EXHIBIT 10.18
SERVICES AGREEMENT, dated as of the 26th of June, 1995 by and
between Faulding Inc., a Delaware corporation having its principal
place of business at 000 Xxxxxxxxx Xxx. Xxxxxxxx, Xxxxxxxxxxx
00000 (hereinafter referred to as "Faulding") and Purepac Pharmaceutical
Co., a Delaware corporation having its principal office at
000 Xxxxxx Xxxxxx, Xxxxxxxxx Xxx Xxxxxx (hereinafter referred to
as "Purepac").
WHEREAS, Faulding has heretofore entered into a Toll
Manufacturing Agreement with Purepac dated as of August 1, 1993,
which agreement was amended as of December 23, 1994 ("the Toll
Manufacturing Agreement") pursuant to which Faulding has contracted
with Purepac for the manufacture of the Product (as hereinafter
defined);
WHEREAS, Faulding has entered into a supply and distribution
agreement (the "Distribution Agreement") with Xxxxxxx-Xxxxx
Squibb Company ("the Distributor") dated December 23, 1994
pursuant to which Faulding has agreed to grant to the Distributor
the exclusive right to distribute the Product in the Territory (as
hereinafter defined) and has agreed in connection with such grant
to provide, or arrange to provide, certain services to the
Distributor;
WHEREAS, the parties, in light of certain provisions of
the Distribution Agreement, wish to clarify each of their
responsibilities under the Toll Manufacturing Agreement and Faulding
wishes to retain Purepac to provide certain additional services, and
Purepac wishes to provide such services, subject to the terms and
conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, the parties agree to the following:
1. DEFINITIONS
For the purposes of this Agreement the following terms
shall have the following meanings:
1.1 "Development Period" shall mean the period commencing
as of August 1, 1993 and ending on the date of the validation and
commencement of commercial production of the Product.
1.2 "Distribution Agreement" shall mean the Supply and
Distribution Agreement dated December 23, 1994 between Faulding
and the Distributor.
1.3 "Distributor" shall mean Xxxxxxx-Xxxxx Squibb
Company, a corporation organized under the laws of the State of
Delaware.
1.4 "FDA" shall mean the United States Federal Food and
Drug Administration.
1.5 "X. X. Xxxxxxxx" shall mean X.X. Xxxxxxxx & Co.
Limited, a South Australian corporation.
1.6 "Fiscal Year" means the twelve month period
commencing on July 1 of each year and ending on June 30, or any
other twelve month period designated as the fiscal year of Purepac.
1.7 "NDA" shall mean the New Drug Application to be
filed with the FDA in respect of the Product.
1.8 "Product" shall mean an oral sustained release
morphine product comprising a multitude of polymer coated sustained
released pellets of morphine sulphate encapsulated in hard gelatin
capsules containing 20 mg, 50 mg and 100 mg doses or any other dose
in the range of 20 mg to 100 mg of polymer coated sustained release
pellets of morphine sulphate.
1.9 "Specifications" shall mean the written specifications
with respect to the Product mutually agreed to by the parties
hereto, which Specifications may be changed or modified only as
agreed to by the parties in writing.
1.10 "Territory" shall mean the United States of America
and its territories and possessions, including, without limitation,
Puerto Rico.
1.11 "Toll Manufacturing Agreement" shall mean the Toll
Manufacturing Agreement between Faulding and Purepac dated as of
August 1, 1993, as amended as of December 24, 1994.
1.12 "Trademark" shall mean that xxxx "Xxxxxx" or any
replacement xxxx for the marketing and sale of the Product agreed
to by the parties as contemplated by Section 14 of the Distribution
Agreement.
2. QUALITY CONTROL AND PRODUCT ACCEPTANCE.
2.1 Purepac will ensure that deliveries of the Product
to Purepac's warehouse are accompanied by quality control certificates
of analysis and will send copies of such certificates of
analysis contemporaneously by telecopier (confirmed by hard copies
mailed) to Faulding and the Distributor.
2.2 Purepac agrees to perform quality control testing of
any returned Product as follows. In the event that any of the
Product is returned to Purepac's warehouse by the Distributor or
the Distributor's customers for the reason that said Product is
claimed not to meet Specifications or is otherwise defective,
Purepac shall notify Faulding within five (5) days of such return
by written notice (the "Return Notice") specifying, if applicable,
the manner in which such Product is claimed not to meet Specifications
or to be otherwise defective. In the case of a return
received by the Distributor, upon Faulding's receipt of written
notice from the Distributor (the "Distributor's Return Notice"),
Faulding may request the Distributor to return the Product which
is claimed to be defective or samples thereof to Purepac for
testing and will contemporaneously notify Purepac of such request.
Upon receipt and testing of the Product, if Purepac concludes that
such Product does not conform to the Specifications or is otherwise
defective and that such departure from Specifications or defect is
due to the fault or act of Purepac (collectively, a "Defect Caused
by Purepac"), Purepac will use its best efforts to replace such
Product, free of charge, with conforming goods within ninety (90)
days from, in the case of a return to Purepac's warehouse, the
return of such Product, or, in the case of a return to the
Distributor, Faulding's receipt of the Distributor's Return Notice
or Purepac's receipt of the samples, whichever is later. If Purepac
concludes that the Product conforms to the Specifications, is not
otherwise defective or that the Product defect is not a Defect
Caused by Purepac, Purepac shall promptly notify Faulding of its
findings and shall cooperate, as reasonably requested by Faulding,
in Faulding's communications with the Distributor and the submission,
if necessary of the Product to an independent laboratory for
analysis in the form of a written report ("Report"). If Faulding
notifies the Distributor that it disagrees with the return of
Product to Purepac's warehouse or with a Distributor's Return
Notice, and if the Distributor submits a new purchase order for
Product to Faulding at such time for the same amount of Product as
in dispute, upon notification by Faulding, Purepac agrees to use
reasonable efforts to deliver such Product as promptly as commercially
practicable. In the event that the Report determines that
any of the Product returned to the Distributor or Purepac's
warehouse does not meet Specifications or is otherwise defective
and such defect is a Defect Caused by Purepac, Purepac will use its
best efforts to replace such Product with conforming goods, free
of charge, within ninety (90) days from the date of the Report.
All transportation, shipping and insurance costs and other fees
incidental to the shipping back to Purepac of Product conceded by
Purepac or determined by the Report to be a Defect Caused by
Purepac and the shipping to the Distributor of the replacement
Product (and costs of the independent laboratory only if the Report
of which has concluded that the Product does not meet Specifications
or is otherwise defective due to a Defect Caused by Purepac)
will be paid for by Purepac.
2.3 Purepac agrees to accept any return of the Product
from the Distributor, whether the Product in question is dated or
claimed to be defective, it being understood that, unless Purepac
is so required, at its cost, to replace such returned Product for
the reasons set forth in Section 2.2 above, Faulding shall bear, or
ensure that the Distributor bears, the cost of any such returned
Product at the applicable invoice price, as agreed to by the
Distributor and Faulding in the Distribution Agreement, and shall
indemnify and hold Purepac harmless from any additional expenditures
relating to the shipping back to Purepac of Product and the
shipping by Purepac of any replacement Product. Purepac shall
dispose of all returned Product by, as appropriate, including it in
the Distributor's inventory or destroying it in accordance with
applicable legal and regulatory requirements. All commercially
reasonable costs of the handling of returned Product, other than
that determined to have returned due to a Defect Caused by Purepac,
shall be charged to the Distributor or otherwise borne by Faulding
and Faulding shall indemnify and hold Purepac harmless from any
such costs.
2.4 No later than the time each batch of the Product is
released by Purepac and transferred to its finished goods warehouse,
Purepac shall furnish the Distributor with a specimen
Product sample from such batch in order that the Distributor may
conduct its own quality control assays. Purepac shall not ship out
any Product from any batch until and unless the Distributor, after
its independent quality assays, has furnished Purepac with a
written release with respect to such batch. Faulding shall use its
best efforts to cause the Distributor to conduct such assays and
furnish Purepac with a written release with respect to each such
batch in a timely manner. Any disagreement as to whether any batch
shall be regarded as defective (thereby requiring Purepac to
replace such batch) shall be dealt with as provided in Section 2.2
of this Agreement and Section 6(b) of the Distribution Agreement.
2.5 Purepac agrees to grant representatives of X.X.
Xxxxxxxx and the Distributor, at their respective costs, the right
to inspect Purepac's quality control procedures and records in
regard to the manufacture of the Product during Purepac's normal
business hours upon prior reasonable written notice by Faulding to
Purepac and, in particular, the right at any time and from time to
time during business hours, after prior arrangements have been
established with Purepac, to inspect that part of Purepac's plant
facility (or facilities) which is engaged in the manufacture,
preparation, processing or warehousing of the Product for the sole
purpose of reviewing Purepac's compliance with applicable current
Good Manufacturing Practice and applicable DEA regulations as they
specifically relate to the Product. Faulding shall assume all
risk of loss and indemnify and hold Purepac harmless from and
against any and all loss, liability, damage, claim and expense
including, but not limited to, reasonable attorneys' fees arising
out of or resulting from either X.X. Xxxxxxxx'x or the Distributor's
employees' acts or omissions at Purepac facilities.
3. RECALLS.
3.1 In the event that Faulding or Purepac determines that
a Product does not conform to the Specifications or that it should
be recalled for any other reason, prior to taking any action, it
shall give written notice to the other party and the Distributor
specifying its reasons for the necessity of a recall (the "Recall
Notice") or if either party receives a Recall Notice from the
Distributor, it shall promptly notify the other party. If either
Faulding or Purepac has requested the recall or Faulding agrees
with the determination made by the Distributor as stated in a
Recall Notice given by the Distributor to Faulding, and relayed by
Faulding to Purepac, or the FDA has requested a recall or voluntary
market withdrawal, the parties agree that the Distributor shall
handle the administration of the recall and that Purepac shall use
its best efforts, consistent with relevant requirements and
restrictions of the FDA, to replace all Product recalled within one
hundred twenty (120) days from the date of the Recall Notice. The
Distributor shall be reimbursed for all out-of-pocket expenses
relating to such recall (a) by Purepac if it is determined, as set
forth in Section 2.2, that the recalled Product does not meet
Specifications or is otherwise defective as a result of a Defect
Caused by Purepac and (b) by Faulding if the recall has been agreed
to by the parties for any other reason. However, if the Distributor,
in its sole determination, with a Recall Notice to Faulding,
initiates and implements a Product recall, Purepac will not be
required to replace the recalled Product and reimburse the
Distributor for expenses as provided in the preceding sentence or
Section 3.2, without a determination, as set forth in Section 2.2
that the Product recalled did not meet Specifications or is
otherwise defective.
3.2 The parties agree to abide by any recall/voluntary
market withdrawal request of the FDA. Moreover, the parties agree
that in all cases, the Distributor will handle the administration
of the recalls as follows:
(a) If within ten (10) days from the date of a Recall
Notice from the Distributor, Faulding has been unable to
reach an agreement with the Distributor concerning the
necessity of a recall, the parties hereto agree that the
Product shall be submitted to a mutually acceptable
independent laboratory for a Report, the cost of which
shall be borne by Purepac only if the finding of the
Report is that the Product does not meet Specifications
or is otherwise defective as a result of a Defect Caused
by Purepac and otherwise, as the case may be, by Faulding
or the Distributor as set forth under the terms of the
Distribution Agreement.
(b) In the event that the finding of the Report is that
the Product does not meet Specifications or is otherwise
defective as a result of a Defect Caused by Purepac,
Purepac shall, consistent with relevant requirements and
restrictions of the FDA and at its own cost, use its best
efforts to replace all Product recalled within one
hundred twenty (120) days from the date of the Report and
shall reimburse the Distributor for all reasonable out-of-pocket
expenses relating to such recall. In the event
that the discrepancy is resolved in the Report against
Faulding\Purepac for any reason other than that the
Product does not meet Specifications or is defective as
a result of a Defect Caused by Purepac, the parties agree
that the Distributor shall handle the administration of
the recall (unless the Distributor has by that time
already implemented the recall in question pursuant to
the last sentence of Section 3.1} and Purepac, at
Faulding's cost, shall use its best efforts , consistent
with relevant requirements and restrictions of the FDA,
to replace all Product recalled within one hundred twenty
(120) days from the date of the Report and Faulding shall
reimburse the Distributor for all reasonable
out-of-pocket expenses relating to such recall. In the
event that the discrepancy is resolved in the Report in
favor of Faulding\Purepac and the Distributor elects to
recall the Product notwithstanding the Report, the
parties agree that the Distributor shall handle the
administration of the recall (unless the Distributor has
by that time already implemented the recall in question
pursuant to the last sentence of Section 3.1). In such
event, neither of the parties to this Agreement will have
any obligation with respect to replacement of the
Product or reimbursement of the Distributor's expenses.
3.3 Faulding and Purepac shall each advise the other
party, by written notice, in the event that it learns of any facts
or circumstances which could warrant the recall of the Product for
reasons of safety, health or efficacy.
4. THE TRADEMARK AND LABELING
4.1 Purepac shall package and label the Product in
accordance with the packaging and labeling provided by Faulding
(which, as set forth in the Distribution Agreement, shall receive
such packaging and labeling from the Distributor), which shall
comply with FDA specifications and requirements; provided, however
that Purepac has received camera ready labeling and insert copy in
the appropriate quantities for Purepac's use in packaging the
Product and provided, further that Purepac is supplied with the art
work for such packaging and labeling. The parties agree that the
packaging and labeling will carry the Trademark and the packaging
will indicate the actual manufacturer of the Product. Purepac
acknowledges and agrees, as approved Product manufacturer under the
NDA, that it shall be responsible for any of its own acts and
omissions with respect to the form and content of all Product
labels and other aspects of Product packaging and labeling
(collectively, the "Labeling") except to the extent that any claims
with respect to the Labeling relate to label information and
content that either Faulding or the Distributor supplied Purepac.
Faulding agrees to indemnify Purepac and hold it harmless from all
such claims with respect to the Labeling to the extent that such
claims relate to label information and content that either Faulding
or the Distributor supplied Purepac.
4.2 The parties understand and agree that the Distributor,
under Section 14(e) of the Distribution Agreement, has granted
to both of the parties hereto permission to refer to the Trademark
(and any substitute, replacement or additional trademark relating
to the Product) in its regulatory filings, annual reports and other
financial and corporate reporting obligations, brochures and
promotional and public relation materials.
5. COSTS OF SERVICES/PAYMENTS
5.1 Each of the parties agrees that the aggregate cost
of services provided to Faulding by Purepac through March 31, 1995
pursuant to the Toll Manufacturing Agreement and this Service
Agreement, as detailed on Schedule 1, equals $U.S.1,413,558, which
Faulding has heretofore paid to Purepac in full.
5.2 The parties agree that within five (5) working days
after the end of each month, Purepac shall submit to Faulding a
statement detailing the costs of services during that month (a
"Cost Statement"). Subject to the provisions of the immediately
following sentence and Section 6 of this Agreement, Faulding shall
pay to Purepac the amount due as reflected in the Cost Statement
within thirty (30) days of its receipt of such Statement. Faulding
may withhold from its payment to Purepac only any amount in dispute
with regard to such payment; provided, however that within 10 days
after its receipt of any Cost Statement, Faulding shall initiate a
review of Purepac's costs, as reflected in the Statement, by
written notice to Purepac. Within 10 days of Purepac's receipt of
such notice, the parties will meet and negotiate in good faith to
resolve any differences.
5.3 Both parties acknowledge and agree that they expect
that the costs, chargeable to Faulding as set forth in Section 5.2
hereof, that are associated with services (a) set forth in this
Services Agreement will continue throughout the term of this
Agreement and (b) set forth in the Toll Manufacturing Agreement
(the "Toll Manufacturing Costs") will continue only through the
Development Period; provided, however, that if Purepac, at any
time, discovers that any such Toll Manufacturing Costs are likely
to continue after the end of the Development Period, it shall
immediately so advise Faulding in writing, including a detailed
description of the service to be provided, the estimated cost and
duration of such service to be provided after the end of the
Development Period and the rationale for including the cost of such
service as a Toll Manufacturing Cost. Upon Faulding's receipt of
such notice and provided that such Toll Manufacturing Cost would
have been chargeable to Faulding if it had been incurred during the
Development Period, then Purepac shall have the right to invoice
Faulding, and Faulding shall have the obligation to pay Purepac,
for such Toll Manufacturing Services that are incurred after the
Development Period. If Faulding disagrees that any such charge is
a Toll Manufacturing Charge, it shall give Purepac written notice,
which shall detail its objections, and within ten (10) days of
Purepac's receipt of such notice, the parties will meet and
negotiate in good faith to resolve any differences between them.
5.4 All payments made under this Section 5 shall be
payable in United States Dollars. Such payments may be
accomplished by direct payment or credit against any amount due
Faulding from Purepac or otherwise, as the parties shall agree.
6. BUDGET REVIEW AND REVIEW OF SERVICES
6.1 Set forth on Schedules 2 and 3 of this Agreement
are, respectively, the (a) estimated costs of services provided,
and to be provided, by Purepac to Faulding, under the Toll
Manufacturing Agreement and this Services Agreement, from April 1,
1995 through June 30, 1995 and (b) forecast of the cost of services
to be provided by Purepac to Faulding, under both such agreements(the
"Budget Forecast") during the 1995/96 Fiscal Year. All
of such costs will be calculated using Purepac's standard allocation
procedures based on usage, consistent with United States
generally accepted accounting procedures.
6.2 During the Development Period, no later than 120
days before the end of each Fiscal Year, Purepac shall submit to
Faulding a Budget Forecast of its projected costs for the following
Fiscal Year. Within 30 days after its receipt of Purepac's Budget
Forecast, Faulding may initiate a review of Purepac's projected
costs by written notice to Purepac. Within seven (7) days of
Purepac's receipt of such notice, the parties will meet and
negotiate in good faith to resolve any differences between them.
6.3 During the Development Period, Purepac shall review
at least quarterly the projected costs in its current Budget
Forecast and shall promptly notify Faulding in writing whenever
current projected costs exceed 115% of the costs previously
forecasted and delivered to Faulding. Upon Faulding's receipt of
such notice, Faulding may give notice in writing to Purepac (the
"Demand Notice"), requiring a review of Purepac's projected costs
within fourteen (14) days of Purepac's receipt of the Demand
Notice.
6.4 Faulding understands and agrees that it must give
Purepac reasonable notice of any required services under this
Agreement and the Toll Manufacturing Agreement to avoid any
unnecessary disruptions in the operation of Purepac's business. In
the event of any conflict between the parties with respect to
either of their respective obligations hereunder or under the Toll
Manufacturing Agreement, either party, by written notice to the
other party which reasonably details the items in dispute, may
initiate a review of the parties' obligations. Within fourteen
(14) days of the recipient's receipt of such notice, the parties
will meet and negotiate in good faith to resolve any differences
between them.
7. TAXATION ISSUES
7.1 Each of the parties is aware that the commercial
arrangements of this Agreement may be subject to transfer pricing
reviews by the relevant taxation authorities in the Territory and
Australia. As a result, this Agreement may be subject to internal
reviews by either or both parties and to audits by the relevant
taxation authorities. If as a result of such reviews or audits, it
becomes necessary or advisable for either party (the "Affected
Party")to change any commercial arrangements of this Agreement,
including, without limitation, making retroactive adjustments, the
other party, within thirty (30) days after written notification by
the Affected Party, which notification shall explain in reasonable
detail the reason for the proposed change, shall meet with the
Affected Party and each of the parties agrees to negotiate in good
faith, and to use its best efforts to reach agreement with respect
to, any modifications to the commercial terms of this Agreement.
In the event that the parties, despite their best efforts, cannot
reach agreement with respect to any material change, which in the
opinion of either party is necessary or advisable for the reasons
set forth in this Section 7.1, either party, upon written notice to
the other party, may terminate this Agreement.
7.2 Each of the parties agrees to provide reasonable
assistance, at the other party's reasonable cost, if such other
party is subject to a taxation audit that reviews any commercial
arrangements of this Agreement.
8. TERM AND TERMINATION
The term of this Agreement shall commence as of the date
hereof and shall continue until the expiration or termination of
either or both of the Distribution Agreement and/or the Toll
Manufacturing Agreement.
9. NOTICES
Notices provided under this Agreement to be given or
served by either party on the other shall be given in writing and
served personally or by prepaid registered airmail post or by
express mail or by overnight courier to the following respective
addresses or to such other addresses as the parties may hereafter
advise each other in writing. It being agreed and understood by the
parties that any such notice shall be deemed given and served four
(4) days after the date of airmail by post or express mail:
To: Faulding
President
Faulding Inc.
000 Xxxxxxxxx Xxx.
Xxxxxxxx, Xxxxxxxxxxx 00000
Facsimile (000) 000-0000
To: Purepac
Chief Operating Officer
Purepac Pharmaceutical Co.
000 Xxxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Facsimile (000) 000-0000
10. NON WAIVER
Any party's failure to exercise or enforce any right
conferred upon it under this Agreement shall not be deemed to be a
waiver of any such right or operate to bar the exercise or
performance thereof at any time or times thereafter nor shall any
party's waiver of any right under this Agreement at any given time
including rights to any payment be deemed a waiver for any other
time.
11. GOVERNING LAW
This Agreement shall be deemed to be a contract made
under and shall be governed by and construed in accordance with the
laws of the State of New Jersey.
12. ASSIGNMENT AND SUB-CONTRACTING
The rights and obligations covered hereunder are personal
to each party hereto, and for this reason, this Agreement shall not
be assignable by either party in whole or in part; nor shall either
party sub-contract any of its obligations hereunder without the
prior written consent of the other party; provided, however, that
the restriction contained herein shall in no way limit the rights
of either party to make assignments to its parent or any of its
affiliates. This Agreement shall be binding upon any permitted
assignee or successor of either party.
13. ENTIRE AGREEMENT
This Agreement and the Toll Manufacturing Agreement
incorporate the entire understanding of the parties and revokes and
supersedes any and all agreements, contracts, understandings or
arrangements that might have existed heretofore between the parties
regarding the subject matter hereof.
14. HEADINGS
The headings used in this Agreement are intended for
guidance only and shall not be considered part of this written
understanding between the parties hereto.
IN WITNESS WHEREOF, this Agreement has been executed by the
parties on the date first above written.
PUREPAC PHARMACEUTICAL CO.
By: /s/
-----------------------
FAULDING INC.
By: /s/
------------------------
SCHEDULE 1
US $
DATE INVOICE NUMBERS AMOUNT
Dec. 31, 93 FHF-001-12 $ 39,100
Mar. 31, 94 FHF-002-03 $13,750
Jun. 30, 94 FHF-011-06 89,148
SUB-TOTAL FY 93/4 141,998
July 31, 94 FHF-001-07 80,743
July 31, 94 FHF-001-07 4,331
Aug. 31, 94 FHF-001-08 4,611
Sept. 30, 94 FHF-011-09A 199,535
Oct. 26, 94 FHF-011-10 128,427
Nov. 28, 94 FHF-011-11 168,720
Dec. 29, 94 FHF-011-12 174,256
Jan. 24, 95 FHF-011-01 127,863
Feb. 28, 95 FHF-011-02 111,917
Mar. 28, 95 FHF-011-03 121,332
Apr. 24, 95 FHF-011-04 149,825
SUB-TOTAL FY 94/5 $1,271,560
LIFE OF PROJECT $1,413,558
SCHEDULE 2
XXXXXX CHARGES TO FAULDING FOR THE PERIOD APRIL 1 TO JUNE 30, 1995
April, 1995 $115,693 (actual - billed 5/29/95)
May, 1995 $110,000 (forecast)
June, 1995 $80,000 (forecast)
