expenses incurred by LHSI and not addressed in 6.3 (b)
above shall be paid by ENDO to LHSI within thirty (30) days of receipt
of an invoice from LHSI for such expenses.
(f) In addition to LHSI's right to terminate this Agreement under Article
16.1 in the case of non-payment, if LHSI elects not to terminate this
Agreement, ENDO shall pay a finance charge of *** (***) per month
for each invoice past due for more
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than thirty (30) days from the payment date as set forth in paragraphs
6.3 (a), (b) and (c) above.
6.4 Records and Inspections
(a) ENDO may inspect and audit any and all records, books, and documents
related to LHSI's performance of the Services and its obligations
under this Agreement, during normal business hours provided, however,
that ENDO shall first provide LHSI with reasonable notice (which shall
not be less than 72 hours) in a Record of any such intended inspection
and/or audit. Further, LHSI shall permit representatives of the FDA or
DEA or their agents with reasonable notice to visit and inspect and
audit any and all records, documents, or facilities related to or used
by LHSI in the performance of the Services and its obligations under
this Agreement.
(b) Endo shall have the right to require LHSI to deliver to ENDO from
time-to-time such records, books, and documents related to LHSI's
performance of the Services and its obligations under this Agreement
as ENDO shall designate. When LHSI ceases to provide Warehouse and
Distribution Services to ENDO, it shall provide ENDO with a complete
history of all Warehouse and Distribution Services activities under
this Agreement and all preceding agreements in an electronic format to
be designated by ENDO.
(c) LHSI will provide to ENDO on request all information necessary in
connection with all Product recalls including, without limitation,
customer(s) who received the Product, lot number, date shipped,
ship-to address and other relevant information, all in an electronic
format to be specified by ENDO at the time of the Product recall.
6.5. Retention of Records
All documentation and records pertaining to this Agreement and the Services
provided by LHSI shall be held by LHSI for the length of time specified by
the applicable laws and regulations. After the termination or expiration of
the Term of this Agreement, and for as long as such information is required
by the FDA or DEA to be made available, and for such longer periods as are
customary when dealing with substances such as the Products, LHSI will
provide to ENDO on request all information necessary in connection with all
Product recalls including, without limitation, customer(s) who received the
Product, lot number, date shipped, ship-to address and other relevant
information, all in an electronic format to be specified by ENDO at the
time of the Product recall.
7. WARRANTIES AND REPRESENTATIONS
------------------------------
7.1 Each party represents and warrants to the other that it has the legal
power, authority and right to enter into this Agreement and to perform its
respective obligations as set forth herein.
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7.2 Each party represents and warrants that as of the date of this Agreement it
is not a party to any agreement or arrangement with any third party or
under any obligation or restrictions, which in any way limits or conflicts
with its ability to fulfill any of its obligations under this Agreement.
7.3 LHSI further represents and warrants that it has the requisite expertise,
experience and skill to provide the Services set forth herein and in
Schedule C, and that it shall use its Best Efforts to perform such Services
in a competent, efficient and professional manner.
7.4 The foregoing representations and warranties shall survive the execution,
delivery, and performance of this Agreement, notwithstanding any due
diligence investigation by or on behalf of ENDO.
8. LHSI'S DUTIES
-------------
8.1 LHSI shall use its Best Efforts to train its personnel and perform all
services required under this Agreement in accordance with the Work
Instructions.
8.2 The Services to be provided by LHSI under this Agreement are specified in
Schedule C attached hereto and made a part hereof, and may be amended in
writing from time-to-time upon the mutual consent of the parties.
8.3 Access and Modifications to the LHSI Premises
(a) LHSI represents that the LHSI Premises as currently configured and
equipped, and taken as a whole, are adequate to meet ENDO's current
requirements. With respect to the Warehouse and Distribution Services,
ENDO's "current requirements" (as that term is used in this Section)
are the requirements established by the Warehousing and Distribution
Agreement dated as of June 15, 1999, as amended, and these
requirements will remain applicable until March 1, 2000, when the
requirements for Warehouse and Distribution Services described in this
Agreement and Schedule C will become the applicable current
requirements. The work required to enable LHSI to provide the
Warehouse and Distribution Services described in this Agreement and
Schedule C and satisfy all projected requirements at the LHSI Premises
will be completed, at LHSI's sole cost and expense, no later than
February 29, 2000.
(b) LHSI shall within twenty-four (24) hours notify ENDO, upon notice to
LHSI, of all inspections of any LHSI facility by any federal, state,
or local regulatory representative. LHSI shall provide ENDO within
twenty-four (24) hours with written summaries of the results of such
inspections, and of the actions, if any, taken to remedy conditions
cited in such inspections.
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(c) Endo reserves the right to conduct audits and inspections of the LHSI
Premises at any time and from time to time during the Term upon at
least twenty-four (24) hours prior written notice.
8.4 Other Duties
(a) Upon seventy-two (72) hours advance notice, LHSI shall allow ENDO's
personnel or its representatives, as well as its lenders and auditors,
to perform physical inventory audits of Products in LHSI's custody,
possession or control at any time during normal business hours,
provided such audit is performed without interruption of LHSI's normal
business activities.
(b) LHSI shall provide, with ENDO's consent, ENDO's lenders and auditors
with any document to which ENDO is otherwise entitled that any such
lender or auditor may reasonably request.
(c) LHSI shall obtain and maintain all applicable federal, state and local
licenses, permits and registrations from all applicable federal,
state, and local agencies necessary for the performance of its
obligations under this Agreement, including without limitation, the
warehousing, storage, distribution, use, marketing, promotion, and
sale of Products, including Controlled Substances. LHSI shall be
responsible, with the assistance of ENDO, if requested by ENDO, for
any and all communications with the DEA or other federal, state or
local drug enforcement agency with respect to the maintenance of all
appropriate licenses and payment of fees in connection with the
ordertaking, invoicing, and recordkeeping of Controlled Substances.
LHSI shall immediately notify ENDO of any significant regulatory
action which impacts or may impact upon the ability of LHSI and/or
ENDO to perform their respective obligations under this Agreement.
(d) LHSI shall comply with all requirements of all federal, state and
local governments and agencies having jurisdiction over the Products
and LHSI's activities under this Agreement, including without
limitation, the FDA, DEA, Environmental Protection Agency,
Occupational Safety and Health Administration and the Department of
Transportation.
(e) LHSI shall work cooperatively with ENDO to expeditiously and
economically execute and implement the transition of Services from
ENDO's current Services providers to LHSI.
(f) LHSI shall discuss Products with Authorized Customers in the Territory
in accordance with Work Instructions.
(g) LHSI shall only utilize the ENDO Literature provided by ENDO, at
ENDO's expense and direction, to be used in communications with
Authorized Customers in the Territory.
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(h) LHSI shall be responsible for executing, at ENDO's direction, all
responses to inquiries from Authorized Customers in the Territory in
connection with the performance of the Services provided by LHSI to
ENDO under this Agreement.
(i) LHSI shall from time-to-time perform activities identified by ENDO
which are not presently within the scope of the Services, and which
will not be billable to ENDO (at either the Schedule B overtime rate
or the Accessorial rate) if these activities: (1) are performed during
normal business hours; (2) are scheduled by LHSI; (3) require no types
of resources which are not normally employed by LHSI in rendering the
Services to Endo; and (4) do not cause LHSI to incur additional
expense.
(j) To the extent out of scope activities are identified by ENDO which
cannot be performed under 8.4(i), above, LHSI will perform such
activities under this Agreement at the accessorial or overtime rates
specified on Schedule B II. LHSI will endeavor to perform out of scope
activities requested by ENDO first, under 8.4(i) above, second, during
normal working hours at the accessorial rate, and third, to the extent
neither of these two options are feasible, at the overtime rate.
(k) PDMA Obligations
(1) LHSI shall comply with the Prescription Drug Marketing Act of
1987, as amended ("PDMA") and all other applicable laws, rules,
and regulations, including maintaining appropriate procedures and
policies and maintaining and retaining all reports required by
such laws.
(2) LHSI shall comply with all applicable federal, state, and local
laws, rules, and regulations governing the ordertaking,
invoicing, and recordkeeping of Products, including Controlled
Substances, including, but not limited to, the Controlled
Substances Act, as amended. LHSI shall be responsible for
completion, submission to the DEA and /or any other state, or
local regulatory agency, and retention of any forms and/or
reports with respect to the ordertaking for and invoicing of
Products, including Controlled Substances in accordance with any
applicable federal, state, and/or local laws, rules, and
regulations.
(3) LHSI shall provide input in the development of and maintain,
monitor and enforce the Work Instructions governing the
day-to-day management of all LHSI personnel who are responsible
for the performance of LHSI's obligations under this Agreement
including but not limited to policies and procedures regarding
PDMA and ordertaking, invoicing, and recordkeeping of Products,
including Controlled Substances, Authorized Customer addition and
deletion processes, and Adverse Drug Experience/product complaint
reporting.
(4) LHSI shall immediately investigate and take action, if necessary,
against any and all LHSI personnel in connection with any
violation of or noncompliance with
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any local, state, or federal laws, rules and regulations,
including but not limited to, the PDMA and the Controlled
Substances Act, the Work Instructions, and/or any LHSI policy
and/or procedure governing the performance of its obligations
under this Agreement.
(5) LHSI shall notify ENDO of any material discrepancy, violation, or
act of noncompliance within seven (7) calendar days from the date
that LHSI becomes aware of such occurrence.
(6) LHSI shall be responsible for the payment of any and all fines,
penalties, and/or any other corrective actions which may be taken
by local, state, and federal agencies, including but not limited
to the DEA and/or FDA, in connection with and to the extent of
LHSI and/or its personnel's failure to comply with any local,
state, and/or federal laws, rules, and regulations.
(7) To the extent required by applicable law or regulation, LSHI will
not use the services of any individual or firm debarred by the
FDA or anyone convicted of a felony under federal law for conduct
relating to List 1 chemicals (as set forth in 21 CFR Section
1310.02) or Controlled Substances in connection with the
provision of Services.
9. ENDO'S DUTIES
-------------
9.1 ENDO shall use its Best Efforts to perform all obligations required under
this Agreement substantially in accordance with the Work Instructions.
9.2 ENDO's Products.
(a) ENDO shall deliver Products to LHSI at the LHSI Premises during normal
working hours, unless alternative arrangements have been made in
advance. Products delivered for storage shall be properly marked and
packaged, and shall provide a manifest showing sizes or specific stock
keeping units.
(b) ENDO shall be responsible for providing its Products to LHSI at the
LHSI Premises in quantities sufficient to meet the demands of ENDO's
customers, subject to the manufacturing capacity of ENDO and its
suppliers, and the demand, if any, for ENDO's Products.
(c) ENDO shall be responsible for the procurement, marketing and sale of
the Products.
(d) ENDO shall be responsible for ensuring that the Products comply with
all federal, state, local and other laws and regulations with respect
to Product manufacturing, safety, labeling and advertising.
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(e) ENDO shall be responsible to its Authorized Customers for all
warranties express or implied that exist with respect to the Products
as required by law.
(f) ENDO shall be responsible for addressing all regulatory issues
regarding manufacturing defects or safety issues related to any
Product, including handling, with the assistance of LHSI, at ENDO's
request, any Product recalls.
(g) ENDO shall pay the Fees enumerated in Schedule "B" and perform all of
its other obligations under this Agreement and the Work Instructions
9.3 Other Duties:
(a) ENDO shall provide to LHSI, at ENDO's expense, all ENDO Literature for
each Product to be utilized by LHSI representatives in communications
to Authorized Customers in the Territory.
(b) ENDO shall be responsible for all inquiries from healthcare
professionals in the Territory.
(c) ENDO shall be responsible for developing the content of all responses
to inquiries from Authorized Customers in the Territory in connection
with the performance of the Services provided by LHSI to ENDO under
this Agreement.
(d) During the Term of this Agreement, ENDO shall promptly notify LHSI of
any additions or deletions to the Products on Schedule A so that LHSI
may expeditiously update the information used by its personnel to
perform their obligations under this Agreement.
9.4 Title to and ownership of the Products in possession of LHSI shall always
be vested in ENDO and subject to its direction and control.
9.5 ENDO shall bear the expense of any taxes on inventory, such as personal
property taxes.
10. ADVERSE DRUG EXPERIENCES/PRODUCT COMPLAINTS
-------------------------------------------
10.1 LHSI shall notify ENDO or its designee within twenty-four hours (24) of
receipt by LHSI of any Adverse Drug Experience or product complaint
resulting from the marketing, sale, promotion, and/or use of any Product in
the Territory.
10.2 ENDO shall be responsible for completion and submission to the FDA of any
forms and/or reports, including periodic and annual reports with respect to
an Adverse Drug Experience involving Products or any complaint that would
require a field alert, as and when appropriate.
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10.3 ENDO shall inform LHSI of any withdrawal or recall of any Product, or any
other significant regulatory actions by the FDA or DEA, which may affect
LHSI's ability to perform its obligations under this Agreement.
11. CONFIDENTIALITY
---------------
11.1 All information disclosed by one party to the other under this Agreement
shall be deemed to be confidential information ("Confidential
Information"). The parties hereby agree to hold in strictest confidence any
and all Confidential Information disclosed by one party to the other under
this Agreement or obtained by either party as a result of performing its
obligations under this Agreement. The parties hereby agree that the
following shall not be considered Confidential Information subject to this
Agreement:
(a) information which at the time of disclosure by one party to the other
is in the public domain;
(b) information which, after disclosure by one party to the other becomes
part of the public domain by publication or otherwise, provided that
such publication is not in violation of this Agreement or any other
confidentiality agreement;
(c) information which the receiving party can establish in a Record was
already known to it or was in its possession at the time of disclosure
by the other party and was not acquired, directly or indirectly, from
the disclosing party.
(d) information which the receiving party lawfully receives from a third
party, provided, however, that such third party was not obligated to
hold such information in confidence.
(e) information which the receiving party is compelled to disclose by a
court or other tribunal of competent jurisdiction, or the FDA,
provided however, that in such case the receiving party shall
immediately give notice to the disclosing party to enable the
disclosing party to exercise its legal rights to prevent and/or limit
such disclosure. In any event, the receiving party shall disclose only
that portion of the Confidential Information that, in the opinion of
the disclosing party's legal counsel, is legally required to be
disclosed and will exercise reasonable efforts to ensure that any such
information so disclosed will be accorded confidential treatment by
said court or tribunal.
11.2 The receiving party shall not use Confidential Information for any purpose
other than for the purposes set forth in this Agreement, which includes not
using ENDO's Confidential Information for the benefit of a third party or
in connection with the provision by LHSI of similar services to any third
party for any third party's products that directly compete with any
Product.
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11.3 The receiving party will not disclose Confidential Information to any
person other than to its employees, officers, agents, and consultants that
have a need to know such information to effectuate the purpose of this
Agreement and that such employees, officers, agents, and consultants shall
be informed of this Confidentiality Agreement and shall, in a Record, be
bound by its terms. All Confidential Information will contain a statement
indicating that the information is confidential and should not be disclosed
to unauthorized individuals.
11.4 Upon request in a Record from the disclosing party or termination or
expiration of this Agreement, whichever comes sooner, the receiving party
shall either promptly return to the disclosing party all Confidential
Information provided to the receiving party pursuant to this Agreement
including any copies thereof and notes, extracts based thereon, other
derivative documents or information; or in the alternative, provide the
disclosing party with a notarized certification by the senior executive
officer of the receiving party that all such documents have been duly
destroyed by the receiving party; except that the receiving party may keep
one (1) copy of such documents for archival purposes.
11.5 The terms of this confidentiality provision shall remain in effect until
five (5) years after the expiration or termination of this Agreement.
11.6 ENDO and LHSI agree not to make any public announcements regarding the
existence of this Agreement or its terms without the prior review and
consent of the other party in a Record, unless such disclosure is required
by law, in which event the disclosing party will provide the non-disclosing
party with sufficient prior notice of such legally required disclosure as
well as the nature of the information to be disclosed prior to disclosing
such information. Notwithstanding the foregoing, LHSI may list ENDO in its
client list and make such client list available publicly after consultation
with ENDO. For purposes of clarification, the prohibition against public
announcement contained in this paragraph 11.6 shall not require LHSI to
conceal the presence of the Products at the LHSI Premises.
12. INDEPENDENT CONTRACTOR
----------------------
12.1 LHSI and its directors, officers, and the persons providing Services under
the Agreement are at all times independent contractors with respect to
ENDO. Persons provided by LHSI to perform Services shall not be deemed
employees of ENDO. ENDO shall not be responsible for the acts of LHSI's
officers, agents or employees while performing the Services whether on ENDO
premises or elsewhere.
12.2 LHSI shall not be responsible for any cost, however, attributable to: (i)
any actions by ENDO that caused a person(s) provided by LHSI to perform
Services under this Agreement to be reclassified as an employee of ENDO,
(ii) any unlawful or discriminatory acts of ENDO, and (iii) language in any
ENDO benefit plan that is deemed to extend coverage to a person(s) provided
by LHSI to perform Services under the Agreement based on their activities
under this Agreement.
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13. OWNERSHIP OF PROPERTY AND DEVELOPMENTS
--------------------------------------
All Confidential Information, and any derivative property or documents,
supplied to either party during the Term of this Agreement, by or through
the other, which relate to the Services shall be the sole and exclusive
property of the originator of those materials and developments. Each party
agrees to hold all such property and developments, confidential in
accordance with Article 11 of this Agreement. For purposes of this
Agreement, information regarding ENDO's customers, including, but not
limited to, customer lists, customer identifying information, customer
profiles, customer purchasing history, and customer phone logs, whether
created by ENDO or LHSI in the performance of its obligations under this
Agreement, shall be the property of ENDO and may not be used by LHSI
without ENDO's prior written consent.
14. NONCOMPETITION
--------------
During the Term of this Agreement, the LHSI personnel responsible for
performing the Customer Service and Chargeback Processing Services and the
Accounts Receivable Services under this Agreement shall not provide similar
Services to any third party for any third party's products that directly
compete with any Product. At no time during or after the expiration or
termination of this Agreement, shall LHSI or any of its personnel
(regardless of the type of Service they provide) use ENDO Confidential
Information for the benefit of any third party or in connection with the
provision by LHSI of similar services to any third party for any third
party's products that directly compete with any Product.
15. INSURANCE AND INDEMNIFICATION
-----------------------------
15.1 LHSI Insurance
(a) At all times during the term of this Agreement, LHSI shall maintain,
at its own expense, the following insurance coverage:
(1) 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;
(2) Logistics management liability (including warehouseman's legal
liability) insurance in an amount no less than ***;
(3) Comprehensive general liability insurance for bodily injury or
property damage designating ENDO as an additional insured for any
losses or damages arising out of LHSI's duties hereunder in the
amount of at least ***. The policy shall also cover liabilities
specifically assumed under this Agreement; and
15
(4) Crime coverage for employee dishonesty and forgery in amounts
sufficient to cover losses in connection with LHSI's rendering of
the Accounts Receivable Services.
(b) LHSI shall have ENDO listed as an additional insured on its insurance
policies providing the coverage described in Sections 15.1(a)(2), and
15.1(a)(3) during the entire Term of this Agreement, and for five (5)
years after this Agreement expires or is terminated, which insurance
shall be primary to any other insurance. LHSI will supply at least
thirty (30) days prior written notice to ENDO in the event of
cancellation or material reduction in coverage, and upon request
promptly submit to ENDO satisfactory evidence of such insurance.
15.2 LHSI Indemnification. LHSI shall indemnify, defend, and hold harmless ENDO,
its officers, agents, Affiliates, subsidiaries, parent companies, and
employees, from and against any and all loss, damage, claim, injury, cost
or expenses, including reasonable attorneys' fees and expenses of
litigation, in connection with any illness or personal injury, including
death, or property damage, that arises out of or is attributable to: (1)
the negligence or willful misconduct of LHSI; (2) the violation of or
noncompliance with any statutes or regulations applicable to the Services
provided by LHSI under this Agreement; or (3) LHSI 's breach of the terms
of this Agreement; provided, however, LHSI shall, under no circumstances,
be obligated to indemnify ENDO to the extent that any loss, damage, claim,
injury, cost, or expense arises out of ENDO's sole negligence, willful
misconduct, violation of and/or noncompliance with any statutes or
regulations governing the use, manufacture, marketing, promotion and/or
sale, of Products in the Territory, or ENDO's breach of the terms of this
Agreement.
15.3 Endo Insurance. ENDO shall maintain primary comprehensive first-party
insurance sufficient to cover the replacement value of Products in the
possession of LHSI. ENDO shall maintain in effect during the term of this
Agreement and for a period of five (5) years after termination of this
Agreement, product liability insurance in the amount of at least
*** and general liability insurance in the amount of at least ***, which
shall include contractual liability coverage for all liability assumed
under this Agreement and shall include LHSI as an additional insured. ENDO
shall have LHSI listed as an additional insured on its comprehensive
general liability and products/completed operations insurance during the
entire term of this Agreement, and for five (5) years after this Agreement
expires or is terminated, which insurance shall be primary to any other
insurance. ENDO will supply at least thirty (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.
15.4 Endo Indemnification. ENDO shall indemnify, defend, and hold harmless LHSI,
its officers, agents, Affiliates, subsidiaries, parent companies, and
employees, from and against any and all loss, damage, claim, injury, cost
or expense, including reasonable attorneys' fees and expenses of
litigation, in connection with any illness or personal
16
injury, including death, or property damage, that arises out of: (1) the
negligence or willful misconduct of ENDO; (2) the violation of or
noncompliance with any statutes or regulations governing the manufacturing,
use, marketing, promotion, and/or sale, of Products; (3) an alleged defect
in any ENDO Product; (4) ENDO's breach of the terms of this Agreement; or
(5) a claim that Services rendered by LHSI or obligations performed by LHSI
under this Agreement infringe any patent, trademark, copyright, license or
other property right or proprietary right of any third party, provided,
however, ENDO shall, under no circumstances, be obligated to indemnify LHSI
to the extent that any loss, damage, claim, injury, cost or expense arises
out of LHSI's sole negligence, willful misconduct, violation of and/or
noncompliance with any statutes or regulations applicable to the Services
provided by LHSI under this Agreement or LHSI's breach of the terms of this
Agreement.
15.5 Indemnification Process. Any indemnity available hereunder shall be
dependent upon the party seeking indemnity providing prompt notice to the
indemnitor of any claim or lawsuit giving rise to the indemnity.
Thereafter, the indemnitor shall have exclusive control over the handling
of the claim or lawsuit, and the indemnitee shall provide reasonable
assistance to the indemnitor, at the indemnitor's expense, in defending the
claim.
16. TERMINATION
-----------
16.1 Material Breach. Either party may terminate this Agreement in the case of a
material breach by one of the other parties which is not cured within
thirty (30) days after notice by the terminating party in a Record of the
breach; provided, however, that the failure of LHSI to obtain all
applicable federal, state and local licenses, permits and registrations
necessary for the performance of its obligations under this Agreement
including, without limitation, its DEA license for the new Controlled
Substances vault, by March 1, 2000, shall entitle ENDO to terminate this
Agreement immediately.
16.2 Bankruptcy. Either party may terminate this Agreement immediately in its
entirety if the other party is declared insolvent by a court of competent
jurisdiction, files a petition of bankruptcy, is adjudged bankrupt, takes
advantage of any insolvency act, is in receivership, or executes an or
assignment for the benefit of creditors.
16.3 Termination by ENDO. This Agreement or, from time-to-time, the Term with
respect to any one or more Services rendered under this Agreement, may be
terminated by Endo for any of the following reasons upon one hundred twenty
(120) days prior notice, which notice shall specify the basis for such
termination:
(a) The sale of ENDO or its parent company;
(b) The sale by ENDO of all or substantially all of its business;
17
(c) The present owners of the stock of ENDO entitled to vote shall no
longer own or control in the aggregate more than fifty (50%) percent
of such voting stock or control the election of the board of directors
of ENDO;
(d) The present owners of the stock of ENDO's parent company entitled to
vote shall no longer own or control in the aggregate more than fifty
(50%) percent of such voting stock or control the election of the
board of directors of ENDO's parent company;
(e) The determination by ENDO to perform directly or through one or more
Affiliates ("in-house") the Services with respect to which the Term is
being terminated; or
(f) The inability of LHSI to supply storage space for Products in addition
to the storage space described on Schedule B within 90 days of any
request by ENDO's for such space in a Record.
In the event of a termination under this paragraph 16.3 of the Warehouse
and Distribution Services, ENDO will pay to LHSI an amount equal to the
positive difference, if any, between the "Capital Investment" (defined
------------------
below) minus the "Liquidated Capital Investment" (defined below). For
-----------------------------
purposes hereof, the "Capital Investment" shall mean the costs incurred by
LHSI prior to the effective date of termination exclusively in connection
with LHSI's preparations to perform the Warehouse and Distribution Services
required under this Agreement, which are not reimbursable by a third party
or which cannot be cancelled, and which are documented appropriately in
writing; provided, however, that in no event shall the amount of the
Capital Investment exceed One Million Five Hundred Fifty Thousand Dollars
($1,550,000.00). LHSI shall have no obligation to include eligible costs
it incurs in the Capital Investment amount. There shall be no obligation
on the parties to agree upon the calculation of the Capital Investment
prior to LHSI's requesting payment under this paragraph, although ENDO
shall have the right to request a non-binding estimate of the Capital
Investment amount once LHSI has commenced rendering all of the Services
under this Agreement. For purposes hereof, the "Liquidated Capital
Investment" shall equal the Capital Investment divided by sixty (60)
----------
multiplied by the number of months between February 1, 2000 and the month
-------------
in which ENDO terminates this Agreement. If ENDO is to make a payment to
LHSI in connection with a termination under this Section 16.3, then legal
title to and possession of any and all assets whose costs are included in
the Capital Investment amount (whether LHSI acquired those assets by
purchase, lease and/or construction) shall be transferred to ENDO at the
time of payment, and LHSI shall cooperate with ENDO in effecting such
transfer; provided, however, that ENDO shall not acquire any rights of any
kind to LSHI's proprietary information technology, or the cost of any
modifications to such proprietary information technology, included in the
Capital Investment amount.
In the event of a termination under this Section 16.3 (a), (b), (c), (d) or
(e) of the Warehouse and Distribution Services provided under this
Agreement, ENDO shall also pay to XXXX,
00
subject to the conditions and limitations described below, an amount (the
"Termination Payment") equal to the sum of: (i) the percentage of LHSI's
Memphis, Tennessee facility (the "Facility") then occupied by ENDO under this
Agreement multiplied by one-half of the Facility's annual rent, plus (ii) two
weeks' of LHSI's payroll costs for any LHSI clerical and warehouse (but not
management) personnel then dedicated to providing Warehouse and Distribution
Services to ENDO whose employment is terminated by LHSI when the Warehouse and
Distribution Services are terminated because there is no other work for them at
the Facility; provided, however, that in no event shall the Termination Payment
exceed $96,000. The portion of the Termination Payment described in clause (i)
will be paid in equal installments over the six-month period commencing with the
effective date of the termination. The portion of the Termination Payment
described in clause (ii) will be paid within 30 days after LHSI provides the
payroll cost information to ENDO. The portion of the Termination Payment
provided for in clause (i) will be reduced dollar-for-dollar by all amounts
collected from any one or more third party or parties who, during the six month
following ENDO's termination, occupy the area(s) in the Facility occupied by
ENDO at the time of its termination of the Agreement. The Termination Payment
will not include the payroll costs for any LHSI clerical and warehouse personnel
who are rehired by LHSI within one year of the date of their termination of
employment, and LHSI agrees to repay to ENDO any amounts it paid under clause
(ii) for those employees who are rehired. If ENDO is making payments under
clause (i) above, ENDO shall have the right to use the portions of the Facility
it previously occupied, subject to LHSI's right to make that space available to
third parties on an arm's-length basis. At the conclusion of ENDO's post-
termination use of the portions of the Facility it previously occupied, LHSI
agrees to assist ENDO with moving out any remaining Product and related
transition issues, with compensation for this activity to be mutually agreed-
upon. LHSI and ENDO agree to meet monthly during the six month period which
begins on the effective date of the termination under this Section 16.3 (a),
(b), (c), (d) or (e) to discuss issues related to the use of the Facility.
16.4 Effect of Termination. Termination of this Agreement shall have no effect
on, or relieve any party from the to perform any actions arising prior to
the effective date of termination. Further, any rights and obligations of
the parties which by their intent are meant to survive the termination or
expiration of this Agreement shall survive the expiration or termination of
this Agreement.
17. SOLICITATION OF EMPLOYEES. During the Term of this Agreement and the
--------------------------
twenty-four (24) month period commencing on the date this Agreement expires
or is terminated, if either party, without the consent of the other party,
either directly or indirectly, on its own behalf or in the service of or on
behalf of others, solicits, recruits or persuades any person to terminate
such person's employment with the other party, whether or not such person
is a full-time employee or whether or not such employment is pursuant to a
written agreement or is at-will, then the soliciting party shall pay to
such other party, if such other party actually replaces such employee
within ninety (90) days from the date of departure of such employee,
compensation for such employee in the amount of *** (***) of such
employee's then annual salary, at the time of employment by the soliciting
party, excluding any
19
incentive compensation and the cost of employee benefits. Such payment
shall be made within thirty (30) days of a written request from the
non-soliciting party.
18. YEAR 2000 COMPLIANCE
--------------------
18.1 Each party 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 agree that
it will 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
supplier's performance. The parties will use their Best Efforts to
cooperate and share information to further comply with this section, and to
minimize the impact of any Year 2000 Problem on the parties' respective
performance under this Agreement. Each party will inform the other party of
any material circumstance indicating a potential obstacle to such
compliance, and the steps being taken to avoid or overcome the obstacle.
18.2 Provided a party complies with this section, such party will not be liable
to the other party for any failure to perform obligations under this
Agreement 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.
19. MISCELLANEOUS
-------------
19.1 Assignment. Neither party may assign its interests, rights, duties, and
obligations under this Agreement without the prior consent of the other
party in a Record, which shall not be unreasonably withheld, provided,
however, that ENDO may assign its interests, rights, duties, and
obligations hereunder to any Affiliate or any successor in interest,
including as a result of a merger or acquisition by a third party of
substantially all or all of ENDO's assets, or acquisition of fifty percent
(50%) of any equity in ENDO, or any reorganization or change in control of
ENDO so long as the acquirer and/or surviving organization/entity (i) is a
financially capable business entity and (ii) expressly assumes in a Record
those interests, rights, duties, and obligations.
19.2 Integration. This Agreement supersedes all prior arrangements and
understandings between parties related to the subject matter of this
Agreement including, without limitation, the Customer Services Agreement
between the parties dated April 1, 1999 and the Warehousing and
Distribution Services Agreement between the parties dated June 15, 1999, as
amended.
19.3 Force Majeure. Noncompliance with the obligations of this Agreement due to
a Force Majeure event shall not constitute a breach of Agreement; provided,
however, that if one
20
party to this Agreement claims, for a period of forty-five (45) days, that
it is unable to fulfill its obligations hereunder due to the existence of a
Force Majeure event, then the other party may elect to terminate this
Agreement with immediate effect.
19.4 Severability. If any provision of this Agreement is finally declared null
and void, or found to be illegal or unenforceable by a court of competent
jurisdiction, both parties shall be relieved of all obligations arising
under such provision, but, if capable of performance, the remainder of this
Agreement shall not be affected by such declaration or finding.
19.5 Amendment. No modification, extension or release from any provision hereof
shall be affected by mutual agreement, acknowledgment, acceptance of
contract documents, or otherwise, unless the same shall be in a Record
signed or otherwise authenticated by the other party and specifically
described as an amendment or extension of this Agreement.
19.6 Arbitration.
(a) All disputes over the meaning and interpretation of this Agreement
shall be resolved by conciliation and non-binding mediation and if
such mediation is unsuccessful then such disputes shall be finally
settled by an Arbitration Panel comprising of one (1) arbitrator
appointed by LHSI and one (1) arbitrator appointed by ENDO, and a
Chairman of the Arbitration Panel appointed by the first two (2)
arbitrators. Any such arbitration proceeding shall be conducted in
accordance with the arbitration rules of the AAA; shall be held in the
State of Delaware, unless otherwise agreed by the parties; and the
arbitration award shall be final and nonappealable and such award may
be entered in any court having jurisdiction.
(b) In order to initiate procedures for dispute resolution by
conciliation, mediation and arbitration either party may give notice
to the other in a Record of intention to resolve a dispute, and absent
satisfactory resolution, then to arbitrate. Such notice shall contain
a statement setting forth the nature of the dispute and the resolution
sought. If, within thirty (30) days of such notice a resolution by
conciliation between the parties themselves or by mediation has not
been achieved to the satisfaction of both parties, and if within sixty
(60) days from said notice in a Record an Arbitration Panel has not
been appointed with an arbitration schedule satisfactory to both
parties, then either party may proceed with judicial remedies.
19.7 Notices. All notices required under this Agreement shall be in a Record and
shall be effective if delivered to the party entitled to receive the same
by hand or if deposited in the United States Mail addressed to such party
at the address set forth below.
21
If to Endo
Endo Pharmaceuticals Inc.
000 Xxxxxxxxxx Xxxx Xxxxxxx Xxxx
Chadds Ford, Pennsylvania 19317, U.S.A.
Attn: Xxxxxxx X. XxxXxxxxx, Executive Vice President, Operations
with a copy to: Xxxxxx Xxxxxxxx, General Counsel
If to: LHSI
Xxxxxxxxxx Healthcare Services, Inc.
000 Xxxx Xxxxx
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxxx Xxxxxxxxxx, President
19.8 Taxes. LHSI shall be responsible for all taxes, including federal, state,
and local taxes assessed or assessable against it for the Services
performed under this Agreement.
19.9 Governing Law. This Agreement shall be construed according to the laws of
the State of Delaware, without reference to its conflict of law rules.
19.10 Counterparts This Agreement may be executed in any number of counterparts,
each of which, when executed, shall be deemed to be an original and all of
which together shall constitute one and the same document.
19.11 Survival. The provisions of this Agreement which by their intent and/or
effect are meant to survive the termination or expiration of this Agreement
shall survive the termination or expiration of this Agreement.
22
WHEREFORE, the parties hereto have caused this Agreement to be executed by their
duly authorized representatives on the date first above written.
XXXXXXXXXX HEALTHCARE
SERVICES, INC. ENDO PHARMACEUTICALS INC.
By: /s/ Xxxxx Xxxxxxxxxx By: /s/ Xxxxxxx X. XxxXxxxxx
---------------------------- ----------------------------------
Name: Xxxxx Xxxxxxxxxx Name: Xxxxxxx X. XxxXxxxxx
Title: President Title: Executive Vice President, Operations
23
SCHEDULE A-I
ENDO PHARMACEUTICALS INC.
BRAND PRODUCT SPECIFICATIONS
***
24
SCHEDULE A-I
ENDO PHARMACEUTICALS INC.
GENERIC PRODUCT SPECIFICATIONS
***
25
Schedule A-II
Returns Products
Brand
***
26
Schedule A-II
Returns Products
Generic
***
27
SCHEDULE B - Part 1
FEE SCHEDULE FOR CUSTOMER SERVICE AND CHARGEBACK PROCESSING
AND ACCOUNTS RECEIVABLE SERVICES
***
28
SCHEDULE B - PART II
FEE SCHEDULE FOR WAREHOUSE AND DISTRIBUTION SERVICES
***
29
SCHEDULE C
DESCRIPTION OF WAREHOUSE AND DISTRIBUTION SERVICES
The ENDO/LHSI Warehousing and Distribution Agreement services will include the
following:
1. Endo, via e-mail, will provide LHSI notification of incoming purchase
orders from contracted manufacturers according to established work
instructions. LHSI will provide DEA Form 222 to contract manufacturer for
purchase of CII pharmaceutical products.
2. LHSI will create Purchase Order in LHSI computer system (LMS) and Customer
Service at Memphis Distribution Center (MDC) will issue a DEA Form 222 to
contract manufacturer (when applicable).
Endo will make sure that LHSI is communicated to via e-mail by all
manufacturing sites so that LHSI is aware of both international and
domestic in-bound transportation from contract manufacturers to LHSI MDC
(Memphis Distribution Center). Actual shipment appointments will be
arranged between manufacturing site and LHSI. LHSI is not responsible for
customs clearance. Dupont will have the ability to e-mail LHSI MDC with
inbound shipment activities. Upon completion of receipt process, via e-
mail, LHSI MDC to send receipt acknowledgement notice to Dupont so they can
close shipments.
3. LHSI performs receipt of incoming inventory from contract manufacturer.
. Receiver One sorts, segregates receipt by SKU and Lot Number,
Expiration date, counts and enters receipt into LMS in a Quarantine
(Q) status.
. Receiver Two re-checks entire receipts and validates both system
entry and paper documents in compliance with DEA requirements.
. Receiver Two also performs RF Scanner put-away functions in
Quarantine (Q) status and validates inventory quantity.
. Supervisor reviews and accepts or modifies any discrepancies in
Purchase Order in LMS quantity and inventory received by completing
system transaction. LMS quantity on hand is updated and a scheduled
EDI inventory receipt will be transmitted to Endo.
. Supervisor provides copy receiver report to Endo Quality Assurance
Associate personnel for review and Quality release. Once product is
released, LMS is updated with scheduled updates to SAP.
. If inventory receipt has discrepancy LHSI is responsible for
reporting to Endo Quality Assurance Associate as detailed in work
instructions.
4. Endo to perform QA functions:
. Endo Quality Assurance Associate personnel (2) will process all
appropriate Endo paperwork and provide written approval for release
of inventory to be transferred to Good Status. Lot sequence
visibility is available via a COGNOS report that has been developed
by LHSI. LHSI Supervisor to receive copy of Release Authorization.
. Endo Quality Assurance Associate personnel will identify inventory
required for sample retention. LHSI Supervisor to receive copy of QA
documentation.
. LHSI Supervisor performs LMS system update to record movement of
sample retention inventory when required. LMS inventory adjustment is
transmitted to SAP.
. LHSI to provide LMS training and visibility to Endo warehouse
inventory within LMS.
5. Endo Corporate will be responsible for communicating in writing the initial
changeover to all Endo customers, including, but not limited to, the
forwarding of all CII purchase orders and DEA Form 222 to LHSI MDC. The
Endo Customer Service function that will be performed by LHSI as specified
elsewhere in this Agreement, will proactively communicate all changes in
distribution to customers as a follow-up to the initial communication.
30
6. LHSI to process orders for CII products from LHSI Memphis Distribution
Center (MDC) within Controlled Area:
. LHSI Supervisor or designate will validate all data on DEA Form 222
prior to processing order.
. LHSI order entry personnel will enter order into SAP. To improve
efficiencies a second check of all CII orders will be done, prior to
being released through the interface to LMS per Work Instructions.
SAP CII report can be utilized for this check.
. SAP will process order and transmits order to LMS according to
agreed upon schedule. LMS will accept electronic order and validate
customer DEA information and product information, prior to
transmitting to LMS Warehouse Management System for processing. If a
change to an order is required, the change must be made manually
according to Work Instructions, both in LMS and SAP.
. LHSI Supervisor to compare pick document to original DEA Form 222.
. LMS system to process order and allocate inventory based on Endo's
FIFO requirements. The limited exceptions to this rule flow from the
desire to never have more than two lots open at a given time while
accommodating LHSI system limitations. Specifically, if successive
lots arrive at MDC which expire before lots already received at MDC,
the MDC will complete the lot it is currently shipping. Then the MDC
will be permitted to select as the next lot to ship as the lot with
the shortest shelf life. In addition, if Quality Assurance Associate
puts a lot on Hold at any time, the MDC will be permitted to ship
from the next lot with the shortest shelf life. If that same lot on
Hold gets released, the MDC will complete the lot it is currently
shipping from and then will be permitted to select the next lot to
ship from with the shortest shelf life. Inventory allocation control
will be achieved through the use of WMS hold reason codes and Cognos
report.
. Picker One - picks and stages order utilizing RF scanner.
. Picker Two - rechecks the pick and validates the staged order to the
original pick document.
. Packer will package order per mutually agreed upon Work
Instructions. Endo packing slip will be enclosed within carton for
CII orders. The pack slip will be standard LHSI pack slip with Endo
name appearing along the top of the document.
. Shipper will process all orders through carrier shipment terminals.
Initially, MDC authorized FTE will enter pertinent information
directly into SAP. Future functionality will allow LHSI new
Transportation Management System to electronically provide shipment
data via EDI.
. LHSI designate will perform dispatch function when carrier arrives
for outbound pick-up.
. LHSI will transmit sales order confirmation to LMS Order Management
System - which will transmit agreed upon data to SAP. Scheduled
transmission will be performed every hour.
. Normal daily order cut-off times for same day processing and
shipping is 3:00pm Central Standard Time (4:00pm Eastern Standard
Time).All orders received after these cut-off times will be
processed and shipped the very next business day. During peak times
(i.e. promotions, backorder processing or unusual customer demands)
order priorities will have to be reviewed and approved by Customer
Service. All controlled substance orders should not be in transit
for more than 2 days. At a minimum, all shipments to customers, with
the exception of backorders, will be delivered within 8 business
days from receipt of order. These requirements will be reviewed and
revised if needed at the end of the 1st full quarter of shipments.
. Carrier service levels to be determined (i.e. last Fed Ex pick-up
11:30 PM CST)
. Emergency orders must be shipped according to Work Instructions.
. Federal Express/UPS labels will be provided to those customers that
request them to send CII orders in to the MDC. The Customer Service
Order Entry personnel at the MDC will be responsible for this
service.
31
7. LHSI to process orders for CIII-CV at LHSI Memphis Distribution Center
(MDC) within appropriate designated working stations within cage area:
. SAP will process orders and transmits order to LMS. LMS will
validate customer DEA information and product information prior to
transmitting to LHSI's Warehouse Management System (WMS) for
processing.
. LMS system to process order and allocate inventory based on Endo's
FIFO requirements. The limited exceptions to this rule flow from the
desire to never have more than two lots open at a given time while
accommodating LHSI system limitations. Specifically, if successive
lots arrive at MDC which expire before lots already received at MDC,
the MDC will complete the lot it is currently shipping. Then the MDC
will be permitted to select as the next lot to ship as the lot with
the shortest shelf life. In addition, if Quality Assurance Associate
puts a lot on Hold at any time, the MDC will be permitted to ship
from the next lot with the shortest shelf life. If that same lot on
Hold gets released, the MDC will complete the lot it is currently
shipping from and then will be permitted to select the next lot to
ship from with the shortest shelf life. Inventory allocation control
will be achieved through the use of WMS hold reason codes and Cognos
report.
. Picker One - picks and stages order utilizing RF scanner.
. Picker Two - validates the staged order to the original pick
document
. Packer will package order per mutually agreed upon Work
Instructions. Endo packing slip will be enclosed within carton for
all CIII-CV orders.
. Shipper will process all orders through carrier shipment terminals.
Initially, MDC authorized FTE will enter pertinent information
directly into SAP. Future functionality will allow LHSI new
Transportation Management System to electronically provide shipment
data via EDI.
. LHSI designate will perform dispatch function when carrier arrives.
. LHSI will transmit sales order confirmation to LHSI's Order
Management System (OMS) and then transmitting agreed upon data to
SAP Scheduled transmission would be performed every hour.
. Normal daily order cut-off times for same day processing and
shipping is 3:00pm Central Standard Time (4:00pm Eastern Standard
Time). All orders received after these cut-off times will be
processed and shipped the very next business day. During peak times
(i.e. promotions, backorder processing or unusual customer demands)
order priorities will have to be reviewed and approved by Customer
Service. All controlled substance orders should not be in transit
for more than 2 days. At a minimum, all shipments to customers, with
the exception of backorders, will be delivered within 8 business
days from receipt of order. These requirements will be reviewed and
revised if needed at the end of the 1st full quarter of shipments.
. Carrier service levels to be determined (i.e. last Fed Ex pick-up
11:30 PM CST)
. Emergency orders must be shipped according to Work Instructions.
8. LHSI to process orders for Rx at LHSI Memphis Distribution Center (MDC)
within appropriate designated working stations within warehouse area:
. SAP will process order and transmits order to LMS. LMS will validate
customer DEA information and product information prior to
transmitting to WMS for processing.
. LMS system to process order and allocate inventory based on Endo's
FIFO requirements. The limited exceptions to this rule flow from the
desire to never have more than two lots open at a given time while
accommodating LHSI system limitations. Specifically, if successive
lots arrive at MDC which expire before lots already received at MDC,
the MDC will complete the lot it is currently shipping. Then the MDC
will be permitted to select as the next lot to ship as the lot with
the shortest shelf life. In addition, if Quality Assurance Associate
puts a lot on Hold at any time, the MDC will be permitted to ship
from the next lot with the shortest shelf life. If that same lot on
Hold gets released, the MDC will complete the lot it is currently
shipping from and then will be permitted to select the next lot to
ship from with the shortest shelf life. Inventory allocation control
will be achieved through the use of WMS hold reason codes and Cognos
report. Picker One - picks and stages order utilizing RF scanner.
32
. Picker Two - validates the staged order to the original pick
document
. Packer will package order per mutually agreed upon Work
Instructions. Endo packing slip will be enclosed within carton for
all Rx orders.
. Shipper will process all orders through carrier shipment terminals.
Initially, MDC authorized FTE will enter pertinent information
directly into SAP. Future functionality will allow LHSI new
Transportation Management System to electronically provide shipment
data via EDI.
. LHSI designate will perform dispatch function when carrier arrives.
. LHSI will transmit sales order confirmation to LMS/OMS and then
transmit agreed upon data to SAP Scheduled transmission will be
performed every hour.
. Normal daily order cut-off times for same day processing and
shipping is 3:00pm Central Standard Time (4:00pm Eastern Standard
Time).All orders received after these cut-off times will be
processed and shipped the very next business day. During peak times
(i.e. promotions, backorder processing or unusual customer demands)
order priorities will have to be reviewed and approved by Customer
Service. All controlled substance orders should not be in transit
for more than 2 days. At a minimum, all shipments to customers, with
the exception of backorders, will be delivered within 8 business
days from receipt of order. These requirements will be reviewed and
revised if needed at the end of the 1st full quarter of shipments.
. Carrier service levels to be determined (i.e. last Fed Ex pick-up
11:30 PM CST)
. Emergency orders must be shipped according to Work Instructions.
9. LHSI MDC to process all other types of orders (same classes as above)
according to above and Work Instructions (i.e. promotions, clinical study
orders, stock fulfillment orders, shortdated orders).
10. All Endo backorders, when product is released, will be processed according
to Work Instructions.
11. Endo Pharmaceuticals will be adding new products to its portfolio and LHSI
MDC will be responsible for providing all services described in this scope
for any and all new products, provided that these products require same
type of PDMA storage specifications as existing products.
12. LHSI MDC must comply with special customer order requirements such as
dating; ship requests will be passed through interface via customer notes.
13. LHSI to perform transportation management for Endo for all outbound orders.
. Carrier selection to be mutually agreed upon by Endo and LHSI
. LHSI to perform random audit of freight invoices.
. LHSI to manage freight payments and audits.
. LHSI to conduct carrier performance audits.
14. LHSI to perform the following Inventory Control functions utilizing
segregation of duties:
. Complete redundancy (double check) of receiving and picking
functions for controlled substances (i.e. Receiver 1, Receiver 2 and
Put Away checks). For ambient products Receiver 1 checks and then a
Put Away check as well.
. LHSI Supervisor will validate all inbound receipts and all internal
product movement.
. LMS to provide a previous workday ending inventory update to SAP by
8:00 AM EST each morning.
. LHSI to perform daily physical inventory count on all active
controlled substance lots and locations.
. LHSI to perform non-controlled inventory cycle counts 8% (1/12) of
location per day.
. LHSI MDC Managers (Director., Distribution Center Manager, Office
Manager) is solely authorized to approve inventory adjustments of
controlled substances.
. LMS RF functionality electronically restricts warehouse personnel
access to proper warehouse zones.
33
. Control cage card access limits LHSI employees access to controlled
areas.
. If inventory receipt has discrepancy, LHSI is responsible for
reporting to Endo Quality Assurance Associate as detailed in Work
Instructions.
. LHSI MDC is responsible for investigating shortages, incorrect
shipments, and reporting to Customer Service according to Work
Instructions.
15. LHSI to perform DEA/XXXXX Compliance Validation and XXXXX Reporting:
. All daily receiving and shipping documents to be maintained in a
secured area outside of control cage.
. DEA Daily Edit Report of LMS controlled substance transactions will
be generated next business day. This report contains all LMS DEA
transactions performed the previous day.
. LHSI non-controlled substance Warehouse Associate will validate the
official receiving and shipping documents to the DEA Daily Edit
Report.
. LHSI does perform a monthly product reconciliation for all classes
of controlled substances comparing a report of monthly DEA
transactions to the month end physical inventory. This ensures the
DEA electronic file confirms the physical inventory.
. LHSI will perform quarterly XXXXX transmissions of all activity.
16. LHSI will manage the handling and processing of short-dated, damaged or
expired inventory on behalf of Endo to be sold to Pharmacy Solutions, Inc:
. LHSI to submit inventory report itemizing product, quantities and
lot and category of product.
. Endo Customer Service Manager or designate and Quality &Compliance
to approve request for destruction. Order entry for destruction
orders will be perform solely within LMS OMS/WMS processes. LMS will
validate Pharmacy Solutions, Inc. as the customer, product
information and quantity prior to transmitting to WMS for
processing.
. If CII product is involved, LHSI will contact Pharmacy Solutions,
Inc. and request them to issue DEA Form 222. LHSI Supervisor will
compare pick document to original DEA Form 222.
. LHSI will process the order as outlined above.
. LHSI will process all product destructions according to all DEA
guidelines.
. LHSI will provide Endo Quality Assurance Associate with copies of
Pharmacy Solution acknowledgement documentation.
. LHSI destruction process will be audited and reviewed from time to
time by Endo Quality Assurance Associate.
17. LHSI will manage receipt, handling and processing of all authorized
returns.
. Endo Customer Service and Distribution will process all
authorization requests for return merchandise based on Endo Returns
Policy and according to Customer Service Work Instructions.
. If in-date product is returned (i.e. mis-shipment,), that product
can be put back into inventory after Endo Quality Assurance
Associate approves.
. LHSI will receive and process return based on mutually agreed upon
Work Instructions.
. LHSI will store return merchandise in designated area under
Quarantined status until authorized by Endo (Customer Service
Manager or designate and on-site Quality Associate for destruction
as detailed in Work Instructions.
. If CII product is involved, LHSI warehouse operator will send
customer a DEA Form 222 so that customer can return product.
. Process for destruction is outlined above.
. All returns should be processed within 5 working days from the
date of receipt.
. LHSI will be required to process all full container returns. Full
container is defined, as original manufactures seal intact. In the
event of a partial container receipt, LHSI will be required to
perform manually regulatory reporting requirement. LHSI will be
responsible for keying partial return credit in SAP system.
34
. Returned Products to be received, handled and processed are
specified on Schedule A-I and A-II.
18. LHSI will provide a Shipping History Report by Lot Number, by customer
should a Recall be issued by Endo. LHSI will assist in executing recall
i.e. communication to customers, and receipt of product in controlled area
according to Endo's Recall policy as a special project.
DESCRIPTION OF LHSI WAREHOUSE FACILITY
1. LHSI to provide PDMA/DEA compliant space for 800 pallet vault, 500 pallet
cage and 1000 ambient pallet positions at 0000 Xxxxxxxxx Xxxx, Xxxxxxx,
Xxxxxxxxx 00000.
2. LHSI to provide security systems to include cameras located in the
receiving, vault, cage and shipping areas; video, limited ID card access to
controlled areas, and pocketless uniforms.
3. LHSI to provide designated office space complete with furniture, telephones
and Personal Computers for Endo Quality Assurance Associate and LHSI Order
Entry personnel.
4. LHSI to provide warehouse space and storage for 4 pallets of refrigerated
CII, ambient control for remaining products.
5. LHSI to provide warehouse equipment (forklifts, racking, RF scanners, pick
lines, carrier terminals, communication lines, and terminal hardware).
6. LHSI to provide secure trucking lounge for truckers.
7. Upon completion of construction of MDC, Endo and LHSI should review and
agree on location of security cameras and overall state of security in
general.
8. Emergency after hour on-call beeper is available. Emergency orders will be
processed as per work instructions
DESCRIPTION OF INFORMATION TECHNOLOGY SERVICES
1. LHSI will provide LMS2000 platform for warehouse management functions and
train appropriate Endo QA personnel.
2. LHSI will participate in the project management, design, and development of
LMS2000 interface with SAP.
3. LHSI will provide LMS2000 test environment and participating in interface
validation.
4. Endo will provide SAP test environment and participate in interface
validation.
5. LHSI will provide terminal hardware, software and connectivity for Endo
Quality Assurance Associate personnel and LHSI order entry associate.
6. This document contains many statements that refer to EDI Transmission and
RF functionality. The following is a definition of these statements and how
they will be applied through out LHSI applications and this document:
. EDI Inbound and Outbound transmissions will be scheduled every hour
between the hours of 8:30AM to 11:30PM EST, or more often as agreed
upon.
. RF is defined in many of LHSI day- to-day activities. In the event of
system failure, LHSI will perform receipts, put away, stock move and
picking utilizing workstation and paper. The workstation / paper mode is
fully capable of performing the same task and providing the same
results.
DESCRIPTION OF HUMAN RESOURCE SERVICES
1. LHSI to recruit, hire and train appropriate LHSI personnel to provide the
Services.
2. LHSI will conduct background checks on new LHSI employees.
3. LHSI will perform initial drug testing and conduct random drug testing of
all active employees.
4. Endo to provide LHSI Hold Harmless Agreement for Endo Quality Assurance
Associate personnel stationed at LHSI Memphis Distribution Center.
5. Endo Quality Assurance Associate personnel will adhere to all LHSI employee
policies and have access to Memphis facility limited to standard business
hours of operation.
6. LHSI to assist Endo in the recruiting process for Quality Assurance
Associate.
7. LHSI to provide limited access to controlled areas (vault and cage) and
only limited employees will be able to work those areas.
8. LHSI will adhere to the required GMP, DEA, OSHA AND EPA regulations.
35
SCHEDULE C (continued)
DESCRIPTION OF CUSTOMER SERVICE AND CHARGEBACK PROCESSING SERVICES
-------------------------------------------------------------------
AND ACCOUNTS RECEIVABLE SERVICES
--------------------------------
The ENDO/LHSI Customer Service, Chargeback Processing and Accounts Receivable
implementation will include the following:
1. Endo will provide LHSI access to SAP to perform Customer Service, the
processing of chargebacks, returns and Accounts Receivable services.
2. LHSI will supply the necessary phone lines to handle customer inquiries and
process orders by phone or fax.
- seamless transfer of customer medical information calls to
appropriate Endo personnel
- seamless transfer of customer calls to Endo corporate
- seamless transfer of customer calls regarding customer
complaints to appropriate Endo personnel
- handle peak times
3. LHSI will provide an address for mail orders and any other correspondence
that should be directed to LHSI.
4. Endo will handle all initial EDI setup, in conjunction with LHSI, using
SAP. Current EDI transactions supported are purchase orders, chargebacks,
chargeback reconciliation, invoicing and award notifications. All future
EDI transactions and/or customer additions to existing accounts will be
handled by ENDO in conjunction with LHSI. Initial EDI training for LHSI
will be provided at Endo's expense and is included in the start-up fee.
LHSI is responsible for the following:
- monitoring EDI error reports
- recording customer calls regarding EDI inquiries and/or
problems
- communicating on a daily basis to Endo any inquiries and/or
problems
5. LHSI will be responsible for communicating the initial changeover to all
Endo customers which will include changes such as telephone numbers,
addresses, changes in returns processing, etc.
6. Endo will establish protocols with LHSI's Memphis Distribution Center
("MDC") to handle CII narcotics orders (DEA form #222). LHSI's MDC Customer
Service Representative will be responsible for entering all CII orders in
SAP at the LHSI MDC. LHSI Customer Service will have access to all order
information related to CII orders to be able to respond to customer
inquiries.
36
7. The MDC will provide ship confirmation and shipment tracking information to
SAP so that LHSI can inform customers of order ship dates.
8. The MDC will provide inventory information to SAP so that LHSI has access
to on hand inventory, and product in quarantine.
9. LHSI, in the absence of electronic invoicing, will mail invoices to Endo's
customers. Postage costs will be passed on to Endo.
10. LHSI will provide the staffing and training necessary to conduct the
following customer service and chargeback functions:
. Call Management to include
. Primary contact for customers, responding to all customer inquiries
within 24 hours. It is assumed that a LHSI customer service
representative will answer all customer calls and handle according
to established work procedures.
. Customer service hours to be from 8:00 am - 6:00 pm
. Emergency calls - Beeper coverage, numbers referenced.
It is assumed that ENDO will require the MDC to have someone
available to respond. Time spent for emergency response will be
charged at the Agreed overtime rate.
. Order inquiries
. Shipping errors
. Product complaints
. Return authorizations (CIIs only) Forms faxed for others.
. Chargeback inquiries
. Invoice inquiries
. Pricing inquiries
. PODs
. Adverse Events forwarded to appropriate Endo personnel as
detailed in work procedures.
. Emergency calls - Beeper coverage. It is assumed that ENDO will
require the MDC to have someone available to respond
. Telephone Metrics
. Report customer calls outlined in work procedures daily.
. Inbound calls
. Number of calls
. Number of Abandoned calls
. Average speed of answer
. Duration of call
. Types of calls (i.e. medical affairs vs customer service)
37
SCHEDULE C (continued)
. Outbound calls
. Number of calls
. Average duration of call
. Hourly report (to monitor peak times for proper coverage)
.. Order Entry (except CIIs), Maintenance (except CIIs) and processing of all
orders to include
. Customer number verification
. Validation of valid DEA license and schedule verification, valid state
license, credit checks
. Order modifications
. Excessive order checks
. NDC and pricing checks
. New business checks (new item purchased)
. Trade Show orders
. Promotional orders
. Export orders
. Drop shipments
. Rush orders
. Re-work on orders (i.e. damages, order entry errors, etc)
. Shortdated orders, overstock orders
. Clinical study orders
. Product complaints - credit/product replacement
. PODs
. Physician personal use units according to Stock Fulfillment procedure
. Donations
.. LHSI will be responsible for backorder management and processing
. Handle backorders according to customers' request (customer's
cancellation policies)
. Proactively advise customer of all backorders and expected delivery
dates whether EDI or manual order (assuming SAP or Endo can provide
this information)
. Work with MDC to prioritize backorder shipments
. Handle according to Endo's procedures and work instructions
. Participate in weekly backorder meetings with Endo
38
SCHEDULE C (continued)
.. LHSI will be responsible for Customer and Product Master file maintenance to
include but not be limited to:
. Assistance with initial file loads of Customer Master profiles, including
drop ships
. New account setups
. DEA updates
. Salesman updates
. Customer/Product eligibility
.. LHSI will be responsible for the preparation of letters to customers for DEA
license 30 days before expiration. LHSI will also be responsible for
maintaining copies of all applicable customer licenses, including DEA
licenses.
.. Day end activity reporting (assumes SAP generated)
.. Customer invoicing (assume SAP generated) to include
. Processing of all Invoices
. Processing of price equalizations
. Processing of return credits, including electronic and manual processing
. Processing of all credits, including electronic and manual processing
. LHSI will work with Endo to have invoices printed
.. Chargeback validation, processing and reconciliation to include:
. 72 hour turn around time (credit to customer) The assumption is that at
least 90% of the transactions are via EDI
. Handle all inquiries from customers related to chargebacks
. Manual entry of chargebacks
. Assist in resolving all chargeback errors with wholesaler customers
. ENDO is responsible for Group membership and wholesaler updates
. Primary conduit for National Account Executives for all customer inquiries
or requests regarding chargebacks
.. Return Authorizations
. Handled return authorizations according to Endo Returns Policy and
Procedures
.. Promotions
. LHSI will be responsible for mailings/fax explosions for new product
launches and promotions. This activity will be on an accessorial basis.
39
SCHEDULE C (continued)
. LHSI will proactively call accounts to build an awareness of
promotions/new product launches. This activity will be on an
accessorial basis.
11. LHSI will be responsible for Accounts Receivable for Endo which includes:
. Deposits
. Cash Management and Application
. Adjustments
. Short Payments
. Cash Discounts
. Payments on Accounts
. Credits/Debits
. Chargebacks
. Write Offs
. Slow Payer's
. Collections Management and Deductions/Dispute Resolution
. Reporting
. ENDO is responsible for credit management (e.g., establishing customer
credit limits, placing and releasing customer orders on credit hold).
12. MDC will be responsible for all XXXXX reporting and tracking.
13. LHSI will allow Endo to do random checks on how customer calls are handled.
14. Endo will be responsible for all contracts, pricing and rebate
administration, including Medicaid (assumes on SAP).
15. LHSI will be responsible for Record Retention for all services Agreed upon
in accordance with the Work Instructions as well as those Record Retention
services described in the Agreement.
KEY ASSUMPTIONS:
.. LHSI does not provide support for SAP.
.. ENDO will provide help desk support for SAP.
.. ENDO's customer base will contain only customers holding current state and
federal licenses to distribute pharmaceuticals (e.g. DEA license,
wholesaler distribution license).
40
SCHEDULE C (continued)
.. Endo will allow LHSI personnel to access these customer files, current
policies and procedures for the purpose of conducting business according to
the work procedures established.
.. Endo will pay for all SAP licenses agreements for LHSI.
.. Endo to assist in training for all customer service, accounts receivable and
chargeback personnel to meet their requirements. LHSI will be responsible for
identifying Super Users for ongoing internal training needs.
.. Endo will own the dedicated 800 phone number (s) and fax number (s)
Endo, with input from LHSI, will be responsible for producing the Work
Instructions that will be necessary to conduct business for Endo. LHSI will
be responsible for ensuring that work procedures are followed when performing
the above services.
.. LHSI will participate in any system validation of SAP that pertains to work
processes.
.. LHSI, with input from Endo, will be responsible for interviewing and hiring
staff needed to perform such services. Initial staffing of resources is as
follows:
. Customer Service
. 1 Supervisor
. 5 CMAs
. Accounts Receivable
. 2 A/R Administrators
. .25 Supervisor
. Chargebacks
. 2 full time chargeback administrators
Future staff requirements will be determined by LHSI and Endo.
LHSI will ensure that it is in compliance with all DEA, PDMA, FDA, local/state
regulatory requirements at all times, as it relates to services being provided.
LHSI will participate in weekly operational discussions with Endo to review any
exceptions, issues or changes in service standards.
Endo will handle all initial and on-going EDI setup in conjunction with LHSI
using SAP. Current EDI transactions supported are purchase orders, chargebacks,
chargeback reconciliation, invoicing and award notifications.
41
SCHEDULE C (continued)
LHSI and Endo will be responsible for ensuring that the network connectivity
works; ENDO will pay for all one time and on-going costs associated with the
connectivity for SAP.
LHSI workstations will be used and Endo will supply the SAP ENDO for each
workstation.
42
SCHEDULE C (continued)
DESCRIPTION OF WAREHOUSE AND DISTRIBUTION SERVICES
--------------------------------------------------
The ENDO/LHSI Warehousing and Distribution Agreement services will include the
following:
1. Endo, via e-mail, will provide LHSI notification of incoming purchase
orders from contracted manufacturers according to established work
instructions. LHSI will provide DEA Form 222 to contract manufacturer for
purchase of CII pharmaceutical products.
2. LHSI will create Purchase Order in LHSI's computer system (LMS) and
Customer Service at Memphis Distribution Center (MDC) will issue a DEA Form
222 to contract manufacturer (when applicable).
Endo will make sure that LHSI is communicated to via e-mail by all
manufacturing sites so that LHSI is aware of both international and
domestic in-bound transportation from contract manufacturers to LHSI MDC.
Actual shipment appointments will be arranged between manufacturing site
and LHSI . LHSI is not responsible for customs clearance. Dupont may be
able to send ASN and then LHSI will need to send receipt notice so that
Dupont can close shipments.
3. LHSI performs receipt of incoming inventory from contract manufacturer. -
. Receiver One sorts, segregates receipt by SKU and Lot Number,
Expiration date, counts and enters receipt into LMS in a Quarantine
status. If the lot number and/or expiration date is not in sequence
the LMS System will trigger a flag.
. Receiver Two re-checks entire receipt and validates both system
entry and paper documents in compliance with DEA requirements.
. Warehouse Associate prepares RF Scanner put-away functions in Q
status and validates inventory quantity.
. Supervisor reviews and accepts or modifies any discrepancies in
Purchase Order in LMS quantity and inventory received by completing
system transaction. LMS is updated with scheduled updates to SAP.
. Supervisor provides copy receiver report to Endo Quality
Assurance Associate personnel for review and Quality release. Once
product is released LMS is updated with scheduled updates to SAP.
. If inventory receipt has discrepancy LHSI is responsible for
reporting to Endo Quality Assurance Associate as detailed in work
instructions.
4. Endo to perform QA functions:
. Endo Quality Assurance Associate personnel (2) will process all
appropriate Endo paperwork and provide written approval for release
to Good Status. LHSI Supervisor to receive copy of Release
Authorization.
. Endo Quality Assurance Associate personnel will identify
inventory required for sample retention. LHSI Supervisor
to receive copy of QA documentation.
. LHSI Supervisor performs LMS system update to record movement of
sample retention inventory when required. LMS inventory adjustment
is transmitted to SAP.
. LHSI to provide LMS training and visibility to Endo warehouse
inventory within LMS.
5. Endo Corporate will be responsible for communicating in writing the initial
changeover to all Endo customers, including, but not limited to, the
forwarding of all CII purchase orders and DEA Form 222 to LHSI MDC. The
Endo Customer Service function (which will be performed by LHSI as
specified elsewhere in this Agreement) will proactively communicate all
changes in distribution to customers as a follow to the initial
communication.
43
6. LHSI to process orders for CII products from LHSI Memphis Distribution
Center (MDC) within Controlled Area:
. LHSI Supervisor or designate will validate all data on DEA Form 222
prior to processing order.
. LHSI order entry personnel will enter order into SAP. To improve
efficiencies a second check of all CII orders will be done, prior
to being released through the interface to LMS per Work
Instructions. SAP CII report can be utilized for this check.
. SAP will process order and transmits order to LMS according to
agreed upon schedule. LMS will accept electronic order and validate
customer DEA information and product information prior to
transmitting to LMS Warehouse Management System for processing. If
a change to an order is required, the change must be made manually
according to Work Instructions, both in LMS and SAP.
. LHSI Supervisor to compare order pick document to original DEA Form
222.
. LMS system to process order and allocate inventory based on Endo's
requirement that lots of a given Product which expire first be
shipped first. The limited exceptions to this rule flow from the
desire to minimize the number of lots from which shipments are
being made at any one time, and are as follows: First, if
successive lots arrive at MDC with expiration dating showing that
they expire sooner than a lot already received at MDC and from
which shipments are already being made, the MDC will continue to
ship the remainder of the lot it is currently shipping, but then
select as the next lot to ship that lot which has the least time
remaining until its expiration date. Second, if Quality Assurance
Associate puts a lot on hold at any time, the MDC should select
from the remaining lots the lot which will expire first and ship
from it. If the lot on hold then gets released, the MDC should
complete shipments from the lot it is currently shipping,and then
select the lot which was on hold as the lot to ship from if it will
expire before any of the then-remaining lots. However, if other
lots will expire before the lot which was on hold, those lots
should be shipped first, and the lot which was on hold will be
shipped when its turn comes up in the sequence of expiration dates.
. Picker One - picks and stages order utilizing RF scanner.
. Picker Two - rechecks the pick and validates the staged order to
the original pick document.
. Packer will package order per mutually agreed upon Work
Instructions. Endo packing slip will be enclosed within carton for
CII orders
. Shipper will process all order through carrier shipment terminals.
Shipper will enter tracking number into Warehouse Management System
Xxxx of Lading maintenance function.
. LHSI designate will perform dispatch function when carrier arrives
for outbound pick-up.
. LHSI will transmit sales order confirmation to LMS Order Management
System -which will transmit agreed upon data to SAP. (real-time)
. Daily Order Cut-off times for same day processing are to be
determined (i.e. end of month peak processing). Order turn around
times need to be determined as well. (Today order is guaranteed for
2-day delivery.)
. Carrier service levels to be determined (i.e. last Fed Ex pull
11:30 PM)
. Emergency orders must be shipped according to Work Instructions.
. Federal Express labels will be provided to those customers that
request them to send CII orders in to the MDC. The Customer Service
Order Entry personnel at the MDC will be responsible for this
service.
7. LHSI to process orders for CIII-CV at LHSI Memphis Distribution Center
(MDC) within appropriate designated working stations within cage area:
. SAP will process order and transmits order to LMS. LMS will
validate customer DEA information and product information prior to
transmitting to the WMS portion of LHSI's LMS for processing.
. LMS system to process order and allocate inventory based on Endo's
FIFO requirement. (i.e.. If successive lots arrive at MDC with
less expiration dating than lots already received at MDC the MDC
will complete the lot it is currently shipping and then select the
next lot to ship utilizing the least expiration date. In addition,
if Quality Assurance Associate puts a lot on hold at any time, the
MDC should ship from the next lot with the lowest expiration date.
If that same lot on hold gets released the MDC should complete the
lot it is currently shipping from and then select the next lot to
ship from utilizing the least expiration date.
44
. Picker One - picks and stages order utilizing RF scanner.
. Picker Two - validates the staged order to the original pick
document
. Packer will package order per mutually agreed upon Work
Instructions. Endo packing slip will be enclosed within carton for
all CIII-CV orders.
. Shipper will process all order through carrier shipment terminals.
Shipper will enter tracking number into WMS Xxxx of Lading
maintenance function.
. LHSI designate will perform dispatch function when carrier arrives.
. LHSI will transmit sales order confirmation to the OMS portion of
LHSI's LMS and then transmitting agreed upon data to SAP. (real-
time)
. Daily Order Cut-off to be determined (i.e. end of month peak
processing). Order turn around times need to be determined as well.
. Carrier service levels to be determined (i.e. last Fed Ex pull
11:30 PM)
. Emergency orders must be shipped according to Work Instructions.
8. LHSI to process orders for Rx at LHSI Memphis Distribution Center (MDC)
within appropriate designated working stations within warehouse area :
. SAP will process order and transmits order to LMS. LMS will
validate customer DEA information and product information prior to
transmitting to WMS for processing.
. LMS system to process order and allocate inventory based on Endo's
FIFO requirement. (i.e. . If successive lots arrive at MDC with
less expiration dating than lots already received at MDC the MDC
will complete the lot it is currently shipping and then select the
next lot to ship utilizing the least expiration date. In addition,
if Quality Assurance Associate puts a lot on hold at any time, the
MDC should ship from the next lot with the lowest expiration date.
If that same lot on hold gets released the MDC should complete the
lot it is currently shipping from and then select the next lot to
ship from utilizing the least expiration date.)
. Picker One - picks and stages order utilizing RF scanner.
. Picker Two - validates the staged order to the original pick
document
. Packer will package order per mutually agreed upon Work
Instructions. Endo packing slip will be enclosed within carton for
all Rx orders.
. Shipper will process all order through carrier shipment terminals.
Shipper will enter tracking number into WMS Xxxx of Lading
maintenance function.
. LHSI designate will perform dispatch function when carrier arrives.
. LHSI will transmit sales order confirmation to LMS/OMS and then
transmit agreed upon data to SAP. (real-time)
. Daily Order Cut-off to be determined (i.e. end of month peak
processing). Order turn around times need to be determined as well.
. Carrier service levels to be determined (i.e. last Fed Ex pull
11:30 PM)
. Emergency orders must be shipped according to Work Instructions.
9. LHSI MDC to process all other types of orders (same classes as above)
according to above and Work Instructions (i.e. promotions, clinical study
orders, stock fulfillment orders, shortdated orders).
10. All Endo backorders, when product is released, will be processed according
to Work Instructions.
11. Endo Pharmaceuticals will be adding new products to its portfolio and LHSI
MDC will be responsible for providing all services described in this scope
for any and all new products.
12. LHSI MDC must comply with special customer order requirements such as
dating, ship requests will be passed through interface via customer notes.
13. LHSI to perform transportation management for Endo for all outbound orders.
. LHSI to perform carrier selection based on Endo guidelines.
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. LHSI to perform random audit of freight invoices.
. LHSI to manage freight payments and audits.
. LHSI to conduct carrier performance audits.
14. LHSI to perform the following Inventory Control functions utilizing
segregation of duties:
. Complete redundancy (double check) of receiving and picking
functions for controlled substances (i.e. Receiver 1, Receiver 2
and Put Away checks) For ambient products Receiver 1 checks and
then there is a Put Away check as well.
. LHSI Supervisor will validate all inbound receipts and all internal
product movement.
. LMS to provide day end inventory update to SAP.
. LHSI to perform daily physical inventory count on all active
controlled substance lots and locations.
. LHSI to perform non-controlled inventory cycle counts 8% (1/12) of
location per day.
. LHSI MDC Manager is solely authorized to approve inventory
adjustments of controlled substances.
. LMS RF functionality electronically restricts warehouse personnel
access to proper warehouse zones.
. Control cage card access limits LHSI employees access to controlled
areas.
. If inventory receipt has discrepancy, LHSI is responsible for
reporting to Endo Quality Assurance Associate as detailed in Work
Instructions.
. LHSI MDC is responsible for investigating shortages, incorrect
shipments, and reporting to Customer Service according to Work
Instructions.
15. LHSI to perform DEA/XXXXX Compliance Validation and XXXXX Reporting:
. All daily receiving and shipping documents to be maintained in a
secured area outside of control cage.
. DEA Daily Edit Report of LMS controlled substance transactions will
be generated next business day. This report contains all LMS DEA
transactions performed the previous day.
. LHSI non-controlled substance Warehouse Associate will validate the
official receiving and shipping documents to the DEA Daily Edit
Report.
. LHSI does perform a monthly product reconciliation for all classes
of controlled substances comparing a report of monthly DEA
transactions to the month end physical inventory. This ensures the
DEA electronic file confirms the physical inventory.
. LHSI will perform quarterly XXXXX transmissions of all activity.
16. LHSI will manage the handling and processing of short-dated, damaged or
expired inventory on behalf of Endo to be sold to Pharmacy Solutions, Inc
. LHSI to submit inventory report itemizing product, quantities and
lot and category of product.
. Endo Customer service and Quality &Compliance to approve request
for destruction.
. LHSI order entry personnel will enter order into SAP.
. SAP will process order and transmits order to LMS. LMS will
validate Pharmacy Solutions, Inc. as the customer, product
information and quantity prior to transmitting to WMS for
processing.
. If CII product is involved, LHSI will contact Pharmacy Solutions,
Inc. and request them to issue DEA Form 222. LHSI Supervisor will
compare pick document to original DEA Form 222.
. LHSI will process the order as outlined above.
. LHSI will process all product destructions according to all DEA
guidelines.
. LHSI destruction process will be audited and reviewed from time to
time by Endo Quality Assurance Associate.
17. LHSI will manage receipt, handling and processing of all authorized
returns.
. Endo's Customer Service function (which will at least initially be
performed by LHSI pursuant to the Agreement) will process all
authorization requests for return merchandise based on existing
Endo Returns Policy and according to Customer Service Work
Instructions
. If indate product is returned (i.e. mis-shipment,), that product
can be put back into inventory after Endo Quality Assurance
Associate approves.
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. LHSI will receive and process return based on mutually agreed upon
Work Instructions.
. LHSI will store return merchandise in designated area under
Quarantined status until authorized by Endo (Customer service and
Quality) for destruction as detailed in Work Instructions.
. If CII product is involved, LHSI warehouse operator will send
customer a DEA Form 222 so that customer can return product.
. Process for destruction is outlined above.
. All returns should be processed within 2 days from the date of
receipt.
. Partial returns received by LHSI will have to be handled manually
by XXXX.
00. XXXX will provide a Shipping History Report by Lot Number, by customer
should a Recall be issued by Endo. LHSI will assist in executing recall
i.e. communication to customers, and receipt of product in controlled area
according to Endo's Recall policy.
DESCRIPTION OF LHSI WAREHOUSE FACILITY
1. LHSI to provide PDMA/DEA compliant space for 800 pallet vault, 500 pallet
cage and 1000 ambient pallet positions at 0000 Xxxxxxxxx Xxxx, Xxxxxxx,
Xxxxxxxxx 00000.
2. LHSI to provide security systems to include cameras located in the
receiving, vault, cage and shipping areas; video, limited ID card access to
controlled areas, and pocketless uniforms.
3. LHSI to provide designated office space (complete with furniture and phones)
for Endo Quality Assurance Associate personnel.
4. LHSI to provide warehouse space for storage of refrigerated and ambient
control and non-controlled sample retention inventory.
5. LHSI to provide warehouse equipment (forklifts, racking, RF scanners, pick
lines, carrier terminals, communication lines, and terminal hardware).
6. LHSI to provide secure trucking lounge for truckers.
7. Upon completion of construction of MDC, Endo and LHSI should review and
agree on location of security cameras and overall state of security in general.
DESCRIPTION OF INFORMATION TECHNOLOGY SERVICES
1. LHSI will provide LMS2000 platform for warehouse management functions and
train appropriate Endo QA personnel.
2. LHSI will participate in the project management, design, and development of
LMS2000 interface with SAP.
3. LHSI will provide LMS2000 test environment and participating in interface
validation.
4. Endo will provide SAP test environment and participate in interface
validation.
5. LHSI will provide terminal hardware, software and connectivity for Endo
Quality Assurance Associate personnel and LHSI order entry associate.
DESCRIPTION OF HUMAN RESOURCE SERVICES
1. LHSI to recruit, hire and train appropriate LHSI personnel to provide the
Services (as defined in the Agreement).
2. LHSI will conduct background checks on new LHSI employees.
3. LHSI will perform initial drug testing and conduct random drug testing of
all active employees.
4. Endo to provide LHSI Hold Harmless Agreement for Endo Quality Assurance
Associate personnel stationed at LHSI Memphis Distribution Center.
5. Endo Quality Assurance Associate personnel will adhere to all LHSI employee
policies and have access to Memphis facility limited to standard business
hours of operation.
6. LHSI to assist Endo in the recruiting process for Quality Assurance
Associate.
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7. LHSI to provide limited access to controlled areas (vault and cage) and only
limited employees will be able to work those areas.
8. LHSI will adhere to the required GMP, DEA, OSHA AND EPA regulations.
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SCHEDULE D
LOGISTICS ASSUMPTIONS
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For purposes of this Agreement, a "line of business" is one line on an order
representing one product transaction between ENDO and one customer of ENDO. The
fees to be paid to LHSI by ENDO for each line of business processed are set
forth in Schedule B.
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