Exhibit 10.3
MERCK SERVICES AGREEMENT
THIS SERVICES AGREEMENT (the "Agreement") is dated as of June 30, 1998,
between Pharmaceutical Resources, Inc., a New Jersey corporation, whose
principal offices are located at One Ram Ridge Road, Spring Valley, New York
10977 (the "Company"), and Merck KGaA, a Kommanditgesellschaft auf Aktien
organized under the laws of Germany, whose principal offices are located at
Frankfurter Strasse 250, 64271 Darmstadt, Germany (the "Service Provider"), each
of which may be referred to individually as a "Party" or collectively as the
"Parties." This Agreement and the Annex contemplated hereby are collectively
referred to as the "Agreement" unless indicated otherwise.
WHEREAS, the Service Provider possesses, inter alia, substantial and
long acquired technical expertise and know-how in the areas of product
development, clinical studies and trials, marketing, distribution, financial and
administrative support, and other areas related to the development of ethical
and generic drugs; and
WHEREAS, the Company wishes to engage certain services of the Service
Provider, and the Service Provider is willing to perform the Services defined
herein, on the terms and conditions set forth herein, in consideration of the
issuance by the Company to the Service Provider of a stock option to acquire
820,000 shares of common stock of the Company (the "Option Shares"), in the form
of the Annex hereto (the "Option").
NOW, THEREFORE, in consideration of the mutual obligations and benefits
set forth in this Agreement, the receipt and sufficiency of which are hereby
acknowledged, the Company and the Service Provider agree to the following terms
and conditions:
1. Services
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1.1 At the request of the Company and subject to the provisions of this
Agreement, the Service Provider will perform some or all of the
following services (the "Services") with respect to certain products as
agreed to between the parties from time to time (the "Products"):
a. providing assistance to conduct, monitor and analyze preclinical
investigations.
b. rendering advice to the Company's research and development department
on the design and development of protocols.
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c. providing assistance and advice to develop and prepare Product
formulations and dosage forms for preclinical, clinical trials and
commercial purposes and develop methods for establishing Product
stability (including expiration dating).
d. providing assistance to develop and transfer to the Company
manufacturing methods and procedures for the synthesis, scale-up and
process validation for the manufacture of Products and their active
ingredients for clinical and commercial purposes.
e. assisting in developing methods and procedures for the testing,
analysis and quality control of finished dosage forms of Products and
their ingredients.
f. assisting the Company in the preparation of ANDAs.
g. providing periodic status reports on the Services being performed.
h. providing assistance, if required, to prepare and file Federal, State
and local tax returns.
i. advising on the investment of funds and rendering assistance and advice
with respect to real property owned or leased by the Company.
j. providing various legal support services when required, including
advice with respect to product liability claims and actions filed
against the Company.
k. providing technical support and/or consulting services for the Company
to optimize the Company's production capacity. To effectuate such an
optimization, the Service Provider may from time to time, transfer
industry demand, capacity utilization data to the Company to assist in
the production planning process.
l. providing assistance in financial planning, budgeting, sales
forecasting for the Products, subject to the Service Provider's
internal operational constraints.
m. providing additional administrative and technical support for new
product launches.
n. providing computer and/or management information system support for the
Company.
o. providing quality control and quality assurance services, as needed,
including Product testing.
p. advising in business planning and analysis.
q. providing assistance in certain data processing functions in support of
other management services provided pursuant hereto.
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1.2 The Service Provider shall use its reasonable efforts to ensure that
the Services provided hereunder are consistent with accepted industry
standards and in a professionally competent manner.
1.3 The Service Provider shall use its reasonable efforts to render
Services in material compliance with all applicable legal requirements.
1.4 In order for the Service Provider to provide the Services hereunder,
the Company shall disclose to the Service Provider such information and
data which is reasonably requested by the Service Provider. The Service
Provider shall use such information and data exclusively in the
performance of its obligations hereunder, and such disclosure shall be
subject to the terms and conditions of this Agreement, including
Section 7, if such disclosure is of Confidential Information as defined
herein.
2. Payment Terms
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In consideration of the Services to be rendered by the Service Provider
hereunder and of its undertaking to perform such Services for the benefit of the
Company during the term of this Agreement, the Company shall make full payment
of its obligations hereunder in the form of the Option. Such Option shall
entitle the Service Provider to acquire, beginning three years and ten days
after the date hereof, 820,000 shares of the Company's common stock at the
Exercise Price (as specified in the Option) for the Services provided. Such
Option shall expire at 5:00 P.M., New York City time, on June 30, 2003 if it
shall not have been fully exercised. The Company shall also reimburse the
Service Provider for all reasonable out-of-pocket costs and expenses (which
shall not include any direct or indirect labor costs) incurred in connection
with the performance of such Services, including, without limitation, travel
expenses, meals and lodging, cost for supplies directly consumed in rendering
such Services, storage and warehousing costs, printing and duplicating costs,
and transport and similar costs; provided, any such reimbursement in excess of
$10,000 in any calendar quarter, shall require the Company's prior written
approval. The Company shall be under no obligation to make any other payments
for the Services contemplated herein pursuant to this Agreement.
3. Schedule of Performance
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During the term of this Agreement, the Service Provider shall perform
the Services from time to time, as reasonably required by the Company and as
agreed upon between the Company and the Service Provider, upon the Company's
advance written notice which shall be received by the Service Provider not less
than ten business days before the proposed service date. Upon receipt of such
notice, the Service Provider shall have five business days to accept or, in
consultation with the Company, reschedule the service date. The Company hereby
acknowledges that the Service Provider must take into consideration its own
labor constraints and existing commitments of its own business to other parties
in determining the service date of such Services. In any event, the Services
requested by the Company shall not be more than a total of 200 man hours per
calendar quarter unless the Service Provider expressly agrees otherwise.
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4. Term
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This Agreement shall be effective from the date of execution of this
Agreement and shall remain in effect for thirty-six (36) months.
5. Representations and Warranties
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5.1 Each Party hereby represents and warrants to the other Party as
follows:
(a) It is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation;
(b) It has the corporate power and authority to own its assets, carry
on its business and execute and deliver this Agreement and to
perform its obligations hereunder;
(c) It has taken all appropriate and necessary action to authorize the
execution, delivery and performance of this Agreement;
(d) All consents, approvals, licenses and authorizations of, and all
filings and registrations with, any governmental authority
necessary for the due execution, delivery, performance and
enforceability of this Agreement, have been obtained and are in
full force and effect; and
(e) This Agreement constitutes a legal, valid and binding obligation,
enforceable in accordance with its terms. The execution, delivery
and performance of this Agreement will not violate any provision
of any applicable laws or regulations.
6. Independent Contractor
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This Agreement does not constitute or create (and the Parties do not
intend to create hereby) a joint venture, pooling arrangement,
partnership, or formal business organization of any kind between and
among any of the Parties, and the rights and obligations of the Parties
shall be only those expressly set forth herein. The Service Provider
will perform the Services as an independent contractor and shall not be
considered, for any purpose, to be an agent of the Company or its
affiliated companies. Each Party shall be responsible for providing its
own personnel and workers' compensation, medical coverage or similar
benefits, any life, disability or other insurance protection. Each
Party shall be solely responsible for the payment of social security
benefits, unemployment insurance, pension benefits, withholding any
required amounts for income and other employment-related taxes and
benefits of its own employees, and shall make its own arrangements for
injury, illness or other insurance coverage to protect itself, its
affiliated companies, its subcontractors and personnel from any costs,
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expenses, damages, loss and/or liability arising out of performance of
the Services, or any transportation associated therewith. The Service
Provider has no power or authority to act for, represent, or bind the
Company or its affiliated companies in any manner.
7. Confidentiality
7.1 (a) The Parties recognize that in the course of performance of the
Agreement, either of them may disclose to the other information
about the disclosing Party's business or activities which such
Party considers proprietary and confidential including, without
limitation, trade secrets, marketing and business plans, customer
lists, and information concerning the operations of the Parties
(all of such proprietary and confidential information is
hereinafter referred to as the "Confidential Information"). The
Party who receives any Confidential Information (the "Receiving
Party") agrees to maintain a confidential status for such
Confidential Information, not to use any such Confidential
Information for any purpose other than the purpose for which it
was originally disclosed to the Receiving Party, and not to
disclose any of such Confidential Information to any third party,
unless such information:
(i) is or has become available to the public from a source
other than the Receiving Party;
(ii) was already known to the Receiving Party from sources other
than the other Party at the time it was disclosed to the
Receiving Party and was not obtained by the Receiving Party
from such other party in violation of a confidentiality or
similar agreement with such other party;
(iii) is disclosed to the Receiving Party by a third party who is
not under any legal obligation prohibiting such disclosure;
(iv) is required to be disclosed by law;
(v) is developed independently by the Receiving Party; or
(vi) is disclosed to the Receiving Party by a third party
pursuant to an obligation of such third party or the
exercise of a right by the Receiving Party in circumstances
where no obligation of confidentiality applies to the
Receiving Party with respect to the information so
disclosed.
(b) The Parties acknowledge that they may be required to disclose
Confidential Information to governmental agencies or authorities
by law or in connection with the obtaining of approvals for the
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Company, and each shall endeavor to limit disclosure to that
purpose. If either Party is required to disclose Confidential
Information pursuant to this paragraph, such Party will
immediately give the other Party written notice of any such
disclosure, which notice shall specify the substance of the
disclosure. The Party making such a disclosure shall take all
reasonable steps to prevent further disclosure of such
Confidential Information.
7.2 Survival of Confidentiality: The provisions of this Section 7 shall
survive the termination of this Agreement for any reason whatsoever.
Upon such termination, the Parties shall return any Confidential
Information which may have been transmitted by the other Party, as well
as any copy or other reproduction, including, without limitation,
electronic data reproductions or representations.
8. Dispute Resolution
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8.1 In the event of any controversy or claim between the Parties arising
out of or in connection with this Agreement or the breach hereof, the
Parties shall, in the first instance, make a good faith effort to
settle such dispute amicably.
8.2 If such controversy or claim is not settled within thirty (30) days
following written notice by one Party to the other Party of the
existence thereof, such controversy or claim shall be settled by
arbitration in New York, NY, in accordance with the Commercial
Arbitration Rules of the American Arbitration Association and judgment
upon the award may be entered in any court having jurisdiction thereof.
9. Notices
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All notices and other communications required or permitted hereunder
shall be given in writing by hand delivery, by facsimile, or by
registered or certified mail, return receipt requested, postage
prepaid, addressed to the Party to receive the same at its respective
address set forth below, or at such other address as may from time to
time be designated by either Party to the other Party hereunder in
accordance with this Section 9:
To the Service Provider:
Merck KGaA
Frankfurter Strasse 250
64271 Darmstadt, Germany
Attn: Professor Dr. Bernhard Scheuble
Facsimile: 011 49-6151-72-5962
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With a copy to:
Coudert Brothers
1114 Avenue of the America
New York, New York 10036-7703
Attn: Edwin S. Matthews Jr., Esq.
Facsimile: 212-626-4120
To the Company:
Pharmaceutical Resources, Inc.
One Ram Ridge Road
Spring Valley, New York 10977
Attn: Kenneth I. Sawyer
Facsimile: 914-425-5097
With a copy to:
Hertzog, Calamari & Gleason
100 Park Avenue
New York, New York 10017
Attn: Stephen Ollendorff, Esq. & Stephen R. Connoni, Esq.
Facsimile: 212-213-1199
All notices shall be effective when received. A notice is considered
received if a written confirmation of receipt appears thereon or there
exists a written fax confirmation. Either Party may by notice to the
other Party designate a new address for notices, such new address to be
effective ten (10) days after receipt of designation.
10. Indemnity
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10.1 Each Party hereby agrees to indemnify and hold harmless the other
Party and its respective shareholders, directors, officers and
employees from and against any and all costs, losses, claims, actions,
demands, damages and liabilities (including attorneys' fees and
disbursements) incurred by such other party arising out of or in
respect of (i) any act, failure to act, or any assumption of any
obligation or responsibility by the indemnifying Party, or by any of
its directors, officers or employees, which is in contravention or
violation of or in conflict with any of the terms or provisions of this
Agreement, or (ii) any material breach of any of the representations or
warranties made by the indemnifying Party under this Agreement;
provided, however, that an indemnified Party shall not be entitled to
indemnification with respect to any costs, losses, claims, actions,
demands, damages and liabilities which was caused by its own gross
negligence, willful misconduct or reckless disregard of its duties
hereunder.
10.2 THE SERVICE PROVIDER MAKES NO WARRANTIES, EXPRESS OR IMPLIED, WITH
RESPECT TO THE AGREEMENT OR THE PERFORMANCE OF THE SERVICES PROVIDED
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HEREUNDER OR THE WORK FURNISHED HEREUNDER, WHETHER ARISING AT LAW OR IN
EQUITY, EXCEPT AS SET FORTH HEREIN.
10.3 IN NO EVENT, OTHER THAN BREACH OF THE EXPRESS PROVISIONS OF THIS
AGREEMENT, SHALL EITHER PARTY OR A PARTY'S AFFILIATES AND ITS OR THEIR
SUBCONTRACTORS AND ITS OR THEIR OFFICERS, EMPLOYEES AND AGENTS, BE
LIABLE, IN CONTRACT, IN TORT, OR OTHERWISE FOR ANY INCIDENTAL OR
CONSEQUENTIAL DAMAGES OF ANY NATURE ARISING AT ANY TIME UNDER THIS
AGREEMENT, INCLUDING SPECIFICALLY, BUT WITHOUT LIMITATION, LOSS OF
PROFITS OR REVENUE, LOSS OF FULL OR PARTIAL USE OF ANY EQUIPMENT,
DELAYS, COST OF REPLACEMENTS, COST OF CAPITAL, LOSS OF GOODWILL, CLAIMS
OF CUSTOMERS, OR OTHER SUCH DAMAGES.
11. Miscellaneous
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11.1 Entire Agreement. This Agreement, together with the Annex hereto,
constitute the entire agreement of the Parties hereto with respect to
the performance of Services by the Service Provider for the Company and
supersedes and terminates all prior arrangements and agreements, if
any, between the Service Provider and the Company or any of its
affiliates with respect to the subject matter hereof.
11.2 No Waiver. No failure by either Party hereto to exercise, and no
delay in exercising, any right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any right
hereunder by either Party preclude any other or future exercise of that
right or any other right hereunder by that Party.
11.3 Severability. In case any one or more of the provisions of this
Agreement should be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby.
11.4 Assignment. Neither Party may assign or transfer, in whole or in part,
its rights or interests in this Agreement.
11.5 Amendment. This Agreement may not be amended, terminated or
superseded except by (i) an agreement in writing between the Company
and the Service Provider and (ii) the prior written approval of a
majority of the Company Designees (as such term is defined in the Stock
Purchase Agreement, dated March 25, 1998, between the Company and Lipha
Americas, Inc.).
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11.6 Survival: Any provision of this Agreement which can reasonably be
construed as surviving the expiration or termination of the Agreement,
including but not necessarily limited to the indemnification and
confidentiality provisions, shall so survive.
11.7 Governing Law: This Agreement, including the Annex, shall be
governed by, and construed in accordance with, the laws of the State of
New York without giving effect to the conflict of law provisions
thereof.
11.8 Agreement to Execute Documents: The Parties agree in good faith to
execute any and all documents required for the performance of this
Agreement.
11.9 Counterparts: This Agreement may be executed in any number of
separate counterparts, each of which, when so executed, shall be deemed
an original, and all of said counterparts taken together shall be
deemed to constitute but one and the same instrument.
IN WITNESS WHEREOF, this Agreement has been executed by the Parties,
effective as of the date above indicated.
PHARMACEUTICAL RESOURCES INC. MERCK, KGaA
/s/Kenneth I. Sawyer /s/Bernhard Scheuble
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By: Kenneth I. Sawyer By: Prof. Dr. Bernhard Scheuble
Name: Name:
Title: Chairman & CEO Title: Member of the Executive Board
/s/Klaus-Peter Brandis
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By: Klaus-Peter Brandis
Name:
Title: Head of Legal Department
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Annex
See Exhibit 10.4